<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 33-98378
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED APRIL 11, 1996)
- --------------------------------------------------------------------------------
NEWCOURT RECEIVABLES ASSET TRUST
$188,172,873 CLASS A 6.24% ASSET BACKED NOTES, SERIES 1996-3
NEWCOURT RECEIVABLES CORPORATION, SELLER,
NEWCOURT CREDIT GROUP INC., SERVICER
- --------------------------------------------------------------------------------
The Newcourt Receivables Asset Trust (the "TRUST" or the "ISSUER") has been
formed pursuant to a Pooling, Collateral Agency and Servicing Agreement, dated
as of April 15, 1996, among Newcourt Receivables Corporation ("NRC"), as Seller,
Newcourt Credit Group Inc. ("NEWCOURT"), as Servicer, Fleet National Bank, as
collateral agent (the "COLLATERAL AGENT"), and Chase Manhattan Bank Delaware, as
issuer trustee (the "ISSUER TRUSTEE"), and will issue $188,172,873 aggregate
principal amount of Class A 6.24% Asset Backed Notes, Series 1996-3 (the "SERIES
1996-3 CLASS A NOTES"). The Series 1996-3 Class A Notes will be issued pursuant
to an Indenture, to be dated as of December 12, 1996 (the "INDENTURE"), between
the Trust and Fleet National Bank, as Indenture Trustee (the "INDENTURE
TRUSTEE"). The trust will also issue $8,181,429 aggregate principal amount of
Class B 6.91% Asset Backed Notes, Series 1996-3 (the "SERIES 1996-3 CLASS B
NOTES") and $8,181,429 aggregate principal amount of Class C 8.66% Asset Backed
Notes, Series 1996-3 (the "SERIES 1996-3 CLASS C NOTES"; together with the
Series 1996-3 Class B Notes, the "SERIES 1996-3 SUBORDINATED NOTES"; and
together with the Series 1996-3 Class A Notes and the Series 1996-3 Class B
Notes, the "SERIES 1996-3 NOTES"). In addition, as more fully described herein,
the Trust has previously issued the Series 1996-1 Notes and the Series 1996-2
Notes (each as defined herein). The Series 1996-3 Subordinated Notes together
with all other outstanding Subordinated Notes (as defined in the Prospectus)
heretofore and from time to time hereafter issued by the Trust are subordinated
to the Series 1996-3 Class A Notes and all other outstanding Class A Notes (as
defined in the Prospectus) heretofore and from time to time hereafter issued by
the Trust, as described herein and in the Prospectus. The Series 1996-3
Subordinated Notes are not being offered and sold hereunder. The Series 1996-3
Class A Notes will rank pari passu with all other outstanding Class A Notes
heretofore and from time to time hereafter issued by the Trust, as described
herein and in the Prospectus. The property of the Trust (the "TRUST ASSETS")
does and will include a pool of contracts (collectively, the "CONTRACTS")
consisting of (i) conditional sale agreements, promissory notes with or without
related security agreements, operating and finance leases, installment payment
agreements, and similar types of financing agreements with end-users (each, an
"END-USER") of the Equipment, Software and Services described below (such
Contracts, "END-USER CONTRACTS") and meeting eligibility requirements specified
herein and in the Prospectus, and in each case with respect to certain
information technology, communications, commercial, industrial, transportation,
resources and construction equipment (the "EQUIPMENT"), certain computer
software (the "SOFTWARE") and related support and consulting services (the
"SERVICES"; together with Equipment and Software, the "FINANCED ITEMS"),
(cover continued on next page)
------------------------
THE SERIES 1996-3 CLASS A NOTES ARE SECURED BY THE ASSETS OF THE TRUST. THE
PROCEEDS OF THE ASSETS OF THE TRUST AND AMOUNTS ON DEPOSIT IN THE RESERVE
ACCOUNT ARE THE ONLY SOURCES OF PAYMENTS ON THE SERIES 1996-3 CLASS A NOTES. THE
SERIES 1996-3 CLASS A NOTES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF,
AND ARE NOT INSURED OR GUARANTEED BY, THE ISSUER TRUSTEE, NEWCOURT CREDIT GROUP
INC., NEWCOURT RECEIVABLES CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE 15 IN THE PROSPECTUS.
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<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT SELLER(1)(2)
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Per Class A Note........................... 99.9910% 0.3000% 99.6910%
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Total...................................... $188,155,937 $564,519 $187,591,418
</TABLE>
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- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, on the Class A Notes from November 1, 1996.
(2) Before deduction of expenses estimated to be $175,000.
------------------------
FIRST UNION CAPITAL MARKETS CORP.
DEUTSCHE MORGAN GRENFELL
LEHMAN BROTHERS
The date of this Prospectus Supplement is December 9, 1996
<PAGE> 2
continued from previous page
together with certain rights of the Financing Originator (as hereinafter
defined) under vendor finance program agreements and vendor assignments with
vendors of the Financed Items, collections thereon, the Equipment or a security
interest in the Equipment, as more fully described herein and in the Prospectus,
and (ii) limited or full recourse promissory notes payable by vendors (such
notes, "VENDOR NOTES") and secured by the vendor's interest in End-User
Contracts originated by such vendor (End-User Contracts securing Vendor Notes
being collectively referred to as "SECONDARY CONTRACTS"), and by the Equipment
related to such End-User Contracts. The Series 1996-3 Notes as well as each
other outstanding Series of Notes heretofore and hereafter issued from time to
time by the Trust will be secured by the Trust Assets pursuant to the Pooling
Agreement. The Seller has acquired, in the case of the Initial Contracts, or
will acquire, in the case of other Contracts, the Contracts (or interests
therein securing Vendor Notes), the Equipment (or interests therein) and related
assets from the Financing Originator.
<PAGE> 3
---------------------------
The Series 1996-3 Class A Notes are offered by the Underwriters, subject
to prior sale, when, as and if issued to and accepted by the Underwriters and
subject to the approval of certain legal matters by counsel for the
Underwriters. The Underwriters reserve the right to withdraw, cancel, or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Series 1996-3 Class A Notes will be made only in book-entry form
through the facilities of The Depository Trust Company, Cedel Bank, Societe
Anonyme and the Euroclear System.
---------------------------
The Trust may from time to time offer other Series of Notes which will
be payable from the assets of the Trust and amounts on deposit in the Reserve
Account and which may have terms significantly different from the Series 1996-3
Notes.
Interest on the Series 1996-3 Notes will be payable monthly on the 20th
day of each month (or if such day is not a Business Day, the next succeeding
Business Day) commencing on December 20, 1996 (each, a "DISTRIBUTION DATE"). The
interest rate for the Series 1996-3 Class A Notes will be 6.24% per annum. The
interest rate for the Series 1996-3 Class B Notes will be 6.91% per annum. The
interest rate for the Series 1996-3 Class C Notes will be 8.66% per annum.
Principal of the Series 1996-3 Notes will be payable on each Distribution Date
to the extent described herein and in the Prospectus.
The Maturity Date for all of the Series 1996-3 Notes is December 20,
2004. However, the actual payment in full of the Series 1996-3 Class A Notes and
the Series 1996-3 Subordinated Notes could occur sooner. The Maturity Date for
the Series 1996-1 Notes is August 20, 2003 and for the Series 1996-2 Notes is
June 20, 2004
The Series 1996-3 Class A Notes will be represented by certificates
that will be registered in the name of CEDE & Co., the nominee of The Depository
Trust Company. The interests of holders of beneficial interests in the Series
1996-3 Class A Notes will be represented by book entries on the records of The
Depository Trust Company and participating members thereof. Definitive Series
1996-3 Class A Notes will be available to the Series 1996-3 Class A Noteholders
only under the limited circumstances described under "Description of the
Notes--Definitive Class A Notes" in the Prospectus.
There is currently no secondary market for the Series 1996-3 Class A
Notes, and there is no assurance that one will develop or, if one does develop,
that it will continue until the Series 1996-3 Class A Notes are paid in full.
---------------------------
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT
THE OFFERING OF THE SERIES 1996-3 CLASS A NOTES. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE SERIES
1996-3 CLASS A NOTES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED
BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
---------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SERIES
1996-3 CLASS A NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Commission maintains a Web site at "http://www.sec.gov" which
contains information regarding registrants that file electronically with the
Commission.
S-3
<PAGE> 4
SUMMARY OF SERIES TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used in this summary are defined elsewhere in this Prospectus
Supplement and a listing of the pages on which such terms are defined is found
in the "Index of Terms". Certain capitalized terms used in this summary but not
otherwise defined herein have the meanings assigned to such terms in the
Prospectus.
Issuer................... Newcourt Receivables Asset Trust, a Delaware
business trust (the "TRUST" or the "ISSUER"). The
principal executive offices of the Trust are in
Wilmington, Delaware, in care of the Issuer Trustee,
at the address of the Issuer Trustee specified
below.
Seller................... Newcourt Receivables Corporation ("NRC"), a Delaware
corporation and a wholly-owned subsidiary of
Newcourt Credit Group USA Inc., a Delaware
corporation ("NEWCOURT USA"), which, in turn, is a
wholly-owned subsidiary of Newcourt Credit Group
Inc. ("NEWCOURT"). The principal executive offices
of the Seller are located at Bank One Tower, 111
Monument Circle, Suite 300, Indianapolis, Indiana
46204.
Servicer................. Newcourt Credit Group Inc., an Ontario corporation.
The principal executive offices of the Servicer are
located at BCE Place, 181 Bay Street, Suite 3500,
P.O. Box 827, Toronto, Ontario, Canada M5J 2T3.
Subservicers............. As described in the Prospectus (see "Credit and
Contract Servicing Procedures--Contract Collections"
in the Prospectus), Newcourt Financial USA Inc. may
perform limited servicing duties.
Issuer Trustee........... Chase Manhattan Bank Delaware. The principal
executive offices of the Issuer Trustee are located
at 1201 Market Street, Wilmington, Delaware 19801.
Indenture Trustee........ Fleet National Bank. The principal executive
offices of the Indenture Trustee are located at 777
Main Street, 11th Floor, Hartford, Connecticut
06115.
Collateral Agent......... Fleet National Bank. The principal executive
offices of the Collateral Agent are located at 777
Main Street, 11th Floor, Hartford, Connecticut
06115.
Financing Originator..... Newcourt Financial USA Inc. (the "FINANCING
ORIGINATOR"), a wholly-owned subsidiary of Newcourt
USA.
Series Cutoff Date....... October 31, 1996.
Series Closing Date...... December 12, 1996.
The Notes................ Class A 6.24% Asset Backed Notes, Series 1996-3 (the
"SERIES 1996-3 CLASS A NOTES") in the aggregate
initial principal amount of $188,172,873 (the
"INITIAL SERIES 1996-3 CLASS A PRINCIPAL AMOUNT").
The Trust will also issue Class B 6.91% Asset Backed
Notes, Series 1996-3 (the "SERIES 1996-3 CLASS B
NOTES") in the aggregate initial principal amount of
$8,181,429 (the "INITIAL SERIES 1996-3 CLASS B
PRINCIPAL AMOUNT") and Class C 8.66% Asset Backed
S-4
<PAGE> 5
Notes, Series 1996-3 (the "SERIES 1996-3 CLASS C
NOTES" and, together with the Series 1996-3 Class A
Notes and the Series 1996-3 Class B Notes, the
"SERIES 1996-3 NOTES") in the aggregate initial
principal amount of $8,181,429 (the "INITIAL SERIES
1996-3 CLASS C PRINCIPAL AMOUNT"). In addition, the
Trust has previously issued $119,656,814 aggregate
principal amount of Class A 6.79% Asset Backed
Notes, Series 1996-1 of which $91,142,688 will be
outstanding as of the Series Closing Date (the
"SERIES 1996-1 CLASS A NOTES"), $5,202,470 aggregate
principal amount of Class B 7.53% Asset Backed
Notes, Series 1996-1 of which $4,331,812 will be
outstanding as of the Series Closing Date (the
"SERIES 1996-1 CLASS B NOTES"), $5,202,470 aggregate
principal amount of Class C 9.05% Asset Backed
Notes, Series 1996-1 of which $4,331,812 will be
outstanding as of the Series Closing Date (the
"SERIES 1996-1 CLASS C NOTES"; together with the
Series 1996-1 Class A Notes, and the Series 1996-1
Class B Notes, the "SERIES 1996-1 NOTES"),
$169,810,862 aggregate principal amount of Class A
6.87% Asset Backed Notes, Series 1996-2 of which
$159,104,292 will be outstanding as of the Series
Closing Date (the "SERIES 1996-2 CLASS A NOTES"),
$7,383,081 aggregate principal amount of Class B
7.54% Asset Backed Notes, Series 1996-2 of which
$7,098,087 will be outstanding as of the Series
Closing Date (the "SERIES 1996-2 CLASS B NOTES") and
$7,383,081 aggregate principal amount of Class C
9.22% Asset Backed Notes, Series 1996-2 of which
$7,098,087 will be outstanding as of the Series
Closing Date (the "SERIES 1996-2 CLASS C NOTES";
together with the Series 1996-2 Class A Notes, and
the Series 1996-2 Class B Notes, the "SERIES 1996-2
NOTES"). The Series 1996-3 Class B Notes are
subordinated to the Class A Notes of all Series to
the extent set forth herein and in the Prospectus
and are not being offered or sold hereunder. The
Series 1996-3 Class C Notes are subordinated to the
Class A Notes and the Class B Notes of all Series to
the extent set forth herein and in the Prospectus
and are not being offered or sold hereunder.
The Series 1996-3 Class A Notes will be available
for purchase in denominations of $1,000 and integral
multiples thereof (except for one Class A Note
which, for rounding purposes, may be less than an
integral multiple thereof) in book-entry form only.
The holders of Series 1996-3 Class A Notes will not
be entitled to receive a definitive Series 1996-3
Class A Note except in the event that definitive
Series 1996-3 Class A Notes are issued in the
limited circumstances described in the Prospectus.
See "Description of the Notes--Definitive Class A
Notes" in the Prospectus. The Series 1996-3 Class A
Notes will be issued pursuant to an Indenture to be
dated as of December 12, 1996 (the "INDENTURE")
among the Issuer, the Collateral Agent, NRC and the
Indenture Trustee.
Class A Interest Rate.... 6.24% per annum.
Class B Interest Rate.... 6.91% per annum.
Class C Interest Rate.... 8.66% per annum.
S-5
<PAGE> 6
Subordinated Note Rate... For purposes of calculating the Series Discount Rate
applicable to the Series 1996-3 Notes, the
Subordinated Note Rate is 14.43%.
Minimum Amount........... For the Series 1996-3 Notes, $4,602,054.
Excess Spread Amount..... To the extent available, a portion of the Series
Available Amounts for all Series will be applied on
each Distribution Date to pay principal on the
Series 1996-3 Notes and the Notes of other Series in
accordance with the allocation method set forth
under "Description of the Notes--Allocations" in the
Prospectus. See "Description of the Series 1996-3
Notes--Excess Spread Amount".
Trust Assets............. The Trust Assets will include (i) (w) the Contracts
transferred to the Trust in connection with the
Series 1996-1 Notes and which are outstanding on the
Series Closing Date (the "SERIES 1996-1 CONTRACTS"),
with an aggregate Discounted Contract Balance (the
"SERIES 1996-1 ADCB") of $99,200,522 as of the
Series Cutoff Date (x) the Contracts transferred to
the Trust in connection with the Series 1996-2 Notes
and which are outstanding on the Series Closing Date
(the "SERIES 1996-2 CONTRACTS"; together with the
Series 1996-1 Contracts, the "PRIOR SERIES
CONTRACTS"), with an aggregate Discounted Contract
Balance (the "SERIES 1996-2 ADCB") of $173,906,258
as of the Series Cutoff Date, (y) Additional
Contracts transferred to the Trust as of the Series
Cutoff Date in connection with the Series 1996-3
Notes (the "SERIES 1996-3 CONTRACTS") with an
aggregate Discounted Contract Balance (the "SERIES
1996-3 ADCB") of $204,535,732 as of the Series
Cutoff Date and (z) Additional Contracts transferred
from time to time prior to the Commitment
Termination Date to the Trust in connection with the
issuance of additional Series of Notes as described
herein and in the Prospectus, (ii) all monies due or
to become due thereunder after, for each Contract,
the Cutoff Date specified therefor in the Supplement
executed in connection with the transfer of such
Contracts to the Trust, (iii) the related Equipment
(or a security interest therein), (iv) with respect
to Contracts which are Vendor Notes, the Applicable
Security related thereto, (v) such amounts as from
time to time may be held in (A) the Collection
Account, (B) the Reserve Account and (C) the Cash
Collateral Account, other than earnings on funds in
any such account, (vi) the rights of the Financing
Originators under certain Vendor Agreements insofar
as such rights relate to the Contracts (including
Additional Contracts) transferred to the Trust,
(vii) the rights of the Seller under the Purchase
Agreements other than certain rights of
indemnification from the Financing Originator to the
Seller and (viii) proceeds of all of the foregoing.
On the Series Closing Date, the Contracts will
consist of the Prior Series Contracts which remain
outstanding and the Series 1996-3 Contracts
(collectively, the "TRANSFERRED CONTRACTS"); the
Equipment will consist of the Equipment (or security
interest therein) related to the Transferred
Contracts; and the Applicable Security will consist
of the Applicable Security related to the
Transferred Contracts which are Vendor Notes.
Subsequent to the Series Closing Date, the Seller at
its option may (at any time prior to the Commitment
Termination Date)
S-6
<PAGE> 7
sell to the Trust Additional Contracts and interests
in related Equipment and Applicable Security,
subject to certain terms and conditions described
herein and in the Prospectus. See "The Trust
Assets--Additional Contracts" and "Description of
the Notes--New Issuances; Addition of Trust Assets"
in the Prospectus. Such additions, if any, will be
made in connection with the issuance of additional
Series of Notes. None of the Seller, the Servicer,
the Issuer Trustee or the Trust is required or
intends to obtain the consent of the Series 1996-3
Noteholders to issue any additional Series or to add
any Additional Contracts in connection therewith.
The Trust is entitled to all collections on the
Prior Series Contracts as of the respective Cutoff
Date for each related Series and will be entitled to
all collections with respect to the Series 1996-3
Contracts due on or after the Series Cutoff Date,
and will be entitled to all collections with respect
to the Additional Contracts due on or after the
Cutoff Date specified in the Supplement executed in
connection with the transfer of such Contracts to
the Trust. The Transferred Contracts and any
Additional Contracts (other than any of the
foregoing which have been re-assigned to the Seller
or have been paid or prepaid in full) will
individually be referred to as "CONTRACTS" and
collectively will comprise the "CONTRACT POOL".
Each Series will be secured by all Trust Assets, and
an Event of Default under any Series will constitute
an Event of Default under all Series. See
"Description of the Series 1996-3 Notes--Events of
Default and Restricting Events".
The Servicer may agree to the early termination or
full prepayment of any Contract included in the
Contract Pool on the terms and subject to the
conditions described in "Description of the
Notes--Prepaid Contracts" in the Prospectus.
Additional Contracts will be required to meet such
criteria as may be required from time to time by the
Rating Agency; provided, however, that Additional
Contracts may not be added to the Contract Pool (i)
following the Commitment Termination Date or (ii)
unless such addition would not result in the Rating
Agency reducing or withdrawing its rating of any
outstanding Series of Class A Notes. See "The
Contracts" and "The Pooling Agreement--
Representations and Warranties" in the Prospectus.
Transferred Contracts.... The Transferred Contracts cover a variety of new and
used information technology, communications,
commercial, industrial, transportation, resources
and construction equipment, computer software and
related services.
The Transferred Contracts have been selected by the
Financing Originator from its portfolio of CSAs,
Secured and Unsecured Notes, Leases, IPAs, Financing
Agreements and Vendor Notes, have the
characteristics specified in the Pooling Agreement
and described herein and in the Prospectus and were
purchased by the Seller (i) in the case of Series
1996-1 Contracts transferred by the Seller to the
Trust under the Series 1996-1 Purchase Agreements,
(ii) in the case of Series 1996-2 Contracts
transferred by the Seller to the Trust, under the
Series
S-7
<PAGE> 8
1996-2 Purchase Agreement and (iii) in the case of
Series 1996-3 Contracts transferred by the Seller to
the Trust under the Series 1996-3 Purchase
Agreement. See "The Pooling Agreement Generally--
Representations and Warranties" and "Use of
Proceeds" in the Prospectus and "The Trust
Assets--Initial Contracts" and "--Other Pool Data"
herein. Certain of the Contracts (the "PBCC
CONTRACTS") transferred to the Trust and purchased
by the Seller under the Series 1996-2 Purchase
Agreement and the Series 1996-3 Purchase Agreement
were acquired by the Financing Originator from
Pitney Bowes Credit Corporation ("PBCC") on June 28,
1996. The PBCC Contracts consist of a portfolio of
End-User Contracts and Vendor Notes secured by
Secondary Contracts and the related Equipment and
Applicable Security. The PBCC Contracts and each
related Vendor, have been re-underwritten by the
Financing Originator using the standard credit
underwriting procedures described in Newcourt's
Credit Manual. See "Credit and Contract Servicing
Procedures" in the Prospectus.
The Transferred Contracts represent substantially
all of the Eligible Contracts owned by the Financing
Originator as of the respective Cutoff Date for each
related Series that satisfied the concentration
criteria set forth in the Prospectus under
"Description of the Notes--Concentration Amounts".
As of the Series Cutoff Date, the ADCB of the
Transferred Contracts was $477,642,511, the weighted
average remaining term to maturity for the
Transferred Contracts was approximately 42 months,
the final scheduled payment date of the Transferred
Contract with the latest expiration was October 25,
2003 and the average Discounted Contract Balance was
approximately $54,588. The Series Discount Rate for
the Series 1996-1 Contracts is 8.11% per annum, the
Series Discount Rate for the Series 1996-2 Contracts
is 8.12% per annum and the Series Discount Rate for
the Series 1996-3 Contracts is 7.50% per annum. For
further information regarding the Transferred
Contracts, see "The Contracts" in the Prospectus and
"The Trust Assets--Initial Contracts" and "--Other
Pool Data" herein.
Terms of the Notes:
A. Interest ............ Interest on the Series 1996-3 Notes will be payable
monthly on the 20th day of each month or, if any
such date is not a day other than a Saturday, a
Sunday or a day on which banking institutions in
Indianapolis, Indiana, Wilmington, Delaware or New
York, New York are authorized or obligated by any
law or regulation to be closed (any such date, a
"BUSINESS DAY"), on the next succeeding Business
Day, commencing December 20, 1996 (each, a
"DISTRIBUTION DATE"), to the holders of record of
the Series 1996-3 Class A Notes (the "SERIES 1996-3
CLASS A NOTEHOLDERS"), the holders of record of the
Series 1996-3 Class B Notes (the "SERIES 1996-3
CLASS B NOTEHOLDERS") and the holders of record of
the Series 1996-3 Class C Notes (the "SERIES 1996-3
CLASS C NOTEHOLDERS", and together with the Series
1996-3 Class A Noteholders and Series 1996-3 Class B
Noteholders, the "SERIES 1996-3 NOTEHOLDERS"), in
each case as of the last day of the calendar month
preceding the month in which such Distribution Date
occurs (the "RECORD DATE"); except that the Record
Date for the
S-8
<PAGE> 9
December 20, 1996 Distribution Date will be the date
of the original issuance of the Series 1996-3 Notes
(the "SERIES CLOSING DATE").
Interest on the outstanding principal amount of the
Series 1996-3 Notes will accrue at the Class A
Interest Rate, Class B Interest Rate or Class C
Interest Rate, as applicable, from and including the
first day of each calendar month to and including
the last day of such calendar month on the
outstanding principal amount of such Series 1996-3
Notes as of the first day of such calendar month,
except that interest payable on the first
Distribution Date following the Series Closing Date
will accrue at the applicable Interest Rate for the
period from but excluding the Series Cutoff Date to
and including the last day of the calendar month
immediately preceding such Distribution Date, on the
Principal Amount of such Series 1996-3 Notes as of
such Series Closing Date (assuming such amount was
outstanding as of the Series Cutoff Date for such
Series) (each period for which interest accrues on
the Series 1996-3 Notes, an "ACCRUAL PERIOD").
Interest on the principal amount of the Series
1996-3 Notes will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
B. Principal
General.............. As described in the Prospectus (see "Description of
the Notes--Allocations" in the Prospectus),
principal of the Series 1996-3 Class A Notes will be
payable on each Distribution Date in an amount equal
to the lesser of the Class A Principal Payment
Amount for the Series 1996-3 Notes for such
Distribution Date and the then outstanding principal
amount of the Series 1996-3 Class A Notes, to the
extent Series Available Amounts for the Series
1996-3 Notes are available therefor and to the
extent of amounts otherwise payable on account of
the Subordinated Notes which are subordinated to the
prior payment of the Class A Principal Payment
Amount for the Series 1996-3 Notes. See "Description
of the Notes--Allocations" in the Prospectus.
As described in the Prospectus (see "Description of
the Notes--Allocations" in the Prospectus), subject
to certain restrictions, principal of the Series
1996-3 Class B Notes will be payable on each
Distribution Date in an amount equal to the lesser
of the Class B Principal Payment Amount for the
Series 1996-3 Notes for such Distribution Date and
the then outstanding principal amount of the Series
1996-3 Class B Notes, to the extent Series Available
Amounts for the Series 1996-3 Notes are available
after the payment of the Class A Principal Payment
Amount for the Series 1996-3 Class A Notes, the
deposit into the Reserve Account of an allocable
portion of amounts necessary to maintain the Minimum
Reserve Balance and payment of interest in respect
of the Series 1996-3 Class C Notes as described in
the Prospectus.
As described in the Prospectus (see "Description of
the Notes--Allocations" in the Prospectus), subject
to certain restrictions, principal of the Series
1996-3 Class C Notes will be payable on each
S-9
<PAGE> 10
Distribution Date in an amount equal
to the Series Available Amounts
remaining after the payment of the
Class A Principal Payment Amount for
the Series 1996-3 Class A Notes, the
payment of interest in respect of the
Series 1996-3 Class B Notes and Series
1996-3 Class C Notes and the payment
of the Class B Principal Payment
Amount for the Series 1996-3 Class B
Notes.
Payment on the Series 1996-3 Class B
Notes and the Series 1996-3 Class C
Notes will be subordinated to payments
on the Class A Notes of all Series
(including the Series 1996-3 Class A
Notes) to the extent described herein
and in the Prospectus.
Maturity Date....................... The Maturity Date for the Series
1996-3 Notes is December 20, 2004.
Expected Amortization Schedule...... The expected amortization schedule for
the Series 1996-3 Class A Notes is set
forth herein under "Description of the
Series 1996-3 Notes--Payments of
Principal". Although the Maturity Date
for the Series 1996-3 Class A Notes is
December 20, 2004, the expected final
payment date for the Series 1996-3
Class A Notes is March 20, 2001.
C. Optional Redemption................. The Series 1996-3 Class A Notes may be
redeemed in whole, but not in part, on
any Distribution Date if the Seller
exercises its option to redeem all
Series of Class A Notes and Class B
Notes when the aggregate outstanding
principal balance of the Class A Notes
and Class B Notes of all Series is
less than 10% of the initial aggregate
principal balance of all Series of
Class A Notes and Class B Notes as of,
in each case, their original date of
issuance. The redemption price for the
Series 1996-3 Class A Notes (the
"REDEMPTION PRICE") will be equal to
the unpaid principal amount of such
Notes plus accrued and unpaid interest
thereon through the date of
redemption.
Reserve Account........................ As described in the Prospectus under
"Description of the Notes--Reserve
Account", a trust account has been
established by the Servicer in the
name of and maintained by the
Collateral Agent (the "RESERVE
ACCOUNT"). As of the Series Closing
Date there will be $4,776,425 in the
Reserve Account, which amount will
include $2,045,357 funded by Newcourt
on the Series Closing Date (the amount
so funded by Newcourt, the "MINIMUM
DEPOSIT"). The Minimum Deposit is
equal to the lesser of (x) 1% of the
Series ADCB for the Series 1996-3
Notes and (y) the amount by which
amounts then on deposit therein are
less than the Minimum Reserve Balance.
Thereafter, on each Distribution Date
amounts required to be maintained on
deposit in the Reserve Account will be
funded with Series Available Amounts
for each Series of Notes remaining
after payment of interest and
principal payments due on the Class A
Notes of such Series and interest
payments due on the Class B Notes of
such Series.
On each Distribution Date, amounts on
deposit in the Reserve Account will be
applied as described in the Prospectus
under "Description of the
Notes--Allocations" and "--Reserve
Account". As so described, on each
Distribution Date amounts on deposit
in the Reserve Account in excess of
the Aggregate Minimum Reserve Balance
will be paid first, to Newcourt and
second, to the holders of the Class C
Notes.
S-10
<PAGE> 11
Servicing Matters................ The Servicer will be entitled to receive on
each Distribution Date a monthly fee (the
"SERVICING FEE") equal to the product of (i)
one-twelfth, (ii) .60% and (iii) the ADCB of
the Contract Pool as of the beginning of the
related Collection Period, payable out of
the Available Amount.
For each Collection Period, if the Servicer
determines that any Scheduled Payment (or
portion thereof) which was due and payable
pursuant to a Contract during such
Collection Period was not received prior to
the end of such Collection Period, the
Servicer may make an advance (a "SERVICER
ADVANCE") in an amount up to the amount of
such delinquent Scheduled Payment (or
portion thereof), to the extent that in its
sole discretion it determines that it can
recoup such amount from subsequent
collections under the related Contract. The
Servicer will be entitled to be reimbursed
for Servicer Advances as described herein
and in the Prospectus.
The PBCC Contracts include Contracts (the
"INTER-TEL CONTRACTS") originated by
Inter-Tel Leasing, Inc. ("INTER-TEL") and
Contracts (the "TRIAD CONTRACTS") originated
by Triad Systems Financial Corporation
(formerly known as TSC Leasing Corporation)
and its subsidiary, Orleans Leasing
Corporation (collectively, "TRIAD"). The
End-Users under the Inter-Tel Contracts and
Triad Contracts will continue to make
payments thereon to Inter-Tel and Triad,
respectively, following the Series Cutoff
Date. The Servicer will cause to be
established and maintained in the name of
the Collateral Agent the Cash Collateral
Account (as defined herein) into which the
Seller will initially deposit an amount
equal to the sum of (i) the maximum
scheduled payments due on the Inter-Tel
Contracts and the Triad Contracts during any
Collection Period and (ii) an amount equal
to the anticipated prepayments on such
Contracts assuming a Conditional Payment
Rate (as defined herein) of 7%, for the
period from and including the Series Cutoff
Date through and including November 30, 1996
(the sum of (i) and (ii) for any period, the
"CASH COLLATERAL REQUIRED AMOUNT"). See
"The Servicer--Servicing" herein.
Tax Status....................... In the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, tax counsel for NRC, for
federal income tax purposes, the Series
1996-3 Class A Notes will properly be
characterized as debt and the Trust will not
be characterized as an association (or a
publicly traded partnership) taxable as a
corporation.
ERISA Considerations............. The Series 1996-3 Class A Notes will be
eligible for purchase by Benefit Plans under
certain circumstances. See "ERISA
Considerations" herein and in the
Prospectus.
Rating of the Securities......... It is a condition to the issuance of the
Class A Notes that the Series 1996-3 Class A
Notes be rated "AAA" by Standard & Poor's
Ratings Services (the "RATING AGENCY").
S-11
<PAGE> 12
A security rating is not a recommendation to
buy, sell or hold securities, and may be
subject to revision or withdrawal at any
time by the assigning entity.
S-12
<PAGE> 13
THE TRUST ASSETS
THE TRANSFERRED CONTRACTS
The Transferred Contracts include the Prior Series Contracts which are
comprised of (i) Contracts which were transferred by the Financing Originator,
to the Seller on December 28, 1995 pursuant to the Original Purchase Agreement
and which remain outstanding on the Series Closing Date and certain additional
Contracts which were transferred by the Financing Originator to the Seller on
April 15, 1996 pursuant to the Purchase Agreement dated as of such date
(together with the Original Purchase Agreement, the "SERIES 1996-1 PURCHASE
AGREEMENTS") and which remain outstanding on the Series Closing Date and (ii)
Contracts which were transferred by the Financing Originator to the Seller on
September 17, 1996 pursuant to the Purchase Agreement dated as of such date (the
"SERIES 1996-2 PURCHASE AGREEMENT") and which remain outstanding on the Series
Closing Date. In addition, the Transferred Contracts include the Series 1996-3
Contracts which will be purchased from the Financing Originator as of the Series
Cutoff Date under the Purchase Agreement dated as of December 12, 1996 (the
"SERIES 1996-3 PURCHASE AGREEMENT"). Certain of the Transferred Contracts,
including certain of the Series 1996-3 Contracts, were acquired by the Financing
Originator on June 28, 1996 from Pitney Bowes Credit Corporation ("PBCC")
pursuant to an asset purchase agreement dated as of May 31, 1996. The
Transferred Contracts were selected by the Financing Originator from its
portfolio of Contracts based on the criteria specified in the Purchase
Agreements and described herein and in the Prospectus. See "The Trust
Assets--Additional Representations and Warranties" herein and "The Pooling
Agreement Generally--Representations and Warranties" and "--Concentration
Amounts" in the Prospectus. The Transferred Contracts represent substantially
all of the Eligible Contracts owned by the Financing Originator that satisfied
as of the respective Cutoff Date for each related Series the concentration
criteria set forth in the Prospectus under "Description of the
Notes--Concentration Amounts". As of the Series Cutoff Date, the ADCB of the
Transferred Contracts was $477,642,511, the weighted average remaining term to
maturity for the Transferred Contracts was approximately 42 months, the final
scheduled payment date of the Transferred Contract with the latest expiration
was October 25, 2003 and the average Discounted Contract Balance was
approximately $54,588. The Series Discount Rate for the Series 1996-1 Contracts
is 8.11% per annum, the Series Discount Rate for the Series 1996-2 Contracts is
8.12% per annum and the Series Discount Rate for the Series 1996-3 Contracts is
7.50% per annum. For further information regarding the Transferred Contracts,
see "The Contracts" in the Prospectus and "The Trust Assets--Other Pool Data"
herein.
ADDITIONAL CONTRACTS
The Pooling Agreement provides that, pursuant to any one or more
Supplements, the Seller may direct the Issuer Trustee to issue from time to time
new Series subject to the conditions described in the Prospectus (each such
issuance, a "NEW ISSUANCE"). Under the Pooling Agreement, the Seller may
designate the terms and conditions of any newly issued Series. In connection
with a New Issuance, the Seller will transfer Additional Contracts and the
related Equipment or other Applicable Security to the Trust (each such transfer,
an "ADDITION") as of the applicable Cutoff Date (the date on which Additional
Contracts are transferred to the Trustee, an "ADDITION DATE"), subject to the
conditions described below. None of the Seller, the Servicer, the Issuer Trustee
or the Trust is required or intends to obtain the consent of any Noteholder of
any outstanding Series (including any Series 1996-3 Noteholder) to issue any
additional Series or add any Additional Contracts in connection therewith. Upon
each Addition, all then outstanding Series of Notes (including any Notes issued
in conjunction with such Addition) will be secured by the related Additional
Contracts, Equipment or other Applicable Security and proceeds thereof. Because
each Series will be secured by all Contracts in the Contract Pool, including
Additional Contracts added in connection with a New Issuance, there can be no
assurance that the terms of any Series might not have an impact on the timing
and amount of payments received by a Class A Noteholder of another Series
previously issued by the Trust. See "Risk Factors--Issuance of Additional
Series" in the Prospectus. The Seller intends to offer, from time to time,
additional Series.
Under the Pooling Agreement and pursuant to a Supplement, a New
Issuance and related Addition may only occur upon the satisfaction of certain
conditions provided in the Pooling Agreement and described in the Prospectus
under "Description of the Notes--New Issuances; Addition of Trust Assets",
including that Additional Contracts may not be added to the Contract Pool (i) at
any time subsequent to the Commitment Termination Date and (ii) unless such
addition would not result in the Rating Agency reducing or withdrawing its
rating of any outstanding Series of Class A Notes.
S-13
<PAGE> 14
ADDITIONAL REPRESENTATIONS AND WARRANTIES
Pursuant to the Supplement to the Pooling Agreement to be executed in
connection with the Series 1996-3 Notes (the "SERIES SUPPLEMENT"), the Seller
and the Servicer represent and warrant that as of the Series Closing Date (i)
none of the Transferred Contracts in the Contract Pool is or may become subject
to a floating interest rate provision and (ii) the aggregate principal amount of
Transferred Contracts in the Contract Pool which are subject to voluntary
prepayment by an Obligor does not exceed 30% of the aggregate principal amount
of the Contracts in the Contract Pool.
In addition to the representations and warranties specified in the
Prospectus, the Seller will represent in the Series Supplement for the benefit
of all Noteholders that each of the PBCC Contracts satisfy the underwriting
policies detailed in Newcourt's Credit Manual.
Notwithstanding the provisions of the Prospectus which would require
that the Financing Originator represent and warrant in the Series 1996-3
Purchase Agreement, with respect to the Contracts transferred thereunder as of
the Cutoff Date, that such Contracts are secured by a fully perfected Lien of
the first priority on the related Equipment or, in the case of any Vendor Note,
related Applicable Security, the Financing Originator will represent and warrant
in the Series 1996-3 Purchase Agreement with respect to the Contracts
transferred thereunder as of the Cutoff Date, that such Contracts are secured by
a fully perfected Lien of the first priority on the related Equipment or, in the
case of any Vendor Note, related Applicable Security, except to the extent the
failure to be so perfected would not have a material adverse effect upon the
Class A Noteholders.
OTHER POOL DATA
As of the Series Cutoff Date, there are 8,750 Transferred Contracts,
with an ADCB (calculated at the respective Series Discount Rates) of
$477,642,511. Approximately 11.16% of the ADCB of the Transferred Contracts
provide for payments by the Obligor thereunder on a basis other than monthly
payments. The composition and distribution of the Transferred Contracts by
remaining term, original term, Discounted Contract Balance, End-User industry,
geographic distribution, type of equipment and type of End-User Contract are set
forth in the following tables and are reported as of the Series Cutoff Date.
Subschedules to Transferred Contracts reflecting amounts billed to separate
billing locations are treated as separate Transferred Contracts. Classification
by industry is based on Newcourt's customary procedures for determining obligor
industry. Percentages and amounts set forth in the following tables may not
total due to rounding.
The ADCB of the Transferred Contracts contained in the following tables
was calculated using a Series Discount Rate for the Series 1996-1 Contracts of
8.11% per annum, a Series Discount Rate for the Series 1996-2 Contracts of 8.12%
per annum and a Series Discount Rate for the Series 1996-3 Contracts of 7.50%
per annum.
DISTRIBUTION OF TRANSFERRED CONTRACTS BY REMAINING CONTRACT TERM
<TABLE>
<CAPTION>
REMAINING CONTRACT NUMBER PERCENTAGE OF ADCB ADCB OF
TERM RANGE (MONTHS) OF CONTRACTS OF CONTRACT POOL CONTRACTS
- ---------------------------------------------------------- ------------ ------------------ ------------
<S> <C> <C> <C>
0 Less than Rem. Term Less than or equal to 12......... 833 5.83 % $ 27,841,779
12 Less than Rem. Term Less than or equal to 24......... 1,236 7.37 % 35,209,989
24 Less than Rem. Term Less than or equal to 36......... 1,925 17.84 % 85,216,913
36 Less than Rem. Term Less than or equal to 48......... 2,369 31.91 % 152,400,488
48 Less than Rem. Term Less than or equal to 60......... 2,324 33.01 % 157,674,251
60 Less than Rem. Term Less than or equal to 72......... 51 2.21 % 10,576,331
72 Less than Rem. Term Less than or equal to 84......... 12 1.83 % 8,722,760
----- ------ ------------
Total.............................................. 8,750 100.00 % $477,642,511
===== ====== ============
</TABLE>
S-14
<PAGE> 15
DISTRIBUTION OF TRANSFERRED CONTRACTS BY DISCOUNTED CONTRACT BALANCES
<TABLE>
<CAPTION>
DISCOUNTED CONTRACT NUMBER PERCENTAGE OF ADCB ADCB OF
BALANCE RANGE OF CONTRACTS OF CONTRACT POOL CONTRACTS
- ------------------------------------------------------------------- ------------ ------------------ -------------
<S> <C> <C> <C>
0 Less than Balance Less than or equal to 25,000 ......... 3,806 8.43 % $ 40,258,886
25,000 Less than Balance Less than or equal to 50,000 ......... 1,661 12.76 % 60,952,676
50,000 Less than Balance Less than or equal to 75,000 ......... 1,422 18.75 % 89,542,783
75,000 Less than Balance Less than or equal to 100,000 ......... 1,166 20.87 % 99,661,907
100,000 Less than Balance Less than or equal to 200,000 ......... 466 12.60 % 60,205,552
200,000 Less than Balance Less than or equal to 300,000 ......... 98 5.03 % 24,025,565
300,000 Less than Balance Less than or equal to 400,000 ......... 41 2.96 % 14,135,246
400,000 Less than Balance Less than or equal to 500,000 ......... 17 1.61 % 7,676,402
500,000 Less than Balance Less than or equal to 1,000,000 ........ 44 6.17 % 29,487,873
1,000,000 Less than Balance Less than or equal to 4,000,000......... 28 9.89 % 47,234,941
4,000,000 Less than Balance......................................... 1 0.93 % 4,460,681
----- ------ ------------
Total.......................................... 8,750 100.00 % $477,642,511
===== ====== ============
</TABLE>
DISTRIBUTION OF TRANSFERRED CONTRACTS BY ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
ORIGINAL CONTRACT NUMBER PERCENTAGE OF ADCB ADCB OF
TERM RANGE (MONTHS) OF CONTRACTS OF CONTRACT POOL CONTRACTS
- ------------------------------------------------------------------- ------------ ------------------ -------------
<S> <C> <C> <C>
0 Less than Orig. Term Less than or equal to 12 ................... 30 0.48 % $ 2,296,376
12 Less than Orig. Term Less than or equal to 24 ................... 483 3.73 % 17,835,309
24 Less than Orig. Term Less than or equal to 36 ................... 1,550 13.99 % 66,832,153
36 Less than Orig. Term Less than or equal to 48 ................... 1,881 24.45 % 116,763,600
48 Less than Orig. Term Less than or equal to 60 ................... 4,118 48.35 % 230,928,288
60 Less than Orig. Term Less than or equal to 72 ................... 660 5.69 % 27,170,962
72 Less than Orig. Term Less than or equal to 84 ................... 26 2.36 % 11,273,636
84 Less than Orig. Term............................................. 2 0.95 % 4,542,188
----- ------ ------------
Total.......................................... 8,750 100.00 % $477,642,511
===== ====== ============
</TABLE>
DISTRIBUTION OF TRANSFERRED CONTRACTS BY END-USER INDUSTRY
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF ADCB ADCB OF
INDUSTRY TYPE OF CONTRACTS OF CONTRACT POOL CONTRACTS
- -------------------------------------------------------------------- ------------ ------------------ ------------
<S> <C> <C> <C>
Transportation...................................................... 4,397 55.56 % $265,370,288
Resources........................................................... 298 5.16 % 24,663,006
Construction........................................................ 267 3.32 % 15,871,185
Printing............................................................ 36 2.06 % 9,823,312
Financial Management................................................ 486 6.41 % 30,637,942
Distribution........................................................ 2,001 6.68 % 31,924,557
Manufacturing....................................................... 293 4.29 % 20,514,431
Government.......................................................... 18 0.15 % 732,312
Commercial.......................................................... 180 3.26 % 15,566,582
Miscellaneous....................................................... 774 13.09 % 62,538,895
----- ------ ------------
Total.......................................... 8,750 100.00 % $477,642,511
===== ====== ============
</TABLE>
S-15
<PAGE> 16
GEOGRAPHIC DISTRIBUTION OF TRANSFERRED END-USER CONTRACTS (a)
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF ADCB ADCB OF
STATE OF CONTRACTS OF CONTRACT POOL CONTRACTS
- ---------------------------------------------- ------------------ ------------
<S> <C> <C> <C>
Texas.............................. 1,475 15.08 % $ 72,009,923
California......................... 758 8.30 % 39,621,584
New York........................... 450 7.34 % 35,038,565
Alabama............................ 372 5.04 % 24,089,168
Georgia............................ 417 4.99 % 23,811,305
Illinois........................... 375 4.37 % 20,885,299
Florida............................ 372 3.53 % 16,873,512
New Jersey......................... 226 3.44 % 16,448,939
Missouri........................... 257 3.00 % 14,351,080
Michigan........................... 234 2.64 % 12,603,915
Pennsylvania....................... 202 2.57 % 12,270,136
Mississippi........................ 180 2.46 % 11,740,840
Ohio............................... 192 2.42 % 11,572,369
Louisiana.......................... 229 2.15 % 10,277,764
Arkansas........................... 159 2.13 % 10,170,777
All other states (b)............... 2,852 30.54 % 145,877,336
----- ------ ------------
Total................ 8,750 100.00 % $477,642,511
===== ====== ============
</TABLE>
(a) By End-User billing address.
(b) No other state accounted for more than 1.76% of the ADCB of the
Contract Pool as of the Series Cutoff Date.
DISTRIBUTION OF TRANSFERRED CONTRACTS BY TYPE OF COLLATERAL
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF ADCB ADCB OF
EQUIPMENT TYPE OF CONTRACTS OF CONTRACT POOL CONTRACTS
- ---------------------------------- ------------ ------------------ ------------
<S> <C> <C> <C>
Transportation..................... 4,547 58.03 % $277,175,474
Construction....................... 206 3.58 % 17,103,144
Computer Hardware.................. 2,009 13.36 % 63,802,680
Computer Software.................. 122 8.76 % 41,863,637
Resources.......................... 280 5.01 % 23,929,204
Printing Equipment................. 13 2.15 % 10,260,466
Manufacturing Equipment............ 68 0.83 % 3,942,356
Miscellaneous...................... 1,505 8.28 % 39,565,551
----- ------ ------------
Total................ 8,750 100.00 % $477,642,511
===== ====== ============
</TABLE>
DISTRIBUTION OF TRANSFERRED END-USER CONTRACTS BY TYPE OF CONTRACT (A)
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF ADCB ADCB OF
CONTRACT TYPE OF CONTRACTS OF CONTRACT POOL CONTRACTS
- ----------------------------------- ------------ ------------------ ------------
<S> <C> <C> <C>
CSAs............................... 4,984 65.76 % $314,102,202
True Leases........................ 448 8.16 % 38,999,426
Finance Leases..................... 3,196 16.49 % 78,776,250
IPAs............................... 94 5.96 % 28,474,489
Secured Notes...................... 5 1.62 % 7,745,073
Unsecured Notes.................... 7 0.63 % 3,006,964
Other Financing Agreements......... 16 1.37 % 6,538,106
----- ------ ------------
Total............................. 8,750 100.00 % $477,642,511
===== ====== ============
</TABLE>
(a) The Vendor Notes related to Secondary Contracts described above
represent $42,447,022 or 8.89% of the ADCB of the Contract Pool.
<PAGE> 17
THE SERVICER
SERVICING
The Contracts will be serviced by Newcourt, as the Servicer, pursuant to
and in accordance with the Pooling Agreement. The Financing Originator will act
as subservicer of the Contracts.
