<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 17, 1997
$1,146,000,000 (APPROXIMATE)
CAPITA EQUIPMENT RECEIVABLES TRUST 1997-1
$ % RECEIVABLE-BACKED NOTES, CLASS A-1
$ % RECEIVABLE-BACKED NOTES, CLASS A-2
$ % RECEIVABLE-BACKED NOTES, CLASS A-3
$ % RECEIVABLE-BACKED NOTES, CLASS A-4
$ FLOATING RATE RECEIVABLE-BACKED NOTES, CLASS A-5
$ % RECEIVABLE-BACKED NOTES, CLASS B
$ % RECEIVABLE-BACKED NOTES, CLASS C
ANTIGUA FUNDING CORPORATION
DEPOSITOR
[LOGO]
SERVICER
Capita Equipment Receivables Trust 1997-1 (the 'Owner Trust') will be
formed pursuant to a Trust Agreement between Antigua Funding Corporation (the
'Depositor'), an indirect wholly owned subsidiary of AT&T Capital Corporation
('TCC'), and 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 Bankers Trust Company, as Indenture Trustee (the 'Indenture
Trustee'). The Notes will consist of five classes of senior notes, designated as
the Class A-1,
(continued on following page)
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THIS OFFERING, SEE 'RISK
FACTORS' ON PAGE S-21 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 8 OF THE
PROSPECTUS.
------------------------
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 SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING 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 A-5 Note......................
Per Class B Note........................
Per Class C Note........................
Total................................... % % %
</TABLE>
- ------------
(1) Plus accrued interest, if any, at the applicable Interest Rate, from
December , 1997.
(2) TCC and certain of its affiliates have agreed to indemnify the 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
$ .
------------------------
The Notes are offered severally by the Underwriters, as specified herein,
subject to prior sale and subject to the 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 December , 1997.
GOLDMAN, SACHS & CO.
BZW SECURITIES INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
------------------------
The date of this Prospectus Supplement is November , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THIS PROSPECTUS SUPPLEMENT BECOMES FINAL. THIS PROSPECTUS SUPPLEMENT AND THE
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>
<PAGE>
(continued from previous page)
Class A-2, Class A-3, Class A-4 and Class A-5 Notes (collectively, the 'Class A
Notes'), and two classes of subordinated notes, designated as the Class B Notes
and the Class C Notes (collectively, the 'Subordinate Notes'). The proceeds from
the issuance of the Notes will be used to acquire a pool of equipment leases,
installment sale contracts, promissory notes, loan and security agreements and
similar types of receivables (the 'Contracts'). TCC will service the Contracts
pursuant to a Transfer and Servicing Agreement among the Depositor, TCC, the
Indenture Trustee and the Owner Trust.
The Notes will be payable solely from, and secured by, the Amount Available
on each Payment Date (which will consist primarily of the Scheduled Payments due
under the Contracts, certain amounts received upon the prepayment or purchase of
Contracts or (to the extent not payable to the Depositor, as described below)
liquidation of the Contracts and disposition of the related Equipment upon
defaults thereunder, and investment earnings on amounts deposited in the
Collection Account and the Class C Funding Account established pursuant to the
Indenture, in each case subject to prior application to pay the Servicing Fee,
together with (i) amounts permitted to be withdrawn therefor from a Cash
Collateral Account and (ii) in the case of the Class C Notes only, amounts on
deposit in the Class C Funding Account) in the order of priority described
herein. In addition, the Class A-5 Notes will have the benefit of a swap
agreement (the 'Class A-5 Swap Agreement'), between the Owner Trust and Goldman
Sachs Mitsui Marine Derivative Products, L.P. ('GSMMDP') (the 'Class A-5 Swap
Counterparty'), pursuant to which, on each Payment Date, an amount equal to the
excess, if any, of interest computed on the Class A-5 Notes at the Class A-5
Interest Rate, as described below, over interest computed on the Class A-5 Notes
at a fixed rate of % per annum, will be payable by the Class A-5 Swap
Counterparty to the Indenture Trustee (any such amount constituting a portion of
the Amount Available, but only in respect of payment of interest on the Class
A-5 Notes), while an amount equal to the excess, if any, of interest computed on
the Class A-5 Notes at such fixed rate over interest computed on the Class A-5
Notes at the Class A-5 Interest Rate will be payable to the Class A-5 Swap
Counterparty from the Amount Available therefor.
The Owner Trust will have a security interest in all Equipment securing
those Contracts financing a sale of such Equipment to the related Obligor ('Loan
Contracts'), and all Liquidation Proceeds (including any derived from the
disposition of the related Equipment) received with respect to any defaulted
Loan Contracts will be payable to the Owner Trust. The Depositor will not
transfer to the Owner Trust its ownership or security interest in the Equipment
(the 'Leased Equipment') subject to the Contracts evidencing a lease of such
Equipment to the related Obligor ('Lease Contracts'), including the right to
receive the Leased Equipment (or the purchase price therefor or proceeds
thereof) upon expiration of the original term of the related Lease Contract. The
Liquidation Proceeds received with respect to any defaulted Lease Contract
(including any derived from the disposition of the related Leased Equipment)
will be allocated between the Owner Trust and the Depositor as described herein.
Amounts payable to the Depositor in respect of the Leased Equipment or otherwise
in respect of Liquidation Proceeds of defaulted Lease Contracts will not be
available for payment of interest or principal on the Notes.
THE LIKELIHOOD OF PAYMENT OF INTEREST ON EACH CLASS OF NOTES WILL BE
ENHANCED BY THE APPLICATION OF THE AMOUNT AVAILABLE, AFTER PAYMENT OF THE
SERVICING FEE, TO THE PAYMENT OF SUCH INTEREST PRIOR TO THE PAYMENT OF PRINCIPAL
ON ANY OF THE NOTES, AS WELL AS BY THE PREFERENTIAL RIGHT OF THE HOLDERS OF
CLASS A AND CLASS B NOTES TO RECEIVE SUCH INTEREST (1) IN THE CASE OF THE CLASS
A NOTES, PRIOR TO THE PAYMENT OF ANY INTEREST ON THE SUBORDINATE NOTES, AND (2)
IN THE CASE OF THE CLASS B NOTES, PRIOR TO THE PAYMENT OF ANY INTEREST ON THE
CLASS C NOTES. LIKEWISE, THE LIKELIHOOD OF PAYMENT OF PRINCIPAL ON EACH CLASS OF
CLASS A AND CLASS B NOTES WILL BE ENHANCED BY THE PREFERENTIAL RIGHT OF THE
HOLDERS OF SUCH NOTES TO RECEIVE SUCH PRINCIPAL, TO THE EXTENT OF THE AMOUNT
AVAILABLE, AFTER PAYMENT OF THE SERVICING FEE AND INTEREST ON THE NOTES AS
AFORESAID, (I) IN THE CASE OF THE CLASS A NOTES, PRIOR TO THE PAYMENT OF ANY
PRINCIPAL ON THE SUBORDINATE NOTES, AND (II) IN THE CASE OF THE CLASS B NOTES,
PRIOR TO THE PAYMENT OF ANY PRINCIPAL ON THE CLASS C NOTES. SEE 'DESCRIPTION OF
THE NOTES' HEREIN AND IN THE PROSPECTUS, DATED NOVEMBER 17, 1997 (THE
'PROSPECTUS'), OF WHICH THIS PROSPECTUS SUPPLEMENT IS A PART.
