<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1996
REGISTRATION NO. 333-08465
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
AMENDMENT NO. 3 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) A total of $1,034,871.59 has been previously paid and $25,473.24 is being
paid herewith.
----------------
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>
PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1996
$3,055,000,000 (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 is to be an indirect wholly owned subsidiary of AT&T Capital
Corporation ("TCC") following the consummation of the Merger, 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 property of the Owner Trust (collectively,
the "Trust Assets"), from the date of issuance of the Notes (the "Closing Date")
to the Transfer Date, will consist of the proceeds of the Notes, plus additional
cash, which will be held (and invested in certain Eligible Investments) in an
Escrow Account, and will be sufficient to redeem the Notes at the Special
Redemption Price on the Special Redemption Date if the Merger is not
consummated, and the Contracts and Equipment hereinafter described are not
transferred to the Owner Trust, on or before November 1, 1996. The cash in the
Escrow Account, 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 on the Transfer Date (which will be the Merger Consummation Date or a
date soon thereafter) 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") and the interest of the Depositor in
certain equipment related to such Contracts (the "Equipment"). 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 17 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
September , 1996.
(2) The Depositor 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
September , 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 SEPTEMBER , 1996
<PAGE>
(CONTINUED FROM PRECEDING PAGE)
The Owner Trust will also issue two classes of certificates of beneficial
interest, the Equipment Certificate and the Equity Certificates, which are not
being offered hereby. The Equipment Certificate will represent an undivided
interest in, and be payable solely from, the Equipment and certain amounts
derived from the sale or other disposition of the Equipment upon expiration or
termination (including an early termination or liquidation) of the related
Contracts and certain other amounts as described herein. Proceeds from the sale
or other disposition of the Equipment upon expiration or termination of the
related Contracts will not be available for payment of interest and principal on
the Notes, except under the limited circumstances described herein. 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 on the Equipment Certificate) liquidation of the Contracts and related
Equipment, 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 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 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 -- Special Redemption" and "-- 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, as the originator of the Owner Trust, has filed a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") on behalf of the Owner Trust 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.............................................................................................. 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 MERGER................................................................................................ 21
THE DEPOSITOR AND THE OWNER TRUST......................................................................... 23
The Depositor........................................................................................... 23
The Owner Trust......................................................................................... 23
Capitalization of the Owner Trust....................................................................... 25
The Owner Trustee....................................................................................... 25
AT&T CAPITAL CORPORATION.................................................................................. 25
THE ORIGINATORS........................................................................................... 26
AT&T Capital Leasing Services, Inc...................................................................... 26
AT&T Credit Corporation and NCR Credit Corp............................................................. 27
AT&T Commercial Finance Corporation..................................................................... 28
Underwriting and Servicing.............................................................................. 28
THE CONTRACTS............................................................................................. 32
Description of the Contracts............................................................................ 32
Representations and Warranties Made by TCC.............................................................. 35
Certain Statistics Relating to the Cut-Off Date Contract Pool........................................... 38
Certain Statistics Relating to Delinquencies and Defaults............................................... 42
DESCRIPTION OF THE NOTES.................................................................................. 45
General................................................................................................. 45
Distributions........................................................................................... 46
Class A Interest........................................................................................ 47
Class B Interest........................................................................................ 47
Principal............................................................................................... 47
Special Redemption of the Notes......................................................................... 49
Subordination of Class B Notes and Equity Certificates.................................................. 49
Cash Collateral Account................................................................................. 49
Liquidated Contracts.................................................................................... 50
Optional Purchase of Contracts.......................................................................... 51
Trust Accounts.......................................................................................... 51
Reports to Noteholders.................................................................................. 51
Book-Entry Registration................................................................................. 52
Definitive Notes........................................................................................ 55
Modification of Indenture Without Noteholder Consent.................................................... 56
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
Modification of Indenture With Noteholder Consent....................................................... 56
Events of Default; Rights Upon Event of Default......................................................... 57
Certain Covenants....................................................................................... 58
Annual Compliance Statement............................................................................. 59
Indenture Trustee's Annual Report....................................................................... 59
Satisfaction and Discharge of Indenture................................................................. 59
The Indenture Trustee................................................................................... 59
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENT....................................................... 60
Transfer and Assignment of Contracts and Equipment...................................................... 60
Collections on Contracts................................................................................ 60
Servicing............................................................................................... 62
Amendment............................................................................................... 64
Termination of the Transfer and Servicing Agreement..................................................... 64
CERTAIN LEGAL ASPECTS OF THE CONTRACTS.................................................................... 65
Enforcement of Security Interests in the Equipment...................................................... 65
Insolvency Matters...................................................................................... 66
UNITED STATES TAXATION.................................................................................... 67
Treatment of the Notes.................................................................................. 67
Treatment of the Owner Trust............................................................................ 67
Payments of Interest.................................................................................... 68
Original Issue Discount................................................................................. 68
Market Discount......................................................................................... 68
Amortizable Bond Premium................................................................................ 68
Sale, Exchange or Retirement of Notes................................................................... 69
Tax Consequences to United States Alien Holders......................................................... 69
Backup Withholding...................................................................................... 70
ERISA CONSIDERATIONS...................................................................................... 71
RATINGS OF THE NOTES...................................................................................... 72
USE OF PROCEEDS........................................................................................... 72
UNDERWRITING.............................................................................................. 73
LEGAL MATTERS............................................................................................. 75
ADDITIONAL INFORMATION.................................................................................... 75
INDEX OF PRINCIPAL TERMS.................................................................................. 76
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 pursuant to an Amended and Restated Trust
Agreement (the "Trust Agreement"), dated as of September
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 an indirect wholly owned subsidiary of AT&T
Capital Corporation ("TCC") following the consummation
of the Merger. The Depositor is expected to acquire the
Contracts and the Originators' interests in the related
Equipment on, or soon after, the Merger Consummation
Date pursuant to a Purchase and Sale Agreement (the
"Purchase Agreement"), dated as of September 1, 1996,
among the Depositor, TCC and the Originators, and will
thereupon transfer the Contracts and such interests in
the related Equipment (the date of such transfer being
herein referred to as the "Transfer Date") to the Owner
Trust pursuant to a Transfer and Servicing Agreement
(the "Transfer and Servicing Agreement"), dated as of
September 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 following
their transfer to the Owner Trust. 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. See "AT&T Capital Corporation."
INDENTURE TRUSTEE... The Chase Manhattan Bank, in its capacity as trustee
under an Indenture (the "Indenture"), dated as of
September 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 the Equity Certificates and the
Equipment Certificate (collectively, the "Certificates")
to the Depositor. The Certificates are not being offered
hereby. See "Equity Certificates" and "Equipment
Certificate" 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 equal one
month's interest (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 Monthly Principal
Amount. Principal payable on the Notes will be paid in
respect of principal on the Class A-1 Notes on each
Payment Date until the Class A-1 Principal Balance has
been
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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), discounted monthly
at the rate of 8.5% 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), discounted
monthly at the rate of 8.5% 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
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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; provided that, with respect to the first
Payment Date, the related Collection Period shall be the
period from the Cut-Off Date through October 31, 1996.
The "Initial Contract Pool Principal Balance" is an
amount equal to $3,182,091,856 (which amount is based
upon the Contract Pool Principal Balance determined as
of the Cut-Off Date, but discounting the applicable
Scheduled Payments with respect to Lease Contracts to
September 15, 1996, and including 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 September , 1996.
CUT-OFF DATE........ September 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 preceding such Payment Date (so
long as the Notes are held in
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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 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
Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Services ("S&P"), Fitch Investors
Service, L.P. ("Fitch") and Duff and Phelps Credit
Rating Co. ("Duff & Phelps" and, together with Moody's,
S&P and Fitch, the "Rating Agencies") (i) rate the Class
A Notes in its highest rating category, and (ii) rate
the Class B Notes at least "A2," "A," "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, as well as receipt
of the Special Redemption Price on the Special
Redemption Date, if applicable. 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..... If the Merger is consummated on or prior to November 1,
1996, 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. See "The Merger."
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THE MERGER.......... It is expected that TCC will be merged with Antigua
Acquisition Corporation, a wholly owned subsidiary of
Hercules Limited, on the Merger Consummation Date.