Pursuant to the Amended and Restated Letter Agreement dated April 27, 1995
(the "LETTER AGREEMENT") among the Financing Originator (as assignee of PBCC),
Inter-Tel and certain affiliates of Inter-Tel, Inter-Tel will continue to bill
and collect collections on account of the Inter-Tel Contracts. Pursuant to the
Loan and Security Agreement dated as of November 1, 1989 (as amended, the "LOAN
AGREEMENT") among Triad and the Financing Originator, Triad will continue to
bill and collect collections on account of the Triad Contracts. No later than
the 20th day of each month, Triad is obligated to remit to the Servicer all
amounts received during the period commencing on the 21st day of the prior month
and ending on the 20th day of the current month from the End-Users under
non-defaulted Triad Contracts. Inter-Tel is obligated to pay to the Servicer no
later than the first day of each month, an amount equal to all payments
scheduled to have been made and all prepayments received, in each case during
the immediately preceding month by the End-Users under non-defaulted Inter-Tel
Contracts. The Servicer expects that the aggregate scheduled payments due to be
received by Inter-Tel and Triad during any monthly period will not exceed
$1,392,411. The Servicer, for the benefit of the Noteholders, will cause to be
established and maintained in the name of the Collateral Agent on behalf of the
Noteholders, with a Qualified Institution designated by the Servicer, a
segregated trust account within the corporate trust department of such Qualified
Institution (the "CASH COLLATERAL ACCOUNT"), bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of
the Noteholders. The Collateral Agent will, for the benefit of the Noteholders,
possess all right, title and interest in all funds on deposit from time to time
in the Cash Collateral Account and in all proceeds thereof. On the Closing Date,
the Servicer will deposit an amount equal to $1,640,227 (the "INITIAL CASH
COLLATERAL AMOUNT") in the Cash Collateral Account, which amount shall be equal
to the Cash Collateral Required Amount for the period from and including the
Series Cutoff Date through and including November 30, 1996.
Each month, the Servicer will deposit all amounts received from Triad and
Inter-Tel, respectively, in the Collection Account, in each case, within two
Business Days of the date of processing thereof. On each Determination Date, the
Servicer will calculate the Cash Collateral Required Amount for the current
Collection Period. On each Distribution Date, all amounts on deposit in the Cash
Collateral Account in excess of the Cash Collateral Required Amount for the
Collection Period immediately preceding the Collection Period during which such
Distribution Date occurs will be released to the Servicer. Upon the occurrence
of (i) an Insolvency Event with respect to either Triad or Inter-Tel, (ii) the
failure of either Triad or Inter-Tel to deliver to the Servicer the required
amounts described above on the due dates therefor or (iii) certain events of
default by Triad under the Loan Agreement or by Inter-Tel under the Letter
Agreement, the Collateral Agent will withdraw from the Cash Collateral Account
and deposit into the Collection Account the portion of the amounts on deposit in
the Cash Collateral Account attributable to Triad or Inter-Tel, as appropriate.
Neither the Seller, the Servicer nor any other party will be obligated to
replenish the Cash Collateral Account for any withdrawals therefrom. If,
however, the scheduled payments under any of the Triad Contracts or Inter-Tel
Contracts are, as a result of actions taken by the Servicer, increased and as a
result thereof the amounts then on deposit in the Cash Collateral Account are
less than the Cash Collateral Required Amount (after giving effect to such
increased payments), the Servicer shall on the immediately following
Distribution Date deposit the amount of such insufficiency into the Cash
Collateral Account. The Financing Originator has the right to terminate the
authority of each of Inter-Tel and Triad to bill and collect as described above
upon the occurrence of certain defaults specified in the Letter Agreement and
the Loan Agreement, respectively.
Pursuant to the Series 1996-3 Supplement, on any Determination Date,
the Servicer will have the right, upon 30-days prior written notice to the
Collateral Agent and the Rating Agency, to substitute for the Cash Collateral
Account a renewable letter of credit ("LETTER OF CREDIT") in the name of the
Collateral Agent and for the account of the Servicer. The short-term debt
obligations of the bank which issues the Letter of Credit must be rated not less
than A-1+ by the Rating Agency and the bank, and the Letter of Credit must at
all times be available in a minimum amount equal to the Cash Collateral Required
Amount for each applicable Collection Period. Upon issuance of a Letter of
Credit to the Collateral Agent, all amounts on deposit in the Cash Collateral
Account will be released to the Servicer. Pursuant to the Series 1996-3
Supplement, the Servicer will be required to maintain either the Cash Collateral
Account or a Letter of Credit, in each case meeting the foregoing requirements,
for so long as any Triad Contracts or Inter-Tel Contracts remain outstanding.
S-17
<PAGE> 18
No assurance can be given that the amounts on deposit in the Cash
Collateral Account for any Collection Period will at least equal the amounts
owed by Inter-Tel and Triad for such period as described above.
DELINQUENCY AND DEFAULT EXPERIENCE
Set forth below is certain information regarding the delinquency and loss
experience of Newcourt with respect to its portfolio of financing agreements
(including Contracts and other financing agreements that it previously sold but
continues to service) for transportation, construction, information technology,
communications, computer software, resources and commercial and industrial
equipment users. Information regarding the delinquency and loss experience of
the Prior Series Contracts for the eight-month period ended on October 31, 1996
is contained in the Monthly Reports for each calendar month in such period,
which Monthly Reports have been filed by Newcourt on Form 8-K under the Exchange
Act. The Servicer will provide without charge to any prospective purchaser of
the Series 1996-3 Class A Notes copies of such Monthly Reports. The Servicer may
be contacted at (416) 594-2400. There can be no assurance that the levels of
delinquency and loss experience on the Contracts will be comparable to that set
forth in the foregoing Monthly Reports or below.
DELINQUENCY EXPERIENCE (a)(b)(c)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, AVERAGE
-------------------------------------------------------- ---------------- --------------
1993 1994 1995 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Investment in Contracts .. $ 415,004,008 $ 611,863,249 $1,020,470,568 $1,646,495,630 $ 923,458,364
Delinquencies: (% of
Investment in Contracts)
31-90 Days ............... 0.25% 0.26% 2.42% 1.93% 1.21%
91+ Days ................. 0.06% 0.01% 0.26% 0.46% 0.20%
Total Delinquencies ...... 0.31% 0.28% 2.68% 2.39% 1.41%
</TABLE>
(a) Newcourt classifies accounts as delinquent at the time a payment (or a
portion thereof) remains unpaid 31 days or more following the date on
which such payment is due. The amount classified as delinquent is the sum
of future minimum payments under the financing agreements. Delinquent
accounts are written off in their entirety when a determination is made
that the account is uncollectible.
(b) The percentages in any column may not total due to rounding.
(c) Contracts payable in Canadian dollars have been converted to U.S. Dollars
at the exchange rate in effect on December 31, 1993, 1994 and 1995 and on
September 30, 1996, respectively.
LOSS EXPERIENCE (a)(b)(c)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, AVERAGE (b)
-------------------------------------------------------- ---------------- --------------
1993 1994 1995 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
LOSSES:
Average
Investment in
Contracts ..... $ 343,511,201 $ 502,162,207 $ 854,260,753 $1,433,303,467 $ 783,309,407
Gross Losses ... 1,709,121 4,332,452 6,035,281 17,224,308 8,760,649
Recoveries .... 891,237 3,200,891 5,716,447 14,517,046 7,291,159
Net Losses ..... 817,883 1,131,561 318,834 2,707,262 1,469,490
Net Losses as a
Percentage of
Investment in
Contracts ... 0.24% 0.23% 0.04% 0.25%(d) 0.19%
</TABLE>
(a) Figures for 1993, 1994, and 1995 are for the year ended. Figures for 1996
are for the nine months ended September 30, 1996.
(b) Average Investment in Contracts is the average of the Investment in
Contracts at the end of each quarter. Average investment in Contracts for
1993, 1994 and 1995 has been restated to exclude the wholesale
transportation portfolio.
(c) Contracts payable in Canadian dollars have been converted to U.S. Dollars
at the exchange rate in effect on December 31, 1993, 1994 and 1995 and on
September 30, 1996, respectively.
(d) The percentage for the nine-month period ended September 30, 1996 is
annualized.
S-18
<PAGE> 19
PREPAYMENTS
Set forth below is information regarding the sensitivity of the Notes to
changes in the rate of prepayment by the End-Users of Contracts. As stated in
the Prospectus, the rate of early terminations of Contracts due to Prepayments
is influenced by various factors over which Newcourt has no control. As a
result, no assurances are given regarding the rate of prepayments or payments on
the Contracts and no prediction can be made as to the actual rate of Prepayments
which will be experienced on the Contracts in the Contract Pool. See "Risk
Factors--Absence of Prepayment History" in the Prospectus.
The following chart sets forth the cumulative amount of Optional
Prepayments made in each of the corresponding years on all United States Dollar
denominated Contracts that Newcourt previously sold but continues to service
(including the Prior Series Contracts) ("USD CONTRACTS"), and the percentage
equivalent of a fraction the numerator of which is such cumulative amount of
Optional Prepayments and the denominator of which is the average of the
outstanding balances of USD Contracts as at the last day of each calendar
quarter (or portion thereof) in such year. No assurances are given that all such
Contracts would be Eligible Contracts; that the portfolio of Financed Items in
the Contract Pool at any date of determination would resemble the portfolio of
equipment from which the following information has been generated; or that the
prepayment experience for any particular Financed Item would resemble that of a
different Financed Item. As a result, and as stated in the Prospectus, no
assurance can be given that Prepayments (including Optional Prepayments) on the
Contracts will conform to the following historical information.
PREPAYMENT EXPERIENCE OF USD CONTRACTS FROM 1993 TO SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
AVERAGE CUMULATIVE
OUTSTANDING AMOUNT OF PREPAYMENT
YEAR PORTFOLIO BALANCE PREPAYMENTS RATE
- ----------------------------------- ------------------ --------------- ----------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
1993 .................... $ 40.45 $ 0.50 1.24%
1994 .................... $ 93.04 $ 0.68 0.73%
1995 .................... $130.14 $ 3.82 2.93%
September 30, 1996 ...... $285.03 $ 15.86 5.56%
</TABLE>
The following chart sets forth the percentage of the Initial Principal
Amount of the Class A Notes which would be outstanding on the Distribution Dates
set forth below assuming a CPR of 0%, 3%, 7% and 10%, respectively. Such
information is hypothetical and is set forth for illustrative purposes only. The
CPR ("CONDITIONAL PAYMENT RATE" or "CPR") assumes that a fraction of the
outstanding Contract Pool is prepaid on each Distribution Date, which implies
that each Contract in the Contract Pool is equally likely to prepay. This
fraction, expressed as a percentage, is annualized to arrive at the Conditional
Payment Rate for the Contract Pool. The CPR measures prepayments based on the
outstanding principal on the previous Distribution Date. The CPR 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 under the column 7% CPR corresponds to the expected amortization
schedule for the Series 1996-3 Class A Notes set forth herein under "Description
of the Series 1996-3 Notes--The Series 1996-3 Class A Notes".
PREPAYMENT TABLE
<TABLE>
<CAPTION>
DISTRIBUTION DATE PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING
- ----------------- ----------------------------------------------------
0% CPR 3% CPR 7% CPR 10% CPR
------ ------ ------ -------
<S> <C> <C> <C> <C>
Closing Date ....... 100.00% 100.00% 100.00% 100.00%
December 20, 1996 .. 97.86% 97.59% 97.21% 96.93%
March 20, 1997 ..... 91.46% 90.45% 89.08% 88.02%
June 20, 1997 ...... 84.85% 83.22% 81.00% 79.31%
September 20, 1997 . 77.62% 75.48% 72.61% 70.44%
December 20, 1997 .. 71.39% 68.82% 65.41% 62.87%
</TABLE>
S-19
<PAGE> 20
<TABLE>
<CAPTION>
DISTRIBUTION DATE PERCENTAGE OF INITIAL PRINCIPAL AMOUNT OUTSTANDING
- ----------------- --------------------------------------------------
0% CPR 3% CPR 7% CPR 10% CPR
------ ------ ------ -------
<S> <C> <C> <C> <C>
March 20, 1998 .............. 65.13% 62.25% 58.45% 55.63%
June 20, 1998 ............... 58.72% 55.62% 51.57% 48.60%
September 20, 1998 .......... 51.58% 48.40% 44.29% 41.30%
December 20, 1998 ........... 45.47% 42.26% 38.15% 35.18%
March 20, 1999 .............. 39.47% 36.32% 32.32% 29.46%
June 20, 1999 ............... 33.76% 30.73% 26.92% 24.22%
September 20, 1999 .......... 27.67% 24.89% 21.41% 18.96%
December 20, 1999 ........... 22.90% 20.34% 17.15% 14.93%
March 20, 2000 .............. 16.59% 15.30% 13.33% 11.35%
June 20, 2000 ............... 11.36% 10.26% 9.74% 8.04%
September 20, 2000 .......... 6.54% 5.67% 5.28% 3.87%
December 20, 2000 ........... 3.10% 2.42% 1.97% 0.76%
March 20, 2001 .............. 0.26% 0.00% 0.00% 0.00%
June 20, 2001 ............... 0.00% 0.00% 0.00% 0.00%
Weighted Average Life (years) 1.96 1.87 1.76 1.67
</TABLE>
THE INDENTURE TRUSTEE
Fleet National Bank, a national banking association, will be the Indenture
Trustee under the Indenture, and its principal offices are located at 777 Main
Street, 11th floor, Hartford, Connecticut 06115. For further information
regarding the Indenture Trustee, see "The Pooling Agreement Generally--The
Indenture Trustees" in the Prospectus.
THE ISSUER TRUSTEE
Chase Manhattan Bank Delaware (formerly known as Chemical Bank Delaware),
a Delaware state chartered bank, will be the Issuer Trustee under the Pooling
Agreement, and its principal offices are located at 1201 Market Street,
Wilmington Delaware 19801. The Issuer Trustee's liability in connection with the
issuance and sale of the Series 1996-3 Notes is limited solely to the express
obligations of the Issuer Trustee set forth in the Pooling Agreement and the
Indenture. For further information regarding the Issuer Trustee, see "The
Pooling Agreement Generally--The Issuer Trustee" in the Prospectus.
THE ISSUER
The Issuer is a Delaware business trust formed solely for the purpose of
effectuating the issuance of Series of Notes and the other transactions
described in the Prospectus. For further information regarding the Issuer see
"The Issuer" in the Prospectus.
DESCRIPTION OF THE SERIES 1996-3 NOTES
GENERAL
The Series 1996-3 Class A Notes will be issued pursuant to the terms of
the Indenture and secured pursuant to the terms of the Pooling Agreement. The
following summary describes certain terms of the Series 1996-3 Notes, the
Pooling Agreement and the Indenture. The summary does not purport to be complete
and is qualified in its entirety by reference to the provisions of the Series
1996-3 Notes, the Pooling Agreement, the Indenture and the Note Documents for
the Subordinated Notes. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Notes of any given Series set forth in the Prospectus, to
which description reference is hereby made. Fleet National Bank, a national
banking association, will be the Indenture Trustee under the Indenture.
S-20
<PAGE> 21
THE SERIES 1996-3 CLASS A NOTES
Payments of Interest. Interest on the outstanding principal amount of the
Series 1996-3 Class A Notes will be payable to the Series 1996-3 Class A
Noteholders on a monthly basis on each Distribution Date. Interest on the
outstanding principal amount of the Series 1996-3 Class A Notes will accrue at
the Class A Interest Rate from and including the first day of each Accrual
Period to and including the last day of such Accrual Period on the outstanding
principal amount of the Series 1996-3 Class A Notes as of the first day of such
Accrual Period. Interest will be payable on each Distribution Date for the
calendar month immediately preceding such Distribution Date. Interest due on any
Distribution Date but not paid on such Distribution Date will be due on the next
Distribution Date. Interest payments on the Series 1996-3 Class A Notes will
generally be derived from the Series Available Amount for the Series 1996-3
Notes. See "Description of the Notes--Allocations" in the Prospectus.
Payments of Principal. Principal of the Series 1996-3 Class A Notes will
be payable on each Distribution Date in an amount equal to the lesser of the
Class A Principal Payment Amount for such Series and for such Distribution Date
and the remaining outstanding principal amount of the Series 1996-3 Class A
Notes, to the extent Series Available Amounts for the Series 1996-3 Notes are
available therefor and to the extent of amounts otherwise payable on account of
the Subordinated Notes which are subordinated to the prior payment of the Class
A Principal Payment Amount for the Series 1996-3 Notes. See "Description of the
Notes--Allocations" in the Prospectus. In addition, principal of the Series
1996-3 Class A Notes will be payable on each Distribution Date in an amount
equal to the product of the Applicable Class Percentage for such Notes and the
Excess Spread Amount for such Series and for such Distribution Date, to the
extent of the Series Available Amounts for the Series 1996-3 Notes remaining
after payment of interest in respect of the Series 1996-3 Class A Notes,
interest in respect of the Series 1996-3 Class B Notes, the Class A Principal
Payment Amount for the Series 1996-3 Class A Notes, amounts required to be
deposited in the Reserve Account, interest in respect of the Series 1996-3 Class
C Notes, the Class B Principal Payment Amount for the Series 1996-3 Class B
Notes and the Class C Principal Payment Amount for the Series 1996-3 Class C
Notes, to the extent described in the Prospectus. See "Description of the
Notes--Allocations" in the Prospectus.
Payment of principal of the Subordinated Notes of all Series and the
payment of interest of the Class C Notes of all Series will be subordinated to
the payment of principal of the Series 1996-3 Class A Notes as described in the
Prospectus under "Description of the Notes--Allocations". The Series 1996-3
Class A Notes will mature and be due and payable on the Maturity Date. Prior
thereto, amounts to be applied in reduction of the outstanding Principal Amount
of any Series 1996-3 Class A Note, including the payment of the Class A
Principal Payment Amount for such Series payable on any Distribution Date, will
not be due and payable, although the failure of the Seller to remit any
Available Amounts (including Available Amounts to be used to make any such Class
A Principal Payment Amount) will, after the applicable grace period, constitute
an Event of Default. See "Description of the Notes--Events of Default" in the
Prospectus.
Assuming a CPR of 7%, the expected amortization schedule for the Series
1996-3 Class A Notes is set forth below.
<TABLE>
<CAPTION>
EXPECTED REPAYMENT
DISTRIBUTION DATE CLASS A BALANCE AMOUNT
- -------------------------------------------- ------------------ ------------------
<S> <C> <C>
Closing Date $188,172,873
December 20, 1996 182,930,850 $ 5,242,023
January 20, 1997 177,945,713 4,985,137
February 20, 1997 172,518,088 5,427,624
March 20, 1997 167,616,860 4,901,229
April 20, 1997 162,796,927 4,819,933
May 20, 1997 157,950,631 4,846,296
June 20, 1997 152,421,185 5,529,446
July 20, 1997 146,952,431 5,468,754
August 20, 1997 141,679,984 5,272,447
September 20, 1997 136,625,843 5,054,141
October 20, 1997 132,092,772 4,533,071
November 20, 1997 127,461,563 4,631,210
</TABLE>
S-21
<PAGE> 22
<TABLE>
<CAPTION>
EXPECTED REPAYMENT
DISTRIBUTION DATE CLASS A BALANCE AMOUNT
- -------------------------------------------- ------------------ ------------------
<S> <C> <C>
December 20, 1997 $123,092,858 $ 4,368,704
January 20, 1998 118,868,104 4,224,754
February 20, 1998 114,151,277 4,716,827
March 20, 1998 109,979,810 4,171,467
April 20, 1998 105,896,838 4,082,971
May 20, 1998 101,782,140 4,114,698
June 20, 1998 97,038,997 4,743,143
July 20, 1998 92,307,014 4,731,983
August 20, 1998 87,775,031 4,531,983
September 20, 1998 83,344,541 4,430,491
October 20, 1998 79,467,349 3,877,192
November 20, 1998 75,484,972 3,982,377
December 20, 1998 71,787,408 3,697,564
January 20, 1999 68,231,616 3,555,792
February 20, 1999 64,299,454 3,932,162
March 20, 1999 60,813,157 3,486,297
April 20, 1999 57,478,990 3,334,167
May 20, 1999 54,217,587 3,261,402
June 20, 1999 50,652,459 3,565,128
July 20, 1999 47,344,654 3,307,805
August 20, 1999 43,822,960 3,521,694
September 20, 1999 40,281,307 3,541,652
October 20, 1999 37,553,507 2,727,800
November 20, 1999 34,924,245 2,629,262
December 20, 1999 32,264,980 2,659,266
January 20, 2000 29,767,206 2,497,773
February 20, 2000 27,460,386 2,306,821
March 20, 2000 25,077,699 2,382,687
April 20, 2000 22,885,204 2,192,495
May 20, 2000 20,753,509 2,131,695
June 20, 2000 18,320,936 2,432,573
July 20, 2000 16,087,819 2,233,118
August 20, 2000 12,852,057 3,235,762
September 20, 2000 9,928,658 2,923,399
October 20, 2000 7,760,382 2,258,275
November 20, 2000 5,592,806 2,077,577
December 20, 2000 3,702,682 1,890,123
January 20, 2001 1,840,222 1,862,460
February 20, 2001 132,722 1,707,501
March 20, 2001 0 132,722
</TABLE>
Based upon the foregoing schedule of payments, the weighted average life
of the Series 1996-3 Class A Notes would be 1.76 years. Because the foregoing
schedule assumes a 7% CPR and that there will not be any Defaulted Contracts, no
assurances are given that the weighted average life of the Series 1996-3 Class A
Notes will not be longer or shorter than 1.76 years. See "Prepayment Table".
Following the occurrence of an Event of Default, and during the
continuance of a Restricting Event, principal payments will be made on the
Series 1996-3 Class A Notes in an amount equal to the remaining outstanding
principal amount thereof; provided, that if the Available Amount remaining to be
allocated to the payment of principal of the Series 1996-3 Class A Notes (as
described in "Description of the Notes--Allocations; Following an Event of
Default" and "--Allocations; Following
S-22
<PAGE> 23
a Restricting Event" in the Prospectus) is less than the full amount required to
be so allocated, such remaining Available Amount shall be allocated to each
Series of Class A Notes pro rata based on the outstanding principal amount
thereof.
Principal payments on the Series 1996-3 Class A Notes will generally be
derived from the Series Available Amount for the Series 1996-3 Notes remaining
after the payment of interest payments on the Series 1996-3 Class A Notes and
interest payments on the Series 1996-3 Class B Notes and from amounts otherwise
payable on account of the Subordinated Notes which are subordinated to the prior
payment of the Class A Principal Payment Amount for the Series 1996-3 Notes. See
"Description of the Notes--Allocations" in the Prospectus. Failure to have paid
in full the outstanding principal amount of any Series of Notes by their
respective Maturity Date will constitute an Event of Default under the
Indenture. See "Description of the Notes--Events of Default" in the Prospectus.
Prior to the Maturity Date, no principal amount will be considered due and
payable on the Series 1996-3 Class A Notes (and, therefore, no Event of Default
will arise from the failure to pay such amount) unless and to the extent funds
are available for the payment therefor.
Definitive Series 1996-3 Class A Notes. Upon the occurrence of certain
events discussed more fully in the Prospectus under the heading "Description of
the Notes--Definitive Class A Notes", the Indenture Trustee will be obligated to
issue Series 1996-3 Class A Notes in fully registered, certificated form.
THE SERIES 1996-3 CLASS B NOTES
General. The Series 1996-3 Class B Notes are not being offered or sold
hereunder. The Series 1996-3 Class B Notes will be sold in a private placement,
provided, that a certain amount of Class B Notes of all Series will continue to
be held by the Seller as described in "The Pooling Agreement Generally--The
Non-Transferrable Notes" in the Prospectus.
Payments of Interest. Interest on the outstanding principal amount of the
Series 1996-3 Class B Notes will be payable to the Series 1996-3 Class B
Noteholders on a monthly basis on each Distribution Date. Interest on the
outstanding principal amount of the Series 1996-3 Class B Notes will accrue at
the Class B Interest Rate from and including the first day of each Accrual
Period to and including the last day of such Accrual Period on the outstanding
principal amount of the Series 1996-3 Class B Notes as of the first day of such
Accrual Period. Interest due on any Distribution Date but not paid on such
Distribution Date will be due on the next Distribution Date. Interest payments
on the Series 1996-3 Class B Notes will generally be derived from the Series
Available Amount for the Series 1996-3 Notes. See "Description of the
Notes--Allocations" in the Prospectus.
Payments of Principal. Principal of the Series 1996-3 Class B Notes will
be payable on each Distribution Date in an amount equal to the lesser of the
Class B Principal Payment Amount for such Series and for such Distribution Date
and the remaining outstanding principal amount of the Series 1996-3 Class B
Notes, to the extent that Series Available Amounts for the Series 1996-3 Notes
are available therefor and to the extent of amounts otherwise payable on account
of the Class C Notes which are subordinated to the prior payment of the Class B
Principal Payment Amount for the Series 1996-3 Notes. See "Description of the
Notes--Allocations" in the Prospectus. In addition, principal of the Series
1996-3 Class B Notes will be payable on each Distribution Date in an amount
equal to the product of the Applicable Class Percentage for such Notes and the
Excess Spread Amount for such Series and for such Distribution Date, to the
extent of the Series Available Amount for the Series 1996-3 Notes remaining
after payment of interest in respect of the Series 1996-3 Class A Notes,
interest in respect of the Series 1996-3 Class B Notes, the Class A Principal
Payment Amount for the Series 1996-3 Class A Notes, amounts required to be
deposited in the Reserve Account, interest in respect of the Series 1996-3 Class
C Notes, the Class B Principal Payment Amount for the Series 1996-3 Class B
Notes and the Class C Principal Payment Amount for the Series 1996-3 Class C
Notes, to the extent described in the Prospectus. See "Description of the
Notes--Allocations" in the Prospectus.
Principal payments on the Series 1996-3 Class B Notes will generally be
derived from the Series Available Amount for the Series 1996-3 Notes remaining
after the payment of interest payments on the Series 1996-3 Class A Notes and
Series 1996-3 Class B Notes, amounts allocable to the Reserve Account and the
aggregate amount of principal payments allocable to the Series 1996-3 Class A
Notes and from amounts otherwise payable on account of the Class C Notes which
are subordinated to the prior payment of the Class B Principal Payment Amount
for the Series 1996-3 Notes. Payment of principal of and interest on the Class C
Notes of all Series will be subordinated to the payment of principal of the
Series 1996-3 Class B Notes as described in the Prospectus under "Description of
the Notes--Allocations". No principal payments on the Series 1996-3 Class B
Notes may be made to the extent that certain allocations have not been made in
full with respect
S-23
<PAGE> 24
to other Series of Class A Notes issued by the Trust. See "Description of the
Notes--Allocations" in the Prospectus. So long as any Series 1996-3 Class A
Notes are outstanding, in the event there is an Event of Default or a
Restricting Event has occurred and is then continuing, amounts otherwise to be
paid as principal on the Class B Notes of each Series (including the Series
1996-3 Class B Notes) will be paid as principal on the Class A Notes of each
Series (including the Series 1996-3 Class A Notes). See "Description of the
Notes--Allocations" in the Prospectus. Failure to have paid in full the
outstanding principal amount of any Series of Class B Notes by their respective
Maturity Date will constitute an Event of Default under the Indenture. See
"Description of the Notes--Events of Default" in the Prospectus. Prior to the
Maturity Date, no principal amount will be considered due and payable on the
Series 1996-3 Class B Notes (and, therefore, no Event of Default will arise from
the failure to pay such amount) unless and to the extent funds are available for
the payment therefor.
THE SERIES 1996-3 CLASS C NOTES
General. The Series 1996-3 Class C Notes are not being offered or sold
hereunder. The Series 1996-3 Class C Notes will be sold in a private placement,
provided, that a certain amount of Class C Notes of all Series will continue to
be held by the Seller as described in "The Pooling Agreement Generally--The
Non-Transferrable Notes" in the Prospectus.
Payments of Interest. Interest on the outstanding principal amount of the
Series 1996-3 Class C Notes will be payable to the Series 1996-3 Class C
Noteholders on a monthly basis on each Distribution Date, provided, that
following the occurrence of an Event of Default and during the continuance of a
Restricting Event, interest on the outstanding principal amount of the Series
1996-3 Class C Notes will be payable solely to the extent funds are available
therefor (after giving effect to distributions of Series Available Amounts in
accordance with the priorities described under "Description of the
Notes-Allocations; Following an Event of Default" and "--Allocations; Following
a Restricting Event" in the Prospectus). Interest on the outstanding principal
amount of the Series 1996-3 Class C Notes will accrue at the Class C Interest
Rate from and including the first day of each Accrual Period to and including
the last day of such Accrual Period on the outstanding principal amount of the
Series 1996-3 Class C Notes as of the first day of such Accrual Period. Interest
payments on the Series 1996-3 Class C Notes will generally be derived from the
Series Available Amount for the Series 1996-3 Notes. See "Description of the
Notes--Allocations" in the Prospectus. Interest due on any Distribution Date but
not paid on such Distribution Date will be due on the next Distribution Date
provided, that on each Distribution Date following the occurrence of an Event of
Default and arising during the continuance of a Restricting Event, any such
unpaid interest on the Series 1996-3 Class C Notes shall be payable solely to
the extent of Available Amounts therefor (after giving effect to distributions
of Available Amounts on such Distribution Date in accordance with the priorities
specified under "Description of the Notes-Allocations; Following an Event of
Default" and "--Allocations; Following a Restricting Event" in the Prospectus).
Any accrued interest which is not paid on any Distribution Date following the
occurrence of an Event of Default and arising during the continuance of a
Restricting Event, together with interest thereon at the Class C Interest Rate,
will be due on the Maturity Date; although such amounts may be paid on earlier
Distribution Dates as provided in the preceding sentence. So long as any Series
1996-3 Class A Notes are outstanding, in the event there is an Event of Default
or a Restricting Event has occurred and is then continuing, amounts otherwise to
be paid on the Class C Notes of each Series (including the Series 1996-3 Class C
Notes) will be paid as interest and principal on the Class A Notes of each
Series (including the Series 1996-3 Class A Notes).
Payments of Principal. Principal of the Series 1996-3 Class C Notes will
be payable on each Distribution Date in an amount equal to the lesser of the
Class C Principal Payment Amount for such Series and for such Distribution Date
and the remaining outstanding principal amount of the Series 1996-3 Class C
Notes, to the extent Series Available Amounts for the Series 1996-3 Notes are
available therefor. See "Description of the Notes--Allocations" in the
Prospectus.
Principal payments on the Series 1996-3 Class C Notes will be derived
solely from the Series Available Amount for the Series 1996-3 Notes remaining
after the payment of interest payments on the Class A Notes and Class B Notes of
all Series, amounts allocable to the Reserve Account, the aggregate amount of
principal payments allocable to all Series of Class A Notes and Class B Notes
and the payment of interest on the Class C Notes. No principal payments on the
Series 1996-3 Class C Notes may be made to the extent that certain allocations
have not been made in full with respect to other Series of Notes issued by the
Trust. See "Description of the Notes--Allocations" in the Prospectus. So long as
any Series 1996-3 Class A Notes or Series 1996-3 Class B Notes are outstanding,
as the case may be, in the event there is an Event of Default or a Restricting
Event has occurred and is then continuing, amounts otherwise to be paid as
principal of and interest on the Class C Notes of each Series (including the
Series 1996-3 Class C Notes) will be paid as principal on the Class A Notes, and
then
S-24
<PAGE> 25
Class B Notes, of each Series (including the Series 1996-3 Class A Notes and the
Series 1996-3 Class B Notes). See "Description of the Notes--Allocations" in the
Prospectus. Failure to have paid in full the outstanding principal amount of any
Series of Class C Notes by their respective Maturity Date will constitute an
Event of Default under the Indenture. See "Description of the Notes--Events of
Default" in the Prospectus. Prior to the Maturity Date, no principal amount will
be considered due and payable on the Series 1996-3 Class C Notes (and,
therefore, no Event of Default will arise from the failure to pay such amount)
unless and to the extent funds are available for the payment therefor.
EXCESS SPREAD AMOUNT
The excess of interest on the Series 1996-3 Class B Notes and the Series
1996-3 Class C Notes calculated at the Subordinated Note Rate less interest on
the Series 1996-3 Class B Notes and the Series 1996-3 Class C Notes at the Class
B Interest Rate and Class C Interest Rate, respectively, will constitute excess
spread. The excess spread available for distribution to Noteholders will be
reduced by prepayments, delinquencies and losses, if any, on the Contracts. On
any Distribution Date, the "EXCESS SPREAD AMOUNT" applicable to Series 1996-3
will be equal to the product of (i) the Series Allocation Percentage for Series
1996-3 and (ii) the portion of the Series Available Amounts for all Series
remaining after giving effect to the payment of amounts described in clauses
A-D(7) under "Description of the Notes--Allocations" in the Prospectus for each
Series. Because excess spread is available to cover delinquencies and losses on
the Contracts, no assurance can be given that an Excess Spread Amount will be
available for distribution to Noteholders on any Distribution Date.
OPTIONAL REDEMPTION
The Series 1996-3 Class A Notes may be redeemed in whole, but not in part,
on any Distribution Date, if the Seller exercises its option to redeem all
Series of Class A Notes and Class B Notes then outstanding. The Seller will have
the option to redeem all then outstanding Series of Class A Notes and Class B
Notes on any Distribution Date if, on such Distribution Date (after giving
effect to all payments otherwise to be made on such Distribution Date), the sum
of the then Aggregate Principal Amount of Class A Notes and Class B Notes of all
Series then outstanding is or would be less than 10% of the sum of the Initial
Principal Amount of the Class A Notes and Class B Notes of all Series as of
their respective Series Issuance Dates, as described in the Prospectus under
"Description of the Notes--Optional Termination". The redemption price for the
Series 1996-3 Class A Notes will be equal to the sum of the outstanding
principal amount thereof together with accrued interest thereon through the day
preceding the date of redemption. Following any redemption, the Series 1996-3
Class A Noteholders will have no further rights with respect to the Trust
Assets.
EVENTS OF DEFAULT; RESTRICTING EVENTS AND MINIMUM AMOUNT
The Events of Default and Restricting Events with respect to the Series
1996-3 Notes will include each of the events specified in the Prospectus under
"Description of the Notes--Events of Default" and "--Restricting Events",
respectively. For purposes of the Restricting Events, the "Minimum Amount" for
the Series 1996-3 Notes is $4,602,054.
As noted in the Prospectus (see "Description of the Notes--Events of
Default") an Event of Default under the Series 1996-3 Notes will include the
occurrence of an "Event of Default" under any indenture or note purchase
agreement pursuant to which any other Notes have been or may be issued. Such
"Events of Default" may be more restrictive than the Events of Default otherwise
applicable to the Series 1996-3 Class Notes. This cross-default feature is
intended to assure that the Class A Notes of all Series receive pro rata and
pari passu benefit of the subordination of all Subordinated Notes.
CERTAIN TAX CONSIDERATIONS
The federal income tax consequences to holders of the Series 1996-3 Class
A Notes is discussed in the Prospectus under "Certain Federal Income Tax
Matters". In addition to the discussion in the Prospectus with respect to
federal income tax consequences to holders of Series 1996-3 Class A Notes,
regulations were proposed on April 22, 1996 by the Internal Revenue Service,
which if enacted in their current form, could affect the procedures to be
followed by persons that are nonresident aliens, foreign corporations or
partnerships, and estates or trusts the income of which (regardless of its
source) is not includible in gross income for U.S. federal income tax purposes
(and, with respect to the tax year of any trust that begins after December 31,
1996, a trust whose administration is not subject to the primary supervision of
a United States court and which
S-25
<PAGE> 26
does not have one or more United States fiduciaries who have the authority to
control all substantial decisions of the trust) (such persons referred to as
"Non-U.S. Investors") in establishing such Non-U.S. Investor's status as a
Non-U.S. Investor for the purposes of the withholding rules. The proposed
regulations, if adopted in their present form, generally would be effective for
payments made after December 31, 1997. Thus, prospective investors in Series
1996-3 Class A Notes should consult their tax advisors concerning the potential
adoption of such proposed regulations and the potential effect on their
ownership of the Series 1996-3 Class A Notes. Special federal tax counsel to the
Seller, Skadden, Arps, Slate, Meagher & Flom LLP, has delivered to the Issuer
Trustee, the Collateral Agent, the Indenture Trustee and the Rating Agency, a
Tax Opinion with respect to the Series 1996-3 Class A Notes.
ERISA CONSIDERATIONS
Although there is little authority on the subject, the Seller believes
that the Class A Notes will be debt rather than equity interests and that assets
of the Trust will therefore not be deemed to be assets of investing Benefit
Plans under applicable Department of Labor regulations (the "PLAN ASSETS
REGULATION"). However, prohibited transactions under ERISA and the Code
nevertheless may occur by reason of the purchase of Class A Notes by Benefit
Plans with respect to which the Seller, the Trust, the Issuer Trustee, an
Indenture Trustee, the Collateral Agent, the Servicer or certain of their
affiliates may be considered to be parties in interest. Therefore, in order to
preclude such a prohibited transaction, the purchase by a Benefit Plan will be
permitted only in a transaction qualifying under a Department of Labor Class
Exemption or another applicable statutory or individual exemption.
By acceptance of a Series 1996-3 Class A Note, each Series 1996-3 Class A
Noteholder will be deemed to have represented and warranted that either (i) such
Series 1996-3 Class A Noteholder is not acquiring (or considered to be
acquiring) the Series 1996-3 Class A Note with the assets of an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") subject to Title 1 of ERISA or Section 4975 of the
Code or (ii) no non-exempt prohibited transaction will occur as a result of such
acquisition.
The Seller, the Issuer Trustee, each Indenture Trustee, the Collateral
Agent, the Servicer or certain of their affiliates may be considered to be
parties in interest or fiduciaries with respect to certain Benefit Plans.
Therefore, the acquisition or holding of a Class A Note by a Benefit Plan may be
a prohibited transaction under ERISA and the Code unless an exemption applies to
such acquisition and holding. Moreover, if the Trust Assets were deemed to
include plan assets subject to regulation under ERISA and the Code, transactions
involving the Trust might be prohibited unless an exemption is available. There
can be no assurance that an exemption would apply to each transaction involving
Trust Assets. Accordingly, each fiduciary of a Benefit Plan considering the
purchase of Series 1996-3 Class A Notes should consult its own counsel as to
whether the acquisition of such Notes would be a prohibited transaction, whether
Trust Assets would be considered plan assets, the consequences that would apply
if Trust Assets were considered plan assets subject to regulation under ERISA
and the Code and the availability of exemptive relief from the prohibited
transaction rules.
For additional information regarding ERISA matters, see "ERISA
Considerations" in the Prospectus.
RATING
It is a condition to issuance of the Series 1996-3 Class A Notes that they
be rated "AAA" by the Rating Agency. A rating is not a recommendation to
purchase, hold or sell Series 1996-3 Class A Notes, inasmuch as such rating does
not comment as to market price or suitability for a particular investor. The
rating of the Series 1996-3 Class A Notes addresses the likelihood of the timely
payment of interest on and the ultimate repayment of principal of the Series
1996-3 Class A Notes on the Maturity Date. There is no assurance that a rating
will remain for any given period of time or that a rating will not be lowered or
withdrawn entirely by the Rating Agency if in its judgment circumstances in the
future so warrant. The rating of the Series 1996-3 Class A Notes is based
primarily on the creditworthiness of the Contracts, the subordination provided
by the Subordinated Notes, the availability of amounts on deposit in the Reserve
Account and the Excess Spread Amount.
S-26
<PAGE> 27
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
dated December 9, 1996 (the "UNDERWRITING AGREEMENT") for the sale of the Series
1996-3 Class A Notes, the Seller has agreed to sell to each of the underwriters
(the "UNDERWRITERS") named below, and each of the Underwriters has severally
agreed to purchase from the Seller, the principal amount of the Series 1996-3
Class A Notes set forth opposite its name below.
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions therein, to purchase all the Series 1996-3 Class A
Notes offered hereby if any of such Series 1996-3 Class A Notes are purchased.
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT
TO BE PURCHASED
---------------------------
SERIES 1996-3 CLASS A NOTES
---------------------------
<S> <C>
First Union Capital Markets Corp. ....................... $62,724,290.84
Deutsche Morgan Grenfell Inc. ........................... $62,724,290.84
Lehman Brothers Inc. .................................... $62,724,290.84
</TABLE>
The Underwriters have advised the Seller that they propose initially to
offer the Series 1996-3 Class A Notes to the public at the price set forth on
the cover page hereof and to certain dealers at such price less a selling
concession not in excess of 0.20% of the initial principal amount of the Series
1996-3 Class A Notes. The Underwriters may allow and such dealers may reallow a
concession not in excess of 0.125% of the initial principal amount of the Series
1996-3 Class A Notes. After the initial public offering, the public offering
price and such concessions may be changed.
The Underwriting Agreement provides that the Seller and Newcourt Credit
Group Inc., jointly and severally, will indemnify the Underwriters against
certain civil liabilities, including liabilities under the Securities Act, or
contribute to payments the Underwriters may be required to make in respect
thereof.
In addition, First Union Capital Markets Corp. ("FIRST UNION") will act as
the private placement agent for the Seller in connection with the sale of the
Series 1996-3 Class B Notes and a portion of the Series 1996-3 Class C Notes and
will receive compensation therefor.
In the ordinary course of their business, the Underwriters and their
affiliates have engaged and may engage in commercial banking and investment
banking transactions with the Seller and its affiliates, including the Financing
Originator and the Servicer.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series 1996-3 Class
A Notes, including federal income tax consequences with respect thereto, as well
as other matters, will be passed upon for the Seller by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York. Certain legal matters relating to the
issuance of the Series 1996-3 Class A Notes will be passed upon for the
Underwriters by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York.
GENERAL INFORMATION
For more information regarding the principal characteristics of the Series
1996-1 Notes and the Series 1996-2 Notes, see Annex I to this Prospectus
Supplement. For more specific information with respect to the Series 1996-1
Notes or the Series 1996-2 Notes, any prospective investor should contact the
Servicer at (416) 594-2400. The Servicer will provide, without charge, to any
prospective purchaser of the Series 1996-3 Class A Notes, a copy of the
disclosure documents for any previous publicly issued Series.
S-27
<PAGE> 28
ANNEX I
The table below sets forth the principal characteristics of the previous
publicly issued Series.
<TABLE>
<CAPTION>
SERIES 1996-1 CLASS A NOTES
<S> <C>
Initial Principal Amount...................................................... $119,656,814
Interest Rate................................................................. 6.79%
Series Maturity Date.......................................................... August 20, 2003
Series Closing Date........................................................... April 15, 1996
Enhancement................................................................... Subordination of Class B Notes
and Class C Notes
Reserve Account
Excess Spread
SERIES 1996-2 CLASS A NOTES
Initial Principal Amount...................................................... $169,810,862
Interest Rate................................................................. 6.87%
Series Maturity Date.......................................................... June 20, 2004
Series Closing Date........................................................... September 17, 1996
Enhancement................................................................... Subordination of Class B Notes
and Class C Notes
Reserve Account
Excess Spread
</TABLE>
S-28
<PAGE> 29
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found.
<TABLE>
<S> <C>
Accrual Period ....................................................... 9
Addition ............................................................. 13
Addition Date ........................................................ 13
Business Day ......................................................... 8
Cash Collateral Account .............................................. 17
Cash Collateral Required Amount ...................................... 11
Collateral Agent ..................................................... 1
Conditional Payment Rate ............................................. 19
Contract Pool ........................................................ 7
Contracts ............................................................ 1,7
CPR .................................................................. 19
Distribution Date .................................................... 3,8
End-User ............................................................. 1
End-User Contracts ................................................... 1
Equipment ............................................................ 1
ERISA ................................................................ 26
Excess Spread Amount ................................................. 25
Financed Items ....................................................... 2
Financing Originator ................................................. 4
First Union .......................................................... 27
Indenture ............................................................ 1,5
Indenture Trustee .................................................... 1
Initial Cash Collateral Amount ....................................... 17
Initial Series 1996-3 Class A Principal Amount ....................... 4
Initial Series 1996-3 Class B Principal Amount ....................... 4
Initial Series 1996-3 Class C Principal Amount ....................... 5
Inter-Tel ............................................................ 11
Inter-Tel Contracts .................................................. 11
Issuer ............................................................... 1,4
Issuer Trustee ....................................................... 1
Letter Agreement ..................................................... 17
Letter of Credit ..................................................... 17
Loan Agreement ....................................................... 17
Minimum Deposit ...................................................... 10
New Issuance ......................................................... 13
Newcourt ............................................................. 1,4
Newcourt USA ......................................................... 4
NRC .................................................................. 1,4
PBCC ................................................................. 8,13
PBCC Contracts ....................................................... 8
Plan Assets Regulation ............................................... 26
Prior Series Contracts ............................................... 6
Rating Agency ........................................................ 11
Record Date .......................................................... 8
Redemption Price ..................................................... 10
Reserve Account ...................................................... 10
Secondary Contracts .................................................. 2
Seller ............................................................... 1
</TABLE>
S-29
<PAGE> 30
<TABLE>
<S> <C>
Series 1996-1 ADCB ................................................... 6
Series 1996-1 Class A Notes .......................................... 5
Series 1996-1 Class B Notes .......................................... 5
Series 1996-1 Class C Notes .......................................... 1,5
Series 1996-1 Contracts .............................................. 6
Series 1996-1 Notes .................................................. 5
Series 1996-1 Purchase Agreements .................................... 13
Series 1996-2 ADCB ................................................... 6
Series 1996-2 Class A Notes .......................................... 5
Series 1996-2 Class B Notes .......................................... 5
Series 1996-2 Class C Notes .......................................... 5
Series 1996-2 Contracts .............................................. 6
Series 1996-2 Notes .................................................. 5
Series 1996-2 Purchase Agreement ..................................... 13
Series 1996-3 ADCB ................................................... 6
Series 1996-3 Class A Noteholders .................................... 8
Series 1996-3 Class A Notes .......................................... 1,4
Series 1996-3 Class B Noteholders .................................... 8
Series 1996-3 Class B Notes .......................................... 1,4
Series 1996-3 Class C Noteholders .................................... 8
Series 1996-3 Class C Notes .......................................... 1,5
Series 1996-3 Contracts .............................................. 6
Series 1996-3 Noteholders ............................................ 8
Series 1996-3 Notes .................................................. 1,5
Series 1996-3 Purchase Agreement ..................................... 13
Series 1996-3 Subordinated Notes ..................................... 1
Series Closing Date .................................................. 9
Series Cutoff Date ................................................... 4
Series Supplement .................................................... 14
Servicer ............................................................. 1
Servicer Advance ..................................................... 11
Services ............................................................. 1
Servicing Fee ........................................................ 11
Software ............................................................. 1
Transferred Contracts ................................................ 6
Triad ................................................................ 11
Triad Contracts ...................................................... 11
Trust ................................................................ 1,4
Trust Assets ......................................................... 1
Underwriters ......................................................... 27
Underwriting Agreement ............................................... 27
USD Contracts ........................................................ 19
Vendor Notes ......................................................... 2
</TABLE>
S-30
<PAGE> 31
PROSPECTUS
NEWCOURT RECEIVABLES ASSET TRUST
ASSET BACKED NOTES
--------------
NEWCOURT RECEIVABLES CORPORATION
SELLER
--------------
NEWCOURT CREDIT GROUP INC.
SERVICER
--------------
The Asset Backed Notes (the "NOTES") described herein may be sold from
time to time in one or more series (each, a "SERIES"), in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "PROSPECTUS SUPPLEMENT"). The Notes of each
Series will be issued by Newcourt Receivables Asset Trust, a Delaware business
trust (the "TRUST"). The Trust will be formed pursuant to a Pooling, Collateral
Agency and Servicing Agreement (the "POOLING AGREEMENT") to be entered into
among Newcourt Receivables Corporation ("NRC"), as Seller, Newcourt Credit Group
Inc. ("NEWCOURT"), as Servicer, Fleet National Bank, as collateral agent (the
"COLLATERAL AGENT") and Chemical Bank Delaware, as issuer trustee (the "ISSUER
TRUSTEE").
(continued on next page)
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE
INFORMATION SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 15.
--------------
THE PROCEEDS OF THE ASSETS OF THE TRUST AND AMOUNTS ON DEPOSIT IN THE
RESERVE ACCOUNT ARE THE ONLY SOURCES OF PAYMENTS ON THE NOTES FOR
EACH SERIES. THE NOTES WILL NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF, AND ARE NOT INSURED OR GUARANTEED BY THE
ISSUER TRUSTEE, NEWCOURT CREDIT GROUP INC., NEWCOURT
RECEIVABLES CORPORATION OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of securities offered hereby
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is April 11, 1996.