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, Class B and Class C Notes, or at the
floating rate described below for the Class A-5 Notes (in each case, the
'Interest Rate' for such Class), will be paid to Holders of each Class of Notes,
and principal will be paid on the applicable Class of
(continued on following page)
S-2
<PAGE>
<PAGE>
(continued from previous page)
Notes, (1) in the case of each such Class other than the Class C Notes, on the
15th day of each month (or, if such day is not a Business Day, on the next
succeeding Business Day), commencing December 15, 1997 (each, a 'Monthly Payment
Date'), and (2) in the case of the Class C Notes, on the Monthly Payment Dates
occurring in February, May, August and November (each, a 'Quarterly Payment
Date' and, together with the Monthly Payment Dates, each a 'Payment Date'),
commencing, in the case of interest, February 17, 1998, and, in the case of
principal, the first such date occurring on or after the Monthly Payment Date on
which the Principal Balance of the Class B Notes has been reduced to zero. The
Class A-5 Interest Rate for each Interest Period will be the rate of interest
per annum equal to % plus the London interbank offered rate for United States
dollar deposits having a maturity of one month ('One-Month LIBOR'), determined
as described herein on the related LIBOR Determination Date. The Stated Maturity
Date for the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class B and
Class C 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 under
'Description of the Notes -- Optional Purchase of Contracts' herein and in the
Prospectus.
The Depositor will have the right to purchase the Class A-5 Notes in whole
on any Payment Date, as described herein under 'Description of the
Notes -- Optional Purchase of Class A-5 Notes.'
There is currently no secondary market for the Notes and there is no
assurance that one will develop. The Underwriters expect, but will not be
obligated, to make a market in the Notes. There is no assurance that such market
will develop, or if such market does develop, that such market will continue.
See 'Risk Factors' herein and in the Prospectus.
It is a condition of issuance of the Notes that each of Standard & Poor's
Rating Services, Moody's Investors Service, Inc., Duff & Phelps Credit Rating
Co. and Fitch Investors Service, L.P. (i) rate the Class A-1 Notes in its
highest short-term rating category, (ii) rate the Class A-2, Class A-3, Class
A-4 and Class A-5 Notes in its highest long-term rating category, (iii) rate the
Class B Notes at least 'A,' 'A2,' 'A' and 'A,' respectively, and (iv) rate the
Class C Notes at least 'BBB,' 'Baa2,' 'BBB' and 'BBB,' respectively. See
'Ratings of the Notes' herein and in the Prospectus.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS,
AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL. SALES OF THE NOTES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO
THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS
IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING' HEREIN.
Upon receipt of a request by an investor who has received an electronic
Prospectus and related Prospectus Supplement from any Underwriter or a request
by such investor's representative within the period during which there is an
obligation to deliver a Prospectus and related Prospectus Supplement, such
Underwriter will promptly deliver, or cause to be delivered, without charge, to
such investor a paper copy of the Prospectus and related Prospectus Supplement.
S-3
<PAGE>
<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 Supplement and
prior to the termination of the offering of the Notes shall be deemed to be
incorporated by reference into this Prospectus Supplement. 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 Supplement 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 Supplement.
The Depositor will provide without charge to each person to whom a copy of
this Prospectus Supplement 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, 44 Whippany Road, Morristown, New
Jersey 07962, Attention: Secretary.
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. See 'Description of the Notes -- Book-Entry Registration' in the
Prospectus. In the event Definitive Notes are issued, such reports will be sent
to Noteholders as of the most recent Record Date. Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. See 'Description of the Notes -- Reports to Noteholders'
herein 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:
Bankers Trust Company, 4 Albany Street, 10th Floor, New York, New York 10006
(facsimile (212) 250-6439), Attention: Corporate Trust and Agency 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
Securities and Exchange Commission (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 1997.
S-4
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
INCORPORATION BY REFERENCE................................................................................. S-4
REPORTS TO NOTEHOLDERS..................................................................................... S-4
PROSPECTUS SUPPLEMENT SUMMARY.............................................................................. S-6
RISK FACTORS............................................................................................... S-21
Limited Assets of the Owner Trust..................................................................... S-21
Subordination of the Subordinate Notes................................................................ S-21
Reliance of Class A-5 Noteholders on Amounts Payable Under Class A-5 Swap Agreement................... S-21
Yield and Prepayment Considerations................................................................... S-21
No Gross-Up for Withholding Tax....................................................................... S-22
Limited Liquidity..................................................................................... S-22
THE OWNER TRUST............................................................................................ S-22
The Owner Trust....................................................................................... S-22
Capitalization of the Owner Trust..................................................................... S-23
The Owner Trustee..................................................................................... S-23
THE CONTRACTS.............................................................................................. S-23
Description of the Contracts.......................................................................... S-23
Representations and Warranties Made by AT&T Capital Corporation....................................... S-23
Certain Statistics Relating to the Cut-Off Date Contract Pool......................................... S-24
Certain Statistics Relating to Delinquencies and Defaults............................................. S-28
WEIGHTED AVERAGE LIFE OF THE NOTES......................................................................... S-30
DESCRIPTION OF THE NOTES................................................................................... S-30
General............................................................................................... S-30
Distributions......................................................................................... S-31
Class A Interest...................................................................................... S-33
Class B Interest...................................................................................... S-34
Class C Interest...................................................................................... S-34
Principal............................................................................................. S-35
Class A-5 Swap Agreement.............................................................................. S-36
Class A-5 Swap Counterparty........................................................................... S-36
Redemption of Notes................................................................................... S-37
Optional Purchase of Class A-5 Notes.................................................................. S-37
Subordination of Subordinate Notes.................................................................... S-37
Cash Collateral Account............................................................................... S-37
Liquidated Contracts.................................................................................. S-38
Optional Purchase of Contracts........................................................................ S-38
Reports to Noteholders................................................................................ S-39
The Indenture Trustee................................................................................. S-39
UNITED STATES TAXATION..................................................................................... S-40
Treatment of the Notes................................................................................ S-40
Treatment of the Owner Trust.......................................................................... S-40
Payments of Interest.................................................................................. S-41
Original Issue Discount............................................................................... S-41
Market Discount....................................................................................... S-41
Amortizable Bond Premium.............................................................................. S-41
Sale, Exchange or Retirement of Notes................................................................. S-42
Tax Consequences to United States Alien Holders....................................................... S-42
Backup Withholding.................................................................................... S-43
ERISA CONSIDERATIONS....................................................................................... S-44
RATINGS OF THE NOTES....................................................................................... S-45
USE OF PROCEEDS............................................................................................ S-45
UNDERWRITING............................................................................................... S-46
LEGAL MATTERS.............................................................................................. S-46
INDEX OF PRINCIPAL TERMS................................................................................... S-47
</TABLE>
S-5
<PAGE>
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Certain capitalized terms used in this Prospectus Supplement
Summary are defined elsewhere in this Prospectus Supplement and in the
Prospectus.
<TABLE>
<S> <C>
Issuer........................... A trust, referred to as the 'Capita Equipment Receivables Trust 1997-1' (the
'Owner Trust'), formed by the Depositor and governed by a Trust Agreement
(the 'Trust Agreement'), dated as of November 1, 1997, between the Depositor
and the Owner Trustee. See 'The Owner Trust' herein.