Following the Merger, the Depositor (which currently is
a wholly owned subsidiary of Antigua Acquisition
Corporation) will become an indirect wholly owned
subsidiary of TCC (which will be the surviving company
in the Merger).
On the Transfer Date (which will be the Merger
Consummation Date or a date soon thereafter), the
Depositor will transfer the Contracts, its interest in
the Equipment and the other Trust Assets to the Owner
Trust, and the proceeds of the Escrow Account (which
will include the proceeds of the sale of the Notes) will
be released to, or upon the order of, the Depositor. See
"Use of Proceeds" above. Consummation of the Merger is
subject to certain regulatory approvals and other
preconditions. See "The Merger."
MERGER CONSUMMATION
DATE............... The date on which the Merger is consummated, currently
anticipated to be October 1, 1996.
SPECIAL
REDEMPTION......... If the Merger is not consummated, and the Contracts,
Equipment and other Trust Assets are not transferred to
the Owner Trust, on or prior to November 1, 1996, all of
the Notes will be redeemed and paid in full on November
4, 1996, or on such earlier date as the Depositor may
elect upon giving the Indenture Trustee written notice
thereof at least five Business Days prior to such date
(the "Special Redemption Date"), at a redemption price
(the "Special Redemption Price") which is equal to (i)
in respect of any Class of Notes, the initial offering
price of such Class of Notes as shown on the cover page
of this Prospectus, plus (ii) interest on such offering
price, from (and including) the Closing Date to (but
excluding) such Special Redemption Date, at the rate of
10% per annum (calculated on the basis of a 360-day year
comprised of twelve 30-day months). The Special
Redemption Price in respect of the Notes will be paid
from the amounts on deposit in the Escrow Account as
described under "Trust Assets" below, which amounts will
be sufficient (without regard to any proceeds of the
investment thereof) to so pay such Special Redemption
Price on the Special Redemption Date. A public notice of
the Special Redemption, if any, will be provided by
publication in Luxembourg. See "Description of the Notes
-- Special Redemption of the Notes."
TRUST ASSETS........ From the Closing Date until the Transfer Date, the Trust
Assets will consist solely of the proceeds of the Notes,
plus additional cash, which will be deposited and held
(and invested in certain Eligible Investments at the
direction of the Depositor) in the Escrow Account
maintained by the Indenture Trustee pursuant to the
Indenture until (i) applied by the Indenture Trustee to
the special redemption of the Notes as described under
"Special Redemption" above, or (ii) paid over to the
Depositor and used
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as described under "Use of Proceeds" above. See
"Description of the Notes -- Special Redemption of the
Notes."
The Trust Assets, from and after the Transfer Date, 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 the right
to receive all Scheduled Payments and Prepayments
received thereon from and 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);
(ii) the interest of the Depositor in the equipment
subject to such Contracts (the "Equipment"), which
interest is either an ownership interest or a security
interest;
(iii) 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
(iv) certain other property and assets as herein
described.
A portion of 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 and related Equipment 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
during the current Collection Period ("Current
Collection Period Pledged Revenues"), plus (b) amounts
permitted to be withdrawn therefor from the Cash
Collateral Account, as described under "Cash Collateral
Account" below.
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"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 the related Contract will not constitute Pledged
Revenues but will be allocated to the Equipment
Certificate;
(iii) any amounts paid by TCC to purchase Contracts
and the related Equipment due to a breach of
representations and warranties with respect thereto as
described under "Mandatory Purchase of Certain
Contracts" below or by the Depositor to purchase the
Contracts and the related Equipment as described under
"Optional Purchase of Contracts" below, in each case
excluding those portions thereof allocable to the
Equipment Certificate;
(iv) certain of the proceeds derived from the
liquidation of the Contracts and the related
Equipment, as described under "Liquidated Contracts"
below; and
(v) any earnings on the investment of amounts
credited to the Collection Account.
ORIGINATORS......... The Contracts that are expected to be included in the
Trust Assets on and after the Transfer Date have been
originated or, in some cases, acquired by four wholly
owned 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."
THE CONTRACTS....... The aggregate of the Contracts and the related Equipment
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." The Depositor has prepared certain
statistics relating to the pool of Contracts which
constitute the Cut-Off Date Contract Pool.
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As of the Cut-Off Date, the 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
$3,182,091,856;
(ii) there were 281,895 Contracts;
(iii) the average Contract Principal Balance was
approximately $11,288;
(iv) of such Contracts, approximately 79.8% were true
leases (defined for this purpose as a Contract under
which the Obligor has a right to purchase the related
Equipment only upon payment of the fair market value
thereof) and approximately 20.2% were other types of
Contracts (as described under "The Contracts");
(v) approximately 39.8% 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 13.1% of the
Contracts were located in California; approximately
10.6% were located in New Jersey; approximately 9.7%
were located in New York; approximately 6.7% were
located in Florida; approximately 5.8% were located in
Texas; and no other state represented more than 5.0%
of the Contracts;
(vii) approximately 90.6% of the Contracts had been
originated by the Originators, with the remaining 9.4%
of the Contracts having been originated by third
parties and purchased by an Originator;
(viii) the remaining term of the Contracts as of the
Cut-Off Date ranged from 1 month to 96 months; and
(ix) the weighted average remaining term of the
Contracts was approximately 38.5 months and the
weighted average age of the Contracts was
approximately 17.5 months. See "The
Contracts -- Certain Statistics Relating to the
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 warranty that materially and
adversely affects the value of such Contract. See
"Mandatory Purchase of Certain Contracts" below.
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
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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). Under the Transfer and Servicing
Agreement, the Servicer will be permitted to allow
Prepayments of any of the Lease Contracts 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 3.9% 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 Contract which
exceeds the Required Payoff Amount for such Contract.
LIQUIDATED
CONTRACTS.......... Liquidation Proceeds received with respect to the
liquidation of a Contract and the related Equipment
(which will be reduced by 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 Notes
and the Equity Certificates; and
(ii) with respect to any Lease Contract, such
Liquidation Proceeds will be allocated on a pro rata
basis between the Equipment Certificate, on the one
hand, and the Notes and the Equity Certificates, on
the other, based respectively on (a) the "Book Value"
of the Equipment (which is an amount equal to the
value of the Equipment as shown on the accounting
books and records of TCC or the applicable Originator,
as appropriate) and (b) the Required Payoff Amount for
such Lease Contract; provided that, in the event the
Liquidation Proceeds in respect of any Lease Contract
exceed the sum of the Required Payoff Amount for such
Contract and the Book Value of the related Equipment,
any such excess shall be allocated solely to the
Equipment Certificate.
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All Liquidation Proceeds which are so allocable to the
Notes and the Equity Certificates 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, an amount equal
to $ ), 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."
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 the related Equipment, at a
price equal to (i) the Required Payoff Amount, plus (ii)
the Book Value of the related Equipment (which Book
Value amount will be allocated to the Equipment
Certificate), 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 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 "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, %
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of the Monthly Principal Amount will be payable on the
Equity Certificates on each Payment Date until the
aggregate amount so paid equals $ (which is 1% of
the Initial Contract Pool Principal Balance).
EQUIPMENT
CERTIFICATE........ The Owner Trust will issue the Equipment Certificate,
representing a beneficial ownership interest in the
Owner Trust, to the Depositor. The Equipment Certificate
will be retained by the Depositor and will represent an
undivided interest in:
(i) all related Equipment or the proceeds thereof upon
the expiration of the initial term of any Lease
Contracts;
(ii) 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 Equipment;
(iii) a portion of the Liquidation Proceeds derived from
the liquidation of any Lease Contract and the related
Equipment (as described under "Liquidated Contracts"
above); and
(iv) that portion of the purchase price allocable to the
Equipment Certificate (a) paid by TCC to purchase any
Lease Contract and the related Equipment due to a
breach of any of TCC's representations and warranties
with respect thereto (as described under "Mandatory
Purchase of Certain Contracts" above), or (b) paid by
the Depositor pursuant to its option to repurchase all
of the outstanding Contracts and the related Equipment
(as described under "Optional Purchase of Contracts"
below).