<PAGE> 32
(continued from previous page)
The property of the Trust will include a pool of contracts ("CONTRACTS")
consisting of (i) conditional sale agreements, promissory notes with or without
related security agreements, operating and finance leases, installment payment
agreements, and similar types of financing agreements with end-users (each, an
"END-USER") of the Equipment, Software and Services described below (such
Contracts, "END-USER CONTRACTS") and meeting eligibility requirements specified
herein, and in each case with respect to certain information technology,
communications, commercial, industrial, transportation, resources and
construction equipment (the "EQUIPMENT"), certain computer software (the
"SOFTWARE") and related support and consulting services (the "SERVICES; together
with Equipment and Software, the "FINANCED ITEMS"), together with certain rights
of the Financing Originators (as hereinafter defined) under vendor finance
program agreements and vendor assignments with vendors of the Financed Items,
collections thereon due or received on and after the date (the "CUTOFF DATE")
set forth in the related Prospectus Supplement, the Equipment or a security
interest in the Equipment, as more fully described herein and, with respect to a
particular Series, in the related Prospectus Supplement, and (ii) limited
recourse promissory notes payable by vendors (such notes, "VENDOR NOTES") and
secured by the vendor's interest in End-User Contracts originated by such vendor
(End-User Contracts securing Vendor Notes being collectively referred to as
"SECONDARY CONTRACTS"), and by the Equipment related to such End-User Contracts.
The Class A Notes of each Series will be issued pursuant to a separate
Indenture (for each Series, the "APPLICABLE INDENTURE", and collectively for all
Series, the "INDENTURES") among the Issuer Trustee, the Collateral Agent and the
Indenture Trustee specified in the related Prospectus Supplement (for each
Series, the "APPLICABLE INDENTURE TRUSTEE", and collectively for all Series, the
"INDENTURE TRUSTEES"). The Class B Notes of each Series and the Class C Notes of
each Series will be issued pursuant to the supplement to the Pooling Agreement
for such Series (each, a "SUPPLEMENT"). The Notes of each Series will be secured
pursuant to the Pooling Agreement. Each Series issued by the Trust will consist
of three classes (each, a "CLASS") of Notes: the Class A Notes ("CLASS A
NOTES"), the Class B Notes ("CLASS B NOTES") and the Class C Notes ("CLASS C
NOTES"; the Class B Notes and the Class C Notes being sometimes referred to as
the "SUBORDINATED NOTES"). The right of the Class A Notes of a Series to receive
payments will be senior to the rights of the Subordinated Notes of all Series as
described herein and in the related Prospectus Supplement. Only the Class A
Notes will be offered hereby and by the related Prospectus Supplement.
Each Series of Notes may differ as to the timing of payment, interest rate or
amount of distributions in respect of principal or interest or both.
THE ONLY OBLIGATIONS OF THE SELLER OR OF NEWCOURT FINANCIAL USA INC. OR
NEWCOURT TRANSPORTATION USA INC., AS ORIGINATORS OR FINANCING ORIGINATORS OF
CONTRACTS WITH RESPECT TO A SERIES OF NOTES, WILL BE PURSUANT TO CERTAIN
REPRESENTATIONS AND WARRANTIES MADE BY EACH SUCH PARTY. NEWCOURT CREDIT GROUP
INC. WILL BE THE SERVICER FOR EACH SERIES. THE OBLIGATIONS OF THE SERVICER WILL
BE LIMITED TO ITS CONTRACTUAL SERVICING OBLIGATIONS UNDER THE POOLING AGREEMENT.
Each Series of Class A Notes will represent the right to receive on
each Distribution Date (as defined herein) an expected amount of payments of
principal, together with interest on the outstanding principal thereof, in the
manner described herein and in the related Prospectus Supplement. The remaining
outstanding principal amount of each Class A Note will be due in full on its
applicable Maturity Date (as defined herein). The rate of payment in respect of
principal on the Class A Notes will depend on the priority of payment of such
Class and the rate and timing of payments (including prepayments, defaults,
liquidations and repurchases of Contracts) on the Contracts. A rate of payment
on the Contracts lower or higher than that anticipated may affect the weighted
average life of the Class A Notes of a Series in the manner described herein.
There currently is no secondary market for the Notes offered hereby.
There can be no assurance that a secondary market for any Class of Notes will
develop or, if it does develop, that it will continue. No Class of Notes will be
listed on any securities exchange.
2
<PAGE> 33
Unless otherwise provided in the related Prospectus Supplement, each
Series of Class A Notes initially will be represented by global Notes registered
in the name of Cede & Co. ("CEDE"), the nominee of The Depository Trust Company
("DTC"). The interests of beneficial owners of each Series of Class A Notes will
be represented by book entries on the records of DTC and participating members
thereof. Definitive Class A Notes (as hereinafter defined) will be available
only under limited circumstances.
3
<PAGE> 34
AVAILABLE INFORMATION
NRC, as originator of the Trust, has filed with the Securities and
Exchange Commission (the "COMMISSION") on behalf of the Trust a Registration
Statement (together with all amendments and exhibits thereto, referred to herein
as the "REGISTRATION STATEMENT") under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), with respect to the Notes offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which is available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies
of the Registration Statement may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
REPORTS TO NOTEHOLDERS
Unless and until Definitive Class A Notes are issued, monthly,
quarterly and annual unaudited reports containing information concerning the
Contracts (including Secondary Contracts) will be prepared by the Servicer and
sent on behalf of the Trust only to Cede, as nominee of DTC and registered
holder of the Class A Notes. See "Description of the Notes--Book-Entry
Registration", "--Definitive Notes" and "--Reports to Noteholders". Such reports
will not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Trust will file with the Commission such
periodic reports as are required under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and the rules and regulations of the Commission
thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by NRC, on behalf of the Trust,
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to
the date of this Prospectus and prior to the termination of the offering of the
Notes offered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be part hereof from the date of filing of such documents. Any
statement contained herein or in a document deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained in any other
subsequently filed document that also is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Servicer will provide without charge to each person, including any
Noteholder, to whom a copy of this Prospectus is delivered, upon the written or
oral request of any such person, a copy of any of or all the documents
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference). Written requests for
such copies should be directed to Newcourt Credit Group Inc., BCE Place, 181 Bay
Street, Suite 3500, P.O. Box 827, Toronto, Ontario, Canada M5J 2T3, Attention:
Vice President--Treasurer.
4
<PAGE> 35
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Notes contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of such
Notes. Certain capitalized terms used in this Prospectus Summary are defined
elsewhere in this Prospectus. A listing of the pages on which some of such terms
are defined is found in the "Glossary".
GENERALLY APPLICABLE TERMS
Issuer............................ The Trust to be formed pursuant to the
Pooling Agreement will be the issuer of each
Series of Notes.
Seller............................ NRC, a Delaware corporation and a
wholly-owned subsidiary of Newcourt Credit
Group USA Inc., a Delaware corporation
("NEWCOURT USA"), which, in turn, is a
wholly-owned subsidiary of Newcourt. The
principal executive offices of the Seller
are located at Ten Almaden Boulevard, Suite
500, San Jose, California 95113.
Servicer.......................... Newcourt, an Ontario corporation. The
principal executive offices of the Servicer
are located at BCE Place, 181 Bay Street,
Suite 3500, P.O. Box 827, Toronto, Ontario,
Canada M5J 2T3.
Issuer Trustee.................... Chemical Bank Delaware. The principal
executive offices of the Issuer Trustee are
located at 1201 Market Street, Wilmington,
Delaware 19801.
Collateral Agent.................. Fleet National Bank. The principal executive
offices of the Collateral Agent are located
at 777 Main Street, 11th Floor, Hartford,
Connecticut 06115.
Financing Originators............. Newcourt Financial USA Inc. and Newcourt
Transportation USA Inc. (collectively, the
"FINANCING ORIGINATORS"), both of which are
wholly-owned subsidiaries of Newcourt USA
and are domiciled in the United States.
Trust Assets...................... The assets of the Trust ("TRUST ASSETS")
will include the following:
A. Contracts................... On the closing date (a "CLOSING DATE") for
the first Series of Notes (the "FIRST
CLOSING DATE"), the Seller will sell to the
Trust an initial pool of Contracts
originated or purchased by Newcourt
Financial USA Inc., one of the Financing
Originators, (the "ORIGINAL CONTRACTS"),
consisting of End-User Contracts and Vendor
Notes specified in a supplement (each, a
"SUPPLEMENT") to the Pooling Agreement.
Certain of the Original Contracts were
purchased by the Seller from Newcourt
Financial USA Inc. on December 28, 1995
under the Original Purchase Agreement. See
"Use of Proceeds". The Trust will be
entitled to all collections with respect to
the Original Contracts due on or after the
Cutoff Date specified in the related
Supplement. Subsequent to the First Closing
Date, the Seller at its option may, in
connection with the issuance of an
additional Series of Notes, sell to the
Trust from time to time prior to the date
which is eighteen months from the First
Closing Date (such date, the "COMMITMENT
TERMINATION DATE"), additional Contracts
originated by one or both of the Financing
Originators and purchased by the Seller
5
<PAGE> 36
under a Subsequent Purchase Agreement, as
specified in the related Supplement
("ADDITIONAL CONTRACTS"), subject to certain
terms and conditions described herein. Such
terms and conditions include, without
limitation, the satisfaction of certain
coverage tests, the delivery of certain
legal opinions and the receipt of
confirmation from the Rating Agency that
such addition will not result in a Ratings
Effect with respect to any outstanding
Series of Notes. In connection with each
transfer of Additional Contracts to the
Trust, a Supplement describing such
Additional Contracts will be executed by the
Seller, the Servicer, the Collateral Agent
and the Issuer Trustee. See "Description of
the Notes--New Issuances; Addition of Trust
Assets". The Trust will be entitled to all
collections with respect to the Additional
Contracts due on or after the Cutoff Date
specified in the related Supplement. The
Original Contracts and any Additional
Contracts will individually be referred to
as "CONTRACTS". The aggregate of the
Contracts, other than any Contracts which
have been re-assigned to the Seller as
provided herein or have been paid (or
prepaid) in full, will collectively comprise
the "CONTRACT POOL". Each Series will be
secured by all Collections on each Contract
in the Contract Pool as of the Cutoff Date
for such Contract specified in the
Prospectus Supplement related to the Closing
Date on which such Contract is transferred
to the Trust and in the Supplement executed
in connection with such transfer.
All of the Contracts to be included from
time to time in the Trust are conditional
sale agreements (each, a "CSA"), promissory
notes with (a "SECURED NOTE") or without (an
"UNSECURED NOTE") related security
agreements (each, a "SECURED OR UNSECURED
NOTE"), operating and finance leases (each,
a "LEASE"), installment payment agreements
(each, an "IPA") or other similar types of
financing agreements (each, a "FINANCING
AGREEMENT") covering Financed Items or in
the case of Vendor Notes, secured by
End-User Contracts which, in turn, cover
Financed Items. With respect to Leases, the
Seller will represent either (i) that such
Leases are "net leases" and contain "hell or
high water" provisions in favor of the
Seller, which unconditionally obligate each
applicable lessee (each, a "LESSEE") to make
all payments scheduled under its Lease,
without setoff or (ii) with respect to
certain Leases with Lessees that are
governmental entities or municipalities, if
such Lease is cancelled in accordance with
its terms, either (x) the Vendor (as
hereinafter defined) which assigned such
Lease to a Financing Originator is
unconditionally obligated to repurchase such
Lease from such Financing Originator for a
purchase price not less than the Discounted
Contract Balance of such Lease (as of the
date of purchase) plus interest thereon at
the weighted average of the Series Discount
Rates through the Distribution Date
following such date of repurchase or (y)
pursuant to the Applicable Purchase
Agreement, the Financing Originator which
sold such Lease to the Seller has
indemnified the Seller against such
cancellation in an amount equal to the
Discounted Contract Balance of such Lease
(as of the date of purchase) plus interest
thereon at the weighted average of the
Series Discount Rates through the
Distribution Date following such
cancellation less any amounts paid by the
Vendor pursuant to clause (x).
The Original Contracts will be or have been
selected by each applicable Financing
Originator from its respective portfolio of
CSAs, Secured or
6
<PAGE> 37
Unsecured Notes, Leases, IPAs, Financing
Agreements and Vendor Notes and will have
the characteristics specified in the Pooling
Agreement and described herein and in the
related Prospectus Supplement. Additional
Contracts will be required to meet such
criteria as may be required from time to
time by the Rating Agency and will have the
characteristics specified in the Pooling
Agreement and described herein and in the
related Prospectus Supplement; provided,
however, that Additional Contracts may be
added to the Contract Pool only if such
addition would not result in the Rating
Agency reducing or withdrawing its rating of
any Series of Class A Notes previously
issued. See "The Contracts" and "The Pooling
Agreement--Representations and Warranties".
B. Contract Property.......... All of the Seller's right, title and
interest (which may be limited to a security
interest) in the Original Purchase
Agreement, each Subsequent Purchase
Agreement and the Equipment, if any, subject
to each Lease and the security interest of
the Financing Originators in the Equipment,
if any, subject to each CSA, Secured Note,
IPA, Financing Agreement and Vendor Note
included in the Contract Pool will be
transferred to the Trust.
Equipment will be comprised primarily of
information technology, communications,
commercial, industrial, transportation,
resources and construction equipment. See
"The Contracts--Equipment". In the event the
party obligated to make payments under any
Contract (as to a Contract, the "OBLIGOR")
defaults in such payments, the Servicer will
follow its customary and usual collection
procedures, which may include the
repossession and sale of any related
Equipment on behalf of the Trust. Any
Recoveries from such sale shall constitute
Available Amounts (as hereinafter defined).
See "The Contracts--Equipment", "Credit and
Contract Servicing Procedures--Contract
Collections" and "Description of the
Notes--Defaulted Contracts".
Certain End-User Contracts cover Financed
Items other than Equipment, including
computer software ("SOFTWARE") and related
support and consulting services
(collectively, "SERVICES"). The Trust will
not have title to or a security interest in
such Software, nor will it own such
Services, and would not be able to realize
any value therefrom under a related Contract
upon a default by the Obligor. See "The
Contracts--Software" herein.
Each Series of Notes will be secured (to the
extent described herein) by all Contracts
and Applicable Security in the Contract
Pool.
C. Collection Account.......... A trust account will be established by the
Servicer in the name of and maintained by
the Collateral Agent (the "COLLECTION
ACCOUNT") into which all amounts that will
be collected for the Trust will be deposited
in accordance with the Pooling Agreement.
See "Description of the Notes--Collection
Account".
D. Reserve Account............. A trust account will be established by the
Servicer in the name of and maintained by
the Collateral Agent (the "RESERVE ACCOUNT")
and will be funded on each Series Closing
Date by Newcourt in an amount (the "MINIMUM
DEPOSIT") equal to the lesser of (x) 1% of
the Series ADCB for such Series and (y) the
amount by which amounts then on deposit
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therein are less than the Minimum Reserve
Balance. Thereafter, on each Distribution
Date amounts required to be maintained on
deposit in the Reserve Account will be
funded with Series Available Amounts for
such Series remaining after the payment of
interest and principal payments due on such
Series of Class A Notes and interest
payments due on such Series of Class B
Notes.
On each Distribution Date, amounts on
deposit in the Reserve Account will be
applied as described herein under
"Description of the Notes--Reserve Account".
As so described, on each Distribution Date
amounts on deposit in the Reserve Account in
excess of the Minimum Reserve Balance will
be paid first, to Newcourt and second, to
the holder of the Class C Notes.
E. Vendor Agreements .......... Each Financing Originator's vendor finance
program agreements (each, a "PROGRAM
AGREEMENT") are agreements with equipment
manufacturers, dealers and distributors or
computer software licensors or distributors
or other persons located in either the
United States or Canada ("VENDORS") which,
in each case, provide the Financing
Originator with the opportunity to finance
transactions relating to the acquisition or
use by an End-User of a Vendor's Equipment,
Software, Services or other products. Some
of these Program Agreements take the form of
a referral relationship which typically does
not include credit support from the Vendor.
All rights of the Financing Originators
under the Program Agreements with respect to
the Contracts are generally assignable and
will be so assigned by the Financing
Originator to the Seller and contributed by
the Seller to the Trust. Such rights may
include various forms of support to the
Financing Originators under such Program
Agreements including representations and
warranties by the Vendor in respect of the
End-User Contracts assigned by the Vendor to
the Financing Originator and related
Equipment, Software or Services, credit
support with respect to defaults by
End-Users and equipment repurchase and
remarketing arrangements upon early
termination of End-User Contracts upon a
default by the End-User. See "The
Contracts--Vendor Agreements".
In addition to the foregoing, each Financing
Originator may enter into assignment
agreements (each a "VENDOR ASSIGNMENT";
collectively, with the Program Agreements,
"VENDOR AGREEMENTS") from time to time with
Vendors pursuant to which individual
End-User Contracts originated by Vendors are
assigned to such Financing Originator,
rather than pursuant to a Program Agreement.
Each Vendor Assignment will either be made
with or without recourse against the Vendor
for End-User defaults and will generally
contain many, if not all, of the
representations, warranties and covenants
typically contained in Program Agreements,
as well as a Vendor repurchase requirement
in the event of a breach by the Vendor of
such representations, warranties or
covenants. Vendor Assignments typically do
not provide for any Vendor remarketing
support in the event of an End-User default.
Distribution Dates.............. The 20th day of each calendar month or, if
such day is either a Saturday, a Sunday or
any other day on which banking institutions
in New York, New York, Hartford,
Connecticut, Toronto, Ontario, Canada (or,
with respect to any Series, any additional
city specified in the related Supplement)
are authorized or obligated by law or
required by executive
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<PAGE> 39
order to be closed (each such day, a
"BUSINESS DAY"), the next following Business
Day (each such day, a "DISTRIBUTION DATE").
Indenture Trustees............... The Applicable Indenture Trustee under an
Indenture will be specified in the related
Prospectus Supplement.
Issuance of Additional Series.... The Pooling Agreement will provide that,
pursuant to any one or more Supplements, the
Seller may from time to time prior to the
Commitment Termination Date cause the Issuer
Trustee without the consent of Noteholders
(but subject to the conditions set forth
herein under "Description of the Notes--New
Issuances; Addition of Trust Assets") to
issue one or more new Series of Notes. Under
the Pooling Agreement, the Seller may
determine the terms of any new Series
without the consent of Noteholders. In
connection with the issuance of each
subsequent Series, the Seller will transfer
Additional Contracts to the Trust. Because
(i) each Series will have an interest in the
entire Contract Pool (and, therefore, each
subsequent Series will have an interest in
each of the Contracts (and related security)
transferred to the Trust in connection with
each prior Series of Notes) and (ii) an
Event of Default under a subsequent Series
will result in an Event of Default under an
existing Series, there can be no assurance
that the terms of any subsequent Series will
not have an impact on the timing and amount
of payments received by a Noteholder of
another Series previously issued by the
Trust. See "Risk Factors--Issuance of
Additional Series; Credit Quality of
Additional Contracts".
The Seller may offer any Series to the
public or other investors, in transactions
either registered under the Securities Act
or exempt from registration thereunder,
directly or through one or more underwriters
or placement agents, in fixed-price
offerings or in negotiated transactions or
otherwise. See "Plan of Distribution".
A new Series to be issued by the Trust may
be issued only upon satisfaction of the
conditions described herein under
"Description of the Notes--New Issuances"
including, among others, that (a) such
issuance will not result in a Ratings Effect
with respect to other Series of the Trust
and (b) the Seller shall have delivered to
the Collateral Agent and certain providers
of Credit Enhancement a certificate of an
authorized officer to the effect that, in
the reasonable belief of the Seller, such
issuance will not, based on the facts known
to such officer at the time of such
certification, cause an Event of Default or
a Restricting Event to occur with respect to
any Series of the Trust. See "Description of
the Notes-Restricting Events". The proceeds
from the issuance of an additional Series of
Notes will be used either (i) to purchase
Additional Contracts or (ii) to refinance
any other Series of Notes.
The occurrence of an Event of Default or a
Restricting Event under any Indenture will
constitute an Event of Default or
Restricting Event, respectively, for all
Series of Class A Notes.
The Notes...................... Each Series will consist of three Classes of
Notes: the Class A Notes, the Class B Notes
and the Class C Notes, in each case as
designated in the related Prospectus
Supplement. Each Series of Class A Notes
will be issued pursuant to a separate
Indenture (the "APPLICABLE INDENTURE")
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<PAGE> 40
among the Trust, the Collateral Agent and
the Applicable Indenture Trustee.
Class A Notes will be available for purchase
in denominations of $1,000 and integral
multiples thereof, and will be available in
book-entry form only. Class A Noteholders
will be able to receive Definitive Class A
Notes only in the limited circumstances
described herein. See "Certain Information
Regarding the Notes--Definitive Notes".
Each Series of Class A Notes may differ as
to the timing of payment, allocations of
loss, Interest Rate or amount of payments of
principal or interest, or as to which
payments of principal or interest may or may
not be made upon the occurrence of specified
events or on the basis of collections from
designated portions of the Contract Pool.
Interest....................... Each Class of Notes will have a stated
principal amount and will bear interest at a
specified rate or rates (with respect to
each Class of Notes, the "INTEREST RATE").
Each Class of Notes may have a different
Interest Rate, which may be a fixed,
variable or adjustable Interest Rate, or any
combination of the foregoing. Each
Prospectus Supplement will specify the
Interest Rate for the related Class of
Notes, or the initial Interest Rate and the
method for determining subsequent changes to
the Interest Rate.
Principal....................... Each Note will mature on the date (the
"MATURITY DATE") specified in the related
Prospectus Supplement. However, if all
payments on the Contracts are made as
scheduled, final payment with respect to the
Notes would occur prior to stated maturity.
Principal of the Class A Notes of a Series
will be payable on each Distribution Date in
an amount equal to the Class A Principal
Payment Amount (as defined herein) for such
Series and for such Distribution Date to the
extent of the Series Available Amounts (as
so defined) remaining after payment of
interest in respect of the Notes to the
extent described herein and to the extent of
amounts otherwise payable on account of the
Subordinated Notes of all Series. See
"Description of the Notes--Allocations".
Payment of principal of the Subordinated
Notes of all Series and payment of interest
of the Class C Notes of all Series will be
subordinated to the payment of principal of
the Class A Notes of each Series as
described under "Description of the
Notes--Allocations". The Notes will mature
and be due and payable on their respective
Maturity Dates. Prior thereto, amounts to be
applied in reduction of the outstanding
Principal Amount of any Note, including the
payment of the Class A Principal Payment
Amount payable on any Distribution Date,
will not be due and payable, although the
failure of the Seller to remit any Available
Amounts (as so defined) (including Available
Amounts to be used to make a Class A
Principal Payment Amount) will, after the
applicable grace period, constitute an Event
of Default. See "Description of the
Notes--Events of Default".
Credit Enhancement............... Credit enhancement with respect to the Class
A Notes of any Series will include
subordination of the payment of the
principal of the Subordinated Notes of each
Series and of all of the interest on the
Class C Notes of each Series, the allocation
of amounts on deposit in the Reserve Account
and, if so specified in the related
Prospectus Supplement, the availability
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<PAGE> 41
of an Excess Spread Amount. If and to the
extent specified in the related Prospectus
Supplement, credit enhancement with respect
to a Series of Notes (as to such Series,
"SERIES ENHANCEMENT") may also include any
one or more of the following:
overcollateralization, letters of credit,
credit or liquidity facilities, repurchase
obligations, a surety bond, insurance
policy, guaranty or similar forms of third
party payments or support, the establishment
of a cash collateral account, additional
reserve account, spread account or similar
cash deposits, the subordination of one or
more Classes of Notes of such Series, the
use of cross support features, or any
combination of the foregoing. Any form of
credit enhancement may have certain
limitations and exclusions from coverage
thereunder, which will be described in the
related Prospectus Supplement. The credit
enhancement, including any Series
Enhancement, available to a Class of Notes
is referred to as the "CREDIT ENHANCEMENT"
for such Series.
The type, characteristics and amount of the
Credit Enhancement with respect to any
Series or Class thereof will be determined
based on several factors, including the
characteristics of the Contracts comprising
the Trust Assets, and will be established on
the basis of the requirements of each
applicable Rating Agency. The available
amount of any Credit Enhancement with
respect to any Series or Class may be
limited, may not provide protections against
all risks of loss and will be subject to
reduction from time to time as described in
the Prospectus Supplement. See "Description
of the Notes--Credit Enhancement" and "Risk
Factors--Limited Nature of Rating".
Subordination................. The rights of the holders of Class B Notes
(the "CLASS B NOTEHOLDERS") and Class C
Notes (the "CLASS C NOTEHOLDERS"; together
with the Class B Noteholders, the
"SUBORDINATED NOTEHOLDERS") to receive the
payment of the principal of the Subordinated
Notes, the rights of the Class C Noteholders
to the payment of interest on the Class C
Notes and the right of Class B Noteholder to
the payment of interest on the Class B Notes
will be subordinated to the rights of the
Class A Noteholders (together with the
Subordinated Noteholders, collectively, the
"NOTEHOLDERS"), as described more fully
herein and in the related Prospectus
Supplement.
Pooling Agreement.............. With respect to each Series of Notes, the
Seller will purchase or, with respect to the
first Series of Notes, will have purchased
Contracts from one or both of the Financing
Originators pursuant to the Applicable
Purchase Agreement and the Seller will
transfer such Contracts to the Trust
pursuant to the Pooling Agreement. The Trust
will grant a security interest in the
Contracts so acquired and the other Trust
Assets to the Collateral Agent for the
benefit of the Indenture Trustees, the
Noteholders of each Series and certain
providers of Credit Enhancement (the
"SECURED PARTIES").
With respect to each Series of Notes, the
Servicer will be responsible for servicing,
managing and making collections on the
Contracts. Subject to certain exceptions,
the Servicer will deposit any collections on
the Contracts in a Collection Period into
the Collection Account within two business
days of the date such collections are
processed by or on behalf of the Servicer.
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<PAGE> 42
In certain limited circumstances, Newcourt
may resign or be removed as Servicer, in
which event either the Collateral Agent or,
so long as it meets certain eligibility
standards set forth in the Pooling
Agreement, a third-party servicer may be
appointed as successor servicer (Newcourt or
any such successor servicer is referred to
herein as the "SERVICER"). Newcourt is
permitted to delegate any of its duties as
Servicer to any of its affiliates and to
certain third-party service providers, but
any such delegation will not relieve the
Servicer of its obligations under the
Pooling Agreement or any Supplement. The
Servicer will receive servicing fees payable
with respect to each Series offered hereby
as servicing compensation from the Trust.
Mandatory Reassignment and Transfer
of Certain Contract Payments...... Pursuant to the Purchase Agreements,
Newcourt Financial USA Inc. has (in the case
of the Existing Contracts) or either or both
of the Financing Originators will sell to
the Seller Contracts, amounts due thereon
and the related Equipment, security
interests in Equipment and/or security
interests in Secondary Contracts and related
Equipment, as applicable (the Equipment
securing End-User Contracts and the End-User
Contracts (and related interests in
Equipment) securing Vendor Notes are
collectively referred to as the "APPLICABLE
SECURITY"), and, with respect to each
Financing Originator, will make certain
representations and warranties to the Seller
with respect to the Contracts sold by it and
the Secondary Contracts related to Vendor
Notes sold by it, including (i) that the
transfer to the Seller of such Contracts
constitutes a valid sale and transfer of
such Financing Originator's right, title and
interest therein and that such Contracts are
Eligible Contracts and (ii) that the
transfer to the Seller of such Financing
Originator's security interest in the
Secondary Contracts securing each Vendor
Note constitutes a valid sale and transfer
of such Financing Originator's right, title
and interest therein and that such Secondary
Contracts are Eligible Secondary Contracts.
Pursuant to the Pooling Agreement, the
Seller will sell to the Trust the
Transferred Assets (as hereinafter defined)
and the Seller's rights under the Purchase
Agreements and will make certain
representations and warranties with respect
to the Contracts, including (i) that the
transfer to the Trust of the Contracts
constitutes a valid sale thereof and (ii)
that the lien thereon granted by the Trust
in favor of the Collateral Agent constitutes
a valid and duly perfected lien. In
connection with the issuance of additional
Series of Notes, one or both of the
Financing Originators will transfer
Additional Contracts and related Equipment
(or Applicable Security) to the Seller, and
the Seller will transfer such Additional
Contracts and related Equipment (or
Applicable Security) to the Trust and the
Trust will grant a lien thereon in favor of
the Collateral Agent. Additional Contracts
generally will be subject to the same
representations and warranties by the
applicable Financing Originators and the
Seller as the Original Contracts. In the
event of a breach of any such representation
and warranty, under certain circumstances
and subject to certain conditions described
under "The Pooling Agreement
Generally--Representations and Warranties",
the Contracts with respect to which such
breach relates will be reassigned to the
Seller. The reassignment of Contracts will
be the Trust's only remedy for the breach by
a Financing Originator or the Seller of any
of such representations and
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<PAGE> 43
warranties. An Ineligible Contract
reassigned to the Seller is not required to
be replaced by the Seller with an Additional
Contract.
Servicer Advances............. The Servicer may advance Scheduled Payments
with respect to any Contract (a "SERVICER
ADVANCE") which were due in a Collection
Period and were not received by the
Determination Date following the end of the
Collection Period, to the extent that the
Servicer, in its sole discretion, expects to
recover the Servicer Advance from subsequent
payments on or with respect to the Contract.
The Servicer shall be entitled to
reimbursement of Servicer Advances from
subsequent payments on or with respect to
the Contract and from other Contracts
included in the Trust and, unless otherwise
described in the related Prospectus
Supplement, any cash collateral or reserve
account or other Credit Enhancement. See
"The Pooling Agreement Generally--Collection
and Other Servicing Procedures".
Optional Termination......... The Seller will have the option, subject to
certain conditions, to redeem (without
penalty) all, but not less than all, of the
Class A Notes and Class B Notes of all
Series on any Distribution Date on which the
then outstanding principal balance of the
Class A Notes and Class B Notes of all
Series (after giving effect to any payments
on such Distribution Date) is 10% or less
than the aggregate principal amount of the
Class A Notes and Class B Notes of all
Series as of the date of their respective
original issuance. In the event of such an
optional termination, the entire outstanding
principal amount of the Class A Notes and
Class B Notes of all Series, together with
accrued interest thereon, shall be payable
to the holders of the Class A Notes and
Class B Notes on such Distribution Date. The
Class C Notes of any Series will not be
subject to optional redemption prior to the
payment in full of the Class A Notes and
Class B Notes of each Series.
Tax Status................... Tax Counsel to NRC is of the opinion that
under existing law (i) the Class A Notes
will be characterized as indebtedness for
federal income tax purposes and (ii) the
Trust will not be treated as an association
taxable as a corporation or a publicly
traded partnership taxable as a corporation.
See "Certain Federal Income Tax Matters" and
"Certain State Income Tax Matters" for
additional information concerning the
application of federal and state tax laws.
ERISA Considerations.......... The Class A Notes may be eligible for
purchase by pension, profit-sharing or
other employee benefit plans, as well as
individual retirement accounts and certain
types of Keogh Plans (each, a "BENEFIT
PLAN"). See "ERISA Considerations" herein
and in the related Prospectus Supplement.
Rating of the Notes........... It will be a condition to the issuance of
each Series of Class A Notes that they be
rated no less than AA by Standard & Poor's
Ratings Services ("S&P") or Aa by Moody's
Investors Service, Inc. ("MOODY'S"), as
selected by the Seller (the rating agency or
agencies selected by the Seller to rate any
Series, the "RATING AGENCY"). The rating or
ratings condition applicable to the Class A
Notes of each such Series will be set forth
in the Prospectus Supplement.
A security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any
time by the
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<PAGE> 44
assigning Rating Agency. A security rating
should be evaluated independently of any
other rating. See "Risk Factors--Limited
Nature of Rating".
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<PAGE> 45
RISK FACTORS
MATURITY AND PREPAYMENT CONSIDERATIONS
Because the rate of payment of principal on the Notes will depend,
among other things, on the rate of payment on the Contracts, the rate of payment
of principal on the Notes, including the payment of any Class A Principal
Payment Amount when expected, cannot be assured. Payments on the Contracts will
include Scheduled Payments as well as partial and full prepayments (including
any Scheduled Payment (or portion thereof) which the Servicer has received, and
expressly permitted the related Obligor to make, in advance of its scheduled due
date and which will be applied on such due date (any such prepayment of a
Scheduled Payment, an "OPTIONAL PREPAYMENT"), and any and all cash proceeds or
rents realized from the sale, lease, re-lease or re-financing of Equipment under
a Prepaid Contract, net of liquidation expenses), payments upon the liquidation
of Defaulted Contracts, payments upon purchases by the Seller or Servicer as a
result of the breach of certain representations and warranties or covenants in
the Pooling Agreement and payments upon an optional termination of the Trust
(any such voluntary or involuntary prepayment, purchase or termination, a
"PREPAYMENT"). The occurrence of an Event of Default or a Restricting Event may
also result in the receipt by Class A Noteholders of principal payments on the
Class A Notes in excess of the expected Class A Principal Payment Amount and
result in earlier than anticipated repayment of the Class A Notes, and an Event
of Default or Restricting Event under any Indenture will constitute an Event of
Default or Restricting Event, respectively, for all Series of Class A Notes.
Noteholders may not be able to reinvest Distributions of principal at yields
equivalent to the yield on the Notes. See "Description of the Notes--Principal",
"--Additions of Trust Assets" and "--Restricting Events". 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 financed by the Noteholders (together with accrued interest thereon) so
long as the Trust is indemnified for any such insufficiency by the Vendor or
Financing Originator related to such Contract. See "Description of the
Notes--Prepaid Contracts".
The rate of early terminations of Contracts due to Prepayments,
including defaults, is influenced by various factors, including technological
change, changes in customer requirements, the level of interest rates, the level
of casualty losses, and the overall economic environment. Many prepayments occur
at the request of customers, whose motivations may not be known to NRC. No
assurance can be given that Prepayments (including Optional Prepayments) on the
Contracts will conform to any historical experience, and no prediction can be
made as to the actual rate of Prepayments which will be experienced on the
Contracts. Noteholders will bear all reinvestment risk resulting from the rate
of Prepayments on the Contracts.
ABSENCE OF SECONDARY MARKET TRADING
It is anticipated that, to the extent permitted, the underwriters of
any Series of Class A Notes offered hereby will make a market in such Notes, but
in no event will any underwriter be under an obligation to do so. There can be
no assurance that a secondary market will develop with respect to the Class A
Notes of any Series or, if such a secondary market does develop, that it will
provide Class A Noteholders with liquidity of investment or that it will
continue for the life of the Class A Notes.
ISSUANCE OF ADDITIONAL SERIES; CREDIT QUALITY OF ADDITIONAL CONTRACTS
It is anticipated that the Trust will from time to time issue more than
one Series. While the terms of any Series will be specified in a Supplement, the
provisions of a Supplement and, therefore, the terms of any Additional Series,
will not be subject to prior review by, or consent of, holders of the Notes of
any Series previously issued by the Trust. Such terms may include methods for
allocating collections, provisions creating different or additional security or
other Credit Enhancements and any other amendment or supplement to the Pooling
Agreement which is made applicable only to such Series. Such terms may also
include Events of Default in addition to those applicable to any other Series,
and an Event of Default under any Series will be an Event of Default under all
Series. The obligation of the Issuer Trustee to issue any new Series is subject
to the following conditions, among others: (i) the issuance will not result in
any Rating Agency reducing or withdrawing its rating of the Notes of any
outstanding Series (any such reduction or withdrawal is referred
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<PAGE> 46
to herein as a "RATINGS EFFECT"), and (ii) the Seller shall have delivered to
the Issuer Trustee and certain providers of Credit Enhancement a certificate of
an authorized officer to the effect that, in the reasonable belief of the
Seller, the issuance will not, based on the facts known to the officer at the
time of the certification, cause an Event of Default or a Restricting Event to
occur with respect to any Series. There can be no assurance, however, that the
terms of any subsequent Series will not affect the timing and amount of payments
received by a Class A Noteholder of another Series previously issued by the same
Trust. See "Description of the Notes--New Issuances".
In connection with each New Issuance the Seller expects to designate
Eligible Contracts that it has available as Additional Contracts to be conveyed
along with an interest in any related Equipment or Applicable Security to the
Trust for inclusion in the Contract Pool. Such Additional Contracts may include
CSAs, Secured or Unsecured Notes, Leases, IPAs, Financing Agreements and Vendor
Notes originated using criteria different from those which were applied to the
related Original Contracts because such CSAs, Secured or Unsecured Notes,
Leases, IPAs, Financing Agreements and Vendor Notes may have been originated at
a later date than the Original Contracts or were part of a portfolio of
operating and finance leases, installment purchase agreements or financing
agreements different from the portfolio from which the Original Contracts were
selected. Consequently, there can be no assurance that Additional Contracts will
be of the same credit quality as the Original Contracts or the Additional
Contracts previously included in the Trust. Moreover, Additional Contracts
designated at any time may be CSAs, Secured or Unsecured Notes, Leases, IPAs,
Financing Agreements and Vendor Notes which contain terms and conditions that
differ from the terms and conditions of the Contracts previously included in the
Trust, including lower periodic finance charges and other fees and charges,
which may have the effect of reducing the average yield on the Contract Pool.
See "The Pooling Agreement Generally--Representations and Warranties". In
addition, Additional Contracts designated at any time may contain greater
End-User, Vendor or geographic concentrations, or greater concentrations based
upon type or age of Equipment than the concentrations applicable to the Original
Contracts, which may have the effect of reducing the credit quality of the
Contract Pool. The designation of Additional Contracts will be subject to the
satisfaction of certain conditions described herein under "Description of the
Notes--New Issuances; Addition of Trust Assets", including that (i) such
Addition will not result in a Ratings Effect and (ii) the Seller shall have
delivered to the Issuer Trustee and certain providers of Credit Enhancement a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Seller, the Addition will not, based on the facts known to such
officer at the time of such certification, cause an Event of Default or a
Restricting Event to occur with respect to any Series. See "Description of the
Notes--New Issuances; Addition of Trust Assets" and "--Restricting Events".
There can be no assurance that the addition of Additional Contracts might not
affect the timing of payments received by Noteholders.
CERTAIN LEGAL ASPECTS
Transfer of Contracts. There are certain limited circumstances under
the Uniform Commercial Code (the "UCC") and applicable federal law in which
prior or subsequent transferees of Contracts or Secondary Contracts could have
an interest in such contracts with priority over the Trust's interest. In
addition, a lien on a Contract in favor of a third party arising subsequent to
the Closing Date on which such Contract is transferred to the Trust may have
priority over the interests of the Noteholders of each subsequently issued
Series in such Contract. In such event, because the proceeds of each Contract
would be shared pro rata among all outstanding Series of Notes, each Noteholder
of an outstanding Series (including each outstanding Series issued prior to the
creation of such lien) could be adversely affected thereby. See "Certain Legal
Aspects of the Contracts--Transfer of Contracts."
In addition, in the case of an End-User Contract (including a Secondary
Contract) that is a "true lease" of Equipment the cost of which exceeds the
discounted present value of the rental payments under such End-User Contract, a
Financing Originator or third party residual investor may, at its sole
discretion, advance to the Vendor the present value of all or a portion of the
anticipated residual value of the Equipment (the "RESIDUAL INVESTMENT") in
addition to funding the discounted present value of the rental payments due
under such End-User Contract. The Financing Originator may also assign its
interest in the Residual Investment, including any security interest in the
Equipment in respect of such Residual Investment (the "SUBORDINATED RESIDUAL
INTEREST"), to Residual Assignees (as hereinafter defined) or may retain such
interest itself. As a result, entities other than the Financing Originator may
have an interest in the Equipment related to a Contract or Secondary Contract.
Under each Applicable Purchase Agreement, each Financing Originator party
thereto has (in the case of the Existing Contracts) or will warrant to the
Seller, and under the Pooling Agreement, the Seller will warrant and covenant to
the Trust, that any Subordinated Residual Interest will be subordinated to the
interests
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of the Trust in such End-User Contract and the related Equipment and that any
Residual Assignee will bear the full risk of any deficiency in respect of the
Residual Investment as a result of prior satisfaction of the Trust's interest in
such End- User Contract and the related Equipment. See "The Contracts--Vendor
Agreements". The Residual Investment (other than a Guaranteed Residual
Investment) is not included in the Discounted Contract Balance of any Contract
and, therefore, is not financed with the proceeds of any Series of Notes
described herein.
Under each Vendor Agreement, the Vendor (i) has or will warrant to the
Financing Originator that the Contracts transferred thereunder will be
transferred free and clear of the lien of any third party and that the interests
in Secondary Contracts transferred thereunder will be transferred free and clear
of the lien of any third party and (ii) has or will also covenant that it will
not sell, pledge, assign, transfer or grant any lien on any Contract (or
Secondary Contract) transferred thereunder to a Financing Originator. Under each
Applicable Purchase Agreement, each Financing Originator party thereto has (in
the case of the Existing Contracts) or will warrant to the Seller and, under the
Pooling Agreement, the Seller will warrant to the Trust, that the Contracts and
security interests in Secondary Contracts transferred thereunder will be
transferred free and clear of the lien of any third party except for the
Subordinated Residual Interest of any Residual Assignee. Under each Applicable
Purchase Agreement, each Financing Originator party thereto has (in the case of
the Existing Contracts) or will covenant to the Seller and, under the Pooling
Agreement, the Seller will also covenant to the Trust, that it will not sell,
pledge, assign, transfer or grant any lien on any Contract or Secondary Contract
transferred to the Seller or the Trust except for (i) the Subordinated Residual
Interest of any Residual Assignee and (ii) the lien of any Vendor and of a
Financing Originator on Secondary Contracts securing a Vendor Note.
Interests in Vehicles. The transfer to the Seller of the Financing
Originators' security interest in vehicles securing certain Contracts or
ownership interest in vehicles subject to Leases and the transfer of such
interests by the Seller to the Trust is subject to state vehicle registration
laws. Due to the significant administrative burden and expense, the certificates
of title to the vehicles securing Contracts and to vehicles subject to Leases
will not identify the Trust as secured party or owner, as the case may be, of
such vehicles. There exists a risk in not identifying the Trust on the
certificate of title as the new secured party or owner that, through fraud or
negligence, a third party could acquire an interest in the vehicle superior to
that of the Trust. In addition, statutory liens for repairs or unpaid taxes may
have priority even over a perfected security interest in the vehicles.
Risk of Ineffective Sale. Each Financing Originator will either (i)
originate Contracts or (ii) acquire End-User Contracts from a Vendor, which
Contracts will be transferred to the Seller. In addition to the foregoing,
certain of the Existing Contracts were acquired by Newcourt from various Vendors
and sold to Newcourt Financial USA Inc. pursuant to an Asset Transfer Agreement
dated December 20, 1995 (the "ASSET TRANSFER AGREEMENT"). The Discounted
Contract Balance of such Contracts (the "PURCHASED CONTRACTS") represents less
than 8% of the Discounted Contract Balance of all Existing Contracts. If the
acquisition of an End-User Contract by a Financing Originator is treated as a
sale of such Contract from the applicable Vendor to such Financing Originator,
except in certain limited circumstances, such Contract would not be part of such
Vendor's bankruptcy estate and would not be available to such Vendor's
creditors. If a Vendor became a debtor in a bankruptcy case and, in the case of
End-User Contracts acquired as described in clause (ii) above, if an unpaid
creditor of such Vendor or a representative of creditors of such Vendor, such as
a trustee in bankruptcy, or such Vendor acting as a debtor-in-possession, were
to take the position that the sale of such Contracts to the Financing Originator
was ineffective to remove such Contracts from such Vendor's estate (for
instance, that such sale should be recharacterized as a pledge of Contracts to
secure borrowings of such Vendor), then delays in payments under the Contracts
to the Trust could occur or, should the court rule in favor of such creditor,
representative or Vendor, reductions in the amount of such payments could
result. If the transfer of End-User Contracts to the Financing Originators as
described in clause (ii) above is recharacterized as a pledge, a tax or
government lien on the property of the pledging Vendor arising before the
Contracts came into existence may have priority over such Financing Originator's
interest in the Contracts. No law firm will, in connection with any offering of
the Notes, express any opinion as to the issues discussed in this paragraph. See
"Certain Legal Aspects of the Contracts--Certain Matters Relating to
Bankruptcy".
Further, if the acquisition of a Purchased Contract by Newcourt
Financial USA Inc. is treated as a sale of such Contract from Newcourt to such
Financing Originator, except in certain limited circumstances, such Contract
would not be part of Newcourt's bankruptcy estate and would not be available to
Newcourt's creditors. If Newcourt became a debtor in a bankruptcy case then, in
the case of Purchased Contracts, if the transfer thereof pursuant to the Asset
Transfer Agreement is not treated as a sale, such Contract would be available to
satisfy claims against Newcourt. Special Canadian counsel to Newcourt has
delivered on the Bridge Closing Date a reasoned legal opinion that, based on the
assumptions and qualifications contained therein, under the laws of the Province
of Ontario and the federal laws of
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Canada creditors of Newcourt could not look successfully to the Purchased Assets
to satisfy a claim which they may have against the Seller, whether before or
after a bankruptcy or insolvency of the Seller, or in any proceeding instituted
by or against the Seller under the Bankruptcy and Insolvency Act (Canada) or the
Companies' Creditors Arrangement Act (Canada).
In each Applicable Purchase Agreement, each Financing Originator party
thereto has (in the case of the Existing Contracts) or will warrant to the
Seller that the conveyance of the Contracts by it to the Seller thereunder is a
valid sale and transfer of such Contracts to the Seller. In addition, each
Financing Originator and the Seller will treat the transactions described herein
as a sale of the Contracts to the Seller and each Financing Originator will take
all actions that are required under applicable law to perfect the Seller's
ownership interest in the Contracts sold by it and the Seller's security
interest in the Secondary Contracts securing Vendor Notes sold by it. See
"Certain Legal Aspects of the Contracts--Transfer of Contracts". Notwithstanding
the foregoing, if a Financing Originator became a debtor in a bankruptcy case
and an unpaid creditor of such Financing Originator or a representative of
creditors of such Financing Originator, such as a trustee in bankruptcy, or such
Financing Originator acting as a debtor-in-possession, were to take the position
that the sale of Contracts to the Seller was ineffective to remove such
Contracts from such Financing Originator's estate (for instance, that such sale
should be recharacterized as a pledge of Contracts to secure borrowings of such
Financing Originator), then delays in payments under the Contracts to the Trust
could occur or, should the court rule in favor of such creditor, representative
or Financing Originator, reductions in the amount of such payments could result.
If the transfer of Contracts to the Seller is recharacterized as a pledge, a tax
or government lien on the property of the pledging Financing Originator arising
before the Contracts came into existence may have priority over the Seller's
interest in the Contracts. See "Certain Legal Aspects of the Contracts--Certain
Matters Relating to Bankruptcy". If the transactions contemplated herein are
treated as a sale of Contracts to the Seller, except in certain limited
circumstances, the Contracts would not be part of any Financing Originator's
bankruptcy estate and would not be available to such Financing Originator's
creditors.
In a recent decision, Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948
(10th Cir. 1993), the United States Court of Appeals for the Tenth Circuit held
that, under the UCC, accounts sold by a debtor remain property of the debtor's
estate under Section 541 of the Bankruptcy Code. In the event of a bankruptcy of
a Financing Originator, or, in the case of Contracts originated by a Vendor and
purchased by a Financing Originator, a bankruptcy of a Vendor, and a
determination by a court that the sale of the Contracts to the Seller or to the
Financing Originator, respectively, should be recharacterized as a pledge of
such Contracts to secure a borrowing, not as a "true sale," including as a
result of the application by a court of the Octagon court's reasoning to a
Financing Originator's sale of Contracts to the Seller or to a Vendor's sale of
Contracts to a Financing Originator, delays in distributions on Notes, and
possible reductions in the amount of distributions, could occur.