Depositor........................ Antigua Funding Corporation, all of the stock of which is owned by the
Originators and AT&T Commercial Finance Corporation, each of which is, in
turn, a subsidiary of AT&T Capital Corporation ('TCC'). The Depositor has
acquired or will acquire the Contracts and the Originators' interests in the
equipment subject thereto (the 'Equipment') pursuant to substantially
similar Purchase and Sale Agreements (the 'Purchase Agreements') among the
Depositor, TCC and the Originators. On the Closing Date, the Depositor will
transfer the Contracts and the other Trust Assets (as described under 'Trust
Assets' below) to the Owner Trust pursuant to a Transfer and Servicing
Agreement (the 'Transfer and Servicing Agreement'), dated as of November 1,
1997, among the Depositor, TCC, the Indenture Trustee and the Owner Trust.
See 'The Depositor' in the Prospectus.
Servicer......................... TCC, in its capacity as servicer of the Contracts under the Transfer and
Servicing Agreement. See 'Description of the Transfer and Servicing
Agreements -- Servicing' and 'AT&T Capital Corporation' in the Prospectus.
Recent Developments.............. Under the terms of a Stock Purchase Agreement, dated as of November 17, 1997,
Hercules Holdings (Cayman) Limited and certain management investors of TCC
have agreed to sell all of the outstanding capital stock of TCC to Newcourt
Credit Group.
The transaction is expected to close during February 1998. The closing is
subject to, among other things, the receipt by Newcourt of the proceeds of a
public offering of Newcourt common stock, expected to be consummated by
mid-December, and to the receipt of required regulatory approvals.
Newcourt Credit Group is an independent non-bank financial services company
which originates, sells and manages asset based financing of a broad range
of equipment and capital assets by way of secured loans, conditional sales
contracts and financial leases. The Newcourt Credit Group's loan origination
activities focus on the commercial finance and corporate finance segments of
the asset based lending market. It is headquartered in Toronto, with owned
and managed loans of more than US$7.13 billion.
Indenture Trustee................ Bankers Trust Company, in its capacity as trustee under an Indenture (the
'Indenture'), dated as of November 1, 1997, 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 seven classes of notes
(the 'Notes'), consisting of five classes of senior notes, designated as the
Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Notes
</TABLE>
S-6
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(collectively, the 'Class A Notes'), and two classes of subordinate Notes,
designated as the Class B Notes and the Class C Notes (collectively, the
'Subordinate Notes'). See 'Description of the Notes' herein and in the
Prospectus.
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 Supplement, or at the floating rate described below for the
Class A-5 Notes (in each case, the 'Interest Rate' for such Class), from and
including the Closing Date to but excluding December 15, 1997 (or, in the
case of the Class C Notes, February 15, 1998), and thereafter for each
successive Interest Period. The Class A-5 Interest Rate for each Interest
Period will be the rate of interest per annum equal to % plus the London
interbank offered rate for United States dollar deposits having a maturity
of one month ('One-Month LIBOR'), determined as described herein on the
related LIBOR Determination Date. Interest on the Class A-1 and Class A-5
Notes will be computed on the basis of the actual number of days elapsed and
a 360-day year. Interest on the Class A-2, Class A-3, Class A-4, Class B and
Class C Notes will be computed on the basis of a 360-day year comprised of
twelve 30-day months. To the extent the Amount Available is sufficient
therefor after payment of the Servicing Fee, the amount of interest to be
paid on the Notes on each Payment Date will be the interest accrued during
the related Interest Period (computed on the basis described above) and will
be equal to the product of (i) the applicable Interest Rate, (ii) the
Principal Balance of the related Class as of the immediately preceding
Payment Date (after giving effect to reductions in Principal Balance on such
immediately preceding Payment Date) and (iii) a fraction equal to (a) in the
case of the Class A-2, Class A-3, Class A-4 and Class B Notes, one-twelfth
(or, for the first Payment Date, divided by 360), (b) in the case of
the Class C Notes, one-fourth (or, for the first Payment Date, divided
by 360), and (c) in the case of the Class A-1 and Class A-5 Notes, the
number of days in such Interest Period divided by 360.
In the event that, on any 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
case of the Class A-5 Notes, the determination of any such shortfall and
allocation of Amount Available will be based on the payment of interest
thereon at the Class A-5 Assumed Fixed Rate, as discussed under 'Source of
Payment and Security' below, and will not include in the Amount Available
any amounts paid to the Indenture Trustee pursuant to the Class A-5 Swap
Agreement. 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 Class B
Notes pro rata, 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 Class
</TABLE>
S-7
<PAGE>
<PAGE>
<TABLE>
<S> <C>
B Noteholders 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 and Class B Notes, is not sufficient to make a full
payment of interest to the Holders of Class C Notes, the amount of interest
to be paid on the Class C Notes will be allocated among the Class C Notes
pro rata, and the amount of such shortfall will be carried forward and,
together with interest thereon at the Class C Interest Rate, added to the
amount of interest Class C Noteholders will be entitled to receive on the
next Payment Date. See 'Description of the Notes' herein.
The 'Interest Periods' for each Class of Notes (other than the Class C Notes)
will consist of an initial period from and including the Closing Date to but
excluding December 15, 1997, and thereafter each successive period (i) for
the Class A-2, Class A-3, Class A-4 and Class B Notes, from and including
the first day following completion of the preceding period to but excluding
the 15th day of the following month (in each case without respect to whether
such days are Business Days), and (ii) for the Class A-1 and Class A-5
Notes, from and including each Payment Date to but excluding the following
Payment Date, in each case until the Principal Balance of such Class has
been reduced to zero. The 'Interest Periods' for the Class C Notes will
consist of an initial period from and including the Closing Date to but
excluding February 15, 1998, and thereafter each successive period from and
including the first day following completion of the preceding period to but
excluding the 15th day of the third following month (in each case without
respect to whether such days are Business Days) until the Principal Balance
of the Class C Notes has been reduced to zero. The Payment Date with respect
to each Interest Period will be the Monthly Payment Date next succeeding the
end of such Interest Period.
Principal........................ To the extent the Amount Available is sufficient therefor after payment of
interest on the Notes, the aggregate amount of principal to be paid on the
Notes on each Payment Date (except in the case of the Class C Notes) will
equal the Monthly Principal Amount. Principal payable on the Notes will be
paid on each Payment Date in respect of principal on the Class A Notes until
the Principal Balance of each Class of Class A Notes has been reduced to
zero, then in respect of principal on the Class B Notes until the Class B
Principal Balance has been reduced to zero, and then in respect of principal
on the Class C Notes until the Class C Principal Balance has been reduced to
zero. Principal paid on the Class A Notes will be allocated % to the
Class A-1, Class A-2, Class A-3 and Class A-4 Notes in the aggregate (paid
first on the Class A-1 Notes until the Class A-1 Principal Balance has been
reduced to zero, then on the Class A-2 Notes until the Class A-2 Principal
Balance has been reduced to zero, then on the Class A-3 Notes until the
Class A-3 Principal Balance has been reduced to zero, and then on the Class
A-4 Notes until the Class A-4 Principal Balance has been reduced to zero)
and % to the Class A-5 Notes. See 'Description of the Notes Principal'
herein.
The 'Monthly Principal Amount' for any Monthly Payment Date will equal the
excess, if any, of (i) the sum of the Principal Balances of the Notes as of
such Monthly Payment Date (determined prior to the payment of any principal
in respect thereof on such Monthly 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 Monthly Payment Date; provided that the amount
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referred to in clause (ii) shall be deemed to be zero on any Payment Date on
which the Contract Pool Principal Balance is less than $1,000,000.
