<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1996
REGISTRATION NO. 333-08645
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
AMENDMENT NO. 6 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
(ISSUER WITH RESPECT TO THE NOTES)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-7097632
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
</TABLE>
ANTIGUA FUNDING CORPORATION
(ORIGINATOR OF THE OWNER TRUST DESCRIBED HEREIN)
C/O CT CORPORATION
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302) 658-7581
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CT CORPORATION
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801
(302) 658-7581
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
COPIES TO:
<TABLE>
<S> <C>
OWEN C. MARX RICHARD M. SCHETMAN
Dorsey & Whitney LLP Cadwalader, Wickersham & Taft
250 Park Avenue 100 Maiden Lane
New York, New York 10177 New York, New York 10038
(212) 415-9285 (212) 504-6906
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Receivable-Backed Notes.................... $3,075,000,000 100% $3,075,000,000 $1,060,344.83(2)
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
(2) Previously paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be used
in connection with an offering in the United States (the "U.S. Prospectus"), and
one to be used in connection with a concurrent international offering outside
the United States (the "International Prospectus"). The International Prospectus
is substantially the same as the U.S. Prospectus except for the front cover page
and the pages reflecting the "Underwriting" section. The pages to be used in the
International Prospectus which differ from those in the U.S. Prospectus follow
the U.S. Prospectus pages. Each of the pages for the International Prospectus is
labeled "Alternate Page for International Prospectus." Each of the U.S.
Prospectus and the International Prospectus will be filed with the Securities
and Exchange Commission pursuant to Rule 424(b) under the Securities Act of
1933, as amended.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 7, 1996
PROSPECTUS
$3,057,800,000 (APPROXIMATE)
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
$ % RECEIVABLE-BACKED NOTES, CLASS A-1
$ % RECEIVABLE-BACKED NOTES, CLASS A-2
$ % RECEIVABLE-BACKED NOTES, CLASS A-3
$ % RECEIVABLE-BACKED NOTES, CLASS A-4
$ % RECEIVABLE-BACKED NOTES, CLASS B
ANTIGUA FUNDING CORPORATION
DEPOSITOR
[LOGO]
SERVICER
Capita Equipment Receivables Trust 1996-1 (the "Owner Trust") has been
formed pursuant to a Trust Agreement between Antigua Funding Corporation (the
"Depositor"), which will be an indirect wholly owned subsidiary of AT&T Capital
Corporation ("TCC"), and The Bank of New York, as Owner Trustee (the "Owner
Trustee"). The Receivable-Backed Notes (the "Notes") will be issued by the Owner
Trust pursuant to an Indenture (the "Indenture") between the Owner Trust and The
Chase Manhattan Bank, as Indenture Trustee (the "Indenture Trustee"). The Notes
will consist of four classes of senior notes, designated as the Class A-1, Class
A-2, Class A-3 and Class A-4 Notes (collectively, the "Class A Notes"), and one
class of subordinated notes, designated as the Class B Notes. The proceeds from
the issuance of the Notes, together with the proceeds of the Equity Certificates
to be issued by the Owner Trust to the Depositor (which will thereafter be
transferred by the Depositor in a transaction unrelated to the issuance of the
Notes), will be used to acquire a pool of equipment leases (the "Lease
Contracts") and installment sale contracts, promissory notes, loan and security
agreements and similar types of receivables (the "Loan Contracts," and, together
with the Lease Contracts, the "Contracts"). TCC will service the Contracts
pursuant to a Transfer and Servicing Agreement among the Depositor, TCC, the
Indenture Trustee and the Owner Trust. Of the Notes being offered, $ ,
$ , $ , $ and $ initial principal amount of
the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class
B Notes, respectively, are being offered initially in the United States by the
U.S. Underwriters and $ , $ , $ , $ and
$ , respectively, are being offered initially outside the United States
by the International Managers. The Initial Public Offering Price and
Underwriting Discount will be identical for both offerings.
(CONTINUED ON FOLLOWING PAGE)
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THIS OFFERING,
SEE "RISK FACTORS" ON PAGE 16 HEREIN.
-------------
THE NOTES WILL REPRESENT OBLIGATIONS OF THE OWNER TRUST AND WILL NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF ANTIGUA FUNDING CORPORATION, AT&T
CAPITAL 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.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT (2) THE DEPOSITOR (1)(3)
------------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Per Class A-1 Note........ % % %
Per Class A-2 Note........ % % %
Per Class A-3 Note........ % % %
Per Class A-4 Note........ % % %
Per Class B Note.......... % % %
Total..................... $ $ $
</TABLE>
- ------------------
(1) Plus accrued interest, if any, at the applicable Interest Rate, from October
, 1996.
(2) TCC and certain of its affiliates have agreed to indemnify the U.S.
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Depositor, estimated to be
$ .
GLOBAL COORDINATORS:
NOMURA INTERNATIONAL PLC GOLDMAN, SACHS & CO.
The Notes are offered severally by the U.S. Underwriters, as specified
herein, subject to prior sale and subject to the U.S. Underwriters' right to
reject orders in whole or in part. It is expected that the Notes will be ready
for delivery in book-entry form through the facilities of The Depository Trust
Company in New York, New York, Cedel Bank, societe anonyme, and the Euroclear
System against payment therefor in immediately available funds on or about
October , 1996.
Application has been made to list the Notes on the Luxembourg Stock
Exchange.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
-----------
THE DATE OF THIS PROSPECTUS IS OCTOBER , 1996
<PAGE>
(CONTINUED FROM PRECEDING PAGE)
The Owner Trust will also issue a single class of certificates of beneficial
interest, the Equity Certificates, which are not being offered hereby. It is
expected that the Equity Certificates will initially represent the right to
receive principal in an amount equal to approximately 4% of the Initial Contract
Pool Principal Balance, together with interest thereon at a rate of % per
annum.
The Notes and the Equity Certificates will be payable solely from, and
secured by, the Amount Available on each Payment Date (which will consist
primarily of the Scheduled Payments due under the Contracts, certain amounts
received upon the prepayment or purchase of Contracts or (to the extent not
payable to the Depositor, as described below) liquidation of the Contracts and
disposition of the related Equipment upon defaults thereunder, and investment
earnings on amounts deposited in the Collection Account established pursuant to
the Indenture, in each case subject to prior application to pay the Servicing
Fee, together with amounts permitted to be withdrawn therefor from a Cash
Collateral Account) in the order of priority described herein.
The Owner Trust will have a security interest in all Equipment securing the
Loan Contracts, and all Liquidation Proceeds (including any derived from the
disposition of the related Equipment) received with respect to any defaulted
Loan Contracts will be payable to the Owner Trust. The Depositor will not
transfer to the Owner Trust its ownership or security interest in the Equipment
related to the Lease Contracts (the "Leased Equipment"), including the right to
receive the Leased Equipment (or the purchase price therefor or proceeds
thereof) upon expiration of the original term of the related Lease Contract. The
Liquidation Proceeds received with respect to any defaulted Lease Contract
(including any derived from the disposition of the related Leased Equipment)
will be allocated between the Owner Trust and the Depositor as described herein.
Amounts payable to the Depositor in respect of the Leased Equipment or otherwise
in respect of Liquidation Proceeds of defaulted Lease Contracts will not be
available for payment of interest or principal on the Notes.
THE LIKELIHOOD OF PAYMENT OF INTEREST ON EACH CLASS OF NOTES WILL BE
ENHANCED BY THE APPLICATION OF THE AMOUNT AVAILABLE, AFTER PAYMENT OF THE
SERVICING FEE, TO THE PAYMENT OF SUCH INTEREST PRIOR TO THE PAYMENT OF PRINCIPAL
ON ANY OF THE NOTES OR THE EQUITY CERTIFICATES, AS WELL AS BY THE PREFERENTIAL
RIGHT OF THE HOLDERS OF NOTES OF EACH SUCH CLASS TO RECEIVE SUCH INTEREST (1) IN
THE CASE OF THE CLASS A NOTES, PRIOR TO THE PAYMENT OF ANY INTEREST ON THE CLASS
B NOTES OR THE EQUITY CERTIFICATES, AND (2) IN THE CASE OF THE CLASS B NOTES,
PRIOR TO THE PAYMENT OF ANY INTEREST ON THE EQUITY CERTIFICATES. LIKEWISE, THE
LIKELIHOOD OF PAYMENT OF PRINCIPAL ON EACH CLASS OF NOTES WILL BE ENHANCED BY
THE PREFERENTIAL RIGHT OF THE HOLDERS OF NOTES OF EACH SUCH CLASS TO RECEIVE
SUCH PRINCIPAL, TO THE EXTENT OF THE AMOUNT AVAILABLE, AFTER PAYMENT OF THE
SERVICING FEE AND INTEREST ON THE NOTES AND THE EQUITY CERTIFICATES AS
AFORESAID, (I) IN THE CASE OF THE CLASS A NOTES, PRIOR TO THE PAYMENT OF ANY
PRINCIPAL ON THE CLASS B NOTES OR (EXCEPT AS DESCRIBED HEREIN) THE EQUITY
CERTIFICATES, AND (II) IN THE CASE OF THE CLASS B NOTES, PRIOR TO THE PAYMENT OF
ANY PRINCIPAL ON THE EQUITY CERTIFICATES, EXCEPT AS DESCRIBED HEREIN. SEE
"DESCRIPTION OF THE NOTES."
To the extent the Amount Available is sufficient therefor after payment of
the Servicing Fee, interest at the rate per annum noted above for each of the
Class A-1, Class A-2, Class A-3, Class A-4 and Class B Notes (the applicable
"Interest Rate") will be paid to Holders of each Class of Notes, and principal
will be paid on the applicable Class of Notes, on the 15th day of each month
(or, if such day is not a Business Day, on the next succeeding Business Day),
commencing November 15, 1996 (each, a "Payment Date"). The Stated Maturity Date
for the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes and the Class B Notes is , , ,
, and , respectively, but final payment of any Class
of Notes could occur significantly earlier than the Stated Maturity Date of such
Class.
The Notes are subject to redemption in whole as described herein under
"Description of the Notes -- Optional Purchase of Contracts."
There is currently no secondary market for the Notes and there is no
assurance that one will develop. The U.S. Underwriters expect, but will not be
obligated, to make a market in the Notes in the United States. The International
Managers expect, but will not be obligated, to make a market in the Notes
outside the United States. There is no assurance that either such market will
develop, or if either such market does develop, that such market will continue.
See "Risk Factors."
It is a condition of issuance of the Notes that each of Standard & Poor's
Ratings Services, Moody's Investors Service, Inc., Duff & Phelps Credit Rating
Co. and Fitch Investors Service, L.P. (i) rate the Class A Notes in its highest
rating category, and (ii) rate the Class B Notes at least "A," "A2," "A" and
"A," respectively. See "Ratings of the Notes."
IN CONNECTION WITH THIS OFFERING, THE U.S. UNDERWRITERS AND/OR INTERNATIONAL
MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
Upon receipt of a request by an investor who has received an electronic
Prospectus from any Underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
such Underwriter will promptly deliver, or cause to be delivered, without
charge, to such investor a paper copy of the Prospectus.
<PAGE>
INCORPORATION BY REFERENCE
All documents filed by the Servicer, on behalf of the Owner Trust, pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this Prospectus and prior to the
termination of the offering of the Notes shall be deemed to be incorporated by
reference into this Prospectus. Any statement contained herein or in a document
incorporated or 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 herein or in any subsequently filed document which also is
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Depositor will provide without charge to each person to whom a copy of
this Prospectus is delivered on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference, except the
exhibits to such documents. Requests for such copies should be directed to
Antigua Funding Corporation, 1209 Orange Street, Wilmington, Delaware 19801,
Attention: Secretary.
AVAILABLE INFORMATION
The Depositor and the Owner Trust have filed a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "Commission") with respect to the Notes
offered pursuant to this Prospectus. For further information, reference is made
to the Registration Statement and amendments thereof and to the exhibits
thereto, which are 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 Northwest Atrium Center, 500 Madison Street, Chicago, Illinois 60661.
Copies of the Registration Statement and amendments thereof and exhibits thereto
may be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a World Wide Web site which provides on-line access to reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission at the address "http://www.sec.gov."
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, monthly unaudited reports
containing information concerning the Owner Trust, and prepared by the Servicer,
will be sent by the Indenture Trustee on behalf of the Owner Trust only to Cede
& Co., as nominee of The Depository Trust Company ("DTC") and registered holder
of the Notes, and to the Luxembourg Paying Agent. See "Description of the Notes
- -- Book-Entry Registration." In the event Definitive Notes are issued, such
reports will be sent to Noteholders as of the most recent Record Date and to the
Luxembourg Paying Agent. Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. See
"Description of the Notes -- Reports to Noteholders" for additional information
concerning periodic reports to Noteholders. Note Owners may receive such
reports, upon written request to the Indenture Trustee, together with a
certification that they are Note Owners. Any such request should be made to the
Indenture Trustee at the following address: The Chase Manhattan Bank, 450 W.
33rd Street (15th floor), New York, New York 10001 (facsimile (212) 946-3240),
Attention: Advanced Structured Products Group. Neither TCC nor the Depositor
intends to send any of its financial reports to Note Owners. The Servicer, on
behalf of the Owner Trust, will file with the Commission periodic reports
concerning the Owner Trust to the extent required under the Exchange Act and the
rules and regulations of the Commission thereunder. However, in accordance with
the Exchange Act and the rules and regulations of the Commission thereunder, the
Depositor expects that the Owner Trust's obligation to file such reports will be
terminated at the end of 1996.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
INCORPORATION BY REFERENCE................................................................................ i
AVAILABLE INFORMATION..................................................................................... i
REPORTS TO NOTEHOLDERS.................................................................................... i
PROSPECTUS SUMMARY........................................................................................ 1
RISK FACTORS.............................................................................................. 16
Limited Assets of the Owner Trust....................................................................... 16
Subordination of the Class B Notes...................................................................... 16
Bankruptcy and Insolvency Risks......................................................................... 16
Yield and Prepayment Considerations..................................................................... 18
Certain Legal Aspects of the Contracts.................................................................. 19
No Gross-Up for Withholding Tax......................................................................... 20
Limited Liquidity....................................................................................... 20
Book-Entry Registration................................................................................. 20
THE DEPOSITOR AND THE OWNER TRUST......................................................................... 20
The Depositor........................................................................................... 20
The Owner Trust......................................................................................... 21
Capitalization of the Owner Trust....................................................................... 22
The Owner Trustee....................................................................................... 22
AT&T CAPITAL CORPORATION.................................................................................. 23
THE ORIGINATORS........................................................................................... 24
AT&T Capital Leasing Services, Inc...................................................................... 24
AT&T Credit Corporation and NCR Credit Corp............................................................. 24
AT&T Commercial Finance Corporation..................................................................... 25
Underwriting and Servicing.............................................................................. 26
THE CONTRACTS............................................................................................. 30
Description of the Contracts............................................................................ 30
Representations and Warranties Made by TCC.............................................................. 33
Certain Statistics Relating to the Cut-Off Date Contract Pool........................................... 36
Certain Statistics Relating to Delinquencies and Defaults............................................... 39
DESCRIPTION OF THE NOTES.................................................................................. 42
General................................................................................................. 42
Distributions........................................................................................... 43
Class A Interest........................................................................................ 44
Class B Interest........................................................................................ 44
Principal............................................................................................... 44
Subordination of Class B Notes and Equity Certificates.................................................. 46
Cash Collateral Account................................................................................. 46
Liquidated Contracts.................................................................................... 47
Optional Purchase of Contracts.......................................................................... 47
Trust Accounts.......................................................................................... 47
Reports to Noteholders.................................................................................. 48
Book-Entry Registration................................................................................. 49
Definitive Notes........................................................................................ 52
Modification of Indenture Without Noteholder Consent.................................................... 52
Modification of Indenture With Noteholder Consent....................................................... 53
Events of Default; Rights Upon Event of Default......................................................... 53
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
Certain Covenants....................................................................................... 55
Annual Compliance Statement............................................................................. 55
Indenture Trustee's Annual Report....................................................................... 55
Satisfaction and Discharge of Indenture................................................................. 55
The Indenture Trustee................................................................................... 56
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENT....................................................... 56
Transfer and Assignment of Contracts and Equipment...................................................... 56
Collections on Contracts................................................................................ 56
Servicing............................................................................................... 58
Amendment............................................................................................... 60
Termination of the Transfer and Servicing Agreement..................................................... 61
CERTAIN LEGAL ASPECTS OF THE CONTRACTS.................................................................... 61
Enforcement of Security Interests in the Equipment...................................................... 61
Insolvency Matters...................................................................................... 62
UNITED STATES TAXATION.................................................................................... 63
Treatment of the Notes.................................................................................. 64
Treatment of the Owner Trust............................................................................ 64
Payments of Interest.................................................................................... 64
Original Issue Discount................................................................................. 64
Market Discount......................................................................................... 65
Amortizable Bond Premium................................................................................ 65
Sale, Exchange or Retirement of Notes................................................................... 65
Tax Consequences to United States Alien Holders......................................................... 66
Backup Withholding...................................................................................... 67
ERISA CONSIDERATIONS...................................................................................... 68
RATINGS OF THE NOTES...................................................................................... 68
USE OF PROCEEDS........................................................................................... 69
UNDERWRITING.............................................................................................. 70
LEGAL MATTERS............................................................................................. 71
ADDITIONAL INFORMATION.................................................................................... 71
INDEX OF PRINCIPAL TERMS.................................................................................. 72
APPENDIX A--GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES................................. A-1
Initial Settlement...................................................................................... A-1
Secondary Market Trading................................................................................ A-1
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS............................................... A-3
APPENDIX B--WEIGHTED AVERAGE LIFE OF THE NOTES............................................................ B-1
</TABLE>
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms used in this Prospectus Summary are defined elsewhere in this Prospectus
on the pages indicated in the "Index of Principal Terms."
<TABLE>
<S> <C>
ISSUER.............. A trust, referred to as the "Capita Equipment
Receivables Trust 1996-1" (the "Owner Trust"), formed by
the Depositor and governed by an Amended and Restated
Trust Agreement (the "Trust Agreement"), dated as of
October 1, 1996, between the Depositor and the Owner
Trustee. See "The Depositor and the Owner Trust -- The
Owner Trust."
DEPOSITOR........... Antigua Funding Corporation (the "Depositor"), which
will be a direct subsidiary of the Originators and an
indirect wholly owned subsidiary of AT&T Capital
Corporation ("TCC"). The Depositor will acquire the
Contracts and the Originators' interests in the
equipment subject thereto (the "Equipment") on the
Closing Date pursuant to a Purchase and Sale Agreement
(the "Purchase Agreement"), dated as of October 1, 1996,
among the Depositor, TCC and the Originators, and will
thereupon transfer the Contracts and the other Trust
Assets (as described under "Trust Assets" below) to the
Owner Trust pursuant to a Transfer and Servicing
Agreement (the "Transfer and Servicing Agreement"),
dated as of October 1, 1996, among the Depositor, TCC,
as Servicer, the Indenture Trustee and the Owner Trust.
See "The Depositor and the Owner Trust -- The
Depositor."
SERVICER............ TCC will, pursuant to the Transfer and Servicing
Agreement, act as Servicer of the Contracts. See
"Description of the Transfer and Servicing Agreement --
Servicing." TCC is a full-service, diversified equipment
leasing and finance company that operates principally in
the United States. Prior to October 1, 1996, TCC had
been a subsidiary of AT&T Corp., but is now owned by
members of management of TCC and other investors. See
"AT&T Capital Corporation."
INDENTURE TRUSTEE... The Chase Manhattan Bank, in its capacity as trustee
under an Indenture (the "Indenture"), dated as of
October 1, 1996, between the Owner Trust and the
Indenture Trustee.
OWNER TRUSTEE....... The Bank of New York, in its capacity as trustee under
the Trust Agreement.
THE NOTES........... Pursuant to the Indenture, the Owner Trust will issue
five classes of notes (the "Notes"), consisting of four
classes of senior notes, designated as the %
Receivable-Backed Notes, Class A-1, in the original
principal amount of $ (the "Class A-1 Notes"),
the % Receivable-Backed Notes, Class A-2, in the
original principal amount of $ (the "Class A-2
Notes"), the % Receivable-Backed Notes, Class A-3, in
the original principal amount of $ (the "Class A-3
Notes"), and the % Receivable-Backed Notes, Class A-4,
in the original principal amount of
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
$ (the "Class A-4 Notes," and, together with the
Class A-1, Class A-2 and Class A-3 Notes, the "Class A
Notes"), and one class of subordinated notes, designated
as the % Receivable-Backed Notes, Class B, in the
original principal amount of $ (the "Class B
Notes"). See "Description of the Notes." The Owner Trust
will also issue a single class of certificates of
beneficial interest (the "Equity Certificates") to the
Depositor. The Equity Certificates are not being offered
hereby. See "Equity Certificates" below.
INTEREST............ Interest on the outstanding principal balance of the
Notes of each Class will accrue at the interest rate for
such Class specified on the cover page of this
Prospectus (the "Interest Rate" for such Class) from and
including the Closing Date to but excluding November 15,
1996 (in the case of the first interest period), and
thereafter for each successive Payment Date from and
including the most recent prior Payment Date to which
interest has been paid, to but excluding such Payment
Date, in each case calculated on the basis of a 360-day
year comprised of twelve 30-day months. To the extent
the Amount Available is sufficient therefor after
payment of the Servicing Fee, the amount of interest to
be paid on the Notes on each Payment Date will be equal
to one-twelfth of the product of (i) the applicable
Interest Rate and (ii) the related Class principal
balance as of the immediately preceding Payment Date
(after giving effect to reductions in principal balance
on such immediately preceding Payment Date) (or, in the
case of the first interest period, interest accrued from
and including the Closing Date to but excluding November
15, 1996). In the event that, on a given Payment Date,
the Amount Available is not sufficient to make a full
payment of interest to the Holders of Class A Notes, the
amount of interest to be paid on the Class A Notes will
be allocated among each Class thereof (and within a
Class among the Notes of such Class) pro rata in
accordance with their respective entitlements to
interest, and the amount of such shortfall will be
carried forward and, together with interest thereon at
the applicable Interest Rate, added to the amount of
interest such Holders will be entitled to receive on the
next Payment Date. In the event that, on a given Payment
Date, the Amount Available, after payment of interest on
the Class A Notes, is not sufficient to make a full
payment of interest to the Holders of Class B Notes, the
amount of interest to be paid on the Class B Notes will
be allocated among the Notes of such Class pro rata in
accordance with their respective entitlements to
interest, and the amount of such shortfall will be
carried forward and, together with interest thereon at
the Class B Interest Rate, added to the amount of
interest such Holders will be entitled to receive on the
next Payment Date. See "Description of the Notes."
PRINCIPAL........... To the extent the Amount Available is sufficient
therefor after payment of interest on the Notes and the
Equity Certificates, the aggregate amount of principal
to be paid on the Notes and the Equity Certificates on
each Payment Date will equal the
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Monthly Principal Amount. Principal payable on the Notes
will be paid on each Payment Date in respect of
principal on the Class A-1 Notes until the Class A-1
Principal Balance has been reduced to zero, then in
respect of principal on the Class A-2 Notes until the
Class A-2 Principal Balance has been reduced to zero,
then in respect of principal on the Class A-3 Notes
until the Class A-3 Principal Balance has been reduced
to zero, then in respect of principal on the Class A-4
Notes until the Class A-4 Principal Balance has been
reduced to zero, and then in respect of principal on the
Class B Notes until the Class B Principal Balance has
been reduced to zero. Commencing on the first Payment
Date, however, % of the Monthly Principal Amount for
each Payment Date will be payable on the Equity
Certificates, on a parity with payment of principal on
the Notes, until the aggregate amount so paid equals
$ . See "Description of the Notes -- Principal."
The "Monthly Principal Amount" for any Payment Date will
equal the excess, if any, of (i) the sum of the
principal balances of the Notes and the Equity
Certificates as of such Payment Date (determined prior
to the payment of any principal in respect thereof on
such Payment Date), over (ii) the aggregate of the
Contract Principal Balances of the Contracts (the
"Contract Pool Principal Balance") as of the last day of
the Collection Period relating to such Payment Date.
The "Contract Principal Balance" of any Contract as of
the last day of any Collection Period is:
(1) in the case of a Lease Contract, the present
value of the unpaid Scheduled Payments due on such
Lease Contract after such last day of the Collection
Period (excluding all Scheduled Payments due on or
prior to, but not received as of, such last day, as
well as any Scheduled Payments due after such last day
and received on or prior thereto), after giving effect
to any Prepayments received on or prior to such last
day, discounted monthly at the rate of 8.10% per annum
(assuming, for purposes of such calculation, that each
Scheduled Payment is due on the last day of the
applicable Collection Period); and
(2) in the case of a Loan Contract, the lesser of
(a) the outstanding principal balance of such Loan
Contract after giving effect to Scheduled Payments due
on or prior to such last day of the Collection Period,
whether or not received, as well as any Prepayments,
and any Scheduled Payments due after such last day,
received on or prior to such last day, and (b) the
present value of the unpaid Scheduled Payments due on
such Loan Contract after such last day of the
Collection Period (excluding all Scheduled Payments
due on or prior to, but not received as of, such last
day, as well as any Scheduled Payments due after such
last day and received prior thereto), after giving
effect to any Prepayments received on or prior to such
last day, discounted monthly at
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the rate of 8.10% per annum (assuming, for purposes of
such calculation, that each Scheduled Payment is due
on the last day of the applicable Collection Period).
The Contract Principal Balance of any Contract which
became a Liquidated Contract during a given Collection
Period or which TCC was obligated to purchase as of the
end of a given Collection Period due to a breach of
representations and warranties, will, for purposes of
computing the Monthly Principal Amount and the Requisite
Amount for the Cash Collateral Account, be deemed to be
zero on and after the last day of such Collection
Period.
A "Liquidated Contract" is any Contract (a) which the
Servicer has charged off as uncollectible in accordance
with its credit and collection policies and procedures
(which shall be no later than the date as of which the
Servicer has repossessed and disposed of the related
Equipment, or otherwise collected all proceeds which, in
the Servicer's reasonable judgment, can be collected
under such Contract), or (b) as to which 10% or more of
a Scheduled Payment is delinquent 180 days or more. See
"Description of the Notes -- Principal."
The "Collection Period" for any Payment Date will be the
calendar month preceding the month in which such Payment
Date occurs.
The "Initial Contract Pool Principal Balance" is
$3,185,229,329 (which amount is based upon the Contract
Pool Principal Balance determined as of the Cut-Off
Date, but also includes an amount in respect of
Scheduled Payments on the Contracts due prior to, but
not received as of, the Cut-Off-Date). The aggregate of
the initial principal balances of the Notes and the
Equity Certificates will be equal to or less than the
Initial Contract Pool Principal Balance.
STATED MATURITY
DATES.............. If and to the extent not previously paid, the
outstanding principal balance of each Class of Notes
will be payable on the Stated Maturity Date of such
Class. The Class A-1 Stated Maturity Date will be
, ; the Class A-2 Stated
Maturity Date will be , ; the
Class A-3 Stated Maturity Date will be , ;
the Class A-4 Stated Maturity Date will be ,
; and the Class B Stated Maturity Date will be
, .
DENOMINATIONS....... The Notes will be available for purchase in
denominations of $10,000 and integral multiples thereof.
CLOSING DATE........ On or about October , 1996.
CUT-OFF DATE........ October 1, 1996.
PAYMENT DATES AND
RECORD DATES....... Interest and principal on the Notes will be paid on the
15th day of each month (or, if such 15th day is not a
Business Day, the next succeeding Business Day),
commencing in November 1996, to Holders of record on the
Business Day immediately
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preceding such Payment Date (so long as the Notes are
held in book-entry form), or to Holders of record on the
last day of the preceding calendar month (if Definitive
Notes have been issued).
SUBORDINATION....... The likelihood of payment of interest on each Class of
Notes will be enhanced by the application of the Amount
Available, after payment of the Servicing Fee, to the
payment of such interest prior to the payment of
principal on any of the Notes or the Equity
Certificates, as well as by the preferential right of
the Holders of Notes of each such Class to receive such
interest (1) in the case of the Class A Notes, prior to
the payment of any interest on the Class B Notes or the
Equity Certificates, and (2) in the case of the Class B
Notes, prior to the payment of any interest on the
Equity Certificates. Likewise, the likelihood of payment
of principal on each Class of Notes will be enhanced by
the preferential right of the Holders of Notes of each
such Class to receive such principal, to the extent of
the Amount Available, after payment of the Servicing Fee
and interest on the Notes and the Equity Certificates as
aforesaid, (i) in the case of the Class A Notes, prior
to the payment of any principal on the Class B Notes or
(except as described herein) the Equity Certificates,
and (ii) in the case of the Class B Notes, prior to the
payment of any principal on the Equity Certificates,
except as described herein. See "Description of the
Notes."
RATINGS............. It is a condition of issuance of the Notes that each of
Standard & Poor's Ratings Services ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Duff and Phelps
Credit Rating Co. ("Duff & Phelps") and Fitch Investors
Service, L.P. ("Fitch" and, together with S&P, Moody's
and Duff & Phelps, the "Rating Agencies") (i) rate the
Class A Notes in its highest rating category, and (ii)
rate the Class B Notes at least "A," "A2," "A" and "A,"
respectively. The rating of each Class addresses the
likelihood of the timely receipt of interest and payment
of principal on such Class of Notes on or before the
Stated Maturity Date for such Class. A 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 Rating Agency. The ratings of the Notes do not
address the likelihood of payment of principal on any
Class of Notes prior to the Stated Maturity Date
thereof, or the possibility of the imposition of United
States withholding tax with respect to non-United States
Persons. See "Ratings of the Notes."
USE OF PROCEEDS..... The proceeds from the offering and sale of the Notes,
together with the proceeds derived by the Depositor from
its disposition of the Equity Certificates, after
funding a portion of the Cash Collateral Account and
paying the expenses of the Depositor, will be paid to
the Originators by the Depositor in connection with the
transfer of the Contracts and the Originators' interests
in the Equipment.
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TRUST ASSETS........ The Trust Assets will consist of:
(i) a pool of equipment lease contracts (each, a
"Lease Contract") and installment sale contracts,
promissory notes, loan and security agreements and
other similar types of receivables (each, a "Loan
Contract") (all such Lease Contracts and Loan
Contracts being referred to herein as the "Contracts")
with various lessees, borrowers or other obligors
thereunder (each, an "Obligor"), including (a) all
monies at any time paid or payable thereon or in
respect thereof from and after the Cut-Off Date in the
form of (1) Scheduled Payments (including all
Scheduled Payments due prior to, but not received as
of, the Cut-Off Date, but excluding any Scheduled
Payments due on or after, but received prior to, the
Cut-Off Date), (2) Prepayments (but excluding, in the
case of a Lease Contract, any portion thereof
allocated to the Depositor, as described in clause
(ii) of the definition of "Pledged Revenues"), and (3)
Liquidation Proceeds (including any derived from the
disposition of the related Equipment) received with
respect to defaulted Contracts (excluding, in the case
of a Lease Contract, any portion thereof allocable to
the Depositor, as described under "Liquidated
Contracts" below), and (b) all rights of the secured
party in the Equipment related to the Loan Contracts,
but excluding the rights of the lessor in the Leased
Equipment (which rights, subject to the allocation of
Liquidation Proceeds received in respect thereof, have
been retained by the Depositor);
(ii) amounts on deposit in (and Eligible Investments
allocated to) certain accounts established pursuant to
the Indenture and the Transfer and Servicing
Agreement, including the Collection Account; and
(iii) certain other property and assets as herein
described.
The Trust Assets will secure payment of the Notes. See
"Source of Payment and Security" below and "The
Depositor and the Owner Trust -- The Owner Trust."
SOURCE OF PAYMENT
AND SECURITY....... Principal of and interest on the Notes and the Equity
Certificates will be paid on each Payment Date, after
payment of the Servicing Fee, solely from, and secured
by, the "Amount Available" for such Payment Date, which
is equal to the sum of (a) those Pledged Revenues on
deposit in the Collection Account as of the last
Business Day preceding the related Determination Date
(the "Deposit Date") (i) which were received by the
Servicer during the related Collection Period or which
represent amounts paid by TCC or the Depositor to
purchase Contracts as of the end of such Collection
Period ("Related Collection Period Pledged Revenues"),
or (ii) to the extent necessary to pay interest on the
Notes and the Equity Certificates on such Payment Date,
which were received by the Servicer after the end of the
related Collection Period but on or prior to such
Deposit Date ("Current Collection Period Pledged
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Revenues"), plus (b) amounts permitted to be withdrawn
therefor from the Cash Collateral Account, as described
under "Cash Collateral Account" below.
"Pledged Revenues" will consist of:
(i) "Scheduled Payments" on the Contracts (which
will consist of all payments under the Contracts other
than those portions of such payments which, under the
Contracts, are to be (A) applied by the Servicer to
the payment of insurance charges, maintenance, taxes
and other similar obligations, or (B) retained by the
Servicer in payment of Administrative Fees) received
on or after the Cut-Off Date and due during the term
of the Contracts, without giving effect to end-of-term
extensions or renewals thereof (including all
Scheduled Payments due prior to, but not received as
of, the Cut-Off Date, but excluding any Scheduled
Payments due on or after, but received prior to, the
Cut-Off Date);
(ii) any voluntary prepayments ("Prepayments")
received on or after the Cut-Off Date under the
Contracts, provided that the amount, if any, by which
any such Prepayment exceeds the Required Payoff Amount
of a Lease Contract will not constitute Pledged
Revenues but will be allocated to the Depositor;
(iii) any amounts paid by TCC to purchase Contracts
due to a breach of representations and warranties with
respect thereto, as described under "Mandatory
Purchase of Certain Contracts" below, excluding, in
the case of a Lease Contract, any portion thereof
allocable to the Depositor;
(iv) any amounts paid by the Depositor to purchase
the Contracts as described under "Optional Purchase of
Contracts" below;
(v) certain of the proceeds derived from the
liquidation of the Contracts and the related
Equipment, as described under "Liquidated Contracts"
below; and
(vi) any earnings on the investment of amounts
credited to the Collection Account.
The Depositor will not transfer to the Owner Trust (1)
its ownership or security interest in the Leased
Equipment, including the right to receive the Leased
Equipment (or the purchase price therefor or proceeds
thereof) upon expiration of the original term of the
related Lease Contract, or (2) the right to receive a
portion of (a) Prepayments, as described in clause (ii)
above, and (b) the Liquidation Proceeds of any defaulted
Lease Contract, including any derived from the
disposition of the related Leased Equipment, as
described under "Liquidated Contracts" below. Amounts
payable to the Depositor in respect of the Leased
Equipment or otherwise in respect of
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Prepayments or Liquidation Proceeds of defaulted Lease
Contracts will not be available for payment of interest
or principal on the Notes. See "Leased Equipment" below.
THE CONTRACTS....... The aggregate of the Contracts expected to be held by
the Owner Trust as part of the Trust Assets, as of any
particular date, is referred to as the "Contract Pool,"
and the Contract Pool, as of the Cut-Off Date, is
referred to as the "Cut-Off Date Contract Pool." As of
the Cut-Off Date, the Cut-Off Date Contract Pool had the
following characteristics (unless otherwise noted,
percentages are by Initial Contract Pool Principal
Balance);
(i) the Initial Contract Pool Principal Balance is
$3,185,229,329;
(ii) there were 280,634 Contracts;
(iii) the average Contract Principal Balance was
approximately $11,350;
(iv) of such Contracts, approximately 96.0% were Lease
Contracts and approximately 4.0% were Loan Contracts;
(v) approximately 40.0% of such Contracts related to
telecommunications equipment; approximately 23.0% of
such Contracts related to manufacturing and
construction equipment; and approximately 18.8% of
such Contracts related to computers and point-of-sale
equipment;
(vi) the Obligors on approximately 13.2% of the
Contracts were located in California; approximately
9.8% were located in New York; approximately 8.9% were
located in New Jersey; approximately 6.8% were located
in Florida; approximately 5.8% were located in Texas;
approximately 5.5% were located in Illinois; and no
other state represented more than 5.0% of the
Contracts;
(vii) approximately 90.8% of the Contracts had been
originated by the Originators, with the remaining 9.2%
of the Contracts having been originated by third
parties and purchased by an Originator;
(viii) the remaining term of the Contracts ranged from
1 month to 95 months; and
(ix) the weighted average remaining term of the
Contracts was approximately 38.6 months and the
weighted average age of the Contracts was
approximately 17.5 months. See "The
Contracts -- Certain Statistics Relating to the
Cut-Off Date Contract Pool."
TCC will make certain representations and warranties
regarding each Contract, and will be obligated to
purchase any Contract in the event of a breach of any
such representation or
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warranty that materially and adversely affects the value
of such Contract. See "Mandatory Purchase of Certain
Contracts" below.
ORIGINATORS......... The Contracts included in the Cut-Off Date Contract Pool
have been originated or, in some cases, acquired by four
subsidiaries of TCC: AT&T Capital Leasing Services, Inc.
("Leasing Services"), AT&T Credit Corporation ("Credit
Corp."), NCR Credit Corp. ("NCR Credit"), and the
Portland division of AT&T Commercial Finance Corporation
(such division is referred to herein as "CFC")
(collectively, the "Originators"). See "AT&T Capital
Corporation" and "The Originators."
CONTRACT
PREPAYMENTS........ TCC will represent and warrant that none of the Lease
Contracts permit the Obligor thereunder to prepay the
amounts due under such Lease Contract or otherwise
terminate the Lease Contract prior to its scheduled
expiration date (except for a DE MINIMIS number of Lease
Contracts which allow for a prepayment or early
termination upon payment of an amount which is not less
than the Required Payoff Amount). Nevertheless, under
the Transfer and Servicing Agreement, the Servicer will
be permitted to allow Prepayments of any of the Lease
Contracts, but only if the amount paid by or on behalf
of the Obligor (or, in the case of a partial Prepayment,
the sum of such amount and the remaining Contract
Principal Balance of the Lease Contract after
application of such amount) is at least equal to the
Required Payoff Amount for such Lease Contract.
Most Loan Contracts permit the Obligor thereunder to
prepay the Loan Contract, in whole or in part, at any
time at par plus accrued interest. Approximately 4.0% of
the Contracts (by Initial Contract Pool Principal
Balance) were Loan Contracts.
The "Required Payoff Amount," with respect to any
Collection Period for any Contract, is equal to the sum
of:
(i) the Scheduled Payment due in such Collection
Period, together with any Scheduled Payments due in
prior Collection Periods and not yet received, plus
(ii) the Contract Principal Balance of such Contract
as of the last day of such Collection Period (after
taking into account the Scheduled Payment due in such
Collection Period).
In no event will Pledged Revenues include (nor will the
Notes or the Equity Certificates otherwise be payable
from) any portion of a Prepayment on a Lease Contract
which exceeds the Required Payoff Amount for such
Contract.
LIQUIDATED
CONTRACTS.......... Liquidation Proceeds (which will consist generally of
all amounts received by the Servicer in connection with
the
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liquidation of a Contract and disposition of the related
Equipment, net of any related out-of-pocket liquidation
expenses) will be allocated as follows:
(i) with respect to any Loan Contract, all such
Liquidation Proceeds will be allocated to the Owner
Trust; and
(ii) with respect to any Lease Contract, such
Liquidation Proceeds will be allocated on a pro rata
basis between the Depositor, on the one hand, and the
Owner Trust, on the other, based respectively on (a)
the "Book Value" of the Leased Equipment (which is a
fixed amount equal to the value of the Leased
Equipment as shown on the accounting books and records
of TCC or the applicable Originator, as appropriate,
as of the Cut-Off Date) and (b) the Required Payoff
Amount for such Lease Contract (determined as of the
Collection Period during which such Lease Contract
became a Liquidated Contract); provided that, in the
event the Liquidation Proceeds in respect of any Lease
Contract and the related Leased Equipment exceed the
sum of the Required Payoff Amount for such Contract
and the Book Value of such Leased Equipment, any such
excess shall be allocated solely to the Depositor.
All Liquidation Proceeds which are so allocable to the
Owner Trust will be deposited in the Collection Account
and constitute Pledged Revenues to be applied to the
payment of interest and principal on the Notes and the
Equity Certificates in accordance with the priorities
described under "Priority of Payments" below.
SERVICING........... The Servicer will be responsible for managing,
administering, servicing and making collections on the
Contracts. Compensation to the Servicer will include a
monthly fee (the "Servicing Fee"), which will be payable
to the Servicer from the Amount Available on each
Payment Date, in an amount equal to the product of
one-twelfth of % per annum multiplied by the Contract
Pool Principal Balance determined as of the last day of
the second preceding Collection Period (or, in the case
of the Servicing Fee with respect to the Collection
Period commencing on the Cut-Off Date, the Contract Pool
Principal Balance as of the Cut-Off Date), plus any late
fees, late payment interest, documentation fees,
insurance administration charges and other
administrative charges and a portion of any extension
fees (collectively, the "Administrative Fees") collected
with respect to the Contracts during the related
Collection Period and any investment earnings on
collections prior to deposit thereof in the Collection
Account. The Servicer may be terminated as Servicer
under certain circumstances, in which event a successor
Servicer would be appointed to service the Contracts.
See "AT&T Capital Corporation" and "Description of the
Transfer and Servicing Agreement -- Servicing -- Events
of Termination."
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MANDATORY PURCHASE
OF CERTAIN
CONTRACTS.......... TCC will make certain representations and warranties
with respect to each Contract and the related Equipment,
as more fully described in "The Contracts --
Representations and Warranties Made by TCC." The
Indenture Trustee will be entitled to require TCC to
purchase any Contract and, in the case of a Lease
Contract, the related Leased Equipment, at a price equal
to (i) the Required Payoff Amount, plus (ii) if
applicable, the Book Value of the related Leased
Equipment (which Book Value amount will be allocated to
the Depositor), if the value of the Contract is
materially and adversely affected by a breach of any
such representation or warranty which is not cured
within a specified period.
EQUITY
CERTIFICATES....... The Owner Trust will issue the Equity Certificates,
representing the beneficial ownership interest in the
Owner Trust, to the Depositor. The Equity Certificates
will be transferred by the Depositor in a separate
transaction unrelated to the issuance of the Notes. The
Equity Certificates will be payable from Pledged
Revenues in the priority described under "Priority of
Payments" below. It is expected that the Equity
Certificates initially will represent the right to
receive principal in an amount equal to approximately 4%
of the Initial Contract Pool Principal Balance, together
with interest thereon at an interest rate of % per
annum. Commencing on the first Payment Date, % of the
Monthly Principal Amount will be payable on the Equity
Certificates on each Payment Date, on a parity with
payment of principal on the Notes, until the aggregate
amount so paid equals $ (which is 1% of the
Initial Contract Pool Principal Balance).
LEASED EQUIPMENT.... The Depositor will not transfer to the Owner Trust its
ownership or security interest in the Equipment related
to the Lease Contracts (the "Leased Equipment"),
including the right to receive the Leased Equipment (or
the purchase price therefor or proceeds thereof) upon
expiration of the original term of the related Lease
Contract. The Depositor will also not transfer to the
Owner Trust the right to receive the following:
(i) a portion of certain Prepayments (as described in
clause (ii) of the definition of "Pledged Revenues"),
which portion is anticipated to represent the value of
the related Leased Equipment;
(ii) a portion of the Liquidation Proceeds derived from
the liquidation of any Lease Contract and disposition of
the related Leased Equipment (as described under
"Liquidated Contracts" above); and
(iii) the purchase price paid by TCC to purchase any
Leased Equipment due to a breach of any of TCC's
representations and warranties with respect to the
related Lease Contract (as described under "Mandatory
Purchase of Certain Contracts" above).
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Amounts payable to the Depositor in respect of Leased
Equipment or otherwise as described above are not
available to pay, and will not provide security for the
payment of, interest or principal on the Notes or the
Equity Certificates.
SERVICING AND
COLLECTION
ACCOUNTS........... The Indenture Trustee will establish and maintain a
Servicing Account, into which the Servicer will deposit,
no later than the second Business Day after receipt
thereof, all Scheduled Payments, Prepayments,
Liquidation Proceeds and other amounts received by the
Servicer in respect of the Contracts after the Cut-Off
Date. The Indenture Trustee will also establish and
maintain the Collection Account, into which those
amounts deposited in the Servicing Account and
constituting Pledged Revenues will be transferred within
three Business Days following the deposit thereof in the
Servicing Account. The Servicer will be permitted to use
any alternative remittance schedule which is acceptable
to the Rating Agencies if the effect thereof will not
result in a qualification, reduction or withdrawal of
any of the ratings then applicable to the Notes. See
"Description of the Transfer and Servicing Agreement --
Collections on Contracts."
CASH COLLATERAL
ACCOUNT............ A "Cash Collateral Account" will be established on or
prior to the Closing Date and will be available to the
Indenture Trustee. The Cash Collateral Account will
initially be funded in an amount equal to % of the
Initial Contract Pool Principal Balance (approximately
$ ). Amounts on deposit from time to time in the
Cash Collateral Account (up to, but not in excess of,
the Requisite Amount (as defined under "Description of
the Notes -- Cash Collateral Account"), and not
including any investment earnings on such funds) shall
be used to fund the amounts specified below in the
following order of priority (to the extent that amounts
on deposit in the Collection Account as of any Deposit
Date are insufficient therefor and provided that any
such insufficiency has resulted, directly or indirectly,
from delinquencies or defaults, or both, on the
Contracts):
(i) to pay interest on the Notes and the Equity
Certificates in the following order of priority:
(a) interest on the Class A Notes (including any overdue
interest and interest thereon),
(b) interest on the Class B Notes (including any overdue
interest and interest thereon), and
(c) interest on the Equity Certificates (including any
overdue interest and interest thereon);
(ii) to pay any Principal Deficiency Amount (equal to
the lesser of:
(a) the aggregate Liquidation Losses on all Contracts
that became Liquidated Contracts during the related
Collection Period, or
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(b) the excess, if any, of (A) the aggregate principal
balance of the Notes and the Equity Certificates
(after giving effect to all other distributions of
principal on such Payment Date), over (B) the
aggregate of the Required Payoff Amounts for all
Contracts as of the last day of the related
Collection Period); and
(iii) to pay principal on the Notes and Equity
Certificates at the applicable Stated Maturity Date
thereof.
If and to the extent that the amount on deposit in the
Cash Collateral Account as of any Payment Date is less
than the Requisite Amount, such deficiency is to be
restored from the remaining Amount Available, after
payment of the Servicing Fee and interest and principal
on the Notes and the Equity Certificates, as described
under "Priority of Payments" below. Any amount on
deposit in the Cash Collateral Account in excess of the
Requisite Amount, and all investment earnings on funds
in the Cash Collateral Account, will be released from
the Cash Collateral Account and paid to or upon the
order of the Depositor, and will not be available to
make payments on the Notes or the Equity Certificates.
See "Description of the Notes -- Cash Collateral
Account."
PRIORITY OF
PAYMENTS........... On each Payment Date, the Indenture Trustee will be
required to make the following payments, first, from the
Related Collection Period Pledged Revenues, second, to
the extent the Related Collection Period Pledged
Revenues are insufficient to pay interest on the Notes
and the Equity Certificates on such Payment Date, the
amount necessary to cure such insufficiency from the
Current Collection Period Pledged Revenues, and third
(but only as to amounts described in clause (ii) and
certain amounts included in clause (iii)), from amounts
permitted to be withdrawn from the Cash Collateral
Account as described under "Cash Collateral Account"
above, in the following order of priority (except as
otherwise described under "Description of the Notes --
Events of Default; Rights Upon Event of Default"):
(i) the Servicing Fee;
(ii) interest on the Notes and the Equity Certificates
in the following order of priority:
(a) interest on the Class A Notes (including any overdue
interest and interest thereon),
(b) interest on the Class B Notes (including any overdue
interest and interest thereon), and
(c) interest on the Equity Certificates (including any
overdue interest and interest thereon);
(iii) an amount equal to the Monthly Principal Amount as
of such Payment Date in respect of principal on the
Notes and the Equity Certificates in the priority
described under "Principal" above;
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(iv) to the Cash Collateral Account, the amount, if any,
necessary to increase the balance therein to the
Requisite Amount; and
(v) the remainder, if any, to payment of certain amounts
payable in connection with the Cash Collateral Account
and thereafter to the Equity Certificateholders.
OPTIONAL PURCHASE OF
CONTRACTS.......... The Depositor may purchase all of the Contracts on any
Payment Date following the date on which the unpaid
principal balance of the Notes and the Equity
Certificates is less than 10% of the Initial Contract
Pool Principal Balance, subject to certain provisions as
described herein under "Description of the Notes --
Optional Purchase of Contracts." The purchase price to
be paid in connection with such purchase shall be at
least equal to the unpaid principal balance of the Notes
and the Equity Certificates as of such Payment Date plus
interest to be paid on the Notes and the Equity
Certificates on such Payment Date. The proceeds of such
purchase shall be applied on such Payment Date to the
payment of the remaining principal balance of the Notes
and the Equity Certificates, together with accrued
interest thereon.
U.S. TAXATION....... In the opinion of counsel to the Depositor and the
opinion of counsel to the Underwriters, the Notes will
be characterized as indebtedness and the Owner Trust
will not be characterized as an "association" or
"publicly traded partnership" taxable as a corporation
for federal income tax purposes. Each Noteholder, by its
acceptance of a Note, will agree to treat the Notes as
indebtedness for federal, state and local income tax
purposes. Prospective investors are advised to consult
their own tax advisors regarding the federal income tax
consequences of the purchase, ownership and disposition
of Notes, and the tax consequences arising under the
laws of any state or other taxing jurisdiction. See
"United States Taxation."
In the opinion of counsel, under United States federal
income tax law in effect as of the date hereof, payments
of principal and interest on the Notes to a United
States Alien Holder will not be subject to United States
federal withholding tax (subject to the exceptions noted
in "United States Taxation -- Tax Consequences to United
States Alien Holders"). If such law were to change and,
as a result thereof, United States withholding tax were
imposed on such payments, a United States Alien Holder
would receive such payments net of such withholding tax,
and neither the Owner Trust, the Depositor, TCC nor any
other party would have any obligation to gross up such
payments to compensate for such withholding tax.
ERISA
CONSIDERATIONS..... If the Notes are considered to be indebtedness without
substantial equity features under a regulation issued by
the United States Department of Labor, the acquisition
or holding of Notes by or on behalf of a Benefit Plan
will not cause the assets of the Owner Trust to become
plan assets, thereby generally preventing the
application of certain prohibited
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transaction rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the
Internal Revenue Code of 1986, as amended (the "Code"),
that otherwise could possibly be applicable. Although
there can be no assurances in this regard, it appears
that the Notes should be treated as indebtedness without
substantial equity features for purposes of such
regulation. As a result, subject to the considerations
described in "ERISA Considerations" herein, the Notes
are eligible for purchase with plan assets of any
Benefit Plan. However, a fiduciary or other person
contemplating purchasing the Notes on behalf of or with
plan assets of any Benefit Plan should carefully review
with its legal advisors whether the purchase or holding
of the Notes could give rise to a transaction prohibited
or not otherwise permissible under ERISA or Section 4975
of the Code. See "ERISA Considerations."