Amounts payable in respect of the Equipment Certificate
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 Transfer Date and will thereafter be
available to the Indenture Trustee. The Cash Collateral
Account will initially be
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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
(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."
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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;
(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 and the
related Equipment 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, plus the Book
Value of the Equipment. The proceeds of such purchase
shall be applied on such Payment Date (i) as to such
proceeds in an amount necessary to pay the principal of
and interest on the Notes and the Equity Certificates,
to the payment of the
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remaining principal balance of the Notes and the Equity
Certificates, together with one month's interest
thereon, and (ii) as to the balance of such proceeds, to
the payment of amounts on the Equipment Certificate.
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 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. The Depositor believes 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."
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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 but
not any payments constituting proceeds from the disposition of Equipment (except
in the case of a Liquidated Contract), which amounts will be paid solely to the
holder of the Equipment Certificate. Moreover, from and after the Transfer Date,
the Owner Trust will have no assets other than the Contracts, the Equipment,
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 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 trustee in bankruptcy would be unable to successfully challenge the
transfer of the Contracts and the Equipment to the Depositor or the Owner Trust
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 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
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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, the Owner Trust and the Indenture Trustee in the Equipment will be
filed against the Originators. Even if such Contracts were not so rejected, 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.
If any of the Originators or TCC were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy or TCC itself were to request a
bankruptcy court to order that the Depositor be substantively consolidated with
TCC, delays in and reductions in the amount of distributions to Noteholders
could occur. However, the Depositor has taken steps in structuring the
transactions described herein that are intended to prevent the voluntary or
involuntary application for relief by TCC under any Insolvency Law from
resulting in the consolidation of the assets and liabilities of the Depositor
with those of TCC. 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, 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 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
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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 and the related Equipment at a price equal to (i) the
Required Payoff Amount of such Contract, plus (ii) the Book Value of such
Equipment. 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.
From and after the Merger Consummation Date, substantially all of the equity
capital of TCC will be owned by HoldCo., and the capitalization of TCC will
differ from the capitalization of TCC prior to the Merger. See "The Merger."
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 and the related Equipment 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 and related
Equipment (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 3.9% 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 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.
If the Merger is not consummated (see "The Merger"), and the Contracts,
Equipment and other Trust Assets are not transferred to the Owner Trust, on or
prior to November 1, 1996, all of the Notes will be redeemed on the Special
Redemption Date at a price equal to the Special Redemption Price. While the
Depositor has no reason to believe that the regulatory approvals which are a
precondition to the
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consummation of the Merger will not be obtained on or prior to its scheduled
date (October 1, 1996) or that any of the other conditions will not be
satisfied, there can be no assurances that the Merger will in fact be
consummated by November 1, 1996.
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 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 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
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.
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 by the
Depositor to the Owner Trust and the pledge 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 otherwise marked to
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reflect that such Contracts and Equipment 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) the 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 the Contracts, or a security interest, which would be senior to the security
interest held by the Owner Trust.
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 MERGER
On June 5, 1996, Antigua Acquisition Corporation, a newly formed Delaware
corporation ("MergerCo."), executed an Agreement and Plan of Merger (as amended,
the "Merger Agreement") with Hercules Limited, a newly formed Cayman Islands
corporation ("HoldCo."), TCC and AT&T Corp. ("AT&T"), which provides for the
merger (the "Merger") of MergerCo. with and into TCC and pursuant to which each
outstanding share of common stock, par value $0.01 per share ("Common Stock"),
of TCC (other than shares owned by TCC, HoldCo., MergerCo., or their respective
wholly owned subsidiaries or by any stockholders properly exercising their
appraisal rights under Delaware law ("Excluded Shares")) will be converted into
the right to receive $45 in cash per share (the "Merger Consideration"). In
addition, pursuant to the terms of the Merger Agreement, each outstanding option
on shares of Common Stock (the "Options"), other than those management options
(the "Management Options") held by certain
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members of management of TCC (the "Management Offerees") which may be exchanged
for new options to purchase common stock of the surviving corporation, will be
canceled upon consummation of the Merger in exchange for cash in an amount equal
to the excess of the Merger Consideration over the Option exercise price per
share. The Merger is subject to certain regulatory approvals and other
conditions precedent (set out below). Upon consummation of the Merger, the
current stockholders of TCC will cease to be stockholders of TCC, except that
the Management Offerees will be offered the opportunity to maintain all or a
portion of their current equity investment in TCC and may be granted new options
for common stock of the surviving corporation. All of the outstanding equity
capital of MergerCo. will, save for the Management Offerees, be owned by HoldCo.
All of the outstanding equity capital of HoldCo. is owned by a group of
companies led by GRS Holding Company Limited. The Depositor is a wholly owned
subsidiary of MergerCo. and will, upon consummation of the Merger, be an
indirect wholly owned subsidiary of TCC (see "The Depositor and the Owner Trust
- -- The Depositor").
Under the Merger Agreement, the respective obligations of HoldCo.,
MergerCo., AT&T and TCC to consummate the Merger are subject to the fulfillment
or waiver, where permissible, of the following conditions at or prior to October
1, 1996: (i) the expiration or termination of the waiting period applicable to
the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended; (ii) the receipt of all required consents, registrations, approvals,
permits and authorizations in full force and effect; and (iii) no court or
governmental entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order that is in effect and restrains, enjoins or
otherwise prohibits consummation of the Merger Agreement.
The obligation of HoldCo. to consummate the Merger is further conditioned
on: (i) the truth and accuracy in all material respects of the representations
and warranties made by TCC and AT&T in the Merger Agreement; (ii) the
performance in all material respects of all obligations of TCC and AT&T under
the Merger Agreement; (iii) the receipt by TCC and AT&T of the consent or
approval of each person whose consent or approval is required, except for those
for which the failure to obtain such consent or approval is not reasonably
likely to have a material adverse effect on TCC; (iv) the receipt by HoldCo. of
the resignations of each director of TCC; and (v) AT&T and TCC having entered
into a transitional services agreement.
The obligations of TCC and AT&T to consummate the Merger are further
conditioned on: (i) the truth and accuracy in all material respects of the
representations and warranties made by HoldCo. and MergerCo.; (ii) the
performance in all material respects of all obligations of HoldCo. and
MergerCo.; and (iii) the receipt by HoldCo. of the consent or approval of each
person whose consent or approval is required, except for those consents for
which the failure to obtain such consent or approval is not reasonably likely to
have a material adverse effect on the ability of HoldCo. or MergerCo. to
consummate the Merger. HoldCo. has received an unconditional and irrevocable
undertaking from Nomura International plc to underwrite an international capital
markets issue on behalf of HoldCo. to satisfy its obligations under the Merger
Agreement.
HoldCo. may, at its option, choose to postpone the closing of the Merger to
a date no later than October 31, 1996, even if all of the conditions to closing
are satisfied or waived prior to such date. If HoldCo. exercises such option,
interest will be payable on the $45 per share purchase price at a rate of LIBOR
plus 0.5% for the period from and including September 18, 1996 through but
excluding the closing date of the Merger.
The consummation of the Merger is currently scheduled for October 1, 1996.
It is currently anticipated that all regulatory approvals will be obtained on or
around October 1, 1996. If the Merger is not consummated, and the Contracts,
Equipment and other Trust Assets are not transferred to the Owner Trust, on or
prior to November 1, 1996, all of the Notes will be redeemed and prepaid on the
Special Redemption Date as described under "Description of the Notes -- Special
Redemption of the Notes."
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<PAGE>
THE DEPOSITOR AND THE OWNER TRUST
THE DEPOSITOR
Antigua Funding Corporation is incorporated under the laws of the State of
Delaware. Prior to the Merger Consummation Date, all of the equity capital of
the Depositor will be owned by MergerCo. All of the initial equity capital of
MergerCo. will be owned by HoldCo. See "The Merger." On the Merger Consummation
Date, MergerCo. and TCC will merge, the corporate entity resulting from, and
surviving, such merger will be TCC, and the Depositor will thereafter become an
indirect wholly owned subsidiary of TCC. On the Transfer Date (expected to be on
or shortly after the Merger Consummation 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 consideration for which the Depositor shall 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 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
such Contracts and interests in the Equipment to the Owner Trust, (iii)
executing and performing its obligations under the Trust Agreement, the Purchase
Agreement, and the Transfer and Servicing Agreement, (iv) holding or
transferring the Equity Certificates and the Equipment Certificate, (v) 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 (vi) 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 OWNER TRUST
The Owner Trust has been created pursuant to the Trust Agreement. Prior to
the Closing Date, the Owner Trust will have no assets, property or obligations.