The Seller will warrant in the Pooling Agreement, among other things,
(i) that the conveyance of the Contracts to the Trust is a valid sale of the
Contracts to the Trust and (ii) that the security interest thereon granted by
the Trust in favor of the Collateral Agent is a valid and duly perfected
security interest, and will take all actions that are required under applicable
law to perfect the Trust's and the Collateral Agent's respective interests in
the Contracts and the Secondary Contracts securing Vendor Notes sold by it.
Nevertheless, if the Seller were to become a debtor in a bankruptcy case and an
unpaid creditor of the Seller or a representative of creditors of the Seller,
such as a trustee in bankruptcy, or the Seller acting as a debtor-in-possession,
were to take the position that the sale of such Contracts to the Trust was
ineffective to remove such Contracts from the Seller's estate (for instance,
that such sale should be recharacterized as a pledge of Contracts to secure
borrowings of the Seller), then delays in payments under the Contracts to the
Trust could occur or, should the court rule in favor of such creditor,
representative or Seller, reductions in the amount of such payments could
result. If the transfer of Contracts to the Trust is recharacterized as a
pledge, a tax or government lien on the property of the Seller arising before
the Contracts came into existence may have priority over the Noteholders'
interest in the Contracts. See "Certain Legal Aspects of the Contracts--Certain
Matters Relating to Bankruptcy".
If the transactions contemplated herein are treated as a sale of
Contracts, except in certain limited circumstances, the Contracts would not be
part of the transferor's estate and would not be available to such transferor's
creditors.
Risk of Rejection of "True Leases". A bankruptcy trustee or debtor in
possession under the United States Bankruptcy Code (Title 11 U.S.C. Section 101
et seq.) (the "BANKRUPTCY CODE") has the right to elect to assume or reject any
executory contract or unexpired lease which is considered to be a "true lease"
(and not a financing) under applicable
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<PAGE> 49
law. Any rejection of such a contract or lease would constitute a breach of such
contract or lease, as applicable, as of the day preceding the commencement of
the applicable bankruptcy case, entitling the nonbreaching party to a
pre-petition claim for damages.
Certain End-User Contracts will be "true leases" and thus subject to
rejection by the lessor under the Bankruptcy Code. Any such End-User Contract
originated by a Financing Originator or acquired by a Financing Originator in a
transaction whereby such Financing Originator is the "lessor" thereunder, will
be subject to rejection by such Financing Originator, as debtor in possession,
or by such Financing Originator's bankruptcy trustee. Upon any such rejection
Scheduled Payments under such rejected End-User Contract may terminate and the
Noteholders may be subject to losses if the Credit Enhancement, if any, and
security interests in the related Equipment are insufficient to cover the
losses. In addition, any End-User Contract which is a "true lease" originated by
a Vendor and transferred to a Financing Originator in a transaction whereby such
Vendor continues to be the "lessor" thereunder (such as a transfer by a Vendor
to a Financing Originator of a security interest in such End-User Contract or a
transfer by a Vendor to a Financing Originator of an interest in the right to
payments only under any such End-User Contract), will be subject to rejection by
such Vendor, as debtor in possession, or by such Vendor's bankruptcy trustee.
Upon any such rejection Scheduled Payments under such rejected End-User Contract
may terminate and the Noteholders may be subject to losses if the Credit
Enhancement, if any, and security interests in the related Equipment are
insufficient to cover the losses.
There can be no assurance as to the exact amount of the Discounted Contract
Balance of End-User Contracts in the Contract Pool at any date that are or might
be "true leases". The Seller will, however, represent as of each Cut-Off Date
that, in the Seller's reasonable judgment, the Discounted Contract Balance of
End-User Contracts in the Contract Pool that are "true leases" does not exceed
10% of the ADCB of the Contract Pool as of such date.
Insolvency of the Seller or the Trust. Certain restrictions have been
imposed on the Seller and the Trust and certain other parties to the
transactions described herein which are intended to reduce the risk of an
insolvency proceeding involving the Seller or the Trust. These restrictions
include incorporating the Seller as a separate, special purpose company pursuant
to a certificate of incorporation containing certain restrictions on the nature
of its business. Additionally, the Seller may commence a voluntary case or
proceeding under any bankruptcy or insolvency law, or cause the Trust to
commence a voluntary case or proceeding under any bankruptcy or insolvency law,
only upon the affirmative vote of all its directors, including its independent
directors, as long as the Seller is solvent and does not reasonably foresee
becoming insolvent. The Seller's certificate of incorporation requires that the
Seller have at all times at least one independent director. In addition, the
Seller has no intent to file, and Newcourt and Newcourt USA have represented
that they have no intent to cause the filing of, a voluntary application under
the insolvency laws with respect to the Seller, as long as the Seller is solvent
and does not reasonably foresee becoming insolvent. However, no assurance can be
given that insolvency proceedings involving either the Seller or the Trust will
not occur. In the event the Seller becomes subject to insolvency proceedings,
the Trust, the Trust's interest in the Trust Assets and the Trust's obligation
to make payments on the Notes might also become subject to such insolvency
proceedings. In the event of insolvency proceedings involving the Trust, the
Trust's interest in the Trust Assets and the Trust's obligation to make payments
on the Notes would become subject to such insolvency proceedings. No assurance
can be given that insolvency proceedings involving Newcourt USA or either
Financing Originator would not lead to insolvency proceedings of either, or
both, of the Seller or the Trust. In either such event, or if an attempt were
made to litigate any of the foregoing issues, delays of distributions on the
Notes, possible reductions in the amount of payment of principal of and interest
on the Notes and limitations (including a stay) on the exercise of remedies
under the Indentures and the Pooling Agreement could occur, although the
Noteholders would continue to have the benefit of the Collateral Agent's
security interest in the Trust Assets under the Pooling Agreement.
The right of the Collateral Agent, as a secured party under the Pooling
Agreement for the benefit of the Noteholders, to foreclose upon and sell the
Trust Assets is likely to be significantly impaired by applicable bankruptcy
laws, including the automatic stay pursuant to Section 362 of the Bankruptcy
Code, if a bankruptcy proceeding were to be commenced by or against the Trust,
and possibly the Seller, before or possibly even after the Collateral Agent has
foreclosed upon and sold the Trust Assets. Under the bankruptcy laws, payments
on debts are not made and secured creditors are prohibited from repossessing
their security from a debtor in a bankruptcy case or from disposing of security
repossessed from such a debtor, without bankruptcy court approval. Moreover, the
bankruptcy laws generally permit the debtor to continue to retain and to use
collateral even though the debtor is in default under the applicable debt
instruments, provided generally that the secured creditor has the right to seek
"adequate protection". The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the
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security from any diminution in the value of the collateral as a result of the
use of the collateral by the debtor during the pendency of the bankruptcy case.
In view of the lack of a precise definition of the term "adequate protection"
and the broad discretionary powers of a bankruptcy court, it is impossible to
predict whether or to what extent the holders of the Notes would be compensated
for any diminution in value of the Trust Assets. Furthermore, in the event a
bankruptcy court determines that the value of the Trust Assets is not sufficient
to repay all amounts due on the Notes, the Noteholders would hold secured claims
only to the extent of the value of the Trust Assets to which the holders are
entitled, and unsecured claims with respect to such shortfall. The bankruptcy
laws do not permit the payment or accrual of post-petition interest, costs and
attorneys' fees during a debtor's bankruptcy case unless, and then only to the
extent, the claims are oversecured.
Insolvency of the Vendors. In the event a Vendor under a Vendor Note
becomes subject to insolvency proceedings, the Secondary Contracts and other
Applicable Security for such Vendor Note as well as such Vendor's obligation to
make payments on such Vendor Note would also become subject to such insolvency
proceedings. In such event, delays of distributions on the Notes, possible
reductions in the amount of payment of principal of and interest on the Notes
and limitations (including a stay) on the exercise of remedies under the
Indentures, the Pooling Agreement and the Note Documents could occur, although
the Noteholders would continue to have the benefit of the Collateral Agent's
security interest in the Vendor Notes and Applicable Security therefor under the
Pooling Agreement.
The right of the Collateral Agent, as secured party under the Pooling
Agreement for the benefit of the Noteholders, to foreclose upon and sell any
Secondary Contracts or Applicable Security is likely to be significantly
impaired by applicable bankruptcy laws, including the automatic stay pursuant to
Section 362 of the Bankruptcy Code, if a bankruptcy proceeding were to be
commenced by or against a Vendor under a Vendor Note, before or possibly even
after the Collateral Agent has foreclosed upon and sold such Secondary Contracts
or Applicable Security. Under the bankruptcy laws, payments on debts are not
made and secured creditors are prohibited from repossessing their security from
a debtor in a bankruptcy case or from disposing of security repossessed from
such a debtor, without bankruptcy court approval. Moreover, the bankruptcy laws
generally permit the debtor to continue to retain and to use collateral even
though the debtor is in default under the applicable debt instruments, provided
generally that the secured creditor has the right to seek "adequate protection".
The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the
security from any diminution in the value of the collateral as a result of the
use of the collateral by the debtor during the pendency of the bankruptcy case.
In view of the lack of a precise definition of the term "adequate protection"
and the broad discretionary powers of a bankruptcy court, it is impossible to
predict whether or to what extent the holders of the Notes would be compensated
for any diminution in value of the Secondary Contracts. Furthermore, in the
event a bankruptcy court determines that the value of the Secondary Contracts is
not sufficient to repay all amounts due on the related Vendor Notes, the
Noteholders would hold secured claims in a Vendor bankruptcy only to the extent
of the value of the Secondary Contracts to which the holders are entitled, and
unsecured claims with respect to such shortfall. The bankruptcy laws do not
permit the payment or accrual of post-petition interest, costs and attorneys'
fees during a debtor's bankruptcy case unless, and then only to the extent, the
claims are oversecured.
Loss in Event of Sale of Contracts Upon Seller Bankruptcy. If a
conservator, receiver or liquidator of the Seller was appointed or if certain
other events relating to the bankruptcy, insolvency or receivership of the
Seller were to occur (an "INSOLVENCY EVENT"), then an Event of Default would
occur with respect to each Series and, pursuant to the terms of the Pooling
Agreement, new Additional Contracts would not thereafter be transferred to the
Trust and, assuming the Trust was not then a debtor in a bankruptcy case, the
Collateral Agent would sell the Contracts, thereby causing early termination of
the Trust and a loss to the Class A Noteholders if the sum of (i) the proceeds
of the sale allocable to the Class A Noteholders and (ii) the proceeds of any
collections on the Contracts in the Collection Account allocable to the Class A
Noteholders is insufficient to pay the Class A Noteholders in full. In addition,
certain events relating to the bankruptcy of the Servicer will be Restricting
Events and Additional Contracts would not thereafter be transferred to the
Trust. See "Certain Legal Aspects of the Contracts--Transfer of Contracts" and
"--Certain Matters Relating to Bankruptcy".
Risk of Realization of Contract Amount Upon Bankruptcy or Sale.
Application of Federal and state bankruptcy and insolvency laws in the event of
bankruptcy of End-Users could affect the interests of the Noteholders in the
Contracts and Secondary Contracts if such laws result in any such contracts
being written off as uncollectible or result in delay in payments due on any
Contracts. See "Description of the Notes--Defaulted Contracts" and "Certain
Legal Aspects of the Contracts--Certain Matters Relating to Bankruptcy". In
addition, application of federal and state bankruptcy and
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insolvency laws in the event of bankruptcy of Vendors could affect the interests
of the Noteholders in the Vendor Notes and Secondary Contracts if such laws
result in any such Vendor Notes or Secondary Contracts being written off as
uncollectible or result in delay in payments due on any such Vendor Notes or
Secondary Contracts. See "--Insolvency of the Vendors". State laws impose
requirements and restrictions relating to foreclosure sales and obtaining
deficiency judgments following such sales. In the event that the Noteholders
must rely on repossession and disposition of Equipment to recover amounts due on
Defaulted Contracts, such amounts may not be realized because of the application
of these requirements and restrictions. Other factors that may affect the
ability of the Noteholders to realize the full amount due on a Contract or a
Secondary Contract include the failure to file financing statements to perfect
the Financing Originator's, Seller's, Issuer Trustee's or the Collateral Agent's
security interest, as applicable, in the Equipment or other Applicable Security
and the depreciation, obsolescence, damage or loss of any item of Equipment. As
a result, the Noteholders may be subject to delays in receiving payments and
losses if the Credit Enhancement, if any, is insufficient to cover the delayed
payments and losses.
Certain UCC Considerations. Certain states have adopted a version of
Article 2A of the UCC ("ARTICLE 2A"), which purports to codify many provisions
of existing common law. Although there is little precedent regarding how Article
2A will be interpreted, it may, among other things, limit enforceability of any
"unconscionable" lease or "unconscionable" provision in a lease, provide a
lessee with remedies, including the right to cancel the lease contract, for
certain lessor breaches or defaults, and may add to or modify the terms of
"consumer leases" and leases in which the lessee is a "merchant lessee".
However, in each Applicable Purchase Agreement, each Financing Originator party
thereto has (in the case of the Existing Contracts) or will represent that (i)
no End-User Contract is a "consumer lease" as defined in Section 2A-103(1)(e) of
the UCC; and (ii) to the best of its knowledge, each End-User has accepted the
Equipment leased to it and, after reasonable opportunity to inspect and test,
has not notified such Financing Originator of any defects therein. Article 2A,
moreover, recognizes typical commercial lease "hell or high water" rental
payment clauses and validates reasonable liquidated damages provisions in the
event of lessor or lessee defaults. Article 2A also recognizes the concept of
freedom of contract and permits the parties in a commercial context a wide
degree of latitude to vary from the provisions of the law.
Recharacterization of Certain Assignments. Certain Vendor Assignments
and certain assignments executed under various Program Agreements (each, a
"PROGRAM ASSIGNMENT") provide that the Financing Originator has recourse to the
related Vendor for all or a portion of the losses the Financing Originator may
incur as a result of a default under the End-User Contracts sold under such
Vendor Assignment or Program Assignment. In the event of a Vendor's bankruptcy,
a bankruptcy trustee, a creditor or the Vendor as debtor in possession might
attempt to characterize sales to the Financing Originators pursuant to such
Vendor Assignments or Program Assignments as loans to the Vendor from the
Financing Originator secured by the Contracts sold thereunder. If such an
attempt is successful, such Vendor Assignment or Program Assignment would be
subject to the risks described herein for Vendor Notes. In such case the
Contracts sold under such Vendor Assignment or Program Assignment would
constitute Secondary Contracts under the recharacterized Vendor Assignment or
Program Assignment.
LIMITED NATURE OF RATING
Any rating assigned to the Notes of a Series or a Class by a Rating
Agency will not, unless otherwise specified in the Prospectus Supplement with
respect to such Series or Class, address the likelihood that the principal of
any Notes of such Series or Class will be paid on a scheduled date or will be
prepaid. In addition, any such rating will not address the possibility of the
occurrence of an Event of Default or Restricting Event with respect to any such
Series or Class or the possibility of the imposition of U.S. withholding tax
with respect to non-U.S. Noteholders. Further, the available amount of any
Credit Enhancement with respect to any such Series or Class may be limited, may
not provide protection against all risks of loss and will be subject to
reduction from time to time as described herein and, if any Additional Series
Enhancement is provided for such Series, in the Prospectus Supplement. The
rating of the Notes of a Series or Class will not be a recommendation to
purchase, hold or sell the Notes, and such rating will not comment as to the
marketability of the Notes, any market price or suitability for a particular
investor. There is no assurance that any rating will remain for any given period
of time or that any rating will not be lowered or withdrawn entirely by a Rating
Agency if in such Rating Agency's judgment circumstances so warrant. In the
event that the rating initially assigned to any Note is subsequently lowered for
any reason, no person or entity is obligated to provide any additional Credit
Enhancement.
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The reduction, suspension or withdrawal of the ratings of the Notes will not, in
and of itself, constitute an Event of Default or a Restricting Event.
CONTROL OVER TRUST ASSETS BY HOLDERS OF ALL SERIES
The Trust Assets and the exercise of rights and remedies under the
Pooling Agreement with respect thereto will be subject, in most circumstances as
long as any Class A Notes remain outstanding, to the control of Class A
Noteholders of all Series holding not less than 66-2/3% of the Aggregate
Principal Amount of all Class A Notes (the "REQUIRED PERCENTAGE"). Such control
will include the ability, subject to certain limitations, following an Event of
Default under any Indenture to direct the Collateral Agent in the exercise of
all rights and remedies under the Pooling Agreement, including the foreclosure
of the lien of the Pooling Agreement. The Class A Noteholders of any Series may
not hold sufficient Class A Notes to constitute the Required Percentage.
EQUIPMENT OBSOLESCENCE
Technological change could affect the Noteholders. For example, to the
extent that technological change results in increased prepayment activity, it
may increase Prepayments of the Contracts. See "--Maturity and Prepayment
Considerations" and "The Contracts--Equipment", "--Leases" and "--Installment
Payment Agreements and Financing Agreements".
In the event a Contract becomes a Defaulted Contract at any time when
no funds are available from a Credit Enhancement, if any, the only source of
payment for such amounts will be the income and proceeds from the disposition of
any related Equipment and a deficiency judgement, if any, against the Obligor
under the Defaulted Contract. Since the market value of the Equipment may
decline faster than the Discounted Contract Balance, the Servicer may not
recover the entire amount due on the Contract and might not receive any
Recoveries on the Equipment. Certain types of Equipment also may be subject to
sudden, significant declines in value because of technological advances. See
"The Contracts--Equipment" herein.
NO INTEREST IN SOFTWARE OR SERVICES
Certain Contracts will relate not to Equipment but rather to Software
or Services that are not owned by the Financing Originators and in which no
related interest will be transferred to the Trust. See "The Contracts".
Accordingly, if any such Contract becomes a Defaulted Contract, the Trust will
not realize any proceeds from the related Software or Services from which to
satisfy any related outstanding Scheduled Payments.
NONRECOURSE OBLIGATIONS
The Notes. The Notes represent obligations of the Trust only and do not
represent interests in or recourse obligations of the Seller, the Servicer, any
Financing Originator or any affiliate thereof. Consequently, Noteholders must
rely solely upon the Contracts, any related Equipment and other Applicable
Security, and the Credit Enhancement, if any, for the payment of principal of,
and interest on, the Notes. If the Credit Enhancement has been reduced to zero
value and the amounts due on the Contracts in the Contract Pool and the
Recoveries in respect of any Defaulted Contracts are insufficient to make
payments on the Notes, no other assets will be available for the payment of the
deficiency. See "The Seller" and "Description of the Notes--Credit Enhancement".
The Vendor Notes. The Vendor Notes are, by their terms, payable solely
from the proceeds of the Secondary Contracts securing such Vendor Notes, and
generally do not represent recourse obligations of the Vendor (except that
Secondary Contracts may be covered by such Vendor's UNL Pool or other forms of
Vendor recourse). Consequently, Noteholders must rely solely upon the Secondary
Contracts and any other Applicable Security, if any, for the payment of
principal of, and interest on, the related Vendor Notes. As noted above (see
"--Certain Legal Aspects; Risk of Rejection of 'True Leases'"), any Secondary
Contract which is a "true lease" originated by a Vendor will be subject to
rejection by such Vendor, as debtor in possession, or by such Vendor's
bankruptcy trustee. Upon any such rejection
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Scheduled Payments under such rejected Secondary Contract may terminate and the
Noteholders may be subject to losses if the Credit Enhancement, if any, and
security interests in the related Equipment are insufficient to cover the
losses. Further, as noted under "--Risk of Ineffective Sale" a tax or government
lien on the property of the pledging Vendor arising before a Secondary Contract
came into existence may have priority over the Financing Originator's interest
in such Secondary Contract. See "Certain Legal Aspects of the Contracts--Certain
Matters Relating to Bankruptcy". If the Credit Enhancement has been reduced to
zero value and the amounts due on the Contracts in the Contract Pool and the
Recoveries in respect of any Defaulted Contracts are insufficient to make
payments on the Notes, no other assets will be available for the payment of the
deficiency. See "The Seller" and "Description of the Notes--Credit Enhancement."
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THE CONTRACTS
Pursuant to the Pooling Agreement the Seller will sell the Original
Contracts to the Trust on the First Closing Date. Subsequent to the First
Closing Date, the Seller at its option may from time to time prior to the
Commitment Termination Date sell to the Trust Additional Contracts, subject to
certain conditions described herein. See "Description of the Notes--New
Issuances; Addition of Trust Assets". The Trust will be entitled to all
collections on account of the Contracts in the Contract Pool and related
Equipment and Applicable Security, except for (i) collections on deposit in the
Collection Account or otherwise received by the Servicer on or with respect to
the Contract Pool or related Equipment, which collections are attributable to
any taxes, fees or other charges imposed by any governmental authority, and (ii)
collections representing reimbursements of insurance premiums or payments for
certain services that were not financed by the Financing Originator, and (iii)
any proceeds from the sale or other disposition of Equipment in excess of the
difference between (x) the Discounted Contract Balance of the related Contract
as of the applicable Cutoff Date, over (y) the present value as of the
applicable Cutoff Date of all amounts actually received by the Trust in respect
of such Contract, discounted monthly at the applicable Series Discount Rate
(amounts described in clauses (i), (ii) and (iii), "EXCLUDED AMOUNTS") due on or
after the applicable Cutoff Date for such Contracts.
The Financing Originators originate asset-based financings by providing their
services to specific segments of the vendor asset finance market through
Newcourt's offices in the United States. Newcourt and its subsidiaries
specialize in providing asset-based financing programs for transportation and
construction equipment users, information technology and communication equipment
users, computer software users, resources equipment users, and commercial and
industrial equipment users.
END-USER CONTRACTS
The following discussion describes the End-User Contracts (including
End-User Contracts which are Secondary Contracts). All of the End-User Contracts
to be included from time to time in the Trust are CSAs, Leases, Secured or
Unsecured Notes, IPAs and Financing Agreements in respect of Equipment, Software
and Services. There is no limit on the number of Contracts in the Contract Pool
which may consist of any of the foregoing types. Each Contract is required,
however, to be an Eligible Contract as of the related Cutoff Date. The
Prospectus Supplement delivered in connection with each Series of Notes will set
forth, in tabular form, the percentage of the ADCB of the Contract Pool which,
as of the date set forth therein, consists of each of the foregoing types of
Contracts.
Conditional Sale Agreements
The Financing Originators offer financing for Equipment under CSAs
assigned to them by Vendors. It is expected that most of the CSAs in the
Contract Pool will consist of Newcourt's standard, pre-printed forms used in
financing transportation and construction Equipment. The CSA sets forth the
description of each Financed Item and the schedule of installment payments.
Generally, loans under CSAs are fixed rate and are for a one to five year term.
Payments under CSAs generally are due monthly. CSA terms (i) provide for a grant
by the End-User thereunder of a security interest in any related Equipment
(which security interest is assigned by the Vendor to a Financing Originator),
(ii) may allow prepayment of the obligation upon payment, where allowed by
applicable state law, of an additional prepayment fee, (iii) require the
End-User to maintain the Equipment, keep it free and clear of liens and
encumbrances and pay all taxes related to the Equipment, (iv) restrict the
modification or disposal of the Equipment without the seller's, or its
assignee's, consent, (v) include a disclaimer of warranties, (vi) include the
End-User's indemnity against liabilities arising from the use, possession or
ownership of the Equipment, (vii) include the End-User's absolute (except as
provided in clause (ii)) and unconditional obligation to pay the installment
payments thereunder and (viii) include specifically identifiable events of
default and remedies therefor. The CSA also requires each End-User to maintain
insurance, the terms of which may vary. The terms of a CSA may be modified at
its inception at the End-User's request. Such modifications must either be
approved by the Financing Originator's legal department and certain levels of
management before the Financing Originator will agree to accept an assignment of
the CSA from a Vendor or the Vendor must indemnify the Financing Originator
against any losses or damages it may suffer as a result of such modifications.
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Leases
The Financing Originators, either directly or by assignment from
Vendors, offer financing of Equipment, Software and Services under Leases. Each
Lease is generally written under a master lease agreement (each an "MLA") which
contains the general terms and conditions of the transaction. Specific terms and
conditions, such as descriptions of the specific Equipment, Software and
Services being leased or financed and the schedule of related rental payments,
are contained in a supplement or schedule to the MLA (each an "MLA SUPPLEMENT"),
which is signed by the End-User as lessee, and either the Vendor or a Financing
Originator, as lessor. The MLA Supplement incorporates the MLA by reference, and
is treated by the Financing Originator as a separate Lease. Each Lease is
originated in the ordinary course of business by either a Financing Originator
or a Vendor (and assigned to a Financing Originator pursuant to a Vendor
Agreement).
The initial terms of the Leases in a Contract Pool generally range from
one to five years. Each Lease provides for the periodic payment by the End-User
of rent in advance or arrears, generally monthly or quarterly. Such periodic
payments represent the amortization, generally on a level basis, of the total
amount that an End-User is required to pay throughout the term of a Lease.
The Leases to be included in the Contract Pool are "net leases" under
which the End-User assumes responsibility for the Financed Items, including
operation, maintenance, repair, insurance or self-insurance, return of any
Equipment at the expiration or termination of the Lease and the payment of all
sales and use and property taxes relating to the Financed Items during the Lease
term. The End-User further agrees to indemnify the lessor for any liabilities
arising out of the use or operation of the Financed Items. In most cases, the
lessor is also authorized to perform the End-User's obligations under the Lease
at the End-User's expense, if it so elects, in cases where the End-User has
failed to perform. In addition, the Leases 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 a Financing
Originator is the lessor, the Lease contains no express or implied warranties
with respect to the Financed Items other than a warranty of quiet enjoyment. If
a Vendor is the lessor, the Lease or a related agreement may contain certain
representations and warranties with respect to the Financed Items 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 (which would include a
Financing 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 or to
self-insure against such risks, if approved in advance by the Financing
Originator.
The Leases include both "true leases" and leases intended for security
as defined in Section 1-201(37) of the UCC. Under a "true lease," the lessor
bears the risk of ownership (although the risk of loss of the Equipment is
passed to the End-User under the Leases), takes any tax benefits associated with
the ownership of depreciable property under applicable law and no title is
conferred upon the lessee. The lessee under a "true lease" has the right to the
temporary use of property for a term shorter than the economic life of such
property in exchange for payments at scheduled intervals during the lease term
and the lessor retains a significant "residual" economic interest in the leased
property. End of lease options for "true leases" include purchase or renewal at
fair market value. 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 MLA
Supplement, but generally such terms provide for the purchase of the Equipment
at a prestated price, which may be nominal. The inclusion of "true leases" in
the Contract Pool will have no federal income tax impact on Holders since the
Notes are treated as debt for federal income tax purposes. See "Certain Federal
Income Tax Matters." However, "true leases" are treated differently under the
Bankruptcy Code from leases intended for security. See "Certain Legal Aspects of
the Contracts--Certain Matters Relating to Bankruptcy."
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. Under certain MLAs, the End-User may assign its rights and
obligations under the Lease, but only upon receiving the prior written consent
of the lessor, or may relocate the Equipment upon giving the lessor prompt
written notice of such relocation. The right to grant or deny such consent or to
receive such written notice will be exercised by the Servicer
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pursuant to the authority delegated to it in the Pooling Agreement. Certain
Leases permit the End-User to substitute substantially identical leased
Equipment for leased Equipment scheduled to be returned to the lessor under the
Lease.
While the terms and conditions of the Leases do not generally permit
cancellation by the End-User, certain Leases may be modified or terminated
before the end of the Lease term. Modifications to a Lease term or early Lease
terminations may be permitted by a Vendor, with the consent of a Financing
Originator, and are generally associated with additional financing opportunities
from the same End-User. End-Users may also arrange to purchase Equipment during
the term of a Lease for an amount generally equal to or in excess of the present
value of the remaining rental payments under the Lease plus the anticipated
market value of the related Equipment as of the end of the Lease term. In some
circumstances, early termination of a Lease may be permitted in connection with
the acquisition of new technology requiring the replacement of the Equipment. In
such cases, the related Equipment is returned to the Vendor and an amount
generally equal to the present value of the remaining rental payments under the
Lease plus an early termination fee is paid by the End-User to the Financing
Originator. Modifications usually involve repricing a Lease or modification of
the Lease term. Occasionally a Lease may be modified in connection with an
increase in the capacity or performance of Equipment by adding additional
Equipment that includes new technology. Coincident with the financing of an
upgrade to such Equipment, a Financing Originator may reprice and extend the
related base Lease term to be coterminous with the desired term of the Lease
relating to the upgrade. In certain cases, subject to certain conditions
described under "Description of the Notes--Prepaid Contracts," such base lease
extensions may remain in the Contract Pool. Newcourt expects, as Servicer, to
continue to permit these modifications and terminations with respect to Leases
included in the Contract Pool pursuant to the authority delegated to it in the
Pooling Agreement, subject to certain conditions and covenants of the Servicer
described under "Description of the Notes--Prepaid Contracts."
In certain circumstances, the standard terms and conditions of the MLA
are modified at the inception of a Lease at the request of the End-User. Such
modifications must either be approved by the Financing Originator's legal
department and certain levels of management before the Financing Originator will
agree to enter into the Lease or accept an assignment of the Lease from a
Vendor, or the Vendor must indemnify the Financing Originator against any losses
or damages it may suffer as a result of such modifications. Common permitted
modifications include, but are not limited to, (i) a one dollar purchase option
at the end of the Lease term, (ii) prearranged mid-Lease purchase options, early
termination options and lease extension options as described above, (iii)
modifications to the lessor's equipment inspection rights, (iv) modifications to
the End-User's insurance requirements permitting the End-User to self-insure
against casualty to the Equipment, (v) 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 (vi) extended grace periods for late payments
of rent.
Secured Notes
The Financing Originators provide direct initial financing or
refinancing of Equipment, especially transportation and construction Equipment,
under secured promissory notes (each a "SECURED NOTE"), which consist of an
installment note and a separate security agreement. In an initial financing
transaction, the Financing Originator pays to the Vendor the purchase price for
the Equipment and in a refinancing transaction, the Financing Originator pays
off an End-User's existing financing source, and the initial financing or
refinancing is documented as a direct loan by the Financing Originator to the
End-User of the Equipment using a Secured Note. In the case of a refinancing
transaction, upon payment to the existing financing source, the Financing
Originator obtains a release of such party's lien on the financed Equipment. In
either case, the Financing Originator records its own lien against the financed
Equipment and takes possession of the Secured Note, which constitutes chattel
paper under the UCC. Except for the lack of references to "sale" or "purchase"
of Equipment, the terms and conditions contained in a Secured Note are
substantially similar to those contained in a CSA.
Installment Payment Agreements and Unsecured Notes
The Financing Originators provide financing for certain Software
license fees and related support and consulting services under installment
payment supplements to software license agreements, separate IPAs, Unsecured
Notes and other forms of Financing Agreements assigned to them by Vendors of
Software. Each such Financing Agreement is an
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unsecured obligation of the End-User, generally provides for a fixed schedule of
payment with no End-User right of prepayment, is noncancellable for its term and
contains a "hell or high water" clause unconditionally obligating the End-User
to make periodic payments, without setoff, at the times and in the amounts
specified therein, permit the Vendor to assign the payment agreement to a third
party (including a Financing Originator) and include the End-User's agreement,
upon such assignment, not to assert against such assignee any claims or defenses
the End-User may have against the Vendor, and contain default and remedy
provisions that include acceleration of amounts due and to become due and, in
certain cases, the right of the Vendor, or the Financing Originator by
assignment, to terminate the underlying Software license and all related support
and consulting activities.
Equipment
The End-User Contracts cover a wide variety of new and used information
technology equipment (such as mainframe and mini-computers, computer work
stations, personal computers, data storage devices and other computer-related
peripheral equipment), communications equipment (such as telephone switching and
networking systems), commercial and industrial equipment (such as printing
presses, machine tools and other manufacturing equipment, energy control
equipment and automated testing equipment), resources equipment (such as
feller-bunchers and grapplers) and transportation and construction equipment
(such as school buses, golf carts, heavy and medium duty trucks and highway
trailers, bulldozers, loaders, graders, excavators, forklifts and other
materials handling equipment, and other road and off-road machinery)
(collectively, "EQUIPMENT"). All of the interests of the applicable Financing
Originator in the Equipment subject to each related End-User Contract (which
consists or will consist of either title to the Equipment or a security interest
in the Equipment) will be transferred to the Trust.
Software and Services
Certain of the End-User Contracts cover license fees and other fees
owed by the End-Users under either perpetual or term software license agreements
and other related agreements in connection with the use by such End-Users of
computer software programs ("SOFTWARE"), and such End-User Contracts may also
cover related support and consulting services ("SERVICES"). No interest in the
Software, the Software license agreement (other than the right to collect the
payment of Software license fees and, in certain cases, to exercise certain
rights and remedies under the Software license agreement or other agreements
related thereto) or the related Services has been or will be conveyed to the
Financing Originators by either the Vendors or licensors of the Software or by
the End-Users under the related End-User Contracts. Consequently, the Trust will
not have title to or a security interest in such Software, nor will it own such
Services, and would not be able to realize any value therefrom under a related
End-User Contract upon a default by the End-User. Equipment, Software and
Services are collectively referred to as "FINANCED ITEMS". It is a condition to
the issuance of any Series of Notes that as of the related Closing Date, after
giving effect to any Addition on such date, no more than 20% of the ADCB of the
Contract Pool will consist of Software transactions.
VENDOR NOTES
The Contracts may include limited recourse promissory notes ("VENDOR
NOTES") each of which is payable by a Vendor and secured by all of the Vendor's
interest in an individual End-User Contract (especially Leases which constitute
"true leases") originated by such Vendor and by the Equipment related to such
End-User Contract.
Vendor Notes may serve as a form of assignment document pursuant to a
Program Agreement with respect to "true lease" Contracts and may provide for
further recourse against the Vendor subject to a UNL Pool or other recourse
arrangement included in the Program Agreement. The repayment terms under a
Vendor Note, including periodic amounts payable and schedule of payments,
correspond to the payment terms of the End-User under the End-User Contract
collaterally assigned under such Vendor Note. Each Vendor Note either includes
most, if not all, of the representations and warranties regarding the End-User
Contract and related Equipment typically included in a Vendor Agreement, or
incorporates such representations and warranties included in any related Program
Agreement by reference.
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VENDOR AGREEMENTS
It is expected that a substantial portion of the End-User Contracts to
be included from time to time in the Trust will consist of End-User Contracts
originated by Vendors and assigned or pledged to the Financing Originators
pursuant to Program Agreements. Each Financing Originator's Program Agreements
are agreements with Equipment manufacturers, dealers and distributors or
Software licensors or distributors located in either the United States or Canada
("VENDORS") which provide the Financing Originator with the opportunity to
finance transactions relating to the acquisition or use by an End-User of a
Vendor's Equipment, Software, Services or other products. Vendor finance
arrangements provide a financing company with a steady, sustainable flow of new
business with lower costs of origination than asset-based financings marketed
directly to end-users. Many of the Program Agreements provide various forms of
support to the Financing Originator, including representations and warranties by
the Vendor in respect of the End-User Contracts assigned by the Vendor to the
Financing Originator and related Equipment, Software or Services, credit support
with respect to defaults by End-Users and equipment repurchase and remarketing
arrangements upon early termination of End-User Contracts upon a default by the
End-User. Some of these Program Agreements also take the form of a referral
relationship which is less formal and typically does not include credit support
to the Financing Originator from the Vendor.
Each Program Agreement (other than Program Agreements that only
establish a referral relationship) generally includes the following provisions,
among others:
1. Vendor representations, warranties and covenants regarding each
End-User Contract assigned to the Financing Originator, including among
other things that: the obligations of the End-User under the assigned
End-User Contract are absolute, unconditional, noncancellable,
enforceable in accordance with its terms and free from any rights of
offset, counterclaim or defense; the Financing Originator holds the
sole original of the End-User Contract and has either title to or a
first priority perfected security interest in the Equipment; the
Equipment and the End-User Contract are free and clear of all liens,
claims or encumbrances; the Equipment or the Software has been
irrevocably accepted by the End-User and will perform as warranted to
the End-User; and the assigned End-User Contract was duly authorized
and signed by the End-User.
2. Remedies in the event of a misrepresentation or breach of a warranty or
covenant by the Vendor regarding an assigned End-User Contract, which
usually require the Vendor to repurchase the affected End-User Contract
for the Financing Originator's investment balance in the End-User
Contract plus costs incurred by the Financing Originator in breaking
any underlying funding arrangement (which may or may not be calculated
in accordance with a specified formula).
3. In the case of End-User Contracts covering Equipment, remarketing
support from the Vendor in the event of an End-User default and
subsequent repossession or return of the Equipment under the End-User
Contract (to assist the Financing Originator in realizing proceeds from
the Equipment assigned as collateral security to support the
obligations of the End-User under the End-User Contract).
4. The right of the Financing Originator to further assign its interests
in assigned End-User Contracts, all payments thereunder and any related
interest in Equipment.
In addition to the foregoing, a Program Agreement may include recourse
against the Vendor with respect to End-User defaults under certain identified
End-User Contracts, either by specifying that the assignment of the End-User
Contract from the Vendor to the Financing Originator is with full recourse
against the Vendor, or by inclusion of the End-User Contract in an "ultimate
net loss pool" ("UNL POOL") created under the Program Agreement. In the event of
an End-User default under an End-User Contract which was assigned by the Vendor
to a Financing Originator subject to the UNL Pool, the Financing Originator may
draw against the UNL Pool up to the amount of the Financing Originator's
remaining unpaid investment balance in the defaulted End-User Contract, but not
in excess of the UNL Pool balance then available. Drawings may also be made
against the UNL Pool with respect to End-User Contracts that are not included in
the Contract Pool and, accordingly, there can be no assurance that any amounts
contributed by a Vendor to the UNL Pool will be available in the event of an
End-User default under a End-User Contract included in the Contract Pool.
The manner in which End-User Contracts are assigned to the Financing
Originators by the Vendors differs under each Program Agreement, depending upon
the nature of the Financed Items, the form of the End-User Contract, the
accounting treatment sought by the Vendor and the End-User, and certain tax
considerations.
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With respect to "true leases" (as described below) of Equipment, the
Financing Originator either accepts a Vendor Note and collateral assignment of
the "true lease" End-User Contract and related Equipment from the Vendor or
accepts a full assignment of such End-User Contract (usually with an agreement
to reassign the End-User Contract at the end of the lease term to the Vendor)
and either (i) a collateral assignment of the related Equipment from the Vendor,
which collateral assignment secures the End-User's obligations under the
End-User Contract or (ii) title to the Equipment. Recourse against the Vendor
under such Vendor Notes or form of assignment is limited to the Vendor's
residual interest in the related Equipment. "Non-true leases" or CSAs covering
Equipment are generally fully assigned by the Vendor to the Financing
Originators, along with all of the Vendor's right, title and interest in the
Equipment (which only consists of the Vendor's security interest in the
Equipment and not title thereto, since title has already passed to the End-User
under these forms of End-User Contracts). A Financing Originator also receives a
full assignment of leases, installment payment agreements, installment payment
supplements to license agreements, promissory notes and other types of financing
agreements used in financing Software license payments and related support and
consulting services. Such assignments may include an assignment of the Software
Vendor's or licensor's right, or the agreement of the Vendor or licensor (at the
Financing Originator's instructions), to terminate the software license covered
by the End-User Contract and suspend related support in the event of an End-User
default under the End-User Contract. In some cases, the Software Vendor also
agrees not to relicense the same or similar software to a defaulted End-User for
some period of time (e.g., one year) unless the End-User cures its default.
It is also expected that a substantial portion of the End-User
Contracts to be included from time to time in the Contract Pool, especially in
the case of CSAs, will consist of End-User Contracts originated by Vendors and
assigned to a Financing Originator pursuant to Vendor Assignments, each of which
relates to an individual End-User Contract, rather than pursuant to a Program
Agreement. Each Vendor Assignment will either be made with or without recourse
against the Vendor for End-User defaults and will generally contain many, if not
all, of the representations, warranties and covenants typically contained in
Program Agreements, as well as a Vendor repurchase requirement in the event of a
breach by the Vendor or such representations, warranties or covenants. Vendor
Assignments typically do not provide for any Vendor remarketing support in the
event of an End-User default.
RESIDUAL INVESTMENTS
A Financing Originator may finance all or a portion of the residual
interest in the Equipment under certain Program Agreements and under direct
transactions between the Obligor and the Financing Originator. (Any investment
by the Financing Originator in such residual interest shall be referred to as a
"RESIDUAL INVESTMENT".) Certain Program Agreements provide that the Financing
Originator may, at its sole discretion and in connection with the funding of a
"true lease" of Equipment make a Residual Investment in the Equipment subject to
a Contract by advancing additional funds against a portion of the anticipated
residual value of the Equipment, and not just against the discounted present
value of the rental payments due under the End-User Contract. Such Residual
Investments may take the form of an advance of the present value of some
specified percentage of the anticipated residual value of the Equipment or a
specified percentage (generally not greater than 10%) of the amount to be paid
by the Financing Originator in funding the present value of the rental payments
due under the End-User Contract. Certain transactions involving Vendor
Assignments result in the Financing Originator advancing the entire purchase
price of the Equipment subject to a "true lease", taking title to the Equipment,
and accepting an assignment of the "true lease" Contract from a Vendor. Certain
direct transactions between the Obligor under a "true lease" Contract and the
Financing Originator also result in the Financing Originator advancing the
entire purchase price of the Equipment to the Vendor, taking title to the
Equipment from the Vendor, and entering into a "true lease" Contract with the
Obligor (with the Financing Originator named as "lessor" under such Contract).
In either of the two foregoing types of transactions, the Financing Originator
will have advanced more than the discounted present value of the rents payable
under the "true lease" Contracts by paying the purchase price for the Equipment,
and so will have made a Residual Investment in the Equipment.
In some Program Agreements, the Financing Originator may make the
Residual Investment in the form of a full recourse loan of additional funds to
the Vendor, repayable by the Vendor at the expiration or termination of the
End-User Contract with interest, secured by a security interest in the Equipment
covered by the End-User Contract. In some transactions involving Vendor
Assignments or direct transactions with Obligors under "true lease" Contracts,
the Financing Originator may obtain the obligation of either the Vendor or the
Obligor to purchase the Equipment at the end of the Lease term for the full
amount of the Financing Originator's Residual Investment in such Equipment with
interest
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thereon. (Any such transaction in which the Financing Originator may look to
either the Vendor or the Obligor, and not just the value of Equipment itself, to
recover its Residual Investment with interest shall be referred to as a
"GUARANTEED RESIDUAL INVESTMENT"). It is a condition to the issuance of any
Series of Notes that as of the related Closing Date, after giving effect to any
Addition on such date, the aggregate amount of Guaranteed Residual Investments
included in the Contract Pool will not exceed 5% of the ADCB of the Contract
Pool. Other than Guaranteed Residual Investments, a Residual Investment is not
included in the Discounted Contract Balance of any End-User Contract and,
therefore, is not financed with the proceeds of any Series of Notes described
herein.
Other than a Guaranteed Residual Investment, the Residual Investment
associated with any End-User Contract included in the Contract Pool has not been
and will not be purchased by the Seller from the Financing Originators under any
Purchase Agreement, and, accordingly, will not be sold to the Trust under the
Pooling Agreement. The Trust's interest in End-User Contracts with associated
Residual Investments (other than Guaranteed Residual Investments) will be
limited to the discounted present value of the rental payments due under the
End-User Contract and a security interest in the related Equipment. A Financing
Originator may assign its Residual Investment (other than a Guaranteed Residual
Investment) to a third party (a "RESIDUAL ASSIGNEE"), including the security
interest in the Equipment in respect of such Residual Investment (the
"SUBORDINATED RESIDUAL INTEREST"), either prior to the inclusion of the related
End-User Contract in the Contract Pool or thereafter. Under each Applicable
Purchase Agreement, each Financing Originator party thereto has (in the case of
the Existing Contracts) or will warrant to the Seller, and under the Pooling
Agreement the Seller will warrant and covenant to the Trust, that any
Subordinated Residual Interest will be subordinated to the interests of the
Seller and the Trust, respectively, and that any Residual Assignee will bear the
full risk of any deficiency in respect of the Residual Investment as a result of
prior satisfaction of the Trust's interest in the End-User Contract and the
related Equipment.
CONTRACT POOL
The Seller will indicate in its books and records, including the
appropriate computer files relating to the Contracts that such Contracts have
been transferred to the Trust for the benefit of the Noteholders and stamp the
related Contract Files or otherwise mark such Contracts with a legend to the
effect that such Contracts have been transferred to the Trust for the benefit of
the Noteholders and deliver to the Collateral Agent a computer file or
microfiche or written list containing a true and complete list of all Contracts
then being transferred to the Trust, identified by account number and by the
Discounted Lease Balance as of the related Cutoff Date. Such file or list shall
be marked as Schedule 1 to the related Supplement.
All collections received with respect to the Contracts will be
allocated as described herein. See "Description of the Notes--Allocations".
Prepayments will be given effect as of the last day of the Collection
Period in which they are received and Scheduled Principal Payments made in
advance of their due date will be given effect on their due date.
For each issuance of Notes hereunder, the composition and distribution
of the Contracts to be included in the Contract Pool, such as type of End-User
Contract, Discounted Contract Balance, type of Equipment, Software or Services,
and End-User industry and geographic location will be set forth in the
Prospectus Supplement.
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THE TRUST
The Trust will not engage in any business activity other than acquiring
and holding Trust Assets and proceeds therefrom, issuing Series of Notes and
making payments thereon and incidental activities. As a consequence, the Trust
is not expected to have any source of capital resources other than the Trust
Assets. The Trust will be created by the Pooling Agreement, which is governed by
the laws of the State of New York. One hundred percent of the beneficial
interest in the Trust will be owned by the Seller.
The Seller will sell to the Trust, without recourse, its interest in
the Contracts included in the Contract Pool. The Trust Assets will consist of
such Contracts, security interests in Secondary Contracts any related Equipment
or security interests in related Equipment, all monies due or to become due
under the Contracts and Secondary Contracts (except for Excluded Amounts), the
proceeds of the Contracts, all monies on deposit in the Collection Accounts and
in certain other accounts maintained for the benefit of the Noteholders and any
Credit Enhancements. The Trust Assets are expected to change over the life of
the Trust as Additional Contracts and related Equipment become subject to the
Trust and as Contracts are prepaid, terminate or are charged off or removed and
are no longer subject to the Trust. Pursuant to the Pooling Agreement, the
Seller will have the right (subject to certain limitations and conditions) to
designate Additional Contracts as Trust Assets. See "Description of the
Notes--New Issuances; Addition of Trust Assets". The Trust is expected to issue
additional Series from time to time.
THE SELLER
The Seller is a special purpose company incorporated on August 29, 1995
under the laws of the State of Delaware. The Seller's sole shareholder is
Newcourt USA. The Seller's principal executive offices are located at Ten
Almaden Boulevard, Suite 500, San Jose, California 95113. Its telephone number
is (408) 271-0500. The Seller was organized for the limited purpose of
purchasing, holding, owning, and selling Contracts and Equipment and related
rights therein, and any activities incidental to and necessary or convenient for
the accomplishment of such purposes. The Seller has no assets other than its
beneficial interest in the Trust. Pursuant to the Pooling Agreement the Seller
has covenanted that it will not sell, pledge, assign or transfer its beneficial
interest in the Trust. The Seller's certificate of incorporation provides that
the Seller may not change its business purpose without the consent of all of its
directors, including its independent directors, and the Issuer Trustee has been
informed that neither the Seller nor Newcourt intends to change the business
purpose of the Seller. Further, pursuant to the Pooling Agreement the activities
of the Seller will be limited to its participation in the transactions described
herein.