LEGAL INVESTMENT.... The Class A-1 Notes will be eligible securities for
purchase by money market funds under Rule 2a-7 under the
Investment Company Act of 1940.
REGISTRATION,
CLEARANCE AND
SETTLEMENT OF
NOTES.............. Each of the Notes will be registered in the name of Cede
& Co., as the nominee of The Depository Trust Company
("DTC"), and will be available for purchase only in
book-entry form on the records of DTC and participating
members thereof. Notes will be issued in definitive form
only under the limited circumstances described under
"Description of the Notes -- Definitive Notes." All
references herein to "Holders" or "Noteholders" shall
reflect the rights of beneficial owners of Notes (the
"Note Owners"), as they may indirectly exercise such
rights through DTC and participating members thereof,
except as otherwise specified herein. See "Description
of the Notes -- Book-Entry Registration." Noteholders
may elect to hold their Notes through DTC (in the United
States) or Cedel Bank or Euroclear (in Europe).
Transfers will be made in accordance with the rules and
operating procedures described in Appendix A hereto.
LISTING............. Application has been made to list the Notes on the
Luxembourg Stock Exchange.
GOVERNING LAW....... The Transfer and Servicing Agreement, the Trust
Agreement, the Purchase Agreement, the Indenture and the
Notes will be governed by the laws of the State of New
York.
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RISK FACTORS
Prospective Noteholders should consider the following factors in connection
with the purchase of the Notes:
LIMITED ASSETS OF THE OWNER TRUST
The Notes are secured by the payments to be derived from the Contracts and
other Trust Assets, which will not include any amounts constituting the purchase
price for or proceeds of Leased Equipment upon expiration of the original term
of the related Lease Contract or the portion of the Liquidation Proceeds derived
from the liquidation of any defaulted Lease Contract and disposition of the
related Leased Equipment that is allocable to the Depositor as described herein,
which amounts will be paid solely to the Depositor. Moreover, the Owner Trust
will have no assets other than the Contracts (including all or, in the case of
Lease Contracts, an allocable portion of the Liquidation Proceeds derived from
the disposition of the related Equipment or otherwise upon the liquidation of
defaulted Contracts), amounts on deposit from time to time in the Collection
Account and the accounts established pursuant to the Transfer and Servicing
Agreement and the right to certain amounts in the Cash Collateral Account. The
Notes will represent obligations solely of the Owner Trust, and none of the
Notes will be insured or guaranteed, directly or indirectly, by TCC, the
Depositor, the Indenture Trustee or the Owner Trustee (or any affiliate of any
of them) or any other person or entity. Consequently, Holders of the Notes must
rely for payment of interest and principal thereon on a given Payment Date on
the Amount Available for such Payment Date.
SUBORDINATION OF THE CLASS B NOTES
To the extent described herein under "Description of the Notes --
Distributions" and "-- Subordination of Class B Notes and Equity Certificates,"
(i) payments of interest and principal on the Class B Notes will be subordinated
in priority of payment to interest and principal, respectively, on the Class A
Notes and (ii) payments of interest and principal on the Equity Certificates
will be subordinated in priority of payment to interest and principal,
respectively, on the Class A Notes and the Class B Notes. In addition, payments
of principal on the Notes will be subordinated in priority of payment to
payments of interest on the Notes and the Equity Certificates. The Equity
Certificates initially will represent the right to receive principal in an
amount equal to 4% of the Initial Contract Pool Principal Balance, but such
amount will be reduced as a result of principal payments made on the Equity
Certificates (see "Description of the Notes -- Principal"), which will reduce
the benefit to the Notes of the subordination of the Equity Certificates.
Delinquencies and defaults on the Contracts could eliminate the protection
afforded the Class B Noteholders by the Cash Collateral Account and the
subordination of the Equity Certificates, and the Class B Noteholders could
incur losses on their investment as a result. Further delinquencies and defaults
on the Contracts could eliminate the protection offered to the Class A
Noteholders by the subordination of the Class B Notes, and such Noteholders
could also incur losses on their investment as a result.
BANKRUPTCY AND INSOLVENCY RISKS
Dorsey & Whitney LLP, counsel to the Depositor, will deliver a legal opinion
to the effect that, subject to the qualifications and limitations expressed
therein, the transfer of the Contracts and the Leased Equipment from the
Originators to the Depositor constitutes a sale or absolute assignment, rather
than a pledge to secure indebtedness of TCC or the Originators; and that in the
event that TCC or any of the Originators were to become a debtor under the
federal bankruptcy code, a creditor or trustee in bankruptcy would be unable to
successfully challenge the transfer of the Contracts and the Leased Equipment to
the Depositor and the Contracts, payments thereunder and the Equipment would not
be property of the bankruptcy estate. However, if TCC or any of the Originators
were to become a debtor under the federal bankruptcy code or similar applicable
state laws (collectively, "Insolvency Laws"), a creditor or trustee in
bankruptcy of TCC or such Originator, or TCC or such Originator or either of
them as debtor-in-possession, might argue that such transfer of the Contracts
and the Equipment from the Originators to the Depositor was (or should be
recharacterized as) a pledge of such assets rather than a
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sale. If this position were accepted by a court, any Lease Contracts considered
to be "true" leases under the applicable Insolvency Laws (as described under
"The Contracts--Description of the Contracts"), and any other Contract
considered to be executory under such Insolvency Laws, could be rejected by such
trustee in bankruptcy or by TCC or such Originator as debtor-in-possession,
which would result in the termination of Scheduled Payments under any such
Contracts and reductions in distributions to Noteholders, and Noteholders could
incur a loss on their investment as a result. To reduce the likelihood of such
rejection, UCC financing statements perfecting a security interest for the
benefit of the Depositor in the Equipment, and assignments of such perfected
security interest to the Owner Trust and the Indenture Trustee, will be filed
against the Originators (except in two States representing less than 3.5% of the
Initial Contract Pool Principal Balance). Even if such Contracts were not so
rejected in the event of an insolvency of TCC or any of the Originators, the
Owner Trust and the Indenture Trustee could experience a delay in or reduction
of collections on all of the Contracts, and Noteholders could incur a loss on
their investment as a result. In addition, in the event of an insolvency of an
originator other than one of the Originators, a court could attempt to
recharacterize the sale of the Contracts by such third-party originator to the
applicable Originator as a borrowing from the Originator, secured by a pledge of
such Contracts and the rights in the Equipment.
A case decided by the United States Court of Appeals for the Tenth Circuit
contains language to the effect that accounts sold by an entity that
subsequently became bankrupt remained property of the debtor's bankruptcy estate
because the sale of accounts is treated as a "security interest" that must be
perfected under the Uniform Commercial Code ("UCC"). Although the Contracts
constitute chattel paper or general intangibles rather than accounts under the
UCC, sales of chattel paper, like sales of accounts, must be perfected under
Article 9 of the UCC. If TCC or any of the Originators were to become a debtor
under any Insolvency Law and a court were to follow the reasoning of the Tenth
Circuit Court of Appeals and apply such reasoning to chattel paper, the Owner
Trust (and thus the Indenture Trustee) could experience a delay in or reduction
of collections on the Contracts, and Noteholders could incur a loss on their
investment as a result.
Dorsey & Whitney LLP will deliver a legal opinion to the effect that,
subject to the qualifications and limitations expressed therein, if any of the
Originators or TCC were to become a debtor in a bankruptcy case, a bankruptcy
court would not order that the assets and liabilities of the Depositor be
consolidated with those of such Originator or TCC. The Depositor has taken steps
in structuring the transactions described herein that are intended to prevent
the voluntary or involuntary application for relief by or on behalf of TCC or
any Originator under any Insolvency Law from resulting in the consolidation of
the assets and liabilities of the Depositor with those of TCC or such
Originator. Such steps include the maintenance of separate books and records and
the insistence on arm's-length terms in all agreements with TCC, the Originators
and affiliates thereof. Nevertheless, there can be no assurance that, in the
event of a bankruptcy or insolvency of TCC or any Originator, a court would not
order that the Depositor's or Owner Trust's assets and liabilities be
consolidated with those of TCC or such Originator. Any such order would
adversely affect the Owner Trust's and Noteholders' ability to receive payments
on the Contracts, and Noteholders could incur a loss on their investment as a
result.
Under federal or state fraudulent transfer laws, a court could, among other
things, subordinate the rights of the Noteholders in the Contracts and Equipment
to the rights of creditors of TCC or the Originators, if a court were to find,
among other things, that TCC or the Originators received less than reasonably
equivalent value or fair consideration for the Contracts and the Equipment and,
at the time of any transfers, was insolvent or rendered insolvent as a result of
such transfer, and Noteholders could incur a loss on their investment as a
result.
While TCC is the Servicer, cash collections held by TCC may, subject to
certain conditions, be commingled and used for the benefit of TCC prior to the
date on which such collections are required to be deposited in a Collection
Account as described under "Description of the Transfer and Servicing Agreement
- -- Collections on Contracts" and, in the event of the insolvency or receivership
of TCC or, in
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certain circumstances, the lapse of certain time periods, the Owner Trust may
not have a perfected ownership or security interest in such collections, and
Noteholders could incur a loss on their investment as a result.
If the Depositor were to become insolvent under any Insolvency Law, delays
and reductions in the amount of distributions to Noteholders could occur. The
Depositor has taken certain steps to minimize the likelihood that it will become
bankrupt or otherwise insolvent. The Depositor is prohibited by its
organizational documents and the Transfer and Servicing Agreement from engaging
in activities (including the incurrence or guaranty of debt) other than those
permitted by the Trust Agreement and the Transfer and Servicing Agreement. See
"The Depositor and the Owner Trust -- The Depositor." Its certificate of
incorporation also contains restrictions on the Depositor's ability to commence
a voluntary case or proceeding under any Insolvency Law without the affirmative
vote of all its directors, including its independent directors. The Indenture
Trustee, on behalf of the Noteholders, will covenant not to subject the
Depositor to bankruptcy proceedings until the Notes have been paid in full and
one year and one day has elapsed. The Depositor believes that such actions
substantially mitigate the risk of an involuntary bankruptcy petition being
filed against it.
TCC will make certain representations and warranties regarding the
Contracts, the Equipment and certain other matters (see "The Contracts --
Representations and Warranties Made by TCC"). In the event that any such
representation or warranty with regard to a specific Contract is breached, is
not cured within a specified period of time, and the value of such Contract is
materially and adversely affected by such breach, TCC shall be required to
purchase the Contract from the Owner Trust at a price equal to the Required
Payoff Amount of such Contract, and, in the case of a Lease Contract, shall be
required to purchase the related Leased Equipment from the Depositor at a price
equal to the Book Value thereof. In the event of a bankruptcy or insolvency of
TCC, the Indenture Trustee's right to compel a purchase would both be impaired
and have to be satisfied out of the available assets, if any, of TCC's
bankruptcy estate, and Noteholders could incur a loss on their investment as a
result.
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Notes will be reduced by prepayments and
early terminations of the Contracts. Prepayments may result from payments by
Obligors, certain amounts received as a result of default or early termination
of a Contract, the receipt of proceeds from the physical damage to the Equipment
to the extent described herein under "The Contracts," purchases by TCC of
Contracts as a result of certain uncured breaches of the representations and
warranties made by it with respect thereto (see "The Contracts --
Representations and Warranties Made by TCC") or the Depositor exercising its
option to purchase all of the remaining Contracts (see "Description of the Notes
- -- Optional Purchase of Contracts"). Generally, none of the Lease Contracts
permit a prepayment or early termination thereof. Nevertheless, TCC historically
has permitted lessees to terminate leases early, either in connection with the
execution of a new lease of replacement equipment or upon payment of a
negotiated prepayment premium, or both. The Transfer and Servicing Agreement
will permit the Servicer to allow a voluntary prepayment of a Lease Contract by
an Obligor at any time so long as the amount paid by or on behalf of the Obligor
(or, in the case of a partial prepayment, the sum of such amount and the
remaining Contract Principal Balance of the Lease Contract after application of
such amount) is at least equal to the Required Payoff Amount for such Lease
Contract. Approximately 4.0% of the Contracts (by Initial Contract Pool
Principal Balance) are Loan Contracts, most of which permit the Obligor to
prepay the Contract, in whole or in part, at any time. The amounts so received
in respect of such prepayments are to be added to the Amount Available and
applied in the priority described in "Description of the Notes --
Distributions." No assurance can be given as to the rate of prepayments or as to
whether there will be a substantial amount of prepayments, nor can any assurance
be given as to the level or timing of any prepayments that do occur. As the rate
of payment of principal of the Notes will depend on the rate of payment
(including prepayments) on the Contracts, final payment of a Class of Notes
could occur significantly earlier than the Stated Maturity Date of such Class.
There can be no assurance that
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Noteholders will be able to reinvest principal paid on any Class of Notes at an
interest rate equal to the Interest Rate for such Class, and Noteholders will
bear all reinvestment risk resulting from the timing of payments of principal on
the Notes. See "Weighted Average Life of the Notes" in Appendix B hereto.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The transfer of the Contracts by the Originators to the Depositor and by the
Depositor to the Owner Trust, the perfection of the interest of the Depositor
and the Owner Trust in the Contracts and the right to receive payments thereon,
and the Owner Trust's and the Indenture Trustee's interest in such Contracts and
in the Equipment are subject to the requirements of the UCC as in effect in New
York and the states where the various Originators, the Depositor and the Owner
Trust are located and, with respect to certain of the Equipment, in the various
states in which the Equipment subject to the applicable Contract is located from
time to time. The Depositor will take or cause to be taken such actions as are
required to perfect the transfer to the Owner Trust of the Depositor's rights in
the Contracts and the right to receive payments thereunder and to perfect the
security interest of the Indenture Trustee in the Owner Trust's rights in the
Contracts and the right to receive payments thereunder.
It has been the general policy of TCC, depending on the dollar amount and
type of the particular Contract, the perceived credit quality of the particular
Obligor and the estimated repossession value of the particular related
Equipment, not to file or (in certain cases) not to obtain or file UCC financing
statements with respect to the Equipment relating to certain Contracts. See "The
Originators -- Underwriting and Servicing -- Documentation." With respect to any
such Contracts that were deemed to be loans or leases intended for security (as
described under "The Contracts -- Description of the Contracts"), a purchaser
from the applicable Obligor of the related Equipment would acquire such
Equipment free and clear of the interest of the applicable Originator in such
Equipment, and a creditor of the Obligor which has taken a security interest in
such Equipment and filed a UCC financing statement with respect thereto or a
trustee in the bankruptcy of such Obligor would have priority over the interest
of the applicable Originator in such Equipment. Any such purchaser, creditor or
trustee would have an interest superior to the interest of the Owner Trust in
such Equipment, which interest is derived from the transfer and conveyance of a
security interest in the Equipment by the Depositor to the Owner Trust. All of
the Contracts prohibit the Obligor from selling or pledging the related
Equipment to third parties.
Due to the administrative burden and expense, no assignments of the UCC
financing statements evidencing the security interest of the Originators in the
Equipment (to the extent that such financing statements have been filed against
the Obligor, as discussed above) will be filed to reflect the Depositor's, the
Owner Trust's or the Indenture Trustee's interests therein. While failure to
file such assignments does not affect the Owner Trust's interest in the
Contracts or perfection of the Indenture Trustee's interest in such Contracts
(including the related Originator's security interest in the related Equipment),
it does expose the Owner Trust (and thus Noteholders) to the risk that the
Originator could release its security interest in the Equipment of record, and
it could complicate the Owner Trust's enforcement, as assignee, of the
Originator's security interest in the Equipment. While these risks should not
affect the perfection or priority of the interest of the Indenture Trustee in
the Contracts or rights to payment thereunder, they may adversely affect the
right of the Indenture Trustee to receive proceeds of disposition of the
Equipment subject to a Liquidated Contract, which are to be allocated to the
Owner Trust as described under "Description of the Notes -- Liquidated
Contracts." Additionally, statutory liens for repairs or unpaid taxes and other
liens arising by operation of law may have priority even over prior perfected
security interests in the Equipment assigned to the Indenture Trustee.
The Servicer will hold the Contracts and certain related documents on behalf
of the Owner Trust and Indenture Trustee. To facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in the Servicer's possession. UCC financing
statements will be filed in the appropriate jurisdictions reflecting the sale
and assignment of the Contracts and the Originators' interests in the Equipment
by the Originators to the Depositor, the transfer and assignment of the
Contracts by the Depositor to the Owner Trust and the pledge of the Contracts by
the Owner Trust to the Indenture Trustee, and the Servicer's accounting records
and computer systems will also reflect such sale, assignment, transfer and
pledge. The Contracts will not, however, be stamped or
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otherwise marked to reflect that such Contracts have been sold to the Depositor,
transferred to the Owner Trust or pledged to the Indenture Trustee. If, through
inadvertence or otherwise, any of the Contracts were sold to another party (or a
security interest therein were granted to another party) that purchased (or took
a security interest in) any of such Contracts in the ordinary course of business
and took possession of such Contracts, the purchaser (or secured party) would
acquire an interest in the Contracts superior to the interest of the Owner Trust
and Indenture Trustee if the purchaser (or secured party) acquired (or took a
security interest in) such Contracts for new value and without actual knowledge
of the Owner Trust's or Indenture Trustee's interest. Such superior interest may
include an ownership interest, which would cut off all rights of the Owner Trust
to such Contracts and payments thereunder, or a security interest, which would
be senior to the security interest held by the Owner Trust; in either case,
Noteholders could incur a loss on their investment as a result.
NO GROSS-UP FOR WITHHOLDING TAX
In the opinion of counsel, under current United States federal income tax
law in effect as of the date hereof, payments of principal and interest on the
Notes to a United States Alien Holder will not be subject to United States
federal withholding tax (subject to the exceptions noted in "United States
Taxation -- Tax Consequences to United States Alien Holders"). If such law were
to change and, as a result thereof, United States withholding tax were imposed
on such payments, a United States Alien Holder would receive such payments net
of such withholding tax; and neither the Owner Trust, the Depositor, TCC nor any
other party has any obligation to gross up such payments to account for such
withholding tax.
LIMITED LIQUIDITY
There is currently no market for the Notes. The U.S. Underwriters expect,
but will not be obligated, to make a market for the Notes in the United States;
and the International Managers expect, but will not be obligated, to make a
market for the Notes outside the United States. There can be no assurance that a
secondary market for the Notes will develop or, if it does develop, that it will
provide the Holders of such Notes with liquidity of investment or will continue
for the life of such Notes. Although it is expected that the Notes will be
listed on the Luxembourg Stock Exchange, there can be no assurances that such
listing will increase the liquidity of the Notes.
BOOK-ENTRY REGISTRATION
The Notes will be issued in book-entry, rather than physical, form and, as a
result, in certain circumstances, the liquidity of the Notes in the secondary
market and the ability of the Noteholders to pledge them may be adversely
affected. See "Underwriting" and "Description of the Notes -- Book-Entry
Registration." The Notes will be registered in the name of a nominee of DTC and
will not be registered in the names of the beneficial owners or their nominees.
As a result, unless and until Definitive Notes are issued in the limited
circumstances described under "Description of the Notes -- Definitive Notes,"
beneficial owners will not be recognized by the Indenture Trustee as
Noteholders, as that term is used in the Indenture. Hence, until such time,
beneficial owners will only be able to exercise the rights of Noteholders
indirectly through DTC and its participating organizations. In addition, the
laws of some states require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in the Notes.
THE DEPOSITOR AND THE OWNER TRUST
THE DEPOSITOR
Antigua Funding Corporation is incorporated under the laws of the State of
Delaware and is a wholly owned subsidiary of TCC. On the Closing Date, all of
the Contracts and the interests of the Originators in the related Equipment will
be transferred by the Originators to the Depositor in return for stock in the
Depositor, pro rata in accordance with the value of the Contracts and Equipment
transferred by each Originator. The Depositor will pay to the Originators the
net proceeds received from the offering and sale of the Notes and the Equity
Certificates.
The Depositor has been formed solely for the purposes of the transactions
described in this Prospectus; and under its incorporation documents and the
Transfer and Servicing Agreement, the
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Depositor is not permitted to engage in any activity other than (i) acquiring
the Contracts and interests of the Originators in the Equipment related thereto,
(ii) transferring and conveying the Loan Contracts and the security interests in
the related Equipment to the Owner Trust, (iii) transferring and conveying the
Lease Contracts to the Owner Trust, (iv) executing and performing its
obligations under the Trust Agreement, the Purchase Agreement, and the Transfer
and Servicing Agreement, (v) holding or transferring the Equity Certificates,
(vi) engaging in other transactions, including entering into agreements, that
are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith and (vii) engaging in similar
transactions with respect to other trusts similar to the Owner Trust. The
Depositor is prohibited from incurring any debt, issuing any obligations or
incurring any liabilities, except in connection with the formation of the Owner
Trust and the issuance of the Notes. The Depositor is not liable, responsible or
obligated, directly or indirectly, for payment of any principal, interest or any
other amount in respect of any of the Notes.
The Depositor will not transfer to the Owner Trust its ownership or security
interest in the Equipment related to the Lease Contracts (the "Leased
Equipment"), including the right to receive the Leased Equipment (or the
purchase price therefor or the proceeds thereof) upon expiration of the original
term of the related Lease Contracts. The Depositor will also not transfer to the
Owner Trust the right to receive the following:
(i) a portion of certain Prepayments (as described in clause (ii) of the
definition of "Pledged Revenues" under "Description of the Notes --
Distributions"), which portion is anticipated to represent the value of the
related Leased Equipment;
(ii) a portion of the Liquidation Proceeds derived from the liquidation of
any Lease Contract and the disposition of the related Leased Equipment (as
described under "Description of the Notes -- Liquidated Contracts"); and
(iii) the purchase price paid by TCC to purchase any Leased Equipment due to
a breach of any of TCC's representations and warranties with respect to the
related Lease Contract (as described under "The Contracts -- Representations and
Warranties Made by TCC").
Amounts payable to the Depositor in respect of Leased Equipment or otherwise
as described above are not available to pay, and will not provide security for
the payment of, interest or principal on the Notes or the Equity Certificates.
THE OWNER TRUST
The Owner Trust was created pursuant to a Trust Agreement, dated as of
September 1, 1996, between the Depositor and the Owner Trustee, and the
Depositor and the Owner Trustee will enter into an Amended and Restated Trust
Agreement on the Closing Date. Prior to the Closing Date, the Owner Trust will
have no assets, property or obligations.
The Owner Trust will issue the Equity Certificates, representing a
beneficial ownership interest in the Owner Trust, to the Depositor. The Equity
Certificates will be transferred by the Depositor in a separate transaction
unrelated to the issuance of the Notes. The Equity Certificates will be payable
from Pledged Revenues in the priority described under "Description of the Notes
- -- Distributions" below. It is expected that the Equity Certificates initially
will represent the right to receive principal in an amount equal to
approximately 4% of the Initial Contract Pool Principal Balance, together with
interest thereon at an interest rate of % per annum. Commencing on the first
Payment Date, % of the Monthly Principal Amount will be payable on the Equity
Certificates on each Payment Date, on a parity with payment of principal on the
Notes, until the aggregate amount so paid equals $ (which is 1% of the
Initial Contract Pool Principal Balance).
On the Closing Date, the Depositor and the Owner Trustee will execute and
deliver the Amended and Restated Trust Agreement; the Owner Trust and the
Indenture Trustee will execute and deliver the Indenture; the Depositor, the
Indenture Trustee, the Owner Trustee and the Servicer will execute and deliver
the Transfer and Servicing Agreement; and the Depositor, TCC and the Originators
will execute and deliver the Purchase Agreement. On the Closing Date, the
Depositor will, pursuant to the Transfer
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and Servicing Agreement, transfer and convey to the Owner Trust all of the
Contracts and the related security interests in the Equipment in consideration
for (i) the proceeds from the sale of the Notes, less that portion thereof to be
used to fund a portion of the Cash Collateral Account and to pay the expenses of
the Depositor, and (ii) the Equity Certificates.
From and after the Closing Date, the Trust Assets will consist of:
(1) a pool of equipment lease contracts (the "Lease Contracts") and
installment sale contracts, promissory notes, loan and security agreements and
other similar types of receivables (the "Loan Contracts" and, together with the
Lease Contracts, the "Contracts"), with various lessees or other obligors
thereunder (each, an "Obligor"), including, (a) all monies at any time paid or
payable thereon or in respect thereof from and after the Cut-Off Date in the
form of (i) Scheduled Payments (including all Scheduled Payments due prior to,
but not received as of, the Cut-Off Date, but excluding any Scheduled Payments
due on or after, but received prior to, the Cut-Off Date, (ii) Prepayments (but
excluding, in the case of a Lease Contract, any portion thereof allocable to the
Depositor, as described in clause (ii) of the definition of "Pledged Revenues")
and (iii) Liquidation Proceeds (including any derived from the disposition of
the related Equipment) received with respect to defaulted Contracts (excluding,
in the case of a Lease Contract, any portion thereof allocable to the Depositor,
as described under "Description of the Notes -- Liquidated Contracts"), and (b)
all rights of the secured party in the Equipment related to the Loan Contracts,
but excluding the rights of the lessor in the Leased Equipment (which rights,
subject to the allocation of Liquidation Proceeds received in respect thereof,
have been retained by the Depositor);
(2) amounts on deposit in (and Eligible Investments allocated to) certain
accounts established pursuant to the Indenture and the Transfer and Servicing
Agreement, including the Collection Account;
(3) the Depositor's rights under the Purchase Agreement; and
(4) the Depositor's rights (but not its obligations) with respect to the
Cash Collateral Account.
The Owner Trust will not engage in any business activity other than (i)
issuing the Notes and the Equity Certificates, (ii) holding and dealing with
(including disposing of) the Trust Assets, (iii) making payments on the Notes
and the Equity Certificates, (iv) entering into and performing the duties,
responsibilities and functions required under the Transfer and Servicing
Agreement, the Indenture, the Contracts, and related documents, and (v) matters
related to the foregoing.
CAPITALIZATION OF THE OWNER TRUST
The following table illustrates the capitalization of the Owner Trust as of
the Cut-Off Date, as if the issuance and sale of the Notes offered hereby had
taken place on such date:
<TABLE>
<S> <C>
Class A-1 Receivable-Backed Notes............................... $
Class A-2 Receivable-Backed Notes...............................
Class A-3 Receivable-Backed Notes...............................
Class A-4 Receivable-Backed Notes...............................
Class B Receivable-Backed Notes.................................
Equity Certificates.............................................
---------
Total....................................................... $
---------
---------
</TABLE>
THE OWNER TRUSTEE
The Bank of New York will be the Owner Trustee under the Trust Agreement.
The Owner Trustee is a New York banking corporation and its principal offices
are located at 101 Barclay Street, New York, New York 10286. The Owner Trustee's
liability in connection with the issuance and sale of the Notes and the Equity
Certificates is limited solely to the express obligations of the Owner Trustee
set forth in the Trust Agreement and the Indenture.
The Owner Trustee may resign at any time, in which event the Depositor will
be obligated to appoint a successor Owner Trustee. The Depositor may also remove
the Owner Trustee if the Owner Trustee
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ceases to be eligible to continue as such under the Trust Agreement or if the
Owner Trustee becomes insolvent. Any resignation or removal of the Owner Trustee
will not become effective until acceptance of the appointment of a successor
Owner Trustee.
AT&T CAPITAL CORPORATION
AT&T Capital Corporation ("TCC") is a full-service, diversified equipment
leasing and finance company that operates principally in the United States and
also has operations in Europe, Canada, the Asia/Pacific region, Mexico and South
America. TCC is one of the largest equipment leasing and finance companies in
the United States, based on the aggregate value of equipment leased or financed,
and is the largest lessor of telecommunications equipment in the United States.
TCC, through its various subsidiaries, leases and finances a wide variety of
equipment, including general office, manufacturing and medical equipment,
telecommunications equipment (such as private branch exchanges, telephone
systems and voice processing units), information technology equipment (such as
personal computers, retail point of sale systems and automatic teller machines)
and transportation equipment (primarily vehicles). In addition, TCC provides
inventory financing for equipment dealers, franchise financing for franchisees
and financing collateralized by real estate. TCC's leasing and financing
services are marketed to (i) customers of equipment manufacturers, distributors
and dealers with which TCC has a marketing relationship for financing services
and (ii) directly to end-users of equipment. TCC's approximately 500,000
customers include large global companies, small and mid-sized businesses and
federal, state and local governments and their agencies.
During its 11 year history, TCC has achieved significant growth in assets,
finance volume (aggregate dollar amount of equipment and other items financed),
revenues and net income. At December 31, 1995, TCC's total assets were $9.5
billion, an increase of 18.9% over the prior year-end; finance volume for 1995
was $4.6 billion, an increase of 7.4% over 1994; total revenues for 1995 were
$1.6 billion, an increase of 13.9% over 1994; and net income of $127.6 million
for 1995 was 27.1% greater than the net income for 1994. Total assets at the end
of the second quarter of 1996 were $10.1 billion representing a 15.5% increase
over total assets at the end of the second quarter of 1995, and net income of
$74.8 million for the first six months of 1996 represented an increase of 41.2%
over the net income for the corresponding period in 1995.
TCC's predecessor was founded in 1985 by AT&T Corp. ("AT&T") principally as
a captive finance company to assist its equipment marketing and sales efforts by
providing AT&T's customers with tailored financing. In 1993, AT&T sold
approximately 14% of TCC's common stock in an initial public offering. TCC's
common stock traded on the New York Stock Exchange under the symbol "TCC."
Although TCC's common stock has been delisted following the consummation of the
Merger (as described below), TCC will, from time to time, continue to issue
securities in the public market and, accordingly, will continue to be subject to
the informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission.
On September 20, 1995, AT&T announced plans to separate itself into three
publicly traded companies (AT&T, Lucent Technologies Inc. ("Lucent") and NCR
Corporation ("NCR")) and to sell its remaining equity interest in TCC in a
public or private sale. On October 1, 1996, Antigua Acquisition Corporation, a
newly formed Delaware corporation ("MergerCo."), merged with and into TCC, with
TCC being the surviving company (the "Merger"), and the outstanding common stock
of TCC was converted into the right to receive $45 per share. As a result of the
Merger, all of the outstanding equity capital of the surviving company is owned
by members of management of TCC and by Hercules Limited, a newly formed Cayman
Islands corporation ("HoldCo."). All of the outstanding equity capital of
HoldCo. is currently owned by a group of companies led by GRS Holding Company
Limited.
TCC has an experienced management team with a significant amount of
expertise in the equipment leasing and finance industry. At June 30, 1996, TCC
and its subsidiaries had approximately 2,850 members (employees). The principal
executive offices of TCC are located at 44 Whippany Road, Morristown, New Jersey
07962.
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The Contracts comprising the Trust Assets have been originated or, in some
cases, purchased from third parties by four subsidiaries of TCC: AT&T Capital
Leasing Services, Inc. ("Leasing Services"), AT&T Credit Corporation ("Credit
Corp."), NCR Credit Corp. ("NCR Credit") and the Portland division of AT&T
Commercial Finance Corporation (such division is referred to as "CFC")
(collectively, the "Originators").
THE ORIGINATORS
AT&T CAPITAL LEASING SERVICES, INC.
Leasing Services provides leasing and financing programs for certain
targeted manufacturers and distributors as well as leasing and financing to
existing customers. Leasing Services (formerly known as Eaton Financial
Corporation) was acquired by a predecessor of Credit Corp. in March 1989, and
became a subsidiary of a predecessor of TCC in connection with TCC's
reorganization in March 1990. It thereafter became a subsidiary of TCC in
connection with TCC's restructuring in March 1993.
Leasing Services is headquartered in Framingham, Massachusetts and employed,
as of June 30, 1996, approximately 430 people in a network of four full service
offices throughout the United States and a support office in Framingham. Its
portfolio of contracts includes leases and loans on a variety of equipment
types, including office automation and general-purpose business equipment such
as copiers and computers, as well as industry-specific equipment such as
printing, machine tools and medical/ dental equipment. At June 30, 1996, the
Leasing Services portfolio (which includes both contracts owned by Leasing
Services and contracts serviced on behalf of others) was comprised of the
following equipment types: computers 23%, machine tool manufacturing equipment
23%, copiers 18%, medical/ dental equipment 12%, printing equipment 7%,
automobile test/repair equipment 6% and other 11%.
At June 30, 1996, 87% of Leasing Services' portfolio of contracts consisted
of leases. Approximately 21% of such leases include fair market value purchase
options exercisable by the applicable lessee upon expiration of the applicable
lease. The balance of the leases contain fixed price or nominal purchase
options. At June 30, 1996, 13% of Leasing Services' portfolio of contracts
consisted of loans, which are prepayable, in whole or in part, at any time.
Generally under Leasing Services' contracts, the obligor is responsible for all
maintenance, insurance and taxes.
Leasing Services' total portfolio of contracts has a customer base of over
146,000 customers (as of June 30, 1996), who are mainly small and medium-sized
companies. The portfolio is also broadly diversified; as of June 30, 1996, the
ten largest customers comprised only 0.5% of the aggregate portfolio. As of June
30, 1996, the average exposure per customer for the entire portfolio was
approximately $13,000. In terms of geographical distribution, five states
accounted for approximately 47% of outstanding receivables (California 17%,
Florida 8%, New York 8%, Texas 7% and New Jersey 7%) as of June 30, 1996.
Leasing Services' credit and collections operations are decentralized within
its network of four full-service offices located in the Atlanta, Georgia;
Dallas, Texas; San Francisco, California; and Boston, Massachusetts metropolitan
areas. As of June 30, 1996, Leasing Services had approximately 260 members
responsible for credit and contract approval and collections activities.
AT&T CREDIT CORPORATION AND NCR CREDIT CORP.
Credit Corp. supports the sales of AT&T, Lucent and NCR equipment by
providing leasing and financing options to customers who have selected equipment
manufactured or supplied by these vendors. Credit Corp.'s predecessor was
established as a captive finance company of AT&T in 1985. The predecessor of NCR
Credit, which is a subsidiary of Credit Corp., was established as a captive
finance company of NCR in 1980. In 1992, when AT&T acquired NCR, ownership of
NCR Credit was transferred to TCC. At that time Credit Corp. and NCR Credit
operated as separate business units of TCC. In 1995, TCC consolidated the
operations of NCR Credit and Credit Corp.; relocated the credit and collections
operations supporting NCR Credit from Dayton, Ohio, to Credit Corp.'s executive
offices in Parsippany, New Jersey; ceased using NCR Credit to originate new
financings; and began using Credit Corp. to originate business in that market
segment. As of June 30, 1996, Credit Corp. employed approximately 520 members.
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Substantially all of Credit Corp.'s transactions are generated through
Lucent and NCR. NCR is currently a subsidiary of AT&T, and Lucent, until
recently, was a subsidiary of AT&T. See "AT&T Capital Corporation." Lucent
manufactures and distributes telecommunications and related equipment, and NCR
manufactures and distributes information technology (including retail point-of
sale systems, automated teller machines ("ATMs") and computers). At June 30,
1996, the combined portfolio of contracts of Credit Corp. and NCR Credit (the
"Combined Portfolio") comprised both leases and loans on the following equipment
types: telecommunications equipment 76%, computer equipment 5%, retail point-
of-sale systems 5%, ATMs 4%, and other 10%.
At June 30, 1996, 93% of the Combined Portfolio consisted of leases.
Approximately 91% of such leases include fair market value purchase options
exercisable by the applicable lessee upon expiration of the applicable lease.
The balance of the leases contain fixed price or nominal purchase options. At
June 30, 1996, 7% of the Combined Portfolio consisted of loans, the majority of
which are prepayable, in whole or in part, at any time. Generally under the
contracts included in the Combined Portfolio, the obligor is responsible for all
maintenance, insurance and taxes.
Transactions generated from the sales of Lucent equipment historically are
small ticket transactions (approximately 132,800 customers; average transaction
size of $13,258; comprising 52% of the Lucent equipment portfolio) and middle
market transactions (approximately 1,800 customers; average transaction size of
$686,771; comprising 36% of the Lucent equipment portfolio). In terms of
geographical distribution, five states accounted for approximately 48% of the
outstanding receivables in the Lucent equipment portfolio (New Jersey 18%,
California 10%, New York 9%, Illinois 6% and Texas 5%) as of June 30, 1996.
Transactions generated from the sales of NCR equipment historically are large
ticket transactions (approximately 20 customers; average transaction size of
$14,389,623; comprising 51% of the NCR equipment portfolio) and middle market
transactions (approximately 300 customers; average transaction size of $975,326;
comprising 41% of the NCR equipment portfolio). In terms of geographical
distribution, five states accounted for approximately 50% of the outstanding
receivables in the NCR equipment portfolio (New Jersey 16%, Florida 12%, New
York 8%, Wisconsin 7%, and Ohio 7%) as of June 30, 1996.
Credit Corp.'s credit and collection operations are handled on a centralized
basis through its executive offices in Parsippany, New Jersey. As of June 30,
1996, Credit Corp. had approximately 200 members in New Jersey responsible for
credit and contract approvals, documentation and collections. Substantially all
of these members work in teams that are focused on distinct market segments
(e.g., by vendor (Lucent or NCR), by size of transaction (small ticket or middle
market) or by geographic region). Other members provide company-wide oversight
of the credit, contract and collections processes associated with the portfolio
originated by Credit Corp. and NCR Credit. In addition, as of June 30, 1996
Credit Corp. had approximately 20 account managers located in Lucent offices
throughout the United States to help process credit applications and
documentation packages.
AT&T COMMERCIAL FINANCE CORPORATION
CFC provides financing and leasing programs for manufacturers and
distributors of material handling and construction equipment. CFC was formed in
December 1989 in connection with the acquisition of substantially all the assets
of two divisions of Pacificorp Credit, Inc.
CFC is headquartered in Portland, Oregon and employed as of June 30, 1996,
approximately 50 members, including 8 regionally deployed sales representatives.
CFC's credit and collection operations are located in Portland, Oregon. As of
June 30, 1996, CFC had approximately 30 members responsible for credit and
collections activity.
At June 30, 1996, the CFC portfolio (which includes both contracts owned by
CFC and contracts serviced on behalf of others) related entirely to material
handling equipment. At June 30, 1996, 78% of CFC's portfolio consisted of leases
and 22% consisted of loans. Approximately 50% of the leases include fair market
value purchase options exercisable by the applicable lessee upon expiration of
the applicable lease. The balance of the leases contain fixed price or nominal
options. The loans included within CFC's portfolio are prepayable, in whole or
in part, at any time. Generally under CFC's contracts, the obligor is
responsible for all maintenance, insurance and taxes.
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CFC's end user portfolio has a diverse customer base, with over 5,000
customers (as of June 30, 1996) comprising businesses of varying sizes in a wide
variety of industries. As of June 30, 1996, the average exposure per end user
customer was approximately $54,000. The ten largest end user customers comprised
21% of the aggregate end user portfolio. In terms of geographical distribution,
five states accounted for approximately 32% of the outstanding end user
receivables (California 9%, Texas 6%, Georgia 6%, Ohio 6% and New York 5%) as of
June 30, 1996.
UNDERWRITING AND SERVICING
CREDIT MANAGEMENT PHILOSOPHY
TCC strives to manage certain risks in connection with its business,
including credit risk and residual value risk associated with the acquisition
and holding of receivables such as the Contracts. The management of these risks
is critical to each strategic business unit within TCC (an "SBU"). As such, TCC
has in place policies, controls, systems and procedures intended to manage and
limit such risks, promote early problem recognition and corrective action as
well as facilitate consistent portfolio performance measurements. Such policies,
controls, systems and procedures are subject to periodic review by TCC's Risk
Management Department, which includes legal, credit and asset management
personnel, by TCC's internal auditors and TCC's Audit Committee. In addition,
TCC's executive officers, acting as a committee (the "CLT"), regularly monitor
TCC's overall risk profile.
The control of credit losses is an important element of TCC's business. TCC
seeks to minimize its credit risk through diversification of its portfolio by
customer, industry segment, equipment type, geographic location and transaction
maturity. TCC's financing activities have been spread across a wide range of
equipment types (E.G., general equipment, telecommunications equipment, office
equipment, information technology and transportation equipment) and real estate
and a large number of end-users located throughout the United States and, to a
lesser extent, abroad.
Each SBU has a senior credit officer and a credit committee that together
are responsible for overseeing the quality, integrity and performance of their
respective credit portfolios. Before any transaction can be committed to, it
must first be credit approved by one of TCC's proprietary credit scoring models
or by a duly authorized credit officer in accordance with clearly defined
authorities, policies and procedures. Each SBU credit committee is charged with
the responsibility of establishing credit policies appropriate for its business
and periodically reviewing its credit personnel's exercise of credit authority
for adherence to the established credit policies. Credit authorities are an
important tool that TCC uses to manage and control its portfolio risk. Credit
authorities are set in order to enable individual credit officers (and SBUs) to
handle approximately 80-85% of the transactions flowing to them. This approach
results in approximately 15-20% of the transactions being reviewed by higher
credit authorities. This ensures oversight of an individual's judgment, credit
skills and compliance with credit policy by more senior credit officials. Each
SBU credit committee is empowered to establish credit authorities for qualified
members of their credit staff for up to $250,000. Approval of new credit
authorities up to $1,000,000 requires the approval of TCC's Chief Credit Officer
or its Chief Risk Management Officer in addition to the approval of the SBU
credit committee. Approval of new credit authorities in excess of $1,000,000
also require the approval of the CLT or TCC's Chief Executive Officer. The
existing credit authorities allow the SBU senior credit officer to approve
transactions up to $4.5 million in the case of Credit Corp., up to $2.0 million
in the case of Leasing Services, up to $2.0 million in the case of NCR Credit
and up to $1.5 million in the case of CFC. In addition, approval by TCC's Chief
Credit Officer, Chief Risk Management Officer, Corporate Business Leader or CLT
is required for transactions in excess of the SBU's credit authority and for
certain other matters. The credit authority granted to approve transactions may
not be delegated. Portfolio quality is monitored regularly to assess the overall
condition of the portfolio and identify the major exposures within the
portfolio. TCC utilizes the "one obligor concept" in computing total credit
exposure; this means that the level of credit authority required to approve an
incremental transaction must be sufficient to approve the customer's total
credit exposure. TCC tracks credit exposure in an automated fashion aggregating
all SBUs' exposure to each customer including its subsidiaries, affiliates and
commonly controlled companies. Unless otherwise specifically approved, credit
approvals are valid for up to 180 days.
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UNDERWRITING -- GENERAL
TCC's underwriting standards are intended to evaluate a prospective
customer's credit standing and repayment ability. Credit decisions are made
based upon the credit characteristics of the applicant, loss experience with
comparable customers, the amount and terms and conditions of the proposed
transaction and the type of equipment to be leased or financed. For almost all
transactions under $50,000 originated by Leasing Services and Credit Corp.,
credit scoring systems (where a computer makes the initial credit decision after
consideration of many variables from the credit application data and credit
bureau information, based on a statistical model of TCC's prior loss experience)
are utilized to make credit decisions. TCC's proprietary credit scoring systems
are designed to improve credit decisions on new lease applications, expedite
response times to customers and increase business volume and portfolio
profitability while maintaining credit quality. With respect to credit decisions
for those transactions which are not based on credit scoring, TCC's credit
officers conduct various credit investigations including reference calling and
the procurement and analysis of data from credit reporting agencies such as Dun
& Bradstreet, TRW and other credit bureaus. In the case of larger sized
transactions (generally over $100,000), TCC's credit officers will obtain and
analyze financial statements from the customer. Analysis will be conducted to
determine the reliability of the financial statements and to ascertain the
financial condition and operating performance of the potential customer. Asset
quality is carefully reviewed and stated liabilities are compared to the
information obtained from reference checking and credit reports. Cash flow is
checked for reliability and adequacy to service funded debt maturities and other
fixed charges. The financial analysis would typically involve a review of the
potential customer's leverage, profitability, liquidity and cash flow utilizing
a variety of financial ratios and comparing the company to other companies its
size in similar businesses. In this connection, various reference sources are
utilized such as Robert Morris Associates Annual Statement Studies.
Additionally, information may be obtained from rating agencies, securities
firms, Bloomberg and numerous other sources. A written analysis is then prepared
by the credit officer summarizing the amount and terms of the credit request and
setting forth the credit officer's recommendation including detailed supporting
rationale. Alternative exit strategies, including an analysis of the value of
the equipment as well as its essentiality of use, are also considered in the
event the customer fails to honor its payment obligations, but TCC does not
impose rigid loan-to-value ratios in its underwriting processes, nor is a
maximum loan-to-value ratio imposed. The credit approval will also set forth any
conditions of approval such as personal or corporate guarantees, shorter lease
terms, more advance payments or other credit enhancements, and it will dictate
the necessary documentation. Any subsequent modification of approval terms or
required documentation must be re-approved by one of TCC's authorized credit
officers. TCC also requires the credit personnel of each SBU to rate the
creditworthiness of each of such unit's customer accounts over $100,000 and, in
connection therewith, to take into account certain other factors affecting the
credit risk of a particular transaction, such as collateral value, credit
enhancement and duration of the credit.
UNDERWRITING -- ADVANCED CREDIT SCORING SYSTEMS
In 1992, TCC commissioned the Bell Laboratories Operations Research
Department ("Bell Labs") to design decision support systems and associated
strategies for credit risk management throughout the customer's financing life
cycle. This life cycle approach, while commonplace in the consumer credit field,
is not common in commercial leasing. Three sets of decision support systems were
developed and implemented, covering each stage of the small ticket leasing life
cycle; front-end credit decisions, credit line management, and delinquent
account collections (see "-- Collections" below). Each system is comprised of a
suite of statistically derived risk prediction models, a sequential decision
strategy which determines the model to be used in each instance, and a risk
based strategy which determines the optimal decision based upon the model
results.
The current front-end credit decisioning systems follow a series of steps
including the selection and electronic retrieval of credit bureau information,
the quantification of credit risk and the decision to accept, reject or manually
review the credit applicant. While both Leasing Services and Credit Corp. have
been using credit application scoring models based on more traditional credit
scorecards since 1991 and 1989, respectively, Leasing Services implemented an
improved decisioning system in March 1993, while Credit Corp. implemented such
system in May 1995. Separate credit line management models have been developed
and implemented within Credit Corp. in May 1995 and are currently
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being implemented within Leasing Services. The credit scoring systems are
monitored using various reporting mechanisms and have been upgraded over time to
incorporate the value of more recent data and to take advantage of improved
statistical techniques. Overrides of credit scoring decisions by authorized
credit officers are permitted, but are discouraged unless additional information
is uncovered which materially strengthens the transaction or if sufficient
credit enhancements can be obtained to mitigate the risk. Overrides are tracked
by the operating units each month, and are more common at Credit Corp. than they
are at Leasing Services. Such advanced credit scoring systems are not used by
CFC and NCR Credit because the contracts originated by each of them have larger
original balances.
DOCUMENTATION
Prior to funding leasing and financing transactions, a complete
documentation package (including generally a credit application, signed
lease/installment sale or financing agreement, vendor invoice, initial
lease/advance payment, proof of insurance (where relevant), delivery and
acceptance acknowledgements and appropriate UCC financing statements) is
required. Filing of UCC financing statements typically is required by Leasing
Services unless the underlying equipment has a cost of less than $10,000 (or
$30,000 in the case of a lease contract with a fair market value purchase
option); by Credit Corp. unless the underlying equipment has a cost of less than
$20,000 (or $50,000 in the case of a lease contract with a fair market value
purchase option); by NCR Credit unless the underlying equipment has a cost of
less than $25,000; and by CFC in all transactions.
BILLING
Billing for the Originators is handled by third parties, which prepare and
mail monthly invoices. All customers are assigned a billing cycle and invoices
are sent either 19 days before the due date in the case of Credit Corp., 30 days
before the due date in the case of Leasing Services, 20 days before the due date
in the case of CFC, or 25 days before the due date in the case of NCR Credit.
From time to time to facilitate customer needs, the Originators will provide
manual invoices. Monthly invoices include the scheduled payment, taxes,
insurance and late charges, if any. The vast majority of contracts provide for
level payments throughout their term. Substantially all customers forward
payments to lockboxes with certain financial institutions.
PORTFOLIO MONITORING
Delinquency is tracked and calculated monthly for each major portfolio
segment, including segmentation by classification of days past due. In addition,
non-accruals (see "-- Non-Accrual and Write-off Policy") are tracked monthly,
including the portion which is deemed to be at risk by the SBU credit officials.
Similarly, credit losses are monitored each month and are compared with credit
losses for previous months and the corresponding month in a number of prior
years. TCC also employs other techniques in evaluating the performance of its
portfolio. These techniques include roll rate analysis (a type of portfolio
analysis examining the rate at which accounts in various stages of delinquency
become, or "roll" into, losses), a type of vintage analysis (another type of
portfolio analysis in which TCC's assets are classified by age and then compared
across different years (e.g., comparing loss experience for two-year-old
portfolio in 1996 with that in 1995)) as well as other types of analysis. For
transactions over $1,000,000, TCC conducts annual reviews of customer financial
condition and risk rating. Such annual reviews are conducted on transactions
over $500,000 in the event of certain higher risk ratings. All other
transactions are monitored via the normal collection process, meaning that they
would receive individual attention only if they became delinquent or for some
other reason came to the attention of the company's credit and collections
personnel -- for example, a material adverse change in the financial condition
of the obligor in the transaction.
In addition to providing an initial credit review, ongoing credit review
procedures exist to identify at an early stage those customers that may be
experiencing financial difficulty. Once identified, these customers are
monitored by credit personnel, who periodically make recommendations to the SBU
Credit Committee and/or the CLT about what remedial actions should be taken;
what portion, if any, of total credit exposures should be written off; or
whether a specific allocation of TCC's loss reserves should be made.
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In establishing allowances for credit losses, TCC's management reviews,
among other things, the aging of TCC's portfolio, all non-performing leases and
receivables and prior collection experience, as well as TCC's overall exposure
and changes in credit risk.
COLLECTIONS
TCC collects overdue payments using several different methods. At Credit
Corp. and Leasing Services, computerized collection management systems have been
developed and deployed. Leasing Services has used outbound call management
systems and behavioral scoring systems in prioritizing collection activities in
its collection process since March 1994. Credit Corp. has utilized similar
technology in its collection activities since 1989 with the exception of
behavioral scoring, which is now being implemented company-wide following a
testing period in several of Credit Corp.'s units for most of 1996. The
collection management systems prioritize delinquent accounts into automated
queues using delinquent account scoring systems (also referred to as behavioral
scoring). Telephone calls to delinquent accounts are automatically dialed by the
system eliminating no answer and busy line calls (which are automatically
rescheduled).