From the Closing Date to the Transfer Date, the assets of the Owner Trust (the
"Trust Assets") will consist solely of the proceeds of the Notes, plus
additional cash, which will be deposited and held (and invested in certain
Eligible Investments at the direction of the Depositor) in the Escrow Account
maintained by the Indenture Trustee pursuant to the Indenture until (i) applied
by the Indenture Trustee to the special redemption of the Notes as described
under "Description of the Notes -- Special Redemption of the Notes," or (ii)
paid over to the Depositor and used to acquire the Contracts, the Originators'
interests in the related Equipment and the other property described below.
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 until the aggregate amount so paid equals
$ (which is 1% of the Initial Contract Pool Principal Balance).
The Owner Trust will also issue the Equipment Certificate, representing a
beneficial ownership interest in the Owner Trust, to the Depositor. The
Equipment Certificate will be retained by the Depositor and will represent an
undivided interest in:
(i) all related Equipment or the proceeds thereof upon the expiration of
the initial term of any Lease Contracts;
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<PAGE>
(ii)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 Equipment;
(iii)
a portion of the Liquidation Proceeds derived from the liquidation of
any Lease Contract and the related Equipment (as described under
"Description of the Notes -- Liquidated Contracts"); and
(iv)that portion of the purchase price allocable to the Equipment
Certificate (a) paid by TCC to purchase any Lease Contract and the
related Equipment due to a breach of any of TCC's representations and
warranties with respect thereto (as described under "The Contracts --
Representations and Warranties Made by TCC"), or (b) paid by the Depositor
pursuant to its option to repurchase all of the outstanding Contracts and
the related Equipment (as described under "Description of the Notes --
Optional Purchase of Contracts").
Amounts payable in respect of the Equipment Certificate are not available to
pay, and will not provide security for the payment of, interest or principal on
the Notes or the Equity Certificates.
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 (each with effect from the
Transfer Date). On the Transfer Date, the Depositor will, pursuant to the
Transfer and Servicing Agreement, transfer and convey to the Owner Trust all of
the Contracts and the Depositor's interest in the Equipment related thereto in
consideration for (i) all amounts at the time on deposit in the Escrow Account
(including any investment earnings thereon), less that portion thereof to be
used to fund a portion of the Cash Collateral Account, and (ii) the proceeds
derived by the Depositor from the transfer of the Equity Certificates. If for
any reason, the Transfer Date does not occur on or prior to November 1, 1996,
then the Notes will be redeemed at the Special Redemption Price on the Special
Redemption Date.
From and after the Transfer 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, without limitation, all monies at
any time paid or payable thereon or in respect thereof from and after the
Cut-Off Date (whether in the form of (i) Scheduled Payments (including those
Scheduled Payments due prior to, but not received as of, the Cut-Off Date, but
excluding those Scheduled Payments due on or after, but received prior to, the
Cut-Off Date), (ii) Prepayments, (iii) payments made after the original term of
such Contracts, (iv) payments to be applied by the Servicer to the payment of
insurance premiums, maintenance, taxes or other similar obligations, (v)
payments to be retained by the Servicer in payment of Administrative Fees, or
otherwise), all rights of the lessor or the secured party, as the case may be,
in any insurance policies and any other security for the payment of amounts due
under the Contracts, all items contained in the related Contract Files, any and
all other documents that are kept on file in accordance with the applicable
Originator's customary procedures relating to the Contracts, and all proceeds of
the foregoing;
(2) the interest of the Depositor in the equipment subject to each such
Contract (the "Equipment"), which interest is either an ownership interest or a
security interest;
(3) 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;
(4) the Depositor's rights under the Purchase Agreement; and
(5) the Depositor's rights (but not its obligations) with respect to the
Cash Collateral Account.
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The Owner Trust will not engage in any business activity other than (i)
issuing the Notes and the Certificates, (ii) holding and dealing with (including
disposing of) the Trust Assets, (iii) making payments on the Notes and the
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............................................. $
Equipment Certificate........................................... $
---------
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 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
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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 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 14% of TCC's common stock
in an initial public offering. TCC's common stock has traded on the New York
Stock Exchange under the symbol "TCC." While it is anticipated that TCC's common
stock will be delisted upon the consummation of the Merger (see "The Merger"),
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. See "The Merger."
TCC has an experienced management team; its six executive officers have been
in management positions with TCC for an average of 10 years and, on a combined
basis, have more than 100 years experience 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.
The Contracts comprising the Trust Assets have been originated or, in some
cases, purchased from third parties by four wholly owned 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 wholly owned subsidiary of a predecessor of TCC in connection with
TCC's reorganization in March 1990. It thereafter became a wholly owned
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.
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<PAGE>
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 wholly owned 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.
Substantially all of Credit Corp.'s transactions are generated through
Lucent and NCR, which currently are subsidiaries 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.
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<PAGE>
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
1990 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 39% 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.
CFC's retail 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 $67,000. The ten largest end user customers comprised
21% of the aggregate portfolio. In terms of geographical distribution, five
states accounted for approximately 32% of the outstanding 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.
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<PAGE>
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.
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
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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 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
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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 techniques in the analysis and oversight of its
portfolio. For that portion of the portfolio assets consisting of transactions
under $25,000, roll rate analysis (a type of portfolio analysis examining the
rate at which accounts in various stages of delinquency become, or "roll" into,
losses) and 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)) are used together with other types of analyses (such as
historical experience and various industry indices) in evaluating the
performance of TCC's portfolio.
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.
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.
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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.
THE CONTRACTS
DESCRIPTION OF THE CONTRACTS
GENERAL
The Contracts, as of the Cut-Off Date, consist of Lease Contracts (96.1% by
Initial Contract Pool Principal Balance) and Loan Contracts (3.9% 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 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.
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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.
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.
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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 Transfer 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 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.
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PREPAYMENTS AND EARLY TERMINATION
None of the Lease Contracts permit the prepayment or early termination of
the Lease (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). Notwithstanding that fact, the Servicer is
permitted under the Transfer and Servicing Agreement to accept prepayments of
the Lease Contracts 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 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 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
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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 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 thereto and was the sole owner thereof, free of any
Lien created by the applicable Originator;
(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;
(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 or the transfer and conveyance from the Depositor to the Owner Trust
under the Transfer and Servicing Agreement is 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 will 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 the Obligor's software
license or maintenance contract for leased Equipment, which Contracts, in
proportion to the 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 (the
"Computer Tape") 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 Transfer Date, the portions of the electronic master record of TCC
and each Originator (the "Electronic Ledger") 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;
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(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
Transfer Date, and (iii) 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 Transfer 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;
(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 Lessee 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)Each Loan Contract permits the prepayment of the amount due thereunder,
at the option of the Obligor, but any 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
Depositor'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;
37
<PAGE>
(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, but will speak only as of the Cut-Off Date.
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 from
the Owner Trust. 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 plus the Book Value (if any)
of the related Equipment. 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 Agreement, TCC will indemnify
the Indenture Trustee, the Owner Trustee, the Owner Trust, the Noteholders and
the 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 the related Equipment), the
Indenture Trustee will release its liens thereon and the Owner Trust will convey
such Contract and the related Equipment to TCC.
CERTAIN STATISTICS RELATING TO THE CUT-OFF DATE CONTRACT POOL
GENERAL
The Depositor has prepared certain statistics relating to the Cut-Off Date
Contract Pool. The Initial Contract Pool Principal Balance is an amount equal to
$3,182,091,856 (which amount is based upon the Contract Pool Principal Balance
determined as of the Cut-Off Date, but discounting the applicable Scheduled
Payments with respect to Lease Contracts to September 15, 1996, and including 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 281,895. The average Contract Pool Principal Balance of
the Contracts, as of the Cut-Off Date, was approximately $11,288. Within the
Cut-Off Date Contract Pool, 90.6% of the Contracts (by Initial Contract Pool
Principal Balance) were originated by the Originators (or by other affiliates of
TCC) and 9.4% of such Contracts (by Initial Contract Pool Principal Balance)
were purchased by the Originators (or by other affiliates of TCC) from unrelated
third parties.