As of each Cutoff Date, the Seller will sell to the Trust, pursuant to
the Pooling Agreement, Contracts which were sold to the Seller pursuant to the
Applicable Purchase Agreement.
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief by Newcourt USA under the United States Bankruptcy Code or similar
applicable state laws or applicable laws of other countries ("INSOLVENCY LAWS")
will not result in the consolidation of the assets and liabilities of the Seller
with those of Newcourt USA and its affiliates. These steps include incorporating
the Seller as a separate, special purpose company pursuant to a certificate of
incorporation containing certain restrictions on the nature of its business and
on its ability to commence a voluntary case or proceeding under any bankruptcy
or insolvency law, or to cause the Trust to commence a voluntary case or
proceeding under any bankruptcy or insolvency law, without the affirmative vote
of all its directors, including its independent directors, and the requirement,
set forth in the Seller's certificate of incorporation, that at all times no
less than one member of the Board of Directors of the Seller will be an
individual who has not been, within the previous five years, affiliated with
Newcourt or any of its affiliates other than the Seller and the Trust (Newcourt
and each of its affiliates other than the Seller and the Trust, a "NEWCOURT
ENTITY"). However, there can be no assurance that the activities of the Seller
would not result in a court concluding that the assets and liabilities of the
Seller should be consolidated with those of Newcourt USA or either Financing
Originator in a proceeding under any Insolvency Law. See "Risk Factors--Certain
Legal Aspects" and "Certain Legal Aspects of the Contracts--Certain Matters
Relating to Bankruptcy". In such event there is no assurance that the Trust
would not become a debtor in such a bankruptcy case as well.
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The Seller will receive, on the First Closing Date, a reasoned opinion
from its counsel concluding (although there is no case litigated on the merits
directly in point) that, subject to certain assumptions and qualifications
specified therein, in the event a Newcourt Entity were to become a debtor in a
case under the Bankruptcy Code, a bankruptcy court would not, on motion of such
Newcourt Entity, as debtor-in-possession, or any other party in interest in such
case, (a) substantively consolidate the Seller and Newcourt USA or (b)
substantively consolidate the Trust and Newcourt USA. The opinion assumes, among
other things, that (a) the Seller and the Trust will adhere to specified
operating procedures including, without limitation, (i) that at all times no
less than one member of the Board of Directors of the Seller will be an
individual who has not been, within the previous five years, affiliated with any
Newcourt Entity, (ii) the Seller shall have at least one senior officer who is
similarly unaffiliated and the Trust's business will be run by officers and
employees of the Issuer Trustee, (iii) the Seller will maintain its own payroll
and separate books of account and will maintain an office separate from any
Newcourt Entity, (iv) neither the Seller nor the Trust will, except as provided
in the Pooling Agreement, commingle any of its money or other assets with those
of any Newcourt Entity, (v) the Seller and the Trust will maintain separate bank
accounts in its own name or in the name of the Seller and (vi) except for the
obligations under the Purchase Agreements, neither the Seller nor the Trust will
acquire obligations or securities of, or make loans or advances to, any Newcourt
Entity, (b) the Seller and the Trust will maintain an arm's-length relationship
in all transactions with each Newcourt Entity, (c) the purchase price for the
Contracts set forth in each Purchase Agreement represents fair and reasonably
equivalent value for the sale of the Contracts transferred thereunder to the
Seller, (d) the financing provided by the issuance of the Notes constitutes a
practical and reasonable course of action designed to improve the financial
position of Newcourt without impairing the rights of its creditors and (e) the
financing provided by the issuance of the Notes is being effected in furtherance
of Newcourt's ongoing business operations and not in contemplation of
bankruptcy. The opinion is not binding on any court. Accordingly, there can be
no assurance that a court will not reach a different conclusion. If a court
concluded otherwise, or if an attempt were made to litigate any of the foregoing
issues, delays of distributions on the Notes and possible reductions in the
amount of payments of principal of and interest on the Notes could occur.
In addition, tax and certain other statutory liabilities of Newcourt or
its affiliates can be asserted against the Financing Originators or the Seller.
To the extent that any such liabilities arise after the transfer of Contracts to
a Trust, the Trust's interest in the Contracts would be prior to the interest of
the claimant with respect to any such liabilities. However, if a claim could be
asserted against a Financing Originator or the Seller, the claimant might be
able to subject the Financing Originator or the Seller to an involuntary
proceeding under the United States Bankruptcy Code or other Insolvency Law. See
"Risk Factors--Certain Legal Aspects" and "Certain Legal Aspects of the
Contracts--Certain Matters Relating to Bankruptcy".
The Seller will not acquire any assets other than Trust Assets and
other assets transferred to the Seller pursuant to the Purchase Agreements or
other equipment and contracts transferred to the Seller pursuant to similar
agreements, including operating and finance leases, loans, installment payment
obligations, receivables and other obligations received from Newcourt or its
affiliates.
THE SERVICER
Newcourt is an independent financial services company which originates
and manages asset-based financings. Newcourt is the third largest independent
asset finance company in North America, with total owned and managed assets in
excess of Canadian $4.3 billion.
Newcourt was formed in 1984 as an investment bank which originated and
structured asset based financings for the corporate and institutional asset
finance market and syndicated such financings to Canadian financial
institutions. In 1988 Newcourt broadened its activities to include vendor and
direct equipment financing. Since 1993, Newcourt has issued in excess of
Canadian $2.5 billion of asset-backed debt supported by financing agreements.
Newcourt and its subsidiaries originate their asset-based financings by
providing services to specific segments of the vendor asset finance market and
corporate and institutional asset finance market. Newcourt's strategy has been
to sell and manage, rather than own, the majority of the finance assets it and
its subsidiaries originate, thereby reducing
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its capital requirements. Consequently, Newcourt's consolidated revenues are
generated primarily by gains and fees earned from the sale of financings it and
its subsidiaries originate and by management fees earned following such sales.
Newcourt's principal executive offices are located at BCE Place, 181
Bay Street, Suite 3500, P.O. Box 827, Toronto, Ontario, Canada M5J 2T3 and its
telephone number is (416) 594-2400. Newcourt has 24 North American offices and
one overseas office.
Newcourt may not be licensed to do business in each State in which such
license is necessary is order to service the Contract Pool. If Newcourt is not
licensed to do business in a State in which such license is necessary in order
to service the Contract Pool, Newcourt has warranted in the Pooling Agreement
that it will appoint Newcourt Financial USA Inc., or another entity which is so
licensed, as subservicer.
CREDIT AND CONTRACT SERVICING PROCEDURES
CREDIT UNDERWRITING PROCESS
As part of its credit underwriting procedures, Newcourt and its
subsidiaries review the creditworthiness of the End-User, the value of the
Financed Items and the creditworthiness of the Vendor. Newcourt has designed
specific credit philosophies, credit standards and processes for each of its
marketing units, which are enumerated in Newcourt's Credit Manual. Newcourt's
philosophy is that credit adjudication policies and procedures require strict
adherence to the Credit Manual. The underwriting policies detailed in Newcourt's
Credit Manual include, but are not limited to, (i) clearly defined underwriting
criteria for each of Newcourt's individual business segments, (ii) within each
individual business segment, strict guidelines for certain equipment types and
End-User types, (iii) the use of two forms of credit rating (as described below)
on every approved transaction that quantify the financial strength of the
End-User and the overall perceived risk rating of the transaction being approved
and (iv) a requirement that asset financings must normally carry a credit rating
of BBB or better on the covenant-based rating system and a credit rating of 3 or
better on the asset-based rating system.
If a potential End-User is publicly rated by an independent ratings
agency for a similarly structured debt instrument, the public rating is used as
the covenant-based rating. If a potential End-User is not publicly rated, it
will be scored on a covenant-based rating system with six categories ranging
from AAA to single B. This system is based on the methods commonly used to rate
public and private debt issues which Newcourt has adapted to suit equipment
financing and leasing transactions. The system is based on four key financial
ratios: return on assets, long-term debt to equity, cash flow to long-term debt
and interest coverage. Qualitative considerations include the reputation of the
Vendor as well as existing vendor recourse agreements. Allowance is also made
for being fully secured on the transaction. Newcourt and its subsidiaries will
normally not enter into any new financing commitment with a potential End-User
that has been rated a single B. With potential End-Users rated BB, significant
credit enhancements would be required, such as an extremely strong security
position or full corporate guarantees from creditworthy companies, for any
credit exposure to be considered. Newcourt's goal is to maintain a credit
quality of its portfolio of End-Users of BBB or better.
In addition, an asset-based rating system has been developed by
Newcourt to score every potential transaction in five categories ranging from 1
to 5. This system takes into account a broader range of factors than the
covenant-based rating system, combining certain key financial ratios with
collateral and business considerations. The evaluation of collateral examines
the remarketability of the assets as well as the length of the finance term
relative to the economic life of the assets. Newcourt and its subsidiaries will
not, under normal circumstances, enter into any new transaction with a potential
End-User rating a 5 and will enter into a new transaction with a potential
End-User rating a 4 only in special circumstances. Newcourt's goal is to
maintain an overall credit quality of 3 or better throughout its portfolio.
Credit review procedures require the preparation of a credit
application outlining the structure and purpose of the transaction, the
background and business of the proposed End-User and the reasons of the source
account executive for recommending approval. Newcourt's credit guidelines
require financial statements covering three fiscal years and interim financial
information if the most recent year-end financial statement is more than six
months out of date. If the assigned credit officer makes an initial
determination that the request has sufficient merit to consider an approval and
sufficient information is provided, the credit officer will prepare a full
credit report and financial analysis which includes
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expanded basic information, an analysis of the financial condition, performance
and covenants of the proposed End-User, a review of the proposed End-User's
banking facilities and contacts with credit agencies, and collateral and
exposure analyses. The transaction will be assigned a grade based on the two
credit rating systems described above. If a favorable credit report approved by
the credit officer is completed, approval of the new business is made at the
appropriate level, depending on the size of the transaction. In cases in which
credit approval is permitted to be made by a senior credit manager, such
approvals are reviewed on a regular basis by a corporate vice president to
ensure adherence to the appropriate approval policies. Credit authorization
levels are reviewed at least annually by a committee of Newcourt's Board of
Directors and approved by the Board of Directors.
Newcourt's current policy is to perform a written annual review on
every account with an outstanding book value equal to or in excess of Canadian
$500,000. In addition, standard documentation requires the End-User to provide
annual financial statements within 120 days of its fiscal year-end and certain
transactions may require quarterly or semi-annual financial statements as a
condition of approval. If, based upon such financial statements, a credit
officer determines that there appears to be a financial impairment in the
End-User's repayment ability, a formal review will also be performed for
accounts with an outstanding book value less than Canadian $500,000.
In initially establishing a Program Agreement or other form of
financing arrangement with a Vendor, Newcourt completes a formal underwriting
review of such Vendor to ensure that the Vendor can perform the financial and
other obligations contained in any Vendor Agreement or Vendor Note. This review
encompasses a financial review, a product review (including an analysis of
market acceptance of the Vendor's products) and a general operational and
managerial review of the Vendor.
Vendors must be established in their field and must market
industry-accepted Equipment or other products. The Vendor must have a history of
success, maintain a substantial market position and have sufficient financial
resources to support the financing relationship contemplated by Newcourt.
Program Agreements are continually monitored by Newcourt. Formal annual
reviews are undertaken on each Vendor which cover general financial, operating
and performance review as well as performance under the Program Agreement.
CONTRACT COLLECTIONS
Newcourt's portfolio management unit will be responsible for the
ongoing management of portfolios. Limited servicing, namely invoicing, cash
application, and sales and use and property tax reporting for Newcourt's United
States portfolios is currently performed by Parrish Financial Servicing Company
L.P. ("PARRISH"). All other tasks, such as collection, cash receipt and bank
reconciliation, customer services, UCC registration, insurance review and
portfolio reconciliation, are performed by Newcourt through on-line access to
Parrish's lease administration system. In the event that Parrish is unable to
perform its limited duties, the processing currently performed by Parrish could
be assumed by Newcourt within a matter of a few days as both Parrish and
Newcourt use the same administration software and there currently exists a
procedure whereby financial information is transmitted regularly to Newcourt.
Parrish is part of an affiliated group of companies servicing the
equipment leasing industry. Parrish is owned by Parrish Equipment Partners,
L.P., an investment group consisting of the Travelers Companies, The Hillman
Company and Mr. Karl Parrish, and was formed in 1993 as a dedicated lease
servicing company.
Newcourt, using Parrish as its service bureau, will generate and mail
to the End-Users monthly invoices and statements summarizing the account
activity and current invoicing details. The invoiced amount will represent the
contracted repayment amount under the End-User Contract inclusive of applicable
taxes, if any. Copies of the invoices and statements are also distributed to the
appropriate offices of Newcourt and its subsidiaries for review.
Newcourt's portfolio management unit is also responsible for the
preparation of monthly reports on past due, delinquent and problem accounts, the
collection and administration of such accounts, the preparation and
recommendation of requests for account restructuring and/or payment
rescheduling, and asset remarketing in cases of repossession or end of lease
equipment returns. The approval required in the case of End-User requests for
account restructuring and/or payment rescheduling is the same as that required
for a new transaction, as set forth in Newcourt's Credit Manual. Such
restructuring and/or rescheduling generally will only be approved in cases where
it is believed that an End-User's
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financial difficulties are only temporary and that the security value will not
be seriously impaired by such undertaking. Newcourt has no set policy on the
timing of repossession, but its practice is to proceed to repossess as soon as
required and usually no later than when an account is 120 days past due. In such
situations, Vendors may decide to make payments on behalf of an End-User or,
under certain Vendor Agreements, Vendors may be responsible for remarketing the
repossessed Equipment.
In December 1995, Newcourt purchased the portfolio management
operations of Lessor Capital Services ("LCS") and certain of its other assets,
including LCS's office facilities. Newcourt intends to use LCS to provide
services currently provided by Parrish. Tasks such as credit, collections,
legal, cash receipts, bank reconciliation, customer services and UCC
registration will continue to be performed by Newcourt through on-line access to
LCS's lease administration system.
Newcourt anticipates that LCS will fully assume the administrative
functions currently performed by Parrish by the end of the first quarter of
1996.
CASH COLLECTIONS
Payments by End-Users of amounts payable under their respective
Contracts are made by check mailed to a Newcourt post office box or wire
transfer to a Newcourt lock-box account. Invoices mailed to an End-User instruct
the End-User to forward payment to a post office box for processing by a
lock-box bank. End-Users that wish to remit by wire transfer are provided with
wire transfer instructions to remit to a lock-box account.
Invoices sent to End-Users contain a remittance advice. The lock-box
bank processes the deposits and credits the appropriate Newcourt bank accounts
daily. A daily summary of deposits received by the lock box bank is forwarded to
both Newcourt and Parrish, together with copies of the remittance advices and
any other information passed along with the payment. Parrish then matches the
remittance advices to the cash deposits and applies the payments to the
End-Users' accounts. Amounts received from an End-User with respect to a
Secondary Contract are applied to the related Vendor Note and reduce, on a
dollar-for-dollar basis, amounts due under such Secondary Contract. Unmatched
deposits are recorded as unapplied cash for further review and processing after
investigation by both Newcourt and Parrish. Each day Parrish provides Newcourt
with a system summary of the cash application from the previous day which is
then reconciled by Newcourt to the lock box bank summary, and any variances are
then investigated by Newcourt.
WRITE-OFF POLICY
When the recoverability of an account is in question, or if the
underlying collateral with respect to an account has been repossessed, Newcourt
generally will suspend the accrual of income on that account for Newcourt's own
accounting purposes.
Upon the repossession of collateral, an evaluation of the collateral
involved is immediately undertaken in order to establish a liquidation value.
After a liquidation value has been established, the difference between the net
book value of the account at the time of income suspension and the liquidation
value, if less than the net book value of the account, is stated as a "likely
loss." The "likely loss" amount may change, upward or downward, over a period of
time as more current or detailed information on the collateral is obtained. When
the collateral is sold, the difference between the net book value of the account
and the actual net sales proceeds, if less than the net book value of the
account, will be written off. If, however, there is any potential for future
recovery, the account will continue to be followed for the recovery of any
deficiency balance.
USE OF PROCEEDS
On December 28, 1995 (the "BRIDGE CLOSING DATE"), the Seller incurred
approximately $138,000,000 of limited recourse indebtedness (the "EXISTING
DEBT") under a Limited Recourse Term Loan and Security Agreement with First
Union National Bank of North Carolina (the "LENDER"), an affiliate of First
Union. The proceeds of the Existing Debt
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were utilized by the Seller to purchase the certain Contracts from Newcourt
Financial USA Inc., one of the Financing Originators, pursuant to a Purchase
Agreement dated as of December 28, 1995 between the Seller and such Financing
Originator (as amended and restated prior to the First Closing Date, the
"ORIGINAL PURCHASE AGREEMENT") and the Lender was granted a Lien on such
Contracts by the Seller. The proceeds of such purchase were used by such
Financing Originator for general corporate purposes. Subsequent to the Bridge
Closing Date and prior to the First Closing Date, certain of the Contracts
purchased by the Seller under the Original Purchase Agreement were repurchased
by Newcourt Financial USA Inc. The Contracts purchased by the Seller under the
Original Purchase Agreement and owned by the Seller on the First Closing Date
are referred to as the "EXISTING CONTRACTS".
The net proceeds from the sale of the Notes of the initial Series
offered hereby will be paid to the Seller in consideration of the transfer to
the Trust of (i) certain of the Existing Contracts and (ii) certain additional
Contracts to be transferred by Newcourt Financial USA Inc. to the Seller
pursuant to a Subsequent Purchase Agreement to be executed on or about the First
Closing Date. Such proceeds will be used by the Seller (i) to repay the Existing
Debt and (ii) the remainder will be distributed to Newcourt Financial USA Inc.
in payment of the purchase price for such additional Contracts. Such proceeds
will be used by Newcourt Financial USA Inc. for general corporate purposes,
including loans to affiliates and dividends to Newcourt. Simultaneously with
repayment of the Existing Debt, the Lender will release its Lien on the Existing
Contracts. Thereafter, the net proceeds from the sale of the Notes of any Series
offered hereby will be paid to the Seller and then distributed to the applicable
Financing Originators in payment of the purchase price for the Additional
Contracts transferred to the Trust in connection with such issuance. Each
Financing Originator will use such proceeds for general corporate purposes,
including loans to affiliates and dividends to Newcourt.
DESCRIPTION OF THE NOTES
The statements under this caption are summaries, do not purport to be
complete and are subject to and qualified in their entirety by reference to the
Pooling Agreement, the applicable Supplement and the Applicable Indenture (for
any Series, the "OPERATIVE DOCUMENTS"). Copies of the Pooling Agreement,
Supplement and Applicable Indenture with respect to any Series offered hereby
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
GENERAL
The Notes of each Series will consist of three Classes, the Class A
Notes, the Class B Notes and the Class C Notes and will be issued pursuant to
the Applicable Indenture among the Trust, the Collateral Agent and the
Applicable Indenture Trustee, or the applicable Note Documents, as the case may
be. See "--New Issuances". The following summary describes the material terms
generally applicable to the Notes of each Series and is qualified in its
entirety by reference to the Pooling Agreement, the applicable Supplement and
the Applicable Indenture.
The Class A Notes of each Series will initially be represented by one
or more certificates registered in the name of the nominee of DTC (together with
any successor depository selected by the Seller, the "DEPOSITORY"), except as
set forth below. The Class A Notes of each Series offered hereby will be
available for purchase in minimum denominations of $1,000 and in integral
multiples thereof in book-entry form. The Seller has been informed by DTC that
DTC's nominee will be Cede. See "--Book-Entry Registration" and "--Definitive
Notes". Only the Class A Notes will be offered hereby and by the related
Prospectus Supplement.
The date upon which a Series or Class will be issued will be referred
to as its "SERIES ISSUANCE DATE". The initial principal amount of a Class of
Notes will be referred to as its "INITIAL PRINCIPAL AMOUNT".
All calculations with respect to the Contracts and the Notes are
computed based on activity occurring during a period beginning on the first day
of such month (or, in the case of Notes issued on the initial Series Issuance
Date, the initial Cutoff Date) and ending on, but not including, the first day
of the next month (each, a "COLLECTION PERIOD").
The Collateral Agent will be granted a lien of the first priority on
the Trust Assets to secure the Notes of each Series; provided, that
distributions on the Notes of each Series (and each Class within each Series)
will be allocated as
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provided herein. Each Series of Class A Notes may differ as to timing of
distributions, allocations of losses and amount of distributions in respect of
principal and interest. The Notes are nonrecourse obligations of the Trust only
and do not represent interests in or obligations of either the Seller or the
Servicer or any affiliate of either the Seller or the Servicer.
INTEREST
Interest on each Series of Class A Notes will be payable on each of the
Distribution Dates occurring on or prior to the earlier of (i) the date of
payment in full of such Series of Class A Notes and (ii) the Maturity Date for
such Series of Class A Notes. Interest will accrue at the applicable Interest
Rate, which may be fixed, floating based on an index or otherwise, stated or
determined in the manner described in the related Prospectus Supplement for the
period from and including the first day of each calendar month to and including
the last day of such calendar month, on the outstanding Principal Amount of such
Class A Notes as of the first day of such Accrual Period, except that interest
payable on the first Distribution Date following the Closing Date for a Series
of Class A Notes will accrue at the applicable Interest Rate for the period from
but excluding the applicable Cutoff Date for such Series of Class A Notes to and
including the last day of the calendar month immediately preceding such
Distribution Date, on the Principal Amount of such Class A Notes as of such
Closing Date (assuming such amount was outstanding as of the applicable Cutoff
Date for such Series) (each period for which interest accrues on the Notes of a
Series, an "ACCRUAL PERIOD").
PRINCIPAL
Each Class A Note will mature on the applicable Maturity Date specified
in the related Prospectus Supplement. However, if all payments on the Contracts
are made as scheduled, final payment with respect to the Class A Notes would
occur prior to stated maturity.
Principal of the Class A Notes of a Series will be payable on each
Distribution Date in an amount equal to the lesser of the Class A Principal
Payment Amount (as defined herein) for such Distribution Date and the then
outstanding Principal Amount of such Class A Notes, to the extent of the Series
Available Amount (as so defined) remaining after payment of interest in respect
of the Class A Notes and Class B Notes to the extent described herein and to the
extent of amounts otherwise payable on account of the Subordinated Notes. See
"Description of the Notes--Allocations". Payment of interest on the Class C
Notes of all Series and payment of principal of the Subordinated Notes of all
Series will be subordinated to the payment of principal of the Class A Notes of
each Series as described under "Description of the Notes--Allocations". The
Notes will mature and be due and payable on their respective Maturity Dates.
Prior thereto, amounts to be applied in reduction of the outstanding Principal
Amount of any Note, including the payment of the Class A Principal Payment
Amount payable on any Distribution Date, will not be due and payable, although
the failure of the Seller to remit any Available Amounts (as so defined)
(including Available Amounts to be used to make a Class A Principal Payment
Amount) will, after the applicable grace period, constitute an Event of Default.
See "Description of the Notes--Events of Default".
As used herein, the following terms shall have the following meanings:
"ADCB" means the sum of the Discounted Contract Balances of
each Contract included in the group of Contracts for which an ADCB
determination is being made.
"ADJUSTED SCHEDULED PAYMENTS" means, for all Contracts in the
Contract Pool as of the date for which a Series ADCB determination is
being made, all remaining Scheduled Payments under such Contracts due
and payable after such date of determination excluding (x) each
Scheduled Payment either becoming due after such date of determination
or due and payable after the applicable Cutoff Date that has not been
received by the Servicer, under each of the Defaulted Contracts in the
Contract Pool and (y) each Scheduled Payment, or part thereof, becoming
due after such date of determination for any Contract in the Contract
Pool for which a Prepayment has been received by the Servicer.
"AGGREGATE PRINCIPAL AMOUNT" means, for any group of Notes at
any date of determination, the sum of the Principal Amounts of such
Notes at such date.
"ALLOCATED SERIES DISCOUNTED CONTRACT BALANCE" means, with
respect to any Series, at any time of determination, the present value
(discounted monthly at the applicable Series Discount Rate) of the
product of
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(1) the applicable Series Allocation Percentage and (2) the remaining
Scheduled Payments becoming due under a Contract after such date of
determination.
"APPLICABLE CLASS PERCENTAGE" means, for any Contract and for
any outstanding Class of Notes of any Series, the ratio that the
Initial Principal Amount of such Class of Notes of such Series bears to
the sum of the Initial Principal Amount of the outstanding Notes of all
Classes of such Series.
"CLASS A PRINCIPAL PAYMENT AMOUNT" for a Series of Class A
Notes means, for any Distribution Date, the sum of (i) the product of
(A) the Applicable Class Percentage for such Notes and (B) the excess
of (1) the Series ADCB as of the last day of the second Collection
Period preceding such Distribution Date (or, in the case of Contracts
that were first added to the Contract Pool during the Collection Period
immediately preceding such Distribution Date, as of the Cutoff Date for
such Contracts) over (2) the Series ADCB as of the last day of the
Collection Period immediately preceding such Distribution Date (without
giving effect, in the case of clauses (1) and (2), to Scheduled
Payments expected to have been received on or after the last day of the
Applicable Collection Period referred to in such clause under each
Contract in the Contract Pool which became a Defaulted Contract or a
Prepaid Contract during such Collection Period) and (ii) the sum of the
following amounts: the present value (discounted monthly at the
applicable Series Discount Rate) of the product of (x) each Scheduled
Payment expected to have been received on or after the last day of the
Collection Period immediately preceding such Distribution Date under
each Contract in the Contract Pool which became a Defaulted Contract or
a Prepaid Contract during such Collection Period and (y) the Series
Allocation Percentage as of the last day of the Collection Period
immediately preceding such Distribution Date (the sum of (i) and (ii),
the "Expected Class A Payment") and (iii) the aggregate amount of
Expected Class A Payments which were not paid on each preceding
Distribution Date.
"CLASS B PRINCIPAL PAYMENT AMOUNT" for a Series of Class B
Notes means, for any Distribution Date, the sum of (i) the product of
(A) the Applicable Class Percentage for such Notes and (B) the excess
of (1) the Series ADCB as of the last day of the second Collection
Period preceding such Distribution Date (or, in the case of Contracts
that were first added to the Contract Pool during the Collection Period
immediately preceding such Distribution Date, as of the Cutoff Date for
such Contracts) over (2) the Series ADCB as of the last day of the
Collection Period immediately preceding such Distribution Date (without
giving effect, in the case of clauses (1) and (2), to Scheduled
Payments expected to have been received on or after the last day of the
Applicable Collection Period referred to in such clause under each
Contract in the Contract Pool which became a Defaulted Contract or a
Prepaid Contract during such Collection Period) and (ii), from and
after the date the Class A Notes of each Series have been paid in full,
the sum of the following amounts: the present value (discounted monthly
at the applicable Series Discount Rate) of the product of (x) each
Scheduled Payment expected to have been received on or after the last
day of the Collection Period immediately preceding such Distribution
Date under each Contract in the Contract Pool which became a Defaulted
Contract or a Prepaid Contract during such Collection Period and (y)
the Series Allocation Percentage as of the last day of the Collection
Period immediately preceding such Distribution Date (the sum of (i) and
(ii), the "Expected Class B Payment") and (iii) the aggregate amount of
Expected Class B Payments which were not paid on each preceding
Distribution Date.
"CLASS C PRINCIPAL PAYMENT AMOUNT" for a Series of Class C
Notes means, for any Distribution Date, the sum of (i) the product of
(A) the Applicable Class Percentage for such Notes and (B) the excess
of (1) the Series ADCB as of the last day of the second Collection
Period preceding such Distribution Date (or, in the case of Contracts
that were first added to the Contract Pool during the Collection Period
immediately preceding such Distribution Date, as of the Cutoff Date for
such Contracts) over (2) the Series ADCB as of the last day of the
Collection Period immediately preceding such Distribution Date (without
giving effect, in the case of clauses (1) and (2), to Scheduled
Payments expected to have been received on or after the last day of the
Applicable Collection Period referred to in such clause under each
Contract in the Contract Pool which became a Defaulted Contract or a
Prepaid Contract during such Collection Period)and (ii), from and after
the date the Class A Notes and Class B Notes of each Series have been
paid in full, the sum of the following amounts: the present value
(discounted monthly at the applicable Series Discount Rate) of the
product of (x) each Scheduled Payment expected to have been received on
or after the last day of the Collection Period immediately preceding
such Distribution Date under each Contract in the Contract Pool which
became a Defaulted Contract or a Prepaid Contract during such
Collection Period and (y) the Series Allocation Percentage as of the
last day of the Collection Period immediately preceding such
Distribution Date (the sum of (i) and (ii), the "Expected Class
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C Payment") and (iii) the aggregate amount of Expected Class C Payments
which were not paid on each preceding Distribution Date.
"DISCOUNTED CONTRACT BALANCE" means with respect to any
Contract, (A) as of the related Cutoff Date, the present value of all
of the remaining Scheduled Payments becoming due under such Contract
after the applicable Cutoff Date discounted monthly at the applicable
Series Discount Rate and (B) as of any other date of determination, the
sum of (1) the present value for each Series of the product of (a) the
applicable Series Allocation Percentage of such Series and (b) all of
the remaining Scheduled Payments becoming due under such Contract after
such date of determination discounted monthly at the Series Discount
Rate for such Series and (2) the aggregate amount of all Scheduled
Payments due and payable under such Contract after the applicable
Cutoff Date and prior to such date of determination (other than
Scheduled Payments related to Defaulted Contracts and Prepaid
Contracts) that have not then been received by the Servicer.
The "Discounted Contract Balance" for each Contract shall be calculated
assuming:
(a) All payments due in any Collection Period are due on
the last day of the Collection Period;
(b) Payments are discounted on a monthly basis using a 30
day month and a 360 day year; and
(c) all security deposits and drawings under letters of
credit, if any, issued in support of a Contract are
applied to reduce Scheduled Payments in inverse order
of the due date thereof.
"EXCESS SPREAD AMOUNT" for the Class A Notes and Class B Notes
of a Series means, such portion of the Series Available Amount
available to pay the Class C Noteholders of such Series which is
specified in the Supplement related to such Series of Notes. The Excess
Spread Amount for the Class C Notes of a Series shall be an amount
equal to the portion of the Series Available Amount, if any, remaining
after payment of the Excess Spread Amount for the Series 1996-1 Class A
Notes and the Series 1996-1 Class B Notes. The Excess Spread Amount
specified for any Series of Class A Notes, Class B Notes and Class C
Notes may increase or decrease from time to time in connection with the
issuance of Additional Series depending upon the amount, if any, of the
"Excess Spread Amount" deductible from the Series Available Amount
available to pay the Class C Noteholders of such Additional Series.
"PRINCIPAL AMOUNT" of a Class of Notes means the aggregate
initial principal amount thereof reduced by (i) the aggregate amount of
any Distributions applied in reduction of such principal amount and
(ii) the aggregate amount of any Distributions then on deposit in the
note payment account, if any, for such Class of Notes established in
accordance with the Applicable Indenture or the related Note Documents
and to be applied in reduction of such principal amount in accordance
with such Applicable Indenture or Note Documents.
"SCHEDULED PAYMENTS" means, with respect to any Contract, the
monthly or quarterly or semi-annual rent or financing (whether
principal or principal and interest) payment scheduled to be made by
the related Obligor under the terms of such Contract after the related
Cutoff Date (it being understood that (i) Scheduled Payments do not
include any Excluded Amounts and (ii) the interest component of rent or
financing payments scheduled to be made under a Contract which has been
hedged pursuant to an Interest Rate Hedge shall be the amount payable
under the Interest Rate Hedge for such Contract for the term of such
Interest Rate Hedge).
"SERIES ADCB" for a Series of Notes as of any date of
determination means the sum of (1) the present value (discounted
monthly at the applicable Series Discount Rate) of the product of (x)
the applicable Series Allocation Percentage and (y) the Adjusted
Scheduled Payments and (2) the product of (x) the applicable Series
Allocation Percentage and (y) all Scheduled Payments due and payable
after the applicable Cutoff Date and prior to such date of
determination under such Contracts that have not been received by the
Servicer.
"SERIES DISCOUNT RATE" applicable to a Series shall mean, at
any date of determination, the sum of (1) the weighted average of the
Class A Interest Rate and the Subordinated Note Rate applicable to the
Notes issued in connection with such Series and (2) the Servicing Fee
Percentage.
"SUBORDINATED NOTE RATE" means, for a Series, the rate that is
equivalent to the pre-tax yield of 800 basis points over the yield of
the U.S. Treasury security having a maturity nearest to the weighted
average life of the Class A Notes of such Series. The Subordinated Note
Rate for a Series shall be specified in the related Prospectus
Supplement.
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PREPAID CONTRACTS
The Servicer may, subject to certain conditions and covenants, at the
request of an End-User and at the Servicer's option, waive, modify or otherwise
vary any other provision of a Contract in accordance with its customary and
usual practices, provided, that no such waiver, modification or variance shall,
without the consent of each Rating Agency, have the result of accelerating
(except as provided in the immediately following sentence), delaying, reducing
or extending the date for payment of Scheduled Payments with respect to such
Contract. In furtherance of the foregoing, the Servicer may, at its option and
in accordance with its customary and usual practices, agree to the early
termination or full prepayment of any Contract (any such terminated or prepaid
Contract, a "PREPAID CONTRACT") provided, that the Servicer will agree in the
Pooling Agreement not to permit the early termination or full prepayment of a
Contract unless (i) such early termination or full prepayment would not result
in the Trust receiving an amount (the "PREPAYMENT AMOUNT") less than the greater
of (x) the sum of (A) the Discounted Contract Balance on the date of such
prepayment plus any accrued and unpaid interest payments thereon (at the
weighted average of the Series Discount Rates in effect on the date of such
prepayment) and (B) any outstanding Servicer Advances thereon and (y) the
present value of remaining Scheduled Payments under such Contract, discounted at
a rate equal to 150 basis points over the monthly-equivalent yield of the U.S.
treasury security with a maturity closest to the remaining life of the Contract
being prepaid or (ii) if such early termination or full prepayment would result
in the Trust receiving a Prepayment Amount from the End-User less than the
amount set forth in clause (i), either the Vendor or the Financing Originator
agrees to pay the Trust the difference between the Prepayment Amount actually
paid by the End-User and the amount set forth in clause (i) (such payment by the
Vendor or Financing Originator also to be considered a "Prepayment Amount").
Prepayment Amounts will constitute Available Amounts and will, as such, be
allocated as described in "Description of the Notes--Allocations".
Certain Contracts were originally executed which allow the End-User in
certain circumstances to cause the early termination or prepayment of the
Contract at the End-User's option. The Seller will represent and warrant as to
each such Contract that such Contract has not been modified in a way that would
permit the Prepayment Amount to ever be less than the amounts described above
or, if any Contract has been so modified, the Vendor or Financing Originator of
such Contract will indemnify the Trust for any payments by which the Prepayment
Amount is less than the amount described above.
REMOVAL OF CONTRACTS
The Seller will not have the right to remove any Contract from the
Contract Pool or any related Equipment or Applicable Security from the Trust
Assets, except to the extent that a Vendor may have reserved the right to
repurchase a Contract under limited conditions.
NEW ISSUANCES; ADDITION OF TRUST ASSETS
The Pooling Agreement provides that, pursuant to any one or more
Supplements, the Seller may direct the Issuer Trustee to issue from time to time
prior to the Commitment Termination Date new Series subject to the conditions
described below (each such issuance a "NEW ISSUANCE"). Under the Pooling
Agreement, the Seller may designate the terms and conditions of any newly issued
Series. In connection with a New Issuance, the Seller will transfer Additional
Contracts and the related Equipment or Applicable Security to the Trust (each
such transfer, an "ADDITION") as of the applicable Cutoff Date (the date on
which Additional Contracts are transferred to the Trust, an "ADDITION DATE"),
subject to the conditions described below. The Seller will transfer Additional
Contracts and the related Equipment or Applicable Security to the Trust only in
connection with a New Issuance. None of the Seller, the Servicer, the Issuer
Trustee or the Trust is required or intends to obtain the consent of any
Noteholder of any outstanding Series to issue any additional Series or add any
Additional Contracts in connection therewith. The Seller may offer the Class A
Notes of any Series to the public under a Prospectus Supplement or other
disclosure document in transactions either registered under the Securities Act
or exempt from registration thereunder directly, through underwriters or
placement agents, in fixed-price offerings or in negotiated transactions or
otherwise. See "Plan of Distribution". Any Series may be issued in fully
registered or book-entry form in minimum denominations determined by the Seller.
The Seller intends to offer, from time to time, additional Series.
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Each Series may have the benefits of Credit Enhancements different from
the Credit Enhancement, if any, provided with respect to any other Series. Under
the Pooling Agreement, the Collateral Agent or the Applicable Indenture Trustee
shall hold any Credit Enhancement only on behalf of the Series to which the
Credit Enhancement relates. The Seller also has the option under the Pooling
Agreement to vary among Series the terms upon which a Series may be repurchased
by the Seller or remarketed to other investors. Unless otherwise provided in a
Prospectus Supplement, there is no limit to the number of New Issuances that the
Seller may cause under the Pooling Agreement. The Trust will terminate only as
provided in the Pooling Agreement. Because each Series will be secured by all
Contracts in the Contract Pool, including Additional Contracts added in
connection with a New Issuance, there can be no assurance that the terms of any
Series might not have an impact on the timing and amount of payments received by
a Class A Noteholder of another Series previously issued by the Trust. See "Risk
Factors--Issuance of Additional Series".
Under the Pooling Agreement and pursuant to a Supplement, a New
Issuance may only occur upon the satisfaction of certain conditions provided in
the Pooling Agreement. The obligation of the Applicable Indenture Trustee to
authenticate the Class A Notes of a new Series and the obligation of the Issuer
Trustee and the Collateral Agent to execute and deliver the Supplement is
subject to the satisfaction of the following conditions:
(a) on or before the tenth business day immediately preceding the date
upon which the New Issuance is to occur (unless the parties to be
notified agree to a shorter notice period), the Seller shall have given
the Issuer Trustee, the Collateral Agent, the Servicer, each Indenture
Trustee, the Rating Agency and certain providers of Credit Enhancement,
if any, written notice of the New Issuance and the related Addition,
the date upon which the New Issuance is to occur and specifying certain
information with respect to the related Additional Contracts;
(b) the Seller shall have delivered to the Issuer Trustee and the
Collateral Agent (i) the Supplement, in form satisfactory to the Issuer
Trustee and the Collateral Agent, executed by each party to the Pooling
Agreement other than the Issuer Trustee and the Collateral Agent, (ii)
a Subsequent Purchase Agreement referencing the Additional Contracts
and (iii) the Applicable Indenture and Note Documents for the
Subordinated Notes of such Series;
(c) the Seller shall have delivered to the Collateral Agent any
applicable Credit Enhancement agreement executed by each of the parties
to the agreement;
(d) the Issuer Trustee shall have received confirmation from the Rating
Agency that neither the New Issuance nor the related Addition will
result in a Ratings Effect with respect to any other Series or Class of
the Trust;
(e) the Seller shall have delivered to the Issuer Trustee, each
Indenture Trustee and certain providers of Credit Enhancement, if any,
a certificate of an authorized officer, dated the date upon which the
New Issuance is to occur, to the effect that the Seller reasonably
believes that the New Issuance and related Addition will not, based on
the facts known to the officer at the time of the certification, cause
an Event of Default or a Restricting Event to occur with respect to any
Series;
(f) the Seller shall have perfected the Trust's and the Collateral
Agent's respective interests in such Additional Contracts and any
related Equipment or Applicable Security to the extent specified in the
Pooling Agreement and shall deliver to the Collateral Agent an opinion
of counsel reasonably acceptable to the Collateral Agent (an "OPINION
OF COUNSEL") in the form annexed to the Pooling Agreement with respect
thereto;
(g) the Seller shall have deposited in the Collection Account,
Collections with respect to the related Additional Contracts since the
related Cutoff Date;
(h) the Seller shall have delivered to the Issuer Trustee, the
Collateral Agent, each Indenture Trustee, the Rating Agency and certain
providers of Credit Enhancement, if any, an Opinion of Counsel
acceptable to the Issuer Trustee that for Federal income tax purposes
(x) following the New Issuance the Trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation
and (y) the New Issuance will not affect the tax characterization as
debt of Notes of any outstanding Series or Class issued by the Trust
for which an opinion of counsel has been provided that such Notes are
debt for Federal income tax purposes (an Opinion of Counsel to the
effect referred to in clauses (x) and (y) with respect to any action is
referred to herein as a "TAX OPINION");
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(i) the Seller and each applicable Financing Originator shall be deemed
to make certain representations and warranties (w) regarding the
accuracy of the information delivered to the Collateral Agent with
respect to the identity of such Additional Contracts, (x) that each
Additional Contract is, as of the related Cutoff Date, an Eligible
Contract, (y) that no selection procedures reasonably believed by such
Financing Originator or the Seller to be materially adverse to the
interests of the Noteholders were utilized in selecting the Additional
Contracts from the available Eligible Contracts and (z) that as of the
Addition Date, such Financing Originator and the Seller is not
insolvent and will not be rendered insolvent by transferring any such
Additional Contract to the Trust;
(j) the sum of (i) the excess of (x) the ADCB over (y) the Excess
Concentration Amount for the Addition (such excess, the "NET POOL
BALANCE") and (ii) amounts on deposit in the Reserve Account shall not
be less, after giving effect to such New Issuance and related Addition,
than the Aggregate Principal Amount;
(k) immediately prior to the New Issuance and after giving effect
thereto, no Event of Default or Restricting Event shall have occurred
or be continuing;
(l) Newcourt shall have deposited into the Reserve Account the
applicable Minimum Deposit (the aggregate outstanding amount deposited
by Newcourt in the Reserve Account at any time, the "NEWCOURT
ADVANCE");
(m) the Commitment Termination Date shall not have occurred; and
(n) any other conditions specified in any Supplement to the Pooling
Agreement.
Upon satisfaction of the above conditions, the Issuer Trustee shall execute the
Supplement and the Applicable Indenture Trustee shall authenticate, execute and
deliver the Class A Notes of the new Series for delivery in accordance with the
Pooling Agreement. In order for the tax opinion described in clause (f) (x) to
be delivered, it is expected that the Subordinated Notes of the New Issuance
will be required either (i) to qualify as debt for Federal income tax purposes
or (ii) to be privately placed in accordance with tax requirements preventing
the Trust from becoming a publicly traded partnership taxable as a corporation.
ALLOCATIONS
Prior to an Event of Default. On the third business day prior to each
Distribution Date (each, a "DETERMINATION DATE") prior to an Event of Default or
a Restricting Event, the Servicer shall instruct the Collateral Agent to
withdraw, and on the succeeding Distribution Date the Collateral Agent acting in
accordance with such instructions shall withdraw, the amounts required to be
withdrawn from the Collection Account in order to make the following payments or
allocations from the Available Amounts for the related Distribution Date (in
each case, such payment or transfer to be made only to the extent funds remain
available therefor after all prior payments and transfers for such Distribution
Date have been made), in the following order of priority:
A) pay to the Servicer, the amount of any unreimbursed
Servicer Advances;
B) pay to the Servicer the monthly Servicing Fee for the
preceding monthly period together with any amounts in respect
of the Servicing Fee that were due in respect of prior monthly
periods that remain unpaid;
C) pay to each person that provides an interest rate swap or
similar hedging arrangement (each such arrangement, an
"INTEREST RATE HEDGE"; and each such person providing an
Interest Rate Hedge, a "HEDGING COUNTERPARTY") the amount
owing to such Hedging Counterparty under the related Interest
Rate Hedge for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that were
due in respect of prior Accrual Periods that remain unpaid
(excluding, in each case, any amounts owing in respect of
termination payments, liquidated damages and gross-ups);
provided, that if the Available Amount remaining to be
allocated pursuant to this clause is less than the full amount
required to be so allocated, such remaining Available Amount
shall be allocated to each Hedging Counterparty pro rata based
on the amount owing to it;
D) allocate to each Series of Notes the applicable Series
Available Amount and;
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1) pay to the Applicable Indenture Trustee on behalf
of the Class A Notes of such Series an amount equal
to interest accrued in respect of such Class A Notes
for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts
that accrued in respect of prior Accrual Periods for
which no allocation was previously made; provided,
that if the Series Available Amount remaining to be
allocated pursuant to this clause is less than the
full amount required to be so allocated, such
remaining Series Available Amount shall be allocated
to each Class A Note of such Series pro rata based on
the outstanding principal amount thereof;
2) pay to the holders of the Class B Notes of each
Series an amount equal to the interest accrued
thereon for the Accrual Period immediately preceding
such Distribution Date, together with any such
amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made;
provided, that if the Series Available Amount
remaining to be allocated pursuant to this clause is
less than the full amount required to be so
allocated, such remaining Series Available Amount
shall be allocated to each Class B Note of such
Series pro rata based on the outstanding principal
amount thereof;
3) pay to the Applicable Indenture Trustee on behalf
of the Class A Notes of such Series the lesser of (i)
the Class A Principal Payment Amount for such Series
of Class A Notes for such Distribution Date and (ii)
the remaining outstanding Principal Amount of the
Class A Notes of such Series; provided, that if the
Series Available Amount remaining to be allocated
pursuant to this clause is less than the full amount
required to be so allocated, such remaining Series
Available Amount shall be allocated to each Class A
Note of such Series pro rata based on the outstanding
principal amount thereof;
4) to the extent that the amount then maintained in
the Reserve Account is less than 1% of the sum of the
Series ADCB for all outstanding Series (such amount,
the "MINIMUM RESERVE BALANCE"), deposit to the
Reserve Account an amount equal to the Series
Allocation Percentage of such insufficiency provided,
that to the extent the amount on deposit in the
Reserve Account exceeds the Minimum Reserve Balance,
such excess shall be paid to Newcourt as a reduction
of the Newcourt Advance until the outstanding amount
of such Advance has been reduced to zero;
5) pay to the holders of the Class C Notes of such
Series an amount equal to interest accrued in respect
of such Series of Class C Notes for the Accrual
Period immediately preceding such Distribution Date,
together with any such amounts that accrued in
respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the
Series Available Amount remaining to be allocated
pursuant to this clause is less than the full amount
required to be so paid, such remaining Series
Available Amount shall be allocated to each Class C
Note of such Series pro rata based on the outstanding
principal amount thereof;
6) pay to the holders of the Class B Notes of such
Series the lesser of (i) the Class B Principal
Payment Amount for such Series of Class B Notes for
such Distribution Date and (ii) the remaining
outstanding Principal Amount of the Class B Notes of
such Series; provided, that if the Series Available
Amount remaining to be allocated pursuant to this
clause is less than the full amount required to be so
paid, such remaining Series Available Amount shall be
allocated to each Class B Note of such Series pro
rata based on the outstanding principal amount
thereof;
7) pay to the holders of the Class C Notes of such
Series the lesser of (i) the Class C Principal
Payment Amount for such Series of Class C Notes for
such Distribution Date and (ii) the remaining
outstanding Principal Amount of the Class C Notes of
such Series; provided, that if the Series Available
Amount remaining to be allocated pursuant to this
clause is less than the full amount required to be so
allocated, such remaining Series Available Amount
shall be allocated to each Class C Note of such
Series pro rata based on the outstanding principal
amount thereof;
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8) pay to the Applicable Indenture Trustee on behalf
of the Class A Notes of such Series, as an additional
payment of principal of such Class A Notes an amount
equal to the product of (i) the Applicable Class
Percentage for such Class A Notes and (ii) the
applicable Excess Spread Amount;
9) pay to the Class B Noteholders of such Series, as
an additional payment of principal of such Class B
Notes an amount equal to the product of (i) the
Applicable Class Percentage for such Class B Notes
and (ii) the applicable Excess Spread Amount;
10) pay to each Hedging Counterparty an amount equal
to the product of (i) the amounts owing to it in
respect of termination payments, liquidated damages
and gross-ups and (ii) the applicable Series
Allocation Percentage; provided, that if the Series
Available Amount remaining to be allocated pursuant
to this clause is less than the full amount required
to be so allocated, such remaining Series Available
Amount shall be allocated to each Hedging
Counterparty pro rata based on the amount owing to
it; and
11) pay the remaining Series Available Amount to the
holders of the Class C Notes;
provided, that no Series Available Amount shall be allocated pursuant to clauses
(D)(5), (6), (7), (8), (9), (10) or (11) above to the extent that any
allocations having priority over such clauses (D)(5), (6), (7), (8), (9), (10)
or (11) above have not been made in full for any other Series of Notes; any such
remaining Series Available Amount shall be deemed to constitute Series Available
Amounts for such other Series, allocated among such other Series, if more than
one, in proportion to the respective Series Allocation Percentages of such other
Series.