The 'Contract Principal Balance' of any Contract as of the last day of any
Collection Period is: (1) in the case of any Contract that does not by its
terms permit prepayment or early termination, the present value of the
unpaid Scheduled Payments due on such Contract after such last day of the
Collection Period (excluding all Scheduled Payments due on or prior to, but
not received as of, such last day, as well as any Scheduled Payments due
after such last day and received on or prior thereto), after giving effect
to any Prepayments received on or prior to such last day, discounted monthly
at the rate of % per annum (assuming, for purposes of such calculation,
that each Scheduled Payment is due on the last day of the applicable
Collection Period); (2) in the case of any Contract that permits prepayment
or early termination only upon payment of an amount that is at least equal
to the present value (calculated in the manner described in clause (1)
above) of the unpaid Scheduled Payments due on such Contract after the date
of such prepayment, the amount specified in clause (1) above; and (3) in the
case of any Contract that permits prepayment or early termination without
payment of an amount at least equal to the amount specified in clause (2)
above, the lesser of (a) the outstanding principal balance of such 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 amount specified in clause (1) above.
The Contract Principal Balance of any Contract which became a Liquidated
Contract during a given Collection Period or which TCC was obligated to
purchase as of the end of a given Collection Period due to a breach of
representations and warranties will, for purposes of computing the Monthly
Principal Amount and the Requisite Amount for the Cash Collateral Account,
be deemed to be zero on and after the last day of such Collection Period.
A 'Liquidated Contract' is any Contract (a) which the Servicer has charged off
as uncollectible in accordance with its credit and collection policies and
procedures (which shall be no later than the date as of which the Servicer
has repossessed and disposed of the related Equipment, or otherwise
collected all proceeds which, in the Servicer's reasonable judgment, can be
collected under such Contract), or (b) as to which 10% or more of a
Scheduled Payment is delinquent 180 days or more. See 'Description of the
Notes -- Principal.'
The 'Collection Period' for any Payment Date will be the calendar month
preceding the month in which such Payment Date occurs. The 'Initial Contract
Pool Principal Balance' is $ (which amount is based upon the Contract
Pool Principal Balance determined as of the Cut-Off Date, but also includes
an amount in respect of Scheduled Payments on the Contracts due prior to,
but not received as of, the Cut-Off Date). The aggregate of the initial
Principal Balances of the Notes 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 Stated Maturity Date for the Class A-1, Class A-2, Class A-3,
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Class A-4, Class A-5, Class B and Class C Notes is , , ,
, , , and , respectively, but final payment of any
Class of Notes could occur significantly earlier than the Stated Maturity
Date of such Class.
Redemption of Notes.............. The Notes are subject to redemption in whole as referred to under 'Optional
Purchase of Contracts' below.
Optional Purchase of Class A-5
Notes.......................... The Depositor will have the right to purchase all of the Class A-5 Notes, at
par, on any Payment Date. Interest payable on the Class A-5 Notes on any
such Payment Date shall be paid to the Holders of record on the related
Record Date in the ordinary manner. Following such purchase, the Class A-5
Notes will not be retired, but will continue to be entitled to interest and
principal payments on each Payment Date in the manner described above. See
'Description of the Notes -- Optional Purchase of Class A-5 Notes' herein.
Denominations.................... The Notes will be available for purchase in denominations of $10,000 and
integral multiples thereof.
Closing Date..................... On or about December , 1997.
Cut-Off Date..................... November 1, 1997.
Payment Dates and Record Dates... Interest and principal on the Notes (other than the Class C 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 December 15, 1997 (each,
a 'Monthly Payment Date'), to persons in whose names the Notes are
registered (the 'Holders' or 'Noteholders') as of the related Record Date.
Interest and principal on the Class C Notes will be paid on each Monthly
Payment Date occurring in February, May, August and November (each, a
'Quarterly Payment Date'), commencing, in the case of interest, February 17,
1998, and, in the case of principal, the first such date occurring on or
after the Monthly Payment Date on which the Principal Balance of the Class B
Notes has been reduced to zero, in each case to Holders of record as of the
related Record Date. 'Payment Date' shall generally mean each Monthly
Payment Date; provided that, when used with respect to the payment of
interest or principal on the Class C Notes, 'Payment Date' shall mean each
Quarterly Payment Date. 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 book-entry form), or the last day of the prior 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, as well as by the preferential right of the Holders of
Class A and Class B Notes to receive such interest (1) in the case of the
Class A Notes, prior to the payment of any interest on the Subordinate
Notes, and (2) in the case of the Class B Notes, prior to the payment of any
interest on the Class C Notes. Likewise, the likelihood of payment of
principal on the Class A and Class B 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
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payment of the Servicing Fee and interest on the Notes as aforesaid, (i) in
the case of the Class A Notes, prior to the payment of any principal on the
Subordinate Notes, and (ii) in the case of the Class B Notes, prior to the
payment of any principal on the Class C Notes. See 'Description of the
Notes' herein.
Ratings.......................... It is a condition of issuance of the Notes that each of Standard & Poor's
Rating Services, Moody's Investors Service, Inc., Duff & Phelps Credit
Rating Co. and Fitch Investors Service, L.P. (i) rate the Class A-1 Notes in
its highest short-term rating category, (ii) rate the Class A-2, Class A-3,
Class A-4 and Class A-5 Notes in its highest long-term rating category,
(iii) rate the Class B Notes at least 'A,' 'A2,' 'A' and 'A,' respectively,
and (iv) rate the Class C Notes at least 'BBB,' 'Baa2,' 'BBB' and 'BBB,'
respectively. See 'Ratings of the Notes' herein and in the Prospectus. The
rating of each Class of Notes addresses the likelihood of the timely receipt
of interest and payment of principal on such Class on or before the Stated
Maturity Date for such Class. A rating is not a recommendation to buy, sell
or hold securities and may be subject to revision or withdrawal at any time
by the assigning Rating Agency. The ratings of the Notes do not address the
likelihood of payment of principal on any Class of Notes prior to the Stated
Maturity Date thereof, or the possibility of the imposition of United States
withholding tax with respect to non-United States Persons. See 'Ratings of
the Notes' herein and in the Prospectus.
Use of Proceeds.................. The proceeds from the offering and sale of the Notes, after funding a portion
of the Cash Collateral Account and paying the expenses of the Depositor,
will be used by the Depositor to pay down certain warehousing facilities,
and any remaining funds will be paid to the Originators.
Trust Assets..................... The Trust Assets will consist of: (i) a pool of equipment lease contracts,
installment sale contracts, promissory notes, loan and security agreements
and other similar types of receivables (each, a 'Contract') with various
lessees, borrowers or other obligors thereunder (each, an 'Obligor'),
including (a) all monies at any time paid or payable thereon or in respect
thereof from and after the Cut-Off Date in the form of (1) Scheduled
Payments (including all Scheduled Payments due prior to, but not received as
of, the Cut-Off Date, but excluding any Scheduled Payments due on or after,
but received prior to, the Cut-Off Date), (2) Prepayments (but excluding, in
the case of a Contract structured as a lease of the related Equipment (a
'Lease Contract'), any portion thereof allocated to the Depositor, as
described in clause (ii) of the definition of 'Pledged Revenues'), and (3)
Liquidation Proceeds (including any derived from the disposition of the
related Equipment) received with respect to defaulted Contracts (excluding,
in the case of a Lease Contract, any portion thereof allocable to the
Depositor, as described under 'Liquidated Contracts' below), and (b) all
rights of the secured party in the Equipment related to the Contracts
written as installment sales contracts, promissory notes, loan and security
agreements or other similar types of receivables ('Loan Contracts'), but
excluding the rights of the lessor in the Equipment subject to a Lease
Contract ('Leased Equipment') (which rights, subject to the allocation of
Liquidation Proceeds received in respect thereof, have been retained by the
Depositor); (ii) amounts on deposit in (and Eligible Investments allocated
to) certain accounts established pursuant to the Indenture and the Transfer
and Servicing Agreement, including the
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Collection Account and (for the benefit of the Class C Notes only) the Class
C Funding Account; and (iii) certain other property and assets as herein
described. The Trust Assets will secure payment of the Notes. See 'Source of
Payment and Security' below and 'The Owner Trust' herein.