38
<PAGE>
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>
281,895 $3,182,091,856 56 months 38.5 months $11,288
(6 months to 165 months) (1 month to 96 months) ($23 to $12,858,955)
</TABLE>
TYPE OF CONTRACTS
The following table shows the distribution of the Cut-Off Date Contract Pool
between true leases (defined for purposes of this table as a Contract under
which the Obligor has a right to purchase the related Equipment only upon
payment of the fair market value thereof) and all other Contracts (comprising
both Loan Contracts and Lease Contracts with fixed price or nominal purchase
options) 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>
True Leases..................................... 218,934 77.67% $ 2,539,771,995 79.81%
All Other Contracts............................. 62,961 22.33 642,319,861 20.19
----------- ------------ ------------------ -------
Total..................................... 281,895 100.00% $ 3,182,091,856 100.00%
----------- ------------ ------------------ -------
----------- ------------ ------------------ -------
</TABLE>
39
<PAGE>
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............... 3,009 1.07% $ 36,282,593 1.14%
Alaska................ 307 0.11 2,416,132 0.08
Arizona............... 4,698 1.67 53,447,750 1.68
Arkansas.............. 1,291 0.46 13,060,355 0.41
California............ 37,310 13.24 417,515,068 13.12
Colorado.............. 5,746 2.04 51,394,304 1.62
Connecticut........... 4,255 1.51 50,701,830 1.59
Delaware.............. 796 0.28 6,500,480 0.20
District of
Columbia.............. 1,647 0.58 16,868,072 0.53
Florida............... 19,635 6.97 214,646,134 6.75
Georgia............... 8,769 3.11 101,647,461 3.19
Hawaii................ 425 0.15 4,412,970 0.14
Idaho................. 928 0.33 8,558,522 0.27
Illinois.............. 13,383 4.75 131,300,312 4.13
Indiana............... 3,970 1.41 39,391,796 1.24
Iowa.................. 1,694 0.60 22,310,355 0.70
Kansas................ 1,458 0.52 18,500,157 0.58
Kentucky.............. 2,145 0.76 21,048,099 0.66
Louisiana............. 90 0.03 731,325 0.02
Maine................. 47 0.02 585,795 0.02
Maryland.............. 5,165 1.83 55,725,507 1.75
Massachusetts......... 12,462 4.42 135,804,328 4.27
Michigan.............. 10,175 3.61 102,323,679 3.22
Minnesota............. 3,875 1.37 45,438,461 1.43
Mississippi........... 1,547 0.55 13,989,798 0.44
Missouri.............. 3,579 1.27 45,722,085 1.44
Montana............... 548 0.19 4,407,030 0.14
Nebraska.............. 763 0.27 7,912,108 0.25
Nevada................ 1,546 0.55 16,272,286 0.51
New Hampshire......... 1,918 0.68 20,233,809 0.64
New Jersey............ 19,983 7.09 337,826,712 10.62
New Mexico............ 1,391 0.49 11,402,224 0.36
New York.............. 25,583 9.08 309,217,371 9.72
North Carolina........ 6,930 2.46 70,709,859 2.22
North Dakota.......... 221 0.08 1,612,075 0.05
Ohio.................. 9,577 3.40 99,877,059 3.14
Oklahoma.............. 1,889 0.67 24,876,958 0.78
Oregon................ 3,276 1.16 31,072,841 0.98
Pennsylvania.......... 12,324 4.37 115,539,711 3.63
Puerto Rico........... 1 * 1,053 *
Rhode Island.......... 1,429 0.51 15,546,958 0.49
South Carolina........ 3,027 1.07 34,826,640 1.09
South Dakota.......... 337 0.12 10,038,948 0.32
Tennessee............. 4,705 1.67 50,367,688 1.58
Texas................. 17,722 6.29 184,806,573 5.81
Utah.................. 2,020 0.72 28,183,530 0.89
Vermont............... 704 0.25 6,290,270 0.20
Virginia.............. 6,531 2.32 60,048,213 1.89
Washington............ 6,261 2.22 59,345,803 1.86
West Virginia......... 1,151 0.41 9,465,597 0.30
Wisconsin............. 3,273 1.16 59,438,320 1.87
Wyoming............... 379 0.13 2,448,852 0.08
-------- ------- ------------------- -------
Total................. 281,895 100.00% $ 3,182,091,856 100.00%
-------- ------- ------------------- -------
-------- ------- ------------------- -------
</TABLE>
- ------------------------------
* Indicates an amount greater than zero but less than 0.005% of the total number
of Contracts or the Initial Contract Pool Principal Balance, as applicable.
40
<PAGE>
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.
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
CONTRACT POOL
% OF TOTAL AGGREGATE CONTRACT PRINCIPAL
PAYMENT STATUS NUMBER OF CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE BALANCE
- -------------------------------- --------------------- --------------------- ------------------ --------------
<S> <C> <C> <C> <C>
Current......................... 272,692 96.74% $ 3,062,586,846 96.24%
30-60 Days Delinquent........... 9,203 3.26 119,505,010 3.76
-------- ------- ------------------ -------
Total..................... 281,895 100.0% $ 3,182,091,856 100.0%
-------- ------- ------------------ -------
-------- ------- ------------------ -------
</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.............. 124,709 44.24% $ 1,267,259,623 39.82%
Manufacturing and
Construction................... 41,820 14.84 731,052,306 22.97
Computers and Point-of-Sale..... 65,488 23.23 599,487,174 18.84
General Office.................. 33,130 11.75 299,712,774 9.42
Medical......................... 9,123 3.24 160,456,770 5.04
Printing........................ 7,599 2.70 122,628,258 3.85
Other........................... 26 0.01 1,494,951 0.05
-------- ------- ------------------ -------
Total..................... 281,895 100.00% $ 3,182,091,856 100.00%
-------- ------- ------------------ -------
-------- ------- ------------------ -------
</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
CONTRACT POOL
NUMBER OF % OF TOTAL AGGREGATE CONTRACT PRINCIPAL
CONTRACT PRINCIPAL BALANCE CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE BALANCE
- ---------------------------------------- ----------- --------------------- ------------------- --------------
<S> <C> <C> <C> <C>
$ 0 to $ 5,000.00.............. 167,945 59.58% $ 336,434,783 10.57%
$ 5,000.01 to $ 25,000.00............. 88,903 31.54 973,298,209 30.59
$ 25,000.01 to $ 50,000.00............. 14,443 5.12 501,141,334 15.75
$ 50,000.01 to $ 100,000.00............. 6,906 2.45 473,855,550 14.89
$100,000.01 to $ 500,000.00............. 3,406 1.21 581,918,394 18.29
$500,000.01 to $1,000,000.00............ 207 0.07 143,201,325 4.50
Over $1,000,000.00...................... 85 0.03 172,242,261 5.41
----------- ------- ------------------- -------
Total............................. 281,895 100.00% $ 3,182,091,856 100.00%
----------- ------- ------------------- -------
----------- ------- ------------------- -------
</TABLE>
41
<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>
% OF INITIAL
NUMBER CONTRACT POOL
OF % OF TOTAL AGGREGATE CONTRACT PRINCIPAL
REMAINING TERM OF CONTRACTS CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE BALANCE
- ---------------------------------------- ----------- --------------------- ------------------- --------------
<S> <C> <C> <C> <C>
One Month to 12 Months.................. 67,682 24.01% $ 171,103,536 5.38%
13 Months to 24 Months.................. 75,317 26.72 520,288,768 16.35
25 Months to 36 Months.................. 69,003 24.48 766,080,712 24.07
37 Months to 48 Months.................. 39,520 14.02 759,235,929 23.86
49 Months to 60 Months.................. 28,941 10.27 818,908,200 25.73
Over 60 Months.......................... 1,432 0.51 146,474,711 4.60
----------- ------- ------------------- -------
Total............................. 281,895 100.00% $ 3,182,091,856 100.00%
----------- ------- ------------------- -------
----------- ------- ------------------- -------
</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 2.75% 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
CONTRACT POOL
% OF TOTAL AGGREGATE CONTRACT PRINCIPAL
TYPE OF OBLIGOR NUMBER OF CONTRACTS NUMBER OF CONTRACTS PRINCIPAL BALANCE BALANCE
- ------------------------------ --------------------- --------------------- ------------------- --------------
<S> <C> <C> <C> <C>
Service Organizations......... 142,052 50.39% $ 1,326,132,035 41.67%
Manufacturing and
Construction................. 40,001 14.19 767,195,820 24.11
Retail and Wholesale Trade.... 37,916 13.45 409,669,907 12.87
Other......................... 14,290 5.07 203,124,215 6.38
Financial Services............ 15,106 5.36 189,663,310 5.96
Professionals................. 19,221 6.82 111,188,281 3.49
Printing and Copy Centers..... 6,107 2.17 89,413,385 2.81
Medical....................... 7,202 2.55 85,704,903 2.69
-------- ------- ------------------- -------
Total................... 281,895 100.00% $ 3,182,091,856 100.00%
-------- ------- ------------------- -------
-------- ------- ------------------- -------
</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
42
<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
43
<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.