Accounts are ranked using a suite of statistically derived risk prediction
indicators (behavioral scoring) for handling in order of risk weighted exposure.
The collection management systems utilize different account collection
strategies as a function of risk level and account balance. Accounts with low
balances and/or low risk are assigned to a low impact collection strategy which
involve greater reliance upon letters in the early stages of delinquency and
less reliance on telephone calls until the later stages of delinquency. Also,
the number of days between actions are greater for a low risk account than in
the case of a high risk account. A high impact collection strategy is assigned
to accounts with high balances and/or high risk scores. In this case, telephone
calls are commenced sooner in the collection process and collection actions are
more closely spaced.
At NCR Credit and CFC, account collections are undertaken in a more manual
fashion with prioritization being principally driven by the number of days past
due. Accounts are typically assigned to individuals or groups who will be
responsible to ensure appropriate collection activities are undertaken to
effectuate customer payment. The collection process is undertaken using computer
generated reminder notices which are generally sent once an account is 10-15
days past due, individually tailored collection letters and telephone contact,
as appropriate.
Outside collection agencies and attorneys are frequently used to supplement
collection activity. Typically an account is placed with an outside collection
agency or attorney when it is 180 days or more past due. However, accounts past
due less than 180 days may be placed with a collection agency or attorney
depending upon the circumstances of its delinquency. Equipment may be
repossessed at any time after the contracted default but repossession typically
is not made until the account is past due between 70 and 180 days.
NON-ACCRUAL AND WRITE-OFF POLICY
TCC maintains non-accrual and write-off policies which are followed by all
SBUs. The policies require that all accounts which are 90 days past due (or
sooner in the event of a bankruptcy or other appropriate evidence of impairment)
be placed on non-accrual, and be written off or specifically reserved at 180
days past due. Smaller transactions (generally $100,000 or less) will be written
off at such time. Larger transactions (generally more than $100,000) will
utilize specific reserves to appropriately reduce the carrying value of the
equipment to an amount which may be "covered" by collateral value.
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<PAGE>
THE CONTRACTS
DESCRIPTION OF THE CONTRACTS
GENERAL
The Contracts consist of Lease Contracts (96.0% by Initial Contract Pool
Principal Balance) and Loan Contracts (4.0% by Initial Contract Pool Principal
Balance). All of the Contracts are commercial, rather than consumer, leases or
loans. The following description of the Contracts generally describes the
material terms of the Contracts to be included in the Contract Pool, although an
immaterial number of Contracts may differ in one or more provisions from the
description below.
The Lease Contracts 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, takes any federal tax benefits associated
with the lease and no title is conferred upon the lessee. The lessee under a
true lease has the right to the temporary use of equipment for a term shorter
than the economic life of such equipment in exchange for payments at scheduled
intervals during the lease term and the lessor retains a significant "residual"
economic interest in the leased equipment. 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 assets by
the lessee and retains a security interest in the leased assets. The lessee
retains the leased property for substantially all its economic life and the
lessor retains no significant residual interest. These leases are considered
conditional sales type leases for federal tax purposes, and, accordingly, the
lessor does not take any federal tax benefits. End of lease options for such
leases depend on the terms of the related Lease Contract, although generally
these terms provide for purchase of the Equipment at a prestated price. The
inclusion of true leases in the Contract Pool will have no income tax impact on
Noteholders since the Notes are treated as debt for income tax purposes. See
"United States Taxation." However, true leases are treated differently under the
Bankruptcy Code from leases intended for security. See "Risk Factors--Bankruptcy
and Insolvency Risks" and "Certain Legal Aspects of the Contracts--Insolvency
Matters" for a discussion of these differences.
THE FORMS OF CONTRACTS
The Lease Contracts are generally in one of two forms: (a) a master lease
agreement containing all of the general terms and conditions of the lease
transaction or transactions, with schedules setting forth the specific terms of
each lease transaction with that particular Obligor (a "Master Form Lease"), and
(b) specific lease agreement forms containing all of the terms and conditions of
the lease transaction (a "Specific Lease Form"). Credit Corp. generally uses the
Master Form Lease for lease transactions in excess of $100,000 and in connection
with smaller transactions in which the Obligor has previously executed a Master
Form Lease; NCR Credit uses the Master Form Lease for substantially all of its
transactions; CFC uses both a Specific Lease Form and a Master Form Lease; and
Leasing Services generally uses a Specific Lease Form but uses a Master Form
Lease for certain vendor customers. In certain cases, the Lease Contract may be
written on another form which was created by one of the Originators, by a
customer or by a third-party originator. The Loan Contracts are documented on
installment sale contract, promissory note, chattel mortgage or loan and
security agreement forms.
PAYMENTS GENERALLY
Generally, the Contracts require that the Obligor make periodic payments on
a monthly basis, while a number of Contracts (which, in relation to the Initial
Contract Pool Principal Balance, is not material) provide for quarterly,
semi-annual or annual payments. The payments under all of the Contracts are
required to be made in United States dollars and are fixed and specified
payments, rather than payments which are tied to a formula or are otherwise at a
floating rate. Payments under the Contracts are ordinarily payable in advance,
although a small percentage (including most of those originated by NCR Credit)
provide for payments in arrears.
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<PAGE>
EXPENSES RELATING TO EQUIPMENT
The Contracts require the Obligors to assume the responsibility for payment
of all expenses of the related Equipment including (without limitation) any
expenses in connection with the maintenance and repair of the related Equipment,
the payment of any and all premiums for casualty and liability insurance and the
payment of all taxes relating to the Equipment.
INSURANCE; REPAIR AND REPLACEMENT
The Lease Contracts (except for a small number of Contracts which, in
relation to the Initial Contract Pool Principal Balance, is not material)
require the Obligors to maintain liability insurance which must name the lessor
as additional insured. Lease Contracts and Loan Contracts require Obligors to
procure property insurance against the loss, theft or destruction of, or damage
to, the Equipment for its full replacement value, naming the lessor (or lender)
as loss payee. This requirement is, from time to time, waived by the Originator
for a small number of transactions and, for some Lease Contracts, the Obligor is
permitted to self-insure the Equipment under the Obligor's already existing
self-insurance program.
For Lease Contracts originated by Credit Corp. or Leasing Services relating
to equipment with a cost of $100,000 or less, the Obligor is generally provided
with written information concerning its property insurance obligations under the
Lease Contract and the Originator's own property insurance coverage that will be
provided at the expense of the Obligor if the Obligor does not provide the
Originator with satisfactory evidence of its own insurance coverage. The Obligor
is given a specified time period in which to provide such evidence. Proper
evidence of coverage is verified independently and tracked by a third party
tracking company and licensed broker. If the Originator provides the insurance
coverage, the Obligor is charged a monthly fee covering the insurance charges
and other related administrative charges. If, at any time, the Obligor provides
evidence of its own coverage, such monthly charges cease. The Obligor has the
ability to "opt out" of the program by providing evidence of its own coverage.
For transactions involving Equipment with a cost of more than $100,000,
insurance coverage generally is verified and tracked by the respective
Originator and the failure to maintain such insurance constitutes an event of
default under the applicable Lease Contract. Generally, either pursuant to the
Specific Lease Form or the Master Form Lease, the Obligor also agrees to
indemnify the Originator for all liability and expenses arising from the use,
condition or ownership of the Equipment.
Under each Lease Contract, if the Equipment is damaged or destroyed, the
Obligor is required to (i) repair such Equipment, (ii) make a termination
payment to the lessor in an amount not less than the Required Payoff Amount, or
(iii) in some cases, replace such damaged or destroyed Equipment with other
equipment of comparable use and value. Under the Transfer and Servicing
Agreement, the Servicer is permitted (in the case of the destruction of the
Equipment related to a particular Lease Contract) either to allow the Lessee to
replace such Equipment (provided that the replacement equipment is, in the
judgment of the Servicer, of comparable use and at least equivalent value to the
value of the Equipment which was destroyed) or to accept the termination payment
referred to above.
ASSIGNMENT OF CONTRACTS
The Contracts permit the assignment of the Contract by the lessor or secured
party without the consent of the Obligor, except for a small number of Contracts
which require notification of the assignment to, or the consent of, the Obligor
(and TCC will represent and warrant in the Purchase Agreement that such notices
have been given, or such approvals will have been received, not more than ten
days following the Closing Date). The Contracts do not permit the assignment
thereof (or the Equipment related thereto) by the Obligor without the prior
consent of the lessor or secured party, other than Contracts which (i) may
permit assignments to a parent, subsidiary or affiliate, (ii) permit the
assignment to a third party, provided the Obligor remains liable under the
Contract, or (iii) permit assignment to a third party with a credit standing
(determined by TCC in accordance with its underwriting policy and practice at
the time for an equivalent contract type, term and amount) equal to or better
than the original Obligor. Under the Transfer and Servicing Agreement, the
Servicer may permit an assignment of a particular Contract from an Obligor to a
third party only if the Servicer (utilizing the current underwriting
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criteria for its contract origination activities generally) determines that such
third party is of sufficient credit quality that the Servicer would permit such
third party to become an obligor with respect to a lease or loan contract
originated by the Servicer generally.
HELL-OR-HIGH-WATER LEASE CONTRACTS
The Lease Contracts are "hell-or-high-water" contracts which require all
payments thereunder to be made regardless of the condition or suitability of the
related Equipment and notwithstanding any defense, set-off or counterclaim that
the Obligor may have against the lessor.
EVENTS OF DEFAULT AND REMEDIES
Events of default under the Contracts generally include the failure to pay
all amounts required by the Contract when due, the failure of the Obligor to
perform its agreements and covenants under the applicable Contract, material
misrepresentations made by the Obligor, the bankruptcy or insolvency of the
Obligor or the appointment of a receiver for the Obligor and, in some cases,
default by the Obligor under other contracts or agreements. Some of these
default provisions are, in some instances, subject to notice provisions and cure
periods. Remedies available to the lessor or secured party upon the occurrence
of an event of default by the Obligor include the right to cancel or terminate
in the case of a Lease Contract, or to accelerate payments in the case of a Loan
Contract, to recover possession of the related Equipment, and to receive an
amount intended to make the lessor or secured party (as the case may be) whole
plus costs and expenses (including legal fees) incurred by the lessor or secured
party as a result of such default. Notwithstanding such events of default and
remedies, under the Transfer and Servicing Agreement, the Servicer is permitted
to take such actions, with respect to delinquent and defaulted Contracts, as a
reasonably prudent creditor would do under similar circumstances. See
"Description of the Transfer and Servicing Agreement -- Servicing." The
Originators may occasionally provide payment extensions (generally of 3 months
or less, although longer extensions are occasionally granted) to customers
experiencing delays in payment due to cash flow shortages or other reasons.
However, it is not intended that extensions be used to provide a temporary
solution for a delinquent account. Rather, extensions are intended to be used
when, in the judgment of the relevant credit authority, it will permit the
permanent resolution of the delinquency.
PREPAYMENTS AND EARLY TERMINATION
None of the Lease Contracts permit the prepayment or early termination of
the Lease Contract (except for a DE MINIMIS number of Lease Contracts which
allow for a prepayment or early termination upon payment of an amount which is
not less than the Required Payoff Amount). Nevertheless, the Servicer is
permitted under the Transfer and Servicing Agreement to accept prepayments of
any of the Lease Contracts, but only if the amount paid by or on behalf of the
Obligor (or, in the case of a partial prepayment, the sum of such amount and the
remaining Contract Principal Balance of the Lease Contract after application of
such amount) is at least equal to the Required Payoff Amount for such Lease
Contract. All or substantially all of the Loan Contracts permit the Obligors, at
their option, to prepay such Loans at any time, in full or in part, and if in
full in an amount equal to the then outstanding principal balance plus accrued
interest to the date of such prepayment plus any applicable unpaid charges.
DISCLAIMER OF WARRANTIES
The Lease Contracts contain provisions whereby the lessor (or the
Originator, as assignee of the lessor) disclaims all warranties with respect to
the Equipment and, in the majority of cases, the lessor assigns the
manufacturer's warranties to the Obligor for the term of the Lease. Under the
Lease Contracts, the Obligor "accepts" the Equipment under the applicable Lease
Contract following delivery and an opportunity to inspect the related Equipment.
ADDITIONAL EQUIPMENT
Some of the Lease Contracts constitute leases of "additional equipment"
(generally costing $25,000 or less) with existing Obligors. Pursuant to the
terms of the original Lease Contract between the lessor and the Obligor, these
leases for "additional equipment" are documented on a written form prepared by
the lessor and delivered to (but not executed by) the Obligor, which written
form describes
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<PAGE>
all of the terms of the lease. Under the terms of the Lease Contract, the
Obligor agrees that unless it objects in writing within a specified period of
time, it is deemed to have accepted the lease of such "additional equipment."
REPRESENTATIONS AND WARRANTIES MADE BY TCC
Under the Purchase Agreement, TCC will make the following representations
and warranties regarding each Contract (and the related Equipment) as of the
Cut-Off Date:
(A)Each Contract (i) constitutes a valid, binding and enforceable payment
obligation of the Obligor in accordance with its terms (except as may be
limited by applicable bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights generally and the availability of equitable
remedies), (ii) has been duly and properly sold, assigned and conveyed by the
applicable Originator under the Purchase Agreement to the Depositor and has been
duly and properly transferred and conveyed by the Depositor to the Owner Trust
pursuant to the Transfer and Servicing Agreement, (iii) was originated by one of
the Originators in the ordinary course of such Originator's business, or (in the
case of any Contract purchased by one of the Originators) was acquired by such
Originator for proper consideration and was validly assigned to such Originator
by the seller of such Contract, and (iv) contains customary and enforceable
provisions adequate to enable realization against the Obligor and/or the related
Equipment (although no representation or warranty is made with respect to the
perfection or priority of any security interest in such related Equipment);
(B)No selection procedures adverse to the Noteholders or Equity
Certificateholders were utilized in selecting the Contracts from those
lease and loan contracts owned by the Originators on the Cut-Off Date;
(C)All requirements of applicable Federal, state and local laws, and
regulations thereunder, in respect of all of the Contracts, have been
complied with in all material respects;
(D)There is no known default, breach, violation or event permitting
cancellation or termination of the Contract by the lessor (in the case of
Lease Contracts) or by the secured party (in the case of Loan Contracts) under
the terms of any Contract (other than Scheduled Payment delinquencies (in excess
of 10% of the Scheduled Payment due) of not more than 59 days), and (except for
payment extensions and waivers of Administrative Fees in accordance with TCC's
servicing and collection policies and procedures) there has been no waiver of
any of the foregoing; and as of the Cut-Off Date, no related Equipment had been
repossessed;
(E)Immediately prior to the sale, assignment and conveyance of each Contract
by an Originator to the Depositor, such Originator had good title to such
Contract and the Originator's interest in the related Equipment (subject to the
terms of such Contract) and was the sole owner thereof, free of any Lien; and
immediately prior to the transfer and conveyance of the Contracts to the Owner
Trust, the Depositor had good title to such Contracts and such interest in the
related Equipment and was the sole owner thereof, free of any Lien (other than
the rights of the Obligor under the related Contract);
(F)No person has a participation in or other right to receive Scheduled
Payments under any Contract, and neither the Depositor nor any of the
Originators nor TCC has taken any action to convey any right to any person that
would result in such person having a right to Scheduled Payments received with
respect to any Contract;
(G)Each Contract was originated or purchased by an Originator and was sold
and assigned by such Originator to the Depositor without any fraud or
misrepresentation on the part of such Originator or TCC;
(H)Each Obligor (i) is located in the United States, and (ii) is not (a) the
United States of America or any State or local government or any agency,
department, subdivision or instrumentality thereof or (b) the Depositor, an
Originator, TCC or any subsidiary thereof;
(I)The sale, transfer and assignment of such Contract and the Originators'
interest in the related Equipment to the Depositor under the Purchase
Agreement, and the transfer and conveyance of such
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<PAGE>
Contract from, and the grant of a security interest in the related Equipment by,
the Depositor to the Owner Trust under the Transfer and Servicing Agreement, are
not unlawful, void or voidable under the laws of the jurisdiction applicable to
such Contract;
(J)All filings and other actions required to be made, taken or performed by
any person in any jurisdiction to give the Owner Trust a first priority
perfected lien or ownership interest in the Contracts and a first priority
perfected security interest in the Originator's interest in the Equipment have
been made, taken or performed;
(K)There exists a Contract File pertaining to each Contract, and such
Contract File contains the Contract or a facsimile copy thereof;
(L)There is only one original executed copy of each Contract or, if there
are multiple originals, all such originals are in the possession of the
Originator or the signed original in the possession of the Originator is noted
thereon as being the only copy that constitutes chattel paper;
(M)The Contracts constitute chattel paper within the meaning of the UCC as
in effect in the States of New Jersey, Massachusetts and Oregon (other
than those Contracts in which the lessor is financing exclusively the Obligor's
software license or maintenance contract for leased Equipment, which Contracts,
in proportion to the Initial Contract Pool Principal Balance, are not material);
(N)Each Contract was entered into by an Obligor who, at the Cut-Off Date,
had not been identified on the records of TCC or the Originators as being
the subject of a current bankruptcy proceeding;
(O)The computer tape containing information with respect to the Contracts
that was made available by the Depositor to the Owner Trustee and the
Indenture Trustee on the Closing Date and was used to select the Contracts was
complete and accurate in all material respects as of the Cut-Off Date and
includes a description of the same Contracts that are described in the Schedule
of Contracts to the Transfer and Servicing Agreement;
(P)By the Closing Date, the portions of the electronic master record of TCC
and each Originator relating to the Contracts will have been clearly and
unambiguously marked to show that the Contracts constitute part of the Trust
Assets and are owned by the Owner Trust in accordance with the terms of the
Transfer and Servicing Agreement;
(Q)No Contract has a Scheduled Payment delinquency (in excess of 10% of the
Scheduled Payment due) of more than 59 days past due as of the Cut-Off
Date (although some Contracts may have experienced such delinquencies prior to
the Cut-Off Date);
(R)Each Contract may be sold, assigned and transferred by the Originator to
the Depositor, and may be assigned and transferred by the Depositor to
the Owner Trust, without the consent of, or prior approval from, or any
notification to, the applicable Obligor, other than (i) certain Contracts
(which, in proportion to the aggregate of all of the Contracts, are not
material) that require notification of the assignment to the Obligor, which
notification will be given by the Servicer not later than 10 days following the
Closing Date, and (ii) Contracts (which, in proportion to the aggregate of all
of the Contracts, are not material) that require the consent of the Obligor,
which consent will be obtained by the Servicer not later than 10 days following
the Closing Date;
(S)Each Contract prohibits the sale, assignment or transfer of the Obligor's
interest therein, the assumption of the Contract by another person in a
manner that would release the Obligor thereof from the Obligor's obligation, or
any sale, assignment or transfer of the related Equipment, without the prior
consent of the lessor (in the case of Lease Contracts) or the secured party (in
the case of Loan Contracts), other than Contracts which may (i) permit
assignment to a subsidiary, corporate parent or other affiliate, (ii) permit the
assignment to a third party, provided the Obligor remains liable under the
Contract, or (iii) permit assignment to a third party with a credit standing
(determined by TCC in accordance with its underwriting policy and practice at
the time for an equivalent contract type, term and amount) equal to or better
than the original Obligor;
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(T)The Obligor under each Contract is required to make payments thereunder
(i) in United States dollars, and (ii) in fixed amounts and on fixed and
predetermined dates;
(U)Each Contract requires the Obligor to assume responsibility for payment
of all expenses in connection with the maintenance and repair of the
related Equipment, the payment of all premiums for insurance of such Equipment
and the payment of all taxes (including sales and property taxes) relating to
such Equipment;
(V)Each Contract requires the Obligor thereunder to make all Scheduled
Payments thereon under all circumstances and regardless of the condition
or suitability of the related Equipment and notwithstanding any defense, set-off
or counterclaim that the Obligor may have against the manufacturer, lessor or
lender (as the case may be);
(W)Under each Lease Contract, if the Equipment is damaged or destroyed, the
Obligor is required either (i) to repair such Equipment, (ii) to make a
termination payment to the lessor in an amount not less than the Required Payoff
Amount, or (iii) in some cases, to replace such damaged or destroyed Equipment
with other equipment of comparable use and value;
(X)None of the Lease Contracts permit the Obligor to terminate the Lease
Contract prior to the latest Stated Maturity Date or to otherwise prepay
the amounts due and payable thereunder, except for a DE MINIMIS number of Lease
Contracts which allow for an early termination or prepayment upon payment of an
amount which is not less than the Required Payoff Amount;
(Y)Any Loan Contract that permits the prepayment of the amount due
thereunder, at the option of the Obligor, requires that the prepayment in
full must be in an amount not less than the principal amount then outstanding
plus accrued interest thereon to the date of such prepayment;
(Z)It is not a precondition to the valid transfer or assignment of the
Originator's interest in any of the Equipment related to any Contract
that title to such Equipment be transferred on the records of any governmental
or quasi-governmental agency, body or authority;
(AA)The information with respect to the Contracts listed on the Schedule of
Contracts attached to the Purchase Agreement is true, correct and
complete in all material respects;
(BB)No provisions of any Contract have been waived, altered or modified in
any material respect, except as indicated in the Contract File;
(CC)No Lease Contract is a "consumer lease" as defined in Article 2A of the
Uniform Commerical Code; and
(DD)To the best of TCC's knowledge, each Obligor has accepted the related
Equipment and has had reasonable opportunity to inspect and test such
Equipment.
The above-described representations and warranties of TCC will survive the
transfer and assignment of the related Contracts and other Trust Assets to the
Owner Trust.
In the event of a breach of any such representation or warranty with respect
to a Contract that materially and adversely affects the value of such Contract
(any such breach being a "Repurchase Event"), TCC, unless it cures the breach by
the end of the second Collection Period after the date on which TCC or the
Depositor becomes aware of or receives written notice from the Indenture Trustee
or the Servicer of such breach, will be obligated to purchase the Contract and,
in the case of a Lease Contract, the related Leased Equipment. Any such purchase
shall be made on the Deposit Date immediately following the end of such second
Collection Period at a price equal to the Required Payoff Amount applicable to
such Contract (which will be allocated to the Owner Trust) plus, if applicable,
the Book Value of the related Leased Equipment (which will be allocated to the
Depositor). This purchase obligation may be enforced by the Indenture Trustee on
behalf of the holders of the Notes and the Equity Certificates, and will
constitute the sole remedy available to the Noteholders and the Equity
Certificateholders against TCC for any such uncured breach, except that pursuant
to the Transfer and Servicing
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Agreement, TCC will indemnify the Indenture Trustee, the Owner Trustee, the
Owner Trust, the Noteholders and the Equity Certificateholders against losses,
damages, liabilities and claims which may be asserted against any of them as a
result of third-party claims arising out of the facts giving rise to such
breach.
Upon the purchase by TCC of a Contract (and, in the case of a Lease
Contract, any related Leased Equipment), such Contract and related Leased
Equipment will be released to TCC.
CERTAIN STATISTICS RELATING TO THE CUT-OFF DATE CONTRACT POOL
GENERAL
The Depositor has prepared certain statistics relating to the Contract Pool
as of the Cut-Off Date (the "Cut-Off Date Contract Pool"). The Initial Contract
Pool Principal Balance is an amount equal to $3,185,229,329 (which amount is
based upon the Contract Pool Principal Balance determined as of the Cut-Off
Date, but also includes an amount in respect of Scheduled Payments on the
Contracts due prior to, but not received as of, the Cut-Off Date). The total
number of Contracts in the Cut-Off Date Contract Pool is 280,634. The average
Contract Pool Principal Balance of the Contracts, as of the Cut-Off Date, was
approximately $11,350. Within the Cut-Off Date Contract Pool, 90.8% of the
Contracts (by Initial Contract Pool Principal Balance) were originated by the
Originators (or by other affiliates of TCC) and 9.2% of such Contracts (by
Initial Contract Pool Principal Balance) were purchased by the Originators (or
by other affiliates of TCC) from unrelated third parties.
COMPOSITION OF THE CUT-OFF DATE CONTRACT POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED AVERAGE
AVERAGE AVERAGE CONTRACT
INITIAL CONTRACT ORIGINAL REMAINING PRINCIPAL
NUMBER POOL PRINCIPAL TERM TERM BALANCE
OF CONTRACTS BALANCE (RANGE) (RANGE) (RANGE)
- ------------ ------------------ ------------------------------ --------------------------- ------------------------
<S> <C> <C> <C> <C>
280,634 $3,185,229,329 56.1 months 38.6 months $11,350
(6 months to 165 months) (1 month to 95 months) ($50 to $12,393,602)
</TABLE>
TYPE OF CONTRACTS
The following table shows the distribution of the Cut-Off Date Contract Pool
between Lease Contracts and Loan Contracts by indicating the number of Contracts
in each category, the aggregate Contract Principal Balance of such Contracts,
and the percentage (by number of Contracts and by aggregate Contract Principal
Balance) of such Contracts relative to all of the Contracts in the Cut-Off Date
Contract Pool:
<TABLE>
<CAPTION>
% OF TOTAL % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
TYPE OF CONTRACT CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------------------------------ ----------- ------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Lease Contracts................................. 266,812 95.07% $ 3,057,933,979 96.00%
Loan Contracts.................................. 13,822 4.93 127,295,350 4.00
----------- ------------ ------------------ -------
Total..................................... 280,634 100.00% $ 3,185,229,329 100.00%
----------- ------------ ------------------ -------
----------- ------------ ------------------ -------
</TABLE>
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GEOGRAPHICAL DIVERSITY
The following table shows the geographical diversity of the Cut-Off Date
Contract Pool, by indicating the number of Contracts, the aggregate Contract
Principal Balance of such Contracts and the percentage (by number of Contracts
and by aggregate Contract Principal Balance) of such Contracts relative to all
of the Contracts in the Cut-Off Date Contract Pool by reference to the State in
which the Obligors on such Contracts are located:
<TABLE>
<CAPTION>
% OF TOTAL NUMBER AGGREGATE CONTRACT % OF INITIAL CONTRACT POOL
STATE NUMBER OF CONTRACTS OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------- --------------------- ------------------- ------------------- -------------------------------
<S> <C> <C> <C> <C>
Alabama......... 3,000 1.07% $ 36,718,327 1.15%
Alaska.......... 308 0.11 2,494,601 0.08
Arizona......... 4,660 1.66 52,847,913 1.66
Arkansas........ 1,274 0.45 13,278,514 0.42
California...... 37,153 13.23 420,090,005 13.18
Colorado........ 5,752 2.05 51,908,279 1.63
Connecticut..... 4,236 1.51 50,173,901 1.58
Delaware........ 792 0.28 6,484,578 0.20
District of
Columbia........ 1,651 0.59 17,336,636 0.54
Florida......... 19,595 6.98 216,562,830 6.80
Georgia......... 8,665 3.09 100,283,035 3.15
Hawaii.......... 428 0.15 4,375,875 0.14
Idaho........... 954 0.34 8,715,914 0.27
Illinois........ 13,347 4.76 174,412,918 5.48
Indiana......... 3,972 1.42 39,740,659 1.25
Iowa............ 1,690 0.60 21,720,156 0.68
Kansas.......... 1,459 0.52 18,272,507 0.57
Kentucky........ 2,114 0.75 17,824,657 0.56
Louisiana....... 100 0.04 1,280,522 0.04
Maine........... 47 0.02 549,981 0.02
Maryland........ 5,104 1.82 54,819,740 1.72
Massachusetts... 12,310 4.39 135,068,160 4.24
Michigan........ 10,153 3.62 105,261,074 3.30
Minnesota....... 3,860 1.38 46,071,976 1.45
Mississippi..... 1,530 0.55 13,648,051 0.43
Missouri........ 3,541 1.26 58,815,478 1.85
Montana......... 543 0.19 4,310,567 0.14
Nebraska........ 765 0.27 7,608,599 0.24
Nevada.......... 1,546 0.55 16,606,763 0.52
New Hampshire... 1,921 0.68 20,394,787 0.64
New Jersey...... 19,746 7.04 285,066,162 8.95
New Mexico...... 1,386 0.49 11,522,077 0.36
New York........ 25,597 9.11 311,188,230 9.76
North
Carolina........ 6,897 2.46 71,122,763 2.23
North Dakota.... 225 0.08 1,679,648 0.05
Ohio............ 9,497 3.38 99,014,107 3.11
Oklahoma........ 1,891 0.67 25,010,367 0.79
Oregon.......... 3,280 1.17 30,745,165 0.97
Pennsylvania.... 12,304 4.38 115,725,434 3.63
Rhode Island.... 1,420 0.51 15,423,651 0.48
South
Carolina........ 3,049 1.09 34,741,966 1.09
South Dakota.... 331 0.12 6,714,944 0.21
Tennessee....... 4,659 1.66 50,242,806 1.58
Texas........... 17,674 6.30 184,861,723 5.80
Utah............ 2,007 0.72 27,636,061 0.87
Vermont......... 701 0.25 6,412,573 0.20
Virginia........ 6,487 2.31 60,481,512 1.90
Washington...... 6,210 2.21 58,497,290 1.84
West Virginia... 1,140 0.41 9,612,632 0.30
Wisconsin....... 3,283 1.17 59,414,252 1.87
Wyoming......... 380 0.14 2,438,963 0.08
-------- ------- ------------------- -------
Total........... 280,634 100.00% $ 3,185,229,329 100.00%
-------- ------- ------------------- -------
-------- ------- ------------------- -------
</TABLE>
Adverse economic conditions in States where a substantial number of Obligors
are located, such as California and New Jersey, may adversely affect such
Obligors' ability to make payments on the related Contracts, and the Noteholders
could suffer a loss on their investment as a result.
37
<PAGE>
PAYMENT STATUS
The following table shows the payment status of the Cut-Off Date Contract
Pool, by indicating the number of Contracts, the aggregate Contract Principal
Balance of such Contracts and the percentage (by number of Contracts and by
aggregate Contract Principal Balance) of such Contracts relative to all of the
Contracts in the Cut-Off Date Contract Pool by reference to whether such
Contracts were current as of the Cut-Off Date or were 30-59 days delinquent:
<TABLE>
<CAPTION>
% OF INITIAL
% OF TOTAL AGGREGATE CONTRACT CONTRACT POOL
PAYMENT STATUS NUMBER OF CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------------------- --------------------- --------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Current...................... 271,615 96.79% $ 3,078,343,963 96.64%
30-60 Days Delinquent........ 9,019 3.21 106,885,366 3.36
-------- ------- ------------------ -------
Total.................. 280,634 100.00% $ 3,185,229,329 100.00%
-------- ------- ------------------ -------
-------- ------- ------------------ -------
</TABLE>
CONTRACTS BY EQUIPMENT TYPE
The following table shows the type of Equipment securing or otherwise
related to the Contracts, by the number of Contracts, the aggregate Contract
Principal Balance of such Contracts, and the percentage (by number of Contracts
and by aggregate Contract Principal Balance) of such Contracts relative to all
of the Contracts:
<TABLE>
<CAPTION>
% OF INITIAL
CONTRACT POOL
% OF TOTAL AGGREGATE CONTRACT PRINCIPAL
TYPE OF EQUIPMENT NUMBER OF CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE BALANCE
- ------------------------------ --------------------- --------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Telecommunications............ 124,356 44.31% $ 1,274,816,175 40.01%
Manufacturing and
Construction................. 41,589 14.82 733,814,265 23.04
Computers and Point-of-Sale... 65,572 23.37 599,645,315 18.83
General Office................ 32,620 11.62 296,126,406 9.30
Medical....................... 8,937 3.18 156,574,002 4.92
Printing...................... 7,539 2.69 122,921,661 3.86
Other......................... 21 0.01 1,331,505 0.04
-------- ------- ------------------ -------
Total................... 280,634 100.00% $ 3,185,229,329 100.00%
-------- ------- ------------------ -------
-------- ------- ------------------ -------
</TABLE>
CONTRACT PRINCIPAL BALANCES
The following table shows the distribution of the Cut-Off Date Contract Pool
by Contract Principal Balance by indicating the number of Contracts which have a
Contract Principal Balance within a defined range and the aggregate Contract
Principal Balance of such Contracts, and the percentage (by number of Contracts
and by aggregate Contract Principal Balance) of such Contracts relative to all
of the Contracts:
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER OF % OF TOTAL AGGREGATE CONTRACT CONTRACT POOL
CONTRACT PRINCIPAL BALANCE CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------------------- ----------- --------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
$ 0 to $ 5,000.00............ 167,144 59.56% $ 336,022,401 10.55%
$ 5,000.01 to $ 25,000.00........... 88,509 31.54 969,552,852 30.43
$ 25,000.01 to $ 50,000.00........... 14,378 5.12 498,622,975 15.65
$ 50,000.01 to $ 100,000.00........... 6,883 2.45 473,182,026 14.86
$100,000.01 to $ 500,000.00........... 3,438 1.23 586,944,876 18.43
$500,000.01 to $1,000,000.00.......... 198 0.07 136,814,444 4.30
Over $1,000,000.00.................... 84 0.03 184,089,755 5.78
----------- ------- ------------------- -------
Total........................... 280,634 100.00% $ 3,185,229,329 100.00%
----------- ------- ------------------- -------
----------- ------- ------------------- -------
</TABLE>
38
<PAGE>
REMAINING TERMS OF CONTRACTS
The following table shows the remaining term of the Contracts from the
Cut-Off Date to the scheduled expiration date of such Contracts, by indicating
the number of Contracts, the aggregate Contract Principal Balance of such
Contracts, and the percentage (by number of Contracts and by aggregate Contract
Principal Balance) of such Contracts relative to all of the Contracts:
<TABLE>
<CAPTION>
NUMBER % OF INITIAL
OF % OF TOTAL AGGREGATE CONTRACT CONTRACT POOL
REMAINING TERM OF CONTRACTS CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------------------- ----------- --------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
One Month to 12 Months................ 67,412 24.02% $ 173,229,417 5.44%
13 Months to 24 Months................ 74,524 26.56 517,043,108 16.23
25 Months to 36 Months................ 69,326 24.70 764,718,320 24.01
37 Months to 48 Months................ 38,997 13.90 765,522,474 24.03
49 Months to 60 Months................ 28,885 10.29 808,105,010 25.37
Over 60 Months........................ 1,490 0.53 156,611,000 4.92
----------- ------- ------------------- -------
Total........................... 280,634 100.00% $ 3,185,229,329 100.00%
----------- ------- ------------------- -------
----------- ------- ------------------- -------
</TABLE>
TYPES OF OBLIGOR
The Contracts with a single Obligor (or group of affiliated Obligors) having
the largest aggregate Contract Principal Balance as of the Cut-Off Date
represented no more than 2.92% of the Initial Contract Pool Principal Balance.
The following table shows the types of Obligor on Contracts within the Cut-Off
Date Contract Pool, by the number of Contracts, the aggregate Contract Principal
Balance of such Contracts, and the percentage (by number of Contracts and by
aggregate Contract Principal Balance) of such Contracts relative to all of the
Contracts:
<TABLE>
<CAPTION>
% OF INITIAL
NUMBER CONTRACT POOL
OF % OF TOTAL AGGREGATE CONTRACT PRINCIPAL
TYPE OF OBLIGOR CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE BALANCE
- ----------------------------------------- ----------- --------------------- ------------------- --------------
<S> <C> <C> <C> <C>
Service Organizations.................... 141,730 50.51% $ 1,342,031,632 42.14%
Manufacturing and Construction........... 40,028 14.26 776,606,415 24.38
Retail and Wholesale Trade............... 37,789 13.47 400,648,060 12.58
Other.................................... 14,016 4.99 197,310,969 6.19
Financial Services....................... 14,988 5.34 184,329,803 5.79
Professionals............................ 18,976 6.76 109,647,800 3.44
Printing and Copy Centers................ 6,009 2.14 89,812,221 2.82
Medical.................................. 7,098 2.53 84,842,429 2.66
----------- ------- ------------------- -------
Total.............................. 280,634 100.00% $ 3,185,229,329 100.00%
----------- ------- ------------------- -------
----------- ------- ------------------- -------
</TABLE>
CERTAIN STATISTICS RELATING TO DELINQUENCIES AND DEFAULTS
DELINQUENCIES
The following table sets forth statistics relating to Delinquencies on lease
and/or loan contracts within the Originators' owned and managed portfolios of
receivables similar to the Contracts (on an aggregate basis) as of December 31,
in each of the past four years and as of June 30, 1996. Such receivables did not
constitute the Originators' entire portfolio of lease contracts and loan
contracts. For these purposes, a "Delinquency" means that the obligor on the
lease or loan contract has failed to make a required Scheduled Payment in an
amount equal to at least 90% of the required Scheduled Payment within 30 days of
the due date. For these purposes, any payment made by the obligor on a lease or
loan contract subsequent to the required payment date is applied to the earliest
payment which was unpaid. The statistics set forth below relate to the entire
portfolio of receivables similar to the Contracts serviced by the Originators as
of the date specified, and not only to the Contracts; and, accordingly, such
39
<PAGE>
statistics are not necessarily indicative of the future performance of the
Contracts. The following table is based, where indicated, on the gross
receivable balance of the lease and loan contracts, as it appears on the
accounting records of TCC as of the date set forth below and not solely the
overdue payments.
<TABLE>
<CAPTION>
PERCENTAGE OF GROSS RECEIVABLE BALANCE OF CONTRACTS
GROSS RECEIVABLE WHICH WERE DELINQUENT
BALANCE OF ------------------------------------------------------
CONTRACTS 31 TO 60 61 TO 90 91 TO 120 OVER 120
DATE OF CALCULATION (IN THOUSANDS) DAYS DAYS DAYS DAYS TOTAL
- --------------------------------- ----------------- ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
12/31/92......................... $ 3,407,520 2.49% 0.64% 0.36% 1.29% 4.78%
12/31/93......................... $ 3,614,441 2.53% 0.83% 0.36% 0.49% 4.21%
12/31/94......................... $ 4,172,097 2.88% 0.79% 0.41% 0.53% 4.61%
12/31/95......................... $ 4,469,009 3.53% 0.86% 0.44% 0.76% 5.59%
6/30/96......................... $ 4,578,955 2.61% 0.87% 0.39% 1.02% 4.89%
</TABLE>
NON-ACCRUALS
The following table sets forth statistics relating to Non-Accruals on
receivables similar to the Contracts within the Originators' owned and managed
portfolios (on an aggregate basis) as of, and for the 12-month periods ending,
December 31 in each of the past four years and as of, and for the six-month
period ending, June 30, 1996. Such receivables did not constitute the
Originators' entire portfolio of lease contracts and loan contracts. For these
purposes, a "Non-Accrual" means that, as of the date indicated, the obligor on
the relevant lease or loan contract had failed to make payments in an amount at
least equal to 90% of the required Scheduled Payment for at least 90 days beyond
the date required, or commenced a bankruptcy or insolvency proceeding. The
statistics set forth below relate to the portfolio of receivables similar to the
Contracts serviced by the Originators for the period specified and not only to
the Contracts; and, accordingly, such statistics are not necessarily indicative
of the future performance of the Contracts. The following table is based, where
indicated, on the net investment of the lease and loan contracts (gross of any
allowance for losses) as it appears on the records of TCC as of the date
specified below:
<TABLE>
<CAPTION>
AGGREGATE NET PERCENTAGE OF
INVESTMENT OF AGGREGATE NET INVESTMENT
CONTRACTS OF CONTRACTS WHICH WERE ON
DATE OF CALCULATION (IN THOUSANDS) NON-ACCRUAL
- --------------------------------------------------------------------- --------------- ---------------------------
<S> <C> <C>
12/31/92............................................................. $ 3,159,814 2.72%
12/31/93............................................................. $ 3,339,313 1.65%
12/31/94............................................................. $ 3,839,569 1.33%
12/31/95............................................................. $ 4,107,023 1.54%
6/30/96............................................................. $ 4,357,631 1.45%
</TABLE>
LOSSES AND RECOVERIES
The following table sets forth statistics relating to gross losses and
losses net of recoveries on defaulted lease and loan contracts within the
Originators' owned and managed portfolios (of receivables similar to the
Contracts on an aggregate basis) during the 12-month period ending December 31
in each of the past four years and during the six-month period ending June 30,
1996. Such receivables did not constitute the Originators' entire portfolio of
lease contracts and loan contracts. For these purposes, "gross losses" means
total losses before recoveries measured against the net investment of the lease
and loan contracts (gross of any allowance for losses), and "losses net of
recoveries" means losses after recoveries measured against the net investment of
the lease and loan contracts (gross of any allowance
40
<PAGE>
for losses). The statistics set forth below relate to the portfolio of
receivables similar to the Contracts serviced by the Originators during the
period indicated and not only to the Contracts; and, accordingly, such
statistics are not necessarily indicative of the future performance of the
Contracts.
<TABLE>
<CAPTION>
AGGREGATE NET GROSS LOSSES AS A NET LOSSES AS A
INVESTMENT OF CONTRACTS PERCENTAGE OF NET PERCENTAGE OF NET
DATE OF CALCULATION (IN THOUSANDS) INVESTMENT INVESTMENT
- ------------------------- -------------------------- ------------------- -------------------
<S> <C> <C> <C>
12/31/92................. $ 3,159,814 2.68% 2.17%
12/31/93................. $ 3,339,313 2.44% 1.88%
12/31/94................. $ 3,839,569 1.77% 1.22%
12/31/95................. $ 4,107,023 1.80% 1.32%
6/30/96................. $ 4,357,631 1.73% 1.29%
</TABLE>
The Originators' delinquency, non-accrual and net loss experience has
historically been affected by prevailing economic conditions, particularly in
industries and geographic regions where it has customer concentrations.
Recently, for example, a downturn in the retailing industry has caused an
increase in delinquencies in contracts relating to point-of-sale equipment, and
recent weakness in general economic conditions has caused an increase in
delinquencies in the Originators' small-ticket portfolios. TCC believes the
increased use of scoring models, both in underwriting and collections, has been
a factor in the improvement in non-accruals and losses over the past five years.
It has been the Originators' experience that, unlike consumer receivables,
collections from the obligors constitute a significant portion of recoveries on
defaulted receivables, in addition to the proceeds from liquidation of the
related equipment. The resale value of individual items of Equipment, which
would be collected by the Servicer in the event of a default under the related
Contract, will vary substantially, depending on such factors as the expected
remaining useful life of the Equipment at the time of the default and the
obsolescence of the Equipment. It is possible that the resale values for some
Equipment would be negligible or insufficient to justify repossession and
resale.
41
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of the
Indenture will be filed with the Commission following the issuance of the Notes.
The following summary describes certain terms of the Notes and the Indenture.
The summary does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Notes and the
Indenture. The Chase Manhattan Bank, a national banking association
headquartered in New York, New York, will be the Indenture Trustee.
Pursuant to the Indenture, the Owner Trust will issue five classes of notes
(the "Notes"), consisting of four classes of senior notes, designated as the
% Receivable-Backed Notes, Class A-1, in the original principal amount of
$ (the "Class A-1 Notes"), the % Receivable-Backed Notes, Class A-2, in
the original principal amount of $ (the "Class A-2 Notes"), the %
Receivable-Backed Notes, Class A-3, in the original principal amount of $
(the "Class A-3 Notes"), and the % Receivable-Backed Notes, Class A-4, in the
original principal amount of $ (the "Class A-4 Notes" and, together with
the Class A-1, Class A-2 and Class A-3 Notes, the "Class A Notes"), and one
class of subordinated notes, designated as the % Receivable-Backed Notes,
Class B, in the original principal amount of $ (the "Class B Notes").
The Class A Notes will be senior in right of payment to the Class B Notes.
The Owner Trust will also issue a single class of certificates of beneficial
interest, the Equity Certificates, which are not being offered hereby. It is
expected that the Equity Certificates will initially represent the right to
receive principal in an amount equal to approximately 4% of the Initial Contract
Pool Principal Balance, together with interest thereon at % per annum,
payable from Pledged Revenues in the priority described under "-- Distributions"
below.
Payments on the Notes will be made by the Indenture Trustee on each Payment
Date to persons in whose names the Notes are registered as of the related Record
Date (the "Holders" or "Noteholders"). The Payment Date for the Notes will be
the 15th day of each month (or if such 15th day is not a Business Day, the next
succeeding Business Day), commencing in November 1996. The Record Date for any
Payment Date will be the Business Day immediately preceding the Payment Date (so
long as the Notes are held in the book-entry form), or the last day of the prior
calendar month (if Definitive Notes have been issued).
A "Business Day" is any day (other than a Saturday, Sunday or legal holiday)
on which commercial banks in New York City, or any other location of successor
Servicer or Indenture Trustee, are open for regular business.
Each Class of Notes initially will be represented by one or more global
Notes (the "Global Notes") registered in the name of the nominee of DTC
(together with any successor depository selected by the Indenture Trustee, the
"Depository"), except as set forth below. Beneficial interests in each Class of
Notes will be available for purchase in minimum denominations of $10,000 and
integral multiples thereof in book-entry form only. The Depositor has been
informed by DTC that DTC's nominee will be Cede & Co. Accordingly, Cede & Co. is
expected to be the Holder of record of the Notes. Unless and until Definitive
Notes are issued under the limited circumstances described herein, no Note Owner
acquiring an interest in any Class of Notes will be entitled to receive a
certificate representing such Note Owner's interest in such Notes. Until such
time, all references herein to actions by Noteholders of any Class of Notes will
refer to actions taken by the Depository upon instructions from its
participating organizations and all references herein to distributions, notices,
reports and statements to Noteholders of any Class of Notes will refer to
distributions, notices, reports and statements to the Depository or its nominee,
as the registered Holder of the Notes of such Class, for distribution to Note
Owners of such Class in accordance with the Depository's procedures. See "--
Book-Entry Registration" and "-- Definitive Notes."
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any paying agent in trust under the Indenture for
the payment of any amount due with respect
42
<PAGE>
to any Note and remaining unclaimed for two years after such amount has become
due and payable shall be discharged from such trust and, upon request of the
Owner Trustee, shall be deposited by the Indenture Trustee in the Collection
Account; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Owner Trust for payment thereof, and all liability of
the Indenture Trustee or such paying agent with respect to such money shall
thereupon cease.
DISTRIBUTIONS
Principal of and interest on the Notes and the Equity Certificates will be
paid on each Payment Date, after payment of the Servicing Fee, solely from, and
secured by, the Amount Available for such Payment Date, which is equal to the
sum of (a) those Pledged Revenues on deposit in the Collection Account as of the
last Business Day preceding the related Determination Date (the "Deposit Date")
(i) which were received by the Servicer during the related Collection Period or
which represent amounts paid by TCC or the Depositor to purchase Contracts as of
the end of such Collection Period ("Related Collection Period Pledged
Revenues"), or (ii) to the extent necessary to pay interest on the Notes and the
Equity Certificates on such Payment Date, which were received by the Servicer
after the end of the related Collection Period but on or prior to such Deposit
Date ("Current Collection Period Pledged Revenues" and, together with the
Related Collection Period Pledged Revenues, the "Available Pledged Revenues"),
plus (b) amounts permitted to be withdrawn therefor from the Cash Collateral
Account, as described under "-- Cash Collateral Account" below.
"Pledged Revenues" will consist of (i) "Scheduled Payments" on the Contracts
(which will consist of all payments under the Contracts other than those
portions of such payments which, under the Contracts, are to be (A) applied by
the Servicer to the payment of insurance charges, maintenance, taxes and other
similar obligations, or (B) retained by the Servicer in payment of
Administrative Fees) received on or after the Cut-Off Date and due during the
term of the Contracts, without giving effect to end-of-term extensions or
renewals thereof (including all Scheduled Payments due prior to, but not
received as of, the Cut-Off Date, but excluding any Scheduled Payments due on or
after, but received prior to, the Cut-Off Date); (ii) any voluntary prepayments
("Prepayments") received on or after the Cut-Off Date under the Contracts,
provided that the amount, if any, by which any such Prepayment exceeds the
Required Payoff Amount of a Lease Contract will not constitute Pledged Revenues
but will be allocated to the Depositor; (iii) any amounts paid by TCC to
purchase Contracts due to a breach of representations and warranties with
respect thereto, as described under "The Contracts -- Representations and
Warranties Made by TCC," excluding, in the case of a Lease Contract, any portion
thereof allocable to the Depositor; (iv) any amounts paid by the Depositor to
purchase the Contracts as described under "Optional Purchase of Contracts below;
(v) certain of the Liquidation Proceeds derived from the liquidation of the
Contracts and the disposition of the related Equipment, as described under "--
Liquidated Contracts" below; and (vi) any earnings on the investment of amounts
credited to the Collection Account.
On each Payment Date, the Indenture Trustee will be required to make the
following payments, first, from Related Collection Period Pledged Revenues,
second, to the extent the Related Collection Period Pledged Revenues are
insufficient to pay interest on the Notes and the Equity Certificiates on such
Payment Date, the amount necessary to cure such insufficiency from Current
Collection Period Pledged Revenues, and third (but only as to amounts described
in clause (ii) and certain amounts included in clause (iii)), from amounts
permitted to be withdrawn from the Cash Collateral Account as described under
"-- Cash Collateral Account" below, in the following order of priority (except
as otherwise described under "-- Events of Default; Rights Upon Event of
Default" below):
(i)
the Servicing Fee;
(ii)
interest on the Notes and the Equity Certificates in the following order
of priority:
(a) interest on the Class A Notes (including any overdue interest and
interest thereon),
(b) interest on the Class B Notes (including any overdue interest and
interest thereon) and
(c) interest on the Equity Certificates (including any overdue interest
and interest thereon);
43
<PAGE>
(iii)
an amount equal to the Monthly Principal Amount, as of such Payment Date,
in respect of principal on the Notes and the Equity Certificates in the
priority described under "-- Principal" below;
(iv)
to the Cash Collateral Account, the amount, if any, necessary to increase
the balance therein to the Requisite Amount; and
(v)
the remainder, if any, to payment of certain amounts payable in
connection with the Cash Collateral Account and thereafter to the Equity
Certificateholders.
CLASS A INTEREST
Interest will be paid to the Holders of each Class of the Class A Notes on
each Payment Date, to the extent the Amount Available (after taking into account
any prior applications described under "-- Distributions" above) is sufficient
therefor, at the interest rate for such Class specified on the cover of this
Prospectus (the "Interest Rate" for such Class) on the then outstanding
principal balance of the Notes of such Class, and will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Such interest so
payable on such Payment Date will be equal to one-twelfth of the product of (i)
the applicable Interest Rate and (ii) the related Class principal balance as of
the immediately preceding Payment Date (after giving effect to reductions in
such principal balance on such immediately preceding Payment Date). Interest on
each Class of the Class A Notes will accrue from and including the Closing Date
to but excluding November 15, 1996 (in the case of the first interest period),
and thereafter for each successive Payment Date from and including the most
recent prior Payment Date to which interest has been paid, to but excluding such
Payment Date.