As used herein, the following terms shall have the following meanings:
"AVAILABLE AMOUNTS" means as of any Distribution Date, the sum
of (i) all amounts on deposit in the Collection Account as of the
immediately preceding Determination Date on account of Scheduled
Payments due on or before and Prepayments received on or before the
last day of the Collection Period immediately preceding such
Distribution Date (other than Excluded Amounts and net investment
earnings credited to the Collection Account); (ii) amounts received
from any Hedging Counterparty and (iii) Recoveries on account of
previously Defaulted Contracts.
"RESERVE ACCOUNT ALLOCATION AMOUNT" shall mean, with respect
to each Series in respect of which a draw on the Reserve Account is
required to be made on a Distribution Date, an amount equal to the
product of (i) all amounts on deposit in the Reserve Account on such
Distribution Date and (ii) a fraction, the numerator of which is the
Series ADCB of such Series and the denominator of which is sum of the
Series ADCB of each Series in respect of which a draw on the Reserve
Account is required to be made on such Distribution Date.
"SERIES ALLOCATION PERCENTAGE" for a Series of Notes means, at
any time, the ratio that (i) the sum of the Series Expected Cash Flow
and the Series Arrearage bears to (ii) the sum of (A) the sum of the
Series Expected Cash Flows for all Series of Notes then outstanding and
(B) the sum of the Series Arrearages for all Series of Notes then
outstanding.
"SERIES ARREARAGE" for a Series of Notes means, for any
Distribution Date, the amount by which on the previous Distribution
Date the principal of and interest on the Class A Notes and Class B
Notes of such Series were not paid in accordance with the allocations
set forth herein.
"SERIES AVAILABLE AMOUNT" means, with respect to any Series as
of any Distribution Date, the product of (i) the applicable Series
Allocation Percentage and (ii) the Available Amounts remaining to be
allocated after payment of amounts set forth in clauses (A), (B) and
(C) under "Description of the Notes--Allocation; Prior to an Event of
Default".
"SERIES EXPECTED CASH FLOW" means, for any Distribution Date,
(i) with respect to the first Series of Notes, the aggregate amount of
the Adjusted Scheduled Payments scheduled to be made during the
Collection Period immediately preceding such Distribution Date (and any
other Scheduled Payments due and payable after the applicable Cutoff
Date and prior to the last day of such Collection Period that have not
been received by the Servicer prior to the last day of the second
Collection Period immediately preceding such Distribution Date)
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under the terms of all Original Contracts in the Contract Pool as of
the last day of the Collection Period immediately preceding such
Distribution Date and (ii) with respect to each other Series of Notes,
the aggregate amount of the Adjusted Scheduled Payments scheduled to be
made during the Collection Period immediately preceding such
Distribution Date (and any other Scheduled Payments due and payable
after the applicable Cutoff Date and prior to the last day of such
Collection Period that have not been received by the Servicer prior to
the last day of the second Collection Period immediately preceding such
Distribution Date) under the terms of the Additional Contracts sold to
the Trust in connection with the issuance of such Series and in the
Contract Pool as of the last day of the Collection Period immediately
preceding such Distribution Date.
Prior to the occurrence of an Event of Default or a Restricting Event,
to the extent specified by the Servicer, if the Available Amounts or Series
Available Amounts, as applicable, are less than the amount required to make in
full the payments and allocations set forth in items (A), (B), (C), (D)(1),
(D)(2) and (D)(3) above, amounts held in the Reserve Account shall be withdrawn
in order for any of such payments or allocations to be made and such amounts
will be considered as Available Amounts or Series Available Amounts, as
appropriate, for such purpose only provided, to the extent amounts on deposit in
the Reserve Account are insufficient to make such payments in full for each
Series in respect of which a draw on the Reserve Account is required, such
amounts shall be allocated to each such Series pro rata based upon the Reserve
Account Allocation Amount. On each Distribution Date, after giving effect to all
payments and allocations to be made on such date, amounts on deposit in the
Reserve Account in excess of the Minimum Reserve Balance shall be distributed
first, to Newcourt in reimbursement of the outstanding Newcourt Advance and
second, to the holders of the Class C Notes.
Pursuant to the Applicable Indenture, the Applicable Indenture Trustee
will distribute amounts received from the Collateral Agent in accordance with
the foregoing to the Class A Noteholders represented thereby pro rata in
accordance with the respective amounts owed thereto.
Following an Event of Default. On each Determination Date after the
occurrence of an Event of Default, the Servicer shall instruct the Collateral
Agent to withdraw, and on the succeeding Distribution Date the Collateral Agent
acting in accordance with such instructions shall withdraw, the amounts required
to be withdrawn from the Collection Account in order to make the following
payments or allocations from the Available Amount for the related Distribution
Date (in each case, such payment or transfer to be made only to the extent funds
remain available therefor after all prior payments and transfers for such
Distribution Date have been made), in the following order of priority:
A) pay to the Collateral Agent, the amount of any unpaid fees
and expenses;
B) pay to the Servicer, the amount of any unreimbursed
Servicer Advance;
C) pay to the Servicer the monthly Servicing Fee for the
preceding monthly period together with any amounts in respect
of the Servicing Fee that were due in respect of prior monthly
periods that remain unpaid;
D) pay to each Hedging Counterparty the amount owing to such
Hedging Counterparty under the related Interest Rate Hedge for
the Accrual Period immediately preceding such Distribution
Date, together with any such amounts that were due in respect
of prior Accrual Periods that remain unpaid (excluding, in
each case, any amounts owing in respect of termination
payments, liquidated damages and gross-ups); provided, that if
the Available Amount remaining to be allocated pursuant to
this clause is less than the full amount required to be so
allocated, such remaining Available Amount shall be allocated
to each Hedging Counterparty pro rata based on the amount
owing to it;
E) pay to each Applicable Indenture Trustee on behalf of the
Class A Notes represented thereby an amount equal to interest
accrued in respect of such Class A Notes for the Accrual
Period immediately preceding such Distribution Date, together
with any such amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made; provided,
that if the Available Amount remaining to be allocated
pursuant to this clause is less than the full amount required
to be so allocated, such remaining Available Amount shall be
allocated to each Series of Class A Notes pro rata based on
the outstanding principal amount owing to it;
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F) pay to the holders of Class B Notes of each Series an
amount equal to interest accrued in respect of such Class B
Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued
in respect of prior Accrual Periods for which no allocation
was previously made; provided, that if the Available Amount
remaining to be allocated pursuant to this clause is less than
the full amount required to be so allocated, such remaining
Available Amount shall be allocated to each Series of Class B
Notes pro rata based on the outstanding principal amount owing
to it;
G) pay to each Applicable Indenture Trustee on behalf of the
Class A Notes represented thereby the remaining outstanding
principal amount of such Class A Notes; provided, that if the
Available Amount remaining to be allocated pursuant to this
clause is less than the full amount required to be so
allocated, such remaining Available Amount shall be allocated
to each Series of Class A Notes pro rata based on the
outstanding principal amount thereof;
H) pay to Newcourt the outstanding amount of the Newcourt
Advance;
I) pay to the holders of Class C Notes of each Series an
amount equal to interest accrued in respect of such Class C
Notes for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts (and
interest on any such amounts) that accrued in respect of prior
Accrual Periods for which no allocation was previously made;
provided, that if the Available Amount remaining to be
allocated pursuant to this clause is less than the full amount
required to be so allocated, such remaining Available Amount
shall be allocated to each Series of Class C Notes pro rata
based on the outstanding principal amount thereof;
J) pay to the Class B Noteholders the remaining outstanding
principal amount of the Class B Notes; provided, that if the
Available Amount remaining to be allocated pursuant to this
clause is less than the full amount required to be so
allocated, such remaining Available Amount shall be allocated
to each Series of Class B Notes pro rata based on the
outstanding principal amount thereof;
K) pay to the holders of Class C Notes of each Series the
remaining outstanding principal amount of such Class C Notes;
provided, that if the Available Amount remaining to be
allocated pursuant to this clause is less than the full amount
required to be so allocated, such remaining Available Amount
shall be allocated to each Series of Class C Notes pro rata
based on the amount owing to it;
L) pay to each Hedging Counterparty an amount equal to the
amounts owing to it in respect of termination payments,
liquidated damages and gross-ups; provided, that if the
Available Amount remaining to be allocated pursuant to this
clause is less than the full amount required to be so
allocated, such remaining Available Amount shall be allocated
to each Hedging Counterparty pro rata based on the amount
owing to it; and
M) pay any remaining Series Available Amounts to the holders
of Class C Notes of each Series;
Following the occurrence of an Event of Default, and notwithstanding
the occurrence or continuance of a Restricting Event, amounts on deposit in the
Reserve Account shall be treated as Available Funds and allocated as provided
above following an Event of Default; provided, that (i) before giving effect to
any allocations or payments on such Distribution Date, Investment Earnings in
the Reserve Account shall be paid to Newcourt and (ii) after giving effect to
the withdrawal of Investment Earnings, amounts on deposit in the Reserve Account
on the first Distribution Date following such Event of Default (and prior to any
allocations or payments of Available Amounts on such date) in excess of the
Minimum Reserve Balance shall be distributed first, to Newcourt in reimbursement
of the outstanding Newcourt Advance and second to the holders of the Class C
Notes.
Pursuant to the Applicable Indenture, the Applicable Indenture Trustee
will distribute amounts received from the Collateral Agent in accordance with
the foregoing to the Class A Noteholders represented thereby pro rata in
accordance with the respective amounts owed thereto.
Following a Restricting Event. On each Determination Date after the
occurrence, but only during the continuance, of a Restricting Event, the
Servicer shall instruct the Collateral Agent to withdraw, and on the succeeding
Distribution Date the Collateral Agent acting in accordance with such
instructions shall withdraw, the amounts required
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to be withdrawn from the Collection Account in order to pay or allocate from the
Available Amount for the related Distribution Date (in each case, such payment
or transfer to be made only to the extent funds remain available therefor after
all prior payments and transfers for such Distribution Date have been made),
amounts in the same order of priority as described above under "--Allocations;
Following an Event of Default".
Following the occurrence, but only during the continuance, of a
Restricting Event, and prior to the occurrence of an Event of Default, amounts
on deposit in the Reserve Account shall be treated as Available Funds and
allocated as provided above following an Event of Default; provided, that (i),
before giving effect to any allocations or payments on such Distribution Date,
Investment Earnings in the Reserve Account shall be paid to Newcourt and (ii),
after giving effect to the withdrawal of Investment Earnings, amounts on deposit
in the Reserve Account, before giving effect to any allocations or payments on
such Distribution Date, in excess, in the aggregate, of the Minimum Reserve
Balance shall be paid first, to Newcourt in reimbursement of the outstanding
Newcourt Advance and second, to the holders of the Class C Notes.
ALLOCATION OF DEFAULTED CONTRACTS
An Eligible Contract will automatically be deemed to be in default (a
"DEFAULTED CONTRACT") if it is more than 90 days past due or if at any time
prior to such 90-day period the Servicer determines, in accordance with its
customary and usual practices, that such Contract is not collectible. The
current policy of the Servicer with respect to writing off Contracts is
described in "Credit and Contract Servicing Procedures--Newcourt's Write-Off
Policy".
Upon classification as a Defaulted Contract, the Servicer shall
accelerate all payments due thereunder or take such other action as the Servicer
reasonably believes will maximize the amount of Recoveries in respect thereof
and shall otherwise follow its customary and usual collection procedures, which
may include the repossession and sale of any related Equipment or other
Applicable Security on behalf of the Trust. If the Series Available Amounts are
less than the amount required to make in full certain of the payments and
allocations set forth above (see "--Allocations"), including any such
insufficiency as a result of Defaulted Contracts, amounts on deposit in the
Reserve Account shall be withdrawn to make any of such payments or allocations
as more fully described above. To the extent the aggregate amount of Available
Amounts, outstanding principal amounts of Subordinated Notes of all Series and
amounts on deposit in the Reserve Account are insufficient to satisfy the
outstanding Principal Amount of the Class A Notes of any Series, then the
Additional Series Enhancement for such Series shall be reduced until the amount
thereof has been reduced to zero. Class A Noteholders will bear their allocable
share of any losses (based upon the outstanding Principal Amount thereof) in
excess of the foregoing sources of payment. Any recoveries on account of a
previously Defaulted Contract (including proceeds of repossessed Equipment or
other Applicable Security or other property, Insurance Proceeds, amounts
representing late fees and penalties and amounts received pursuant to a Vendor
Agreement, but net of amounts representing costs and expenses of liquidation
incurred by the Servicer; such recoveries net of such amounts, "RECOVERIES")
shall be deemed to be Available Amounts.
COLLECTION ACCOUNT
The Servicer, for the benefit of the Noteholders, shall cause to be
established and maintained in the name of the Collateral Agent on behalf of the
Secured Parties, with an office or branch of a depository institution or trust
company (which may include the Collateral Agent) organized under the laws of the
United States of America or any one of the states thereof and located in the
state designated by the Servicer a non-interest bearing segregated corporate
trust account (the "COLLECTION ACCOUNT") bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of
the Noteholders; provided, however, that at all times such depository
institution or trust company shall be (a) the corporate trust department of the
Collateral Agent or, (b) a depository institution organized under the laws of
the United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), (i)(A) which has either (1)
a long-term unsecured debt rating acceptable to the Rating Agencies or (2) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies, (B) the parent corporation of which has either (1) a
long-term unsecured debt rating acceptable to the Rating Agencies or (2) 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 and
(ii) whose deposits are insured by the Federal Deposit Insurance Corporation
(the "FDIC";
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any such depository institution or trust company, a "QUALIFIED INSTITUTION").
The Prospectus Supplement for a Series may require the Collateral Agent to
establish and maintain, for administrative purposes only, other Series accounts
for such Series bearing a designation clearly indicating that the funds
allocated thereto are held in trust for the benefit of the Noteholders of such
Series. Funds in the Collection Account generally will be invested in (i)
obligations fully guaranteed by the United States of America, (ii) demand
deposits, time deposits or certificates of deposit of depository institutions or
trust companies having commercial paper with the highest rating from each Rating
Agency, (iii) commercial paper (or other short term obligations) having, at the
time of the related Trust's investment therein, the highest rating from each
Rating Agency, (iv) demand deposits, time deposits and certificates of deposit
which are fully insured by the FDIC, (v) notes or bankers' acceptances issued by
any depository institution or trust company described in (ii) above, (vi) money
market funds which have the highest rating from, or have otherwise been approved
in writing by, each Rating Agency, (vii) time deposits with an entity, the
commercial paper of which has the highest rating from the Rating Agency, (viii)
eligible repurchase agreements and (ix) any other investments approved in
writing by the Rating Agency (collectively, "ELIGIBLE INVESTMENTS"). Such funds
may be invested in debt obligations of Newcourt or its affiliates so long as
such obligations qualify as Eligible Investments. Any earnings (net of losses
and investment expenses) on funds in the Collection Account will be distributed
to Newcourt. The Servicer will have the revocable power to instruct the
Collateral Agent to make withdrawals and payments from a related Collection
Account for the purpose of carrying out its duties under the Pooling Agreement
and any Supplement thereto.
RESERVE ACCOUNT
The Servicer, for the benefit of the Noteholders, shall cause to be
established and maintained in the name of the Collateral Agent on behalf of the
Secured Parties, with a Qualified Institution designated by the Servicer, a
segregated trust account within the corporate trust department of such Qualified
Institution (the "RESERVE ACCOUNT"), bearing a designation clearly indicating
that the funds deposited therein are held in trust for the benefit of the
Noteholders. The Collateral Agent shall possess all right, title and interest in
all funds on deposit from time to time in the Reserve Account and in all
proceeds thereof. The Reserve Account will be funded from time to time (i) by
Newcourt as described above under "--New Issuances; Addition of Trust Assets"
and (ii) with Available Amounts allocated thereto as described above under
"--Allocations". Funds in the Reserve Account generally will be invested in
Eligible Investments. Such funds may be invested in debt obligations of Newcourt
or its affiliates so long as such obligations qualify as Eligible Investments.
Any earnings (net of losses and investment expenses) on funds in the Reserve
Account will be distributed to Newcourt. The Servicer will have the revocable
power to instruct the Collateral Agent to make withdrawals and payments from the
Reserve Account for the purpose of carrying out its duties under the Pooling
Agreement and any Supplement thereto.
REPLACEMENT ACCOUNTS
If any institution with which any of the accounts established pursuant
to the Pooling Agreement are established ceases to be a Qualified Institution,
the Servicer or the Issuer Trustee (as the case may be) shall within ten
Business Days establish a replacement account at a Qualified Institution after
notice thereof.
CREDIT ENHANCEMENT
General. The rights of the Subordinated Noteholders of each Series to
receive payments of principal and interest will be subordinated to the rights of
the Class A Noteholders to receive such payments to the extent described in the
Pooling Agreement and any Supplement for such Series of Class A Notes. Such
subordination is afforded both by the preferential right of the Class A
Noteholders of each Series to receive such payments, by the establishment of the
Reserve Account and, if specified for any Series in the related Prospectus
Supplement, by the availability of Excess Spread Amounts. Amounts otherwise
distributable to the Subordinated Noteholders of any Series will, to the extent
described in the Pooling Agreement and any applicable Supplement, be deposited
in the Reserve Account to the extent necessary to maintain the amounts on
deposit therein in an amount no less than the Minimum Reserve Balance. Because
the Credit Enhancement afforded by the subordination of Subordinated Notes of
all Series and the amounts on deposit in the Reserve Account are available to
the Class A Noteholders of each Series, Class A Noteholders of any Series will
be subject to
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the risk that such Credit Enhancement will be exhausted by the claims of Class A
Noteholders of another Series. See "--Allocations".
The presence of Credit Enhancement with respect to a Class is intended
to enhance the likelihood of receipt by Noteholders of the Class of the full
amount of principal and interest due to such Class and to decrease the
likelihood that the Noteholders will experience losses. However, unless
otherwise specified in the Prospectus Supplement for a Series, the Credit
Enhancement, if any, will be limited and will not provide protection against all
risks of loss. Unless otherwise provided in a Prospectus Supplement, Credit
Enhancement will not guarantee repayment of the entire principal balance of the
Notes of any Class and interest thereon. If losses occur which exceed the amount
available under the Credit Enhancement or which are not covered by the Credit
Enhancement, Noteholders will bear their allocable share of such losses. See
"--Allocation of Defaulted Contracts".
Additional Series Enhancement. Additional Credit Enhancement may be
provided with respect to one or more Classes of a Series (as to such Series,
"ADDITIONAL SERIES ENHANCEMENT") in the form of overcollateralization, letters
of credit, credit or liquidity facilities, repurchase obligations, a surety
bond, insurance policy, guaranty or similar forms of third party payments or
support, the establishment of an additional cash collateral account, reserve
account, spread account or similar cash deposits, the use of cross support
features, or any combination of the foregoing. Additional Series Enhancement may
also be provided to a Class or Classes of a Series by additional subordination
provisions (in addition to those described above) which require that
distributions of principal or interest be made with respect to the Notes of such
Class or Classes before distributions are made to one or more other Classes of
such Series. If so specified in the Prospectus Supplement, any form of
Additional Series Enhancement may be structured so as to be available to more
than one Class or Series to the extent described therein. Additional Series
Enhancement is included in the "Credit Enhancement" for a Series or Class of
Notes.
If Additional Series Enhancement is provided with respect to a Series,
the Prospectus Supplement will include a description of (i) the amount payable
under the Additional Series Enhancement, (ii) any conditions to payment
thereunder not otherwise described herein, (iii) the conditions (if any) under
which the amount payable under the Additional Series Enhancement may be reduced
and under which the Additional Series Enhancement may be terminated or replaced
and (iv) any material provisions of any agreement relating to the Additional
Series Enhancement. Additionally, in certain cases, the Prospectus Supplement
may set forth certain information with respect to the provider of any
third-party Additional Series Enhancement (the "CREDIT ENHANCER"), including (i)
a brief description of its principal business activities, (ii) its principal
place of business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies which exercise primary jurisdiction over the conduct of its
business and (iv) its total assets and stockholders' or policyholders' surplus,
if applicable, as of a date specified in the Prospectus Supplement.
Subordination. If so specified in the Prospectus Supplement, one or
more Classes of a Series may, in addition to the subordination of the
Subordinated Notes of all Series to the Class A Notes of all Series, be
subordinated to one or more other Classes of the Series. The rights of the
holders of the subordinated Classes to receive payments of principal or interest
on any Distribution Date will be subordinated to the rights of the holders of
the Classes of Notes which are senior to such subordinated Classes to the extent
set forth in the Prospectus Supplement. Such subordination may be limited in
amount and may not be available to cover certain types of losses, as specified
in the Prospectus Supplement. The Prospectus Supplement will also set forth
information concerning the amount of subordination of a Class or Classes of
Notes in a Series, the circumstances in which the subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, and the conditions under which amounts available from
payments that would otherwise be made to holders of the subordinated Notes will
be distributed to holders of Notes which are senior to the subordinated Notes.
Letter of Credit. If so specified in the Prospectus Supplement, Credit
Enhancement may be provided with respect to a Series or Class of Notes in the
form of a letter of credit issued by a bank or financial institution specified
in the Prospectus Supplement (the "L/C ISSUER"). Subject to the terms and
conditions specified in the Prospectus Supplement, an L/C Issuer will be
obligated to honor drawings under a letter of credit in an aggregate dollar
amount (which may be fixed or may be reduced as described in the Prospectus
Supplement), net of unreimbursed payments thereunder, equal to the amount
described in the Prospectus Supplement. The amount available under a letter of
credit will be reduced to the extent of the unreimbursed payments thereunder. A
letter of credit may not cover all types of losses.
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Cash Collateral or Reserve Account. If so specified in the Prospectus
Supplement, the Notes of any Class or Series offered hereby may have the benefit
of an additional cash collateral or reserve account. Unless otherwise specified
in the Prospectus Supplement, a cash collateral or reserve account with respect
to a Class or Series will be funded on the Series Issuance Date and the funds on
deposit therein will be invested in Eligible Investments. The amount available
to be withdrawn from a cash collateral or reserve account will be the lesser of
the amount on deposit in the cash collateral or reserve account and an amount
specified in the Prospectus Supplement. The Prospectus Supplement will set forth
the circumstances under which withdrawals will be made from the cash collateral
or reserve account.
Surety Bond or Insurance Policy. If so specified in the Prospectus
Supplement, a surety bond or insurance policy may be purchased for the benefit
of the holders of any Series or Class of Notes to assure distributions of
interest or principal with respect to such Series or Class of Notes in the
manner and amount specified in the Prospectus Supplement.
Spread Account. If so specified in the Prospectus Supplement, support
for a Series or one or more Classes of a Series may be provided by the periodic
deposit of certain available excess cash flow from Trust Assets into an account
(the "Spread Account") intended to assure the subsequent distributions of
interest and principal on the Notes of such Class or Series in the manner
specified in the Prospectus Supplement.
EVENTS OF DEFAULT
As described above, allocations of Available Amounts will be made to
each Series as described above under "--Allocations; Prior to an Event of
Default" unless and until an Event of Default with respect to any Series has
occurred, in which case allocations of Available Amounts will be made as
described above under "--Allocations; Following an Event of Default" or
"--Allocations; Following a Restricting Event". An "EVENT OF DEFAULT" with
respect to a Series refers to any of the following events and any other events
specified as such in the Supplement with respect to such Series:
(a) failure to pay the then outstanding principal amount of
any Note, if any, on its related Maturity Date;
(b) (i) failure on the part of the Seller to make any payment
or deposit required under the Pooling Agreement or any Supplement
within three business days after the date the payment or deposit is
required to be made or (ii) failure on the part of the Seller, the
Trust or the Issuer Trustee to observe or perform any other covenants
or agreements of such entity set forth in the Pooling Agreement, any
Supplement, any Indenture or any Note Document, which failure has a
material adverse effect on the Noteholders and which continues
unremedied for a period of 60 days after written notice; provided, that
no such 60-day cure period shall apply in the case of a failure by a
Seller to perform its agreement to accept reassignment of Ineligible
Contracts and further provided, that only a five day cure period shall
apply in the case of a failure by the Seller, the Trustee or the Issuer
Trustee to observe its covenant not to grant a security interest or
otherwise intentionally create a lien on the Contracts;
(c) any representation or warranty made by the Seller, the
Trustee or the Issuer Trustee in the Pooling Agreement, any Supplement,
any Indenture or any Note Document or any information required to be
given by the Seller to the Collateral Agent to identify the Contracts
proves to have been 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 interests of the
Noteholders of the Series are materially and adversely affected;
provided, however, that an Event of Default shall not be deemed to
occur thereunder if the Seller has repurchased the related Contracts
during such period in accordance with the provisions of the Pooling
Agreement;
(d) the occurrence of an Insolvency Event relating to
Newcourt, the Seller, the Trust or the Servicer;
(e) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
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(f) the Seller or any other person sells, assigns, pledges or
transfers any portion of the Non- Transferrable Notes or any economic
interest in the Non-Transferrable Notes in violation of the
restrictions on transfer described under "The Pooling Agreement
Generally--The Non-Transferrable Notes" (a "TRANSFER EVENT"); or
(g) an additional Event of Default as specified in a
Supplement for any Series.
In the case of any event described in (a), (b), (c), (f) or (g), an
Event of Default with respect to any Series will be deemed to have occurred only
if, after the applicable grace period described in such clauses, if any, either
the Collateral Agent or the Required Holders, by written notice to the Seller
and the Servicer (and the Collateral Agent, if given by the Noteholders) declare
that an Event of Default has occurred as of the date of such notice. In the case
of any event described in clause (d) or (e), an Event of Default with respect to
each Series will be deemed to have occurred without any notice or other action
on the part of the Collateral Agent or the Noteholders of any Series immediately
upon the occurrence of such event. In the event the Collateral Agent has actual
knowledge of an Event of Default, it will be required to notify, among others,
the Seller, the Servicer and each Indenture Trustee.
If an Insolvency Event relating to the Seller occurs or if a Transfer
Event occurs, pursuant to the Pooling Agreement, on the day of such Insolvency
Event or Transfer Event, the Seller will promptly give notice to the Collateral
Agent of the Insolvency Event or Transfer Event, and the Collateral Agent will,
unless notified to the contrary by the Controlling Party, 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 such sale,
disposition or liquidation of Contracts will be deposited in the Collection
Account and allocated as described in the Pooling Agreement and Supplement. If
the sum of (i) the portion of such proceeds allocated to the Noteholders of a
Class of any Series and (ii) the proceeds of any collections on Contracts in the
Collection Account allocated to such Noteholders is not sufficient to pay the
Principal Amount of the Notes of such Class in full, such Noteholders will incur
a loss.
An Event of Default under any Series of Class A Notes will include the
occurrence of any additional "Event of Default" under any Supplement pursuant to
which previous or subsequent Series of Notes have been or may be issued.
Additional "Events of Default" set forth in the Supplement for a Series may be
more restrictive than the Events of Default otherwise applicable to any other
Series of Notes. This cross-default feature is intended to assure that the Class
A Notes of all Series receive pro rata and pari passu benefit of the
subordination of all Subordinated Notes.
As used herein, the following terms shall have the following meanings:
"NOTE DOCUMENTS" means each Supplement or similar agreement
pursuant to which a Series of Subordinated Notes has been issued.
"REQUIRED HOLDERS" means (i) prior to the payment in full of
the Class A Notes of all Series outstanding, Class A Noteholders
holding Class A Notes evidencing more than 50% of the Aggregate
Principal Amount of the Class A Notes of all Series, or Indenture
Trustees on behalf of such Noteholders and (ii) from and after the
payment in full of the Class A Notes of all Series outstanding, Class B
Noteholders holding Class B Notes evidencing more than 50% of the
Aggregate Principal Amount of the Class B Notes of all Series
outstanding.
RESTRICTING EVENTS
As described above, prior to the occurrence of an Event of Default,
allocations of Available Amounts will be made to each Series as described above
under "--Allocations; Prior to an Event of Default" unless a Restricting Event
has occurred and is continuing with respect to any Series in which case
allocations will be made to each Series as described above under "--Allocations;
Following an Event of Default". A "RESTRICTING EVENT" with respect to a Series
refers to any of the following events and any other events specified as such in
the Supplement with respect to such Series:
(a) As of any Distribution Date, the weighted average ADCB of
all Contracts in respect of which, during the three preceding
Collection Periods, a Scheduled Payment is more than 60 days past due
exceeds 2.0% of the weighted average ADCB of the Contracts Pool during
such three Collection Periods; or
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(b) As of any Distribution Date, the product of (i) two (2)
multiplied by (ii) the difference between (x) the ADCB of the sum of
(A) all Contracts which were charged off by the Servicer as
uncollectible in accordance with its usual and customary practices
during the six preceding Collection Periods (whether or not such
Contract was a Defaulted Contract) and (B) all Contracts under which
the related End-User was the subject of an Insolvency Event during such
six Collection Periods (Contracts which are the subject of an event
described in clauses (A) or (B) being referred to as "CHARGE-OFFS") and
(y) Recoveries received during the preceding six Collection Periods on
account of Charge-Offs, exceeds 1% of the weighted average ADCB of all
Contracts in the Contract Pool during such six Collection Periods;
(c) As of any Distribution Date, after giving effect to the
allocations to be made on such date, the sum of the following for any
Series (i) the applicable Series Allocation Percentage of amounts on
deposit in the Reserve Account plus (ii) the difference between the
Series ADCB of the Contract Pool and the Aggregate Principal Amount of
the Class A Notes of such Series is less than, for such Series, the
amount specified in the related Prospectus Supplement as the "MINIMUM
AMOUNT"; or
(d) Any additional Restricting Events specified in the
Supplement for any Series.
A Restricting Event under any Series of Class A Notes will include the
occurrence of any additional "Restricting Events" under any Supplement pursuant
to which previous or subsequent Series of Notes have been or may be issued.
Additional "Restricting Events" set forth in the Supplement for a Series may be
more restrictive than the Restricting Events otherwise applicable to any other
Series of Notes. This cross-default feature is intended to assure that the Class
A Notes of all Series receive pro rata and pari passu benefit of the
subordination of all Subordinated Notes.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation with respect to its servicing activities
and reimbursement for its expenses for any Collection Period will be a servicing
fee (the "SERVICING FEE") calculated monthly, and payable on each Distribution
Date, in an amount equal to the product of (i) one-twelfth, (ii) .60% (such
percentage, the "SERVICING FEE PERCENTAGE") and (iii) the ADCB of the Contract
Pool as of the beginning of the related Collection Period. The Servicing Fee
will be funded from Available Amounts and will be paid on the Distribution Date
with respect to each Collection Period from the Collection Account (unless such
amount has been netted against deposits by the Servicer to the Collection
Account).
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Contracts including, without
limitation, expenses related to the enforcement of the Contracts, payment of the
fees and disbursements of the Trustees and independent accountants, casualty
insurance on Equipment (to the extent the Contracts provide for Newcourt to pay
such insurance) and other fees which are not expressly stated in the Pooling
Agreement to be payable by the Trust, the Noteholders or the Seller (other than
Federal, state, local and foreign income, franchise or other taxes based on
income, if any, or any interest or penalties with respect thereto, imposed upon
the Trust). In the event that Newcourt is acting as Servicer and fails to pay
the fees and disbursements of the Trustees, the Trustees will be entitled to
receive the portion of the Servicing Fee that is equal to such unpaid amounts.
In no event will the Noteholders of any Series be liable to the Trustees for the
Servicer's failure to pay such amounts, and any such amounts so paid to the
Trustees will be treated as paid to the Servicer for all other purposes of the
Pooling Agreement.
RECORD DATE
With respect to each Series of Class A Notes, payments thereon will be
made as described herein and in the Prospectus Supplement to the Class A
Noteholders of such Series in whose names the Class A Notes were registered
(expected to be Cede, as nominee of DTC) at the close of business on the day
specified in the Prospectus Supplement (each a "RECORD DATE"). However, the
final payment on the Class A Notes of a Series offered hereby will be made only
upon presentation and surrender of such Notes. All payments with respect to the
principal of and interest on the Class A Notes of each Series (each, a
"DISTRIBUTION") will be made to DTC in immediately available funds. See
"Description of the Notes--Book-Entry Registration".
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OPTIONAL TERMINATION
On any Distribution Date occurring on or after the date on which the
then outstanding principal balance of the Class A Notes and Class B Notes of all
Series is 10% or less of the aggregate principal amount of the Class A Notes and
Class B Notes of all Series as of the date of their respective original
issuance, the Seller will have the option to purchase (without penalty) all, but
not less than all, of the Class A Notes and Class B Notes of all Series. The
redemption price will be equal to the sum of the outstanding principal amount of
the Class A Notes and Class B Notes of all Series, together with accrued
interest thereon through the day preceding the date of redemption, and shall be
payable to the holders of the Class A Notes and Class B Notes on such
Distribution Date. Following any redemption, the Class A Noteholders and Class B
Noteholders will have no further rights with respect to the Trust Assets. The
Class C Notes of any Series will not be subject to redemption prior to the
payment in full of the Class A Notes and Class B Notes of all Series.
REPORTS
No later than the third business day prior to each Distribution Date,
the Servicer will forward to the Collateral Agent, each Indenture Trustee, each
Rating Agency and certain providers of Credit Enhancement with respect to a
Series, a statement (the "MONTHLY REPORT") prepared by the Servicer setting
forth certain information with respect to the Trust and the Notes of the Series
(unless otherwise indicated), including: (i) the Series ADCB (A) as of the end
of the related Collection Period and (B) as of the end of the second Collection
Period preceding such Distribution Date (or, in the case of Contracts that were
first added to the Contract Pool during the related Collection Period, as of the
Cutoff Date for such Contracts); (ii) the Class A Principal Payment Amount with
respect to such Series (including the calculation utilized in the determination
thereof); (iii) the Available Amount processed during the related Collection
Period; (iv) the ADCB of Contracts held by the Trust which were 30 and 90 days
or more delinquent as of the end of such Collection Period; (v) the Discounted
Contract Balance of each Contract in the Contract Pool that became a Defaulted
Contract during such Collection Period and the preceding two Collection Periods;
(vi) the Discounted Contract Balances of all Charge-Offs for such Collection
Period and the preceding five Collection Periods; (vii) the monthly Servicing
Fee for such Collection Period; (viii) the Series Available Amount with respect
to the related Collection Period (including the calculation utilized in the
determination thereof); and (ix) the available amount of Credit Enhancement
(including any Additional Series Enhancement for such Series) for such
Distribution Date.
With respect to each Distribution Date, the Monthly Report with respect
to each Series also will include the following information with respect to the
Notes of the Series: (i) the total amount distributed; (ii) the amount allocable
to principal on the Notes; (iii) the amount allocable to interest on the Notes;
and (iv) the amount, if any, by which the unpaid principal amount of the Notes
of each Class in such Series exceeds the Principal Amount of such Class as of
the Record Date with respect to such Distribution Date. On each Distribution
Date, each Applicable Indenture Trustee (or an agent on its behalf), will
forward to each Noteholder represented by such Indenture Trustee of record a
copy of the Monthly Report.
On or before January 31 of each calendar year, commencing January 31,
1997, each Applicable Indenture Trustee (or an agent on its behalf), will
furnish (or cause to be furnished) to each person who at any time during the
preceding calendar year was a Noteholder of record represented by such Indenture
Trustee a statement containing the information required to be provided by an
issuer of indebtedness under the Code for such preceding calendar year or the
applicable portion thereof during which such person was a Noteholder, together
with such other customary information as is necessary to enable the Noteholders
to prepare their tax returns. See "Certain Federal Income Tax Matters".
LIST OF CLASS A NOTEHOLDERS
At such time, if any, as Definitive Class A Notes have been issued,
upon written request of any Class A Noteholder or group of Class A Noteholders
of record holding Class A Notes evidencing not less than 10% of the aggregate
unpaid principal amount of the Notes of a Series the Collateral Agent will
afford such Class A Noteholders access during normal business hours to the
current list of Class A Noteholders of such Series and each other Series issued
by the Trust for purpose of communicating with other Class A Noteholders with
respect to their rights under the Pooling Agreement or any Supplement or Notes.
While the Class A Notes are held in book-entry form, Class A Noteholders will
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not have access to the list of Class A Noteholders of any Series, which may
impede the ability of Class A Noteholders to communicate with each other. See
"Description of the Notes-Book-Entry Registration" and "--Definitive Class A
Notes".
The Pooling Agreement will not provide for any annual or other meetings
of Noteholders.
BOOK-ENTRY REGISTRATION
Holders of interests in Class A Notes (each, a "CLASS A NOTEHOLDER")
may only hold Class A Notes through DTC (in the United States) or Cedel Bank,
societe anonyme ("CEDEL"), or Morgan Guaranty Trust Company of New York,
Brussels (the "EUROCLEAR OPERATOR" or "EUROCLEAR") (in Europe) if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
Cede, as nominee for DTC, will be the registered holder of the global
Class A Notes. No Class A Noteholder will be entitled to receive a certificate
representing such person's interest in the Class A Notes. Unless and until
Definitive Notes representing the Class A Notes are issued under the limited
circumstances described below, all references herein to actions by Class A
Noteholders shall refer to actions taken by DTC upon instructions from its
Participants, and all references herein to distributions, notices, reports and
statements to Class A Noteholders shall refer to distributions, notices, reports
and statements to Cede, as the registered holder of the Class A Notes, for
distribution to Class A Noteholders in accordance with DTC procedures.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. Citibank, N.A. ("CITIBANK"), will act as depositary for CEDEL and
Morgan Guaranty Trust Company of New York ("MORGAN") will act as depositary for
Euroclear (in such capacities, the "DEPOSITARIES").
Transfers between DTC participants will occur in accordance with DTC
rules. Transfers between CEDEL participants and Euroclear participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL or
Euroclear participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
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 in accordance with 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 in accordance with normal procedures for same-day
funds settlement applicable to DTC. CEDEL participants and Euroclear
participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a DTC participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL participant on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL participant
or a Euroclear participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant CEDEL or Euroclear
cash account only as of the business day following settlement in DTC. For
information with respect to tax documentation procedures relating to the Notes,
see "Certain Federal Income Tax Matters--Non-United States Investors".
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 UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("PARTICIPANTS") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and
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may include certain other organizations. Indirect access to the DTC system also
is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("INDIRECT PARTICIPANTS").
Class A Noteholders that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Class A Notes may do so only through Participants and Indirect
Participants. In addition, Class A Noteholders will receive all distributions of
principal of and interest on the Class A Notes from the Applicable Indenture
Trustee (or a paying agent) through DTC and its Participants. Under a book-entry
format, Class A Noteholders will receive payments after the related Distribution
Date because, while payments are required to be forwarded to Cede, as nominee
for DTC, on each such date, DTC will forward such payments to its Participants
which thereafter will be required to forward them to Indirect Participants or
Class A Noteholders. It is anticipated that the only "Class A Noteholder" (as
such term is used in the Pooling Agreement and each Supplement) will be Cede, as
nominee of DTC, and that Class A Noteholders will not be recognized by the
Issuer Trustee, the Collateral Agent or the Applicable Trustee as "Class A
Noteholders" under the Pooling Agreement and related Supplement. Class A
Noteholders will only be permitted to exercise the rights of Class A Noteholders
or to communicate with other Class A Noteholders under the Pooling Agreement and
each Supplement indirectly through DTC and its Participants which in turn will
exercise their rights through DTC. While the Class A Notes of a Series are held
in book-entry form, Class A Noteholders will not have access to the list of
Class A Noteholders of such Series, which may impede the ability of Class A
Noteholders to communicate with each other.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Class A Notes and is
required to receive and transmit distributions of principal of and interest on
the Class A Notes. Participants and Indirect Participants with which Class A
Noteholders have accounts with respect to the Class A Notes similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Class A Noteholders.
Because DTC can only act on behalf of Participants, which in turn act
on behalf of Indirect Participants and certain banks, the ability of a Class A
Noteholder to pledge Class A Notes to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Class A Notes, may be limited due to the lack of a physical certificate for such
Class A Notes.
DTC has advised the Seller that it will take any action permitted to be
taken by a Class A Noteholder under the Pooling Agreement or Supplements only at
the direction of one or more Participants to whose account with DTC the Class A
Notes are credited. Additionally, DTC has advised the Seller that it will take
such actions with respect to specified percentages of the Class A Noteholders
only at the direction of and on behalf of Participants whose holdings include
principal amounts that satisfy such specified percentages. DTC may take
conflicting actions with respect to other principal amounts of Class A Notes to
the extent that such actions are taken on behalf of Participants whose holdings
include principal amounts.
Distributions with respect to Class A Notes held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL participants or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Matters". CEDEL or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a Class A Noteholder under the Pooling Agreement or the relevant Supplement
on behalf of a CEDEL participant or Euroclear participant only in accordance
with its relevant rules and procedures and subject to its Depositary's ability
to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Class A Notes among participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
Except as required by law, none of the Servicer, the Seller, the Issuer
Trustee, the Collateral Agent or any Indenture Trustee will have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of Class A Notes of any Series held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
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DEFINITIVE CLASS A NOTES
The Class A Notes of a Series will be issued in fully registered,
certificated form to Class A Noteholders or their respective nominees
("DEFINITIVE CLASS A NOTES"), rather than to DTC or its nominee, only if (i) the
Seller advises each Indenture Trustee in writing that DTC is no longer willing
or able to discharge properly its responsibilities as Depository with respect to
the Class A Notes, and the Issuer Trustee or the Seller is unable to locate a
qualified successor, (ii) the Seller, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of a Servicer
Default, Class A Noteholders of any Series evidencing not less than 50% of the
Aggregate Principal Amount of such Series advise the Issuer Trustee and DTC
through Participants in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the best interests of such
Class A Noteholders.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Class A Notes. Upon surrender by DTC of
the definitive global certificates representing the Class A Notes and
instructions for re-registration, the Issuer Trustee will issue such Class A
Notes in the form of Definitive Class A Notes, and thereafter the Issuer Trustee
will recognize the holders of such Definitive Class A Notes as "Class A
Noteholders" under the Pooling Agreement and the related Supplement ("HOLDERS").
If Definitive Class A Notes are issued, distribution of principal and
interest on the Definitive Class A Notes will be made by the paying agent or the
Applicable Indenture Trustee directly to the Holders in whose names the
Definitive Class A Notes were registered on the applicable Record Date in
accordance with the procedures set forth herein and in the Pooling Agreement and
the related Supplement. Distributions will be made by check mailed to the
address of each Holder as it appears on the register maintained by the
Applicable Indenture Trustee, except that the final payment on any Definitive
Class A Note will be made only upon presentation and surrender of such
Definitive Class A Note on the date for such final payment at such office or
agency as is specified in the notice of final distribution to Holders. The
Applicable Indenture Trustee will provide such notice to Holders not later than
the fifth day of the month of the final distribution.
Definitive Class A Notes will be transferable and exchangeable at the
offices of the transfer agent and registrar, which shall initially be the
Applicable Indenture Trustee. No service charge will be imposed for any
registration of transfer or exchange, but the transfer agent and registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
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THE POOLING AGREEMENT GENERALLY
The following is a summary of the material terms of the Pooling
Agreement, the form of which was filed as an exhibit to the Registration
Statement of which this Prospectus is a part, and this summary is qualified in
its entirety by reference to the Pooling Agreement.
THE NON-TRANSFERRABLE NOTES
The Pooling Agreement provides that the Seller shall at all times own
(x) Class B Notes in an amount not less than 1% of the Aggregate Principal
Amount of all Class B Notes and (y) Class C Notes in an amount not less than
33.3% of the Aggregate Principal Amount of the Class C Notes (the Subordinated
Notes referred to in clauses (x) and (y), the "NON-TRANSFERRABLE NOTES"). In
addition, the Pooling Agreement provides that (i) Class C Notes held by the
original owner of such Notes (other than the Seller) may not be sold without the
consent of the Seller (in its unfettered discretion) and (ii) Class B Notes held
by any Person may not be sold without the consent of the Seller, provided, that
the Seller shall not withhold its consent to any such transfer of Class B Notes
described in this clause (ii) unless such transfer would, in the reasonable
opinion of the Seller, result in the Trust being deemed to be an association or
a publicly traded partnership taxable as a corporation. Any sale, assignment,
pledge or transfer in violation of the foregoing restrictions shall be void, but
any permitted assignment shall be recognized by the Issuer Trustee upon written
notice thereof.
TERMINATION OF TRUST
Unless the Seller instructs the Issuer Trustee otherwise, the Trust
will terminate only on the earliest to occur of (i) the day following the day on
which the Aggregate Principal Amount of all Notes of all Series is zero
(provided, that the Seller shall have delivered a written notice to the Issuer
Trustee electing to terminate the Trust), (ii) December 31, 2015, or (iii) if
the Contracts are sold, disposed of or liquidated following the occurrence of an
Insolvency Event or Transfer Event as described under "Description of the
Notes--Events of Default", immediately following such sale, disposition or
liquidation (the "TRUST TERMINATION DATE"). Upon termination of the Trust, all
right, title and interest in the Trust Assets (other than amounts in accounts
maintained by the Trust for the final payment of principal and interest to
Noteholders) will be conveyed and transferred to the Seller and any permitted
assignee.
CONVEYANCE OF CONTRACTS
The Equipment and Contracts, and security interests in the Equipment
and other Applicable Security, to be sold or contributed to the Trust by the
Seller (i), in the case of the Existing Contracts, have been acquired by the
Seller from Newcourt Financial USA Inc., one of the Financing Originators,
pursuant to the Original Purchase Agreement and (ii) in the case of all other
Contracts (including other Original Contracts), will be acquired by the Seller
from one or both of the Financing Originators pursuant to various purchase
agreements (each, a "SUBSEQUENT PURCHASE AGREEMENT"; together with the Original
Purchase Agreement, the "PURCHASE AGREEMENTS"; the Purchase Agreement applicable
to any Transferred Assets or Financing Originator, the "APPLICABLE PURCHASE
AGREEMENT") to be entered into among the Seller, as transferee of the
Transferred Assets, and either or both of the Financing Originators, as
transferors. A form of Purchase Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
Under the Original Purchase Agreement, Newcourt Financial USA Inc. has
sold, and under a Subsequent Purchase Agreement dated as of the First Closing
Date, Newcourt Financial USA Inc. will sell, to the Seller, to the extent of
such Financing Originator's interest therein, (i) the Existing Contracts (and
certain additional Contracts which were repurchased by Newcourt Financial USA
Inc. prior to the First Closing Date) and its interest in any related Equipment
and Applicable Security as of February 29, 1996 (such date being the Cutoff Date
for such Contracts) and (ii) the proceeds thereof (except Excluded Amounts).
Under each Subsequent Purchase Agreement entered into in connection with the
issuance of additional Series, the Financing Originators party thereto will
agree to sell to the Seller, to the extent of such Financing Originator's
interest therein, (i) any Additional Contracts and its interest in any related
Equipment and Applicable Security as of the related Cutoff Date and (ii) the
proceeds of all of the foregoing (except Excluded Amounts).
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In connection with the Pooling Agreement, such interests in the related
Contracts, the Equipment, the Applicable Security and the proceeds thereof will
then be sold by the Seller to the Trust and a lien thereon will be granted by
the Trust in favor of the Collateral Agent, and the Seller will assign its
rights in, to and under each Purchase Agreement with respect to the Contracts
and Equipment and Applicable Security to the Trust and the Trust will assign
such rights to the Collateral Agent. The following summary describes the
material terms of the Purchase Agreements, but is qualified in its entirety by
reference to the applicable Purchase Agreement.