44
<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 two classes of certificates of beneficial
interest, the Equipment Certificate and the Equity Certificate, which are not
being offered hereby. The Equipment Certificate will represent an undivided
interest in, and be payable solely from, the Equipment and certain amounts
derived from the sale or other disposition of the Equipment upon expiration or
termination (including an early termination or liquidation) of the related
Contracts and certain other amounts as described herein. Amounts payable on the
Equipment Certificate will not be available for payment of interest and
principal on the Notes. 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
45
<PAGE>
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."
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 and
related Equipment 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 during the current Collection Period ("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 the related Contract will not constitute Pledged
Revenues but will be allocated to the Equipment Certificate; (iii) any amounts
paid by TCC to purchase Contracts and the related Equipment due to a breach of
representations and warranties with respect thereto, as described under "The
Contracts -- Representations and Warranties Made by TCC," or by the Depositor to
purchase the Contracts and the related Equipment, as described under "--
Optional Purchase of Contracts" below, in each case excluding those portions
thereof allocable to the Equipment Certificate, (iv) certain of the proceeds
derived from the liquidation of the Contracts and the related Equipment, as
described under "-- Liquidated Contracts" below; and (v) 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);
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(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 will be paid in respect of the Class A Notes on
each Payment Date until
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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 of the Class A-3 Notes until the
Class A-3 Principal Balance has been reduced to zero, then in respect of
principal of 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) discounted monthly at
the rate of 8.5% 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), discounted monthly at the rate of 8.5% 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; provided that, with
respect to the first Payment Date, the related Collection Period shall be the
period from the Cut-Off Date through October 31, 1996.
The "Initial Contract Pool Principal Balance" is an amount equal to
$3,182,091,856 (which amount is based upon the Contract Pool Principal Balance
determined as of the Cut-Off Date, but discounting the applicable Scheduled
Payments with respect to Lease Contracts to September 15, 1996, and including 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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SPECIAL REDEMPTION OF THE NOTES
If the Merger is not consummated, and the Contracts, Equipment and other
Trust Assets are not transferred to the Owner Trust, on or prior to November 1,
1996, all of the Notes will be redeemed and paid in full on November 4, 1996, or
on such earlier date as the Depositor may elect upon giving the Indenture
Trustee written notice thereof at least five Business Days prior to such date
(the "Special Redemption Date"), at a redemption price (the "Special Redemption
Price") which is equal to (i) in respect of any Class of Notes, the initial
offering price of such Class of Notes as shown on the cover page of this
Prospectus plus (ii) interest on such initial offering price from (and
including) the Closing Date to (but excluding) the Special Redemption Date, at
the rate of 10% per annum (calculated on the basis of a 360-day year comprised
of twelve 30-day months). The Special Redemption Price in respect of the Notes
will be paid from the amounts on deposit in the Escrow Account as described
under "The Depositor and the Owner Trust -- The Owner Trust," which amounts will
be sufficient (without regard to any proceeds of the investment thereof) to so
pay the Special Redemption Price on the Special Redemption Date.
If the Merger is consummated on or prior to November 1, 1996, the Contracts,
the Depositor's interest in the related Equipment and the other Trust Assets
will be transferred by the Depositor to the Owner Trust on the Transfer Date
(which shall be the Merger Consummation Date or a date soon thereafter) and the
amounts on deposit in the Escrow Account will be applied as described under "Use
of Proceeds."
In the event of a Special Redemption, for so long as the Notes are listed on
the Luxembourg Stock Exchange, the Servicer shall provide public notice of such
redemption in Luxembourg by publication in a newspaper of general publication in
Luxembourg, expected to be the "Luxemburger Wort," as soon as practicable
following the Special Redemption Date but in no event more than five Business
Days thereafter.
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 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 Transfer
Date and will thereafter 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
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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 Notes
and the Equity Certificates (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 Date, and (b) $ (which is % of the Initial Contract Pool
Principal Balance). 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 received with respect to the liquidation of a Contract
and the related Equipment (which will be reduced by 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 Notes and the
Equity Certificates; and (ii) with respect to any Lease Contract, such
Liquidation Proceeds will be allocated on a pro rata basis between the Equipment
Certificate, on the one hand, and the Notes and the Equity Certificates, on the
other, based respectively on (a) the "Book Value" of the Equipment (which is an
amount equal to the value of the Equipment as shown on the accounting books and
records of TCC or the applicable Originator, as appropriate) and (b) the
Required Payoff Amount for such Lease Contract; provided that, in the event the
Liquidation Proceeds in respect of any Lease Contract exceed the sum of the
Required Payoff Amount for such Contract and the Book Value of the related
Equipment, any such excess shall be allocated solely to the Equipment
Certificate. All Liquidation Proceeds which are so allocable to the Notes and
the Equity Certificates 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.
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OPTIONAL PURCHASE OF CONTRACTS
The Depositor may purchase all of the Contracts and the related Equipment 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, plus the Book Value
of the Equipment. The proceeds of such purchase shall be applied on such Payment
Date (1) as to such proceeds in an amount necessary to pay the principal and
interest of the Notes and the Equity Certificates, to the payment of the
remaining principal balance of the Notes and the Equity Certificates, together
with one month's interest thereon, and (2) as to the balance of such proceeds,
to the payment of amounts on the Equipment Certificate.
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," the "Note Distribution Account" and the "Escrow 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 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;
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(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
(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
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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.
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.
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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 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.
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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.
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
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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 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, 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
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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 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 (including the Special 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
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.
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 proceeds of 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 principal on the Class A-1 Notes; (iii) to the payment
of interest and principal on the Class A-2 Notes; (iv) to the payment of
interest and principal on the Class A-3 Notes; (v) to the payment of interest
and principal on the Class A-4 Notes; (vi) to the payment of interest and
principal on the Class B Notes; (vii) to the payment of interest and principal
on the Equity Certificates; and (viii) 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
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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, 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
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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.
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.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENT
TRANSFER AND ASSIGNMENT OF CONTRACTS AND EQUIPMENT
On, or soon after, the Merger Consummation 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 (the
date of such transfer being herein referred to as the "Transfer Date"). Pursuant
to the Transfer and Servicing Agreement, on the Transfer Date, the Depositor
will transfer all of the foregoing, 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 Transfer Date in the applicable jurisdictions reflecting the
assignment 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 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
Equipment Certificate, as described in clause (ii) of the definition
of "Pledged Revenues";
(iii)
all amounts constituting Liquidation Proceeds on Liquidated Contracts
to the extent allocable to the Notes and the Equity Certificates 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
and the related Equipment 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 those portions
thereof allocable to the Book Value of the related Equipment; and
(v) the amount paid by the Depositor to purchase the Contracts and the
related Equipment, as described under "Description of the Notes --
Optional Purchase of Contracts," excluding that portion thereof allocable to
the Book Value of Equipment.