Source of Payment and
Security....................... Principal of and interest on the Notes will be paid on each Payment Date,
after payment of the Servicing Fee, solely from, and secured by, the 'Amount
Available' for such Payment Date, which is equal to the sum of (a) those
Pledged Revenues on deposit in the Collection Account as of the last
Business Day preceding the related Determination Date (the 'Deposit Date')
(i) which were received by the Servicer during the related Collection Period
or which represent amounts paid by TCC or the Depositor to purchase
Contracts as of the end of such Collection Period ('Related Collection
Period Pledged Revenues'), or (ii) to the extent necessary to pay interest
on the Notes on such Payment Date, which were received by the Servicer after
the end of the related Collection Period but on or prior to such Deposit
Date ('Current Collection Period Pledged Revenues'), (b) amounts permitted
to be withdrawn therefor from the Cash Collateral Account, as described
under 'Cash Collateral Account' below, (c) with respect to the Class A-5
Notes only, amounts, if any, paid to the Indenture Trustee pursuant to the
Class A-5 Swap Agreement, and (d) with respect to the Class C Notes only,
amounts on deposit in the Class C Funding Account. For purposes of
allocating the Amount Available on any Payment Date to the payment of
interest on the Class A-5 Notes, the Class A-5 Notes will be assumed to bear
interest at a fixed rate of % per annum (the 'Class A-5 Assumed Fixed
Rate'). All interest at the Class A-5 Assumed Fixed Rate will be calculated
on the basis of a 360-day year comprised of twelve 30-day months. Any
amounts on deposit in the Class C Funding Account will be applied only to
the payment of interest or principal on the Class C Notes, and will not be
available to make payments on any other Class of Notes.
'Pledged Revenues' will consist of: (i) 'Scheduled Payments' on the Contracts
(which will consist of all payments under the Contracts other than those
portions of such payments which, under the Contracts, are to be (A) applied
by the Servicer to the payment of insurance charges, maintenance, taxes and
other similar obligations, or (B) retained by the Servicer in payment of
Administrative Fees) received on or after the Cut-Off Date and due during
the term of the Contracts, without giving effect to end-of-term extensions
or renewals thereof (including all Scheduled Payments due prior to, but not
received as of, the Cut-Off Date, but excluding any Scheduled Payments due
on or after, but received prior to, the Cut-Off Date); (ii) any voluntary
prepayments ('Prepayments') received on or after the Cut-Off Date under the
Contracts, provided that the amount, if any, by which any such Prepayment
exceeds the Required Payoff Amount of a Contract will not constitute Pledged
Revenues but will be allocated to the Depositor; (iii) any amounts paid by
TCC to purchase Contracts due to a breach of representations and warranties
with respect thereto, as described under 'Mandatory Purchase of Certain
Contracts' below, excluding, in the case of a Lease Contract, any portion
thereof allocable to the Depositor; (iv) any amounts paid by the Depositor
to purchase the Contracts as described under 'Optional Purchase of
Contracts' below; (v) certain of the proceeds derived from the liquidation
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of the Contracts and the related Equipment, as described under 'Liquidated
Contracts' below; and (vi) any earnings on the investment of amounts
credited to the Collection Account and the Class C Funding Account.
The Depositor will not transfer to the Owner Trust (1) its ownership or
security interest in the Leased Equipment, including the right to receive
the Leased Equipment (or the purchase price therefor or proceeds thereof)
upon expiration of the original term of the related Lease Contract, or (2)
the right to receive a portion of (a) Prepayments, as described in clause
(ii) above, and (b) the Liquidation Proceeds of any defaulted Lease
Contract, including any derived from the disposition of the related Leased
Equipment, as described under 'Liquidated Contracts' below. Amounts payable
to the Depositor in respect of the Leased Equipment or otherwise in respect
of Prepayments or Liquidation Proceeds of defaulted Lease Contracts will not
be available for payment of interest or principal on the Notes. See 'Leased
Equipment' below.
Class A-5 Swap Agreement......... The Owner Trust will enter into a swap agreement (the 'Class A-5 Swap
Agreement') with GSMMDP (the 'Class A-5 Swap Counterparty') for the sole
benefit of the Class A-5 Notes, pursuant to which (1) the Indenture Trustee
will agree to pay to the Class A-5 Swap Counterparty on each Payment Date an
amount equal to the interest that would be payable on the Class A-5 Notes on
such Payment Date if such Notes bore interest at the Class A-5 Assumed Fixed
Rate (but only from that portion of the Amount Available for such Payment
Date which would be available to pay interest on the Class A-5 Notes at such
rate), and (2) the Class A-5 Swap Counterparty will agree to pay to the
Indenture Trustee on each Payment Date an amount equal to the interest
payable on the Class A-5 Notes on such Payment Date at the Class A-5
Interest Rate. To the extent that interest calculated as aforesaid at the
Class A-5 Interest Rate exceeds interest calculated at the Class A-5 Assumed
Fixed Rate, (a) the Class A-5 Swap Counterparty will be obligated to pay an
amount equal to such excess to the Indenture Trustee, (b) such payment will
constitute a portion of the Amount Available (but only in respect of the
Class A-5 Notes) and (c) the Class A-5 Notes will be dependent upon such
payment for receipt of interest due thereon to the extent of such excess.
Likewise, to the extent that interest calculated as aforesaid at the Class
A-5 Assumed Fixed Rate exceeds interest calculated at the Class A-5 Interest
Rate, (i) the Owner Trust will be obligated to pay an amount equal to such
excess to the Class A-5 Swap Counterparty, (ii) such payment will have the
same priority, in terms of application of the Amount Available, as payment
of interest on the Class A-5 Notes, and (iii) any amount so payable will
reduce the Amount Available for payment of interest on the Subordinate
Notes, as well as principal on all Notes.
Any shortfall in the payment of interest on the Class A-5 Notes due to the
failure of the Class A-5 Swap Counterparty to make a required payment under
the Class A-5 Swap Agreement will not constitute an Event of Default under
the Indenture, and, except to the extent the Amount Available on any Payment
Date exceeds that which is necessary to pay the Servicing Fee, all interest
and principal on the Notes and all amounts payable in connection with the
Cash Collateral Account, no amounts in addition to those derived from the
Class A-5 Swap Agreement will be available under the Indenture to make up
such shortfall. The only
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remedies in such circumstances will be those available to the Owner Trust
under the Class A-5 Swap Agreement. See 'Description of the Notes -- The
Class A-5 Swap Agreement' herein.