Pursuant to the Original Purchase Agreement, Newcourt Financial USA
Inc. has sold, transferred, assigned, set over and otherwise conveyed, and
pursuant to each Subsequent Purchase Agreement each Financing Originator party
thereto will sell, transfer, assign, set over and otherwise convey to the
Seller, without recourse (except as expressly set forth in such Purchase
Agreement) all of such Financing Originator's right, title and interest in and
to (i) specified Original Contracts and/or specified Additional Contracts and
all monies due or to become due in payment of such Contracts on or after the
related Cutoff Date, including all Scheduled Payments thereunder due on or after
such related Cutoff Date, any Prepayment Amounts, any payments in respect of a
casualty or early termination, and any Recoveries received with respect thereto
but excluding any Scheduled Payments due prior to the related Cutoff Date or any
Excluded Amounts, (ii) the related Equipment and, in the case of any Vendor
Note, Applicable Security, including all proceeds from any sale or other
disposition of such Equipment or Applicable Security, (iii) any documents
delivered to the Seller or held by the Servicer on its behalf with respect to
each such Contract (the "CONTRACT FILES"), (iv) all payments made or to be made
in the future with respect to each such Contract and the Vendor thereunder under
any Vendor Agreements with such Financing Originator and under any other
guarantee or similar credit enhancement with respect to such Contracts, (v) all
payments made with respect to each such Contract under any insurance policy
covering physical damage to the related Equipment (the "INSURANCE PROCEEDS") and
(vi) all income and proceeds of the foregoing (the foregoing are referred to
collectively as the "TRANSFERRED ASSETS"). As of the related Cutoff Date the
Seller will transfer and assign, among other things, the Transferred Assets to
the Trust for the benefit of the Noteholders and the Trust will grant a lien on
such Transferred Assets in favor of the Collateral Agent, pursuant to the
Pooling Agreement. The Original Contracts and any Additional Contracts will be
described on the list of Contracts attached to the related Supplement.
Newcourt, as Servicer under the Pooling Agreement, will retain custody
of (but not title to) the Contracts, the Contract Files and any related evidence
of insurance payments, Scheduled Payments and any other similar payments under
the Contracts, except for any Contracts which are Instruments, as described
below under "Certain Legal Aspects of the Contracts" or certain of the Contracts
to be held by the Collateral Agent or other Custodian. Prior to each conveyance
of Contracts to the Seller, each selling Financing Originator and Newcourt has
caused (in the case of the Contracts sold under the Original Purchase Agreement)
or will cause its computer accounting system to be marked to show that the
Contracts transferred thereunder have been conveyed to the Seller, and prior to
each transfer of any Trust Assets to the Trust pursuant to the Pooling Agreement
each Financing Originator or the Seller, as appropriate, will file (i) UCC
financing statements reflecting (A) the conveyance of the Transferred Assets to
the Seller, (B) each sale of Trust Assets to the Trust pursuant to the Pooling
Agreement and (C) the grant of a lien thereon in favor of the Collateral Agent
(except that financing statements will be filed with respect to each conveyance
of an interest in Equipment to the Seller by each Financing Originator and each
sale of an interest in Equipment to the Trust by the Seller and each transfer of
an interest in Equipment to the Collateral Agent by the Trust, in each case, to
the extent the same may be viewed as inventory of such Financing Originator, the
Seller and the Trust, respectively) and (ii) a filing under the Personal
Property Security Act (Ontario) reflecting (A) each sale of Trust Assets to the
Trust pursuant to the Pooling Agreement and (B) the grant of a lien thereon in
favor of the Collateral Agent. Each Financing Originator and the Seller will
mark its books and records, including the appropriate computer files relating to
the Contracts, to indicate that all interests in the Contracts have been
conveyed (i) to the Seller (ii) by the Seller to the Trust and (iii) by the
Trust to the Collateral Agent. See "Certain Legal Aspects of the Contracts".
REPRESENTATIONS AND WARRANTIES
Except as described below, Newcourt Financial USA Inc. has made certain
representations and warranties in the Original Purchase Agreement with respect
to the Contracts transferred thereunder as of the Cutoff Date, and each
Financing Originator will make certain representations and warranties in each
Subsequent Purchase Agreement to which it is a party with respect to each
Additional Contract transferred by it as of the related Cutoff Date, including
that: (i) the information with respect to the Contract, any Secondary Contract
securing the obligations under such Contract, and
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the Equipment, if any, subject to the Contract delivered under the Applicable
Purchase Agreement is true and correct in all material respects; (ii)
immediately prior to the transfer of a Contract and any related Equipment (or
security interest therein) or Applicable Security (or security interest therein)
to the Seller, such Contract was owned by such Financing Originator free and
clear of any adverse claim (other than with respect to any Residual Investment
(other than a Guaranteed Residual Investment) or related Subordinated Residual
Investment); (iii) the Contract did not have a Scheduled Payment that was a
delinquent payment for more than 60 days, and the Contract is not otherwise a
Defaulted Contract; (iv) no provision of the Contract has been waived, altered
or modified in any respect, except by instruments or documents contained in the
Contract File (other than payment delinquencies permitted under clause (iii)
above); (v) the Contract is a valid and binding payment obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by applicable insolvency, bankruptcy, moratorium, reorganization, or
other similar laws affecting enforceability of creditors' rights generally and
the availability of equitable remedies); (vi) the Contract is not and will not
be subject to rights of rescission, setoff, counterclaim or defense and, to such
Financing Originator's knowledge, no such rights have been asserted or
threatened with respect to the Contract; (vii) the Contract, at the time it was
made, did not violate the laws of the United States or any state, except for any
such violations which do not materially and adversely affect the collectibility
of the Contracts in the Contract Pool taken as a whole; (viii) (x) the Contract
and any related Equipment have not been sold, transferred, assigned or pledged
by such Financing Originator to any other person (other than the sale of the
Equipment to the End-User in connection with CSAs, Secured Notes and "non-true
leases" and other than the Residual Investment, if any (other than a Guaranteed
Residual Investment), and any related Subordinated Residual Interest) and, with
respect to a Contract which is a "true lease", any Equipment related to such
true lease is free and clear of any liens or encumbrances of any third parties
(except for Permitted Liens) and (y) either (A) such Contract is secured by a
fully perfected Lien of the first priority on the related Equipment or, in the
case of any Vendor Note, related Applicable Security or (B) in the case of a
Contract secured by vehicle(s) subject to state certificate of title statutes,
either (1) within 30 calendar days of the origination or acquisition of such
Contract by such Financing Originator an application was filed in the
appropriate state office to note such Financing Originator's interest on the
certificate of title for such vehicle and such interest will be so noted within
180 days of such acquisition or origination or (2) a certificate of title on
which the Financing Originators' interest has been noted has been obtained; (ix)
if the Contract constitutes either an "instrument" or "chattel paper" for
purposes of the UCC, there is not more than one "secured party's original"
counterpart of the Contract; (x) all filings necessary to evidence the
conveyance or transfer of the Contract to the Seller have been made in all
appropriate jurisdictions; (xi) the Obligor is not to such Financing
Originator's knowledge, subject to bankruptcy or other insolvency proceedings;
(xii) the Obligor's billing address is in the United States and the Contract is
a U.S. dollar-denominated obligation; (xiii) the Contract does not require the
prior written consent of an Obligor or contain any other restriction on the
transfer or assignment of the Contract (other than a consent or waiver of such
restriction that has been obtained prior to the Closing Date, with respect to an
Original Contract, or the Addition Date, with respect to an Additional
Contract); (xiv) either (A) the obligations of the related Obligor under such
Contract are irrevocable and unconditional and non-cancelable or (B) with
respect to certain Leases with Lessees that are governmental entities or
municipalities, if such Lease is cancelled in accordance with its terms, either
(1) the Vendor which assigned such Lease to a Financing Originator is
unconditionally obligated to repurchase such Lease from such Financing
Originator for a purchase price not less than the Discounted Contract Balance of
such Lease (as of the date of purchase) plus interest thereon at the weighted
average of the Series Discount Rates through the Distribution Date following
such date of repurchase or (2) pursuant to the Applicable Purchase Agreement,
the Financing Originator which sold such Lease to the Seller has indemnified the
Seller against such cancellation in an amount equal to the Discounted Contract
Balance of such Lease (as of the date of purchase) plus interest thereon at the
weighted average of the Series Discount Rates through the Distribution Date
following such cancellation less any amounts paid by the Vendor pursuant to
clause (1); (xv) the Contract has an original maturity of not greater than the
term specified in the Pooling Agreement; (xvi) no adverse selection procedure
was used in selecting the Contract for transfer; (xvii) the Obligor under the
Contract is required to maintain casualty insurance with respect to the related
Equipment or to self-insure against casualty with respect to the related
Equipment in accordance with the Servicer's normal requirements; (xviii) the
Contract constitutes chattel paper, an account, an instrument or a general
intangible as defined under the UCC; (xix) no Lease is a "consumer lease" as
defined in Section 2A-103(1)(e) of the UCC; (xx) each Lessee has represented to
such Financing Originator or the Vendor that it has accepted the related
Equipment and that it has had a reasonable opportunity to inspect and test such
Equipment and such Financing Originator has not been notified of any defects
therein; (xxi) the Contract is not subject to any guarantee by Newcourt nor has
such Financing Originator established any specific credit reserve with respect
to the related Obligor; (xxii) each Lease is a "triple net lease" under which
the Obligor is responsible for the maintenance of the related Equipment in
accordance with general industry standards applicable to such item of Equipment;
(xxiii) each Vendor Note is secured by an Eligible Secondary Contract having an
aggregate
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Discounted Contract Balance for such Eligible Secondary Contract equal to the
outstanding principal amount of such Vendor Note (and assuming the interest rate
specified in such Vendor Note is the "Series Discount Rate" for purposes of
calculating such Discounted Contract Balance); (xxiv) no provision of such
Contract provides for a Prepayment Amount less than the amount calculated in
accordance with the definition thereof (unless otherwise indemnified by the
Vendor or the Financing Originator in an amount equal to the excess of the
"Prepayment Amount" as calculated in accordance with the definition thereof over
the amount otherwise payable upon a prepayment under such Contract) and (xxv)
such other criteria with respect to Additional Contracts as are specified in a
Supplement. The foregoing representations and warranties, as appropriate, will
be reaffirmed by each Financing Originator with respect to any Additional
Contract transferred by it to the Seller. A Contract which satisfies all of the
above representations and warranties shall be termed an "ELIGIBLE CONTRACT" and
Contracts with respect to which the representations in clauses (iii), (xv) and
(xxiv) are not true shall also be Eligible Contracts if the Seller shall have
received confirmation from each Rating Agency that the discrepancy will not
result in a Ratings Effect. In addition, each Financing Originator will
represent and warrant to the Seller that the conveyance pursuant to the
Applicable Purchase Agreement constitutes a valid sale and assignment to the
Seller of all right, title and interest of such Financing Originator in the
related Contracts (other than any Residual Investment that is not a Guaranteed
Residual Investment), whether then existing or thereafter created, and the
proceeds thereof, which is effective (i) as to each Existing Contract
transferred under the Original Purchase Agreement, as of the date of execution
of such agreement, (ii) as to each Additional Contract included within the
Original Contracts, as of the First Closing Date and (iii) as to each Additional
Contract as of the related Addition Date. As used above, "PERMITTED LIENS" shall
mean (a) with respect to Contracts in the Contract Pool: (i) liens for state,
municipal or other local taxes if such taxes shall not at the time be due and
payable or if the Seller shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto, (ii) liens in favor of the Seller
created pursuant to a Purchase Agreement and transferred to the Issuer Trustee
pursuant to the Pooling Agreement, (iii) liens in favor of the Issuer Trustee
created pursuant to the Pooling Agreement and (iv) liens in favor of the
Collateral Agent created pursuant to the Pooling Agreement; and (b) with respect
to the related Equipment: (i) materialmen's, warehousemen's, mechanics' and
other liens arising by operation of law in the ordinary course of business for
sums not due, (ii) liens for state, municipal or other local taxes if such taxes
shall not at the time be due and payable or if the Seller shall currently be
contesting the validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with respect thereto, (iii)
liens in favor of the Seller created pursuant to a Purchase Agreement and
transferred to the Issuer Trustee pursuant to the Pooling Agreement, (iv) liens
in favor of the Issuer Trustee created pursuant to the Pooling Agreement; (v)
liens in favor of the Collateral Agent created pursuant to the Pooling
Agreement, (vi) Subordinated Residual Investments, (vii) other subordinated
liens which are subordinated to the prior payment of the Notes on terms
described in the Pooling Agreement and (viii) liens granted by the End-Users or
Vendors which are subordinated to the interest of the Trust in such Equipment.
In addition to the foregoing, each Financing Originator party thereto
has (in the case of the Existing Contracts) or will represent and warrant in
each Applicable Purchase Agreement with respect to each Secondary Contract
securing a Vendor Note transferred by it under such Applicable Purchase
Agreement as of the related Cutoff Date (unless otherwise indicated), among
other things, (i) that each such Secondary Contract satisfies the
representations set forth in the preceding paragraph (other than the
representations set forth in clauses (ii), (viii) (with respect to ownership by
the Financing Originator of the Contract) and (xxiii), and except that the term
"Obligor" shall be deemed to be "End-User" in all such representations), (ii)
that such Financing Originator holds a duly perfected lien of the first priority
on such Secondary Contract and (iii) that the transfer of such Financing
Originator's security interest in such Secondary Contract and the proceeds
thereof to the Seller is effective to create in favor of the Seller a lien
thereon and that such lien has been duly perfected (Secondary Contracts which
satisfy all of the foregoing representations shall be termed "ELIGIBLE SECONDARY
CONTRACTS").
The Seller will represent and warrant in the Pooling Agreement, among
other things, (i) that the transfer of the related Contracts, whether then
existing or thereafter created, and the proceeds thereof is a valid sale,
transfer and assignment to the Trust of all right, title and interest of the
Seller therein and that all filings necessary to evidence the conveyance or
transfer of the Contracts to the Trust have been made in all appropriate
jurisdictions; (ii) that each Contract transferred by it to the Trust is an
"Eligible Contract"; (iii) that each Secondary Contract (or interest therein)
transferred by it to the Trust is an "Eligible Secondary Contract"; (iv) that
the security interest granted on the related Contracts, whether then existing or
thereafter created, and the proceeds thereof by the Trust to the Collateral
Agent is effective to create in favor of the Collateral Agent a lien thereon and
that such lien has been duly perfected; (v) that the Seller holds
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a duly perfected lien of the first priority on each Secondary Contract and (vi)
that the transfer of the Seller's security interest in each Secondary Contract
and the proceeds thereof by the Trust to the Collateral Agent is effective to
create in favor of the Collateral Agent a lien thereon and that such lien has
been duly perfected.
None of the Collateral Agent, the Indenture Trustees, the Trust, the
Issuer Trustee or Chemical Bank Delaware, in its individual capacity (in such
capacity, the "TRUST COMPANY"), shall make or be deemed to have made any
representations or warranties, express or implied, regarding the Trust Assets or
the transfers thereof by the Financing Originators, the Seller or the Trust.
Under the terms of each Purchase Agreement and the Pooling Agreement,
each Original Contract and each Additional Contract must be an Eligible
Contract. The Collateral Agent shall reassign to the Seller and the applicable
Financing Originator will be obligated to purchase from the Seller any Original
Contract or Additional Contract transferred by it and any interest in Equipment
transferred that is subject to such Contract no later than 90 days after such
Financing Originator becomes aware, or receives written notice from the Servicer
or the Seller, of the breach of any representation or warranty made by such
Financing Originator in the Applicable Purchase Agreement that materially
adversely affects the interests of the Seller or the Issuer Trustee or their
successors or assigns in any Original Contract, Additional Contract or the
related Contract File, which breach has not been cured or waived in all material
respects (an "INELIGIBLE CONTRACT"). This purchase obligation will constitute
the sole remedy against the Financing Originators available to the Seller, the
Collateral Agent, each Indenture Trustee and the Noteholders for a breach of a
representation or warranty under a Purchase Agreement made by the Financing
Originator party thereto with respect to an Original Contract or Additional
Contract. This purchase obligation also will constitute the sole remedy against
the Seller available to the Collateral Agent, each Indenture Trustee and the
Noteholders for a breach of a representation or warranty under the Pooling
Agreement made by the Seller with respect to an Original Contract or Additional
Contract.
Pursuant to the Pooling Agreement, an Ineligible Contract shall be
reassigned to the Seller and the Seller shall make a deposit in the Collection
Account in immediately available funds in an amount equal to the sum of the
Discounted Contract Balance of the Ineligible Contract (utilizing, for purposes
of calculating the Discounted Contract Balance, the Discount Rate at the time
such Ineligible Contract was transferred to the Trust) and any outstanding
Servicer Advances thereon. Any amount deposited into the Collection Account in
connection with the reassignment of an Ineligible Contract (the amount of such
deposit being referred to herein as a "TRANSFER DEPOSIT AMOUNT") shall be
considered payment in full of the Ineligible Contract. Any such Transfer Deposit
Amount shall be treated as an Available Amount.
CONCENTRATION AMOUNTS
In addition to the representations and warranties made by the Financing
Originators and the Seller with respect to the Contracts as described above
under "--Representations and Warranties", the Seller will represent and warrant
as of each Cutoff Date as follows, and it will be a condition to the addition of
any Additional Contracts that, after giving effect thereto, the following
representations and warranties shall be true and correct:
(i) the ADCB of all End-User Contracts with Obligors that are
governmental entities or municipalities does not exceed 1% of the ADCB
of the Contract Pool;
(ii) the ADCB of all End-User Contracts which finance, lease or are
related to Software will not exceed 20% of the ADCB of the Contract
Pool;
(iii) the aggregate principal amount of Guaranteed Residual Investments
included in the Contract Pool will not exceed 5% of the ADCB of the
Contract Pool; and
(iv) in the Seller's reasonable judgment, the Discounted Contract
Balance of End-User Contracts in the Contract Pool that are "true
leases" does not exceed 10% of the ADCB of the Contract Pool.
The Collateral Agent shall reassign to the Seller and the applicable
Financing Originator will be obligated to purchase from the Seller any Original
Contract or Additional Contract transferred by it (and any related Equipment or
Applicable Security) (an "EXCESS CONTRACT") selected by the Servicer at such
time as there is a breach of any of the foregoing representations or warranties,
which breach has not been cured or waived in all material respects, the removal
of which shall remedy such breach. Such purchase shall occur no later than 90
days after the Seller or such Financing Originator becomes aware, or receives
written notice from the Servicer or the Seller, of such breach. This purchase
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obligation will constitute the sole remedy against the Financing Originators
available to the Seller, the Collateral Agent, each Indenture Trustee and the
Noteholders for a breach of one of the foregoing representations or warranties.
Pursuant to the Pooling Agreement, an Excess Contract shall be
reassigned to the Seller and the Seller shall make a deposit in the Collection
Account in immediately available funds in an amount (an "EXCESS CONCENTRATION
AMOUNT") equal to the sum of the Discounted Contract Balance of the Excess
Contract (together with accrued interest thereon at the weighted average of the
Series Discount Rates) and any outstanding Servicer Advances thereon. Any amount
deposited into the Collection Account in connection with the reassignment of an
Excess Contract shall be considered payment in full of the Ineligible Contract.
Any such amount shall be considered a Transfer Deposit Amount and shall be
treated as an Available Amount.
INDEMNIFICATION
The Pooling Agreement provides that the Servicer will indemnify the
Seller, the Trust, the Issuer Trustee, the Collateral Agent and each 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 pursuant to the Pooling Agreement. Pursuant to the Pooling Agreement,
the Servicer, irrevocably and unconditionally, (i) submits for itself and its
property in any legal action arising out of the Pooling Agreement and the other
Operative Documents, to the nonexclusive general jurisdiction of the courts of
the United States of America for the Southern District of New York, and
appellate courts therefrom and (ii) waives any objection it may have that any
action therein was brought in an inconvenient court. Notwithstanding the
foregoing, a court may determine, on its own motion, that an action brought
against the Servicer in any such court was brought in an inconvenient forum.
Under the Pooling Agreement, the Seller has agreed to be liable
directly to an injured party for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Noteholder in the
capacity of an investor in the Notes of any Series) arising out of or based on
the arrangement created by the Pooling Agreement as though such agreement
created a partnership under the New York Uniform Limited Partnership Act in
which the Seller was a general partner. In the event of a Service Transfer, the
successor Servicer will indemnify and hold harmless the Seller for any losses,
claims, damages and liabilities of the Seller as described in this paragraph
arising from the actions or omissions of such successor Servicer.
Except as provided in the two preceding paragraphs, the Pooling
Agreement provides that none of the Seller, the Servicer or any of their
directors, officers, employees or agents will be under any other liability to
the Trust, the Issuer Trustee, the Collateral Agent, the Indenture Trustees, the
holders of Notes of any Series, any provider of Credit Enhancement or any other
person for any action taken, or for refraining from taking any action, in good
faith pursuant to the Pooling Agreement. However, none of the Seller, 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 Pooling 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 Pooling Agreement.
The Servicer may, in its sole discretion, undertake any such legal action which
it may deem necessary or desirable for the benefit of holders of Notes of any
Series with respect to the Pooling Agreement and the rights and duties of the
parties thereto and the interest of Noteholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling Agreement, the Servicer is responsible for
servicing, collecting, enforcing and administering the Contracts in accordance
with its customary and usual procedures for servicing contracts comparable to
the Contracts. See "Credit and Contract Servicing Procedures--Contract
Collections".
The Servicer pursuant to the Pooling Agreement also may advance
Scheduled Payments with respect to any Contract (a "SERVICER ADVANCE") which
were due in a Collection Period and were not received and identified to a
Contract by the close of business on the Determination Date, to the extent that
the Servicer, in its sole discretion, expects to recover the Servicer Advance
from subsequent payments on or with respect to the Contract. The Servicer shall
be
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entitled to reimbursement of Servicer Advances from subsequent payments on or
with respect to the Contract, including collections of any Prepayment Amount,
Transfer Deposit Amount or Recoveries with respect to such Contract, and, if the
Servicer determines that Servicer Advances will not be recovered from the
Contracts to which the Servicer Advances were related, from other Contracts
included in the Trust, the Reserve Account or, unless otherwise provided in a
Prospectus Supplement, other Credit Enhancement.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling Agreement, except upon determination that such duties are no longer
permissible under applicable law. No such resignation will become effective
until the Collateral Agent or a successor to the Servicer has assumed the
Servicer's responsibilities and obligations under the Pooling Agreement.
Any person into which, in accordance with the Pooling Agreement,
Newcourt or the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which Newcourt or the Servicer is a party,
or any person succeeding to the business of Newcourt or the Servicer, will be
the successor to Newcourt, as servicer, or the Servicer, as the case may be,
under the Pooling Agreement.
SERVICER DEFAULT
In the event of any Servicer Default, either the Collateral Agent or
the Controlling Party, by written notice to the Servicer and the Issuer Trustee
(and to the Collateral Agent and certain providers of Credit Enhancement, if
given by the Noteholders) (a "TERMINATION NOTICE"), may terminate all of the
rights and obligations of the Servicer, as servicer, under the Pooling
Agreement. If the Collateral Agent within 60 days of receipt of a Termination
Notice is unable to obtain any 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 Collateral Agent shall offer the Seller the right at its option to accept
retransfer of the Trust Assets. The purchase price for such a retransfer shall
be equal to the sum of the Aggregate Principal Amount of all Series on such
Distribution Date plus accrued and unpaid interest thereon at the applicable
certificate rate (together with, if applicable, interest on interest amounts
that were due and not paid on a prior date), through the date of such
retransfer.
The Collateral Agent shall, as promptly as possible after giving a
Termination Notice, appoint a successor Servicer (a "SERVICE TRANSFER"), and if
no successor Servicer has been appointed by the Collateral Agent and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all rights, authority, power and obligations of the Servicer under the Pooling
Agreement shall pass to and be vested in the Collateral Agent. Prior to any
Service Transfer, the Collateral Agent will seek to obtain bids from potential
Servicers meeting certain eligibility requirements set forth in the Pooling
Agreement to serve as a successor Servicer for servicing compensation not in
excess of the Servicing Fee. The rights and interest of the Seller under the
Pooling Agreement and any Supplement as holder of certain Partnership Notes and
as holder of the beneficial interest in the Trust will not be affected by any
Termination Notice or Service Transfer.
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 Issuer Trustee or
the Collateral Agent pursuant to the Pooling Agreement or any
Supplement or to make any required drawing, withdrawal, or payment
under any Credit Enhancement, or to deliver any Monthly Report on or
before the date occurring two business days after the date such
payment, transfer, deposit, withdrawal or drawing, or such instruction
or notice or report is required to be made or given, as the case may
be, under the terms of this 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 Pooling Agreement or any Supplement which
has a material adverse effect on the Noteholders, which continues
unremedied for a period of 30 days after the first to occur of (i) the
date on which written notice of such failure requiring the same to be
remedied shall have been given to the Servicer by the Collateral Agent,
or to the Servicer and the Collateral Agent by the Noteholders
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or the Applicable Indenture Trustee on behalf of such Noteholders of
Notes aggregating not less than 25% of the Principal Amount of any
Series adversely affected thereby and (ii) the date on which the
Servicer becomes aware thereof and such failure continues to materially
adversely affect such Noteholders for such period; or
(c) any representation, warranty or certification made by the
Servicer in the Pooling Agreement or any Supplement or in any
certificate delivered pursuant to the Pooling Agreement or any
Supplement 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 (i) the date on which written notice of such
incorrectness requiring the same to be remedied shall have been given
to the Servicer and the Issuer Trustee by the Collateral Agent, or to
the Servicer, the Issuer Trustee and the Collateral Agent by
Noteholders or by the Applicable Indenture Trustee on behalf of
Noteholders of Notes aggregating not less than 25% of the Principal
Amount of any Series adversely affected thereby and (ii) the date on
which the Servicer becomes aware thereof, and such incorrectness
continues to materially adversely affect such Holders for such period;
or
(d) an Insolvency Event shall occur with respect to the
Servicer; or
(e) the Servicer delegates any of its duties except to the
extent such delegation is permitted under the Pooling Agreement and
such delegation continues unremedied for 15 days.
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), (c) or (e) for a period of 60 days (in addition to
any period provided in (a), (b), (c) or (e)) 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 similar occurrences. Upon the occurrence of any such event
the Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling
Agreement and any related Supplement and the Servicer shall provide the Issuer
Trustee, the Collateral Agent, the Seller and certain providers of Credit
Enhancement prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations. The Servicer shall
immediately notify the Collateral Agent in writing of any Servicer Default.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement provides that on or before March 31 of each
calendar year the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Seller) to furnish a report to the effect that such firm has
applied certain procedures agreed upon with the Servicer and examined certain
documents and records relating to the servicing of the related Contracts and
that, on the basis of such procedures, nothing came to the attention of such
firm that caused them to believe that such servicing was not conducted in
compliance with the Pooling Agreement and the applicable provisions of each
Supplement except for such exceptions or errors as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.
The Pooling Agreement provides for delivery to the each Indenture
Trustee, each Rating Agency and certain providers of Credit Enhancement on or
before March 31 of each calendar year of a statement signed by an officer of the
Servicer to the effect that, to the best of such officer's knowledge, the
Servicer has performed its obligations in all material respects under the
Pooling Agreement throughout the preceding year or, if there has been a default
in the performance of any such obligation, specifying the nature and status of
the default.
Copies of all statements, certificates and reports furnished to the
Applicable Trustee may be obtained by a request in writing delivered to the
Applicable Trustee.
AMENDMENTS
The Pooling Agreement may be amended from time to time by agreement of
the Issuer Trustee, the Collateral Agent and the Seller without the consent of
the Noteholders of any Series (or any Indenture Trustee) or the consent of the
provider of any Credit Enhancement (i) to cure any ambiguity or (ii) to add any
consistent provisions; provided, that
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such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Noteholder.
The Pooling Agreement may also be amended from time to time by the
Seller, the Servicer, the Collateral Agent and the Issuer Trustee with the
consent of the Noteholders holding Notes evidencing not less than 66 2/3% of the
Principal Amount of each and every Series of Notes for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Pooling Agreement or of modifying in any manner the rights of Noteholders.
No such amendment, however, may
(i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Note of a Series
without, the consent of each Noteholder, as applicable, affected
thereby;
(ii) change the definition of (or that of any definition included
within the definition of) or the manner of calculating the "Applicable
Class Percentage", the "Controlling Party", the "Class A Principal
Payment Amount", the "Class B Principal Payment Amount", the "Class C
Principal Payment Amount", the "Discounted Contract Balance", the
"Principal Amount", the "Series Available Amount" or the "Series
Allocation Percentage" without the consent of each Noteholder; or
(iii) reduce the aforesaid percentage required to consent to any such
amendment without the consent of each Noteholder; or
(iv) modify, amend or supplement the provisions of the Pooling
Agreement relating to the allocation of Available Amounts (see
"Description of the Notes--Allocations") or transfers of the
Non-Transferable Notes without the consent of each Noteholder; or
(v) make any Note payable in money other than Dollars without the
consent of each Noteholder.
Promptly following the execution of any such amendment (other than an amendment
described in the preceding paragraph), the Issuer Trustee will furnish written
notice of the substance of such amendment to each affected Noteholder.
THE ISSUER TRUSTEE
Chemical Bank Delaware will be the Issuer Trustee under the Pooling
Agreement. Newcourt and its affiliates may from time to time enter into banking
and trustee relationships with the Issuer Trustee and its affiliates. Newcourt
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 Issuer Trustee by the Noteholders as a group. The Issuer Trustee's
address is 1201 Market Street, Wilmington, Delaware 19801, Attention: Trust
Department.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Issuer
Trustee will have the power to appoint a co-trustee or separate trustee of all
or any part of the Trust Assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the Issuer Trustee will
be conferred or imposed upon and exercised or performed by such Issuer Trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in
which such Issuer Trustee will be incompetent or unqualified to perform certain
acts, singly upon such separate trustee or co-trustee who shall exercise and
perform such rights, powers, duties and obligations solely at the direction of
the Issuer Trustee.
The Issuer Trustee may resign at any time, in which event a successor
Issuer Trustee will be appointed as provided in the Pooling Agreement. The
Servicer may also remove the Issuer Trustee if such Issuer Trustee ceases to be
eligible to continue as such under the Pooling Agreement. In such circumstances,
a successor Issuer Trustee will be appointed as provided in the Pooling
Agreement. Any resignation or removal of the Issuer Trustee and appointment of a
successor Issuer Trustee does not become effective until acceptance of the
appointment by the successor Issuer Trustee.
THE COLLATERAL AGENT
Fleet National Bank will be the Collateral Agent under the Pooling
Agreement. Newcourt and its affiliates may from time to time enter into banking
and trustee relationships with the Collateral Agent and its affiliates. Newcourt
and
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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 Collateral Agent by the Noteholders as a group. The Collateral Agent's
address is 777 Main Street, 11th Floor, Hartford, Connecticut 06115, Attention:
Corporate Trust Administration.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Collateral
Agent will have the power to appoint a co-trustee or separate trustee of all or
any part of the Trust Assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the Collateral Agent
will be conferred or imposed upon and exercised or performed by such Collateral
Agent and such separate trustee or co-trustee jointly, or, in any jurisdiction
in which such Collateral Agent will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Collateral Agent.
The Collateral Agent may resign at any time, in which event a successor
Collateral Agent will be appointed as provided in the Pooling Agreement. The
Servicer may also remove the Collateral Agent if such Collateral Agent ceases to
be eligible to continue as such under the Pooling Agreement. In such
circumstances, a successor Collateral Agent will be appointed as provided in the
Pooling Agreement. Any resignation or removal of the Collateral Agent and
appointment of a successor Collateral Agent does not become effective until
acceptance of the appointment by the successor Collateral Agent.
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THE INDENTURES
GENERAL
Each Series of Class A Notes will be issued pursuant to an Indenture
among the Issuer Trustee, the Collateral Agent and the Indenture Trustee
specified in the Prospectus Supplement related to the issuance of such Notes.
Pursuant to the related Supplement the Indenture Trustee will obtain the
benefits of the Pooling Agreement for itself and the Noteholders represented
thereby. As used in this section of this Prospectus, "Class A Notes" shall refer
only to the Class A Notes issued under the Applicable Indenture and "Indenture
Trustee" shall refer to the Applicable Indenture Trustee thereunder.
PAYMENTS OF PRINCIPAL AND INTEREST
Pursuant to each Applicable Indenture, each payment received by the
Indenture Trustee as described above under "Description of the
Notes--Allocations; Prior to an Event of Default" shall be promptly distributed
in the following order of priority:
first, so much of such installment or payment as shall be
required to pay in full the aggregate amount of interest then due on or
in respect of the Class A Notes shall be distributed to the Class A
Noteholders ratably, without priority of any one Class A Note over any
other Class A Note, in the proportion that the aggregate amount of all
accrued but unpaid interest to the date of distribution on each Class A
Note bears to the aggregate amount of all accrued but unpaid interest
to the date of distribution on all Class A Notes; and
second, the balance, if any, of such installment or payment
remaining thereafter shall be distributed ratably to the Class A
Noteholders to pay in full the aggregate amount of the Class A
Principal Payment then due pursuant to or in respect of the Class A
Notes, without priority of any one Class A Note over any other Class A
Note, in the proportion that the aggregate unpaid principal amount of
each Class A Note bears to the aggregate unpaid principal amount of all
Class A Notes.
Pursuant to each Applicable Indenture, each payment received by the
Indenture Trustee as described above under "Description of the
Notes--Allocations; Following an Event of Default" shall be promptly distributed
in the following order of priority:
first, so much of such payment as shall be required to
reimburse the Indenture Trustee for any tax, expense, charge or other
loss incurred by the Indenture Trustee (to the extent not previously
reimbursed), (including, without limitation, the expense of sale,
taking or other proceeding, attorneys' fees and expenses, court costs,
and any other expenditures incurred or expenditures or advances made by
the Indenture Trustee in the protection, exercise or enforcement of any
right, power or remedy or any damages sustained by the Indenture
Trustee, liquidated or otherwise, upon the Indenture Event of Default
giving rise to such expenditures or advances) shall be applied by the
Indenture Trustee in reimbursement of such expenses;
second, so much of such payment remaining as shall be required
to reimburse the Noteholders in full for certain indemnity payments, if
any, made by such Noteholders to the Indenture Trustee (to the extent
not previously reimbursed) shall be distributed to the Noteholders,
and, if the aggregate amount remaining shall be insufficient to
reimburse all such payments in full, it shall be distributed ratably,
without priority of any Noteholder over any other, in the proportion
that the aggregate amount of such unreimbursed indemnity payments made
by each such Noteholder bears to the aggregate amount of such
unreimbursed indemnity payments made by all Noteholders;
third, so much of such payment remaining as shall be required
to pay in full the aggregate amount of all accrued but unpaid interest
to the date of distribution on the Class A Notes shall be distributed
to the Noteholders, and, if the aggregate amount remaining shall be
insufficient to pay all such amounts in full, it shall be distributed
ratably, without priority of any one Class A Note over any other Class
A Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class A Note
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bears to the aggregate amount of all accrued but unpaid interest to the
date of distribution on all Class A Notes; and
fourth, the balance, if any, of such payment remaining
thereafter shall be distributed to the Noteholders in order to pay in
full the outstanding aggregate amount of principal of the Class A
Notes, and if the aggregate amount remaining shall be insufficient to
pay all such amounts in full, it shall be distributed ratably, without
priority of any one Class A Note over any other Class A Note, in the
proportion that the aggregate unpaid principal amount of each Class A
Note bears to the aggregate unpaid principal amount of all Class A
Notes.
EVENTS OF DEFAULT AND RESTRICTING EVENTS; REMEDIES
Events of Default and Restricting Events under an Applicable Indenture
shall include each of the Events of Default and Restricting Events,
respectively, specified in the Pooling Agreement together with such additional
Events of Default and/or Restricting Events as shall be specified in such
Indenture.
If an Event of Default referred to in subparagraphs (d) or (e) (see
"Description of the Notes--Events of Default") has occurred, then and in every
such case the unpaid principal of the Class A Notes, together with interest
accrued but unpaid thereon, and all other amounts due to the Class A Noteholders
under the Applicable Indenture, shall immediately and without further act become
due and payable.
If any other Event of Default shall have occurred and be continuing,
then and in every such case, the Applicable Indenture Trustee shall deliver
written notice to the Collateral Agent specifying the percentage of Class A
Notes (based upon outstanding principal amount thereof) desiring to declare the
unpaid principal of the Class A Notes, together with accrued but unpaid interest
thereon, and all other amounts due and payable to the Class A Noteholders to be
immediately due and payable. As described above under "Description of the
Notes--Events of Default" none of the Class A Notes issued under any Indenture
will be accelerated unless Class A Noteholders representing more than 50% of the
Aggregate Principal Amount of the Class A Notes of all Series declare that an
Event of Default has occurred. See "Risk Factors--Limited Control".
THE INDENTURE TRUSTEES
The Indenture Trustee with respect to each Series will be named in the
Prospectus Supplement. Newcourt and its affiliates may from time to time enter
into banking and trustee relationships with the Indenture Trustees and their
respective affiliates. Newcourt 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 any Indenture Trustee by the Noteholders
as a group.
The Indenture Trustee's responsibilities will be generally ministerial
in nature, consisting principally of the distribution of monies received from
the Collateral Agent, the authentication and registration of transfer of Notes
issued under the Applicable Indenture, the delivery of certain information
received from the Seller and the communication to the Collateral Agent of the
percentage of Notes represented by such Indenture Trustee desirous of taking
certain actions.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, each Indenture
Trustee will have the power to appoint a co-trustee or separate trustee of all
or any part of the Trust Assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon an Indenture Trustee
will be conferred or imposed upon and exercised or performed by such Indenture
Trustee and such separate trustee or co-trustee jointly, or, in any jurisdiction
in which such Indenture Trustee will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the direction
of such Indenture Trustee.
Each Indenture Trustee may resign at any time, in which event a
successor Indenture Trustee will be appointed as provided in the Applicable
Indenture. The Servicer may also remove an Indenture Trustee if such Indenture
Trustee ceases to be eligible to continue as such under the Applicable
Indenture. In such circumstances, a successor Indenture Trustee will be
appointed as provided in the Applicable Indenture. Any resignation or removal of
an Indenture Trustee
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and appointment of a successor Indenture Trustee does not become effective until
acceptance of the appointment by the successor Indenture Trustee.
GOVERNING LAW
Each Indenture will be governed by the laws of the State of New York.
AMENDMENTS
At any time and from time to time, (i) the Issuer Trustee, the Seller,
the Collateral Agent and the Applicable Indenture Trustee, with the written
consent of a Majority in Interest of the Class A Noteholders represented
thereby, may execute a supplement to the Applicable Indenture for the purpose of
adding provisions to, or changing or eliminating provisions of, the Applicable
Indenture (including any appendix or schedule hereto) and (ii) the Applicable
Indenture Trustee, with the written consent of a Majority in Interest of the
Class A Noteholders represented thereby, may consent to or execute a written
amendment of or supplement to, or waiver or consent under, the Pooling Agreement
or any Supplement; provided, however, that, without the consent of each Class A
Noteholder under the Applicable Indenture, no such amendment, supplement, waiver
or consent shall
(i) reduce the amount or extend the time of payment of
any amount owing or payable under any Class A Note or (except as
provided in this Indenture) increase or reduce the interest payable on
any Class A Note (except that only the consent of the affected
Noteholder shall be required for any decrease in an amount of or the
rate of interest payable on such Class A Note or any extension for the
time of payment of any amount payable under such Class A Note), or
alter or modify the provisions of the Pooling Agreement with respect to
the order of priorities in which distributions thereunder shall be made
or with respect to the amount or time of payment of any such
distribution,
(ii) reduce, modify or amend any indemnities in favor of
any Noteholder or in favor of or to be paid by the Seller, or alter the
definition of "Indemnitees" to exclude any Noteholder (except as
consented to by each Person adversely affected thereby),
(iii) make any Class A Note payable in money other than
U.S. dollars,
(iv) modify, amend or supplement the provisions of the
Pooling Agreement relating to amendments, waivers and supplements to
the Indentures, the Pooling Agreement or any other document, or
(v) modify the definition of "Majority in Interest" (as
defined in the Applicable Indenture) or the percentage of Noteholders
required to effect any modification of such Applicable Indenture.
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CERTAIN LEGAL ASPECTS OF THE CONTRACTS
TRANSFER OF CONTRACTS
As of each Cut-Off Date, all or certain of the Financing Originators
will sell the Contracts to the Seller, which Contracts will be immediately sold
to the Trust pursuant to the Pooling Agreement. Under commercial law, the
transfer of the Contracts to the Trust is either a sale of the Contracts to the
Trust or a grant of a security interest in such property to the Trust. The
Seller has taken and will take all actions that are required under applicable
law to perfect the Trust's interest in the Contracts in the event the transfer
by the Seller to the Trust is deemed to be a loan for commercial law purposes,
and it is the intent of the Seller that the Trust will at all times have a first
priority perfected security interest in the Contracts and in the proceeds
thereof, with certain exceptions. The Seller will represent and warrant upon the
execution of the Pooling Agreement and as of each Closing Date and, with respect
to Additional Contracts, as of each Addition Date that such sale to the Trust
constitutes a valid sale to the Trust of all right, title and interest of the
Seller in and to the Original Contracts and any Additional Contracts. The Seller
will also represent and warrant to the Trust that, in the event the sale of such
Contracts by the Seller to the Trust is deemed to create a security interest
under the UCC (as in effect in California), there will exist a valid, subsisting
and enforceable first priority perfected security interest in the Contracts, in
existence at the time of the formation of the Trust with respect to the Original
Contracts or at the Addition Date of any Additional Contracts, in favor of the
Trust. For a discussion of the Trust's rights arising from these representations
and warranties not being satisfied, see "The Pooling Agreement
Generally--Representations and Warranties".
Financing statements covering the Contracts will be filed under the UCC
as in effect in California by the Seller, the Trust and the Collateral Agent to
perfect their respective interests in the Contracts and continuation statements
will be filed as required to continue the perfection of such interests. In
addition, Newcourt will indicate in its books and records, including the
appropriate computer files relating to the Contracts that such Contracts have
been transferred by the Financing Originators to the Seller, by the Seller to
the Trust and by the Trust to the Collateral Agent, and stamp the related
Contract Files or otherwise mark such Contracts with a legend to the effect that
such Contracts have been transferred to the Trust and assigned to the Collateral
Agent and deliver to the Collateral Agent a computer file or microfiche or
written list containing a true and complete list of all Contracts then being
transferred to the Trust and all Secondary Contracts in which a security
interest is then being transferred to the Trust, identified by account number
and by the Discounted Contract Balance as of the related Cut off Date.
There are certain limited circumstances under applicable federal law in
which prior transferees of Contracts or Secondary Contracts could have an
interest in such contracts with priority over the Collateral Agent's interest. A
tax or other government lien on property of Newcourt or the Seller arising prior
to the time a Contract or interest in a Secondary Contract is conveyed to the
Trust may also have priority over the interest of the Trust and the Collateral
Agent in such contract. In addition, a lien on a Contract in favor of a third
party arising subsequent to the Closing Date on which such Contract is
transferred to the Trust may have priority over the interests of the Noteholders
of each subsequently issued Series in such Contract. In such event, because the
proceeds of each Contract would be shared pro rata among all outstanding Series
of Notes, each Noteholder of an outstanding Series (including each outstanding
Series issued prior to the creation of such lien) could be adversely affected
thereby. Under the Applicable Purchase Agreement, each Financing Originator
party thereto has (in the case of the Existing Contracts) or will warrant to the
Seller, and, under the Pooling Agreement, the Seller will warrant to the
Collateral Agent, that the Contracts have been transferred free and clear of the
lien of any third party (other than the Subordinated Residual Interest, if any,
assigned to any Residual Assignee) and that the interests in Secondary Contracts
transferred thereunder have been transferred free and clear of the lien of any
third party. Each Financing Originator, the Seller, the Issuer Trustee and the
Trust Company will also covenant that it will not sell, pledge, assign, transfer
or grant any lien on any Contract or Secondary Contract included in the Trust,
other than transfers to the Trust and by the Trust to the Collateral Agent and
assignments of a Subordinated Residual Interest related to any Residual
Investment. In addition, as described above under "The Seller", the Seller has
been organized as a "bankruptcy-remote" entity which is not engaged in any
business or activities unrelated to the transactions described herein.
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SECURITY INTERESTS IN FINANCED VEHICLES
The Contracts will include CSA's for transportation equipment,
including vehicles, subject to state certificate of title statutes. Security
interests in vehicles registered in most states may be perfected by a notation
of the secured party's lien on the certificate of title for such vehicle,
depending on state law. With respect to CSA's for vehicles, such liens would be
noted in the name of the related Financing Originator. The Financing Originator
has been designated as the first and sole lien holder on the certificate of
title. In the event the Vendor fails, due to clerical errors or for any other
reason, to effect such notation of the Financing Originator's interest in a
vehicle, the Financing Originator would not have a perfected first priority
security interest in such vehicle. As a result, the only recourse of the
Financing Originator vis-a-vis third parties would be against the Obligor or the
related Vendor on an unsecured basis. However, the Financing Originator believes
that it has obtained a perfected first priority security interest by notation
with respect to almost all of the vehicles.
Each Financing Originator will assign its security interest in the
individual vehicle to the Trust. However, because of the significant
administrative burden and expense, neither the Financing Originator nor the
Trustee will amend the certificates of title to identify the Trust as the new
secured party and, accordingly, the Financing Originator will continue to be
named as the secured party on the certificates of title relating to the
vehicles. In most states, such assignment is an effective conveyance of such
security interest without amendment of any lien noted on the related
certificates of title and the new secured party succeeds to the Financing
Originator's rights as the secured party as against creditors of the Obligor. In
certain states, the Trustee may not have a perfected security interest in the
vehicle. In such an event or in the event that the Financing Originator did not
have a perfected first priority security interest in the vehicle, the only
recourse of the Trust vis-a-vis third parties would be against an Obligor on an
unsecured basis or against the Financing Originator pursuant to its repurchase
obligation. However, each Financing Originator will execute a power of attorney
to the Trustee authorizing the Trustee to designate the Trust as the first and
sole lien holder on the certificate of title.
In the absence of fraud or forgery by an Obligor or administrative
error by state recording officials, the notation of the lien of the Financing
Originator on the certificate of title will be sufficient to protect the Trust
against the rights of subsequent purchasers of a vehicle or a designation as
first lienholder by lenders who take a security interest in the vehicle. If
there are any vehicles as to which the Financing Originator has failed to
perfect the security interest assigned to the Trust (i) such security interest
would be subordinate to, among others, holders of perfected security interests
and (ii) subsequent purchasers of such vehicles would take possession free and
clear of such security interest. There also exists a risk in not identifying the
Trust as the new secured party on the certificate of title that, through fraud
or negligence, the security interest of the Trust could be released.
In the event that the owner of a vehicle moves to a state other than
the state in which such vehicle is registered, under the laws of most states the
perfected security interest in the vehicle would continue for four months after
such relocation and thereafter until the owner titles the vehicle in such state.
A majority of states generally require surrender of a certificate of title to
re-register a vehicle. Accordingly, the Financing Originator must surrender
possession if it holds the certificates of title to such vehicle or, in the case
of vehicles originally registered in a state which provides for notation of lien
but does not require possession of the certificate of title by the holder of the
security interest in the related motor vehicle, the Financing Originator would
receive notice of surrender if the security interest in the vehicle is noted on
the certificate of title. Accordingly, the Financing Originator would have the
opportunity to re-perfect its security interest in the vehicle in the state of
relocation. In states which do not require a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of motor vehicle CSA's, the Financing
Originator takes steps to effect such reperfection upon receipt of notice of
re-registration of information from the Obligor as to relocation. Similarly,
when an Obligor sells a vehicle, the Financing Originator must surrender
possession of the certificates of title or will receive notice as a result of
its lien noted thereon and accordingly will have an opportunity to require
satisfaction of the related Contract before release of the lien. Under the
Pooling Agreement, the Servicer is obligated to take such steps, at the
Servicer's expense, as are necessary to maintain perfection of security
interests in the vehicles.