In the event that, on a given Payment Date, the Amount Available is not
sufficient to make a full payment of interest to the Holders of Class A Notes,
the amount of interest to be paid on the Class A Notes will be allocated among
each Class thereof (and within a Class among the Notes of such Class) pro rata
in accordance with their respective entitlements to interest, and the amount of
such shortfall will be carried forward and, together with interest thereon at
the applicable Interest Rate, added to the amount of interest such Holders will
be entitled to receive on the next Payment Date.
CLASS B INTEREST
Interest will be paid to the Holders of the Class B Notes on each Payment
Date, to the extent the remaining Amount Available (after taking into account
any prior applications described under "-- Distributions" above) is sufficient
therefor, at the Class B Interest Rate on the then outstanding Class B Principal
Balance, and will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Such interest so paid on such Payment Date will be equal
to one-twelfth of the product of (i) the Class B Interest Rate and (ii) the
Class B Principal Balance as of the immediately preceding Payment Date (after
giving effect to reductions in the Class B Principal Balance on such immediately
preceding Payment Date). Interest on the Class B Notes will accrue from and
including the Closing Date to but excluding November 15, 1996 (in the case of
the first interest period), and thereafter for each successive Payment Date from
and including the most recent prior Payment Date to which interest has been
paid, to but excluding such Payment Date.
In the event that, on a given Payment Date, the Amount Available, after
payment of interest on the Class A Notes, is not sufficient to make a full
payment of interest to the Holders of Class B Notes, the amount of interest to
be paid on the Class B Notes will be allocated among the Notes of such Class pro
rata in accordance with their respective entitlements to interest, and the
amount of such shortfall will be carried forward and, together with interest
thereon at the Class B Interest Rate, added to the amount of interest such
Holders will be entitled to receive on the next Payment Date.
PRINCIPAL
To the extent the remaining Amount Available (after taking into account any
prior applications described under "-- Distributions" above) is sufficient
therefor, the amount of principal to be paid on the Notes and the Equity
Certificates on each Payment Date will equal the Monthly Principal Amount.
Principal payable on the Notes on each Payment Date will be paid in respect of
principal on the Class A-1
44
<PAGE>
Notes until the Class A-1 Principal Balance has been reduced to zero, then in
respect of principal on the Class A-2 Notes until the Class A-2 Principal
Balance has been reduced to zero, then in respect of principal on the Class A-3
Notes until the Class A-3 Principal Balance has been reduced to zero, then in
respect of principal on the Class A-4 Notes until the Class A-4 Principal
Balance has been reduced to zero, and then in respect of principal on the Class
B Notes until the Class B Principal Balance has been reduced to zero. Commencing
on the first Payment Date, however, % of the Monthly Principal Amount for
each Payment Date will be payable on the Equity Certificates, on a parity with
payment of principal on the Notes, until the aggregate amount so paid equals
$ (which is 1% of the Initial Contract Pool Principal Balance).
The "Monthly Principal Amount" for any Payment Date will equal the excess,
if any, of (i) the sum of the principal balances of the Notes and the Equity
Certificates as of such Payment Date (determined prior to the payment of any
principal in respect thereof on such Payment Date), over (ii) the aggregate of
the Contract Principal Balances of the Contracts (the "Contract Pool Principal
Balance") as of the last day of the Collection Period relating to such Payment
Date.
The "Contract Principal Balance" of any Contract as of the last day of any
Collection Period is:
(1) in the case of a Lease Contract, the present value of the unpaid
Scheduled Payments due on such Lease Contract after such last day of
the Collection Period (excluding all Scheduled Payments due on or prior to,
but not received as of, such last day, as well as any Scheduled Payments due
after such last day and received on or prior thereto) after giving effect to
any Prepayments received on or prior to such last day, discounted monthly at
the rate of 8.10% per annum (assuming, for purposes of such calculation,
that each Scheduled Payment is due on the last day of the applicable
Collection Period), and
(2) in the case of a Loan Contract, the lesser of (a) the remaining
scheduled principal balance of such Loan Contract after giving effect
to Scheduled Payments due on or prior to such last day of the Collection
Period, whether or not received, as well as any Prepayments, and any
Scheduled Payments due after such last day, received on or prior to such
last day, and (b) the present value of the unpaid Scheduled Payments due on
such Loan Contract after such last day of the Collection Period (excluding
all Scheduled Payments due on or prior to, but not received as of, such last
day, as well as any Scheduled Payments due after such last day and received
prior thereto) after giving effect to any Prepayments received on or prior
to such last day, discounted monthly at the rate of 8.10% per annum
(assuming, for purposes of such calculation, that each Scheduled Payment is
due on the last day of the applicable Collection Period).
The Contract Principal Balance of any Contract which became a Liquidated
Contract during a given Collection Period or was required to be purchased by TCC
as of the end of a given Collection Period due to a breach of representations
and warranties, will, for purposes of computing the Monthly Principal Amount and
the Requisite Amount for the Cash Collateral Account, be deemed to be zero on
and after the last day of such Collection Period.
A "Liquidated Contract" is any Contract (a) which the Servicer has charged
off as uncollectible in accordance with its credit and collection policies and
procedures (which shall be no later than the date as of which the Servicer has
repossessed and disposed of the related Equipment, or otherwise collected all
proceeds which, in the Servicer's reasonable judgment, can be collected under
such Contract), or (b) as to which 10% or more of a Scheduled Payment is
delinquent 180 days or more.
The "Collection Period" for any Payment Date will be the calendar month
preceding the month in which such Payment Date occurs.
The "Initial Contract Pool Principal Balance" is $3,185,229,329 (which
amount is based upon the Contract Pool Principal Balance determined as of the
Cut-Off Date, but also includes an amount in respect of Scheduled Payments on
the Contracts due prior to, but not received as of, the Cut-Off Date).
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SUBORDINATION OF CLASS B NOTES AND EQUITY CERTIFICATES
The likelihood of payment of interest on each Class of Notes will be
enhanced by the application of the Amount Available, after payment of the
Servicing Fee, to the payment of such interest prior to the payment of principal
on any of the Notes or the Equity Certificates, as well as by the preferential
right of the Holders of Notes of each such Class to receive such interest (1) in
the case of the Class A Notes, prior to the payment of any interest on the Class
B Notes or the Equity Certificates, and (2) in the case of the Class B Notes,
prior to the payment of any interest on the Equity Certificates. Likewise, the
likelihood of payment of principal on each Class of Notes will be enhanced by
the preferential right of the Holders of Notes of each such Class to receive
such principal, to the extent of the Amount Available, after payment of the
Servicing Fee and interest on the Notes and the Equity Certificates as
aforesaid, (i) in the case of the Class A Notes, prior to the payment of any
principal on the Class B Notes or (except as described under "-- Principal"
above) the Equity Certificates and (ii) in the case of the Class B Notes, prior
to the payment of any principal on the Equity Certificates, except as described
under "-- Principal" above.
CASH COLLATERAL ACCOUNT
The Cash Collateral Account will be established on or prior to the Closing
Date and will be available to the Indenture Trustee. The Cash Collateral Account
will initially be funded in an amount equal to % of the Initial Contract Pool
Principal Balance (approximately $ ) (the "Initial Amount"). Amounts on
deposit from time to time in the Cash Collateral Account (up to, but not in
excess of, the Requisite Amount described below, and not including any
investment earnings on such funds) shall be used to fund the following amounts
in the following order of priority (to the extent that amounts on deposit in the
Collection Account as of any Deposit Date are insufficient therefor and provided
that any such insufficiency has resulted, directly or indirectly, from
delinquencies or defaults, or both, on the Contracts): (i) to pay interest on
the Notes and the Equity Certificates in the following order of priority: (a)
interest on the Class A Notes (including any overdue interest and interest
thereon), (b) interest on the Class B Notes (including any overdue interest and
interest thereon) and (c) interest on the Equity Certificates (including any
overdue interest and interest thereon); (ii) to pay any Principal Deficiency
Amount (equal to the lesser of (a) the aggregate Liquidation Losses on all
Contracts that became Liquidated Contracts during the related Collection Period
(the "Current Realized Losses") or (b) the excess, if any, of (A) the aggregate
principal balance of the Notes and the Equity Certificates (after giving effect
to all other distributions of principal on such Payment Date), over (B) the
aggregate of the Required Payoff Amounts for all Contracts as of the last day of
the related Collection Period); and (iii) to pay principal on the Notes and
Equity Certificates at the applicable Stated Maturity Date thereof.
"Liquidation Loss" means, as to any Liquidated Contract, the excess, if any,
of (1) the Required Payoff Amount of such Contract for the Collection Period
during which such Contract became a Liquidated Contract, over (2) that portion
of the Liquidation Proceeds for such Liquidated Contract allocated to the Owner
Trust (as described under "-- Liquidated Contracts" below).
The "Required Payoff Amount," with respect to any Collection Period for any
Contract, is equal to the sum of: (i) the Scheduled Payment due in such
Collection Period, together with any Scheduled Payments due in prior Collection
Periods and not yet received, plus (ii) the Contract Principal Balance of such
Contract as of the last day of such Collection Period (after taking into account
the Scheduled Payment due in such Collection Period).
If and to the extent that the amount on deposit in the Cash Collateral
Account as of any Payment Date is less than the Requisite Amount, then such
deficiency is to be restored from the remaining Amount Available, after payment
of the Servicing Fee and interest and principal on the Notes and the Equity
Certificates as described under "-- Distributions" above. The "Requisite Amount"
will be (i) for any Payment Date on or prior to the Payment Date occurring in
, 1997, the Initial Amount, and (ii) for any Payment Date
thereafter, an amount equal to the greater of (a) the sum of (1) % of the
Contract Pool Principal Balance for such Payment Date, plus (2) the excess, if
any, of (A) the sum of the principal balances of the Notes and the Equity
Certificates after giving effect to any payment of principal in respect thereof
on such Payment Date, over (B) the Contract Pool Principal Balance for such
Payment
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Date, and (b) $ (which is % of the Initial Contract Pool Principal
Balance); provided that in no event will the Requisite Amount exceed the sum of
the principal balances of the Notes and the Equity Certificates. Any amount on
deposit in the Cash Collateral Account in excess of the Requisite Amount, and
all investment earnings on funds in the Cash Collateral Account, will be
released from the Cash Collateral Account and paid to or upon the order of the
Depositor, and will not be available to make payments on the Notes or the Equity
Certificates.
The Cash Collateral Account must be an Eligible Account, and funds on
deposit in the Cash Collateral Account will be invested in Eligible Investments
(each as defined under "-- Trust Accounts" below).
LIQUIDATED CONTRACTS
Liquidation Proceeds (which will consist generally of all amounts received
by the Servicer in connection with the liquidation of a Contract and disposition
of the related Equipment, net of any related out-of-pocket liquidation expenses)
will be allocated as follows: (i) with respect to any Loan Contract, all such
Liquidation Proceeds will be allocated to the Owner Trust; and (ii) with respect
to any Lease Contract, such Liquidation Proceeds will be allocated on a pro rata
basis between the Depositor, on the one hand, and the Owner Trust, on the other,
based respectively on (a) the "Book Value" of the Leased Equipment (which is a
fixed amount equal to the value of the Leased Equipment as shown on the
accounting books and records of TCC or the applicable Originator, as
appropriate, as of the Cut-Off Date) and (b) the Required Payoff Amount for such
Lease Contract (determined as of the Collection Period during which such Lease
Contract became a Liquidated Contract); provided that, in the event the
Liquidation Proceeds in respect of any Lease Contract and the related Leased
Equipment exceed the sum of the Required Payoff Amount for such Contract and the
Book Value of such Leased Equipment, any such excess shall be allocated solely
to the Depositor. By way of example, if the Servicer, in connection with a
defaulted Lease Contract, derived Liquidation Proceeds in the amount of $100
from the liquidation of such Lease Contract and disposition of the related
Leased Equipment, and if the Required Payoff Amount of such Lease Contract was,
as of the Collection Period during which such Lease Contract became a Liquidated
Contract, $120 and the Book Value of such Leased Equipment was $30, such
Liquidation Proceeds would be allocated to the Owner Trust in the amount of $80
and to the Depositor in the amount of $20. All Liquidation Proceeds which are so
allocable to the Owner Trust will be deposited in the Collection Account and
constitute Pledged Revenues to be applied to the payment of interest and
principal on the Notes and the Equity Certificates in accordance with the
priorities described under "-- Distributions" above.
OPTIONAL PURCHASE OF CONTRACTS
The Depositor may purchase all of the Contracts on any Payment Date
following the date on which the unpaid principal balance of the Notes and the
Equity Certificates is less than 10% of the Initial Contract Pool Principal
Balance. The purchase price to be paid in connection with such purchase shall be
at least equal to the unpaid principal balance of the Notes and the Equity
Certificates as of such Payment Date plus interest to be paid on the Notes and
the Equity Certificates on such Payment Date. The proceeds of such purchase
shall be applied on such Payment Date to the payment of the remaining principal
balance of the Notes and the Equity Certificates, together with accrued interest
thereon.
TRUST ACCOUNTS
The Indenture Trustee will establish and maintain under the Indenture
segregated trust accounts (which need not be deposit accounts, but which shall
constitute "Eligible Accounts"), consisting of the "Collection Account," the
"Servicing Account" and the "Note Distribution Account" (collectively, the
"Trust Accounts"). An "Eligible Account" means any account which is (i) an
account maintained with an Eligible Institution (as defined below); (ii) an
account or accounts the deposits in which are fully insured by either the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC; (iii) a
"segregated trust account" maintained with the corporate trust department of a
federal or state chartered depository institution or trust company with trust
powers and acting in its fiduciary capacity for the benefit of the Indenture
Trustee, which depository institution or trust company has capital and
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surplus (or, if such depository institution or trust company is a subsidiary of
a bank holding company system, the bank holding company has capital and surplus)
of not less than $50,000,000 and the securities of such depository institution
or trust company (or, if such depository institution or trust company is a
subsidiary of a bank holding company system and such depository institution's or
trust company's securities are not rated, the securities of the bank holding
company) have a credit rating from each of the Rating Agencies (if rated by such
Rating Agency) which signifies "investment grade"; or (iv) an account that will
not cause any Rating Agency to reduce, qualify or withdraw its then-current
rating assigned to the Notes or Equity Certificates, as confirmed in writing by
such Rating Agency. "Eligible Institution" means any depository institution
organized under the laws of the United States or any state, the deposits of
which are insured to the full extent permitted by law by the Bank Insurance Fund
(currently administered by the Federal Deposit Insurance Corporation), whose
short-term deposits or unsecured long-term debt have a credit rating from each
of the Rating Agencies (if rated by such Rating Agency), and which is subject to
supervision and examination by federal or state authorities.
The Servicer, as agent for the Indenture Trustee, may designate, or
otherwise arrange for the purchase by the Indenture Trustee of, investments to
be made with funds in the Trust Accounts, which investments shall be Eligible
Investments (as defined in the Indenture) that will mature not later than the
business day preceding the applicable monthly Payment Date. "Eligible
Investments" include, among other investments, obligations of the United States
or of any agency thereof backed by the full faith and credit of the United
States; federal funds, certificates of deposit, time deposits and bankers'
acceptances sold by eligible financial institutions; certain repurchase
agreements with eligible institutions and other investments which would not
result in the reduction, qualification or withdrawal of any rating of the Notes
or Equity Certificates by any Rating Agency.
REPORTS TO NOTEHOLDERS
The Servicer will furnish to the Indenture Trustee, and the Indenture
Trustee will include with each distribution to a Noteholder, a statement in
respect of the related Payment Date setting forth, among other things:
(i)
the amount of interest paid on the Class A-1 Notes, including any
unpaid interest from the prior Payment Date, and any remaining unpaid
interest on the Class A-1 Notes;
(ii)
the amount of interest paid on the Class A-2 Notes, including any
unpaid interest from the prior Payment Date, and any remaining unpaid
interest on the Class A-2 Notes;
(iii)
the amount of interest paid on the Class A-3 Notes, including any
unpaid interest from the prior Payment Date, and any remaining unpaid
interest on the Class A-3 Notes;
(iv)
the amount of interest paid on the Class A-4 Notes, including any
unpaid interest from the prior Payment Date, and any remaining unpaid
interest on the Class A-4 Notes;
(v)
the amount of interest paid on the Class B Notes, including any
unpaid interest from the prior Payment Date, and any remaining unpaid
interest on the Class B Notes;
(vi)
the amount of principal paid on the Class A-1 Notes;
(vii)
the amount of principal paid on the Class A-2 Notes;
(viii)
the amount of principal paid on the Class A-3 Notes;
(ix)
the amount of principal paid on the Class A-4 Notes;
(x)
the amount of principal paid on the Class B Notes;
(xi)
the Principal Deficiency Amount, if any, for such Payment Date;
(xii)
the amount of interest and principal (if any) paid on the Equity
Certificates; and
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(xiii)
the Requisite Amount of the Cash Collateral Account and the amount on
deposit in the Cash Collateral Account (after giving effect to any
deposits and withdrawals to be made on the Payment Date).
The Notes will be registered in the name of a nominee of DTC and will not be
registered in the names of the beneficial owners or their nominees. As a result,
unless and until Definitive Notes are issued in the limited circumstances
described under "-- Definitive Notes" below, beneficial owners will not be
recognized by the Indenture Trustee as Noteholders, as that term is used in the
Indenture. Hence, until such time, beneficial owners will receive reports and
other information provided for under the Indenture only if, when and to the
extent provided by DTC and its participating organizations. The Servicer will
file a copy of each such report with the Commission on Form 8-K. However, in
accordance with the Exchange Act and the rules and regulations of the Commission
thereunder, the Depositor expects that the Trust's obligation to file such
reports will be terminated at the end of 1996.
BOOK-ENTRY REGISTRATION
Each Class of Notes will initially be represented by one or more Global
Notes registered in the name of the nominee of DTC. The Depositor has been
informed by DTC that DTC's nominee will be Cede & Co. Noteholders may hold their
Notes through DTC (in the United States) or Cedel Bank or Euroclear (in Europe),
which in turn hold through DTC, if they are participants of such systems
("Participants"), or indirectly through organizations that are participants in
such systems. Cedel Bank and Euroclear will hold omnibus positions on behalf of
the Cedel Bank Participants and the Euroclear Participants, respectively,
through customers' securities accounts in Cedel Bank's and Euroclear's names on
the books of their respective depositories (collectively, the "International
Depositories") which in turn will hold such positions in customers' securities
accounts in the International Depositories' names on the books of DTC.
DTC is a New York-chartered limited-purpose trust company, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the UCC
in effect in the State of New York, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities for
its Participants ("DTC Participants") and facilitates the clearance and
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. Indirect
access to the DTC system is also available to others such as securities brokers
and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Bank Participants and Euroclear Participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel Bank Participants or Euroclear Participants on the other hand,
will be effected through DTC in accordance with DTC rules on behalf of the
relevant European international clearing system by its International Depository;
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 International Depository to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Cedel Bank Participants and Euroclear Participants may not
deliver instructions directly to the International Depositories.
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Because of time-zone differences, credits of securities received in Cedel
Bank or Euroclear as a result of a transaction with a DTC Participant will be
made during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the relevant
Cedel Bank Participant or Euroclear Participant on such business day. Cash
received in Cedel Bank or Euroclear as a result of sales of securities by or
through a Cedel Bank Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available in
the relevant Cedel Bank or Euroclear cash account only as of the business day
following settlement in DTC. For additional information regarding clearance and
settlement procedures and with respect to tax documentation procedures, see
"Global Clearance, Settlement and Tax Documentation Procedures" and "Certain
U.S. Federal Income Tax Documentation Requirements" in Appendix A.
Note Owners that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in, Notes
may do so only through Participants and Indirect Participants. Note Owners will
receive all distributions from the Indenture Trustee through Participants and
Indirect Participants. Note Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Indenture Trustee to
DTC's nominee. DTC will forward such payments to its Participants, which
thereafter will forward them to Indirect Participants or Note Owners. Note
Owners will not be recognized by the Indenture Trustee as Noteholders and Note
Owners will be permitted to exercise the rights of Noteholders only indirectly
through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Notes among Participants on whose behalf it acts with respect to the Notes and
to receive and transmit distributions of amounts payable on the Notes.
Participants and Indirect Participants with which Note Owners have accounts
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Note Owners. Accordingly, although
Note Owners will not possess Notes, the Rules provide a mechanism by which
Participants will receive payments and will be able to transfer their interests.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Note Owner
to pledge Notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Notes, may be limited due to
the lack of a physical certificate for such Notes.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Noteholder under the Indenture, only at the direction of one or more
Participants to whose accounts with DTC the Notes are credited. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Participants whose holdings include such
undivided interests.
Except as required by law, the Depositor, the Owner Trust, and the Indenture
Trustee will not have any liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the Notes held by
DTC's nominee, or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Indenture
Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, Definitive Notes are required to be printed and
delivered. See "-- Definitive Notes."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Depositor believes to be reliable, but
the Depositor takes no responsibility for the accuracy or completeness thereof.
Cedel Bank, societe anonyme ("Cedel Bank") is incorporated under the laws of
Luxembourg as a professional depository. Cedel Bank holds securities for its
Participants ("Cedel Bank Participants") and
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facilitates the clearance and settlement of securities transactions between
Cedel Bank Participants through electronic book-entry changes in accounts of
Cedel Bank Participants, thereby eliminating the need for physical movement of
securities. Transactions may be settled by Cedel Bank in numerous currencies,
including United States dollars. Cedel Bank provides to its Cedel Bank
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel Bank interfaces with domestic markets in several
countries. As a professional depository, Cedel Bank is subject to regulations by
the Luxembourg Monetary Institute. Cedel Bank Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the Underwriters of the Notes. Indirect
access to Cedel Bank is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Bank Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of securities and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in numerous currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear system on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific securities
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel Bank or Euroclear
will be credited to the cash accounts of Cedel Bank Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its International Depository. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. Cedel Bank or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Noteholder under the Indenture on
behalf of a Cedel Bank Participant or a Euroclear Participant only in accordance
with its relevant rules and procedures and subject to its International
Depository's ability to effect such actions on its behalf through DTC.
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Although DTC, Cedel Bank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Cedel Bank and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
A paying agent shall be maintained in respect of the Notes in Luxembourg
(the "Luxembourg Paying Agent") for so long as the Notes are listed on the
Luxembourg Stock Exchange. Kredietbank S.A. Luxembourgeoise has been appointed
as the initial Luxembourg Paying Agent. Kredietbank S.A. Luxembourgeoise shall
be appointed transfer agent in Luxembourg, with respect to the Notes, in case
the Global Notes are replaced by Definitive Notes.
DEFINITIVE NOTES
The Notes of each Class will be issued in registered, certificated form to
the Note Owners of such Class or their nominees ("Definitive Notes"), rather
than to the Depository or its nominee, only if (i) the Depository advises the
Indenture Trustee in writing that it is no longer willing or able to discharge
properly its responsibilities as Depository with respect to the Notes of such
Class, and the Indenture Trustee is unable to locate a qualified successor, or
(ii) Note Owners representing not less than 50% of the principal balance of such
Class advise the Indenture Trustee and the Depository through Participants in
writing that the continuation of a book-entry system through the Depository is
no longer in the best interest of the Note Owners of such Class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Depository is required to notify all Participants of
the availability through the Depository of Definitive Notes. Upon surrender by
the Depository of the definitive certificate representing the Notes of the
affected Class and instructions for registration, the Indenture Trustee will
issue the Notes of such Class as Definitive Notes, and thereafter the Indenture
Trustee will recognize the Note Owners of such Definitive Notes as Noteholders
under the Indenture.
Distributions of principal and interest on the Notes will be made by the
Indenture Trustee directly to Noteholders in accordance with the procedures set
forth herein and in the Indenture. Interest payments and any principal payments
on each Payment Date will be made to Noteholders in whose names the Definitive
Notes were registered at the close of business on the related Record Date.
Distributions will be made by check mailed to the address of such Noteholder as
it appears on the register maintained by the Indenture Trustee. The final
payment on any Note, however, will be made only upon presentation and surrender
of such Note at the office or agency specified in the notice of final
distribution to Noteholders. The Indenture Trustee will provide such notice to
registered Noteholders mailed not later than the fifth day of the month of such
final distributions.
Definitive Notes will be transferable and exchangeable at the offices of the
transfer agent and registrar, which initially will be the Indenture Trustee (in
such capacity, the "Transfer Agent and Registrar") and the offices of
Kredietbank S.A. Luxembourgeoise which shall be appointed as transfer agent in
Luxembourg in respect of such Definitive Notes (the "Luxembourg Transfer
Agent"). 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. The Transfer Agent and Registrar will not be required to register the
transfer or exchange of Definitive Notes for the period from the Record Date
preceding the due date for any payment to the Payment Date with respect to such
Definitive Notes.
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT
The Owner Trust and the Indenture Trustee may, without consent of the
Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the collateral
or add additional collateral; (ii) to provide for the assumption of the Notes
and the Indenture obligations by a permitted successor to the Owner Trust (as
described under "-- Certain Covenants"); (iii) to add additional covenants for
the benefit of the Noteholders, or to surrender any rights or power conferred
upon the Owner Trust; (iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee; (v) to cure any ambiguity or correct
or supplement any
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provision in the Indenture or in any supplemental indenture which may be
inconsistent with any other provision of the Indenture; (vi) to provide for the
acceptance of the appointment of a successor Indenture Trustee or to add to or
change any of the provisions of the Indenture or in any supplemental indenture
as shall be necessary and permitted to facilitate the administration by more
than one trustee; (vii) to modify, eliminate or add to the provisions of the
Indenture in order to comply with the Trust Indenture Act of 1939, as amended;
(viii) to avoid a reduction, qualification or withdrawal of any rating of the
Notes; or (ix) to add any provisions to, or change in any manner or eliminate
any of the provisions of, the Indenture or to modify in any manner the rights of
the Holders of the Notes under the Indenture, provided that such action shall
not (a) result in a reduction, qualification or withdrawal of the then-current
ratings of the Notes or the Equity Certificates, or (b) as evidenced by an
opinion of counsel, adversely affect in any material respect the interests of
any Noteholder.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT
With the consent of the Holders representing a majority of the principal
balance of each Class of the Notes then outstanding (a "Note Majority"), the
Owner Trustee and the Indenture Trustee may execute a supplemental indenture to
add provisions to change in any manner or eliminate any provisions of, the
Indenture, or modify in any manner the rights of the Noteholders.
Without the consent of the Holder of each outstanding Note affected thereby,
however, no supplemental indenture may: (i) change the date, timing or method of
determination of any installment of principal of or interest on any Note or
reduce the principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change the manner of calculating any
such payment or any place of payment where, or the coin or currency in which,
any Note or any interest thereon is payable; (ii) impair the right to institute
suit for the enforcement of certain provisions of the Indenture regarding
payment; (iii) reduce the percentage of each Class of the Notes then outstanding
the consent of the Holders of which is required for any such supplemental
indenture or for any waiver of compliance with certain provisions of the
Indenture or of certain defaults thereunder and their consequences; (iv) modify
or alter the provisions of the Indenture regarding the voting of Notes held by
the Owner Trust, any other obligor on the Notes, the Depositor or an affiliate
of any of them; (v) reduce the percentage of the Notes the consent of the
Holders of which is required to direct the Indenture Trustee to sell or
liquidate the Pledged Revenues if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid interest on the
outstanding Notes; (vi) reduce the percentage of each Class of the Notes then
outstanding required to amend the sections of the Indenture which specify the
applicable percentage of each Class of the Notes then outstanding necessary to
amend the Indenture or certain other related agreements; (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the Holder of any Note of the
security afforded by the lien of the Indenture; or (viii) result in a reduction,
qualification or withdrawal of the rating of any Class of Notes by a Rating
Agency, as confirmed in writing by each Rating Agency.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
"Events of Default" under the Indenture will consist of: (i) a default for
five calendar days or more in the payment of interest due on any Note; (ii)
failure to pay the unpaid principal amount of any Class of Notes on the Stated
Maturity Date or any redemption date for such Class; (iii) a default in the
observance or performance in any material respect of any covenant or agreement
of the Owner Trust made in the Indenture, or any representation or warranty made
by the Owner Trust in the Indenture or in any certificate delivered pursuant
thereto or in connection therewith having been incorrect as of the time made,
and the continuation of any such default or the failure to cure such breach of a
representation or warranty for a period of 30 calendar days after notice thereof
is given to the Owner Trust by the Indenture Trustee or to the Owner Trust and
the Indenture Trustee by the Holders of at least 25% in principal amount of the
Notes then outstanding; or (iv) certain events of bankruptcy, insolvency,
receivership or liquidation of the Owner Trust or the Depositor.
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If an Event of Default should occur and be continuing with respect to the
Notes, the Indenture Trustee or a Note Majority may declare the principal of the
Notes to be immediately due and payable. Such declaration may, under certain
circumstances, be rescinded by a Note Majority.
If the Notes have been declared due and payable following an Event of
Default, the Indenture Trustee may institute proceedings to collect amounts due
or foreclose on Pledged Revenues, exercise remedies as a secured party, sell the
related Pledged Revenues or elect to have the Owner Trust maintain possession of
the Pledged Revenues and continue to apply collections on the Pledged Revenues
as if there had been no declaration of acceleration. The Indenture Trustee,
however, will be prohibited from selling the Pledged Revenues following an Event
of Default, unless (i) the Holders of all the outstanding Notes consent to such
sale; (ii) the proceeds of such sale distributable to Holders of the Notes are
sufficient to pay in full the principal of and the accrued interest on all the
outstanding Notes at the date of such sale; or (iii) the Indenture Trustee
determines that the Pledged Revenues would not be sufficient on an ongoing basis
to make all payments on the Notes as such payments would have become due if such
obligations had not been declared due and payable, and the Indenture Trustee
obtains the consent of the Holders of 66 2/3% of the aggregate outstanding
amount of the Notes. Following a declaration upon an Event of Default that the
Notes are immediately due and payable, any proceeds of liquidation of the
Pledged Revenues, will be applied in the following order of priority: (i) to the
reimbursement of the Trustee for its expenses; (ii) to the payment of interest
and then principal on the Class A Notes; (iii) to the payment of interest and
then principal on the Class B Notes; (iv) to the payment of interest and then
principal on the Equity Certificates; and (v) the remainder, if any, to payment
of certain amounts payable in connection with the Cash Collateral Account and
thereafter to the Equity Certificateholders.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing, the
Indenture Trustee will be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the Holders of
the Notes, if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the Indenture, a Note
Majority will have the right to direct the time, method and place of conducting
any proceeding or any remedy available to the Indenture Trustee, and a Note
Majority may, in certain cases, waive any default with respect thereto, except a
default in the payment of principal or interest or a default in respect of a
covenant or provision of the Indenture that cannot be modified without the
waiver or consent of all of the Holders of such outstanding Notes.
No Holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such Holder previously has given to the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
Holders of not less than 25% in principal amount of the outstanding Notes have
made written request of the Indenture Trustee to institute such proceeding in
its own name as Indenture Trustee, (iii) such Holder or Holders have offered the
Indenture Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60
days failed to institute such proceeding, and (v) no direction inconsistent with
such written request has been given to the Indenture Trustee during such 60-day
period by the Holders of a majority in principal amount of such outstanding
Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the Noteholders.
In addition, the Indenture Trustee and the Noteholders, by accepting the
Notes, will covenant that they will not at any time institute against the
Depositor or the Owner Trust any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law.
Neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor any Holder of a Note including, without limitation, the Depositor,
nor any of their respective owners, beneficiaries,
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agents, officers, directors, employees, affiliates, successors or assigns will,
in the absence of an express agreement to the contrary, be personally liable for
the payment of the Notes or for any agreement or covenant of the Owner Trust
contained in the Indenture.
CERTAIN COVENANTS
The Indenture will provide that the Owner Trust may not consolidate with or
merge into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States or any
state, (ii) such entity expressly assumes the Trust's obligation to make due and
punctual payments upon the Notes and the performance or observance of every
agreement and covenant of the Owner Trust under the Indenture, (iii) no Event of
Default shall have occurred and be continuing immediately after such merger or
consolidation, (iv) the Owner Trustee has been advised that the rating of the
Notes and the Equity Certificates then in effect would not be reduced or
withdrawn by the Rating Agencies as a result of such merger or consolidation,
(v) the Owner Trustee has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence to the
Owner Trust or to any Noteholder or Equity Certificateholder, and (vi) the Owner
Trust or the Person (if other than the Owner Trust) formed by or surviving such
consolidation or merger has a net worth, immediately after such consolidation or
merger, that is (a) greater than zero and (b) not less than the net worth of the
Owner Trust immediately prior to giving effect to such consolidation or merger.
The Owner Trust will not, among other things, (i) except as expressly
permitted by the Indenture or the Trust Agreement, sell, transfer, exchange or
otherwise dispose of any of the assets of the Owner Trust, (ii) claim any credit
on or make any deduction from the principal and interest payable in respect of
the related Notes (other than amounts withheld under the Code or applicable
state law) or assert any claim against any present or former Holder of such
Notes because of the payment of taxes levied or assessed upon the Owner Trust,
(iii) dissolve or liquidate in whole or in part, (iv) permit the validity or
effectiveness of the Indenture to be impaired or permit any person to be
released from any covenants or obligations with respect to the Notes under the
Indenture except as may be expressly permitted thereby, or (v) except as
expressly permitted by the Indenture, the Transfer and Servicing Agreement or
the Trust Agreement, permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or otherwise arise
upon or burden the assets of the Owner Trust or any part thereof, or any
interest therein or proceeds thereof.
The Owner Trust may not engage in any activity other than as specified under
"The Depositor and the Owner Trust -- The Owner Trust." The Owner Trust will not
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the Notes and the Indenture or otherwise in accordance with the
Indenture, the Trust Agreement and the Transfer and Servicing Agreement.
ANNUAL COMPLIANCE STATEMENT
The Owner Trust will be required to file annually with the Indenture Trustee
a written statement as to the fulfillment of its obligations under the
Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The Indenture Trustee will be required to mail each year to all Noteholders
a brief report relating to its eligibility and qualification to continue as
Indenture Trustee under the related Indenture, any amounts advanced by it under
the Indenture, the amount, interest rate and maturity date of certain
indebtedness owing by the Owner Trust to the Indenture Trustee in its individual
capacity, the property and funds physically held by the Indenture Trustee as
such and any action taken by it that materially affects the Notes and that has
not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing the
Notes upon the delivery to the related Indenture Trustee for cancellation of all
such Notes or, with certain limitations, upon deposit with the Indenture Trustee
of funds sufficient for the payment in full of all of such Notes.
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THE INDENTURE TRUSTEE
The Chase Manhattan Bank will be the Indenture Trustee. The Indenture
Trustee may resign at any time, in which event the Depositor will be obligated
to appoint a successor trustee. The Depositor may also remove the Indenture
Trustee if the Indenture Trustee ceases to be eligible to continue as such under
the Indenture, if the Indenture Trustee becomes insolvent or if the rating
assigned to the long-term unsecured debt obligations of the Indenture Trustee
(or the holding company thereof) by the Rating Agencies shall be lowered below
the rating of "BBB", "Baa3" or equivalent rating or be withdrawn by any Rating
Agency. In such circumstances, the Depositor will be obligated to appoint a
successor trustee. Any resignation or removal of the Indenture Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by a successor trustee.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENT
TRANSFER AND ASSIGNMENT OF CONTRACTS AND EQUIPMENT
On the Closing Date, the Originators will transfer to the Depositor pursuant
to the Purchase Agreement all of their right, title and interest in the
Contracts and the related Equipment, including all security interests created
thereby and therein, the right to receive all Scheduled Payments and Prepayments
received on the Contracts on or after the Cut-Off Date (including all Scheduled
Payments due prior to, but not received as of, the Cut-Off Date, but excluding
any Scheduled Payments due on or after, but received prior to, the Cut-Off
Date), all rights under insurance policies maintained on the Equipment pursuant
to the Contracts, all documents contained in the Contract Files and all proceeds
derived from any of the foregoing. Pursuant to the Transfer and Servicing
Agreement, on the Closing Date, the Depositor will transfer all of the foregoing
(excluding the Depositor's ownership or security interest in the Leased
Equipment, as well as a portion of (i) Prepayments received on Lease Contracts
and (ii) Liquidation Proceeds received with respect to the liquidation of
defaulted Lease Contracts and the disposition of the related Leased Equipment,
as described under "The Depositor and the Owner Trust-- The Depositor," all of
which will be retained by the Depositor), together with all its rights under the
Purchase Agreement, to the Owner Trust.
The Transfer and Servicing Agreement will designate the Servicer as
custodian to maintain possession, as the Owner Trust's agent, of the Contracts
and all documents related thereto. To facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in TCC's possession. UCC financing statements will be
filed on the Closing Date in the applicable jurisdictions reflecting the
transfer of the Contracts and the Equipment by the Originators to the Depositor,
the transfer by the Depositor to the Owner Trust, and the pledge by the Owner
Trust to the Indenture Trustee, and the Originators' accounting records and
computer systems will also reflect such assignments and pledge. The Contracts
will not, however, be stamped or otherwise physically marked to reflect their
assignment to the Owner Trust. If, through fraud, negligence or otherwise, a
subsequent purchaser were able to take physical possession of the Contracts
without knowledge of the assignment, the Owner Trust's interest in the Contracts
could be defeated. See "Risk Factors -- Certain Legal Aspects of the Contracts"
and "Certain Legal Aspects of the Contracts."
COLLECTIONS ON CONTRACTS
The Indenture Trustee will establish and maintain a Servicing Account, into
which the Servicer will deposit, no later than the second Business Day after
receipt thereof, all Scheduled Payments, Prepayments, Liquidation Proceeds and
other amounts received by the Servicer in respect of the Contracts after the
Cut-Off Date. The Servicer will thereafter transfer to the Collection Account,
no later than the third Business Day after deposit thereof in the Servicing
Account, the following amounts:
(i) all Scheduled Payments made by or on behalf of Obligors under the
Contracts;
(ii)all Prepayments, excluding any portion thereof allocable to the
Depositor, as described in clause (ii) of the definition of "Pledged
Revenues" under "Description of the Notes -- Distributions";
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(iii)
all amounts constituting Liquidation Proceeds on Liquidated Contracts
to the extent allocable to the Owner Trust as described under
"Description of the Notes -- Liquidated Contracts";
(iv)any and all payments made by TCC pursuant to the Transfer and
Servicing Agreement in connection with the purchase of any Contracts
as a result of a breach of a representation or warranty with respect
thereto, as described under "The Contracts -- Representations and Warranties
Made by TCC," excluding, in the case of a Lease Contract, any portion
thereof allocable to the Depositor; and
(v) the amount paid by the Depositor to purchase the Contracts, as
described under "Description of the Notes -- Optional Purchase of
Contracts."
So long as no Event of Termination shall have occurred and be continuing
with respect to the Servicer, the Servicer may make the remittances to be made
by it to the Collection Account net of amounts (which amounts may be netted
prior to any such remittance for a Collection Period) otherwise to be
distributed to it in payment of its Servicing Fee.
The Servicer will be entitled to withdraw from the Collection Account any
amounts deposited therein in error or required to be repaid to an Obligor, based
on the Servicer's good-faith determination that such amount was deposited in
error or must be returned to the Obligor.
Under the Transfer and Servicing Agreement, the Servicer is required to
establish in its own name one or more "Insurance, Maintenance and Tax Accounts,"
into which are to be deposited any payments made by or on behalf of Obligors
which constitute (a) insurance charges paid by an Obligor to the lessor or
secured party under a Contract (unless such payments are made directly by the
Obligor to the applicable insurance company, or TCC or the Originator has
previously paid such charges), (b) any insurance payments or recoveries paid by
an insurance company or comparable third party and related to the damage to, or
destruction of, the Equipment related to such Contract (unless paid directly by
such insurance company or comparable third party directly to the Obligor), (c)
any payments made by or on behalf of Obligors which constitute amounts paid by
an Obligor to the lessor or secured party under a Contract in respect of the
maintenance of the related Equipment, and (d) taxes paid by the Obligor and
related to the applicable Contract or the Equipment related thereto (unless such
payment is made directly by the Obligor to the applicable taxing authority or
authorities, or TCC or the Originator has previously paid such taxes). The
Servicer may withdraw amounts from the Insurance, Maintenance and Tax Accounts,
when and if appropriate, to pay when due (or may pay from its own funds and
thereafter reimburse itself from amounts in the Insurance, Maintenance and Tax
Accounts) (1) all insurance charges in the amounts received under clause (a)
above, (2) any amounts payable under any applicable maintenance contract or
otherwise with respect to the maintenance of the related Equipment in the
amounts received under clause (c) above, and (3) all taxes in the amounts
received under clause (d) above. Amounts on deposit in the Insurance,
Maintenance and Tax Accounts which represent amounts received by the Servicer
pursuant to clause (b) above shall be applied by the Servicer as follows: if
equipment is purchased to replace the Equipment that was damaged or destroyed,
and such replacement equipment is (in the reasonable opinion of the Servicer) of
comparable use and equivalent value to the Equipment that was damaged or
destroyed, or if the Equipment is to be repaired, the Servicer shall release
such amount so received from the insurance company or comparable third party in
payment or reimbursement for such replacement equipment or such repair; and if
this replacement option is not exercised and the Equipment is not to be
repaired, then the Servicer shall treat such amount as Liquidation Proceeds and
transfer that portion thereof which would be allocable to the Notes and the
Equity Certificates (as described in "Description of the Notes -- Liquidated
Contracts") from the Insurance, Maintenance and Tax Account to the Collection
Account.
The Servicer will pay to the Depositor, no later than the third Business Day
after deposit thereof in the Servicing Account, all proceeds from the
disposition of Leased Equipment, to the extent allocable to the Depositor,
including amounts paid by Obligors to exercise purchase options under Lease
Contracts and the allocable portion of Liquidation Proceeds (as described under
"Description of the Notes -- Liquidated Contracts").
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On or before the fifth Business Day preceding each Payment Date (the
"Determination Date"), the Servicer is required to determine the amount of
Related Collection Period Pledged Revenues for such Payment Date, the amount of
interest payable on the Notes and the Equity Certificates on such Payment Date,
the Monthly Principal Amount for such Payment Date, the Principal Deficiency
Amount (if any) for such Payment Date, and the amount, if any, by which such
Related Collection Period Pledged Revenues, when applied in accordance with the
priorities described under "Description of the Notes -- Distributions," are
insufficient to pay the interest payable on the Notes and the Equity
Certificates on such Payment Date (an "Interest Shortfall"). If there is an
Interest Shortfall for such Payment Date, Current Collection Period Pledged
Revenues will be applied to the payment of interest on the Notes and the Equity
Certificates to the extent necessary to cure such Interest Shortfall. The
Servicer shall further give notice to the Indenture Trustee of amounts to be
withdrawn from the Cash Collateral Account to pay (1) any remaining Interest
Shortfall (after giving effect to the previous application of Available Pledged
Revenues as aforesaid), (2) the Principal Deficiency Amount (if any), and (3) if
such Payment Date is the Stated Maturity Date for any Class of Notes or the
Equity Certificates, the remaining unpaid principal balance of such Class of
Notes or the Equity Certificates (after giving effect to previous application of
Available Pledged Revenues as aforesaid).
SERVICING
Pursuant to the Transfer and Servicing Agreement, TCC will be engaged to act
as Servicer on behalf of the Owner Trust and the Depositor. The Servicer is
generally obligated under the Transfer and Servicing Agreement to service the
Contracts in accordance with customary and usual procedures of institutions
which service equipment lease contracts, installment sale contracts, promissory
notes, loan and security agreements and other similar types of receivables
comparable to the Contracts and, to the extent more exacting, the degree of
skill and attention that the Servicer exercises from time to time with respect
to all comparable such contracts that it services for itself or others. In
performing such duties, so long as TCC is the Servicer, it shall comply in all
material respects with its credit and collection policies and procedures in
effect from time to time (which credit and collection policies currently in
effect are described under "The Originators--Underwriting and Servicing"). The
Servicer may delegate certain of its servicing responsibilities with respect to
the Contracts to third parties, provided that the Servicer will remain obligated
to the Owner Trust and the Depositor for the proper performance of all such
servicing responsibilities.
The Servicer is generally obligated to act in a commercially reasonable
manner with respect to the repossession and disposition of Equipment following a
Contract default with a view to realizing proceeds at least equal to the fair
market value thereof. The Servicer may, in its discretion, choose to dispose of
Equipment through a new lease or in some other manner which provides for payment
for the Equipment over time. In any such event, the Servicer will be required to
pay from its own funds an amount which, in its reasonable judgment, is equal to
the fair market value of such Equipment (less any related out-of-pocket
liquidation expenses), and the Servicer will be entitled to all payments
received thereafter in respect of such Equipment. Any such amounts so paid by
the Servicer will be deemed to constitute additional Liquidation Proceeds with
respect to the related Contract and Equipment and will be allocated as described
under "Description of the Notes -- Liquidated Contracts."
Under the Transfer and Servicing Agreement, the Servicer is responsible for,
among other things: reviewing and certifying that the Contract Files are
complete; monitoring and tracking any property and sales taxes to be paid by
Obligors; billing, collection and recording of payments from Obligors;
communicating with and providing billing records to Obligors; deposit of funds
into the Collection Account; receiving payments as the Owner Trust's agent on
the insurance policies maintained by the Obligors and communicating with
insurers with respect thereto; issuance of reports to the Indenture Trustee
specified in the Indenture and in the Transfer and Servicing Agreement;
repossession and remarketing of Equipment following Obligor defaults; and paying
the fees and ordinary expenses of the Indenture Trustee and the Owner Trustee.
The Servicer shall, to the extent the proceeds of such liquidation are
sufficient therefor, be entitled to recover all reasonable out-of-pocket
expenses incurred by it in the course of liquidating a Contract and
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disposing of the related Equipment, which amounts may be retained by the
Servicer from such proceeds to the extent of such expenses. The Servicer is
entitled under the Transfer and Servicing Agreement to retain, from liquidation
proceeds, a reserve for out-of-pocket liquidation expenses in an amount equal to
such expenses, in addition to those previously incurred, as it reasonably
estimates will be incurred. Upon completion of such liquidation, the remainder
of any such reserve, after reimbursement to the Servicer of all out-of-pocket
liquidation expenses, shall constitute Liquidation Proceeds and be deposited in
the Collection Account.
Under the Transfer and Servicing Agreement, the Servicer, subject to certain
limitations, is permitted to grant payment extensions on a Contract in
accordance with its credit and collection policies and procedures if the
Servicer believes in good faith that such extension is necessary to avoid a
termination and liquidation of such Contract and will maximize the amount to be
received by the Owner Trust with respect to such Contract. Under the Transfer
and Servicing Agreement, the Servicer, subject to certain limitations, is
permitted to grant modifications or amendments to a Contract in accordance with
its credit and collection policies and procedures.
PREPAYMENTS. The Servicer may in its discretion allow a Prepayment of any
Lease Contract, but only if the amount paid by or on behalf of the Obligor (or,
in the case of a partial Prepayment, the sum of such amount and the remaining
Contract Principal Balance of the Lease Contract after application of such
amount) is at least equal to the Required Payoff Amount of such Lease Contract.
To the extent any Prepayment exceeds the Required Payoff Amount of a Lease
Contract, such excess will be paid to the Depositor.
EVIDENCE AS TO COMPLIANCE. On or before March 31 of each year, the Servicer
must deliver to the Indenture Trustee a report of a nationally recognized
accounting firm stating that such firm has examined certain documents and
records relating to the servicing of equipment leases and loans serviced by the
Servicer and stating that, on the basis of such procedures, such servicing has
been conducted in compliance with the Transfer and Servicing Agreement, except
for any exceptions set forth in such report.
CERTAIN MATTERS REGARDING THE SERVICER. The Servicer may not resign from
its obligations under the Transfer and Servicing Agreement except upon a
determination that its duties thereunder are no longer permissible under
applicable law. No such resignation will become effective until a successor
servicer has assumed the Servicer's obligations and duties under the Transfer
and Servicing Agreement. The Servicer can be removed as Servicer only upon the
occurrence of an Event of Termination as discussed below.
The Servicer must keep in place throughout the term of the Transfer and
Servicing Agreement (i) a policy or policies of insurance covering errors and
omissions by the Servicer, and (ii) a fidelity bond. Such policy or policies and
such fidelity bond shall be in such form and amount as is generally customary
among persons that service a portfolio of equipment leases having an unpaid
balance of at least $100 million and which are generally regarded as servicers
acceptable to institutional investors.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES. Compensation to the
Servicer will include a monthly fee (the "Servicing Fee"), which will be payable
to the Servicer from the Amount Available on each Payment Date, in an amount
equal to the product of one-twelfth of % per annum multiplied by the Contract
Pool Principal Balance as of the last day of the second preceding Collection
Period (or, in the case of the Servicing Fee with respect to the Collection
Period commencing on the Cut-Off Date, the Contract Pool Principal Balance as of
the Cut-Off Date), plus any late fees, late payment interest, documentation
fees, insurance administration charges and other administrative fees and charges
and a portion of any extension fees (collectively, the "Administrative Fees")
collected with respect to the Contracts during the prior Collection Period and
any investment earnings on collections prior to deposit thereof in the
Collection Account. Up to % of such % Servicing Fee will be used by the
Servicer to pay certain expenses relating to the Contracts and the Owner Trust.
The Servicer is authorized under the Transfer and Servicing Agreement, in its
discretion, to waive any Administrative Fees or extension fees that may be
collected in the ordinary course of servicing any Contract.
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EVENTS OF TERMINATION. An Event of Termination under the Transfer and
Servicing Agreement will occur if (a) the Servicer fails to make any payment or
deposit required under the Transfer and Servicing Agreement and such failure
continues for five business days (or three business days in the case of a
failure by TCC to pay the amount necessary to purchase a Contract and the
related Equipment due to a breach of representations and warranties with respect
thereto) after notice from the Indenture Trustee or after discovery by the
Servicer; (b) the Servicer fails to deliver to the Indenture Trustee and the
Owner Trustee the Servicer's Certificate by the third Business Day prior to the
related Payment Date; (c) the Servicer fails to observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
the Transfer and Servicing Agreement (and, if TCC is the Servicer, the Purchase
Agreement), and such failure (i) materially and adversely affects the rights of
the Owner Trust, Noteholders or Equity Certificateholders, and (ii) continues
unremedied for 30 days after written notice thereof has been given to the
Servicer by the Owner Trustee, the Indenture Trustee or any Certificateholder or
Noteholder; (d) certain events of bankruptcy or insolvency occur with respect to
the Servicer; or (e) any representation, warranty or statement of the Servicer
made in the Transfer and Servicing Agreement or any certificate, report or other
writing delivered pursuant thereto proves to be incorrect in any material
respect, and such incorrectness (i) has a material adverse effect on the Owner
Trust, Noteholders or Equity Certificateholders, and (ii) continues uncured for
30 days after written notice thereof has been given to the Servicer by the Owner
Trustee, the Indenture Trustee or any Certificateholder or Noteholder. The
Servicer is required under the Transfer and Servicing Agreement to give the
Indenture Trustee, the Owner Trustee and each Rating Agency notice of an Event
of Termination promptly after having obtained knowledge of such event.