Class A-5 Swap Counterparty...... GSMMDP, as counterparty to the Trust under the Class A-5 Swap Agreement. The
Class A-5 Swap Counterparty currently has a 'AAA' financial program rating
from Standard & Poor's and a 'Aaa' counterparty rating from Moody's. See
'Description of the Notes -- The Class A-5 Swap Counterparty' herein.
The Contracts.................... The aggregate of the Contracts expected to be held by the Owner Trust as part
of the Trust Assets, as of any particular date, is referred to as the
'Contract Pool,' and the Contract Pool, as of the Cut-Off Date, is referred
to as the 'Cut-Off Date Contract Pool.' For purposes of calculating
statistics relating to the Contracts presented herein, the Contract
Principal Balance of any Contract was calculated using an assumed discount
rate of 8.00%. The actual discount rate could differ depending upon, among
other factors, the interest rates of the Notes. In any event, the aggregate
of the initial principal balances of the Notes will be no more than the
Initial Contract Pool Principal Balance.
As of the Cut-Off Date, the Cut-Off Date Contract Pool had the following
characteristics (unless otherwise noted, percentages are by Initial Contract
Pool Principal Balance); (i) the Initial Contract Pool Principal Balance was
$1,146,940,285; (ii) there were 75,662 Contracts; (iii) the average Contract
Principal Balance was approximately $15,159; (iv) of such Contracts,
approximately 94.9% were Lease Contracts and approximately 5.1% were Loan
Contracts; (v) approximately 46.8% of such Contracts related to
telecommunications equipment; approximately 19.0% of such Contracts related
to manufacturing and construction equipment; and approximately 15.6% of such
Contracts related to computers and point-of-sale equipment; (vi) the
Obligors on approximately 14.7% of the Contracts were located in California;
approximately 10.5% were located in New York; approximately 7.7% were
located in New Jersey; approximately 6.7% were located in Texas;
approximately 5.8% were located in Florida; and no other state represented
more than 5.0% of the Contracts; (vii) approximately 92.4% of the Contracts
had been originated by the Originators, with the remaining 7.6% of the
Contracts having been originated by third parties and purchased by an
Originator; (viii) the remaining term of the Contracts ranged from 1 month
to 95 months; and (ix) the weighted average remaining term of the Contracts
was approximately 46.6 months and the weighted average age of the Contracts
was approximately 7.2 months. See 'The Contracts -- Certain Statistics
Relating to the Cut-Off Date Contract Pool' herein. 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.
Originators...................... The Contracts included in the Cut-Off Date Contract Pool have been originated
or, in some cases, acquired by one or more of three subsidiaries of TCC:
AT&T Capital Leasing Services, Inc. ('Leasing Services'), AT&T Credit
Corporation ('Credit Corp.'), and NCR Credit Corp. ('NCR Credit')
(collectively, the 'Originators'). See 'AT&T Capital Corporation' and 'The
Originators' in the Prospectus.
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Contract Prepayments............. The Contracts may (i) not permit the Obligor thereunder to prepay the amounts
due under such Contract or otherwise terminate the Contract prior to its
scheduled expiration date, or (ii) allow for a prepayment or early
termination only upon payment of an amount which is not less than the
present value (calculated in the manner specified in clause (1) of the
definition of 'Contract Principal Balance') of the unpaid Scheduled Payments
due on such Contract after the date of such prepayment, or (iii) permit
prepayment or early termination without the payment of an amount at least
equal to the amount described in clause (ii) above. As described under
'Principal' above and in 'Description of the Notes -- Principal,' the method
for calculating the Contract Principal Balance for any Contract is based
upon the prepayment features of such Contract. Under the Transfer and
Servicing Agreement, the Servicer will be permitted to allow Prepayments of
any of the Contracts, but only if the amount paid by or on behalf of the
Obligor (or, in the case of a partial Prepayment, the sum of such amount and
the remaining Contract Principal Balance of the Contract after application
of such amount) is at least equal to the Required Payoff Amount for such
Contract.
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 and not yet received, 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 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 (which will consist generally of all amounts received by
the Servicer in connection with the liquidation of a Contract and
disposition of the related Equipment, net of any related out-of-pocket
liquidation expenses) will be allocated as follows: (i) with respect to any
Loan Contract, all such Liquidation Proceeds will be allocated to the Owner
Trust; and (ii) with respect to any Lease Contract, such Liquidation
Proceeds will be allocated on a pro rata basis between the Depositor, on the
one hand, and the Owner Trust, on the other, based respectively on (a) the
'Book Value' of the Leased Equipment (which is a fixed amount equal to the
value of the Leased Equipment as shown on the accounting books and records
of TCC or the applicable Originator, as appropriate, as of the Cut-Off Date)
and (b) the Required Payoff Amount for such Lease Contract (determined as of
the Collection Period during which such Lease Contract became a Liquidated
Contract); provided that, in the event the Liquidation Proceeds in respect
of any Lease Contract and the related Leased Equipment exceed the sum of the
Required Payoff Amount for such Contract and the Book Value of such Leased
Equipment, any such excess shall be allocated solely to the Depositor. All
Liquidation Proceeds which are so allocable to the Owner Trust will be
deposited in the Collection Account and constitute Pledged Revenues to be
applied to the payment of interest and principal on the Notes 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
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Servicer from the Amount Available on each Payment Date, in an amount equal
to the product of one-twelfth of 1.25% per annum multiplied by the Contract
Pool Principal Balance determined as of the last day of the second preceding
Collection Period (or, in the case of the Servicing Fee with respect to the
Collection Period commencing on the Cut-Off Date, the Contract Pool
Principal Balance as of the Cut-Off Date), plus any late fees, late payment
interest, documentation fees, insurance administration charges and other
administrative charges and a portion of any extension fees (collectively,
the 'Administrative Fees') collected with respect to the Contracts during
the related Collection Period and any investment earnings on collections
prior to deposit thereof in the Collection Account. The Servicer may be
terminated as Servicer under certain circumstances, in which event a
successor Servicer would be appointed to service the Contracts. See 'AT&T
Capital Corporation' and 'Description of the Transfer and Servicing
Agreements -- Servicing -- Events of Termination' in the Prospectus.
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 AT&T Capital
Corporation' herein and in the Prospectus. The Indenture Trustee will be
entitled to require TCC to purchase any Contract and, in the case of a Lease
Contract, the related Leased Equipment, at a price equal to (i) the Required
Payoff Amount, plus (ii) if applicable, the Book Value of the related Leased
Equipment (which Book Value amount will be allocated to the Depositor), if
the value of the Contract is materially and adversely affected by a breach
of any such representation or warranty which is not cured within a specified
period.
Leased Equipment................. The Depositor will not transfer to the Owner Trust its ownership or security
interest in the Equipment related to the Lease Contracts (the 'Leased
Equipment'), including the right to receive the Leased Equipment (or the
purchase price therefor or proceeds thereof) upon expiration of the original
term of the related Lease Contract. The Depositor will also not transfer to
the Owner Trust the right to receive the following: (i) a portion of certain
Prepayments (as described in clause (ii) of the definition of 'Pledged
Revenues'), which portion is anticipated to represent the value of the
related Leased Equipment; (ii) a portion of the Liquidation Proceeds derived
from the liquidation of any Lease Contract and disposition of the related
Leased Equipment (as described under 'Liquidated Contracts' above); and
(iii) the purchase price paid by TCC to purchase any Leased Equipment due to
a breach of any of TCC's representations and warranties with respect to the
related Lease Contract (as described under 'Mandatory Purchase of Certain
Contracts' above). Amounts payable to the Depositor in respect of Leased
Equipment or otherwise as described above are not available to pay, and will
not provide security for the payment of, interest or principal on the Notes.