Under the laws of many states, certain possessory liens for repairs
performed on a motor vehicle and storage, as well as certain rights in favor of
federal and state governmental authorities arising from the use of a motor
vehicle in connection with illegal activities, may take priority even over a
perfected security interest. Certain federal tax liens may have priority over
the lien of a secured party. In each Applicable Purchase Agreement, each
Financing Originator
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party thereto has (in the case of the Existing Contracts) or will represent, and
the Seller will represent in the Pooling Agreement that it is has no knowledge
of any such liens with respect to any vehicle. However, such liens could arise
at any time during the term of a Contract. No notice will be given to the
Indenture Trustee in the event such a lien arises.
The Servicer on behalf of the Trust may take action to enforce the
Trust's security interest by repossession and resale of the vehicles securing
the related Contracts. The actual repossession may be contracted out to third
party contractors. Under the UCC and laws applicable in most states, a creditor
can repossess a motor vehicle securing a loan by voluntary surrender,
"self-help" repossession that is "peaceful" (i.e., without breach of the peace)
and, in the absence of voluntary surrender and the ability to repossess without
breach of the peace, by judicial process. The UCC and consumer protection laws
in most states place restrictions on repossession sales, including requiring
prior notice to the debtor and commercial reasonableness in effecting such a
sale. In the event of such repossession and resale of a vehicle, the Trust would
be entitled to be paid out of the sale proceeds before such proceeds could be
applied to the payment of the claims of unsecured creditors or the holders of
subsequently perfected security interests or, thereafter, to the debtor.
Under the UCC and laws applicable in most states, a creditor is
entitled to obtain a deficiency judgment from a debtor for any deficiency on
repossession and resale of the motor vehicle securing such debtor's loan.
However, some states impose prohibitions or limitations on deficiency judgments.
In general, a defaulting Obligor may not have sufficient assets to make the
pursuit of a deficiency judgment worthwhile.
Certain other federal and state statutory provisions, including
bankruptcy law, insolvency laws, and other laws affecting the rights of
creditors and debtors generally as well as general equitable principles may
limit or delay the ability of a lender to repossess and resell collateral or
enforce a deficiency judgment.
In addition, the Contracts may also include Leases of vehicles where
the Financing Originator is identified on the certificate of title as the owner
of the vehicle. All right, title and interest of the Financing Originator in
each Lease and the related leased vehicle will be assigned to the Seller
pursuant to the Applicable Purchase Agreement. Pursuant to the Pooling
Agreement, the Seller will transfer all of its right, title and interest in each
Lease and the related leased vehicle to the Trust. Because of the significant
administrative burden and expense, neither the Financing Originator nor the
Trustee will amend the certificates of title to identify the Trust as the owner
of the leased vehicle. However, each Financing Originator will execute a power
of attorney in favor of the Trustee, authorizing the Trustee to re-register the
leased vehicles naming the Trust as the owner thereof on the certificate of
title.
CERTAIN CONTRACTS TO BE HELD BY COLLATERAL AGENT OR OTHER CUSTODIAN
The Seller will not be permitted to maintain Instruments in the United
States of America or any State thereof unless (i) a custody or similar agreement
(a "CUSTODY AGREEMENT") shall have been executed pursuant to which the
Collateral Agent or an authorized agent thereof which is not an affiliate of the
Seller (the Collateral Agent or such authorized agent, a "CUSTODIAN") shall have
agreed to possess all such Instruments on terms satisfactory to the Collateral
Agent, each Rating Agency and the Servicer, (ii) there shall have been delivered
to the Collateral Agent and each Rating Agency an Opinion of Counsel to the
effect that the Custody Agreement (together with any filings necessary or
desirable under the UCC) is effective to perfect the Lien of the Collateral
Agent in the Instruments and (iii) the Collateral Agent shall have received
confirmation from each Rating Agency that the maintenance of the Instruments
pursuant to the Custody Agreement will not result in a Ratings Effect.
CERTAIN MATTERS RELATING TO BANKRUPTCY
Each Financing Originator will either (i) originate Contracts or (ii)
acquire End-User Contracts from a Vendor, which Contracts will be transferred to
the Seller. In addition to the foregoing, certain of the Existing Contracts were
acquired by Newcourt from various Vendors and sold to Newcourt Financial USA
Inc. pursuant to an Asset Transfer Agreement dated December 20, 1995 (the "ASSET
TRANSFER AGREEMENT"). The Discounted Contract Balance of such Contracts (the
"PURCHASED CONTRACTS") represents less than 8% of the Discounted Contract
Balance of all Existing Contracts. If the acquisition of an End-User Contract by
a Financing Originator or Newcourt is treated as a sale of such Contract from
the applicable Vendor to such Financing Originator or Newcourt, as applicable,
except in certain limited
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circumstances, such Contract would not be part of such Vendor's bankruptcy
estate and would not be available to such Vendor's creditors. If a Vendor became
a debtor in a bankruptcy case then, in the case of End-User Contracts acquired
as described in clause (ii) above, if an unpaid creditor of such Vendor or a
representative of creditors of such Vendor, such as a trustee in bankruptcy, or
such Vendor acting as a debtor-in-possession, were to take the position that the
sale of such Contracts to the Financing Originator or Newcourt, as applicable,
was ineffective to remove such Contracts from such Vendor's estate (for
instance, that such sale should be recharacterized as a pledge of Contracts to
secure borrowings of such Vendor), then delays in payments under the Contracts
to the Trust could occur or, should the court rule in favor of such creditor,
representative or Vendor, reductions in the amount of such payments could
result. Further, if the transfer of End-User Contracts to Newcourt or to the
Financing Originators as described in clause (ii) above is recharacterized as a
pledge, a tax or government lien on the property of the pledging Vendor arising
before the Contracts came into existence may have priority over the Financing
Originator's interest in the Contracts. No law firm will, in connection with any
offering of the Notes, express any opinion as to the issues discussed above.
Further, if the acquisition of a Purchased Contract by Newcourt
Financial USA Inc. is treated as a sale of such Contract from Newcourt to such
Financing Originator, except in certain limited circumstances, such Contract
would not be part of Newcourt's bankruptcy estate and would not be available to
Newcourt's creditors. If Newcourt became a debtor in a bankruptcy case then, in
the case of Purchased Contracts, if the transfer thereof pursuant to the Asset
Transfer Agreement is not treated as a sale, such Contract would be available to
satisfy claims against Newcourt. Special Canadian counsel to Newcourt has
delivered on the Bridge Closing Date a reasoned legal opinion that, based on the
assumptions and qualifications contained therein, under the laws of the Province
of Ontario and the federal laws of Canada creditors of Newcourt could not look
successfully to the Purchased Assets to satisfy a claim which they may have
against the Seller, whether before or after a bankruptcy or insolvency of the
Seller, or in any proceeding instituted by or against the Seller under the
Bankruptcy and Insolvency Act (Canada) or the Companies' Creditors Arrangement
Act (Canada).
In each Applicable Purchase Agreement, each Financing Originator party
thereto has (in the case of the existing Contracts) or will warrant to the
Seller that the conveyance of the Contracts by it to the Seller is a valid sale
and transfer of such Contracts to the Seller. In addition, each Financing
Originator and the Seller will treat the transactions described herein as a sale
of the Contracts to the Seller and each Financing Originator will take all
actions that are required under applicable law to perfect the Seller's ownership
interest in the Contracts sold by it and the Seller's security interest in the
Secondary Contracts securing Vendor Notes sold by it. Notwithstanding the
foregoing, if a Financing Originator became a debtor in a bankruptcy case and an
unpaid creditor of such Financing Originator or a representative of creditors of
such Financing Originator, such as a trustee in bankruptcy, or such Financing
Originator acting as a debtor-in- possession, were to take the position that the
sale of Contracts to the Seller was ineffective to remove such Contracts from
such Financing Originator's estate (for instance, that such sale should be
recharacterized as a pledge of Contracts to secure borrowings of such Financing
Originator), then delays in payments under the Contracts to the Trust could
occur or, should the court rule in favor of such creditor, representative or
Financing Originator, reductions in the amount of such payments could result. If
the transfer of Contracts to the Seller is recharacterized as a pledge, a tax or
government lien on the property of the pledging Financing Originator arising
before the Contracts came into existence may have priority over the Seller's
interest in the Contracts. If the transactions contemplated herein are treated
as a sale of Contracts to the Seller, except in certain limited circumstances,
the Contracts would not be part of any Financing Originator's bankruptcy estate
and would not be available to such Financing Originator's creditors.
In a recent decision, Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948
(10th Cir. 1993), the United States Court of Appeals for the Tenth Circuit held
that, under the UCC, accounts sold by a debtor remain property of the debtor's
estate under Section 541 of the Bankruptcy Code. In the event of a bankruptcy of
a Financing Originator, or, in the case of Contracts originated by a Vendor and
purchased by a Financing Originator, a bankruptcy of a Vendor, and a
determination by a court that the sale of the Contracts to the Seller or to the
Financing Originator, respectively, should be recharacterized as a pledge of
such Contracts to secure a borrowing, not as a "true sale," including as a
result of the application by a court of the Octagon court's reasoning to a
Financing Originator's sale of Contracts to the Seller or to a Vendor's sale of
Contracts to a Financing Originator, delays in distributions on Notes, and
possible reductions in the amount of distributions, could occur.
The Seller will warrant in the Pooling Agreement (i) that the
conveyance of the Contracts to the Trust is a valid sale of the Contracts to the
Trust and (ii) that the security interest thereon granted by the Trust in favor
of the Collateral Agent is a valid and duly perfected security interest, and
will take all actions that are required under applicable law to
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perfect the Trust's and the Collateral Agent's respective interests in the
Contracts and the Secondary Contracts securing Vendor Notes sold by it.
Nevertheless, if the Seller were to become a debtor in a bankruptcy case and an
unpaid creditor of the Seller or a representative of creditors of the Seller,
such as a trustee in bankruptcy, or the Seller acting as a debtor-
in-possession, were to take the position that the sale of Contracts to the Trust
was ineffective to remove such Contract's from the Seller's estate (for
instance, that such sale should be recharacterized as a pledge of Contracts to
secure borrowings of the Seller), then delays in payments under the Contracts to
the Trust could occur or, should the court rule in favor of such creditor,
representative or Seller, reductions in the amount of such payments could
result. If the transfer of Contracts to the Trust is recharacterized as a
pledge, a tax or government lien on the property of the Seller arising before
the Contracts came into existence may have priority over the Noteholder's
interest in the Contracts.
If the transactions contemplated herein are treated as a sale of
Contracts, except in certain limited circumstances, the Contracts would not be
part of the transferor's estate and would not be available to such transferor's
creditors.
A bankruptcy trustee or debtor in possession under the United States
Bankruptcy Code (Title 11 U.S.C. Section101 et seq.) (the "BANKRUPTCY CODE") has
the right to elect to assume or reject any executory contract or unexpired lease
which is considered to be a "true lease" (and not a financing) under applicable
law. Any rejection of such a contract or lease would constitute a breach of such
contract or lease, as applicable, as of the day preceding the commencement of
the applicable bankruptcy case, entitling the nonbreaching party to a
pre-petition claim for damages.
Certain End-User Contracts will be "true leases" and thus subject to
rejection by the lessor under the Bankruptcy Code. Any such End-User Contract
originated by a Financing Originator or acquired by a Financing Originator in a
transaction whereby such Financing Originator is the "lessor" thereunder, will
be subject to rejection by such Financing Originator, as debtor in possession,
or by such Financing Originator's bankruptcy trustee. Upon any such rejection
Scheduled Payments under such rejected End-User Contract may terminate and the
Noteholders may be subject to losses if the Credit Enhancement, if any, and
security interests in the related Equipment is insufficient to cover the losses.
In addition, any End-User Contract which is a "true lease" originated by a
Vendor and transferred to a Financing Originator in a transaction whereby such
Vendor continues to be the "lessor" thereunder (such as a transfer by a Vendor
to a Financing Originator of a security interest in such End-User Contract or a
transfer by a Vendor to a Financing Originator of an interest in the right to
payments only under any such End-User Contract), will be subject to rejection by
such Vendor, as debtor in possession, or by such Vendor's bankruptcy trustee.
Upon any such rejection Scheduled Payments under such rejected End-User Contract
may terminate and the Noteholders may be subject to losses if the Credit
Enhancement, if any, and security interests in the related Equipment are
insufficient to cover the losses.
Certain restrictions have been imposed on the Seller and the Trust and
certain other parties to the transactions described herein which are intended to
reduce the risk of an insolvency proceeding involving the Seller or the Trust.
These restrictions include incorporating the Seller as a separate, special
purpose company pursuant to a certificate of incorporation containing certain
restrictions on the nature of its business. Additionally, the Seller may
commence a voluntary case or proceeding under any bankruptcy or insolvency law,
or cause the Trust to commence a voluntary case or proceeding under any
bankruptcy or insolvency law, only upon the affirmative vote of all its
directors, including its independent directors, as long as the Seller is solvent
and does not reasonably foresee becoming insolvent. The Seller's certificate of
incorporation requires that the Seller have at all times at least one
independent director. In addition, the Seller has no intent to file, and
Newcourt and Newcourt USA have represented that they have no intent to cause the
filing of, a voluntary application under the insolvency laws with respect to the
Seller, as long as the Seller is solvent and does not reasonably foresee
becoming insolvent. However, no assurance can be given that insolvency
proceedings involving either the Seller or the Trust will not occur. In the
event the Seller becomes subject to insolvency proceedings, the Trust, the
Trust's interest in the Trust Assets, the Trust's obligation to make payments on
the Notes might also become subject to such insolvency proceedings. In the event
of insolvency proceedings involving the Trust, the Trust's interest in the Trust
Assets and the Trust's obligation to make payments on the Notes would become
subject to such insolvency proceedings. No assurance can be given that
insolvency proceedings involving Newcourt USA or either Financing Originator
would not lead to insolvency proceedings of either, or both, of the Seller or
the Trust. In either such event, or if an attempt were made to litigate any of
the foregoing issues, delays of distributions on the Notes, possible reductions
in the amount of payment of principal of and interest on the Notes and
limitations (including a stay) on the exercise of remedies under the Indentures,
the Pooling Agreement and the Note Documents could occur, although the
Noteholders would continue to have the benefit of the Collateral Agent's
security interest in the Trust Assets under the Pooling Agreement.
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The right of the Collateral Agent, as secured party under the Pooling
Agreement for the benefit of the Noteholders to foreclose upon and sell the
Trust Assets is likely to be significantly impaired by applicable bankruptcy
laws, including the automatic stay pursuant to Section 362 of the Bankruptcy
Code, if a bankruptcy proceeding were to be commenced by or against the Trust,
and possibly the Seller, before or possibly even after the Collateral Agent has
foreclosed upon and sold the Trust Assets. Under the bankruptcy laws, payments
on debts are not made and secured creditors are prohibited from repossessing
their security from a debtor in a bankruptcy case or from disposing of security
repossessed from such a debtor, without bankruptcy court approval. Moreover, the
bankruptcy laws generally permit the debtor to continue to retain and to use
collateral even though the debtor is in default under the applicable debt
instruments, provided generally that the secured creditor has the right to seek
"adequate protection". The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the security from any diminution in the value of the collateral as a result
of the use of the collateral by the debtor during the pendency of the bankruptcy
case. In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict whether or to what extent the holders of the Notes would
be compensated for any diminution in value of the Trust Assets. Furthermore, in
the event a bankruptcy court determines that the value of the Trust Assets is
not sufficient to repay all amounts due on the Notes, the Noteholders would hold
secured claims only to the extent of the value of the Trust Assets to which the
holders are entitled, and unsecured claims with respect to such shortfall. The
bankruptcy laws do not permit the payment or accrual of post-petition interest,
costs and attorneys' fees during a debtor's bankruptcy case unless, and then
only to the extent, the claims are oversecured.
If an Insolvency Event with respect to the Seller were to occur, then
an Event of Default would occur with respect to each Series and, pursuant to the
terms of the Pooling Agreement, new Additional Contracts would not thereafter be
transferred to the Trust and, assuming the Trust Assets were not then subject to
being involved in a bankruptcy case, the Collateral Agent would sell the
Contracts, thereby causing early termination of the Trust and would use the
proceeds of such sale to pay the outstanding principal of and accrued interest
on the Class A Notes to the extent and in the order of priority described under
"Description of the Notes--Allocations--Following an Event of Default". The
Class A Noteholders would suffer a loss if the sum of (i) the proceeds of the
sale allocable to the Class A Noteholders and (ii) the proceeds of any
collections on the Contracts in the Collection Account allocable to the Class A
Noteholders is insufficient to pay the Class A Noteholders in full.
The occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer will result in a Servicer Default. If
no other Servicer Default other than the occurrence of an Insolvency Event with
respect to the Servicer exists, 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 Trustees, the Collateral Agent or the Noteholders from
appointing a successor Servicer.
State laws impose requirements and restrictions relating to foreclosure
sales and obtaining deficiency judgments following such sales. In the event that
the Noteholders must rely on repossession and disposition of any Equipment to
recover amounts due on Defaulted Contracts, such amounts may not be realized
because of the application of these requirements and restrictions. Other factors
that may affect the ability of the Noteholders to realize the full amount due on
a Contract or Secondary Contract include the failure to file financing
statements to perfect the Financing Originator's, Seller's, Issuer Trustee's or
Collateral Agent's security interest, as applicable, in the Equipment or other
Applicable Security, depreciation, obsolescence, damage or loss of any item of
Equipment, and the application of Federal and state bankruptcy and insolvency
laws. As a result, the Noteholders may be subject to delays in receiving
payments and losses if the Credit Enhancement, if any, is insufficient to cover
the delayed payments and losses.
If a court, in a lawsuit by an unpaid creditor of a Financing
Originator or by a representative of creditors of such Financing Originator,
such as a trustee in bankruptcy, or by such Financing Originator acting as a
debtor-in-possession, were to find that, at the time of or as a result of any
transfer by such Financing Originator of Contracts pursuant to a Purchase
Agreement, (i) (A) such Financing Originator entered into such transaction with
the intent of hindering, delaying or defrauding creditors or (B) such Financing
Originator received less than a reasonably equivalent value or fair
consideration as a result of such transfer and (ii) such Financing Originator
(A) was insolvent or would be rendered insolvent by such transfer, (B) was
engaged in a business or transaction for which its assets constituted
unreasonably small capital after such transfer or (C) intended to incur, or
believed that it would incur, indebtedness beyond its ability to pay as the
obligations under such indebtedness matured (as the foregoing terms are defined
in or interpreted under the relevant fraudulent conveyance statutes), such court
could invalidate such transfer to the Seller or to the Trust, or
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substantively consolidate the Seller, the Trust and such Financing Originator,
or subordinate the rights of the Noteholders to the rights of unsecured
creditors of such Financing Originator, or take other actions that would be
adverse to the Noteholders.
The measure of insolvency for purposes of the foregoing will vary
depending on the law of the jurisdiction that is being applied. Generally,
however, an entity would be considered insolvent if the fair saleable value of
its assets is less than the amount of its liabilities (including contingent
liabilities) or the amount that will be required to pay its probable liabilities
on its existing debts as they become absolute and matured. Each Financing
Originator believes that it is entering into these transactions (including the
transfers of Contracts pursuant to each Applicable Purchase Agreement to which
it is a party) for proper purposes and in good faith and that the purchase price
for the Contracts identified in each Purchase Agreement to which it is a party
do and will represent reasonably equivalent value or fair consideration for the
transfers of such Contracts to the Seller.
The Seller will receive, on the First Closing Date, a certificate from
Newcourt Financial USA Inc. to the effect that (i) such Financing Originator did
not intend, in entering into the Original Purchase Agreement and consummating
the transactions contemplated thereby, to hinder, delay or defraud either then
present or future creditors or any other person to which such Financing
Originator was or would thereafter become, as of or after the consummation of
such transactions, indebted and (ii) the purchase price for the Contracts sold
under the Original Purchase Agreement represented reasonably equivalent value or
fair consideration as a result of the transfers of such Contracts to the Seller.
Prior to the consummation of a further sale of Contracts under a Subsequent
Purchase Agreement the Seller will receive a certificate from each Financing
Originator to the effect that (i) such Financing Originator did not intend, in
entering into such Purchase Agreement and consummating the transactions
contemplated thereby, to hinder, delay or defraud either then present or future
creditors or any other person to which such Financing Originator was or would
thereafter become, as of or after the consummation of such transactions,
indebted and (ii) the purchase price for the Contracts to be sold under such
Purchase Agreement represents reasonably equivalent value or fair consideration
as a result of the transfers of such Contracts to the Seller. There can be no
assurance, however, that a court would reach the same conclusion.
No law firm will, in connection with any offering of the Notes, express
any opinion as to federal or state laws relating to fraudulent transfers.
Certain states have adopted a version of Article 2A of the UCC
("ARTICLE 2A"), which purports to codify many provisions of existing common law.
Although there is little precedent regarding how Article 2A will be interpreted,
it may, among other things, limit enforceability of any "unconscionable" lease
or "unconscionable" provision in a lease, provide a lessee with remedies,
including the right to cancel the lease contract, for certain lessor breaches or
defaults, and may add to or modify the terms of "consumer leases" and leases
where the lessee is a "merchant lessee". However, in each Applicable Purchase
Agreement each Financing Originator party thereto has (in the case of the
Existing Contracts) or will represent that (i) no Contract is a "consumer lease"
and (ii) each Obligor has accepted the equipment leased to it and, after
reasonable opportunity to inspect and test, has not notified such Financing
Originator of any defects therein. Article 2A, moreover, recognizes typical
commercial lease "hell or high water" rental payment clauses and validates
reasonable liquidated damages provisions in the event of lessor or lessee
defaults. Article 2A also recognizes the concept of freedom of contract and
permits the parties in a commercial context wide degree of latitude to vary
provisions of the law.
VENDOR NOTES AND VENDOR RECOURSE CONTRACTS
The Vendor Notes are, by their terms, payable solely from the proceeds
of the Secondary Contracts securing such Vendor Notes, and do not generally
represent obligations of the Vendor (except that Secondary Contracts may be
covered by such Vendor's UNL Pool or other forms of Vendor recourse).
Consequently, Noteholders must rely solely upon the Secondary Contracts and any
other Applicable Security, if any, for the payment of principal of, and interest
on, the related Vendor Notes. As noted above, any Secondary Contract which is a
"true lease" originated by a Vendor will be subject to rejection by such Vendor,
as debtor in possession, or by such Vendor's bankruptcy trustee. Upon any such
rejection Scheduled Payments under such rejected Secondary Contract may
terminate and the Noteholders may be subject to losses if the Credit
Enhancement, if any, and security interests in the related Equipment are
insufficient to cover the losses. Further, as noted under above, a tax or
government lien on the property of the pledging Vendor arising before
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a Secondary Contract came into existence may have priority over the Financing
Originator's interest in such Secondary Contract.
Certain Vendor Assignments and certain Program Assignments provide
that the Financing Originator has recourse to the related Vendor for all or a
portion of the losses the Financing Originator may incur as a result of a
default under the End-User Contracts sold under such Vendor Assignment or
Program Assignment. In the event of a Vendor's bankruptcy, a bankruptcy trustee,
a creditor or the Vendor as debtor in possession might attempt to characterize
sales to the Financing Originators pursuant to such Vendor Assignments or
Program Assignments as loans to the Vendor from the Financing Originator secured
by the Contracts sold thereunder. If such an attempt is successful, such Vendor
Assignment or Program Assignment would be subject to the risks described herein
for Vendor Notes. In such case the Contracts sold under such Vendor Assignment
or Program Assignment would constitute Secondary Contracts under the
recharacterized Vendor Assignment or Program Assignment.
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CERTAIN FEDERAL INCOME TAX MATTERS
Set forth below is a general discussion of the federal income tax
consequences to holders of Class A Notes of each Series offered hereby. Skadden,
Arps, Slate, Meagher & Flom, special tax counsel to the Seller ("TAX COUNSEL")
has delivered its opinion to the Seller as of the date of this Prospectus to the
effect that the discussion set forth below, subject to the qualifications set
forth therein, accurately describes the material federal income tax consequences
to holders of Class A Notes, under existing law and the assumptions stated
therein. The discussion does not purport to deal with all aspects of federal
income taxation that may be relevant to holders of the Class A Notes in light of
their personal investment circumstances, nor to certain types of holders subject
to special treatment under the federal income tax laws (for example, banks,
securities dealers, life insurance companies and tax-exempt organizations). The
discussion does not, moreover, purport to furnish information in the level of
detail or with attention to an investor's specific tax circumstances that would
be provided by an investor's own tax advisor. Prospective investors are advised
to consult their own tax advisors with regard to the federal income tax
consequences of holding and disposing of Class A Notes, as well as the tax
consequences arising under the laws of any state, foreign country or other
jurisdiction. This discussion is based upon present provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), the regulations promulgated
thereunder, and judicial or ruling authority, all of which are subject to
change, which change may be retroactive. No ruling on any of the issues
discussed below will be sought from the Internal Revenue Service (the "IRS").
Accordingly, each investor is advised to consult its own tax advisors with
regard to the tax consequences to it of investing in Class A Notes.
The discussion assumes that a Class A Note is issued in registered
form, has all payments denominated in U.S. dollars and has a term that exceeds
one year. Moreover, the discussion assumes that the interest formula for the
Class A Notes meets the requirements for "qualified stated interest" under
Treasury regulations (the "OID REGULATIONS") relating to original issue discount
("OID"), and that any OID on the Class A Notes (i.e., any excess of the
principal amount of the Class A Note over its issue price) does not exceed a de
minimis amount (i.e., 1/4% of its principal amount multiplied by the number of
full years until its maturity date), all within the meaning of the OID
Regulations. If those conditions are not satisfied, additional tax
considerations will be disclosed in the applicable Prospectus Supplement.
TREATMENT OF THE CLASS A NOTES AS INDEBTEDNESS
The Seller will agree, and the Class A Noteholders will agree by their
purchase of a Series of Class A Notes, to treat the Class A Notes as debt for
federal income tax purposes. Unless otherwise specified in the related
Prospectus Supplement, Tax Counsel will deliver an opinion at closing that the
Class A Notes of a Series will be classified as debt for federal income tax
purposes. The discussion below assumes that the Class A Notes of each Series
will be characterized as debt.
TREATMENT OF THE TRUST
In the opinion of Tax Counsel, the Trust will not be an association (or
publicly traded partnership) taxable as a corporation. Therefore, in the opinion
of Tax Counsel, such Trust will not be subject to federal income tax.
U.S. INVESTORS
Assuming the Class A Notes of a Series are debt obligations for federal
income tax purposes, based on the above assumptions they will not be considered
issued with OID. Interest thereon will be taxable as ordinary interest income
when received or accrued by holders utilizing the cash or accrual methods of
accounting, respectively. Under the OID regulations, a holder of a Class A Note
issued with a de minimis amount of OID must include such OID in income, on a pro
rata basis, as principal payments are made on the Class A Note. A purchaser who
buys a Class A Note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
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Each Paying Agent will be required to report annually to the IRS, and
to each Class A Noteholder of record, the amount of interest paid on Notes (and
the amount of interest withheld for federal income taxes, if any) for each
calendar year, except as to exempt holders (generally, holders that are
corporations, tax-exempt organizations, qualified pension and profit-sharing
trusts, individual retirement accounts, or nonresident aliens who provide
certification as to their status as nonresidents). As long as the only "Class A
Noteholder" of record is Cede, as nominee for DTC, Class A Noteholders and the
IRS will receive tax and other information only from Participants and Indirect
Participants rather than the related Paying Agent. Accordingly, each nonexempt
Noteholder (other than a Non-U.S. Investor, as described below) will be required
to provide, under penalties of perjury, a certificate on IRS Form W-9 containing
the holder's name, address, correct federal taxpayer identification number and a
statement that such holder is not subject to backup withholding. If a nonexempt
Class A Noteholder fails to provide the required certification, the Paying Agent
(or the Participants or Indirect Participants) will be required to withhold (or
cause to be withheld) 31% of the interest (and principal) otherwise payable to
the holder, and remit the withheld amount to the IRS as a credit against the
holder's federal income tax liability.
As described above, Tax Counsel has provided an opinion that the Trust
will not be subject to federal income tax. However, such opinion is not binding
on the IRS and thus no assurance can be given that such conclusion will prevail.
If the IRS were to successfully contend that the Trust were an association (or
publicly traded partnership) taxable as a corporation the Trust would be subject
to federal income tax at corporate rates on its taxable income generated by
ownership of the Contracts. Moreover, distributions by the entity on the Class C
Notes (and on any Class B Notes not treated as debt for federal income tax
purposes) would not be deductible in computing the entity's taxable income. Such
an entity-level tax could result in reduced distributions to all Noteholders,
and the holders of any Series of Notes that were treated as equity could also be
liable for a share of such a tax.
NON-U.S. INVESTORS
Assuming that the Class A Notes of a Series will properly be classified
as debt for federal income tax purposes:
(a) interest paid to a nonresident alien or foreign
corporation or partnership would be exempt from U.S. withholding taxes
(including backup withholding taxes), provided, that the holder
complies with applicable identification requirements (and does not
actually or constructively own 10% or more of the voting stock of the
Seller or the beneficial interests in the Trust, is not a controlled
foreign corporation with respect to the Seller or the holder(s) of
beneficial interests in the Trust, and does not bear certain
relationships to holders of the Class C Notes (or in certain cases to
holders of Class B Notes that are not debt for federal income tax
purposes)). Applicable identification requirements will be satisfied if
there is delivered to a securities clearing organization (or bank or
other financial institution that holds Notes on behalf of the customer
in the ordinary course of its trade or business) (i) IRS Form W-8
signed under penalties of perjury by the beneficial owner of the Class
A Notes stating that the holder is not a U.S. person and providing such
holder's name and address, (ii) IRS Form 1001 signed by the beneficial
owner of the Class A Notes or such owner's agent claiming an exemption
from withholding under an applicable tax treaty, or (iii) IRS Form 4224
signed by the beneficial owner of the Class A Notes or such owner's
agent claiming exemption from withholding of tax on income connected
with the conduct of a trade or business in the United States; provided,
that in any such case (x) the applicable form is delivered pursuant to
applicable procedures and is properly transmitted to the U.S. entity
otherwise required to withhold tax and (y) none of the entities
receiving the form has actual knowledge that the holder is a U.S.
person or that any certification on the form is false;
(b) a holder of a Class A Note of a Series who is a
nonresident alien or foreign corporation will not be subject to U.S.
federal income tax on gain realized on the sale, exchange or redemption
of such Class A Note, provided, that (i) such gain is not effectively
connected to a trade or business carried on by the holder in the United
States, (ii) in the case of a holder that is an individual, such holder
is not present in the United States for 183 days or more during the
taxable year in which such sale, exchange or redemption occurs, and
(iii) in the case of gain representing accrued interest, the conditions
described in clause (a) are satisfied; and
(c) a Class A Note held by an individual who at the time of
death is a nonresident alien will not be subject to U.S. federal estate
tax as a result of such individual's death if, immediately before his
death, (i) the individual did not actually or constructively own 10% or
more of the voting stock of the Seller, and does
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not bear certain relationships to holders of the Class C Notes or to
certain holders of the Class B Notes that are not debt for federal
income tax purposes, and (ii) the holding of such Class A Note was not
effectively connected with the conduct by the decedent of a trade or
business in the United States.
If the Trust were treated as an association (or publicly traded
partnership) taxable as a corporation, distributions to Noteholders could be
reduced as described under "--United States Investors", and interest on any
Notes characterized as equity for federal income tax purposes could be treated
as dividends subject to U.S. withholding tax.
STATE, LOCAL AND FOREIGN TAXATION
The discussion above does not address the tax treatment of the Trust,
the Class A Notes of any Series, the Class A Noteholders under state and local
tax laws or foreign tax laws. Prospective investors are urged to consult their
own tax advisors regarding the state and local tax treatment of the Trust and
the Class A Notes, and the consequences of purchase, ownership or disposition of
the Class A Notes under any state or local tax law or any foreign tax law, if
applicable.
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ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit certain employee
benefit plans ("BENEFIT PLANS") from engaging in specified transactions
involving plan assets with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the plan. A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and the Code for such persons. For example, a prohibited
transaction would arise, unless an exemption were available, if a Note were
viewed as debt of the Seller and the Seller was a disqualified person or a party
in interest with respect to a Benefit Plan that acquired the Note.
Moreover, additional prohibited transactions could arise if Trust
Assets were deemed to constitute assets of any Benefit Plan that owned Notes.
The Department of Labor ("DOL") has issued a final regulation concerning the
definition of what constitutes "plan assets" subject to the fiduciary and
prohibited transaction rules of ERISA and the Code (the "PLAN ASSET
REGULATION"). Under the Plan Asset Regulation, the assets and properties of
corporations, partnerships and certain other entities such as the Trust in which
a Benefit Plan acquires "an equity interest" could be deemed to be plan assets
subject to these rules in certain circumstances. Although it is anticipated that
the Notes should be treated as debt rather than equity, no assurance can be
given that this will in fact be the characterization of the Notes for these
purposes. If the Notes were to be treated as equity interests rather than as
debt, the Trust would be deemed to hold plan assets unless one of two exceptions
described below were applicable to the Trust.
The Plan Asset Regulation contains an exception to the "look through"
treatment described in the preceding paragraph if a Benefit Plan acquires a
"publicly-offered security". A publicly-offered security is a security that is
(i) freely transferable, (ii) part of a class of securities that is owned by 100
or more investors independent of the issuer and of one another at the conclusion
of the initial offering and (iii) either is (A) part of a class of securities
registered under Section 12(b) or 12(g) of the Exchange Act, or (B) part of an
offering of securities to the public pursuant to an effective registration
statement under the Act and the class of securities of which such security is a
part is registered under the Exchange Act within 120 days (or such later time as
may be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred. There are
no restrictions imposed on the transfer of the Notes, which will be sold as part
of an offering pursuant to an effective registration statement under the Act and
then will be timely registered under the Exchange Act.
The offering of the Notes will likely not meet the criteria of the
publicly-offered security exception under the Plan Asset Regulation, and no
monitoring or other measures will be taken to determine whether such criteria
are met.
The Plan Asset Regulation also provides that an entity's assets will
not be deemed to be plan assets if equity participation in the entity by
"benefit plan investors" is not "significant". Equity participation in an entity
by benefit plan investors is not significant on any date if, immediately after
the most recent acquisition of any equity interests in the entity, less than 25%
of the value of each class of equity interests in the entity is held by benefit
plan investors. For purpose of determining whether this limitation is met, the
value of any equity interests held by any person, other than a benefit plan
investor, with discretionary authority or control with respect the assets of the
entity or any person who provides investment advice for a fee with respect to
such assets, or any affiliate of such person, is excluded. No assurance can be
given that the criteria for this exception will be satisfied at any particular
time, and no monitoring or other measures will be taken to determine whether
such criteria are met.
If the Notes fail to meet the criteria of the exceptions discussed
above and the Trust Assets are deemed to include plan assets subject to
regulation under ERISA and the Code, transactions involving the Trust and
"parties in interest" or "disqualified persons" with respect to investing
Benefit Plans might be prohibited unless an exemption is available. Thus, for
example, if the employer that maintains any Benefit Plan is an Obligor under one
of the Contracts, under a DOL interpretation the purchase of such related Notes
by such Benefit Plan could constitute a prohibited transaction. There can be no
assurance that an exemption would apply to each transaction involving Trust
Assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING
THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN COUNSEL AS TO WHETHER THE
ACQUISITION OF SUCH NOTES WOULD BE A PROHIBITED TRANSACTION, WHETHER TRUST
ASSETS WHICH ARE REPRESENTED BY SUCH NOTES WOULD BE CONSIDERED PLAN ASSETS, THE
CONSEQUENCES THAT WOULD APPLY IF THE TRUST ASSETS WERE CONSIDERED PLAN ASSETS
AND THE APPLICABILITY OF EXEMPTIVE RELIEF FROM THE PROHIBITED TRANSACTION RULES.
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PLAN OF DISTRIBUTION
Upon the terms and subject to the conditions set forth in a note agency
or underwriting agreement (any such agreement, an "UNDERWRITING AGREEMENT"), the
Seller will agree to sell to each of the underwriters named therein and in the
related Prospectus Supplement and each of such underwriters will agree to
purchase from the Seller the principal amount of Class A Notes set forth therein
and in the related Prospectus Supplement.
In each Underwriting Agreement, the several underwriters will agree,
unless otherwise set forth in the related Prospectus Supplement, subject to the
terms and conditions set forth therein, to purchase all the Class A Notes
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Class A Notes are purchased. In the event of a default
by any such underwriter, each Underwriting Agreement will provide that, in
certain circumstances, purchase commitments of the nondefaulting underwriters
may be increased or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
the related Series of Class A Notes being offered thereby will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Series of Class A Notes or (ii) specify that such Series
of Class A Notes are to be resold by the underwriters in negotiated transactions
at varying prices to be determined at the time of such sale. After the initial
public offering of any Series of Class A Notes, the public offering price and
such concessions may be changed.
Each Underwriting Agreement will provide that Newcourt and the Seller
will indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act.
The Collateral Agent may, from time to time, invest the funds in the
Collection Account, the Reserve Account and any other account maintained by the
Collateral Agent pursuant to the Pooling Agreement or any Supplement in Eligible
Investments acquired from the underwriters.
The obligation of each underwriter to purchase any Series of Class A
Notes will be subject to conditions precedent specified in the related
Underwriting Agreement.
The place and time of delivery for the Series of Class A Notes in
respect of which this Prospectus is delivered will be set forth in the related
Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Seller and the Trust by Skadden, Arps, Slate, Meagher & Flom, New York, New York
and for any underwriters, agents or dealers by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
Certain federal income tax matters will be passed upon for the Seller by
Skadden, Arps, Slate, Meagher & Flom, New York, New York.
82
<PAGE> 113
INDEX OF TERMS
Page
Accrual Period................................................................37
ADCB..........................................................................37
Addition......................................................................40
Addition Date.................................................................40
Additional Contracts...........................................................6
Additional Series Enhancement.................................................49
Adjusted Scheduled Payments...................................................37
Aggregate Principal Amount....................................................37
Allocated Series Discounted Contract Balance..................................37
Applicable Class Percentage...................................................38
Applicable Indenture........................................................2, 9
Applicable Indenture Trustee...................................................2
Applicable Purchase Agreement.................................................57
Applicable Security...........................................................12
Article 2A................................................................21, 76
Asset Transfer Agreement..................................................17, 72
Available Amounts.............................................................44
Bankruptcy Code...........................................................18, 74
Benefit Plan..................................................................13
Benefit Plans.................................................................81
Bridge Closing Date...........................................................35
Business Day...................................................................9
Cede...........................................................................3
CEDEL.........................................................................54
Charge-Offs...................................................................52
Citibank......................................................................54
Class..........................................................................2
Class A Noteholder............................................................54
Class A Notes..................................................................2
Class A Principal Payment Amount..............................................38
Class B Noteholders...........................................................11
Class B Notes..................................................................2
Class B Principal Payment Amount..............................................38
Class C Noteholders...........................................................11
Class C Notes..................................................................2
Class C Principal Payment Amount..............................................38
Closing Date...................................................................5
Code..........................................................................78
Collateral Agent...............................................................1
Collection Account.........................................................7, 47
Collection Period ............................................................36
Commission.....................................................................4
Commitment Termination Date....................................................5
Contract Files................................................................58
Contract Pool..................................................................6
Contracts......................................................................2
Credit Enhancement............................................................11
Credit Enhancer...............................................................49
CSA............................................................................6
83
<PAGE> 114
Page
Custodian.....................................................................72
Custody Agreement ............................................................72
Cutoff Date....................................................................2
Defaulted Contract............................................................47
Definitive Class A Notes......................................................56
Depositaries..................................................................54
Depository....................................................................36
Determination Date............................................................42
Discounted Contract Balance...................................................39
Distribution..................................................................52
Distribution Date .............................................................9
DOL ..........................................................................81
DTC ...........................................................................3
Eligible Contract ............................................................60
Eligible Investments..........................................................48
Eligible Secondary Contracts..................................................60
End-User.......................................................................2
End-User Contracts.............................................................2
Equipment..................................................................2, 27
ERISA ........................................................................81
Euroclear Operator or Euroclear...............................................54
Event of Default..............................................................50
Excess Concentration Amount...................................................62
Excess Contract...............................................................61
Excess Spread Amount..........................................................39
Exchange Act...................................................................4
Excluded Amounts..............................................................24
Existing Contracts............................................................36
Existing Debt.................................................................35
FDIC..........................................................................48
Financed Items.............................................................2, 27
Financing Agreement............................................................6
Financing Originators..........................................................5
First Closing Date.............................................................5
Guaranteed Residual Investment................................................30
Hedging Counterparty..........................................................42
Holders.......................................................................56
Indenture......................................................................2
Indenture Trustee .............................................................2
Indirect Participants.........................................................55
Ineligible Contract...........................................................61
Initial Principal Amount......................................................36
Insolvency Event..............................................................20
Insolvency Laws...............................................................31
Insurance Proceeds............................................................58
Interest Rate.................................................................10
Interest Rate Hedge...........................................................42
IPA............................................................................6
IRS...........................................................................78
Issuer Trustee.................................................................1
L/C Issuer....................................................................49
LCS...........................................................................35
84
<PAGE> 115
Page
Lease..........................................................................6
Lender........................................................................35
Lessee.........................................................................6
Maturity Date.................................................................10
Minimum Amount................................................................52
Minimum Deposit................................................................7
Minimum Reserve Balance.......................................................43
MLA...........................................................................25
MLA Supplement................................................................25
Monthly Report................................................................53
Moody's.......................................................................13
Morgan........................................................................54
Net Pool Balance .............................................................42
New Issuance..................................................................40
Newcourt.......................................................................1
Newcourt Advance..............................................................42
Newcourt Entity...........................................................31, 32
Newcourt USA...................................................................5
Non-Transferrable Notes.......................................................57
Note Documents................................................................51
Noteholders...................................................................11
Notes..........................................................................1
NRC............................................................................1
Obligor........................................................................7
OID...........................................................................78
OID Regulations...............................................................78
Operative Documents...........................................................36
Opinion of Counsel............................................................41
Optional Prepayments..........................................................15
Original Contracts.............................................................5
Original Purchase Agreement...................................................36
Parrish.......................................................................34
Participants..................................................................54
Permitted Liens...............................................................60
Plan Asset Regulation.........................................................81
Pooling Agreement..............................................................1
Prepaid Contract..............................................................40
Prepayment....................................................................15
Prepayment Amount.............................................................40
Principal Amount..............................................................39
Program Agreement..............................................................8
Program Assignment............................................................21
Prospectus Supplement..........................................................1
Purchase Agreements...........................................................57
Purchased Contracts.......................................................17, 72
Qualified Institution.........................................................48
Rating Agency.................................................................13
Ratings Effect................................................................16
Record Date...................................................................52
Recoveries....................................................................47
Registration Statement.........................................................4
Required Holders..............................................................51
85
<PAGE> 116
Page
Required Percentage...........................................................22
Reserve Account............................................................7, 48
Reserve Account Allocation Amount.............................................44
Residual Assignee.............................................................30
Residual Investment.......................................................16, 29
Restricting Event.............................................................51
S&P...........................................................................13
Scheduled Payments............................................................39
Secured Note...............................................................6, 26
Secured or Unsecured Note......................................................6
Secured Parties...............................................................11
Securities Act.................................................................4
Seller.........................................................................1
Series.........................................................................1
Series ADCB...................................................................39
Series Allocation Percentage..................................................44
Series Arrearage..............................................................44
Series Available Amount.......................................................44
Series Discount Rate..........................................................39
Series Enhancement............................................................11
Series Expected Cash Flow.....................................................44
Series Issuance Date..........................................................36
Service Transfer..............................................................63
Servicer.......................................................................1
Servicer Advance..........................................................13, 62
Servicer Default..............................................................63
Services................................................................2, 7, 27
Servicing Fee.................................................................52
Servicing Fee Percentage......................................................52
Software................................................................2, 7, 27
Spread Account................................................................50
Subordinated Note Rate........................................................39
Subordinated Noteholders......................................................11
Subordinated Notes.............................................................2
Subordinated Residual Interest............................................16, 30
Subsequent Purchase Agreement.................................................57
Supplement.....................................................................2
Tax Counsel...................................................................78
Tax Opinion...................................................................41
Termination Notice............................................................63
Transfer Deposit Amount.......................................................61
Transfer Event................................................................51
Transferred Assets........................................................12, 58
Trust..........................................................................1
Trust Assets...................................................................5
Trust Company.................................................................61
Trust Termination Date........................................................57
UCC...........................................................................16
Underwriting Agreement........................................................82
UNL Pool......................................................................28
Unsecured Note.................................................................6
Vendor Agreements .............................................................8
86
<PAGE> 117
Page
Vendor Assignment .........................................................8, 29
Vendor Notes...............................................................2, 27
Vendors....................................................................8, 28
87
<PAGE> 118
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE SELLER OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR 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 OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN
OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Series Terms............................. S- 4
The Trust Assets.................................... S-13
Distribution of Transferred Contracts by Remaining
Contract Term..................................... S-14
Distribution of Transferred Contracts by Discounted
Contract Balances................................. S-15
Distribution of Transferred Contracts by Original
Contract Term..................................... S-15
Distribution of Transferred Contracts by End-User
Industry.......................................... S-15
Geographic Distribution of Transferred End-User
Contracts......................................... S-16
Distribution of Transferred Contracts by Type of
Collateral........................................ S-16
Distribution of Transferred End-User Contracts by
Type of Contract.................................. S-16
The Servicer........................................ S-17
Delinquency Experience.............................. S-18
Loss Experience..................................... S-18
Prepayment Table.................................... S-19
The Indenture Trustee............................... S-20
The Issuer Trustee.................................. S-20
The Issuer.......................................... S-20
Description of The Series 1996-3 Notes.............. S-20
Certain Tax Considerations.......................... S-25
ERISA Considerations................................ S-26
Rating.............................................. S-26
Plan of Distribution................................ S-27
Legal Matters....................................... S-27
General Information................................. S-27
Annex 1............................................. S-28
Index of Terms...................................... S-29
PROSPECTUS
Available Information............................... 4
Reports to Noteholders.............................. 4
Incorporation of Certain Documents by Reference..... 4
Prospectus Summary.................................. 5
Risk Factors........................................ 15
The Contracts....................................... 24
The Trust........................................... 31
The Seller.......................................... 31
The Servicer........................................ 32
Credit and Contract Servicing Procedures............ 33
Use of Proceeds..................................... 35
Description of the Notes............................ 36
The Pooling Agreement Generally..................... 57
The Indentures...................................... 67
Certain Legal Aspects of the Contracts.............. 70
Certain Federal Income Tax Matters.................. 78
State, Local and Foreign Taxation................... 80
ERISA Considerations................................ 81
Plan of Distribution................................ 82
Legal Matters....................................... 82
Index of Terms...................................... 83
</TABLE>
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NEWCOURT RECEIVABLES
ASSET TRUST
$188,172,873 CLASS A 6.24%
ASSET BACKED NOTES
SERIES 1996-3
PROSPECTUS SUPPLEMENT
FIRST UNION
CAPITAL MARKETS CORP.
DEUTSCHE MORGAN GRENFELL
LEHMAN BROTHERS
UNTIL MARCH 9, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SERIES 1996-3 CLASS A NOTES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THE DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN
ACTING AS UNDERWRITER(S) AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
DECEMBER 9, 1996
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