Federal bankruptcy laws limit the termination of contracts solely by reason
of the fact that the party obligated to provide such performance is subject to
federal bankruptcy proceedings. In such a circumstance, the Indenture Trustee
may be unable to terminate the Servicer unless it could demonstrate that
independent grounds (whether or not arising from the same facts causing the
Servicer to be subject to bankruptcy proceedings) exist to declare an Event of
Termination and the court supervising the bankruptcy proceeding determines that
such grounds warrant termination of the Servicer.
RIGHTS UPON EVENT OF TERMINATION. So long as an Event of Termination
remains unremedied, the Indenture Trustee may, and at the written direction of
(i) a Note Majority, or (ii) at such time as the Notes are no longer
Outstanding, Equity Certificateholders representing a majority of the aggregate
principal balance of the Equity Certificates (an "Equity Certificate Majority")
shall, terminate all of the rights and obligations of the Servicer under the
Transfer and Servicing Agreement in and to the Contracts, whereupon a successor
servicer (which, unless and until the Indenture Trustee appoints a new servicer,
will be the Indenture Trustee) will succeed to all the responsibilities, duties
and liabilities of the Servicer under the Transfer and Servicing Agreement and
will be entitled to similar compensation arrangements; provided, however, that
any successor servicer will not assume any obligation of TCC to repurchase
Contracts for breaches of representations and warranties, and any successor
servicer will not be liable for any acts or omissions of the prior Servicer
occurring prior to a transfer of the Servicer's servicing and related functions
or for any breach by such Servicer of any of its obligations contained in the
Transfer and Servicing Agreement.
A Note Majority (or, at such time as the Notes are no longer Outstanding, an
Equity Certificate Majority) may waive any default by the Servicer in the
performance of its obligations under the Transfer and Servicing Agreement and
its consequences. Upon any such waiver of a past default, such default shall
cease to exist, and any Event of Termination arising therefrom shall be deemed
to have been remedied. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
AMENDMENT
The Transfer and Servicing Agreement may be amended by the parties thereto
(i) to cure any ambiguity, (ii) to correct or supplement any provision therein
that may be inconsistent with any other provision therein, or (iii) to make any
other provisions with respect to matters or questions arising under the Transfer
and Servicing Agreement that are not inconsistent with the provisions thereof,
provided that
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such action will not adversely affect in any material respect the interests of
the Noteholders or the Equity Certificateholders. The Transfer and Servicing
Agreement may also be amended by the parties thereto with the consent of a Note
Majority and an Equity Certificate Majority for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Transfer and Servicing Agreement or of modifying in any manner the rights of
the Noteholders or the holders of the Equity Certificates; provided, however,
that no such amendment (a) that reduces in any manner the amount of, or
accelerates or delays the timing of, any payment received on or with respect to
Contracts that are required to be distributed on any Note or Equity Certificate
or that reduces the aforesaid percentage required to consent to any such
amendment or any waiver under the Transfer and Servicing Agreement, may be
effective without the consent of the Holder of each such Note and Equity
Certificate, or (b) will be effective unless each Rating Agency confirms that
such amendment will not result in a reduction, qualification or withdrawal of
the ratings on the Notes and the Equity Certificates.
TERMINATION OF THE TRANSFER AND SERVICING AGREEMENT
The obligations created by the Transfer and Servicing Agreement will
terminate (after distribution of all interest and principal then due to
Noteholders and the holders of the Certificates) on the earlier of (i) the
Payment Date next succeeding the later of the final payment or other liquidation
of the last Contract or the disposition of all Equipment acquired upon
termination of any Contract; or (b) the Payment Date on which the Depositor
repurchases the Contracts as described under "Description of the Notes --
Optional Purchase of Contracts." However, TCC's representations, warranties and
indemnities will survive any termination of the Transfer and Servicing
Agreement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
ENFORCEMENT OF SECURITY INTERESTS IN THE EQUIPMENT
Due to the administrative burden and expense, no assignments of the UCC
financing statements evidencing the security interest of the Originators in the
Equipment (to the extent that such financing statements have been filed against
the Obligor, as discussed under "The Originator--Underwriting and
Servicing--Documentation") will be filed to reflect the Depositor's, the Owner
Trust's and the Indenture Trustee's interests therein. While failure to file
such assignments does not affect the Owner Trust's interest in the Contracts
(including the related Originator's interest in the related Equipment), it does
expose the Owner Trust and the Noteholders to the risk that the Originator could
release its security interest in the Equipment of record, and it could
complicate the Owner Trust's enforcement, as assignee, of the Originator's
security interest in the Equipment. While these risks should not affect the
perfection or priority of the interest of the Indenture Trustee in the Contracts
or rights to payment thereunder, they may adversely affect the right of the
Indenture Trustee to receive proceeds of disposition of the Equipment subject to
a Liquidated Contract, which are to be allocated to the payment of the Notes and
the Equity Certificates as described under "Description of the Notes--Liquidated
Contracts." Additionally, statutory liens for repairs or unpaid taxes and other
liens arising by operation of law may have priority even over prior perfected
security interests assigned to the Indenture Trustee in the Equipment.
In the event of a default by the Obligor under a Loan Contract or a Lease
Contract intended for security, the Servicer on behalf of the Owner Trust and
the Depositor may take action to enforce the Originator's interest in the
related Equipment by repossession and resale or re-lease of the Equipment. Under
the UCC in most states, a creditor can, without prior notice to the debtor,
repossess assets securing a defaulted contract by the Obligor's voluntary
surrender, or by "self-help" repossession that does not involve a breach of the
peace and by judicial process. In the event of bankruptcy or insolvency of the
Obligor these remedies may require the permission of a bankruptcy court or may
otherwise not be immediately available. See "-- Insolvency Matters" below.
In the event of a default by the Obligor under a Loan Contract or a Lease
Contract intended for security, some jurisdictions require that the Obligor be
notified of the default and be given a time period within which it may cure the
default prior to repossession. Generally, this right of reinstatement may be
exercised on a limited number of occasions in any one-year period.
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The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the debtor with reasonable
notice of the date, time and place of any public sale and/or the date after
which any private sale of the collateral may be held and that any such sale be
conducted in a commercially reasonable manner.
Under most state laws, an Obligor under a Loan Contract or a Lease Contract
intended for security has the right to redeem collateral for its obligations
prior to actual sale by paying the lessor or secured party the unpaid balance of
the obligation plus reasonable expenses for repossessing, holding and preparing
the collateral for disposition and arranging for its sale, plus, to the extent
provided for in the written agreement of the parties, reasonable attorneys'
fees.
In addition, because the market value of equipment of the type subject to
the Contracts generally declines with age, due to obsolescence, the net
disposition proceeds of Equipment at any time during the term of the Contracts
may not equal or exceed the Contract Principal Balance on the related Contract.
Because of this, and because other creditors may in certain cases have rights in
the related Equipment superior to those of the Owner Trust, the Servicer may not
be able to recover the entire amount due on a defaulted Contract in the event
that the Servicer elects to repossess and dispose of such Equipment at any time.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from an Obligor under a Loan Contract or a Lease
Contract intended for security for any deficiency on repossession and resale of
the asset securing the unpaid balance of such Obligor's Contract. However, some
states impose prohibitions or limitations on deficiency judgments. In most
jurisdictions, the courts, in interpreting the UCC, would impose upon a creditor
an obligation to repossess the equipment in a commercially reasonable manner and
to "mitigate damages" in the event of an Obligor's failure to cure a default.
The creditor would be required to exercise reasonable judgment and follow
acceptable commercial practice in seizing, selling or re-leasing the equipment
and to offset the net proceeds of such disposition against its claim. In
addition, an Obligor may successfully invoke an election of remedies defense to
a deficiency claim in the event that the Servicer's repossession and sale of the
Equipment is found to be a retention discharging the Obligor from all further
obligations under the UCC. If a deficiency judgment were granted, the judgment
would be a personal judgment against the Obligor for the shortfall, but a
defaulting Obligor may have limited assets or sources of income available
following repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
Many states have adopted a version of Article 2A of the UCC ("Article 2A").
Article 2A purports to codify many provisions of existing common law. Although
there is little precedental authority regarding how Article 2A will be
interpreted, it may, among other things, limit enforceability of any
"unconscionable" provision in a Lease Contract, provide an Obligor with remedies
including the right to cancel the Lease Contract for any lessor breach or
default, and may add to or modify the terms of "consumer leases" and leases
where the Obligor is a "merchant lessee." However, each Lease Contract contains
an acknowledgement by the Obligor that the Equipment was acquired for business
purposes, and TCC will represent in the Purchase Agreement that no Lease
Contract is a "consumer lease" under Article 2A. 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
Obligor defaults. Article 2A also recognizes the concept of freedom of contract
and permits the parties in a commercial context a wide latitude to vary
provisions of the law.
INSOLVENCY MATTERS
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may also limit the ability of the Servicer to repossess and
resell or re-lease Equipment or obtain a deficiency judgment. In the event of
the bankruptcy or reorganization of an Obligor, various provisions of the
Bankruptcy Code of 1978 (the "Bankruptcy Code") and related laws may interfere
with or eliminate the ability of the Servicer to enforce the Owner Trust's
rights under the Contracts. For example, although the bankruptcy or
reorganization of an Obligor would constitute an event of default under such
Contract, the
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Bankruptcy Code provides generally that rights and obligations under an
unexpired lease or an executory contract may not be terminated or modified
solely because of a provision in the lease or executory contract conditioned
upon the commencement of a case under the Bankruptcy Code. If bankruptcy
proceedings were instituted in respect of an Obligor under such a Contract, the
Owner Trust could be prevented from continuing to collect payments due from or
on behalf of such Obligor or exercising any remedies assigned to the Owner Trust
without the approval of the bankruptcy court, and, with respect to a Loan
Contract or a Lease Contract intended as security, the bankruptcy court could
permit the Obligor, as owner of the Equipment, to use or dispose of the
Equipment and provide the Owner Trust with a lien on substitute collateral, so
long as the court held that such substitute collateral constituted "adequate
protection" within the meaning of the Bankruptcy Code.
In the case of a Lease Contract that is deemed not to be intended as
security, the Bankruptcy Code grants to the bankruptcy trustee or the
debtor-in-possession a right to elect to assume or reject any executory contract
or unexpired lease. Any such rejection by the lessee would result in the return
of the leased equipment to the lessor. Any rejection of such a lease or contract
constitutes a breach of such lease or contract, entitling the non-breaching
party to a claim for breach of contract, which claim would be payable only from
the assets of the debtor's bankruptcy estate. The net proceeds from any
resulting judgment would be allocated by the Servicer between the Owner Trust
and the Depositor as described under "Description of the Notes -- Liquidated
Contracts."
In the event that, as a result of the bankruptcy or reorganization of an
Obligor, the related Contract becomes a defaulted Contract, the amount available
to be withdrawn from, or drawn on, the Cash Collateral Account has been reduced
to zero and the Contract has become a defaulted Contract without breach of any
representation or warranty of TCC or the Depositor, no recourse would be
available against TCC or the Depositor and the Noteholders and Equity
Certificateholders could suffer a loss with respect to such Contract.
These UCC and bankruptcy provisions, in addition to the possible decrease in
the value of a repossessed item of Equipment, may limit the amount realized on
the sale of Equipment securing the Contracts to less than the amount due
thereunder.
UNITED STATES TAXATION
The following discussion is a summary of certain United States federal
income tax considerations relevant to the purchase, ownership and disposition of
the Notes by the holders thereof. Dorsey & Whitney LLP, counsel to the
Depositor, and Cadwalader, Wickersham & Taft, counsel to the Underwriters
(collectively, "Counsel"), are each delivering their opinion regarding certain
federal income tax matters discussed below. The opinions of Counsel address only
those issues specifically identified below as being covered by such opinions;
however, the opinions of Counsel also state that the additional discussion set
forth below accurately sets forth Counsel's advice with respect to material tax
issues. The opinions of Counsel are not binding on the Internal Revenue Service
(the "IRS"). There can be no assurance that the IRS will take a similar view of
such issues, and no assurance can be given that the opinions of Counsel would be
sustained if challenged by the IRS. No ruling on any of the issues discussed
below will be sought from the IRS.
This summary does not purport to be a complete analysis of all the potential
federal income tax consequences relating to the purchase, ownership and
disposition of the Notes. Moreover, the discussion does not address all aspects
of taxation that may be relevant to particular purchasers in light of their
individual circumstances (including the effect of any foreign, state or local
tax laws) or to certain types of purchasers (including dealers in securities,
insurance companies, financial institutions and tax-exempt entities) subject to
special treatment under United States federal income tax laws. The discussion
below assumes that the Notes are held as capital assets.
The discussion of the United States federal income tax consequences set
forth below is based upon currently existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), judicial decisions and administrative
interpretations, all of which are subject to change, which changes may be
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retroactive. Because individual circumstances may differ, each prospective
purchaser of the Notes is strongly urged to consult its own tax advisor with
respect to its particular tax situation and the tax effects of any state, local,
foreign, or other tax laws and possible changes in the tax laws.
As used herein, the term "United States Holder" means a beneficial owner of
a Note who or which is for United States federal income tax purposes either (i)
a citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust, (A) for taxable years beginning after December 31, 1996 (or after
August 20, 1996, if the trustee has made an applicable election), with respect
to which a court within the United States is able to exercise primary
supervision over its administration, and one or more United States fiduciaries
have the authority to control all of its substantial decisions, or (B)
otherwise, the income of which is subject to U.S. federal income tax regardless
of its source. The term also includes certain former citizens of the United
States whose income and gain on the Notes will be subject to United States
taxation. As used herein, the term "United States Alien Holder" means a
beneficial owner of a Note that is not a United States Holder.
TREATMENT OF THE NOTES
In the opinion of Counsel, the Notes will be treated as indebtedness for
United States federal income tax purposes. Under the terms of the Notes and the
Indenture, each Noteholder agrees and acknowledges upon its purchase of the
Notes and by acceptance of the Notes that it will also treat the Notes as
indebtedness for such purposes.
TREATMENT OF THE OWNER TRUST
In the opinion of Counsel, the Owner Trust will not be characterized as an
"association" or "publicly traded partnership" taxable as a corporation for
United States federal income tax purposes. If the Owner Trust were treated as
either an association or a publicly traded partnership taxable as a corporation,
the resulting entity would be subject to federal income taxes at corporate tax
rates on its taxable income generated by ownership of the Contracts, and certain
distributions by the entity would not be deductible in computing the entity's
taxable income. Such an entity-level tax could result in reduced distributions
to Noteholders.
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable to a United States Holder
as ordinary interest income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for federal income tax
purposes.
ORIGINAL ISSUE DISCOUNT
Under applicable regulations, a Note will be considered issued with original
issue discount ("OID") if the "stated redemption price at maturity" of the Note
(generally equal to its principal amount as of the date of issuance plus all
interest other than "qualified stated interest" payable prior to or at maturity)
exceeds the original issue price (in this case, the initial offering price at
which a substantial amount of the Notes are sold to the public). Any OID would
be considered DE MINIMIS under the regulations if it does not exceed .25% of the
stated redemption price at maturity of a Note multiplied by the number of full
years until its maturity date or, in the case of the Notes which have more than
one principal payment, the weighted average maturity date. It is anticipated
that the Notes will not be considered issued with more than DE MINIMIS OID.
Under the OID regulations, a holder of a Note issued with a DE MINIMIS amount of
OID must include an allocable portion of such OID in income as principal
payments are made on the Note.
While it is not anticipated that the Notes will be issued with more than DE
MINIMIS OID, it is possible that they will be so issued. If the Notes are issued
with more than DE MINIMIS OID, such OID would be includible in the income of
Noteholders as interest over the term of the Notes under a constant yield
method. Any amount included in income as OID would not, however, be includible
again when the amount is actually received. If the yield on a class of Notes is
not materially different from its coupon, this
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treatment will have no significant effect on Noteholders using the accrual
method of accounting. Cash method Noteholders, however, may be required to
report income with respect to Notes issued with OID in advance of the receipt of
cash attributable to such income. Each Noteholder should consult its own tax
advisor regarding the impact of the OID rules if the Notes are issued with OID
and the consequences to such holder as a result of special rules in the Code
which are applicable to debt instruments whose principal payments may be
accelerated by reason of prepayments of other obligations securing such debt
instruments.
MARKET DISCOUNT
If a United States Holder purchases a Note at a price that is less than its
remaining principal amount or, in the case of a Note issued with OID, its
adjusted issue price, by 0.25% or more of its remaining redemption amount
multiplied by the number of whole years to maturity, the Note will be considered
to bear "market discount" in the hands of such United States Holder. In such
case, principal payments received by the United States Holder, or gain realized
by the United States Holder on the disposition of the Note, generally will be
treated as ordinary interest income to the extent of the market discount that
accrued on the Note while held by such United States Holder and that has not
previously been included in income. Market discount generally accrues on a
straight-line basis over the remaining term of a Note except that, at the
election of the United States Holder, market discount may accrue on a constant
yield basis. A United States Holder may not be allowed to deduct immediately all
or a portion of the interest expense on any indebtedness incurred or continued
to purchase or to carry such Note. A United States Holder may elect to include
market discount in income currently as it accrues (either on a straight-line
basis or, if the United States Holder so elects, on a constant yield basis), in
which case the interest deferral rule set forth in the preceding sentence will
not apply. Such an election will apply to all bonds acquired by the United
States Holder on or after the first day of the first taxable year to which such
election applies and may be revoked only with the consent of the IRS. A United
States Holder may not be allowed to deduct immediately all or a portion of the
interest expense on any indebtedness incurred or continued, or short-sale
expenses incurred, to purchase or carry such a Note; provided, that, if such a
Noteholder elected to include market discount in income currently as it accrues,
the foregoing deferral rule will not apply.
AMORTIZABLE BOND PREMIUM
If a United States Holder purchases a Note for an amount that is greater
than the amount payable at maturity, such holder will be considered to have
purchased such Note with "amortizable bond premium" equal in amount to such
excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium using a constant yield method over the remaining term of
the Note. The amount amortized in any year will be treated as a reduction of the
United States Holder's interest income from the Note in such year. A United
States Holder that elects to amortize bond premium must reduce its tax basis in
the Note by the amount of the premium amortized in any year. An election to
amortize bond premium applies to all taxable debt obligations then owned or
thereafter acquired by the United States Holder and may be revoked only with the
consent of the IRS.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Upon the sale, exchange or retirement of a Note, a United States Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (not including any amount
attributable to accrued but unpaid interest) and such holder's adjusted tax
basis in the Note. To the extent attributable to accrued but unpaid interest,
the amount realized by a United States Holder would be treated as a payment of
interest. A United States Holder's adjusted tax basis in a Note will equal the
cost of the Note to such holder, increased by the amount of any OID and market
discount previously included in income by such holder with respect to such Note
and reduced by any amortized bond premium and any principal payments received by
such holder.
Subject to the discussion of market discount above, gain or loss realized on
the sale, exchange or retirement of a Note by a United States Holder will be
capital gain or loss, and will be long-term capital gain or loss if at the time
of the sale, exchange or retirement the Note has been held for more than one
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year. The excess of net long-term capital gains over net short-term capital
losses is taxed at a lower rate than ordinary income for certain non-corporate
taxpayers, but not for corporate taxpayers. The distinction between capital gain
or loss and ordinary income or loss is also relevant for purposes of, among
other things, limitations on the deductibility of capital losses.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payments of principal of and interest on the Notes by the Trustee or
any paying agent to a beneficial owner of a Note that is a United
States Alien Holder, as defined above, will not be subject to United States
federal withholding tax, provided that, in the case of interest, (i) such
holder does not own, actually or constructively, 10 percent or more of the
total combined voting power of all classes of stock of the Depositor or TCC
entitled to vote, (ii) such holder is not, for United States federal income
tax purposes, a controlled foreign corporation related, directly or
indirectly, to the Depositor or TCC through stock ownership, (iii) such
holder is not a bank receiving interest described in Section 881(c)(3)(A) of
the Code, and (iv) the certification requirements under Section 871(h) or
Section 881(c) of the Code and Treasury regulations thereunder (summarized
below) are met;
(b) a United States Alien Holder of a Note will not be subject to United
States federal income tax on gain realized on the sale, exchange or
other disposition of such Note, unless (i) such holder is an individual who
is present in the United States for 183 days or more in the taxable year of
sale, exchange or other disposition, and certain conditions are met or (ii)
such gain is effectively connected with the conduct by such holder of a
trade or business in the United States; and
(c) a Note held by an individual who is not a citizen or resident of the
United States at the time of his death will not be subject to United
States federal estate tax as a result of such individual's death, provided
that, at the time of such individual's death, the individual does not own,
actually or constructively, 10 percent or more of the total combined voting
power of all classes of stock of the Depositor or TCC entitled to vote and
payments with respect to such Note would not have been effectively connected
to the conduct by such individual of a trade or business in the United
States.
Sections 871(h) and 881(c) of the Code and Treasury Regulations thereunder
require that, in order to obtain the exemption from withholding tax described in
paragraph (a) above, either (i) the beneficial owner of a Note must certify
under penalties of perjury to the Indenture Trustee or the paying agent, as the
case may be, that such owner is a United States Alien Holder and must provide
such owner's name and address, and United States taxpayer identification number,
if any, or (ii) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution") and holds the Note on behalf of the
beneficial owner thereof must certify under penalties of perjury to the
Indenture Trustee or the paying agent, as the case may be, that such certificate
has been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and must furnish the payor with copy
thereof. A certificate described in this paragraph is effective only with
respect to payments of interest made to the certifying United States Alien
Holder after issuance of the Notes in the calendar year of its issuance and the
two immediately succeeding calendar years. Under temporary United States
Treasury Regulations, such requirement will be fulfilled if the beneficial owner
of a Note certifies on IRS Form W-8, under penalties of perjury, that it is a
United States Alien Holder and provides its name and address, and any Financial
Institution holding the Note on behalf of the beneficial owner files a statement
with the withholding agent to the effect that it has received such a statement
from the beneficial owner (and furnishes the withholding agent with a copy
thereof).
If a United States Alien Holder of a Note is engaged in a trade or business
in the United States, and if interest on the Note, or gain realized on the sale,
exchange or other disposition of the Note, is effectively connected with the
conduct of such trade or business, the United States Alien Holder, although
exempt from United States withholding tax, will generally be subject to regular
United States income tax on such
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interest or gain in the same manner as if it were a United States Holder. In
lieu of the certificate described in the preceding paragraph, such a holder will
be required to provide to the Trustee or the paying agent, as the case may be, a
properly executed IRS Form 4224 in order to claim an exemption from withholding
tax. In addition, if such United States Alien Holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30% (or such lower rate
provided by an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments. For purposes of
the branch profits tax, interest on and any gain recognized on the sale,
exchange or other disposition of a Note will be included in the earnings and
profits of such United States Alien Holder if such interest or gain is
effectively connected with the conduct by the United States Alien Holder of a
trade or business in the United States.
BACKUP WITHHOLDING
Under current United States federal income tax law, a 31% backup withholding
tax requirement applies to certain payments of interest on, and the proceeds of
a sale, exchange or redemption of, the Notes.
Backup withholding will generally not apply with respect to payments made to
certain exempt recipients such as corporations or other tax-exempt entities. In
the case of a non-corporate United States Holder, backup withholding will apply
only if such holder (i) fails to furnish its taxpayer identification number
("TIN") which, for an individual, would be his social security number, (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed to
report properly payments of interest and dividends or (iv) under certain
circumstances, fails to certify under penalties of perjury that it has furnished
a correct TIN and has not been notified by the IRS that it is subject to backup
withholding for failure to report interest and dividend payments.
In the case of a United States Alien Holder, under current Treasury
Regulations, backup withholding will not apply to payments made by the Indenture
Trustee or any paying agent thereof on a Note if such holder has provided the
required certificate under penalties of perjury that it is not a United States
Holder (as defined above) or has otherwise established an exemption, provided in
each case that the Indenture Trustee or such paying agent, as the case may be,
does not have actual knowledge that the payee is a United States Holder.
Under current Treasury Regulations, if payments on a Note are made to or
through a foreign office of a custodian, nominee or other agent acting on behalf
of a beneficial owner of a Note, such custodian, nominee or other agent will not
be required to apply backup withholding to such payments made to such beneficial
owner.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. Payments to or through the United
States office of a broker will be subject to backup withholding and information
reporting unless the holder certifies under penalties of perjury that it is not
a United States Holder and that certain other conditions are met or otherwise
establishes an exemption.
Holders of Notes should consult their tax advisors regarding the application
of backup withholding in their particular situations, the availability of an
exemption therefrom and the procedure for obtaining such an exemption, if
available. Any amounts withheld from payment under the backup withholding rules
will be allowed as a credit against a holder's United States federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the IRS.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE NOTEHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES TO THE PROSPECTIVE NOTEHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME TAX LAWS AND ANY
RECENT OR POSSIBLE CHANGES IN APPLICABLE TAX LAWS.
67
<PAGE>
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act ("ERISA"), and/or
Section 4975 of the Code, prohibits a pension, profit-sharing or other employee
benefit plan, as well as individual retirement accounts and certain types of
Keogh Plans (each a "Benefit Plan") from engaging in certain transactions with
persons that are "parties in interest" under ERISA or "disqualified persons"
under the Code with respect to such Benefit Plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other penalties
and liabilities under ERISA and the Code for such persons. Title I of ERISA also
requires that fiduciaries of a Benefit Plan subject to ERISA make investments
that are prudent, diversified (except if prudent not to do so) and in accordance
with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code if assets of the Owner Trust were deemed to be assets of a Benefit Plan.
Under a regulation issued by the United States Department of Labor (the "Plan
Assets Regulation"), the assets of the Owner Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquires an "equity interest" in the Owner Trust and none of the
exceptions contained in the Plan Assets Regulation is applicable. An equity
interest is defined under the Plan Assets Regulation as an interest in an entity
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The Plan Assets Regulation
also provides that a beneficial interest in a trust is an equity interest.
Although there can be no assurances in this regard, it appears that the Notes
should be treated as debt without substantial equity features for purposes of
the Plan Assets Regulation and that the Notes do not constitute beneficial
interests in the Owner Trust for purposes of the Plan Assets Regulation.
However, without regard to whether the Notes are treated as an equity interest
for such purposes, the acquisition or holding of Notes by or on behalf of a
Benefit Plan could be considered to give rise to a prohibited transaction if the
Owner Trust, the Owner Trustee or the Indenture Trustee, or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a Note.
Included among these exemptions are: Prohibited Transaction Class Exemption
("PTCE") 96-23, regarding transactions effected by "in-house asset managers";
PTCE 90-1, regarding investments by insurance company pooled separate accounts;
PTCE 95-60, regarding transactions effected by "insurance company general
accounts"; PTCE 91-38, regarding investments by bank collective investment
funds; and PTCE 84-14, regarding transactions effected by "qualified
professional asset managers."
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF ANY OF THE NOTES SHOULD CONSULT
ITS TAX AND/OR LEGAL ADVISORS REGARDING WHETHER THE ASSETS OF THE OWNER TRUST
WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBILITY OF EXEMPTIVE RELIEF FROM THE
PROHIBITED TRANSACTION RULES AND OTHER ISSUES AND THEIR POTENTIAL CONSEQUENCES.
RATINGS OF THE NOTES
It is a condition of issuance that each of S&P, Moody's, Duff & Phelps and
Fitch (i) rate the Class A Notes in its highest rating category and (ii) rate
the Class B Notes at least "A," "A2," "A" and "A," respectively. The rating of
each Class of Notes addresses the likelihood of the timely receipt of interest
and payment of principal on such Class of Notes on or before the Stated Maturity
Date for such Class. The rating of the Notes will be based primarily upon the
Pledged Revenues, the Cash Collateral Account and the subordination provided by
(1) the Class B Notes and the Equity Certificates, in the case of the Class A
Notes and (2) the Equity Certificates, in the case of the Class B Notes. There
is no assurance that any such rating will not be lowered or withdrawn by the
assigning Rating Agency if, in its judgment,
68
<PAGE>
circumstances so warrant. In the event that a rating or ratings with respect to
the Notes is qualified, reduced or withdrawn, no person or entity will be
obligated to provide any additional credit enhancement with respect to the Notes
so qualified, reduced or withdrawn.
The rating of the Notes should be evaluated independently from similar
ratings on other types of securities. A rating is not a recommendation to buy,
sell or hold the Notes, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The ratings of the Notes do not
address the likelihood of payment of principal on any Class of Notes prior to
the Stated Maturity Date thereof, or the possibility of the imposition of United
States withholding tax with respect to non-United States Persons.
USE OF PROCEEDS
The proceeds from the offering and sale of the Notes, together with the
proceeds derived by the Depositor from its disposition of the Equity
Certificates, after funding a portion of the Cash Collateral Account and paying
the expenses of the Depositor, will be paid to the Originators by the Depositor
in connection with the transfer of the Contracts and the Originators' interests
in the Equipment.
69
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the United States underwriting
agreement (the "U.S. Underwriting Agreement"), the underwriters named below (the
"U.S. Underwriters"), through their representative, Goldman, Sachs & Co. (the
"U.S. Representative"), have severally agreed to purchase from the Depositor the
following respective Initial Principal Amount of Notes (the "U.S. Notes") at the
initial public offering price less the underwriting discounts set forth on the
cover page of this Prospectus:
<TABLE>
<CAPTION>
INITIAL INITIAL INITIAL INITIAL INITIAL
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF CLASS AMOUNT OF CLASS AMOUNT OF CLASS AMOUNT OF CLASS AMOUNT OF CLASS
U.S. UNDERWRITERS A-1 NOTES A-2 NOTES A-3 NOTES A-4 NOTES B NOTES
- ---------------------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Goldman, Sachs & Co.........
Lehman Brothers Inc.........
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated...............
J.P. Morgan Securities
Inc........................
--------------- --------------- --------------- --------------- ---------------
Total
--------------- --------------- --------------- --------------- ---------------
--------------- --------------- --------------- --------------- ---------------
</TABLE>
In the U.S. Underwriting Agreement, the U.S. Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
U.S. Notes offered hereby if any of such U.S. Notes are purchased. The Depositor
has been advised by the U.S. Representative that the U.S. Underwriters propose
initially to offer the U.S. Notes to the public at the respective public
offering prices set forth on the cover page of this Prospectus, and to certain
dealers at such price, less a concession not in excess of 0. % per Class A-1
Note, 0. % per Class A-2 Note, 0. % per Class A-3 Note, 0. % per Class A-4
Note and 0. % per Class B Note. The U.S. Underwriters may allow and such
dealers may reallow to other dealers a discount not in excess of 0. % per Class
A-1 Note, 0. % per Class A-2 Note, 0. % per Class A-3 Note, 0. % per Class
A-4 Note and 0. % per Class B Note. After the Notes are released for sale to
the public, the offering prices and other selling terms may be varied by the
U.S. Representative.
TCC and certain of its affiliates have agreed to indemnify the U.S.
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
The Notes are new issues of securities with no established trading market.
The Depositor has been advised by the U.S. Representative that the U.S.
Underwriters intend to make a market in the Notes in the United States but are
not obligated to do so and may discontinue market making at any time without
notice. The Depositor has been advised by the International Managers that the
International Managers intend to make a market in the Notes outside of the
United States but are not obligated to do so and may discontinue market making
at any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
Funds in the Cash Collateral Account and the Trust Accounts may, from time
to time, be invested in Eligible Investments acquired from the U.S.
Underwriters.
TCC and the Depositor have entered into an underwriting agreement (the
"International Underwriting Agreement") with certain managers (the
"International Managers," and collectively with the U.S. Underwriters, the
"Underwriters") through their representative, Nomura International plc (the
"International Representative"), providing for the concurrent offer and sale of
an aggregate of $ , $ $ , $ and $
principal amount of Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes and Class B Notes, respectively (the "International Notes") outside the
United States. The offering price and aggregate underwriting discounts and
commissions per Note for the U.S. Notes and the International Notes are
identical.
To provide for the coordination of their activities, the U.S. Underwriters
and the International Managers have entered into an Agreement between U.S.
Underwriters and International Managers (the "Intersyndicate Agreement") which
provides, among other things, that the U.S. Underwriters and the International
Managers may purchase and sell among each other such number of Notes as is
approved by Nomura International plc. To the extent there are sales among the
U.S. Underwriters and the International Managers pursuant to the Intersyndicate
Agreement and as approved by Nomura International plc, the number of U.S. Notes
initially available for sale by the U.S. Underwriters and the number of
International Notes initially available for sale by the International Managers
may be more or less than the numbers appearing on the cover page of this
Prospectus. Except as permitted by the Intersyndicate Agreement, the price of
any Notes so sold will be the respective initial public offering price, less an
amount not greater than the selling concession.
70
<PAGE>
Pursuant to the Intersyndicate Agreement, as part of the distribution of the
Notes and subject to certain exceptions, (a) the U.S. Underwriters will offer
and sell U.S. Notes only in the United States to U.S. Persons (as defined below)
and (b) the International Managers will offer and sell International Notes only
outside the United States to (i) non-U.S. Persons (including any entity
constituting an investment advisor located outside the United States acting with
discretionary authority for a U.S. Person) or (ii) U.S. Persons if such sales
are pursuant to Rule 15a-6(a)(4)(v) promulgated under the Exchange Act. For
these purposes, U.S. Person means individual residents in the United States,
corporations, partnerships, or other entities organized in or under the laws of
the United States or any political subdivision thereof (including any such
entity constituting an investment advisor acting with discretionary authority
for a non-U.S. Person) whose office most directly involved with the purchase is
located in such country, or a U.S. branch of a foreign bank or financial
institution. "United States" means the United States of America, its
territories, its possessions and all areas subject to its jurisdiction.
Nomura International plc has provided acquisition financing and advisory
services to HoldCo. and MergerCo. in connection with the Merger, and holds
warrants to acquire an indirect majority interest in the common stock of TCC.
See "AT&T Capital Corporation." In addition, Nomura International plc may make a
loan to provide a portion of the initial funding of the Cash Collateral Account.
Application has been made to list the Notes on the Luxembourg Stock
Exchange.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
Depositor by Dorsey & Whitney LLP. Cadwalader, Wickersham & Taft will act as
counsel to the U.S. Underwriters and the International Managers. The Indenture,
the Transfer and Servicing Agreement, the Trust Agreement, the Purchase
Agreement and the Notes will be governed by the laws of the State of New York.
ADDITIONAL INFORMATION
1. The issue of the Notes has been authorized pursuant to the Indenture and
a resolution dated October 8, 1996 of the Board of Directors of the
Depositor.
2. An application has been made to list the Notes on the Luxembourg Stock
Exchange. In connection with such application, a legal notice of the
issuance of the Notes and copies of the Indenture and a copy of the Registration
Statement will be deposited with the Chief Registrar of the District of
Luxembourg (Greffier en Chef du Tribunal d'Arrondissement a Luxembourg) where
such documents may be examined and copies obtained.
3. As long as the Notes are outstanding, copies of the Registration
Statement, all amendments and exhibits thereto, the Indenture and any
reports containing information on the Owner Trust prepared by the Servicer will
be available free of charge at the offices of the Indenture Trustee and
Kredietbank S.A. Luxembourgeoise, as the listing agent in Luxembourg at the
following address: 43, boulevard Royal, L-2955 Luxembourg, and notices of their
availability (together with other notices to be given to Noteholders in
accordance with the Indenture) will be published in a leading newspaper having
general circulation in Luxembourg (which is expected to be the Luxemburger
Wort).
4. There is no litigation, arbitration or administrative proceeding, actual
or pending, which relates to the Owner Trust and to which the Owner Trust
is a party or of which the Owner Trust has been notified, or threatened that it
will be made a party, which is material in the context of the issue of the
Notes.
5. Upon issuance, the Notes will be accepted for clearance and settlement
through DTC, Euroclear and Cedel Bank, as applicable.
<TABLE>
<CAPTION>
COMMON CODE ISIN CUSIP
--------------- -------------------- -----------------
<S> <C> <C> <C>
Class A-1 Notes........................................ 7027931 US13970LAA0-8 13970L AA 0
Class A-2 Notes........................................ 7027958 US13970LAB8-0 13970L AB 8
Class A-3 Notes........................................ 7027966 US13970LAC6-3 13970L AC 6
Class A-4 Notes........................................ 7027974 US13970LAD4-7 13970L AD 4
Class B Notes.......................................... 7028008 US13970LAE2-0 13970L AE 2
</TABLE>
71
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
<S> <C>
Administrative Fees.................. 10, 59
Amount Available..................... 6, 43
Article 2A........................... 62
AT&T................................. 23
ATMs................................. 25
Available Pledged Revenues........... 43
Bankruptcy Code...................... 62
Bell Labs............................ 27
Benefit Plan......................... 68
Book Value........................... 10, 48
Business Day......................... 42
Cash Collateral Account.............. 12
Cedel Bank........................... 50
Cedel Bank Participants.............. 50
CFC.................................. 9, 24
Class A Notes........................ Cover, 2, 42
Class A-1 Notes...................... 1, 42
Class A-2 Notes...................... 1, 42
Class A-3 Notes...................... 1, 42
Class A-4 Notes...................... 2, 42
Class B Notes........................ 2, 42
Closing Date......................... 4
CLT.................................. 26
Code................................. 15, 63
Collection Account................... 47
Collection Period.................... 4, 45
Commission........................... i
Contract Pool........................ 8
Contract Pool Principal Balance...... 3, 45
Contract Principal Balance........... 3, 45
Contracts............................ Cover, 6, 22
Counsel.............................. 63
CPR.................................. B-1
Credit Corp.......................... 9, 24
Current Collection Period Pledged
Revenues............................ 6, 43
Current Realized Losses.............. 46
Cut-Off Date......................... 4
Cut-Off Date Contract Pool........... 8, 36
Definitive Notes..................... 52
Deposit Date......................... 6, 43
Depositor............................ Cover, 1
Depository........................... 42
Determination Date................... 58
DTC.................................. i, 15
DTC Participants..................... 49
Duff & Phelps........................ 5
Eligible Accounts.................... 47
Eligible Investments................. 48
Equipment............................ 1
Equity Certificate Majority.......... 60
Equity Certificates.................. 2, 11
ERISA................................ 15, 68
Euroclear............................ 51
Euroclear Operator................... 51
Euroclear Participants............... 51
Euroclear System..................... 51
Events of Default.................... 53
Exchange Act......................... i
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
<S> <C>
Financial Institution................ 66
Fitch................................ 5
Global Notes......................... 42, A-1
HoldCo............................... 23
Holders.............................. 15, 42
Indenture............................ Cover, 1
Indenture Trustee.................... Cover, 1
Indirect Participants................ 49
Initial Amount....................... 46
Initial Contract Pool Principal
Balance............................. 4, 45
Insolvency Laws...................... 16
Insurance, Maintenance and Tax
Accounts............................ 57
Interest Rate........................ Cover ii, 2
Interest Shortfall................... 58
International Depositories........... 49
International Managers............... 70
International Notes.................. 70
International Representative......... 70
International Underwriting
Agreement........................... 70
Intersyndicate Agreement............. 70
IRS.................................. 63
Lease Contract....................... Cover, 6, 22
Cover ii, 11,
Leased Equipment..................... 21
Leasing Services..................... 9, 24
Liquidated Contract.................. 4, 45
Liquidation Loss..................... 46
Liquidation Proceeds................. 9, 47
Loan Contracts....................... Cover, 6, 22
Lucent............................... 23
Luxembourg Paying Agent.............. 52
Luxembourg Transfer Agent............ 52
Master Form Lease.................... 30
Merger............................... 23
MergerCo............................. 23
Monthly Principal Amount............. 3, 45
Moody's.............................. 5
NCR.................................. 23
NCR Credit........................... 9, 24
Non-Accrual.......................... 40
Note Distribution Account............ 47
Note Majority........................ 53
Note Owners.......................... 15
Noteholders.......................... 15, 42
Notes................................ Cover, 1, 42
Obligor.............................. 6, 22
OID.................................. 64
Originators.......................... 9, 24
Owner Trust.......................... Cover, 1
Owner Trustee........................ Cover, 1
Participants......................... 49
Payment Date......................... Cover ii
Plan Assets Regulation............... 68
Pledged Revenues..................... 7, 43
Prepayments.......................... 7, 43
PTCE................................. 68
Purchase Agreement................... 1
Rating Agencies...................... 5
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
<S> <C>
Related Collection Period Pledged
Revenues............................ 6, 43
Repurchase Event..................... 35
Required Payoff Amount............... 9, 46
Requisite Amount..................... 46
Rules................................ 50
S&P.................................. 5
SBU.................................. 26
Scheduled Payments................... 7, 43
Securities Act....................... i
Servicer............................. 1
Servicing Account.................... 47
Servicing Fee........................ 10, 59
Specific Lease Form.................. 30
Stated Maturity Dates................ 4
TCC.................................. Cover, 1, 23
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
<S> <C>
Terms and Conditions................. 51
TIN.................................. 67
Transfer and Servicing Agreement..... 1
Trust Accounts....................... 47
Trust Agreement...................... 1
Trust Assets......................... 6, 22
UCC.................................. 17
Underwriters......................... 70
U.S. Notes........................... 70
U.S. Person.......................... 71
U.S. Representative.................. 70
U.S. Underwriters.................... 70
U.S. Underwriting Agreement.......... 70
United States........................ 71
United States Holder................. 64
United States Person................. A-4
</TABLE>
73
<PAGE>
APPENDIX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Notes will be available only in
book-entry form (the "Global Notes"). Investors in the Global Notes may hold
such Global Notes through DTC or, if applicable, Cedel Bank or Euroclear. The
Global Notes will be tradeable as home-market instruments in both the European
and United States domestic markets. Initial settlement and all secondary trades
will settle in same-day funds.
Secondary market trading between investors holding Global Notes through
Cedel Bank and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice.
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedures applicable to United
States corporate debt obligations.
Secondary cross-market trading between Cedel Bank or Euroclear participants
and DTC participants holding Notes will be effected on a
delivery-against-payment basis through the respective depositaries of Cedel Bank
and Euroclear and as participants in DTC.
Non-United States holders of Global Notes will be exempt from United States
withholding taxes, provided that such holders meet certain requirements and
deliver appropriate United States tax documents to the securities clearing
organizations or their participants. See "United States Taxation" in the
Prospectus.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedel Bank and Euroclear will hold
positions on behalf of their participants through their respective depositaries,
which in turn will hold such positions in accounts as participants of DTC.
Investors electing to hold their Global Notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through Cedel Bank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Notes will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and the seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
participants will be settled using the procedures applicable to United States
corporate debt issues in same-day funds.
TRADING BETWEEN CEDEL BANK AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Bank participants and/or Euroclear participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
TRADING BETWEEN DTC SELLER AND CEDEL BANK OR EUROCLEAR PURCHASER. When
Global Notes are to be transferred from the account of a DTC participant to the
account of a Cedel Bank participant or a
A-1
<PAGE>
Euroclear participant, the purchaser will send instructions to Cedel Bank or
Euroclear through a participant at least one business day prior to settlement.
Cedel Bank or Euroclear will instruct the respective depositary to receive the
Global Notes against payment. Payment will include interest accrued on the
Global Notes from and including the last coupon payment date to and excluding
the settlement date. Payment will then be made by the respective depositary to
the DTC participant's account against delivery of the Global Notes. After
settlement has been completed, the Global Notes will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedel Bank participant's or Euroclear participant's
account. The Global Notes credit will appear the next day (European time) and
the cash debit will be back-valued to, and the interest on the Global Notes will
accrue from, the value date (which would be the preceding day when settlement
occurred in New York). If settlement is not completed on the intended value date
(i.e., the trade fails), the Cedel Bank or Euroclear cash debit will be valued
instead as of the actual settlement date.
Cedel Bank participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedel Bank or Euroclear. Under
this approach, they may take on credit exposure to Cedel Bank or Euroclear until
the Global Notes are credited to their accounts one day later.
As an alternative, if Cedel Bank or Euroclear has extended a line of credit
to them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, Cedel Bank
participants or Euroclear participants purchasing Global Notes would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Global Notes were credited to their accounts. However, interest on the Global
Notes would accrue from the value date. Therefore, in many cases the investment
income on the Global Notes earned during the one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result will
depend on each participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending Global Notes to the
respective depositary for the benefit of Cedel Bank participants or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
TRADING BETWEEN CEDEL BANK OR EUROCLEAR SELLER AND DTC PURCHASER. Due to
time-zone differences in their favor, Cedel Bank participants and Euroclear
participants may employ their customary procedures for transactions in which
Global Notes are to be transferred by the respective clearing system, through
the respective depositary, to a DTC participant. The seller will send
instructions to Cedel Bank or Euroclear through a participant at least one
business day prior to settlement. In this case, Cedel Bank or Euroclear will
instruct the respective depositary to deliver the Notes to the DTC participant's
account against payment. Payment will include interest accrued on the Global
Notes from and including the last coupon payment date to and excluding the
settlement date. The payment will then be reflected in the account of the Cedel
Bank participant or Euroclear participant the following day, and receipt of the
cash proceeds in the Cedel Bank participant's or Euroclear participant's account
would be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the Cedel Bank participant or Euroclear
participant have a line of credit with its respective clearing system and elect
to be in debit in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date (i.e.,
the trade fails), receipt of the cash proceeds in the Cedel Bank or Euroclear
participant's account would instead be valued as of the actual settlement date.
A-2
<PAGE>
Finally, day traders that use Cedel Bank or Euroclear and that purchase
Global Notes from DTC participants for delivery to Cedel Bank participants or
Euroclear participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
1. borrowing through Cedel Bank or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel Bank or Euroclear
accounts) in accordance with the clearing system's customary procedures;
2. borrowing the Global Notes in the United States from a DTC participant no
later than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their Cedel Bank or Euroclear account
in order to settle the sale side of the trade; or
3. staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the Cedel Bank
participant or Euroclear participant.
CERTAIN U.S. FEDERAL INCOME TAX
DOCUMENTATION REQUIREMENTS
A holder of Global Notes holding securities through Cedel Bank or Euroclear
(or through DTC if the holder has an address outside the United States) will be
subject to 30% United States withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
United States Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
United States entity required to withhold tax complies with applicable
certification requirements and (ii) such holder takes one of the following steps
to obtain an exemption or reduced tax rate:
EXEMPTION FOR NON-UNITED STATES PERSON (FORM W-8). Non-United States
Persons that are beneficial owners can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status).
If the information shown on Form W-8 changes, a new Form W-8 must be filed
within 30 days of such change.
EXEMPTION FOR NON-UNITED STATES PERSONS WITH EFFECTIVELY CONNECTED INCOME
(FORM 4224). A non-United States Person, including a non-United States
corporation or bank with a United States branch, for which the interest income
is effectively connected with its conduct of a trade or business in the United
States, can obtain an exemption from the withholding tax by filing Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States).
EXEMPTION OR REDUCED RATE FOR NON-UNITED STATES PERSONS RESIDENT IN TREATY
COUNTRIES (FORM 1001). Non-United States Persons that are beneficial owners
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the terms of the treaty) by filing
Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8. Form 1001 may be filed by the
beneficial owner or his agent.
EXEMPTION FOR UNITED STATES PERSONS (FORM W-9). United States Persons can
obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. A holder of Global Notes or,
in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting
the appropriate form to the person through
A-3
<PAGE>
which he holds (the clearing agency, in the case of persons holding directly on
the books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year. See
"United States Taxation" in the Prospectus.
The term "United States Person" means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States or any political subdivision thereof or (iii) an estate or
trust the income of which is includible in gross income for United States
federal income tax purposes, regardless of its source.
THIS SUMMARY DOES NOT DEAL WITH ALL ASPECTS OF UNITED STATES FEDERAL INCOME
TAX WITHHOLDING THAT MAY BE RELEVANT TO FOREIGN HOLDERS OF THE GLOBAL NOTES.
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR SPECIFIC TAX ADVICE
CONCERNING THEIR HOLDING AND DISPOSING OF THE GLOBAL NOTES.
A-4
<PAGE>
APPENDIX B
WEIGHTED AVERAGE LIFE OF THE NOTES
THE FOLLOWING INFORMATION IS GIVEN SOLELY TO ILLUSTRATE THE EFFECT OF
PREPAYMENTS ON THE CONTRACTS ON THE WEIGHTED AVERAGE LIFE OF THE NOTES UNDER THE
ASSUMPTIONS STATED BELOW AND IS NOT A PREDICTION OF THE PREPAYMENT RATE THAT
MIGHT ACTUALLY BE EXPERIENCED BY THE CONTRACTS.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Notes will be primarily
a function of the rate at which payments are made on the Contracts. Payments on
the Contracts may be in the form of Scheduled Payments or prepayments
(including, for this purpose, liquidations due to default).
The Constant Prepayment Rate prepayment model ("CPR") represents an assumed
constant rate of prepayment of Contracts outstanding as of the beginning of each
month expressed as a per annum percentage. There can be no assurance that
Contracts will experience prepayments at a constant prepayment rate or otherwise
in the manner assumed by the prepayment model. See"Risk Factors -- Yield and
Prepayment Considerations."
The weighted average lives in the following table were determined assuming
that (i) Scheduled Payments on the Contracts are received in a timely manner and
prepayments are made at the percentages of the prepayment model set forth in the
table; (ii) the Depositor does not exercise its right to purchase the Contracts
described under "Description of the Notes -- Optional Purchase of the
Contracts"; (iii) the Initial Contract Pool Principal Balance is $3,185,229,329
and the Contracts have the characteristics described under "The Contracts"; (iv)
payments are made on the Notes on the 15th day of each month commencing in
November 1996; and (v) the Notes are issued on October , 1996. No
representation is made that these assumptions will be correct, including the
assumption that the Contracts will not experience delinquencies or losses.
In making an investment decision with respect to the Notes, investors should
consider a variety of possible prepayment scenarios, including the limited
scenarios described in the table below.
WEIGHTED AVERAGE LIFE OF THE NOTES
AT THE RESPECTIVE CPRS SET FORTH BELOW:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE LIFE (YEARS)
-----------------------------------------------------------------
0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Class A-1 Notes................................
Class A-2 Notes................................
Class A-3 Notes................................
Class A-4 Notes................................
Class B Notes..................................