Cash Collateral Account.......... A 'Cash Collateral Account' will be established on or prior to the Closing
Date and will be available to the Indenture Trustee. The Cash Collateral
Account will initially be funded in an amount equal to % of the Initial
Contract Pool Principal Balance (approximately $ ). Amounts on deposit
from time to time in the Cash Collateral Account (up to, but not in excess
of, the Requisite Amount (as defined under 'Description of the
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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 and, as to the Class C Notes, the Class C Funding
Account as of any Deposit Date are insufficient therefor): (i) to pay
interest on the Notes in the following order of priority: (a) interest on
the Class A Notes (including any overdue interest and interest thereon, and
assuming the Class A-5 Notes bear interest at the Class A-5 Assumed Fixed
Rate), (b) interest on the Class B Notes (including any overdue interest and
interest thereon), and (c) interest on the Class C Notes (including any
overdue interest and interest thereon, and assuming deposits required to be
made to the Class C Funding Account on each Monthly Payment Date in respect
of interest on the Class C Notes constitute interest due and payable on the
Class C Notes); (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 (less,
with respect to each Monthly Payment Date occurring after the Principal
Balance of the Class B Notes has been reduced to zero, that portion of the
balance of the Class C Funding Account, if any, deposited therein in respect
of principal of the Class C Notes (in each case, after giving effect to all
distributions of principal, or the deposit to the Class C Funding Account in
respect thereof, from Available Pledged Revenues on such Monthly 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 at the applicable Stated Maturity Date thereof
and the first Payment Date on which the Contract Pool Principal Balance is
less than $1,000,000. If and to the extent that the amount on deposit in the
Cash Collateral Account as of any Monthly 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, 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. See 'Description of the Notes Cash Collateral Account.'
Priority of Payments............. On each Monthly 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 on such Monthly
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' in the
Prospectus): (i) the Servicing Fee; (ii) interest on the Notes in the
following order of priority: (a) interest on the Class A Notes
</TABLE>
S-17
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(including any overdue interest and interest thereon, and assuming the Class
A-5 Notes bear interest at the Class A-5 Assumed Fixed Rate), (b) interest
on the Class B Notes (including any overdue interest and interest thereon),
and (c) interest on the Class C Notes (including any overdue interest and
interest thereon), which (1) for any Quarterly Payment Date, shall be the
interest payable on the Class C Notes on such date less any amounts
previously deposited in the Class C Funding Account in respect of interest
on the Class C Notes and available therefor, and (2) for any other Monthly
Payment Date, shall generally be deemed to be one-third of the interest
payable on the Class C Notes on the next succeeding Quarterly Payment Date;
(iii) in respect of principal on the Notes in the priority described under
'Principal' above: (a) in the case of all Classes of Notes other than the
Class C Notes, an amount equal to the Monthly Principal Amount as of such
Monthly Payment Date, and (b) in the case of the Class C Notes, an amount
equal to the Monthly Principal Amount as of such Monthly Payment Date, less
any amounts deposited in the Class C Funding Account on previous Monthly
Payment Dates under this clause in respect of principal of the Class C Notes
and not previously distributed; (iv) to the Cash Collateral Account, the
amount, if any, necessary to increase the balance therein to the Requisite
Amount; (v) to payment of certain amounts payable in connection with the
Cash Collateral Account; (vi) to payment of any shortfalls in the payment of
interest on the Class A-5 Notes due to the failure of the Class A-5 Swap
Counterparty to pay amounts payable to the Indenture Trustee under the Class
A-5 Swap Agreement, together with interest on such shortfalls at the Class
A-5 Interest Rate; and (vii) the remainder, if any, to the Equity
Certificateholder. Any amount received by the Indenture Trustee on any
Monthly Payment Date from the Class A-5 Swap Counterparty pursuant to the
Class A-5 Swap Agreement shall be applied only to the payment of interest on
the Class A-5 Notes. Any amount described above in clause (ii)(c)(2) or, for
any Monthly Payment Date other than a Quarterly Payment Date, clause
(iii)(b) shall be deposited in the Class C Funding Account. On any Quarterly
Payment Date, any amounts on deposit in the Class C Funding Account shall be
applied to the payment of interest and principal on the Class C Notes as
described above in clauses (ii)(c)(1) and (iii)(b).
Optional Purchase of Contracts... The Depositor may purchase all of the Contracts on any Payment Date following
the date on which the unpaid Principal Balance of the Notes is less than 10%
of the Initial Contract Pool Principal Balance, subject to certain
provisions as described herein and in the Prospectus 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 as of such Payment Date plus interest to be
paid on the Notes on such Payment Date. The proceeds of such purchase shall
be applied on such Payment Date to the payment of the remaining Principal
Balance of the Notes, together with accrued interest thereon.
U.S. Taxation.................... In the opinion of counsel to the Depositor and the opinion of counsel to the
Underwriters, the Notes will be characterized as indebtedness and the Owner
Trust will not be characterized as an 'association' or 'publicly traded
partnership' taxable as a corporation for federal income tax purposes. Each
Noteholder, by its acceptance of a Note, will agree to treat
</TABLE>
S-18
<PAGE>
<PAGE>
<TABLE>
<S> <C>
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. Although there can be no
assurances in this regard, it appears that the Notes should be treated as
indebtedness without substantial equity features for purposes of such
regulation. As a result, subject to the considerations described in 'ERISA
Considerations' herein, the Notes are eligible for purchase with plan assets
of any Benefit Plan. However, a fiduciary or other person contemplating
purchasing the Notes on behalf of or with plan assets of any Benefit Plan
should carefully review with its legal advisors whether the purchase or
holding of the Notes could give rise to a transaction prohibited or not
otherwise permissible under ERISA or Section 4975 of the Code. See 'ERISA
Considerations.'
Legal Investment................. The Class A-1 Notes will be eligible securities for purchase by money market
funds under Rule 2a-7 under the Investment Company Act of 1940.
Registration, Clearance and
Settlement of Notes............ Each of the Notes will be registered in the name of Cede & Co., as the nominee
of The Depository Trust Company ('DTC'), and will be available for purchase
only in book-entry form on the records of DTC and definitive form only under
the limited circumstances described under 'Description of the
Notes -- Definitive Notes' in the Prospectus. 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 to the
Prospectus.
</TABLE>
S-19
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Governing Law.................... The Transfer and Servicing Agreement, the Trust Agreement, the Purchase
Agreements, the Indenture and the Notes will be governed by the laws of the
State of New York.
Additional Information........... Upon issuance, the Notes will be accepted for clearance and settlement through
DTC, Euroclear and Cedel Bank, as applicable.
</TABLE>
<TABLE>
<CAPTION>
COMMON CODE ISIN CUSIP
------------ ------------ ------------
<S> <C> <C> <C> <C>
Class A-1 Notes.......
Class A-2 Notes.......
Class A-3 Notes.......
Class A-4 Notes.......
Class A-5 Notes.......
Class B Notes.........
Class C Notes.........