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.
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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 is required to withdraw amounts from the Insurance, Maintenance and Tax
Accounts, when and if appropriate, to pay when due (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 the 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, the Servicer shall release such amount so received from
the insurance company or comparable third party in payment or reimbursement for
such replacement equipment; and if this replacement option is not exercised,
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 transfer to the Equipment Account, no later than the third
Business Day after deposit thereof in the Servicing Account, all proceeds from
the disposition of Equipment, to the extent allocable to the Equipment
Certificate, 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").
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).
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SERVICING
Pursuant to the Transfer and Servicing Agreement, TCC will be engaged to act
as Servicer on behalf of the Owner Trust. 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 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, 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
default on such Contract, will maximize the amount to be received by the Owner
Trust with respect to such Contract, and is otherwise in the best interests of
the Owner Trust. 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. In the case of any Lease Contract, a Prepayment may only be
allowed by the Servicer 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.
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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, an amount equal to $ ), 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.
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.
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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 bankruptcy trustee
of the Servicer might successfully object to the exercise of a right to
terminate the Servicer unless the Indenture Trustee 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.
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) Noteholders representing a majority of the aggregate principal balance of
the Notes (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 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.
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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 (in the case of Loan Contracts and Lease Contracts intended for
security, 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 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 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.
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, because of 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
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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 a Lessee 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 Lessee is a "merchant lessee." However, each Lease Contract contains
an acknowledgement by the Lessee that the Equipment was acquired for business
purposes. Article 2A, moreover, recognizes typical commercial lease "hell or
high water" rental payment clauses and validates reasonable liquidated damages
provisions in the event of lessor or Lessee defaults. Article 2A also recognizes
the concept of freedom of contract and permits the parties in a commercial
context a wide 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 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. The net proceeds from any resulting
judgment would be deposited by the Servicer into the Collection Account and
allocated to the Noteholders and Equity Certificateholders 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
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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. 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, or (iii) an estate or trust the income of
which is subject to United States federal income taxation 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
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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. 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 such OID in
income, on a pro rata basis, 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 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.
MARKET DISCOUNT
If a United States Holder that acquires a Note has a tax basis in the Note
that is less than its "stated redemption price at maturity," the amount of the
difference will be treated as "market discount" for United States federal income
tax purposes, unless such difference is less than a specified DE MINIMIS amount.
Under the market discount rules of the Code, a United States Holder will be
required to treat any principal payment on, and any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
any accrued market discount 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.
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 (where such Note is not callable prior to its maturity date). If such
Note may be called prior to maturity after the United States Holder has acquired
it, the amount of amortizable bond premium is determined with reference to
either the amount payable on maturity or, if it results in a smaller premium,
attributable to the period through the earlier call date with reference to the
amount payable on the earlier call date. The amount amortized in any year will
be treated as a reduction of the United States Holder's interest income from the
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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. 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 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
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
69
<PAGE>
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 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.
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<PAGE>
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.
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. The
Depositor believes that the Notes should be treated as indebtedness without
substantial equity features for purposes of the Plan Assets Regulation. The
Depositor also believes 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.
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<PAGE>
RATINGS OF THE NOTES
It is a condition of issuance that each of Duff & Phelps, Fitch, Moody's and
S&P (i) rate the Class A Notes in its highest rating category and (ii) rate the
Class B Notes at least "A," "A," "A2" 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, as well as receipt of the Special Redemption Price on the
Special Redemption Date, if applicable. 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,
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
If the Merger is consummated on or prior to November 1, 1996, 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. See "The
Merger."
72
<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.
The Depositor 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.
The Depositor and the Owner Trustee (on behalf of the Owner Trust) 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
mutually
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<PAGE>
agreed upon among the U.S. Representative and the International Representative
and as 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 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). 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 will, after
the Merger Consummation Date, hold warrants to acquire an indirect majority
interest in the common stock of TCC. See "The Merger."
Application has been made to list the Notes on the Luxembourg Stock
Exchange.
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<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 September , 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 will be published in a leading newspaper having general circulation
in Luxembourg (which is expected to be 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........................................................
Class A-2 Notes........................................................
Class A-3 Notes........................................................
Class A-4 Notes........................................................
Class B Notes..........................................................
</TABLE>
75
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---------------------------------------- ------------
<S> <C>
Administrative Fees..................... 11, 63
Amount Available........................ 7
Article 2A.............................. 66
AT&T.................................... 21
ATMs.................................... 27
Available Pledged Revenues.............. 46
Bankruptcy Code......................... 66
Bell Labs............................... 30
Benefit Plan............................ 71
Book Value.............................. 10, 50
Business Day............................ 45
Cash Collateral Account................. 12
Cedel Bank.............................. 54
Cedel Bank Participants................. 54
Certificates............................ 2
CFC..................................... 8, 26
Class A Notes........................... Cover, 45
Class A-1 Notes......................... 1, 45
Class A-2 Notes......................... 1, 45
Class A-3 Notes......................... 1, 45
Class A-4 Notes......................... 2, 45
Class B Notes........................... 2, 45
Closing Date............................ Cover, 4
CLT..................................... 28
Code.................................... 15, 67
Collection Account...................... 51
Collection Period....................... 4, 48
Commission.............................. i
Common Stock............................ 21
Computer Tape........................... 36
Contract Pool........................... 8
Contract Pool Principal Balance......... 3
Contract Principal Balance.............. 3
Contracts............................... Cover, 7, 24
Counsel................................. 67
CPR..................................... B-1
Credit Corp............................. 8, 26
Current Collection Period Pledged
Revenues............................... 7, 46
Current Realized Losses................. 50
Cut-Off Date............................ 4
Cut-Off Date Contract Pool.............. 8
Definitive Notes........................ 55
Deposit Date............................ 7, 46
Depositor............................... Cover, 1
Depository.............................. 45
Determination Date...................... 61
DTC..................................... i, 16
DTC Participants........................ 52
Duff & Phelps........................... 5
Electronic Ledger....................... 36
Eligible Accounts....................... 51
Eligible Investment..................... 51
Equipment............................... Cover, 7, 24
Equipment Certificate................... 12
Equity Certificate Majority............. 64
Equity Certificates..................... 11
ERISA................................... 15, 71
Escrow Account.......................... 51
<CAPTION>
TERM PAGE
- ---------------------------------------- ------------
<S> <C>
Euroclear............................... 54
Euroclear Operator...................... 54
Euroclear Participants.................. 54
Euroclear System........................ 54
Events of Default....................... 57
Exchange Act............................ i
Excluded Shares......................... 21
Financial Institution................... 69
Fitch................................... 5
Global Notes............................ 45, A-1
Governing Law........................... 16
HoldCo.................................. 21
Holders................................. 16, 45
Indenture............................... Cover, 1
Indenture Trustee....................... Cover, 1
Indirect Participants................... 53
Initial Amount.......................... 49
Initial Contract Pool Principal
Balance................................ 4, 48
Insolvency Laws......................... 17
Insurance, Maintenance and Tax
Accounts............................... 61
Intersyndicate Agreement................ 73
Interest Rate........................... Cover ii, 2
Interest Shortfall...................... 61
International Depositories.............. 52
International Managers.................. 73
International Notes..................... 73
International Representative............ 73
International Underwriting Agreement.... 73
IRS..................................... 67