</TABLE>
B-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE DEPOSITOR, THE SERVICER, THE OWNER TRUST, THE OWNER TRUSTEE,
THE INDENTURE TRUSTEE, THE U.S. UNDERWRITERS OR THE INTERNATIONAL MANAGERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION 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. NEITHER THE
DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE HEREUNDER, SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Incorporation by Reference..................... i
Available Information.......................... i
Reports to Noteholders......................... i
Table of Contents.............................. ii
Prospectus Summary............................. 1
Risk Factors................................... 16
The Depositor and the Owner Trust.............. 20
AT&T Capital Corporation....................... 23
The Originators................................ 24
The Contracts.................................. 30
Description of the Notes....................... 42
Description of the Transfer and Servicing
Agreement..................................... 56
Certain Legal Aspects of the Contracts......... 61
United States Taxation......................... 63
ERISA Considerations........................... 68
Ratings of the Notes........................... 68
Use of Proceeds................................ 70
Underwriting................................... 70
Legal Matters.................................. 71
Additional Information......................... 71
Index of Principal Terms....................... 72
Appendix A: Global Clearance, Settlement and
Tax Documentation Procedures.................. A-1
Appendix B: Weighted Average Life of the
Notes......................................... B-1
</TABLE>
----------------
UNTIL , 1997 (NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS ACTING AS UNDERWRITERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
$
% RECEIVABLE-BACKED NOTES,
CLASS A-1
$
% RECEIVABLE-BACKED NOTES, CLASS A-2
$
% RECEIVABLE-BACKED NOTES, CLASS A-3
$
% RECEIVABLE-BACKED NOTES, CLASS A-4
$
% RECEIVABLE-BACKED NOTES, CLASS B
ANTIGUA FUNDING
CORPORATION
DEPOSITOR
[LOGO]
SERVICER
---------------------
PROSPECTUS
---------------------
GLOBAL COORDINATORS:
NOMURA INTERNATIONAL PLC
GOLDMAN, SACHS & CO.
-----------
U.S. UNDERWRITERS:
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED OCTOBER 7, 1996
$3,057,800,000 (APPROXIMATE)
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
$ % RECEIVABLE-BACKED NOTES, CLASS A-1, DUE ;
ISSUE PRICE: %
$ % RECEIVABLE-BACKED NOTES, CLASS A-2, DUE ;
ISSUE PRICE: %
$ % RECEIVABLE-BACKED NOTES, CLASS A-3, DUE ;
ISSUE PRICE: %
$ % RECEIVABLE-BACKED NOTES, CLASS A-4, DUE ;
ISSUE PRICE: %
$ % RECEIVABLE-BACKED NOTES, CLASS B, DUE ;
ISSUE PRICE: %
ANTIGUA FUNDING CORPORATION
DEPOSITOR
[LOGO]
SERVICER
Capita Equipment Receivables Trust 1996-1 (the "Owner Trust") has been
formed pursuant to a Trust Agreement between Antigua Funding Corporation (the
"Depositor"), which will be an indirect wholly owned subsidiary of AT&T Capital
Corporation ("TCC") and The Bank of New York as Owner Trustee (the "Owner
Trustee"). The Receivable-Backed Notes (the "Notes") will be issued by the Owner
Trust pursuant to an Indenture (the "Indenture") between the Owner Trust and The
Chase Manhattan Bank, as Indenture Trustee (the "Indenture Trustee"). The Notes
will consist of four classes of senior notes, designated as the Class A-1, Class
A-2, Class A-3 and Class A-4 Notes (collectively, the "Class A Notes"), and one
class of subordinated notes, designated as the Class B Notes. The proceeds from
the issuance of the Notes, together with the proceeds of the Equity Certificates
to be issued by the Owner Trust to the Depositor (which will thereafter be
transferred by the Depositor in a transaction unrelated to the issuance of the
Notes), will be used to acquire a pool of equipment leases (the "Lease
Contracts") and installment sale contracts, promissory notes, loan and security
agreements and similar types of receivables (the "Loan
(CONTINUED ON FOLLOWING PAGE)
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THIS OFFERING, SEE "RISK
FACTORS" ON PAGE 16 HEREIN.
THE NOTES WILL REPRESENT OBLIGATIONS OF THE OWNER TRUST AND WILL NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF ANTIGUA FUNDING CORPORATION, AT&T
CAPITAL 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.
<TABLE>
<CAPTION>
INITIAL PUBLIC OFFERING UNDERWRITING PROCEEDS TO THE
PRICE (1) DISCOUNT (2) DEPOSITOR (1)(3)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Per Class A-1 Note...... % % %
Per Class A-2 Note...... % % %
Per Class A-3 Note...... % % %
Per Class A-4 Note...... % % %
Per Class B Note........ % % %
Total................... $ $ $
</TABLE>
- ----------------
(1) Plus accrued interest, if any, at the applicable Interest Rate, from October
, 1996.
(2) TCC and certain of its affiliates have agreed to indemnify the International
Managers against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Depositor, estimated to be
$ .
GLOBAL COORDINATORS:
NOMURA INTERNATIONAL PLC GOLDMAN, SACHS & CO.
The Notes are offered severally by the International Managers, as specified
herein, subject to prior sale and subject to the International Managers' right
to reject orders in whole or in part. It is expected that the Notes will be
ready for delivery in book-entry form through the facilities of The Depository
Trust Company in New York, New York, Cedel Bank, societe anonyme, and the
Euroclear System against payment therefor in immediately available funds on or
about October , 1996.
Application has been made to list the Notes on the Luxembourg Stock
Exchange.
NOMURA INTERNATIONAL PLC
BARCLAYS DE ZOETE WEDD LIMITED
GOLDMAN SACHS INTERNATIONAL
LEHMAN BROTHERS
MERRILL LYNCH
INTERNATIONAL
J.P. MORGAN & CO.
-------------
THE DATE OF THIS PROSPECTUS IS OCTOBER , 1996
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
(CONTINUED FROM PRECEDING PAGE)
Contracts," and, together with the Lease Contracts, the "Contracts"). TCC will
service the Contracts pursuant to a Transfer and Servicing Agreement among the
Depositor, TCC, the Indenture Trustee and the Owner Trust. Of the Notes being
offered, $ , $ , $ , $ and $ initial
principal amount of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes and Class B Notes, respectively, are being offered initially in the
United States by the U.S. Underwriters and $ , $ ,$ ,
$ and $ , respectively, are being offered initially outside the
United States by the International Managers. The Initial Public Offering Price
and Underwriting Discount will be identical for both offerings.
The Owner Trust will also issue a single class of certificates of beneficial
interest, the Equity Certificates, which are not being offered hereby. It is
expected that the Equity Certificates will initially represent the right to
receive principal in an amount equal to approximately 4% of the Initial Contract
Pool Principal Balance, together with interest thereon at a rate of % per
annum.
The Notes and the Equity Certificates will be payable solely from, and
secured by, the Amount Available on each Payment Date (which will consist
primarily of the Scheduled Payments due under the Contracts, certain amounts
received upon the prepayment or purchase of Contracts or (to the extent not
payable to the Depositor, as described below) liquidation of the Contracts and
disposition of the related Equipment upon defaults thereunder, and investment
earnings on amounts deposited in the Collection Account established pursuant to
the Indenture, in each case subject to prior application to pay the Servicing
Fee, together with amounts permitted to be withdrawn therefor from a Cash
Collateral Account) in the order of priority described herein.
The Owner Trust will have a security interest in all Equipment securing the
Loan Contracts, and all Liquidation Proceeds (including any derived from the
disposition of the related Equipment) received with respect to any defaulted
Loan Contracts will be payable to the Owner Trust. The Depositor will not
transfer to the Owner Trust its ownership or security interest in the Equipment
related to the Lease Contracts (the "Leased Equipment"), including the right to
receive the Leased Equipment (or the purchase price therefor or proceeds
thereof) upon expiration of the orginal term of the related Lease Contract. The
Liquidation Proceeds received with respect to any defaulted Lease Contract
(including any derived from the disposition of the related Leased Equipment)
will be allocated between the Owner Trust and the Depositor as described herein.
Amounts payable to the Depositor in respect of the Leased Equipment or otherwise
in respect of Liquidation Proceeds of defaulted Lease Contracts will not be
available for payment of interest or principal on the Notes.
THE LIKELIHOOD OF PAYMENT OF INTEREST ON EACH CLASS OF NOTES WILL BE
ENHANCED BY THE APPLICATION OF THE AMOUNT AVAILABLE, AFTER PAYMENT OF THE
SERVICING FEE, TO THE PAYMENT OF SUCH INTEREST PRIOR TO THE PAYMENT OF PRINCIPAL
ON ANY OF THE NOTES OR THE EQUITY CERTIFICATES, AS WELL AS BY THE PREFERENTIAL
RIGHT OF THE HOLDERS OF NOTES OF EACH SUCH CLASS TO RECEIVE SUCH INTEREST (1) IN
THE CASE OF THE CLASS A NOTES, PRIOR TO THE PAYMENT OF ANY INTEREST ON THE CLASS
B NOTES OR THE EQUITY CERTIFICATES, AND (2) IN THE CASE OF THE CLASS B NOTES,
PRIOR TO THE PAYMENT OF ANY INTEREST ON THE EQUITY CERTIFICATES. LIKEWISE, THE
LIKELIHOOD OF PAYMENT OF PRINCIPAL ON EACH CLASS OF NOTES WILL BE ENHANCED BY
THE PREFERENTIAL RIGHT OF THE HOLDERS OF NOTES OF EACH SUCH CLASS TO RECEIVE
SUCH PRINCIPAL, TO THE EXTENT OF THE AMOUNT AVAILABLE, AFTER PAYMENT OF THE
SERVICING FEE AND INTEREST ON THE NOTES AND THE EQUITY CERTIFICATES AS
AFORESAID, (I) IN THE CASE OF THE CLASS A NOTES, PRIOR TO THE PAYMENT OF ANY
PRINCIPAL ON THE CLASS B NOTES OR (EXCEPT AS DESCRIBED HEREIN) THE EQUITY
CERTIFICATES, AND (II) IN THE CASE OF THE CLASS B NOTES, PRIOR TO THE PAYMENT OF
ANY PRINCIPAL ON THE EQUITY CERTIFICATES, EXCEPT AS DESCRIBED HEREIN. SEE
"DESCRIPTION OF THE NOTES."
To the extent the Amount Available is sufficient therefor, after payment of
the Servicing Fee, interest at the rate per annum noted above for each of the
Class A-1, Class A-2, Class A-3, Class A-4 and Class B Notes (the applicable
"Interest Rate") will be paid to Holders of each Class of Notes, and principal
will be paid on the applicable Class of Notes, on the 15th day of each month
(or, if such day is not a Business Day, on the next succeeding Business Day),
commencing November 15, 1996 (each, a "Payment Date"). The Stated Maturity Date
for the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes and the Class B Notes is , , ,
, and , respectively, but final payment of any Class of
Notes could occur significantly earlier than the Stated Maturity Date of such
Class.
The Notes are subject to redemption in whole as described herein under
"Description of the Notes -- Optional Purchase of Contracts."
There is currently no secondary market for the Notes and there is no
assurance that one will develop. The U.S. Underwriters expect, but will not be
obligated, to make a market in the Notes in the United States. The International
Managers expect, but will not be obligated, to make a market in the Notes
outside the United States. There is no assurance that either such market will
develop, or if either such market does develop, that such market will continue.
See "Risk Factors."
Each prospective purchaser of the Notes must comply with all applicable laws
and regulations in any jurisdiction in which it purchases or sells the Notes or
possesses or distributes this Prospectus and must obtain any consent, approval
or permission required by it for the purchase, offer or sale by it of the Notes
under the laws and regulations in force in any jurisdiction to which it makes
such purchase, offer or sale, and neither the Owner Trust nor any Underwriter
shall have any responsibility therefor.
(CONTINUED ON FOLLOWING PAGE)
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
(CONTINUED FROM PRECEDING PAGE)
The distribution of this Prospectus and the offer or sale of Notes may be
restricted by law in certain jurisdictions. Persons to whom possession of this
Prospectus and any of the Notes may come must inform themselves about, and
observe, any such restrictions. See "Underwriting." In particular, there are
restrictions on the distribution of this Prospectus and the offer and sale of
the Notes in the United Kingdom and Japan. None of the Owner Trust, the
Underwriters or any of their respective representatives is making any
representation to any offeree or purchaser of the Notes regarding the legality
of or investment therein by such offeree or purchaser under applicable legal
investment or similar laws.
For so long as the Notes are listed on the Luxembourg Stock Exchange and the
rules of such exchange so require, the notices to Noteholders will be published
in a leading newspaper having general circulation in Luxembourg (which is
expected to be the Luxemburger Wort) and will be made available at the offices
of the Luxembourg Listing Agent. See "Additional Information."
It is a condition of issuance of the Notes that each of Standard & Poor's
Ratings Services, Moody's Investors Service, Inc., Duff & Phelps Credit Rating
Co. and Fitch Investors Service, L.P. (i) rate the Class A Notes in its highest
rating category, and (ii) rate the Class B Notes at least "A," "A2," "A" and
"A," respectively. See "Ratings of the Notes."
IN CONNECTION WITH THIS OFFERING, THE U.S. UNDERWRITERS AND/OR INTERNATIONAL
MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
The Depositor has taken all reasonable care to ensure that the information
stated herein is true and accurate in all material respects and is not
misleading as of the date hereof and that there are no material facts omission
of which would make the information contained herein misleading in any material
respect. The Depositor accepts responsibility accordingly.
Upon receipt of a request by an investor who has received an electronic
Prospectus from any Underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
such Underwriter will promptly deliver, or cause to be delivered, without
charge, to such investor a paper copy of the Prospectus.
The Depositor has not authorized any offer of Notes to the public in the
United Kingdom within the meaning of the Public Offers of Securities Regulations
1995 (the "Regulations"). The Notes may not lawfully be offered or sold to
persons in the United Kingdom except in circumstances which do not result in an
offer to the public in the United Kingdom within the meaning of the Regulations
or otherwise in compliance with all applicable provisions of the Regulations.
The Depositor does not intend to register the Notes under the Securities and
Exchange Law of Japan (the "SEL"). Accordingly, the Notes may not be offered or
sold directly or indirectly in Japan, and this Prospectus may not be distributed
or circulated in Japan, except in circumstances that do not constitute an offer
to the public within the meaning of the SEL.
In making an investment decision, investors must rely on their own
examination of the Notes, including the merits and risks involved. The contents
of this Prospectus are not to be construed as legal, business or tax advice.
Each prospective purchaser must consult its own accountant, legal advisor and
other advisors as to the business, legal, tax and related aspects of the
purchase of the Notes. As used herein, references to "dollars" or "$" are to
United States dollars.
<PAGE>
INCORPORATION BY REFERENCE
All documents filed by the Servicer, on behalf of the Owner Trust, pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this Prospectus and prior to the
termination of the offering of the Notes shall be deemed to be incorporated by
reference into this Prospectus. Any statement contained herein or in a document
incorporated or 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 herein or in any subsequently filed document which also is
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Depositor will provide without charge to each person to whom a copy of
this Prospectus is delivered on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference, except the
exhibits to such documents. Requests for such copies should be directed to
Antigua Funding Corporation, 1209 Orange Street, Wilmington, Delaware 19801,
Attention: Secretary.
AVAILABLE INFORMATION
The Depositor and the Owner Trust have filed a Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "Commission") with respect to the Notes
offered pursuant to this Prospectus. For further information, reference is made
to the Registration Statement and amendments thereof and to the exhibits
thereto, which are 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 Northwest Atrium Center, 500 Madison Street, Chicago, Illinois 60661.
Copies of the Registration Statement and amendments thereof and exhibits thereto
may be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a World Wide Web site which provides on-line access to reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission at the address "http://www.sec.gov."
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, monthly unaudited reports
containing information concerning the Owner Trust, and prepared by the Servicer,
will be sent by the Indenture Trustee on behalf of the Owner Trust only to Cede
& Co., as nominee of The Depository Trust Company ("DTC") and registered holder
of the Notes, and to the Luxembourg Paying Agent. See "Description of the Notes
- -- Book-Entry Registration." In the event Definitive Notes are issued, such
reports will be sent to Noteholders as of the most recent Record Date and to the
Luxembourg Paying Agent. Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. See
"Description of the Notes -- Reports to Noteholders" for additional information
concerning periodic reports to Noteholders. Note Owners may receive such
reports, upon written request to the Indenture Trustee, together with a
certification that they are Note Owners. Any such request should be made to the
Indenture Trustee at the following address: The Chase Manhattan Bank, 450 W.
33rd Street (15th floor), New York, New York 10001 (facsimile (212) 946-3240),
Attention: Advanced Structured Products Group. Neither TCC nor the Depositor
intends to send any of its financial reports to Note Owners. The Servicer, on
behalf of the Owner Trust, will file with the Commission periodic reports
concerning the Owner Trust to the extent required under the Exchange Act and the
rules and regulations of the Commission thereunder. However, in accordance with
the Exchange Act and the rules and regulations of the Commission thereunder, the
Depositor expects that the Owner Trust's obligation to file such reports will be
terminated at the end of 1996.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ---------------------------------------------------------------------------------------------------------- ---------
<S> <C>
INCORPORATION BY REFERENCE................................................................................ i
AVAILABLE INFORMATION..................................................................................... i
REPORTS TO NOTEHOLDERS.................................................................................... i
PROSPECTUS SUMMARY........................................................................................ 1
RISK FACTORS.............................................................................................. 17
Limited Assets of the Owner Trust....................................................................... 17
Subordination of the Class B Notes...................................................................... 17
Bankruptcy and Insolvency Risks......................................................................... 17
Yield and Prepayment Considerations..................................................................... 19
Certain Legal Aspects of the Contracts.................................................................. 20
No Gross-Up for Withholding Tax......................................................................... 21
Limited Liquidity....................................................................................... 21
Book-Entry Registration................................................................................. 21
THE DEPOSITOR AND THE OWNER TRUST......................................................................... 21
The Depositor........................................................................................... 21
The Owner Trust......................................................................................... 22
Capitalization of the Owner Trust....................................................................... 23
The Owner Trustee....................................................................................... 23
AT&T CAPITAL CORPORATION.................................................................................. 24
THE ORIGINATORS........................................................................................... 25
AT&T Capital Leasing Services, Inc...................................................................... 25
AT&T Credit Corporation and NCR Credit Corp............................................................. 25
AT&T Commercial Finance Corporation..................................................................... 26
Underwriting and Servicing.............................................................................. 27
THE CONTRACTS............................................................................................. 31
Description of the Contracts............................................................................ 31
Representations and Warranties Made by TCC.............................................................. 34
Certain Statistics Relating to the Cut-Off Date Contract Pool........................................... 37
Certain Statistics Relating to Delinquencies and Defaults............................................... 40
DESCRIPTION OF THE NOTES.................................................................................. 43
General................................................................................................. 43
Distributions........................................................................................... 44
Class A Interest........................................................................................ 45
Class B Interest........................................................................................ 45
Principal............................................................................................... 45
Subordination of Class B Notes and Equity Certificates.................................................. 46
Cash Collateral Account................................................................................. 47
Liquidated Contracts.................................................................................... 48
Optional Purchase of Contracts.......................................................................... 48
Trust Accounts.......................................................................................... 48
Reports to Noteholders.................................................................................. 49
Book-Entry Registration................................................................................. 50
Definitive Notes........................................................................................ 53
Modification of Indenture Without Noteholder Consent.................................................... 53
Modification of Indenture With Noteholder Consent....................................................... 54
Events of Default; Rights Upon Event of Default......................................................... 54
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ---------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Certain Covenants....................................................................................... 55
Annual Compliance Statement............................................................................. 56
Indenture Trustee's Annual Report....................................................................... 56
Satisfaction and Discharge of Indenture................................................................. 56
The Indenture Trustee................................................................................... 56
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENT....................................................... 57
Transfer and Assignment of Contracts and Equipment...................................................... 57
Collections on Contracts................................................................................ 57
Servicing............................................................................................... 59
Amendment............................................................................................... 61
Termination of the Transfer and Servicing Agreement..................................................... 62
CERTAIN LEGAL ASPECTS OF THE CONTRACTS.................................................................... 62
Enforcement of Security Interests in the Equipment...................................................... 62
Insolvency Matters...................................................................................... 63
UNITED STATES TAXATION.................................................................................... 64
Treatment of the Notes.................................................................................. 65
Treatment of the Owner Trust............................................................................ 65
Payments of Interest.................................................................................... 65
Original Issue Discount................................................................................. 65
Market Discount......................................................................................... 66
Amortizable Bond Premium................................................................................ 66
Sale, Exchange or Retirement of Notes................................................................... 66
Tax Consequences to United States Alien Holders......................................................... 66
Backup Withholding...................................................................................... 68
ERISA CONSIDERATIONS...................................................................................... 68
RATINGS OF THE NOTES...................................................................................... 69
USE OF PROCEEDS........................................................................................... 69
UNDERWRITING.............................................................................................. 70
LEGAL MATTERS............................................................................................. 72
ADDITIONAL INFORMATION.................................................................................... 72
INDEX OF PRINCIPAL TERMS.................................................................................. 73
APPENDIX A--GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES................................. A-1
Initial Settlement...................................................................................... A-1
Secondary Market Trading................................................................................ A-1
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS............................................... A-3
APPENDIX B--WEIGHTED AVERAGE LIFE OF THE NOTES............................................................ B-1
</TABLE>
iii
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the international underwriting
agreement (the "International Underwriting Agreement"), the managers named below
(the "International Managers"), through their representative, Nomura
International plc (the "International Representative"), have severally agreed to
purchase from the Depositor the following respective initial principal amount of
Notes (the "International Notes") at the initial public offering price less the
underwriting discounts set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
INITIAL INITIAL INITIAL INITIAL INITIAL
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF CLASS AMOUNT OF CLASS AMOUNT OF CLASS AMOUNT OF CLASS AMOUNT OF CLASS
INTERNATIONAL MANAGERS A-1 NOTES A-2 NOTES A-3 NOTES A-4 NOTES B NOTES
- ------------------------------------ --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Nomura International plc............
Barclays de Zoete Wedd Limited......
Goldman Sachs International.........
Lehman Brothers International
(Europe)...........................
Merrill Lynch International.........
J.P. Morgan Securities Ltd..........
--------------- --------------- --------------- --------------- ---------------
Total.........................
--------------- --------------- --------------- --------------- ---------------
--------------- --------------- --------------- --------------- ---------------
</TABLE>
In the International Underwriting Agreement, the International Managers have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the International Notes offered hereby if any of the International Notes are
purchased. The Depositor has been advised by the International Representative
that the International Managers propose to offer the International Notes to the
public at the respective public offering prices set forth on the cover page of
this Prospectus, and to certain dealers at such price, less a concession not in
excess of 0. % per Class A-1 Note, 0. % per Class A-2 Note, 0. % per Class
A-3 Note, 0. % per Class A-4 Note and 0. % per Class B Note. The International
Managers may allow and such dealers may reallow to other dealers a discount not
in excess of 0. % per Class A-1 Note, 0. % per Class A-2 Note, 0. % per Class
A-3 Note, 0. % per Class A-4 Note and 0. % per Class B Note. After the Notes
are released for sale to the public, the offering price and other selling terms
may be varied by the International Representative.
The Notes are new issues of securities with no established trading market.
The Depositor has been advised by the International Managers that the
International Managers intend to make a market in the Notes outside of the
United States but are not obligated to do so and may discontinue market making
at any time without notice. The Depositor has been advised by the U.S.
Representative that the U.S. Underwriters intend to make a market in the Notes
in the United States but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
Funds in the Cash Collateral Account and the Trust Accounts may, from time
to time, be invested in Eligible Investments acquired from the U.S.
Underwriters.
Each International Manager has represented and agreed that (i) it has not
offered or sold and, prior to the expiry of the period of six months from the
Closing Date, will not offer or sell any Notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1988 with
respect to anything done by it in relation to the Notes in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Notes to a person who is of a kind described in
article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on.
70
<PAGE>
Each International Manager has agreed that the Notes may not be offered or
sold directly or indirectly in Japan, and this Prospectus may not be distributed
or circulated in Japan, except in circumstances that do not constitute an offer
to the public within the meaning of the SEL.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Notes to persons located outside the United Sates.
TCC and certain of its affiliates have agreed to indemnify the International
Managers against certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
TCC and the Depositor have entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with certain underwriters (the "U.S. Underwriters," and
collectively with the International Managers, the "Underwriters") through their
representative, Goldman, Sachs & Co. (the "U.S. Representative"), providing for
the concurrent offer and sale of an aggregate of $ , $ ,
$ ,$ and $ principal amount of Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class B Notes, respectively (the
"U.S. Notes") in the United States. The offering price and aggregate
underwriting discounts and commissions per Note for the U.S. Notes and the
International Notes are identical.
To provide for the coordination of their activities, the U.S. Underwriters
and the International Managers have entered into an Agreement between U.S.
Underwriters and International Managers (the "Intersyndicate Agreement") which
provides, among other things, that the U.S. Underwriters and the International
Managers may purchase and sell among each other such number of Notes as is
approved by Nomura International plc. To the extent there are sales among the
U.S. Underwriters and the International Managers pursuant to the Intersyndicate
Agreement and as approved by Nomura International plc, the number of U.S. Notes
initially available for sale by the U.S. Underwriters and the number of
International Notes initially available for sale by the International Managers
may be more or less than the numbers appearing on the cover page of this
Prospectus. Except as permitted by the Intersyndicate Agreement, the price of
any Notes so sold will be the respective initial public offering price, less an
amount not greater than the selling concession.
Pursuant to the Intersyndicate Agreement, as part of the distribution of the
Notes and subject to certain exceptions, (a) the U.S. Underwriters will offer
and sell U.S. Notes only in the United States to U.S. Persons (as defined below)
and (b) the International Managers will offer and sell International Notes only
outside the United States to (i) non-U.S. Persons (including any entity
constituting an investment advisor located outside the United States acting with
discretionary authority for a U.S. Person) or (ii) U.S. Persons if such sales
are pursuant to Rule 15a-6(a)(4)(v) promulgated under the Exchange Act. For
these purposes, U.S. Person means individual residents in the United States,
corporations, Partnerships, or other entities organized in or under the laws of
the United States or any political subdivision thereof (including any such
entity constituting an investment advisor acting with discretionary authority
for a non-U.S. Person) whose office most directly involved with the purchase is
located in such country or a U.S. branch of a foreign bank or financial
institution. "United States" means the United States of America, its
territories, its possessions and all areas subject to its jurisdiction.
Nomura International plc has provided acquisition financing and advisory
services to HoldCo. and MergerCo. in connection with the Merger, and holds
warrants to acquire an indirect majority interest in the common stock of TCC.
See "AT&T Capital Corporation." In addition, Nomura International plc may make a
loan to provide a portion of the initial funding of the Cash Collateral Account.
Application has been made to list the Notes on the Luxembourg Stock
Exchange.
71
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
Depositor by Dorsey & Whitney LLP. Cadwalader, Wickersham & Taft will act as
counsel to the U.S. Underwriters and the International Managers. The Indenture,
the Transfer and Servicing Agreement, the Trust Agreement, the Purchase
Agreement and the Notes will be governed by the laws of the State of New York.
ADDITIONAL INFORMATION
1. The issue of the Notes has been authorized pursuant to the Indenture and
a resolution dated October 8, 1996 of the Board of Directors of the
Depositor.
2. An application has been made to list the Notes on the Luxembourg Stock
Exchange. In connection with such application, a legal notice of the
issuance of the Notes and copies of the Indenture and a copy of the Registration
Statement will be deposited with the Chief Registrar of the District of
Luxembourg (Greffier en Chef du Tribunal d'Arrondissement a Luxembourg) where
such documents may be examined and copies obtained.
3. As long as the Notes are outstanding, copies of the Registration
Statement, all amendments and exhibits thereto, the Indenture and any
reports containing information on the Owner Trust prepared by the Servicer will
be available free of charge at the offices of the Indenture Trustee and
Kredietbank S.A. Luxembourgeoise, as the listing agent in Luxembourg at the
following address: 43, boulevard Royal, L-2955 Luxembourg, and notices of their
availability (together with other notices to be given to Noteholders in
accordance with the Indenture) will be published in a leading newspaper having
general circulation in Luxembourg (which is expected to be the Luxemburger
Wort).
4. There is no litigation, arbitration or administrative proceeding, actual
or pending, which relates to the Owner Trust and to which the Owner Trust
is a party or of which the Owner Trust has been notified, or threatened that it
will be made a party, which is material in the context of the issue of the
Notes.
5. Upon issuance, the Notes will be accepted for clearance and settlement
through DTC, Euroclear and Cedel Bank, as applicable.
<TABLE>
<CAPTION>
COMMON CODE ISIN CUSIP
--------------- -------------------- ----------------
<S> <C> <C> <C>
Class A-1 Notes......................................... 7027931 US13970LAA0-8 13970L AA 0
Class A-2 Notes......................................... 7027958 US13970LAB8-0 13970L AB 8
Class A-3 Notes......................................... 7027966 US13970LAC6-3 13970L AC 6
Class A-4 Notes......................................... 7027974 US13970LAD4-7 13970L AD 4
Class B Notes........................................... 7028008 US13970LAE2-0 13970L AE 2
</TABLE>
72
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
<S> <C>
Administrative Fees.................. 10, 59
Amount Available..................... 6, 43
Article 2A........................... 62
AT&T................................. 23
ATMs................................. 25
Available Pledged Revenues........... 43
Bankruptcy Code...................... 62
Bell Labs............................ 27
Benefit Plan......................... 68
Book Value........................... 10, 48
Business Day......................... 42
Cash Collateral Account.............. 12
Cedel Bank........................... 50
Cedel Bank Participants.............. 50
CFC.................................. 9, 24
Class A Notes........................ Cover, 2, 42
Class A-1 Notes...................... 1, 42
Class A-2 Notes...................... 1, 42
Class A-3 Notes...................... 1, 42
Class A-4 Notes...................... 2, 42
Class B Notes........................ 2, 42
Closing Date......................... 4
CLT.................................. 26
Code................................. 15, 63
Collection Account................... 47
Collection Period.................... 4, 45
Commission........................... i
Contract Pool........................ 8
Contract Pool Principal Balance...... 3, 45
Contract Principal Balance........... 3, 45
Contracts............................ Cover, 6, 22
Counsel.............................. 63
CPR.................................. B-1
Credit Corp.......................... 9, 24
Current Collection Period Pledged
Revenues............................ 6, 43
Current Realized Losses.............. 46
Cut-Off Date......................... 4
Cut-Off Date Contract Pool........... 8, 36
Definitive Notes..................... 52
Deposit Date......................... 6, 43
Depositor............................ Cover, 1
Depository........................... 42
Determination Date................... 58
DTC.................................. i, 15
DTC Participants..................... 49
Duff & Phelps........................ 5
Eligible Accounts.................... 47
Eligible Investments................. 48
Equipment............................ 1
Equity Certificate Majority.......... 60
Equity Certificates.................. 2, 11
ERISA................................ 15, 68
Euroclear............................ 51
Euroclear Operator................... 51
Euroclear Participants............... 51
Euroclear System..................... 51
Events of Default.................... 53
Exchange Act......................... i
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
<S> <C>
Financial Institution................ 66
Fitch................................ 5
Global Notes......................... 42, A-1
HoldCo............................... 23
Holders.............................. 15, 42
Indenture............................ Cover, 1
Indenture Trustee.................... Cover, 1
Indirect Participants................ 49
Initial Amount....................... 46
Initial Contract Pool Principal
Balance............................. 4, 45
Insolvency Laws...................... 16
Insurance, Maintenance and Tax
Accounts............................ 57
Interest Rate........................ Cover ii, 2
Interest Shortfall................... 58
International Depositories........... 49
International Managers............... 70
International Notes.................. 70
International Representative......... 70
International Underwriting
Agreement........................... 70
Intersyndicate Agreement............. 70
IRS.................................. 63
Lease Contract....................... Cover, 6, 22
Cover ii, 11,
Leased Equipment..................... 21
Leasing Services..................... 9, 24
Liquidated Contract.................. 4, 45
Liquidation Loss..................... 46
Liquidation Proceeds................. 9, 47
Loan Contracts....................... Cover, 6, 22
Lucent............................... 23
Luxembourg Paying Agent.............. 52
Luxembourg Transfer Agent............ 52
Master Form Lease.................... 30
Merger............................... 23
MergerCo............................. 23
Monthly Principal Amount............. 3, 45
Moody's.............................. 5
NCR.................................. 23
NCR Credit........................... 9, 24
Non-Accrual.......................... 40
Note Distribution Account............ 47
Note Majority........................ 53
Note Owners.......................... 15
Noteholders.......................... 15, 42
Notes................................ Cover, 1, 42
Obligor.............................. 6, 22
OID.................................. 64
Originators.......................... 9, 24
Owner Trust.......................... Cover, 1
Owner Trustee........................ Cover, 1
Participants......................... 49
Payment Date......................... Cover ii
Plan Assets Regulation............... 68
Pledged Revenues..................... 7, 43
Prepayments.......................... 7, 43
PTCE................................. 68
Purchase Agreement................... 1
Rating Agencies...................... 5
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
Related Collection Period Pledged
Revenues............................ 6, 43
<S> <C>
Repurchase Event..................... 35
Required Payoff Amount............... 9, 46
Requisite Amount..................... 46
Rules................................ 50
S&P.................................. 5
SBU.................................. 26
Scheduled Payments................... 7, 43
Securities Act....................... i
Servicer............................. 1
Servicing Account.................... 47
Servicing Fee........................ 10, 59
Specific Lease Form.................. 30
Stated Maturity Dates................ 4
TCC.................................. Cover, 1, 23
<CAPTION>
TERM PAGE
- ------------------------------------- ---------------
<S> <C>
Terms and Conditions................. 51
TIN.................................. 67
Transfer and Servicing Agreement..... 1
Trust Accounts....................... 47
Trust Agreement...................... 1
Trust Assets......................... 6, 22
UCC.................................. 17
Underwriters......................... 70
U.S. Notes........................... 70
U.S. Person.......................... 71
U.S. Representative.................. 70
U.S. Underwriters.................... 70
U.S. Underwriting Agreement.......... 70
United States........................ 71
United States Holder................. 64
United States Person................. A-4
</TABLE>
74
<PAGE>
PRINCIPAL OFFICE OF
THE DEPOSITOR
1209 Orange Street
Wilmington, Delaware 19801
TRUSTEE
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
PAYING AGENTS
<TABLE>
<CAPTION>
<S> <C>
The Chase Manhattan Bank Kredietbank S.A. Luxembourgeoise
450 West 33rd Street 43, boulevard Royal
New York, New York 10001 L-2955
Luxembourg
</TABLE>
LISTING AGENT
Kredietbank S.A. Luxembourgeoise
43, boulevard Royal
L-2955
Luxembourg
<TABLE>
<CAPTION>
<S> <C> <C>
LEGAL ADVISOR TO THE DEPOSITOR LEGAL ADVISOR TO THE UNDERWRITERS
AS TO UNITED STATES LAW AS TO UNITED STATES LAW
Dorsey & Whitney LLP Cadwalader, Wickersham & Taft
250 Park Avenue 100 Maiden Lane
New York, New York 10177 New York, New York 10038
</TABLE>
SPECIAL LEGAL ADVISOR TO THE DEPOSITOR
AS TO UNITED STATES TAX MATTERS
Dorsey & Whitney LLP
250 Park Avenue
New York, New York 10177
INDEPENDENT ACCOUNTANTS TO THE DEPOSITOR
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE DEPOSITOR, THE SERVICER, THE OWNER TRUST, THE OWNER TRUSTEE,
THE INDENTURE TRUSTEE, THE U.S. UNDERWRITERS OR THE INTERNATIONAL MANAGERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION 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. NEITHER THE
DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE HEREUNDER, SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Incorporation by Reference..................... i
Available Information.......................... i
Reports to Noteholders......................... i
Table of Contents.............................. ii
Prospectus Summary............................. 1
Risk Factors................................... 16
The Depositor and the Owner Trust.............. 20
AT&T Capital Corporation....................... 23
The Originators................................ 24
The Contracts.................................. 30
Description of the Notes....................... 42
Description of the Transfer and Servicing
Agreement..................................... 56
Certain Legal Aspects of the Contracts......... 61
United States Taxation......................... 63
ERISA Considerations........................... 68
Ratings of the Notes........................... 68
Use of Proceeds................................ 70
Underwriting................................... 70
Legal Matters.................................. 72
Additional Information......................... 72
Index of Principal Terms....................... 73
Appendix A: Global Clearance, Settlement and
Tax Documentation Procedures.................. A-1
Appendix B: Weighted Average Life of the
Notes......................................... B-1
</TABLE>
----------------
UNTIL , 1997 (NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS ACTING AS UNDERWRITERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
$
% RECEIVABLE-BACKED NOTES,
CLASS A-1
$
% RECEIVABLE-BACKED NOTES, CLASS A-2
$
% RECEIVABLE-BACKED NOTES, CLASS A-3
$
% RECEIVABLE-BACKED NOTES, CLASS A-4
$
% RECEIVABLE-BACKED NOTES, CLASS B
ANTIGUA FUNDING
CORPORATION
DEPOSITOR
[LOGO]
SERVICER
---------------------
PROSPECTUS
---------------------
GLOBAL COORDINATORS:
NOMURA INTERNATIONAL PLC
GOLDMAN, SACHS & CO.
-----------
INTERNATIONAL MANAGERS:
NOMURA INTERNATIONAL PLC
BARCLAYS DE ZOETE WEDD LIMITED
GOLDMAN SACHS INTERNATIONAL
LEHMAN BROTHERS
MERRILL LYNCH INTERNATIONAL
J.P. MORGAN & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in connection
with the offering of the Notes, other than underwriting discounts and
commissions, described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.................. $1,060,344.30
Printing and Engraving............................................... 260,000.00
Legal Fees and Expenses.............................................. 1,100,000.00
Luxembourg Stock Exchange Listing Fees............................... 20,000.00
Accounting Fees and Expenses......................................... 250,000.00
Trustee Fees and Expenses............................................ 30,000.00
Rating Agencies' Fees................................................ 550,000.00
Miscellaneous Expenses............................................... 50,000.00
-------------
Total............................................................ $3,320,344.30
-------------
-------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Antigua Funding Corporation is incorporated under the laws of Delaware.
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation, by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise).
The indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceedings, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, for criminal proceedings, had no
reasonable cause to believe that his conduct was illegal. A Delaware corporation
may identify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
The Certificate of Incorporation and Bylaws of Antigua Funding Corporation
provide, in effect, that, subject to certain limited exceptions, such
corporation will indemnify its officers and directors to the extent permitted by
the Delaware General Corporation Law.
ITEM 16. EXHIBITS.
The Exhibits filed as part of this Registration Statement are:
<TABLE>
<C> <C> <S>
1.1 -- Form of U.S. Underwriting Agreement.
1.2 -- Form of International Underwriting Agreement.
*3.1 -- Certificate of Incorporation of Depositor.
*3.2 -- By-Laws of Depositor.
*4.1 -- Form of Transfer and Servicing Agreement.
*4.2 -- Form of Indenture.
*4.3 -- First Amended and Restated Trust Agreement.
*4.4 -- Form of Amended and Restated Trust Agreement
*4.5 -- Form of Purchase Agreement.
*5.1 -- Opinion and consent of Dorsey & Whitney LLP with respect to legality.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <C> <S>
8.1 -- Opinion and consent of Dorsey & Whitney LLP with respect to tax matters.
8.2 -- Opinion and consent of Cadwalader, Wickersham & Taft with respect to tax matters.
*23.1 -- Consent of Dorsey & Whitney LLP (included as part of Exhibit 5.1).
23.2 -- Consent of Dorsey & Whitney LLP (included as part of Exhibit 8.1).
*23.3 -- Consent of Dorsey & Whitney LLP
23.4 -- Consent of Cadwalader, Wickersham & Taft (included as part of Exhibit 8.2).
*24.1 -- Power of Attorney.
*25.1 -- Statement of eligibility of Indenture Trustee.
</TABLE>
- ------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 6 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
7th day of October, 1996.
ANTIGUA FUNDING CORPORATION
By ___________/s/ GUY HANDS___________
Guy Hands
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 6 to the Registration Statement has been signed by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------- ------------------------------------------- ------------------------
<C> <S> <C>
/s/ GUY HANDS President (Principal Executive Officer) and October 7, 1996
Guy Hands Director
/s/ JEFF NASH Vice President (Principal Financial and October 7, 1996
Jeff Nash Accounting Officer) and Director
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 6 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
7th day of October, 1996.
CAPITA EQUIPMENT RECEIVABLES TRUST
1996-1
By: ANTIGUA FUNDING CORPORATION
By____________/s/ GUY HANDS___________
Guy Hands
President
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------
<C> <C> <S> <C>
1.1 -- Form of U.S. Underwriting Agreement.
1.2 -- Form of International Underwriting Agreement.
*3.1 -- Certificate of Incorporation of Depositor.
*3.2 -- By-Laws of Depositor.
*4.1 -- Form of Transfer and Servicing Agreement.
*4.2 -- Form of Indenture.
*4.3 -- First Amended and Restated Trust Agreement.
*4.4 -- Form of Amended and Restated Trust Agreement
*4.5 -- Form of Purchase Agreement.
*5.1 -- Opinion and consent of Dorsey & Whitney LLP with respect to legality.
8.1 -- Opinion and consent of Dorsey & Whitney LLP with respect to tax matters.
8.2 -- Opinion and consent of Cadwalader, Wickersham & Taft with respect to tax matters.
*23.1 -- Consent of Dorsey & Whitney LLP (included as part of Exhibit 5.1).
23.2 -- Consent of Dorsey & Whitney LLP (included as part of Exhibit 8.1).
*23.3 -- Consent of Dorsey & Whitney LLP
23.4 -- Consent of Cadwalader, Wickersham & Taft (included as part of Exhibit 8.2).
*24.1 -- Power of Attorney.
*25.1 -- Statement of eligibility of Indenture Trustee.
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
DRAFT DATED 10/03/96
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
RECEIVABLE-BACKED NOTES
$__________% RECEIVABLE-BACKED NOTES, CLASS A-1
$__________% RECEIVABLE-BACKED NOTES, CLASS A-2
$__________% RECEIVABLE-BACKED NOTES, CLASS A-3
$__________% RECEIVABLE-BACKED NOTES, CLASS A-4
$__________% RECEIVABLE-BACKED NOTES, CLASS B
UNDERWRITING AGREEMENT (U.S.)
______________________________________
October ___, 1996
Goldman, Sachs & Co.,
As representative (the "Representative") of the
several Underwriters named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Antigua Funding Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
$_________ principal amount of the ___% Receivable-Backed Notes, Class A-1,
$_______ principal amount of the ___% Receivable-Backed Notes, Class A-2,
$_______ principal amount of the ___% Receivable-Backed Notes, Class A-3,
$_______ principal amount of the ___% Receivable-Backed Notes, Class A-4, and
$_______ principal amount of the ___% Receivable-Backed Notes, Class B
(collectively, the "U.S. Securities"), of the Capita Equipment Receivables Trust
1996-1 (the "Trust") (together with the International Securities (as defined
below), the "Securities"). The Trust was created and now exists pursuant to an
Amended and Restated Trust Agreement (the "Trust Agreement") dated as of
September 1, 1996, between the Company and The Bank of New York, as owner
trustee (the "Owner Trustee"). The Securities will be issued under an Indenture
(the "Indenture"), dated as of October __, 1996 between the Trust and The Chase
Manhattan Bank, as indenture trustee (the "Indenture Trustee"). The Trust is
also issuing to the Company $_______ principal amount of Equity Certificates
(the "Certificates") evidencing beneficial interests in the Trust.
<PAGE>
The Company will purchase the Contracts (as defined below) and certain
interests in the equipment related to the Contracts (the "Equipment") from AT&T
Capital Leasing Services, Inc., a Massachusetts corporation, AT&T Credit
Corporation, a Delaware corporation, NCR Credit Corp., a Delaware corporation
and AT&T Commercial Finance Corporation, a Delaware corporation (each an
"Originator" and collectively, the "Originators") under a Purchase and Sale
Agreement (the "Purchase Agreement"). Each of the Originators is a direct or
indirect wholly-owned subsidiary of AT&T Capital Corporation ("TCC"). The Trust
will acquire a pool of equipment leases (each a "Lease Contract") and
installment sale contracts, promissory notes, loan and security agreements and
similar types of receivables (each a "Loan Contract", and collectively with the
Lease Contracts, the "Contracts"), the security interest of the Company in
Equipment securing the Loan Contracts, a security interest in the Company's
interest in the Equipment related to the Lease Contracts and certain other
rights pursuant to the Transfer and Servicing Agreement (the "Transfer and
Servicing Agreement"), among the Company, the Trust and TCC, pursuant to which
TCC has agreed to service the contracts. On the Time of Delivery (as defined in
Section 4 hereof), the Company will purchase such Contracts and the Originators'
interest in the Equipment from the Originators pursuant to the Purchase
Agreement to be entered into by the Company, TCC, and each of the Originators.
In addition, one or more financial institutions (the "Cash Collateral
Depositors"), at the Time of Delivery, will enter into a loan agreement (the
"Loan Agreement") pursuant to which the Cash Collateral Depositors and the
Company will deposit $__________ (the "Initial Deposit") into the Cash
Collateral Account at the Time of Delivery. As used herein, the term "Related
Documents" means the Trust Agreement, the Securities, the Indenture, the
Transfer and Servicing Agreement, the Purchase Agreement, the Loan Agreement and
the Letter of Representations, between the Company, the Trust, the Indenture
Trustee and the Depository Trust Company.
It is understood and agreed to by all parties that the Company, TCC
and each of the Originators are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company of
an aggregate of $________ principal amount of the ___% Receivable-Backed Notes,
Class A-1, $_______ principal amount of the ___% Receivable-Backed Notes, Class
A-2, $______ principal amount of ___% Receivable-Backed Notes, Class A-3,
$________ principal amount of the ___% Receivable-Backed Notes, Class A-4 and
$_______ principal amount of the ___% Receivable-Backed Notes, Class B, of the
Trust (the "International Securities") through arrangements with certain
underwriters outside the United States (the "International Underwriters"), for
whom Nomura International plc is acting as lead manager. Anything herein or
therein to the contrary notwithstanding, the respective closings under this
Agreement and the International Underwriting Agreement are hereby expressly made
conditional on one another. The Underwriters hereunder and the International
Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of Securities between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale contemplated by the foregoing, one relating to the Securities
hereunder and the other relating to the International Securities. The latter
form of prospectus will be identical to the former except for certain substitute
pages as included in the registration statement and amendments thereto as
mentioned
2
<PAGE>
below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the
context may otherwise require, references hereinafter to the Securities shall
include all the Securities which may be sold pursuant to either this Agreement
or the International Underwriting Agreement, and references herein to any
prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
Capitalized terms used herein without definition shall have the
meanings set forth in the Indenture.