Lease Contract.......................... Cover, 7, 24
Leasing Services........................ 8, 26
Liquidated Contracts.................... 3, 10, 48
Liquidation Loss........................ 50
Loan Contracts.......................... Cover, 24
Lucent.................................. 26
Luxembourg Paying Agent................. 55
Luxembourg Transfer Agent............... 56
Management Offerees..................... 21
Management Options...................... 21
Master Form Lease....................... 33
Merger Consideration.................... 21
Merger Consummation Date................ 6
Merger.................................. 5, 21
Merger Agreement........................ 21
MergerCo................................ 21
Monthly Principal Amount................ 3, 48
Moody's................................. 5
NCR..................................... 26
NCR Credit.............................. 8, 26
Non-Accrual............................. 43
Note Majority........................... 56, 64
Note Distribution Account............... 51
Noteholders............................. 16, 45
Note Owners............................. 16
Notes................................... Cover, 1, 45
Obligor................................. 7, 24
OID..................................... 68
Options................................. 21
Originators............................. 8, 26
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---------------------------------------- ------------
Owner Trustee........................... Cover
<S> <C>
Owner Trust............................. Cover, 1
Participants............................ 52
Payment Date............................ Cover ii
Plan Assets Regulation.................. 71
8, 24, 46,
Pledged Revenues........................ 60
Prepayments............................. 8, 46
PTCE.................................... 71
Purchase Agreement...................... 1
Rating Agencies......................... 5
Related Collection Period Pledged
Revenues............................... 7, 46
Repurchase Event........................ 38
Required Payoff Amount.................. 10, 50
Requisite Amount........................ 50
Rules................................... 53
S&P..................................... 5
SBU..................................... 28
Scheduled Payments...................... 8, 46
Securities Act.......................... i
Servicer................................ 1
Servicing Account....................... 51
<CAPTION>
TERM PAGE
- ---------------------------------------- ------------
<S> <C>
Servicing Fee........................... 11, 63
Special Redemption Date................. 6, 49
Special Redemption Price................ 6, 49
Specific Lease Form..................... 33
Stated Maturity Dates................... 4
TCC..................................... Cover, 1, 25
Terms and Conditions.................... 55
TIN..................................... 70
Transfer and Servicing Agreement........ 1
Transfer Date........................... 60
Trust Assets............................ Cover, 6, 23
Trust Accounts.......................... 51
Trust Agreement......................... 1
UCC..................................... 18
U.S. Notes.............................. 73
U.S. Representative..................... 73
U.S. Underwriters....................... 73
U.S. Underwriting Agreement............. 73
Underwriters............................ 73
United States........................... 74
United States Holder.................... 67
United States Person.................... A-4
</TABLE>
77
<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................................... 17
The Merger..................................... 21
The Depositor and the Owner Trust.............. 23
AT&T Capital Corporation....................... 25
The Originators................................ 26
The Contracts.................................. 32
Description of the Notes....................... 45
Description of the Transfer and Servicing
Agreement..................................... 60
Certain Legal Aspects of the Contracts......... 65
United States Taxation......................... 67
ERISA Considerations........................... 71
Ratings of the Notes........................... 72
Use of Proceeds................................ 72
Underwriting................................... 73
Legal Matters.................................. 75
Additional Information......................... 75
Index of Principal Terms....................... 76
Appendix A: Global Clearance, Settlement and
Tax Documentation Procedures.................. A-1
Appendix B: Weighted Average Life of the
Notes......................................... B-1
</TABLE>
----------------
UNTIL , 1996 (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 SEPTEMBER 18, 1996
$3,055,000,000 (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 is to be an indirect wholly owned subsidiary of AT&T Capital
Corporation ("TCC") following the consummation of the Merger, 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 property of the Owner Trust (collectively,
the "Trust Assets"), from the date of issuance of the Notes (the "Closing Date")
to the Transfer Date, will consist of the proceeds of the Notes, plus additional
cash, which will be held (and invested in certain Eligible Investments) in an
Escrow Account and will be sufficient to redeem the Notes at the Special
Redemption Price on the Special Redemption Date if the Merger is not consummated
and the Contracts and Equipment hereinafter described are not transferred to the
Owner Trust on or before November 1, 1996. The cash in the Escrow Account,
together with the proceeds of the Equity Certificates to be issued by the
(CONTINUED ON FOLLOWING PAGE)
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THIS OFFERING, SEE "RISK
FACTORS" ON PAGE 17 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
September , 1996.
(2) The Depositor 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 September , 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 SEPTEMBER , 1996
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
(CONTINUED FROM PRECEDING PAGE)
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
on the Transfer Date (which will be the Merger Consummation Date or a date soon
thereafter 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") and the interest of the Depositor in certain
equipment related to such Contracts (the "Equipment"). 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 two classes of certificates of beneficial
interest, the Equipment Certificate and the Equity Certificates and the
Equipment Certificate, which are not being offered hereby. The Equipment
Certificate will represent an undivided interest in, and be payable solely from
the Equipment and certain amounts derived from the sale or other disposition of
the Equipment upon expiration or termination (including an early termination or
liquidation) of the related Contracts and certain other amounts as described
herein. Proceeds from the sale or other disposition of the Equipment upon
expiration or termination of the related Contracts will not be available for
payment of interest and principal on the Notes, except under the limited
circumstances described herein. 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 on the Equipment Certificate) liquidation of the Contracts and related
Equipment, 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 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 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 -- Special Redemption" and "-- 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>
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 agreed that (i) 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 Securities in, from or
otherwise involving the United Kingdom; (ii) it has only issued, distributed or
passed on and will only issue, distribute or pass on in the United Kingdom any
document received by it in connection with the issue of the 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 persons to whom such
document may otherwise lawfully be issued, distributed or passed on; (iii) if it
is an authorized person under Chapter III of Part I of the Financial Services
Act 1986, it has only promoted and will only promote (as that term is defined in
Regulation 1.02(2) of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991) to any person in the United Kingdom the scheme described in
the Prospectus if that person is of a kind described either in section 76(2) of
the Financial Services Act 1986
73
<PAGE>
or in Regulation 1.04 of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991; and (iv) it is a person of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995.
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.
The Depositor 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.
The Depositor has 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
mutually agreed upon among the U.S. Representative and the International
Representative. 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 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). 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 will, after
the Merger Consummation Date, hold warrants to acquire an indirect majority
interest in the common stock of TCC. See "The Merger."
Application has been made to list the Notes on the Luxembourg Stock
Exchange.
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>
Kredietbank S.A. Luxembourgeoise
The Chase Manhattan Bank 43, boulevard Royal
450 West 33rd Street L-2955
New York, New York 10001 Luxembourg
</TABLE>
LISTING AGENT
Kredietbank S.A. Luxembourgeoise
43, boulevard Royal
L-2955
Luxembourg
<TABLE>
<CAPTION>
<S> <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................................... 17
The Merger..................................... 21
The Depositor and the Owner Trust.............. 22
AT&T Capital Corporation....................... 25
The Originators................................ 26
The Contracts.................................. 33
Description of the Notes....................... 45
Description of the Transfer and Servicing
Agreement..................................... 60
Certain Legal Aspects of the Contracts......... 65
United States Taxation......................... 67
ERISA Considerations........................... 71
Ratings of the Notes........................... 72
Use of Proceeds................................ 72
Underwriting................................... 73
Legal Matters.................................. 75
Additional Information......................... 75
Index of Principal Terms....................... 76
Appendix A: Global Clearance, Settlement and
Tax Documentation Procedures.................. A-1
Appendix B: Weighted Average Life of the
Notes......................................... B-1
</TABLE>
----------------
UNTIL , 1996 (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.
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<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.................. $
Printing and Engraving............................................... *
Legal Fees and Expenses.............................................. *
Blue Sky Filing and Counsel Fees..................................... *
Accounting Fees and Expenses......................................... *
Trustee Fees and Expenses............................................ *
Rating Agencies' Fees................................................ *
Miscellaneous Expenses............................................... *
-------------
Total............................................................ $ *
-------------
-------------
</TABLE>
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* To be supplied by amendment.
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 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 -- Form of Trust Agreement.
* *4.4 -- 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 Cadwalader, Wickersham & Taft (included as part of Exhibit 8.2).
* *24.1 -- Power of Attorney.
* 25.1 -- Statement of eligibility of Indenture Trustee.
</TABLE>
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* To be filed by amendment.
** 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. 3 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
13th day of September, 1996.
ANTIGUA FUNDING CORPORATION
By ___________/s/ GUY HANDS___________
Guy Hands
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 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 September 13, 1996
Guy Hands Director
/s/ JEFF NASH Vice President (Principal Financial and September 13, 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. 3 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
13th day of September, 1996.
CAPITA EQUIPMENT RECEIVABLES TRUST
1996-1
By: ANTIGUA FUNDING CORPORATION
By____________/s/ GUY HANDS___________
Guy Hands
President
II-4