1 Each of the Company and TCC, jointly and severally, represents
and warrants to, and agrees with, each of the Underwriters that:
(a) The Trust, the Company and the Securities meet the requirements
for use of Form S-3 under the Securities Act of 1933, as amended (the
"Act"); a registration statement on Form S-3 (File No. 333-08465) in
respect of the Securities has been filed with the Securities and Exchange
Commission (the "Commission"); such registration statement and any
post-effective amendment thereto, each in the form heretofore delivered to
the Representative, and, excluding exhibits thereto but including all
documents incorporated by reference in the prospectus contained therein,
have been declared effective by the Commission in such form; no other
document with respect to such registration statement or document
incorporated by reference therein has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of such
registration statement has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary
prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act, is hereinafter called a "Preliminary Prospectus";
the various parts of such registration statement, including all exhibits
thereto but excluding Form T-1 and including (i) the information contained
in the form of final prospectus filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the registration statement
at the time it was declared effective and (ii) the documents incorporated
by reference in the prospectus contained in the registration statement at
the time such part of the registration statement became effective, each as
amended at the time such part of the registration statement became
effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus"; and any
reference herein to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the Act, as of the date of
such Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment or supplement to any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any
3
<PAGE>
reference to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Company or the Trust filed
pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective
date of the Registration Statement that is incorporated by reference in the
Registration Statement);
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act, and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made (and taking into account Rule 430A
of the Act, which permits certain information to be omitted from a
preliminary prospectus), not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions
made in the statements relating to the Underwriters and this Agreement and
the International Underwriting Agreement set forth in (i) the next-to-last
paragraph of the cover page, the second sentence of the seventh paragraph
on the inside cover page, the second bold paragraph on the inside cover
page, the second sentence under "Risk Factors -- Limited Liquidity", the
statements in the first two paragraphs, the second sentence of the fourth
paragraph, the seventh paragraph and the eighth paragraph under
"Underwriting" in the Prospectus related to the U.S. Securities and (ii)
the next-to-last paragraph of the cover page, the third sentence in the
seventh full paragraph of the first inside cover page, the bold paragraph
on the second inside cover page, the second sentence under "Risk Factors --
Limited Liquidity," the statements in the first two paragraphs, the second
sentence in the third paragraph, the tenth paragraph and the eleventh
paragraph under "Underwriting" in the Prospectus related to the
International Securities (collectively, the "Provided Information");
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that this representation and warranty shall
not apply to any statements or omissions made in the Provided Information;
4
<PAGE>
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and the rules and regulations of the Commission thereunder
and do not and will not, as of the applicable effective date of the
Registration Statement and any amendment thereto and as of the applicable
filing date of the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in the
Provided Information;
(e) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
change, or any development involving a prospective change, in or affecting
the Company, TCC, the Originators or the Trust (other than as contemplated
in the Registration Statement) which would be expected to have a material
adverse effect on either (1) the ability of such person to consummate the
transactions contemplated by, or to perform its respective obligations
under, this Agreement, the International Underwriting Agreement or any of
the Related Documents to which it is a party or (2) the Contracts or the
Trust Estate (as defined in the Trust Agreement);
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of Delaware; TCC has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of Delaware; each of the Originators has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of its incorporation; each of the Company and
TCC has the power and authority (corporate and other) to own its properties
and conduct its business to the extent described in the Prospectus and to
perform its obligations under this Agreement, the International
Underwriting Agreement and the Related Documents to which it is a party;
each of the Originators has the power and authority (corporate and other)
to own its properties and conduct its business to the extent described in
the Prospectus and to perform its obligations under the Purchase Agreement;
and each of the Company, TCC and the Originators has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction;
(g) The Trust has been duly created and is validly existing as a
trust pursuant to the laws of the State of New York, with power and
authority to own its properties and conduct its business as described in
the Prospectus, and to perform its obligations under each of the Related
Documents to which it is a party;
5
<PAGE>
(h) As of the Time of Delivery, each consent, approval, authorization
or order of, or filing with, any court or governmental agency or body that
is required to be obtained or made by the Company, TCC, the Trust and each
of the Originators or their subsidiaries for the consummation of the
transactions contemplated by this Agreement, the International Underwriting
Agreement and the Related Documents shall have been obtained or made,
except for such consents, approvals, authorizations, registrations or
qualifications as may be required under Blue Sky laws;
(i) Any taxes, fees and other governmental charges that are assessed
and due in connection with the execution, delivery and issuance of this
Agreement, the International Underwriting Agreement and each Related
Document shall have been paid or will be paid at or prior to the Time of
Delivery to the extent then due;
(j) This Agreement and the International Underwriting Agreement have
been duly authorized, executed and delivered by the Company and TCC and,
when executed by the other parties hereto, will constitute a valid and
legally binding obligation of the Company and TCC, enforceable in
accordance with their terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other similar laws affecting the enforcement of the
rights of creditors and (ii) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law;
(k) The Securities have been duly and validly authorized and, when
issued pursuant to the Indenture and delivered pursuant to this Agreement,
will have been duly executed, authenticated, issued and delivered and will
constitute valid and legally binding obligations of the Trust entitled to
the benefits provided by the Indenture under which they are to be issued,
which Indenture will be substantially in the form filed as an exhibit to
the Registration Statement; the Indenture has been duly authorized and duly
qualified under the Trust Indenture Act and, assuming the due
authorization, execution and delivery thereof by the other parties thereto,
the Indenture will constitute a valid and legally binding instrument of the
Trust, enforceable in accordance with its terms, except as enforceability
may be limited by (i) bankruptcy, insolvency, liquidation, receivership,
moratorium, reorganization or other similar laws affecting the enforcement
of the rights of creditors and (ii) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law; assuming the due
authorization, execution and delivery thereof by the other parties thereto,
each of the other Related Documents will constitute a valid and legally
binding obligation of the Company, TCC and the Originators, as applicable,
enforceable in accordance with its terms, except as enforceability may be
limited by (i) bankruptcy, insolvency, liquidation, receivership,
moratorium, reorganization or other similar laws affecting the enforcement
of the rights of creditors and (ii) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law; the execution,
delivery and performance by the Company, TCC, the Originators and the Trust
of the Related Documents to which they are a party and the consummation of
the transactions contemplated thereby have been duly and validly authorized
by all necessary action and
6
<PAGE>
proceedings; and the Securities, the Indenture, the Transfer and Servicing
Agreement, the Purchase Agreement and the other Related Documents will
conform to the descriptions thereof in the Prospectus;
(l) The issue of the Securities by the Trust and sale of the
Securities by the Company hereunder and under the International
Underwriting Agreement and the compliance by the Trust, the Company and TCC
with all of the provisions of this Agreement and the International
Underwriting Agreement, and the compliance by the Trust, the Company, TCC
and each of the Originators with all of the provisions of all of the
Related Documents to which they are parties and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Trust, the Company,
TCC or the Originators is a party (except with respect to the notifications
and consents required under certain of the Contracts described in paragraph
(R) in the Schedule of Representations attached to the Purchase Agreement,
which will be given or obtained no later than 10 days after the Time of
Delivery to the extent described in subsection 5(j) hereof or will
otherwise be repurchased as provided in the Transfer and Servicing
Agreement) or by which the Trust, the Company, TCC or the Originators or
any of their subsidiaries is bound or to which any of the property or
assets of the Trust, the Company, TCC or the Originators is subject, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company, TCC or the
Originators or the Trust Agreement or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Trust, the Company, TCC or the Originators or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue of the Securities by the Trust and the sale of the
Securities by the Company or the consummation by the Trust, the Company,
TCC or the Originators of the transactions contemplated by this Agreement,
the International Underwriting Agreement or the Related Documents, except
the registration under the Act of the Securities, such as have been
obtained under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters and the
International Underwriters;
(m) There are no legal or governmental proceedings to which the
Company, TCC, the Trust or any of the Originators is a party or of which
any property of the Company, TCC, the Trust or any of the Originators is
the subject (i) asserting the invalidity of this Agreement, the
International Underwriting Agreement, the Securities or any other Related
Documents, (ii) seeking to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by this Agreement, the
International Underwriting Agreement, or any Related Document, (iii) which
would, if determined adversely to the Company, TCC, the Trust or an
Originator, materially and adversely affect the performance by the Company,
TCC, the Trust or such Originator, of their respective obligations under,
or the validity or enforceability of, this
7
<PAGE>
Agreement, the International Underwriting Agreement, the Securities or the
other Related Documents, as applicable, (iv) seeking to affect adversely
the federal income tax attributes of the Securities described in the
Prospectus or (v) which would, if determined adversely to the Company, TCC,
the Trust or an Originator, individually or in the aggregate, have a
material adverse effect on the Company, TCC, the Trust or such Originator;
and, to the best of the Company's and TCC's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others;
(n) The Company, TCC, and each of the Originators are not in
violation of their respective Certificate of Incorporation or By-laws and
the Trust is not in violation of the Trust Agreement, and neither the
Company, TCC, the Trust nor any of the Originators is in default in the
performance or observance of any material obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party or
by which it or any of its properties may be bound;
(o) Each of the Company and the Trust are not and, after giving
effect to the offering and sale of the Securities and other transactions
contemplated hereby, will not be, an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(p) Neither the Trust, the Company, TCC, the Originators nor any of
their affiliates does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning of Section 517.075,
Florida Statutes;
(q) As of the Cut-off Date, the computer tape of the Contracts made
available to the Representative by TCC, the Originators and the Company was
accurate in all material respects;
(r) No selection procedures adverse to the holders of the Securities
have been or will be used in selecting the Contracts from among the lease
and loan contracts owned by the Originators as of the Cut-off Date;
(s) Upon execution and delivery of the Purchase Agreement and the
consummation of the transactions thereunder, the Company will acquire the
Contracts and the Originators' interest in the related Equipment, free and
clear of any lien, charge or encumbrance (other than as contemplated by the
Related Documents) but subject to the rights of the related obligors; and,
upon execution and delivery of the Transfer and Servicing Agreement, the
Trust will acquire the Contracts, free and clear of any lien, charge or
encumbrance (other than as contemplated by the Related Documents) but
subject to the rights of the related obligors;
(t) As of the date hereof and as of the Time of Delivery, a
Repurchase Event (as defined in the Purchase Agreement) does not and will
not exist with respect
8
<PAGE>
to Contracts constituting a material portion of the Contract Pool Principal
Balance (as defined in the Indenture);
(u) As of the date hereof, the Company is a wholly-owned direct
subsidiary of TCC and at the Time of Delivery will become a wholly-owned
subsidiary of the Originators; and
(v) In accordance with General Accepted Accounting Principles, as
currently in effect, each party to the Purchase Agreement will treat the
transactions contemplated by the Purchase Agreement as a sale of the
Contracts and the Originators' interest in the related Equipment to the
Company, and the Company will treat the transactions contemplated by the
Transfer and Servicing Agreement as a sale of the Contracts to the Trust.
All representations, warranties and agreements made herein shall be deemed
made as of the date hereof and as of the Time of Delivery; PROVIDED, HOWEVER,
that to the extent any representation or warranty relates to a specific date,
such representation and warranty shall be deemed to continue to relate to such
date.
2. Subject to the terms and conditions herein set forth, the Company
agrees to cause the Trust to issue the Securities and the Company agrees to sell
to each of the Underwriters, and Goldman, Sachs & Co. agrees, jointly with each
other Underwriter, and each of the other Underwriters agrees, severally and not
jointly, to purchase from the Company, the principal amount of U.S. Securities
set forth opposite the name of such Underwriter, and at the purchase price set
forth, in Schedule I hereto.
3. (a) It is understood that upon the authorization by the
Representative of the release of the U.S. Securities, the Underwriters
propose and agree to offer the U.S. Securities for sale upon the terms and
conditions set forth in the Prospectus.
(b) Each of the Underwriters agree that if it is a foreign
broker or dealer not eligible for membership in the National Association of
Securities Dealers, Inc. (the "NASD"), it will not effect any transaction
in the U.S. Securities within the United States or induce or attempt to
induce the purchase of or sale of the U.S. Securities within the United
States, except that you shall be permitted to make sales to the other
Underwriters or to its United States affiliates; provided that such sales
are made in compliance with an exemption of certain foreign brokers or
dealers under Rule 15a-6 under the Exchange Act, and in conformity with the
Rules of Fair Practice of the NASD as such rules apply to non-NASD brokers
or dealers.
4. (a) The U.S. Securities to be purchased by each Underwriter
hereunder will be represented by one or more definitive global Securities
in book-entry form which will be deposited by or on behalf of the Company
with The Depository Trust Company ("DTC") or its designated custodian. The
Company will deliver the U.S. Securities to Goldman, Sachs & Co., for the
account of each Underwriter, against payment by Goldman, Sachs & Co. (by or
on behalf of each such Underwriter or
9
<PAGE>
otherwise) of the purchase price therefor by wire transfer payable to the
order of the Company in Federal (same day) funds (to such account or
accounts as the Company shall designate), by causing DTC to credit the U.S.
Securities to the account of Goldman, Sachs & Co. at DTC. The Company will
cause the certificates representing the U.S. Securities to be made
available to Goldman, Sachs & Co. for checking at least twenty-four hours
prior to the Time of Delivery at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such delivery
and payment shall be 9:00 a.m., New York City time, on October __, 1996 or
such other time and date as Goldman, Sachs & Co., the Company and Nomura
International plc may agree upon in writing. Such time and date are herein
called the "Time of Delivery".
(b) The documents to be delivered at Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the U.S. Securities and any additional documents
requested by the Underwriters pursuant to Section 7(w) hereof, will be
delivered at the offices of Dorsey & Whitney LLP, 250 Park Avenue, New
York, New York (the "Closing Location"), and the U.S. Securities will be
delivered at the Designated Office, all at the Time of Delivery. A meeting
will be held at the Closing Location at 10 a.m., New York City time, on the
New York Business Day next preceding the Time of Delivery, at which meeting
the final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company and TCC, jointly and severally, agree with each of
the Underwriters that:
(a) The Company will prepare the Prospectus in a form approved by the
Representative and will file such Prospectus pursuant to Rule 424(b) under
the Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3) under
the Act; make no further amendment or any supplement to the Registration
Statement or Prospectus prior to the Time of Delivery which shall be
disapproved by the Representative promptly after reasonable notice thereof;
will advise the Representative, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; will file
promptly all reports and any definitive proxy or information statements
required to be filed by the Company (on behalf of the Trust) or the Trust
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as
the delivery of a prospectus is required in connection with the offering or
sale of the Securities; to advise the Representative, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending
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the use of any Preliminary Prospectus or Prospectus, of the suspension of
the qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
Prospectus or suspending any such qualification, will promptly use its best
efforts to obtain the withdrawal of such order;
(b) The Company will promptly from time to time take such action as
the Representative may reasonably request to qualify the Securities for
offering and sale under the securities laws of such States as the
Representative may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such States for as long as may
be necessary to complete the distribution of the Securities, provided that
in connection therewith the Company or the Trust shall not be required to
qualify as a foreign corporation or entity or to file a general consent to
service of process in any State;
(c) The Company will furnish the Underwriters with copies of the
Prospectus in such quantities as the Underwriters may from time to time
reasonably request, and, if the delivery of a prospectus is required at any
time prior to the expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the Securities and if
at such time any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during such
period to amend or supplement the Prospectus or to file under the Exchange
Act any document incorporated by reference in the Prospectus in order to
comply with the Act or the Exchange Act or the Trust Indenture Act, will
notify the Representative and upon the Representative's request will file
such document and will prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Prospectus or a supplement to
the Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Securities at any time nine months
or more after the time of issue of the Prospectus, upon the
Representative's request but at the expense of such Underwriter, will
prepare and deliver to such Underwriter as many copies as such Underwriter
may request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) The Company will cause the Trust to make generally available to
its securityholders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Act), an earnings statement of the Trust
(which need not be audited) complying
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with Section 11(a) of the Act and the rules and regulations thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the later of the Time of Delivery and such earlier time as
the Representative may notify the Company, neither the Company, TCC nor the
Originators will offer, sell, contract to sell or otherwise dispose of,
except as provided hereunder any securities (other than the Certificates
and the securities sold pursuant to that certain Placement Agreement, dated
the date hereof between the Company, the Originators, TCC and certain
placement agents) secured by or evidencing interests in receivables similar
to the Contracts;
(f) So long as any Securities shall be outstanding, the Company will
deliver or cause to be delivered to the Representative the annual statement
as to compliance and the annual statement of a firm of independent public
accountants required to be delivered to the Indenture Trustee pursuant to
Sections 3.10 and 3.11 of the Transfer and Servicing Agreement, as soon as
such statements are furnished to the Company;
(g) The Company will furnish such information, execute such
instruments and take such actions, if any, as the Representative may
reasonably request in connection with the filing with the NASD relating to
the Securities should the Representative determine that such filing is
required or appropriate;
(h) So long as any of the Securities are outstanding, the Company
will furnish or cause the Trust to furnish to the Representative as soon as
practicable (i) all documents required to be distributed to the holders of
the Securities or filed with the Commission pursuant to the Exchange Act or
any order of the Commission thereunder, (ii) all monthly reports required
to be delivered to or filed with the Owner Trustee or the Indenture
Trustee, (iii) all notices or requests to or from the Rating Agencies with
respect to the Securities that have been delivered to or received by the
Company or the Trust and (iv) from time to time, any other publicly
available information concerning the Company or the Trust filed with any
government or regulatory authority, as the Representative may reasonably
request;
(i) At the Time of Delivery, the electronic ledger used by TCC as a
master record of the Contracts conveyed by the Originators to the Company
and by the Company to the Trust shall be marked in such a manner as shall
clearly indicate the Trust's absolute ownership of the Contracts, and from
and after the Time of Delivery, neither the Company, TCC, the Originators
nor any of their affiliates shall take any action inconsistent with the
Trust's ownership of such Contracts, other than as permitted by the
Transfer and Servicing Agreement;
(j) No later than 10 days after the Time of Delivery, the Originators
and TCC will deliver to the Representative a written certification that all
notifications and consents required by paragraph (R) in the Schedule of
Representations attached to the Transfer and Servicing Agreement have been
given, or obtained, as applicable, or if not given or
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<PAGE>
obtained within such period, the related Contract has been repurchased
pursuant to the terms of the Purchase Agreement.
(k) To the extent, if any, that the rating provided with respect to
the Securities by any of the Rating Agencies that initially rate the
Securities is conditional upon the furnishing of documents or the taking of
any other actions by the Trust, the Company, the Originators or TCC, the
Company and TCC will use their best efforts to furnish, as soon as
practicable, such documents and take (or cause the taking of) any such
other actions;
(l) The Company will cause the Trust to use the net proceeds received
by it from the issuance of the Securities in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(m) The Company will file with the Commission such reports on Form SR
for so long as such filings are required by Rule 463 under the Act; and
(n) The Company shall use its reasonable best efforts to cause the
Securities to be approved for listing on the Luxembourg Stock Exchange on
or before the Time of Delivery.
6. The Company and TCC covenant and agree with the several
Underwriters that the Company will pay or cause to be paid the following: (i)
the fees, disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Syndicate Agreement (as defined below), the Selling Agreement, if
any, any Related Document, the Blue Sky Memoranda, closing documents (including
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; (iii) all expenses in connection
with the qualification of the Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and Legal Investment surveys;
(iv) any fees charged by the Rating Agencies for rating the Securities, the
Certificates and the loans made pursuant to the Loan Agreement; (v) the up-front
fees and expenses of the Indenture Trustee and Owner Trustee and any agent of
the Indenture Trustee and Owner Trustee and the up-front fees and disbursements
of counsel for the Indenture Trustee and Owner Trustee in connection with the
Indenture and the Securities; and (vi) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
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their counsel, stock transfer taxes on resale of any of the Securities by them,
and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject,
in their discretion, to the condition that all representations and warranties
and other statements of the Company and TCC herein are, at and as of the Time of
Delivery, true and correct (except to the extent that any representation or
warranty relates to a specific date, in which case such representation or
warranty shall be deemed to continue to relate to such date), the condition that
the Company and TCC shall have performed all of their respective obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to the Representative's reasonable satisfaction;
(b) Cadwalader, Wickersham & Taft, counsel for the Underwriters,
shall have furnished to the Underwriters such opinion or opinions, dated
the Time of Delivery, with respect to the incorporation of the Company,
this Agreement, the validity of the Related Documents, the Notes, the
Registration Statement, the Prospectus and other related matters as the
Representative may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them
to pass upon such matters;
(c) The Underwriters shall have received (i) from Dorsey & Whitney
LLP., opinions in respect of "true sale" and "nonconsolidation" in form and
substance reasonably satisfactory to them or letters authorizing the
Underwriters to rely upon such opinions and (ii) letters authorizing the
Underwriters to rely upon any other opinion or opinions delivered by
counsel or certificates delivered by any party to any of the Rating
Agencies in connection with the transactions contemplated by this Agreement
and the Related Documents;
(d) Dorsey & Whitney LLP., counsel for the Company, shall have
furnished to the Underwriters their opinion, dated the Time of Delivery, in
form and substance satisfactory to the Representative, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware; the Trust has been duly created and is validly existing
as a trust pursuant to the laws of the state of New York; and each of
the Company and the Trust has the power and authority (corporate,
trust and other) to own its properties and conduct its business as
described in the Prospectus, to enter into and perform its
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<PAGE>
obligations under this Agreement, the International Underwriting
Agreement and the Related Documents to which it is a party, and to
consummate the transactions contemplated thereby and hereby;
(ii) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or the Trust is a party or of
which any property of the Company or the Trust is the subject which,
if determined adversely to the Company or the Trust would individually
or in the aggregate have a material adverse effect on the ability of
the Company or the Trust to fulfill their obligation under this
Agreement, the International Underwriting Agreement or the Related
Documents; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(iii) This Agreement, the International Underwriting Agreement and
each Related Document to which the Company is a party have been duly
authorized, executed and delivered by the Company;
(iv) Each Related Document to which the Trust is a party has been
duly authorized and executed and delivered by the Trust;
(v) Each Related Document to which the Company is a party, each
Related Document to which the Trust is a party, each Related Document
to which TCC is a party and each Related Document to which the
Originators are parties constitutes, assuming due authorization,
execution and delivery thereof by the other parties thereto, the valid
and binding obligation of the Company, the Trust, TCC or each of the
Originators, as applicable except as enforceability may be limited by
(i) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other similar laws affecting the enforcement of the
rights of creditors and (ii) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law;
(vi) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally
binding obligations of the Trust entitled to the benefits provided by
the Indenture and are enforceable in accordance with their terms,
except as enforceability may be limited by (i) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other similar
laws affecting the enforcement of the rights of creditors and (ii)
general principles of equity, whether enforcement is sought in a
proceeding in equity or at law;
(vii) The issuance of the Securities by the Trust and sale of the
Securities by the Company and the compliance by the Trust and the
Company with all of the provisions of the Related Documents, this
Agreement and the International Underwriting Agreement and the
consummation of the transactions
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<PAGE>
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Trust or the Company or any of their subsidiaries is a
party or by which the Trust or the Company or any of their
subsidiaries is bound or to which any of the property or assets of the
Trust or the Company or any of their subsidiaries is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or the Trust
Agreement or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Trust or the Company or any of their
subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue by the Trust and sale of the Securities by
the Company or the consummation by the Trust and the Company of the
transactions contemplated by the Related Documents, this Agreement and
the International Underwriting Agreement, except the registration
under the Act and qualification under the Trust Indenture Act, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Underwriters and the International Underwriters;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required on the part of the Company, in connection with the sale of
the Contracts and the Originators' interest in the Equipment from the
Originators to the Company and the transfer of the Contracts from the
Company to the Trust;
(x) To the best of such counsel's knowledge and information, the
execution and delivery of this Agreement, the International
Underwriting Agreement and the Related Documents and the consummation
of the transactions contemplated herein and therein will not result in
the violation by the Company or the Trust of the provisions of any
applicable federal or New York law or administrative regulation;
(xi) The statements set forth in the Prospectus under the
captions "DESCRIPTION OF THE NOTES" and "DESCRIPTION OF THE TRANSFER
AND SERVICING AGREEMENT", insofar as they purport to constitute a
summary of the terms of the Securities, the Indenture and the Transfer
and Servicing Agreement, under the caption "CERTAIN LEGAL ASPECTS OF
THE CONTRACTS" -- "RISK FACTORS -- Bankruptcy and Insolvency Risks, --
Certain Legal Aspects, and -- No Gross-Up Withholding Tax" insofar as
they purport to describe the provisions of the laws and
16
<PAGE>
documents referred to therein, are accurate, complete and fair in all
material respects. The statements set forth in the Prospectus under
the caption "UNITED STATES TAXATION" accurately describe the material
Federal income tax consequences to holders of the Securities, and the
statements in the Prospectus under the caption "ERISA CONSIDERATIONS",
to the extent that they constitute statements of matters of law or
legal conclusions with respect thereto (but subject to the
qualifications therein set forth), have been prepared or reviewed by
such counsel and accurately describe the material consequences to
holders of the Securities under ERISA;
(xii) Neither the Company nor the Trust is, and after giving
effect to the offer and sale of the Securities and Certificates, will
be, an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the Investment
Company Act;
(xiii) The Indenture has been duly qualified under the Trust
Indenture Act, and the Trust Agreement is not required to be qualified
under the Trust Indenture Act;
(xiv) To the extent the assignment pursuant to the Purchase
Agreement constitutes a contribution in accordance with the intent of
the parties, the assignment to the Company pursuant to the Purchase
Agreement will transfer to the Company all the right, title and
interest of each Originator in and to the Contracts (including any
security interest in the related Equipment created by the Contracts),
the Originators' interests in the Leased Equipment and all proceeds
thereof free and clear of any liens, claims or encumbrances. The
Contracts constitute "chattel paper" under the Uniform Commercial
Code as in effect in the State of New York (the "New York UCC")
(except for those Contracts financing the purchase only of software
or maintenance services, which Contracts constitute "general
intangibles" under the New York UCC). The filing of the financing
statements with respect to the Contracts (including any security
interest in the related Equipment created by the Contracts) naming
each Originator as debtor and the Company as secured party in the
offices of ______________, ______________, _____________
and __________ [insert appropriate filing offices in the States
where the Originators have their respective chief executive offices]
(the "Originators Contracts Filing Offices") will perfect the
security interest (as defined in Section 1-201(37) of the New York
UCC to include the interest of a buyer of chattel paper) of the
Company in such Contracts (including any security interest in the
related Equipment created by the Contracts) (except for those
Contracts financing the purchase only of software or maintenance
services, which Contracts constitute "general intangibles" under the
New York UCC). In the event that a court were to conclude that after
such contribution, the Contracts (including any security interest in
the related Equipment created by the Contracts) and the Originator's
interest in the Leased Equipment were property of the Originators,
the provisions of the Purchase Agreement are effective to create in
favor of the Company a valid security interest in each Originator's
right, title and interest in the Contracts (including any security
interest in the related Equipment created by the Contracts), the
Leased Equipment
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and all proceeds thereof to secure the loans deemed to have been made
to the Originators by the Company pursuant to the Purchase Agreement
(the "Originator Loans"). Upon the filing of the financing
statements with respect to the Contracts (including any security
interest in the related Equipment created by the Contracts) and the
Leased Equipment and naming each Originator as a debtor and the
Company as secured party in the Originators Contracts Filing Offices
and in [list filing offices where financing statements will be filed
for Equipment] (the "Equipment Filing Offices"), such security
interest will be a first priority perfected security interest in
Originator's interest in the Contracts (including any security
interest in the related Equipment created by the Contracts) and the
proceeds thereof and a perfected security interest in the Leased
Equipment. No other filings or actions are necessary except for the
filing of appropriate continuation statements at five-year intervals.
The perfection of the Company's security interest in the Contracts
(including any security interest in the related Equipment created by
the Contracts) is governed by the laws of [States in which
Originators chief executive offices are located], respectively. The
perfection of the Company's security interest in the Leased Equipment
is governed by the laws of the States in which the Equipment is
located;
(xv) To the extent the assignment pursuant to the Transfer and
Servicing Agreement constitutes a sale in accordance with the intent
of the parties, the assignment to the Trust pursuant to the Transfer
and Servicing Agreement will transfer to the Trust all the right,
title and interest of the Company in and to the Contracts (including
any security interest in the related Equipment created by the
Contracts), the Originators' Loans (including any security therefor)
and all proceeds thereof free and clear of all liens, claims and
encumbrances. The filing of the financing statements with respect to
the Contracts (including any security interest in the related
Equipment created by the Contracts) and the Originators' Loans
(including any security therefor) and naming the Company as debtor and
the Trust as secured party in the office of the Secretary of State of
New Jersey (the "Company Contracts Filing Office") will perfect the
security interest (as defined in Section 1-201(37) of the New York UCC
to include the interest of a buyer of chattel paper) of the Trust in
such Contracts (including any security interest in the related
Equipment created by the Contracts) (except for the purchase of those
Contracts financing the purchase only of software or maintenance
services, which Contracts constitute "general intangibles" under the
New York UCC). In the event a court were to conclude that such
assignment was not a sale, the provisions of the Transfer and
Servicing Agreement are effective to create in favor of the Trust a
valid security interest in the Company's right, title and interest in
and to the Contracts (including any security interest in the related
Equipment created by the Contracts), the Originators' Loans (including
any security therefor) and all proceeds thereof to secure the loan
deemed to have been made to the Company by the Trust pursuant to the
Transfer and Servicing Agreement (the "Company Loan"). Upon the
filing of financing statements with respect to the Contracts
(including any security interest in the related Equipment created by
the Contracts) and the Originators' Loans (including any security
therefor) and naming the Company as debtor and the Trust as secured
party in the Company Contracts Filing Office, such security interest
will be a first priority perfected security interest in the Contracts
(including any security interest in the related Equipment created by
the Contracts) and the Originators' Loans (including any security
therefor).
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The Transfer and Servicing Agreement is effective to create a valid
security interest in favor of the Trust to secure payment of amounts
described in Sections 2.1(a)(i)(3) and 2.1(a)(ii) (the "Sharing
Obligation") in the Depositor's right, title and interest in and to
the Leased Equipment. Upon the filing of financing statements naming
the Company as debtor and the Trust as secured party with respect to
the Leased Equipment in the Equipment Filing Offices, the security
interest of the Trust in the Leased Equipment and all proceeds
thereof will be a perfected security interest. The naming of the
Trust as assignee on each financing statement naming an Originator as
debtor and the Company as secured party and covering the Contracts
(including any security interest in the related Equipment created by
the Contracts) and the Leased Equipment is effective to assign of
record to the Trust the Company's security interest in each
Originator's interest in the Contracts and in the Leased Equipment
and to make the Trust the secured party of record for all purposes
with respect thereto. No other filings or actions are necessary
except for the filing of appropriate continuation statements at
five-year intervals. The perfection of the Trust's security
interest in the Contracts (including any security interest in the
related Equipment created by the Contracts) and the Originators
Loans (including the security therefor) is governed by the laws of
the State of New Jersey. The perfection of the Trust's security
interest in the Leased Equipment is governed by the laws of the
States in which the Equipment is located;
(xvi) The Indenture is effective to create a valid security
interest in favor of the Indenture Trustee to secure the Notes in the
Trust's right, title and interest in and to the Contracts (including
any security interest in the related Equipment created by the
Contracts) and the Trust's right, title and interest in the Sharing
Rights (including any security therefor), the Originators' Loans
(including any security therefor) and the Company Loan (including any
security therefor) and all
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<PAGE>
proceeds thereof. Upon the filing of financing statements with
respect to the Contracts (including any security interest in the
related Equipment created by the Contracts), the Sharing Rights
(including any security therefor), the Originators' Loans (including
any security therefor) and the Company Loan (including any security
therefor) in the offices of the Secretary of State of the State of
New York and the City Register of New York County and naming the
Trust as debtor and the Indenture Trustee as secured party, such
security interest will be a first priority perfected security
interest in the Contracts (including any security interest in the
related Equipment created by the Contracts), the Sharing Rights
(including any security therefor), the Originators' Loans (including
any security therefor) and the Company Loan (including any security
therefor). The naming of the Indenture Trustee as assignee with
respect to each financing statement naming the Company as debtor and
the Trust as secured party and covering the Contracts (including any
security interest in the related Equipment created by the
Contracts) and the Originators' Loans (including any security
therefor) and the Leased Equipment in the respective filing offices
where each such financing statement was filed is effective to assign
to the Indenture Trustee of record the Trust's security interest in
the Company's interest in the Leased Equipment and the Trust's
security interest in the Company's interest in the Originators'
interest in the Contracts (including any security interest in the
related Equipment created by the Contracts) and the Originators' Loans
(including any security therefor) and to make the Indenture Trustee
the secured party of record for all purposes with respect thereto.
The filing of UCC-3 assignments naming the Indenture Trustee as
assignee with respect to each financing statement covering the
Contracts and the Equipment and naming the Originator as debtor and
the Company as secured party and the Trust as assignee in the filing
office in which each such financing statement was filed is effective
to assign to the Indenture Trustee of record the Company's interest in
the Originator's interest in the Contracts (including any security
interest in the related Equipment created by the Contracts) and the
Leased Equipment and to make the Indenture Trustee the secured party
of record for all purposes with respect thereto. No other filings or
actions are necessary except for the filing of appropriate
continuation statements at five-year intervals. The provisions of
the Indenture, together with compliance with the requirements set
forth in the Indenture for the investment of funds in Eligible
Investments, are effective to create in favor of the Indenture Trustee
to secure the Notes a valid, first priority perfected security
interest in the Eligible Investments credited to the Cash Collateral
Account and Trust Accounts and the proceeds thereof. The perfection
of the Indenture Trustee's security interest in the Contracts
(including any security interest in the related Equipment created by
the Contracts), the Sharing Rights (including any security therefor),
the Originators' Loans (including any security therefor) and the
Company Loan (including any security therefor) will be governed by the
laws of State of New York;
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(xvii) The Registration Statement has become effective under the
Act; any required filing of the Prospectus or any supplement thereto
pursuant to Rule 424(b) has been made in the manner and within the
time period required by Rule 424(b); to the best knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or threatened;
(xviii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company or the
Trust prior to the Time of Delivery comply as to form in all material
respects with the requirements of the Act and the Trust Indenture Act
and the rules and regulations thereunder;
(xix) Although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (xi) of this Section 7(d), they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company or the
Trust prior to the Time of Delivery (other than the financial
statements, schedules and statistical data, as to which such counsel
need express no view) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that, as of
its date, the Prospectus or any further amendment or supplement
thereto made by the Company or the Trust prior to the Time of Delivery
(other than the financial statements, schedules and statistical data,
as to which such counsel need express no view) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as
of the Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company or the Trust prior to the Time of Delivery (other than the
financial statements, schedules and statistical data, as to which such
counsel need express no view) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by reference
into the Prospectus or required to be described in the Registration
Statement or the Prospectus which are not filed or incorporated by
reference or described as required (provided that the matters set
forth in this subsection (xix) may be stated by such counsel in a
separate letter); and
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(xx) The Class A-1 Notes are eligible for purchase by money
market funds under Rule 2a-7 of the Investment Company Act.
In rendering such opinion, counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York, the United States or the General Corporation Law of the State of
Delaware, to the extent deemed proper and specified in such opinion, upon the
opinion of other counsel of good standing believed by such counsel to be
reliable and acceptable to the Representative and its counsel, and (B) as to
matters of fact, to the extent deemed proper and as stated therein, on
certificates of responsible officers of the Trust, the Company, TCC, the
Originators and public officials.
(e) The Underwriters shall have received from each of Dorsey &
Whitney LLP and Cadwalader, Wickersham & Taft opinions in respect of tax
matters in form and substance reasonably satisfactory to them;
(f) The Underwriters shall have received one or more opinions from
counsel of TCC and the Originators, dated the Time of Delivery, in form and
substance satisfactory to the Representative, to the effect that:
(i) TCC has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware; each of the
Originators has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its
incorporation; TCC has the power and authority (corporate and other)
to own its properties and conduct its business as described in the
Prospectus, to enter into and perform its obligations under this
Agreement, the International Underwriting Agreement and the Related
Documents to which it is a party, and to consummate the transactions
contemplated thereby and hereby; each of the Originators has the power
and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus, to enter into and perform
its obligations under the Purchase Agreement, and to consummate the
transactions contemplated thereby;
(ii) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which TCC or any of the Originators is a party
or of which any property of TCC or any of the Originators is the
subject which, if determined adversely to TCC or any of the
Originators would individually or in the aggregate have a material
adverse effect on the ability of TCC or any of the Originators to
fulfill their obligation under, in the case of TCC, this Agreement and
the International Underwriting Agreement and, in the case of TCC and
the Originators, the Related Documents to which they are a party; and,
to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
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(iii) This Agreement, the International Underwriting Agreement and
each Related Document to which TCC is a party have been duly
authorized, executed and delivered by TCC;
(iv) The Purchase Agreement has been duly authorized and executed
and delivered by each of the Originators;
(v) The compliance by TCC with all of the provisions of the
Related Documents to which it is a party, this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which TCC or any of its subsidiaries is a party or by which TCC or
any of its subsidiaries is bound or to which any of the property or
assets of TCC or any of its subsidiaries is subject, (other than
with respect to Contracts as to which the Depositor and TCC have a
contingent obligation to repurchase as described in paragraph (R) of
the Schedule of Representations) nor will such action result in any
violation of the provisions of the Certificate of Incorporation or
By-laws of the TCC or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the TCC or any of its subsidiaries or any
of its properties; the compliance by each of the Originators with
all of the provisions of the Purchase Agreement and the consummation
of the transactions therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Originators or any of their subsidiaries is a party or by
which the Originators or any of their subsidiaries is bound or to
which any of the property or assets of the Originators or any of their
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of
the Originators or any statute or any order, rule or regulation known
to such counsel or any court or governmental agency or body having
jurisdiction over the Originators or any of their subsidiaries or any
of their properties;
(vi) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the consummation by TCC and the Originators of the
transactions contemplated by the Related Documents, and by TCC of this
Agreement and the International Underwriting Agreement;
(vii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
will be required on the part of TCC or the Originators in connection
with the transfer of the Contracts and the Originators' interest in
the Equipment from the Originators to the Company;
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(viii) To the best of such counsel's knowledge and information, (i)
the execution and delivery of this Agreement, the International
Underwriting Agreement and the Related Documents and the consummation
of the transactions contemplated herein and therein will not result in
the violation by TCC of the provisions of any applicable federal or
state law or administrative regulation and (ii) the execution and
delivery of the Purchase Agreement and the consummation of the
transactions contemplated therein will not result in the violation by
the Originators of the provisions of any applicable federal or state
law or administrative regulation; and
(ix) The assignment of the Originators' interest in the Contracts
and the Equipment, all documents and instruments relating thereto and
all proceeds thereof to the Company will transfer all the rights,
title and interest of the Originators in and to the Contracts and the
Equipment, free and clear of any liens then existing or thereafter
created (subject to such conditions and assumptions as may be
specified in such opinion).
In rendering such opinion, counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New Jersey, the United States or the General Corporation Law of the
State of Delaware, to the extent deemed proper and specified in such
opinion, upon the opinion or advice of other counsel of good standing
believed by such counsel to be reliable and acceptable to the
Representative and its counsel, and (B) as to matters of fact, to the
extent deemed proper and as stated therein, on certificates of responsible
officers of TCC, the Company, the Originators and public officials.
(g) Thacher, Proffitt & Wood, counsel for the Indenture Trustee,
shall have furnished to the Underwriters their opinion, dated the Time of
Delivery, in form and substance satisfactory to the Representative, to the
effect that:
(i) The Indenture Trustee has been duly incorporated and is
validly existing and in good standing as a banking
corporation under the laws of the State of New York, with
full power and authority to execute and deliver the Related
Documents to which it is a party and perform its obligations
thereunder;
(ii) No consent, approval or authorization of, or registration,
declaration or filing with, any federal or State of New York
court or governmental agency or body is required for the
execution, delivery or performance by the Indenture Trustee
of the Related Documents to which it is a party;
(iii) The execution and delivery of the Related Documents to which
it is a party by the Indenture Trustee and the performance
by the Indenture Trustee of the respective terms thereof do
not conflict with or result in a violation of (A) any
federal or State of New York law or regulation
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governing the banking or trust powers of the Indenture
Trustee and (B) the charter documents or by-laws of the
Indenture Trustee;
(iv) To the best of such counsel's knowledge, there are no
actions proceedings or investigations pending or threatened
against or affecting the Indenture Trustee before or by any
court, arbitrator, administrative agency or other
governmental authority which, if adversely decided, would
materially and adversely affect the ability of the Indenture
Trustee to carry out the transactions contemplated in the
Related Documents to which it is a party;
(v) The Related Documents to which it is a party have been duly
authorized, executed and delivered by the Indenture Trustee
and, assuming the due authorization, execution and delivery
thereof by the other parties thereto, constitute the legal,
valid and binding agreement of the Indenture Trustee,
enforceable against the Indenture Trustee in accordance with
its terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, liquidation, receivership,
moratorium, reorganization or other similar laws affecting
the enforcement of the rights of creditors and (ii) general
principles of equity, whether enforcement is sought in a
proceeding in equity or at law; and
(vi) The Securities have been duly authenticated and delivered by
the Indenture Trustee in accordance with the Indenture.
(h) Emmet, Marvin & Martin, LLP, counsel for the Owner Trustee, shall
have furnished to the Underwriters their opinion, dated the Time of
Delivery, in form and substance satisfactory to the Representative, to the
effect that:
(i) The Owner Trustee has been duly organized and is validly
existing as a New York banking corporation in good standing under the
laws of the State of New York;
(ii) The Owner Trustee has full corporate trust power and
authority to enter into and perform its obligations under the Trust
Agreement and, on behalf of the Trust, under the Related Documents to
which the Trust is a party;
(iii) The execution and delivery of the Trust Agreement and, on
behalf of the Trust, of the Related Documents to which the Trust is a
party, and the performance by the Owner Trustee of its obligations
under the Trust Agreement, and the Related Documents to which the
Trust is a party have been duly authorized by all necessary corporate
action of the Owner Trustee and each has been duly executed and
delivered by the Owner Trustee;
(iv) The Related Documents to which the Trust is a party
constitute valid and binding agreements of the Owner Trustee,
enforceable against the
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Owner Trustee in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer reorganization, moratorium and other
similar laws of general applicability relating to or affecting
creditors' rights and general equity principles;
(v) The execution and delivery by the Owner Trustee of the Trust
Agreement and, on behalf of the Trust, of the Related Documents to
which the Trust is a party do not require any consent, approval or
authorization of, or any registration or filing with, any New York or
federal governmental authority having jurisdiction over the trust
power of the Owner Trustee, other than those consents, approvals or
authorizations as have been obtained and the filing of the Certificate
of Trust with the Secretary of State of the State of New York;
(vi) The Securities have been duly authorized, executed and
issued by the Owner Trustee, on behalf of the Trust; and
(i) The execution and delivery by the Owner Trustee of the Trust
Agreement and, on behalf of the Trust, the Related Documents to which
the Trust is a party, and the performance by the Owner Trustee of its
obligations thereunder do not conflict with, result in breach or
violation of or constitute a default under, the Articles of
Incorporation or By-laws of the Owner Trustee.
(i) (i) On the date of the Prospectus, (ii) at 9:30 a.m., New York
City time, on the effective date of any post-effective amendment to the
Registration Statement filed subsequent to the date of this Agreement and
(iii) at the Time of Delivery, Arthur Andersen LLP and Coopers & Lybrand
L.L.P. shall each have furnished to the Representative a letter or letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to the Representative, containing statements and information
of the type customarily included in accountants' "agreed-upon procedures
letters" to underwriters in transactions of this nature, including a
statement to the effect that Arthur Andersen LLP and Coopers & Lybrand
L.L.P. are independent public accountants with respect to the Trust, the
Company, the Originators and TCC, as defined in the Act and the rules and
regulations of the Commission thereunder;
(j) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not
have been any change, or any development involving a prospective change, in
or affecting the Company, TCC, the Originators or the Trust (other than as
contemplated in the Registration Statement) which, in the judgment of the
Representative, would be expected to have an effect on either (a) the
ability of such person to consummate the transactions contemplated by, or
to perform its respective obligations under, this Agreement, the
International Underwriting Agreement or any of the Related Documents to
which it is a party or (b) the Contracts or the Trust Estate, that, in
either case, is so material and adverse as to make it impractical or
inadvisable to proceed with the offering or the delivery of the
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Securities as contemplated by the Registration Statement and the Prospectus
(and any supplements thereto);
(k) At the Time of Delivery, the Representative shall have received
from the Owner Trustee a certificate signed by one or more duly authorized
officers of the Owner Trustee, dated as of the Time of Delivery, as to the
due acceptance of the Trust Agreement by the Owner Trustee and the due
execution and delivery of the Securities delivered by the Owner Trustee in
accordance therewith and such other matters as the Representative shall
reasonably request;
(l) At the Time of Delivery, (i) the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class A-4 Notes shall be rated by each of
Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc.
("Fitch") and Duff & Phelps Credit Rating Co. ("DCR") in their highest
rating category; the Class B Notes shall be rated at least "A" by S&P, "A2"
by Moody's, "A" by Fitch and "A" by DCR; and the Equity Certificates shall
be rated at least "BBB" by S&P, "Baa2" by Moody's, "BBB" by Fitch and "BBB"
by DCR;
(m) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; or (iii) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (iii) in the judgment of the Representative makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated in
the Prospectus;
(n) Each of the Company and TCC shall have delivered to the
Representative a certificate, dated the Time of Delivery, signed by its
Chairman of the Board, President, Executive Vice President, Senior Vice
President, Vice President, principal financial officer, principal
accounting officer, or treasurer to the effect that the signer of such
certificate has examined this Agreement, the International Underwriting
Agreement, the Transfer and Servicing Agreement, the Indenture the Loan
Agreement, the Prospectus (and any supplements thereto) and the
Registration Statement and that:
(i) the representations and warranties of the Company or TCC, as
applicable, in this Agreement are true and correct at and as of the
Time of Delivery as if made on and as of the Time of Delivery (except
to the extent they expressly relate to an earlier date, in which case
the representations and warranties of such party are true and correct
as of such earlier date as if made at the Time of Delivery);
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<PAGE>
(ii) the Company or TCC, as applicable, has complied with all the
agreements and satisfied all the material conditions of its part to be
performed or satisfied under this Agreement and the International
Underwriting Agreement at or prior to the Time of Delivery;
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the knowledge of the signer,
threatened;
(iv) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been
any change, or any development involving a prospective change, in or
affecting the Company, TCC, the Originators or the Trust (other than
as contemplated in the Registration Statement) which would be expected
to have a material adverse effect on either (1) the ability of such
person to consummate the transactions contemplated by, or to perform
its respective obligations under, this Agreement, the International
Underwriting Agreement or any of the Related Documents to which it is
a party or (2) the Contracts or the Trust Estate;
(v) as of the Time of Delivery, a Repurchase Event does not
exist with respect to Contracts constituting a material portion of the
Contract Pool Principal Balance; and
(vi) as to such other matters as the Representative may
reasonably request.
(o) Each of the Originators shall have delivered to the Underwriters
a certificate, dated the Time of Delivery, signed by its Chairman of the
Board, President, Executive Vice President, Senior Vice President, Vice
President, principal financial officer, principal accounting officer, or
treasurer to the effect that the signer of such certificate has examined
the Purchase Agreement and that:
(i) as of the Time of Delivery, a Repurchase Event does not
exist with respect to a material portion of the Contracts sold by such
Originator to the Company; and
(ii) as to such other matters as the Representative may
reasonably request.
(p) The Company shall have delivered to the Representative a copy,
certified by an officer of the Company, of the Registration Statement as
initially filed with the Commission and of all amendments thereto
(including all exhibits) and full and complete sets of all comments of the
Commission or its staff and all responses thereto with respect to the
Registration Statement.
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(q) The Representative shall have received a copy of an executed
Certificate of Merger, evidencing that it has been filed with the Secretary
of State of Delaware, with respect to consummation of the merger of TCC
with and into Antigua Acquisition Corporation, with a certification from
either the Company or TCC that such Certificate of Merger is a true and
correct copy of the original;
(r) The Company, TCC, the Owner Trustee, the Indenture Trustee and
the Trust shall have executed and delivered each Related Document to which
it is a party and the Originators shall have executed and delivered the
Purchase Agreement;
(s) The Underwriters shall have received copies of all UCC searches
and evidence reasonably satisfactory to counsel to the Underwriters of the
filing of all UCC financing statements as described in Section 7(d),(xiv),
(xv) and (xvi) hereof and the taking of any other action in all
jurisdictions necessary to protect and perfect the ownership and security
interests of the Company, the Trust and the Indenture Trustee in the
Contracts, and in the case of the Equipment, to the extent described in the
Prospectus and Section 7(d),(xiv), (xv) and (xvi) hereof;
(t) The Loan Agreement shall have been duly authorized, executed and
delivered by each party thereto; on or prior to the Time of Delivery, the
Indenture Trustee shall have established the Cash Collateral Account
pursuant to Section 8.06 of the Indenture and the Cash Collateral
Depositors and the Company shall have deposited the Initial Deposit in the
Cash Collateral Account; and all fees due and payable to the Cash
Collateral Depositors as of the Time of Delivery shall have been paid in
full on or prior to the Time of Delivery;
[(u) The Underwriters shall have received from counsel for each of the
[name of foreign Cash Collateral Depositors] reasonably acceptable to the
Representative, an opinion, dated the Time of Delivery, in form and
substance satisfactory to the Representative, to the effect that:
(i) such Cash Collateral Depositor is a corporation duly
organized and validly existing under the laws of its country of
organization and has the corporate power and authority under the laws
of its country of organization to execute, deliver and perform its
obligations under the Loan Agreement through the [Branch];
(ii) the Loan Agreement has been duly authorized and, when
executed and delivered by such Cash Collateral Depositor through the
[Branch], will constitute the valid and legally biding obligation of
such Cash Collateral Depositor enforceable against the [Branch] in
accordance with its terms, subject, as to enforcement, to (A)
bankruptcy, insolvency, reorganization, liquidation, readjustment of
debt and other laws and equitable principles relating to or affecting
the enforcement of creditors' rights generally as they may be applied
in the event of the bankruptcy, insolvency, reorganization,
liquidation or readjustment of debt of, or the appointment of a
receiver with respect to the
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property of, or a similar event applicable to, the [Branch], and (B)
the effect of any moratorium or similar occurrence affecting the
[Branch];
(iii) the Loan Agreement is enforceable in accordance with its
terms against such Cash Collateral Depositor's head office in its
country of organization if the [Branch] defaults in its obligations
thereunder, subject, as to enforcement, to (A) bankruptcy, insolvency,
reorganization, liquidation, readjustment of debt and other laws and
equitable principles relating to or affecting the enforcement of
creditors' rights generally as they may be applied in the event of the
bankruptcy, insolvency, reorganization, liquidation or readjustment of
debt of, or the appointment of a receiver with respect to the property
of, or a similar event applicable to, such Cash Collateral Depositor,
and (B) the effect of any moratorium or similar occurrence affecting
such Cash Collateral Depositor;
(iv) no consent or approval of any governmental authority in its
country of organization is required as a condition to the validity of
the Loan Agreement;
(v) the choice of the law of the State of New York to govern the
Loan Agreement is valid under the laws of its country of organization,
and a court in such country would uphold such choice of law in a suit,
action or other proceeding on the Loan Agreement brought in a court in
such country; and
(vi) any judgment for a fixed and definite sum of money rendered
by the courts of the State of New York or the United States of America
located in the State of New York, in respect of any suit, action or
other proceeding against the [Branch] for the enforcement of the Loan
Agreement will, upon request, be declared valid and enforceable
against such Cash Collateral Depositor by the competent courts of its
country of organization, without reexamination of the matters
adjudicated upon, if such judgment is not subject to appeal and is
enforceable according to the laws of the State of New York or United
States Federal law.]
(v) The Underwriters shall have received from United States counsel
for each of the Cash Collateral Depositors reasonably acceptable to the
Representative, an opinion, dated the Time of Delivery, in form and
substance satisfactory to the Representative to the effect that:
(i) such Cash Collateral Depositor is licensed by the
superintendent of banks or similar department of the State in which it
maintains a branch for the conduct of the banking business
contemplated by the Loan Agreement;
(ii) no authorization, consent or approval of or by any
governmental authority of the United States or the state in which it
maintains the [Branch] for the conduct of business is necessary for
the execution, delivery and performance
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by such Cash Collateral Depositor or the [Branch] of the Loan
Agreement, except such authorizations, consents and approvals as are
in full force and effect;
(iii) the Loan Agreement has been duly authorized, executed and
delivered by the [Branch]; and
(iv) the Loan Agreement constitutes the legal, valid and binding
obligation of such Cash Collateral Depositor and the [Branch],
enforceable against such Cash Collateral Depositor and the [Branch] in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
liquidation, moratorium, readjustment of debt or other similar laws
affecting the enforcement of creditors' rights generally, as such laws
may be applied in the event of a bankruptcy, insolvency,
reorganization, liquidation, moratorium, readjustment of such debt or
other similar proceedings of or affecting such Cash Collateral
Depositor or the [Branch], and subject to the application of general
principles of equity regardless of whether such enforceability is
considered in a proceeding at law or in equity; and
(w) The Underwriters and counsel to the Underwriters shall have
received such information, certificates and documents as the Underwriters
or counsel for the Underwriters may reasonably request.
8. (a) The Company and TCC, jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; PROVIDED, HOWEVER, that the
Company and TCC shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Provided Information in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement.
(b) Each Underwriter will indemnify and hold harmless the
Company and TCC against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration
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Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Provided Information in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement;
and will reimburse the Company and TCC for any legal or other expenses
reasonably incurred by the Company and TCC in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and TCC on the one hand and the
Underwriters on the other from the offering of the Securities. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or
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payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and TCC on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and TCC
on the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Securities
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to the Securities purchased under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or TCC on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, TCC and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by PRO RATA allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and TCC under this Section 8
shall be in addition to any liability which the Company and TCC may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section 8 shall be in addition to any
liability which the respective Underwriters may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the Company
or TCC (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to each
person, if any, who controls the Company or TCC within the meaning of the Act.
9. If Goldman, Sachs & Co. shall fail to purchase all of the
Securities which it has agreed to purchase hereunder, Nomura International plc,
pursuant to Section 9 of
33
<PAGE>
the Agreement between U.S. and International Underwriting Syndicates (the
"Syndicate Agreement"), of even date herewith, between Goldman, Sachs & Co., on
behalf of itself and the U.S. Underwriters and Nomura International plc, on
behalf of itself and the International Underwriters, has agreed to purchase such
unpurchased Securities. If an Underwriter named herein, other than Goldman,
Sachs & Co., has defaulted in its obligation to purchase all of the Securities
which it has agreed to purchase hereunder, Nomura International plc and Goldman,
Sachs & Co., pursuant to Section 9 of the Syndicate Agreement, have agreed to
each purchase one-half of such unpurchased Securities. If Goldman, Sachs & Co.
shall default on its obligation to purchase one-half of such Securities, Nomura
International plc has agreed, pursuant to Section 9 of the Syndicate Agreement,
to purchase all of such unpurchased Securities. The Underwriters agree that the
Company shall be a third party beneficiary of Section 9 of the Syndicate
Agreement and the Company hereby accepts such third party beneficiary status.
Notwithstanding the foregoing, nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, TCC and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or TCC, or any officer or director or controlling
person of the Company or TCC, and shall survive delivery of and payment for the
Securities.
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Company and TCC in subsection (a) of Section 8 hereof, the
representations and warranties in subsections (b), (c) and (d) of Section 1
hereof and any representation or warranty as to the accuracy of the Registration
Statement or the Prospectus contained in any certificate furnished by the
Company or TCC pursuant to Section 7 hereof, insofar as they may constitute a
basis for indemnification for liabilities (other than payment by the Company or
TCC, of expenses incurred or paid in the successful defense of any action, suit
or proceeding) arising under the Act, shall not extend to the extent of any
interest therein of a controlling person or partner of an Underwriter who is a
director, officer or controlling person of the Company when the Registration
Statement has become effective or who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company, except in
each case to the extent that such interest shall have been determined by a court
of appropriate jurisdiction as not against public policy as expressed in the
Act. Unless in the opinion of counsel for the Company the matter has been
settled by controlling precedent, the Company will, if a claim for such
indemnification is asserted, submit to a court of appropriate jurisdiction the
question of whether such interest is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
11. If the Underwriters fail to purchase all of the U.S. Securities
pursuant to Sections 2 and 9 hereof, the Company shall not then be under any
liability to any Underwriter except as provided in Section 8 hereof; but, if for
any other reason, the U.S. Securities are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the
34
<PAGE>
Underwriters through the Representative for all out-of-pocket expenses approved
in writing by the Representative, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the U.S. Securities, but the Company shall then be under no
further liability to any Underwriter except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representative in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; and if to TCC shall be delivered
or sent by mail, telex or facsimile transmission to AT&T Capital Corporation, 44
Whippany Road, Morristown, New Jersey 07962-1983, Attention: General Counsel;
provided, however, that any notice to an Underwriter pursuant to Section 8(c)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by the Representative upon request. Any such statements, requests,
notices or agreements shall take effect at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and TCC and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and TCC and
each person who controls the Company and TCC or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the U.S. Securities from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
35
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us one for each of the Company and TCC and for each of the
Underwriters plus one for each counsel counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement between each of the
Underwriters and the Company and TCC.
Very truly yours,
Antigua Funding Corporation
By:
---------------------------------
Name:
Title:
AT&T Capital Corporation
By:
---------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
as Representative of the Underwriters
- ---------------------------------
(Goldman, Sachs & Co.)
36
<PAGE>
SCHEDULE I
Total Aggregate Principal Amount
Underwriter of Securities to be Purchased
----------- -----------------------------------------------
Class A-1 Class A-2 Class A-3 Class A-4 Class B
Goldman, Sachs & Co. . . . . . $ $ $ $ $
Lehman Brothers Inc. . . . . . $ $ $ $ $
Merrill Lynch, Pierce, Fenner
& Smith Incorporated . . . . $ $ $ $ $
--------- --------- --------- --------- -------
J.P. Morgan Securities Inc.. . $ $ $ $ $
--------- --------- --------- --------- -------
Total. . . . . . . . $ $ $ $ $
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Purchase Price Paid by
Underwriters (as a percentage of
the principal amount of each class
of U.S. Securities)*
----------------------------------
Class A-1: ___%
Class A-2: ___%
Class A-3: ___%
Class A-4: ___%
Class B: ___%
* plus accrued interest from ______, 1996
to the Time of Delivery
<PAGE>
DRAFT DATED 10/03/96
CAPITA EQUIPMENT RECEIVABLES TRUST 1996-1
CAPITA EQUIPMENT TRUST 1996-1 RECEIVABLE-BACKED NOTES
$________% RECEIVABLE-BACKED NOTES, CLASS A-1
$________% RECEIVABLE-BACKED NOTES, CLASS A-2
$________% RECEIVABLE-BACKED NOTES, CLASS A-3
$________% RECEIVABLE-BACKED NOTES, CLASS A-4
$_________% RECEIVABLE-BACKED NOTES, CLASS B
UNDERWRITING AGREEMENT (INTERNATIONAL)
_______________________________
October __, 1996
Nomura International plc
As Lead Manager (the "Lead Manager") of the several Underwriters
named in Schedule I hereto,
c/o Nomura International plc
Nomura House
1 St. Martin's-le-Grand
London EC1A 4NP, England
Ladies and Gentlemen:
Antigua Funding Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
$_________ principal amount of the _____% Receivable-Backed Notes, Class A-1,
$______ principal amount of the ____% Receivable-Backed Notes, Class A-2,
$______ principal amount of the ___% Receivable-Backed Notes, Class A-3, $____
principal amount of the ___% Receivable-Backed Notes, Class A-4 and $_____
principal amount of the ____% Receivable-Backed Notes, Class B (collectively,
the "International Securities"), of Capita Equipment Receivables Trust 1996-1
(the "Trust") (together with the U.S. Securities (as defined below), the
"Securities").
It is understood and agreed to by all parties that the Company and
AT&T Capital Corporation, a Delaware corporation ("TCC"), are concurrently
entering into an agreement, a copy of which is attached hereto (the
"U.S. Underwriting Agreement"), providing for the sale by the Company of an
aggregate of ___ principal amount of the ___%
<PAGE>
Receivable-Backed Notes, Class A-1, $_____ principal amount of the ____%
Receivable-Backed Notes, Class A-2, $_____ principal amount of the ____%
Receivable-Backed Notes, Class A-3, $_____ principal amount of the ____%
Receivable-Backed Notes, Class A-4 and $_____ principal amount of the ___%
Receivable Backed Notes, Class B, of the Trust (the "U.S. Securities") through
arrangements with certain underwriters in the United States (the
"U.S. Underwriters"), for whom Goldman, Sachs & Co. is acting as Representative.
Anything herein and therein to the contrary notwithstanding, the respective
closings under this Agreement and the U.S. Underwriting Agreement are hereby
expressly made conditional on one another. The Underwriters hereunder and the
U.S. Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of Securities between the two
syndicates and for consultation by the Lead Manager hereunder with Goldman,
Sachs & Co. prior to exercising certain rights of the Underwriters. Two forms
of prospectus are to be used in connection with the offering and sale of
Securities contemplated by the foregoing, one relating to the Securities
hereunder and the other relating to the U.S. Securities. The latter form of
prospectus will be identical to the former except for certain substitute pages
as included in the registration statement and amendments thereto as mentioned
below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the
context may otherwise require, references hereinafter to the Securities shall
include all of the Securities which may be sold pursuant to either this
Agreement or the U.S. Underwriting Agreement, and references herein to any
prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both of the U.S. and the international versions
thereof.
In addition, this Agreement incorporates by reference certain
provisions from the U.S. Underwriting Agreement (including the related
definitions of terms, which are also used elsewhere herein) and, for purposes
of applying the same, references (whether in these precise words or their
equivalent) in the incorporated provisions to the "Underwriters" shall be to
the Underwriters hereunder, to the " Securities" shall be to the Securities
hereunder as just defined, to "this Agreement" (meaning therein the U.S.
Underwriting Agreement) shall be to this Agreement (except where this
Agreement is already referred to as the context may otherwise require) and to
the Representative of the Underwriters, to Goldman, Sachs & Co. shall be to
the addressees of this Agreement to Nomura International plc, and, in
general, all such provisions and defined terms shall be applied MUTATIS
MUTANDIS as if the incorporated provisions were set forth in full herein
having regard to their context in this Agreement as opposed to the U.S.
Underwriting Agreement.
1. The Company and TCC hereby make with the Underwriters the same
representations, warranties and agreements as are set forth in Section 1 of the
U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
2. Subject to the terms and conditions set forth herein, Nomura
International plc agrees, jointly with each other Underwriter, and each of the
other Underwriters agrees, severally and not jointly, to purchase from the
Company, and the Company agrees to sell to each of the Underwriters, the
principal amount of International
-2-
<PAGE>
Securities set forth opposite the name of such Underwriter, and at the purchase
price set forth, in Schedule I hereto.
3. (a) It is understood that upon the authorization by Nomura
International plc of the release of the International Securities, the
Underwriters propose and agree to offer the International Securities for sale
upon the terms and conditions set forth in the Prospectus.
(b) Each Underwriter represents and agrees that (i) it has not
offered or sold and, prior to the expiry of the period of six months from the
Time of Delivery, will not offer or sell any International Securities to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995;
(ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the International Securities in, from or otherwise involving the United Kingdom;
and (iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of the
International Securities to a person who is of a kind described in article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or is a person to whom such document may otherwise lawfully be issued
or passed on.
(c) Each Underwriter represents that it will not offer or sell
the Securities directly or indirectly in Japan or distribute or circulate the
Prospectus in Japan, except in circumstances that do not constitute an offer to
the public within the meaning of the Securities and Exchange Law of Japan.
4. (a) The International Securities to be purchased by each
Underwriter hereunder will be represented by one or more definitive global
Securities in book-entry form which will be deposited by or on behalf of the
Company with The Depository Trust Company ("DTC") or its designated custodian.
The Company will deliver the International Securities to Nomura International
plc, for the account of each Underwriter, against payment by or on behalf of
Nomura International plc (by or on behalf of each such Underwriter or otherwise)
of the purchase price therefor by wire transfer payable to the order of the
Company in Federal (same day) funds (to such account or accounts as the Company
shall designate), by causing DTC to credit the International Securities to the
account of Nomura International plc at DTC. The Company will cause the
certificates representing the International Securities to be made available to
Nomura International plc for checking at least twenty-four hours prior to the
Time of Delivery (as defined below) at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such delivery and
payment shall be 9:00 a.m. New York City time, on October ___, 1996 or such
other time and date as Nomura International plc, the Company and Nomura
International plc may agree upon in writing. Such time and date are herein
called the "Time of Delivery".
-3-
<PAGE>
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting
Agreement, including the cross receipt for the International Securities and any
additional documents requested by the Underwriters pursuant to Section 7 of the
U.S. Underwriting Agreement hereof, will be delivered at the offices of Dorsey &
Whitney LLP, 250 Park Avenue, New York, New York (the "Closing Location"), and
the International Securities will be delivered at the Designated Office, all at
the Time of Delivery. A meeting will be held at the Closing Location at 10:00
a.m., New York City time, on the New York Business Day next preceding the Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company and TCC, jointly and severally, hereby make to the
Underwriters the same agreements as are set forth in Section 5 of the
U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
6. The Company and TCC and the Underwriters hereby agree with
respect to certain expenses on the same terms as are set forth in Section 6 of
the U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
7. Subject to the provisions of the Agreement between Syndicates,
the obligations of the Underwriters hereunder shall be subject, in their
discretion, at the Time of Delivery, to the condition that all representations
and warranties and other statements of the Company and TCC herein are, at and as
of the Time of Delivery, true and correct, the condition that the Company and
TCC shall have performed all of their obligations hereunder theretofore to be
performed, and additional conditions identical to those set forth in Section 7
of the U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
8. (a) The Company and TCC jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act, under the law of any jurisdiction or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company and TCC shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Provided Information in
-4-
<PAGE>
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement.
(b) Each Underwriter will indemnify and hold harmless the Company and
TCC against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act, under the law of any jurisdiction or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Provided Information in any Preliminary
Prospectus, the Registration Statement or Prospectus or any such amendment or
supplement; and will reimburse the Company and TCC for any legal or other
expenses reasonably incurred by the Company and TCC in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect
-5-
<PAGE>
of any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and TCC on
the one hand and the Underwriters on the other from the offering of the
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and TCC on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and TCC on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Securities purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus relating to such Securities. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or TCC on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and TCC and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by PRO RATA allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and TCC under this Section 8 shall
be in addition to any liability which the Company and TCC may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act or the laws of any
jurisdiction governing such determination;
-6-
<PAGE>
and the obligations of the Underwriters under this Section 8 shall be in
addition to any liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company (including any person who, with his or her consent, is
named in the Registration Statement as about to become a director of the
Company) and TCC and to each person, if any, who controls the Company and TCC
within the meaning of the Act or the laws of any jurisdiction governing such
determination.
9. If Nomura International plc shall fail to purchase all of the
Securities which it has agreed to purchase hereunder, Goldman, Sachs & Co.,
pursuant to Section 9 of the Agreement between U.S. and International
Underwriting Syndicates (the "Syndicate Agreement"), of even date herewith,
between Goldman, Sachs & Co., on behalf of itself and the U.S. Underwriters and
Nomura International plc, on behalf of itself and the International
Underwriters, has agreed to purchase such unpurchased Securities. If an
Underwriter named herein, other than Nomura International plc, has defaulted in
its obligation to purchase all of the Securities which it has agreed to purchase
hereunder, Nomura International plc and Goldman, Sachs & Co., pursuant to
Section 9 of the Syndicate Agreement, have agreed to each purchase one-half of
such unpurchased Securities. If Nomura International plc shall default on its
obligation to purchase one-half of such Securities, Goldman, Sachs & Co. has
agreed, pursuant to Section 9 of the Syndicate Agreement, to purchase all of
such unpurchased Securities. The Underwriters agree that the Company shall be a
third party beneficiary of Section 9 of the Syndicate Agreement and the Company
hereby accepts such third party beneficiary status. Notwithstanding the
foregoing, nothing herein shall relieve a defaulting Underwriter from liability
for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and TCC and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or TCC or any officer or director of the Company or
TCC, and shall survive delivery of and payment for the Securities.
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Company and TCC in subsection (a) of Section 8 hereof, the
representations and warranties in subsections (b), (c) and (d) of Section 1 of
the U.S. Underwriting Agreement incorporated by reference herein and any
representation or warranty as to the accuracy of the Registration Statement or
the Prospectus contained in any certificate furnished by the Company pursuant to
Section 7 hereof, insofar as they may constitute a basis for indemnification for
liabilities (other than payment by the Company or TCC of expenses incurred or
paid in the successful defense of any action, suit or proceeding) arising under
the Act, shall not extend to the extent of any interest therein of a controlling
person or partner of an Underwriter who is a director, officer or controlling
person of the Company when the Registration Statement has become effective or
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company, except in each case to the extent that such
interest shall have been determined by a court of appropriate jurisdiction as
not against public policy as expressed in
-7-
<PAGE>
the Act. Unless in the opinion of counsel for the Company the matter has been
settled by controlling precedent, the Company will, if a claim for such
indemnification is asserted, submit to a court of appropriate jurisdiction the
question whether such interest is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
11. If the Underwriters fail to purchase all of the International
Securities pursuant to Sections 2 and 9 hereof, the Company shall not then be
under any liability to any Underwriter except as provided in Section 8 hereof,
but, if for any other reason the International Securities are not delivered by
or on behalf of the Company as provided herein, the Company will reimburse the
Underwriters through Nomura International plc for all out-of-pocket expenses
approved in writing by Nomura International plc, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the International
Securities, but the Company shall then be under no further liability to any
Underwriter except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Lead Manager shall act on behalf
of each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by the Lead Manager on the Underwriters' behalf.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of Nomura International plc,
Nomura House, 1 St. Martin's-le-Grand, London EC1A 4NP, facsimile transmission
No. _____________, with a copy delivered, sent by mail, telex or facsimile
transmission to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004,
Attention: Registration Department; if to the Company shall be delivered or sent
by registered mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; and if to
TCC shall be delivered or sent by mail, telex or facsimile transmission to AT&T
Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07692-1983,
Attention: General Counsel; PROVIDED, HOWEVER, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by Nomura International plc upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, TCC and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and TCC and
each person who controls the Company and TCC, or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the International Securities from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
-8-
<PAGE>
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, United States of America.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
-9-
<PAGE>
If the foregoing is in accordance with the Underwriters'
understanding, please sign and return to us one for the Company and one for each
of the Underwriters plus one for each counsel counterparts hereof, and upon the
acceptance hereof by the Lead Manager, on behalf of each of the Underwriters,
this letter and such acceptance hereof shall constitute a binding agreement
among each of the Underwriters, the Company and TCC.
Very truly yours,
Antigua Funding Corporation
By:
----------------------------------
Name:
Title:
AT&T Capital Corporation
By:
----------------------------------
Name:
Title:
Accepted as of the date hereof:
Nomura International plc
By:
-----------------------------
Name:
Title:
As Lead Manager of the Underwriters
-10-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Total Aggregate Principal Amount
of Securities to be Purchased
Underwriter
----------- ---------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Class A-1 Class A-2 Class A-3 Class A-4 Class B
Nomura International plc . . . . . . . . $
Barclays de Zoete Wedd Limited . . . . . $
Goldman Sachs International. . . . . . . $
Lehman Brothers International (Europe) . $
Merrill Lynch International. . . . . . . $
J.P. Morgan Securities Ltd.. . . . . . . $
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
Total . . . . . . . $
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
</TABLE>
Purchase Price Paid by Underwriters*
Class A-1: ___%
Class A-2: ___%
Class A-3: ___%
Class A-4 ___%
Class B: ___%
* plus accrued interest from ______, 1996 to the Time of Delivery
<PAGE>
EXHIBIT 8.1
Antigua Funding Corporation
c/o CT Corporation
1209 Orange Street
Wilmington, Delaware 19801
Re: Capita Equipment Receivables Trust 1996-1
Registration Statement in Form S-3
Registration No. 333-08465
Ladies and Gentlemen:
We have acted as counsel for Antigua Funding Corporation, a Delaware
corporation ( the "Depositor"), in connection with the establishment by the
Depositor of Capita Equipment Receivables Trust 1996-1 (the "Owner Trust"),
pursuant to the Amended and Restated Trust Agreement dated as of October 1, 1996
(the "Trust Agreement"), between the Depositor and The Bank of New York, as
Owner Trustee (the "Owner Trustee"), and the upcoming issuance by the Owner
Trust of an aggregate of up to $3,075,000,000 of Receivable-Backed Notes, in
five classes (the "Notes"), pursuant to the Indenture dated as of October 1,
1996 (the "Indenture"), between the Owner Trust and The Chase Manhattan Bank, as
Indenture Trustee (the "Indenture Trustee").
Pursuant to the Trust Agreement, the Equity Certificate has been
issued by the Owner Trust to the Depositor. Pursuant to a Purchase and Sale
Agreement dated as of October 1, 1996 (the "Purchase Agreement"), among the
Depositor, AT&T Capital Corporation ("TCC") and four wholly owned subsidiaries
of TCC (AT&T Capital Leasing Services, Inc., AT&T Credit Corporation, NCR Credit
Corp. and the Portland division of AT&T Commercial Finance Corporation,
collectively the "Originators"), the Originators will assign to the Depositor
all of their right, title and interest in and to all of the Contracts
<PAGE>
Antigua Funding Corporation
September 30, 1996
Page 2
and the related Equipment, described below. Pursuant to a Transfer and
Servicing Agreement dated as of October 1, 1996 (the "Transfer and Servicing
Agreement"), among the Owner Trustee, the Depositor, TCC, in its individual
capacity and as Servicer, and the Indenture Trustee, the Depositor will transfer
such Contracts and a right to a portion of the Liquidation Proceeds with respect
to Leased Equipment to the Owner Trust and the Owner Trust will issue to the
Depositor the Notes, which will be offered and sold by the Depositor.
You have requested our opinion with respect to the federal income tax
characterization of the Notes and the Owner Trust. For purposes of rendering
our opinion we have examined the Prospectus, the Trust Agreement, the Purchase
Agreement, the Cash Collateral Account Agreement, the Transfer and Servicing
Agreement, the Indenture and the related documents and agreements contemplated
therein (collectively, the "Transaction Documents") and we have reviewed such
questions of law as we have considered necessary and appropriate. All
capitalized terms used herein and not defined herein have the meanings set forth
in the Indenture or the Transfer and Servicing Agreement.
Our opinion is based upon the existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), currently applicable Treasury
Department regulations issued thereunder, current published administrative
positions of the Internal Revenue Service (the "Service") contained in revenue
rulings and revenue procedures, and judicial decisions, all of which are subject
to change, either prospectively or retroactively, and to possibly differing
interpretations. Any change in such authorities may affect the opinions
rendered herein.
Our opinion is also based on the projections, representations,
warranties, covenants and agreements set forth in the Transaction Documents and
the assumption that the Depositor, TCC, the Cash Collateral Account Lenders, the
Owner Trustee, the Indenture Trustee, the Noteholders and the holder of the
Equity Certificate will at all times comply with the requirements of the
Transaction Documents. We have also relied in part on various factual
representations made to us by the Depositor and TCC. Although we have not
undertaken an independent investigation of any factual matters, nothing contrary
to any of these representations has come to our attention in the course of our
consideration of these matters. Any alteration of such factual representations
may adversely affect our opinion.
An opinion of counsel is predicated on all the facts and conditions
set forth in the opinion and is based upon counsel's analysis of the statutes,
regulatory interpretations and case law in effect as of the date of the opinion.
It should not be accepted as a guarantee that a court of law or an
administrative agency will concur in the opinion.
<PAGE>
Antigua Funding Corporation
September 30, 1996
Page 3
FEDERAL INCOME TAX CHARACTERIZATION OF THE NOTES
In general, for federal income tax purposes, the characterization of
the issuance and sale of notes as the issuance and sale of debt, the issuance
and sale of an equity or beneficial interest in the issuer or the sale of an
ownership interest in property of the issuer is a question of fact, the
resolution of which is based upon a variety of factors, principal among which is
a determination of who will receive the benefits of, and bear the burdens
relating to, the property. Thus, the determination of whether an instrument
issued in connection with such a transaction will be treated as debt for federal
income tax purposes, or instead will be treated as an equity or beneficial
interest in the issuer or as an ownership interest in the assets of the issuer,
depends on all the facts and circumstances in each case. See generally, Plumb,
THE FEDERAL INCOME TAX SIGNIFICANCE OF CORPORATE DEBT: A CRITICAL ANALYSIS AND
A PROPOSAL, 26 Tax L. Rev. 369 (1971).
In any such determination, several factors must be considered, and
debt characterization may be indicated by, among other things, the independence
of the debt holders and equity holders, the intention of the parties to create a
debt, the issuance of a formal debt instrument, the provision of a fixed
maturity date, the likelihood and expectation that the principal amount will be
repaid, the debt to equity ratio of the issuer, the nature of the assets serving
as security for the obligation, and various other factors. In the context of
this transaction, the most important considerations are: (i) whether the
Noteholders bear the burdens of ownership (i.e., the risk of loss from the
Contracts) and (ii) whether the Noteholders have acquired the benefits of
ownership (i.e., the potential for gain from the Contracts). In view of all of
the relevant facts and circumstances, the likelihood of the Noteholders bearing
any actual loss in respect of the Contracts is considered to be remote.
Accordingly, the Noteholders should not be regarded as bearing a significant
risk of loss associated with ownership of the Contracts. In addition, because
the Noteholders are entitled to receive a fixed principal amount and a fixed
rate of interest, the economic return to the Noteholders will not be affected by
any change in the value of the Contracts. Accordingly, the Noteholders will not
receive any benefit from any increase in the value of the Contracts.
A number of other factors are consistent with the treatment of the
Notes as debt. The most important of these factors are as follows: the form of
the Notes as debt, the fact that interest rates for the Notes have been
determined in a separate, identifiable market from the one in which interest
rates on the Contracts were set, the sequential payment and lockout features of
the Notes, the Servicer's ability to permit prepayments on the Lease Contracts,
the ultimate retention of reinvestment risk by the Depositor or TCC, the fact
that delinquencies on the Contracts and the negative carry resulting therefrom
are not borne by the Noteholders, the existence of a clean-up call option in
favor of the Depositor and the
<PAGE>
Antigua Funding Corporation
September 30, 1996
Page 4
limited rights of Noteholders in the proceeds of any liquidation of Equipment
upon a default under the related Lease Contract.
Based upon the foregoing, we are of the opinion that the Notes will be
treated as debt for federal income tax purposes.
FEDERAL INCOME TAX CHARACTERIZATION OF THE OWNER TRUST
The Owner Trust is similar in many respects to trusts established to
hold collateral pledged as security in connection with lending transactions. If
all classes of Certificates issued by the Owner Trust were debt for federal
income tax purposes, the Owner Trust would be disregarded for federal income tax
purposes and would be characterized as a mere security arrangement. Treas. Reg.
Section 1.61-13(b); Rev. Rul. 76-265, 1976-2 C.B. 448; SEE ALSO Rev. Rul. 73-
100, 1973-1 C.B. 613 (domestic corporations's transfer of securities to Canadian
security holder, to secure liabilities to policyholders in Canada, does not
create a trust where discretionary powers retained by corporation); Rev. Rul.
71-119, 1971 C.B. 163 (settlement fund administered by "trustee" not a trust).
The Owner Trust, however, has issued the Equity Certificate to the Depositor and
the Equity Certificate (i) will not take the form of debt, (ii) is intended not
to be treated as debt for federal income tax purposes, and (iii) is intended to
be treated instead as evidencing the ownership interests of the Depositor in
property transferred by the Depositor to the Owner Trust, subject to the
security interests of the Noteholders and the rights of the Cash Collateral
Account Lenders. As long as, for federal income tax purposes, the Notes are
treated as debt and the Depositor is viewed to hold all interests in the Owner
Trust other than the Notes, the Owner Trust should be treated as a mere security
arrangement and disregarded for federal income tax purposes. Alternatively, if
the Owner Trust were not characterized as a mere security arrangement, then
under the circumstances set forth above it would be viewed as a grantor trust,
with the Depositor being treated as the grantor, for federal income tax
purposes. Treas. Reg. Section 301.7701-4.
If any person in addition to the Depositor, however, were viewed to
hold an interest in the Owner Trust or the Trust Assets other than the Notes or
other debt of the Owner Trust or a security interest in the Trust Assets, the
Owner Trust could be viewed, pursuant to Treasury Regulation Section 301.7701-
4(c), as an entity whose characterization for federal income tax purposes would
be determined under Section 7701 of the Code and Treasury Regulation Section
301.7701-2. In two significant cases regarding the classification of limited
partnerships for tax purposes, the opinions of the Court of Claims and the
United States Tax Court closely followed the tests set forth in these
regulations. SEE ZUCKMAN V. UNITED STATES, 524 F.2d 79 (Ct. Cl. 1975); LARSON
V. COMMISSIONER, 66 T.C. 159 (1976), acq., 1979-1 C.B. 1; SEE ALSO Rev. Rul. 79-
106, 1979-1 C.B. 448, Rev. Rul. 95-9, 1995-3 I.R.B. 17, and Rev. Proc. 89-12,
1989-1 C.B. 798. Furthermore, in Revenue Ruling
<PAGE>
Antigua Funding Corporation
September 30, 1996
Page 5
88-79, 1988-2 C.B. 361, the Service ruled that the tests set forth in these
regulations to distinguish a partnership from an association should also be
applied to determine the tax characterization of a business trust.
Section 301.7701-2(a)(1) of the Treasury Regulations lists six major
characteristics ordinarily found in a corporation which distinguish a
corporation from other forms of organizations. Section 301.7701-2(a)(2) of the
Treasury Regulations provides that since two of these factors (associates and an
objective to carry on business and divide the gains therefrom) are generally
common to both corporations and partnerships, the determination of whether an
organization that has such characteristics is to be treated for tax purposes as
a partnership or as an association taxable as a corporation depends upon an
analysis of the remaining factors: continuity of life, free transferability of
interests, centralization of management and limited liability.
Section 301.7701-2(a)(3) of the Treasury Regulations specifies that an
unincorporated organization shall not be classified as an association taxable as
a corporation unless such organization has more corporate characteristics than
non-corporate characteristics, excluding characteristics common to both types of
organizations. Under Section 301.7701-2(a)(3) of the Treasury Regulations, each
of the four above-described characteristics is assigned equal weight in
determining whether an organization has more corporate characteristics than non-
corporate characteristics. SEE LARSON and Rev. Rul. 95-9, 1995-3 I.R.B. 17,
each of which applied equal weight to each of the four characteristics.
We conclude that under the Treasury Regulations' tests and relevant
judicial authorities, the Owner Trust lacks continuity of life and limited
liability and that the Owner Trust therefore will not be treated as an
association taxable as a corporation for federal income tax purposes.
PUBLICLY TRADED PARTNERSHIP
Section 7704 of the Code provides that, subject to certain exceptions,
a partnership the interests in which are (i) traded on an established securities
market or (ii) readily tradable on a secondary market (or the substantial
equivalent thereof) will be treated as a corporation for federal income tax
purposes.
Treasury Regulations Section 1.7704-1, issued on November 29, 1995
(the "PTP Regulations"), provide further explanation of the rules governing
publicly traded partnerships. The PTP Regulations provide that an "established
securities market" includes a national, foreign, regional or local exchange, as
well as an interdealer quotation system which regularly disseminates firm buy or
sell quotations by identified brokers or dealers, by electronic means or
otherwise. The PTP Regulations also provide that interests in a
<PAGE>
Antigua Funding Corporation
September 30, 1996
Page 6
partnership are readily tradable on a secondary market or the substantial
equivalent thereof if the partners are readily able to buy, sell or exchange
their partnership interests in a manner that is economically comparable to
trading on an established securities market.
Interests in the Owner Trust or in the Trust Assets which might be
viewed to constitute interests in a partnership will not be traded on an
established securities market within the meaning of the PTP Regulations. The
PTP Regulations provide a safe harbor pursuant to which interests in a
partnership will not be considered readily tradable on a secondary market or the
substantial equivalent thereof if (i) all interests in such partnership were
issued in a transaction (or transactions) that was not required to be registered
under the Securities Act of 1933 and (ii) the partnership does not have more
than 100 partners at any time during the taxable year of the partnership.
As discussed above, it is our opinion that the Notes will be treated
as debt and will not be viewed to constitute interests in a partnership for
federal income tax purposes. The Equity Certificate will be issued to the
Depositor and the Depositor will be required to retain the Equity Certificate,
except that the Equity Certificate will be pledged to secure additional
financing by the Depositor. The Transaction Documents will prohibit the
issuance or transfer of any interests which might be viewed to constitute a
beneficial interest in the Owner Trust, the Equity Certificate or the Trust
Assets if as a result of such issuance or transfer more than 100 persons would
be viewed to hold any such interests at any time during a taxable year. In
addition, no such interests will be issued in a transaction that is required to
be registered under the Securities Act of 1933. Accordingly, under current
law, if the Owner Trust were considered to be a partnership for federal income
tax purposes, in our opinion it would not be treated as a publicly traded
partnership for purposes of Section 7704 because none of its interests would
be tradable as provided for therein.
Based upon the foregoing, we are of the opinion that the Owner Trust
will not be characterized as an "association" or "publicly traded partnership"
taxable as a corporation for federal income tax purposes.
We express no opinions other than those expressly set forth above.
Except as provided below, the foregoing opinions are being furnished
to you solely for your benefit and may not be relied upon by, nor may copies be
delivered to, any other person without our prior written consent.
We hereby consent to the inclusion of this opinion as an exhibit to
the Registration Statement and to the use of our name under the heading "United
States Taxation" in the Prospectus, and we hereby confirm that the discussion
under such
<PAGE>
Antigua Funding Corporation
September 30, 1996
Page 7
heading accurately sets forth our advice as to the likely outcome of material
issues under the federal income tax laws.
Dated: September 30, 1996
Very truly yours,
/s/ DORSEY & WHITNEY LLP
<PAGE>
October 4, 1996
AT&T Capital Corporation
44 Whippany Road
Morristown, New Jersey 07962-1983
Antigua Funding Corporation
c/o CT Corporation
1209 Orange Street
Wilmington, Delaware 19801
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Nomura International plc
Nomura House
1 St. Martin's-Le-Grand
London, United Kingdom EC1A 4NP
Re: Capita Equipment Receivables Trust 1996-1
-----------------------------------------
Ladies and Gentlemen:
You have requested our opinion as to whether the Receivable-Backed Notes
(the "Notes") to be issued by the Capita Equipment Receivables Trust 1996-1 (the
"Trust") pursuant to the Amended and Restated Trust Agreement dated as of
October 1, 1996 (the "Trust Agreement"), between Antigua Funding Corporation,
a Delaware corporation (the "Depositor") and The Bank of New York, as Owner
Trustee, and the Indenture dated as of October 1, 1996 (the "Indenture"),
between the Owner Trustee and The Chase Manhattan Bank (National Association) as
Indenture Trustee, which are described in the Prospectus dated October [ ],
1996 (the "Prospectus"), will be treated as indebtedness for federal income tax
purposes. You have also requested our opinion as to the classification of the
Trust for federal income tax purposes.
<PAGE>
Goldman, Sachs & Co. 2 October 4, 1996
In connection with your request, we have examined (i) the Prospectus,
(ii) certain transaction documents (including the Trust Agreement and the
Indenture), and (iii) such other documents as we have deemed necessary or
appropriate. The opinions set forth below are subject to the following: (i)
all of the parties to the documents we have examined will, at all times,
comply with the provisions of such documents, (ii) the facts and assumptions
and representations stated below are accurate, and (iii) the Notes and other
certificates to be issued by the Trust will be issued and administered in a
manner consistent with the description contained herein and in the
Prospectus. We have also relied in part on certain factual representations
provided to us by the Depositor, AT&T Capital Corporation ("TCC"), Goldman,
Sachs & Co. and Nomura International plc. All capitalized terms used herein
and not defined herein have the meanings set forth in the Indenture or the
Transfer and Servicing Agreement (defined below).
It is our opinion that the creation of the Trust and the issuance
of Notes by the Trust will be treated for federal income tax purposes as the
issuance of indebtedness secured by the assets of the Trust, and that the Trust
will not be treated as an association (or a publicly-traded partnership) taxable
as a corporation for federal income tax purposes. Our opinion in this regard
is based upon the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury regulations promulgated thereunder, and the relevant case law and
administrative pronouncements of the Internal Revenue Service (the "Service"),
all as of the date hereof. We express no opinions other than those expressed
herein.
This opinion is not to be used, circulated or otherwise referred to
without our prior written consent. We hereby consent to the inclusion of
this opinion as an exhibit to the Registration Statement and the reference to
this opinion in the Prospectus. We hereby confirm that the discussion under
the heading "United States Taxation" in the Prospectus accurately sets forth
our advice as to the likely outcome of material issues under the federal
income tax laws.
An opinion of counsel is predicated on all the facts, assumptions, and
conditions set forth therein and is based upon counsel's analysis of the
statutes, regulatory interpretations and case law in effect as of the date of
the opinion. It should not be accepted as a guarantee that a court of law or
an administrative agency will concur in the opinion.
FACTS
Pursuant to a Purchase and Sale Agreement among the Depositor, TCC, and
four wholly owned subsidiaries of TCC (the subsidiaries, collectively, the
"Originators"), the Originators will (i) assign and otherwise convey certain
equipment lease contracts (the "Lease Contracts"), installment sale
contracts, promissory notes and security agreements, and certain other
chattel paper (the "Loan Contracts"; the Lease Contracts and Loan Contracts,
collectively, the "Contracts"), (ii) assign and otherwise convey the rights
to all payments on the Contracts, and (iii) assign and otherwise convey the
equipment subject to the Lease Contracts (the "Equipment"), to the
<PAGE>
Goldman, Sachs & Co. 3 October 4, 1996
Depositor. (1)
Pursuant to a Transfer and Servicing Agreement, the Depositor will
transfer (i) the Contracts, (ii) the interests in the Equipment that secure
the Loan Contracts, (iii) the right to receive a portion of the proceeds of a
liquidation of the Equipment related to the Lease Contracts, and (iv) the
right to receive the proceeds from a prepayment of a Lease Contract up to a
specified amount, to the Trust, the Trust will issue the Notes to the public
in a registered offering for cash, and the Trust will remit a portion of the
cash proceeds to the Depositor along with the Equity Certificates issued by
the Trust.(2) Goldman, Sachs & Co. and Nomura International plc will act
as underwriters for the Notes.
The Notes are being issued in a form customary for debt pursuant to and
subject to the terms of the Indenture, and provide for principal amounts to be
repaid to Noteholders, with interest at a fixed rate. In the event of a default
in payment of the Notes, the Noteholders will be entitled to the benefit of
certain remedies and rights under the Indenture.
The Equity Certificates represent an interest in the Trust's assets that is
subordinated to the Notes. A portion of the proceeds realized from a
liquidation of the Equipment following default on a Contract will be made
available to fund the Notes and Equity Certificates.
A segregated account (the "Cash Collateral Account" or the "CCA") will be
established as credit support. The Depositor and/or its indirect parent,
TCC, will be entitled to a portion of the cash flow in respect of the Trust's
assets after certain required payments are made.
The Trust will be prohibited from engaging in any business activity
other than (i) issuing the Notes and the Equity Certificates, (ii) holding
and dealing with (including disposing of) the Trust Assets, (iii) making
payments on the Notes and the Equity Certificates, (iv) entering into and
performing the duties, responsibilities and functions required under the
Transfer and Servicing Agreement, the Indenture, the Contracts and related
documents, and (v) matters related to the foregoing.
Pursuant to the Transfer and Servicing Agreement, TCC will service the
Contracts and
- -----------------------
1 Purchase and Sale Agreement (the "Purchase and Sale Agreement") dated as
of October 1, 1996 among the Depositor, as Purchaser, TCC, in its individual
capacity and as Servicer, and the Originators, Section 2.1.
2 Transfer and Servicing Agreement dated as of October 1, 1996 (the
"Transfer and Servicing Agreement"), among the Trust, the Depositor, TCC, in
its individual capacity and as Servicer, and the Indenture Trustee.
<PAGE>
Goldman, Sachs & Co. 4 October 4, 1996
the Equipment to the extent the Equipment secures the Contracts (as such, the
"Servicer"), and will be entitled to a fee for such services. The Servicer
will review the Contract files, monitor and track property and sales taxes to
be paid by lessees, collect payments on the Contracts, repossess and remarket
the Equipment following a lessee default, pay the fees and expenses of the
Trust, manage the funds held by the Trust, make payments into the Trust's
collection accounts for payments on the Notes and Equity Certificates, and
negotiate and accept prepayments from lessees under Lease Contracts. In this
regard, the Servicer will have discretion to permit prepayments based on its
independent business objectives, and may permit prepayments in situations
that are adverse to Noteholders.
The Servicer will pledge a portion of its servicing fee to fund payments
with respect to the CCA.
The Depositor will transfer the Equity Certificates to a second trust,
which will issue certificates to investors for cash in a private placement.
FEDERAL INCOME TAX TREATMENT OF NOTES AS DEBT
It is our opinion that the Notes constitute debt for federal income tax
purposes. The Notes will have all the requisite indicia of debt, an absolute
and legally enforceable obligation to pay a sum certain at a specified
maturity, and, based on the credit ratings for each class of Notes, it is
reasonable to expect that the Notes will be paid in accordance with their
terms. Further, based upon an analysis of the economic substance of the
transaction, the Noteholders do not own the Trust Assets or equity interests
in the Trust, but rather have acquired creditor interests.
FORM OF THE TRANSACTION
The form in which a transaction is cast will be respected if consistent
with its substance, and only in unusual circumstances will debt instruments
such as the Notes not be treated in accordance with their form. SEE, E.G.,
TOWN & COUNTRY FOOD CO. V. COMMISSIONER, 51 T.C. 1049 (1969) (transaction
documented as a financing was respected as such where its form was consistent
with the substance), ACQ. 1969-2 C.B. xxv. The Notes bear all of the formal
indicia of indebtedness: (i) an unconditional promise to repay principal and
pay interest at fixed dates, (ii) collateral provisions with no transfer of
the assets to Noteholders absent default, (iii) conventional creditor
remedies to enforce the payment of interest and principal against the Trust,
(iv) no participation in the management of the Trust or the Depositor absent
default, and (v) provisions that all parties will treat the Notes as
indebtedness for federal income tax purposes.
Courts and the Service have frequently applied a multi-factor test that
is designed to help assess the economic substance of the form chosen. SEE,
E.G., MATHERS V. COMMISSIONER, 57 T.C. 666, 675 (1972), ACQ. 1973-2 C.B. 2;
TOWN & COUNTRY FOOD CO. V. COMMISSIONER, SUPRA; General Counsel Memoranda 39584
(December 3, 1986) and 38147 (October 26, 1979);
<PAGE>
Goldman, Sachs & Co. 5 October 4, 1996
PLR 8149041 (September 9, 1981).(3) Several factors cited in this test focus
on various mechanical indicia such as legal title, collection and servicing
of the collateral, and liability for taxes. The Notes are consistent with
the debt treatment based upon such indicia.
CONTROL OF THE ASSETS
In addition to the more formal indicia noted above, a critical factor in
characterizing a transaction as a loan secured by the pledge of assets is the
degree of control retained over the collateral by the borrower or its agent,
and the lack of such control by the lender. SEE, E.G., MATHERS V.
COMMISSIONER, SUPRA at 675 (transferee's exclusive control over underlying
assets relevant in finding sale of assets). Such control includes the right
to dispose of the assets, the right to service and make collections on the
assets, the taking of other action with respect to assets, and the right to
make investment decisions with respect to the proceeds from the assets. The
Noteholders will not have any formal or practical control over the Contracts
absent default, and there will be no direct or indirect contact between the
Noteholders and the obligors under the Contracts.
Perhaps the most critical element of control over the Contracts and
Equipment is the ability to withdraw such assets and possibly substitute new
collateral of either the same or a different type and of equal or greater
value. In this regard, the Depositor will have the ability to reacquire a
portion of the Contracts through its clean-up call, and TCC, the indirect
parent of the Depositor, will have the ability to accept prepayments based on
its independent business objectives, and even accept a prepayment that is
less than the required amount, and fund the difference.
ECONOMIC SUBSTANCE
In addition to the more formalistic indicia, courts and the Service also
will analyze which of the Noteholders or the Depositor possesses the economic
benefits and burdens of owning the underlying collateral. SEE, E.G., UNITED
SURGICAL STEEL CO., INC. V. COMMISSIONER, 54 T.C. 1215, 1229-30 (1970),
ACQ. 1971-2 C.B. 3; General Counsel Memorandum 39584 (December 3, 1986). Where,
as here, the borrower has retained sufficient economic ownership, and the
creditors have not acquired the substantial incidents thereof, the Notes will
be treated as debt and not as ownership in the underlying assets.
In general, there are four discrete types of risk with respect to these
types of assets: credit risk, market risk, interest rate risk ("reinvestment
risk"), and the economic
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3 Section 6110(j)(3) of the Code provides that private letter rulings and
General Counsel Memoranda may not be relied upon as precedent. Nevertheless,
we believe that the private letter rulings and General Counsel Memoranda
cited herein provide some guidance as to the analysis that the Service has
applied in characterizing asset-backed securities for federal income tax
purposes. All references to section numbers herein are to the Code or the
Treasury regulations issued thereunder.
<PAGE>
Goldman, Sachs & Co. 6 October 4, 1996
volatility of the total return on the Contracts attributable to their
prepayment ("prepayment risk"). The Depositor will bear virtually all, and
Noteholders will bear virtually none, of the credit, market and reinvestment
risks associated with the Trust's assets, which are the three major economic
indicia in this transaction. Further, the retention by the Depositor of a
meaningful economic interest in the Contracts, and the corresponding absence
thereof by the Noteholders, is fundamental in precluding the Noteholders from
being treated for federal income tax purposes as owning the assets. Thus, in
our view, the Depositor will be treated as having retained sufficient
economic benefits and burdens with respect to the Trust assets to continue to
be treated as their owner.
CREDIT RISK. The Noteholders have been shielded from substantially all
of the realistic risk of loss attributable to credit problems on the
Contracts. The Depositor will provide or arrange to provide for credit
enhancement resulting in credit ratings on the Notes between A and AAA. The
associated retained credit risk is expected to be substantial based upon
historical experience.(4)
MARKET RISK. The party who can benefit from or suffer the risk of
fluctuations in the market value of the property has an important attribute
of owning that property. SEE, E.G., UNITED SURGICAL STEEL CO. V.
COMMISSIONER, SUPRA; General Counsel Memoranda 37989 (June 22, 1979) and
34602 (September 9, 1971). In this regard, the courts have identified as
strongly supporting debt characterization the fact that the interest rate on
the loan is set in the debt market, independently of the interest rate on the
underlying collateral. SEE, E.G., UNITED SURGICAL STEEL CO. V. COMMISSIONER,
SUPRA at 1229; YANCY BROS. CO. V. U.S., 319 F. Supp. 441 (N.D. GA. 1970);
TOWN & COUNTRY FOOD, SUPRA. The interest rates on the Contracts and the
Notes will have been set in separate, indentifiable markets.
Ordinarily, the power of disposition is critical to who bears the market
opportunity and risk with respect to the underlying property. Where a lien
is placed on the property for its life, this factor is somewhat neutralized.
The Depositor and TCC can preclude the Noteholders from realizing the
benefit of appreciation in the Contracts through the ability of TCC to accept
prepayments of Contracts. The Depositor and TCC can likewise shield the
Noteholders from the detriment of losses on the Contracts pursuant to an
accepted prepayment where TCC pays the corresponding par
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4 Generally, courts have not treated the retention of credit risk alone as
sufficient to establish a financing where the taxpayer transferred significantly
all of the other economic interests in the underlying assets. SEE, E.G., EAST
COAST EQUIP. CO. V. COMMISSIONER, 222 F.2d 676 (3d Cir. 1955). However, in such
situations, the taxpayer did not demonstrate that the credit rating of the
asset-backed security was significantly better than that of the obligors on
the underlying assets. In appropriate circumstances, retention of credit risk
alone may be sufficient to cause an asset-backed security to be treated as a
debt obligation for federal income tax purposes.
<PAGE>
Goldman, Sachs & Co. 7 October 4, 1996
value of the Notes. This ability to insulate Noteholders from realizing market
value changes in the underlying Lease Contracts pursuant to the ability to
accept prepayments is inconsistent with the Noteholders owning the underlying
Lease Contracts.
In addition, the Depositor retains a clean-up call any time after ten
percent or less of the remaining securities are outstanding. This gives the
Depositor the potential to realize upside on a meaningful portion of the
collateral.
REINVESTMENT RISK. With respect to financial assets, an important element
of the benefits and risks of ownership is how closely payments on the Notes will
track payments received on the collateral. SEE TOWN & COUNTRY FOOD CO. V.
COMMISSIONER, SUPRA. Mismatches with respect to the payment of cash flows can
create a potential for profit opportunity and risk of loss. There are
significant differences between the cash flows on the Contracts and the Notes.
Noteholders will have no interest in or detriment attributable to float or the
early receipt of payments or delinquencies on the Lease Contracts.
PREPAYMENT RISK. Noteholders, and not the Depositor, will generally bear
prepayment risk because prepayments on the Contracts will be used to prepay
principal amounts on the Notes. However, the prepayment risk will be borne
inversely with credit risk (i.e., the Class A Notes will receive principal
payments prior to Class B Notes, but the Class B Notes are subordinated to the
Class A Notes).
SPECIFIC IDENTIFICATION OF COLLATERAL
Another factor that courts and the Service have examined in characterizing
whether debt will be treated as such or as an ownership interest in underlying
collateral, is whether the transaction focuses on particular items of collateral
or the collateral in the aggregate. Where the collateral is dealt with in the
aggregate, this factor has tended to support debt characterization rather than
sale.(5)
PLEDGE OF LEASES
Additional recourse beyond the mere rental streams is a powerful factor
in treating the transfer of lease receivables as a financing. SEE WATTS COPY
SYSTEM, INC. V. COMMISSIONER, T.C.M. 1994-124; COULTER ELECTRONICS, INC. V.
COMMISSIONER, SUPRA. In these cases, the Tax Court held that an assignment of
leases was a secured loan for federal income tax purposes despite, in WATTS, the
transaction's form, and, in both cases, the near identical payment schedules and
asset by asset
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5 Debt has been recharacterized as a sale only where indentifiable,
individual items of collateral can be traced to the terms of the note. COMPARE
COULTER ELECTRONICS, INC. V. COMMISSIONER, T.C.M. 1990-186, AFF'D WITHOUT OP.,
943 F. 2D 1318 (11TH CIR. 1991) WITH BOGATIN V. U.S., 78-2 U.S.T.C. (CCH)
PARAGRAPH 9733 (W.D. TENN. 1978).
<PAGE>
Goldman, Sachs & Co. 8 October 4, 1996
assignments. The fact of additional recourse was especially important.(6) The
additional promises and obligations reflected in the recourse redefined the
nature of the rental stream and rendered the transaction a loan secured by the
leases.
The Equipment will secure payment on the Notes to some extent because a
portion of the value of the Equipment is allocated to the Notes and Equity
Certificates in the event of a Lease Contract default. The Depositor will also
provide other recourse of significant value. Therefore, like the enhancements
in COULTER and WATTS, the Notes contain additional promises that redefine the
nature of the cash flows from the Contracts.
CONCLUSION
Based upon the foregoing analysis, the Notes constitute debt for federal
income tax purposes.
CHARACTERIZATION OF THE TRUST
As discussed above, the arrangement created by the Trust Agreement and
the Indenture will be characterized for federal income tax purposes as debt
secured by the Trust assets. It is our opinion that as long as the Depositor
is viewed as having all of the interests in the Trust (apart from the Notes),
the Trust Agreement and the Indenture will be viewed for federal
income tax purposes as a mere security device for the issuance of debt and
not as a trust. SEE Rev. Rul. 76-265, 1976-2 C.B. 448; Rev. Rul. 61-181,
1961-2 C.B. 21; SEE ALSO Treas. Reg. Section 1.61-13(b). CF. P.L.R. 8425002
(Feb. 22, 1984). Were the Trust not viewed as a mere security device, the
Trust would be viewed as a grantor trust because it would have a single owner
(I.E., the Depositor). Treas. Reg. Section 301.7701-4. Alternatively, if
any person in addition to the Depositor were viewed to hold an interest in
the Trust (other than the Notes), the Trust would be classified as a
partnership for federal income tax purposes, and not as a "publicly traded
partnership." Treas. Reg. Section 301.7701-2, Section 301.7701-4(c), Section
1. 7704-1 and Code Section 7704.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
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6 COULTER ELECTRONICS, SUPRA ("Continental's potential loss with respect to
any lease was limited by petitioner's contractual obligation to correct any
default on a lease or to reacquire any lease in which a default could not be
corrected."); SEE ALSO WATTS, SUPRA.