</TABLE>
S-20
<PAGE>
<PAGE>
RISK FACTORS
Prospective Noteholders should consider the following factors in connection
with the purchase of the Notes:
LIMITED ASSETS OF THE OWNER TRUST
The Notes are secured by the payments to be derived from the Contracts and
other Trust Assets, which will not include any amounts constituting the purchase
price for or proceeds of Leased Equipment upon expiration of the original term
of the related Lease Contract or the portion of the Liquidation Proceeds derived
from the liquidation of any defaulted Lease Contract and disposition of the
related Leased Equipment that is allocable to the Depositor as described herein,
which amounts will be paid solely to the Depositor. Moreover, the Owner Trust
will have no assets other than the Contracts (including all or, in the case of
Lease Contracts, an allocable portion of the Liquidation Proceeds derived from
the disposition of the related Equipment or otherwise upon the liquidation of
defaulted Contracts), amounts on deposit from time to time in the Collection
Account and the accounts established pursuant to the Transfer and Servicing
Agreement and the right to certain amounts in the Cash Collateral Account. The
Notes will represent obligations solely of the Owner Trust, and none of the
Notes will be insured or guaranteed, directly or indirectly, by TCC, the
Depositor, the Indenture Trustee or the Owner Trustee (or any affiliate of any
of them) or any other person or entity. Consequently, Holders of the Notes must
rely for payment of interest and principal thereon on a given Payment Date on
the Amount Available for such Payment Date.
SUBORDINATION OF THE SUBORDINATE NOTES
To the extent described herein under 'Description of the
Notes -- Distributions' and ' -- Subordination of Subordinate Notes,' (i)
payments of interest and principal on the Subordinate 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 Class C Notes 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.
Delinquencies and defaults on the Contracts could eliminate the protection
afforded the Class C Noteholders by the Cash Collateral Account, and the Class C
Noteholders could incur losses on their investment as a result. Further
delinquencies and defaults on the Contracts could eliminate the protection
afforded the Class B Noteholders by the subordination of the Class C Notes, and
the Class B Noteholders could also incur losses on their investment as a result.
Still further delinquencies and defaults on the Contracts could eliminate the
protection offered to the Class A Noteholders by the subordination of the
Subordinate Notes, and the Class A Noteholders could also incur losses on their
investment as a result.
RELIANCE OF CLASS A-5 NOTEHOLDERS ON AMOUNTS PAYABLE UNDER CLASS A-5 SWAP
AGREEMENT
Under certain circumstances, the Class A-5 Notes will be dependent upon
payments to be made by the Class A-5 Swap Counterparty under the Class A-5 Swap
Agreement for receipt of the full amount of interest payable thereon. Any
shortfall in the payment of interest on the Class A-5 Notes due to the failure
of the Class A-5 Swap Counterparty to make a required payment under the Class
A-5 Swap Agreement will not constitute an Event of Default under the Indenture,
and, except to the extent the Amount Available on any Payment Date exceeds that
which is necessary to pay the Servicing Fee, all interest and principal payable
on the Notes as described under 'Description of the Notes -- Distributions' and
all amounts payable in connection with the Cash Collateral Account, no amounts
in addition to those derived from the Class A-5 Swap Agreement will be available
under the Indenture to make up such shortfall. The only remedies in such
circumstances will be those available to the Owner Trust under the Class A-5
Swap Agreement.
YIELD AND PREPAYMENT CONSIDERATIONS
The prepayment experience on the Contracts may affect the weighted average
life of the Notes. See 'Weighted Average Life of the Notes' herein and 'Risk
Factors -- Yield and Prepayment Considerations' in the Prospectus.
S-21
<PAGE>
<PAGE>
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 Underwriters expect, but
will not be obligated, to make a market for the Notes. 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.
THE OWNER TRUST
THE OWNER TRUST
The Owner Trust will be created on the Closing Date pursuant to a Trust
Agreement, dated as of November 1, 1997, between the Depositor and the Owner
Trustee.
On the Closing Date, the Depositor will, pursuant to the Transfer and
Servicing Agreement among the Depositor, the Indenture Trustee, the Owner
Trustee and the Servicer, transfer all of the Contracts and the related security
interests in the Equipment to the Owner Trust. The Owner Trust and the Indenture
Trustee will execute and deliver the Indenture, and the Indenture Trustee will
authenticate and deliver the Notes.
The Owner Trust will issue a certificate (the 'Equity Certificate'),
representing the beneficial ownership interest in the Owner Trust, to the
Depositor. The Equity Certificate will be entitled to any excess Amount
Available on any Payment Date after payment of Servicing Fees, principal and
interest on the Notes and amounts payable in connection with the Cash Collateral
Account as described under 'Description of the Notes -- Distributions' herein.
From and after the Closing Date, the Trust Assets will consist of:
(1) a pool of equipment lease contracts, installment sale contracts,
promissory notes, loan and security agreements and other similar types of
receivables (each, a 'Contract') with various lessees, borrowers or other
obligors thereunder (each, an 'Obligor'), including (a) all monies at any
time paid or payable thereon or in respect thereof from and after the
Cut-Off Date in the form of (i) Scheduled Payments (including all Scheduled
Payments due prior to, but not received as of, the Cut-Off Date, but
excluding any Scheduled Payments due on or after, but received prior to,
the Cut-Off Date), (ii) Prepayments (but excluding, in the case of a
Contract structured as a lease of the related Equipment (a 'Lease
Contract'), any portion thereof allocated to the Depositor, as described in
clause (ii) of the definition of 'Pledged Revenues'), and (iii) Liquidation
Proceeds (including any derived from the disposition of the related
Equipment) received with respect to defaulted Contracts (excluding, in the
case of a Lease Contract, any portion thereof allocable to the Depositor,
as described under 'Description of the Notes -- Liquidated Contracts'), and
(b) all rights of the secured party in the Equipment related to the
Contracts written as installment sales contracts, promissory notes, loan
and security agreements or other similar types of receivables ('Loan
Contracts'), but excluding the rights of the lessor in the Equipment
subject to a Lease Contract ('Leased Equipment') (which rights, subject to
the allocation of Liquidation Proceeds received in respect thereof, have
been retained by the Depositor);
(2) amounts on deposit in (and Eligible Investments allocated to)
certain accounts established pursuant to the Indenture and the Transfer and
Servicing Agreement, including the Collection Account and (for the benefit
of the Class C Notes only) the Class C Funding Account;
(3) the Depositor's rights under the Purchase Agreements;
(4) the Depositor's rights (but not its obligations) with respect to
the Cash Collateral Account; and
S-22
<PAGE>
<PAGE>
(5) (for the benefit of the Class A-5 Notes only) the Class A-5 Swap
Agreement.
The Owner Trust will not engage in any business activity other than (i)
issuing the Notes and the Equity Certificate, (ii) holding the Trust Assets,
(iii) making payments on the Notes and the Equity Certificate, (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 A-5 Receivable-Backed Notes...............................................
Class B Receivable-Backed Notes.................................................
Class C Receivable-Backed Notes.................................................
Equity 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 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.
THE CONTRACTS
DESCRIPTION OF THE CONTRACTS
All of the Contracts are commercial, rather than consumer, leases or loans.
Certain information with respect to the Contracts is set forth under the heading
'The Contracts' in the Prospectus.
REPRESENTATIONS AND WARRANTIES MADE BY AT&T CAPITAL CORPORATION
Under the Purchase Agreement, TCC will make the representations and
warranties regarding each Contract (and the related Equipment) as of the Cut-Off
Date that are set forth under 'The Contracts -- Representations and Warranties
Made by AT&T Capital Corporation' in the Prospectus.
S-23
<PAGE>
<PAGE>
CERTAIN STATISTICS RELATING TO THE CUT-OFF DATE CONTRACT POOL
GENERAL
The Depositor has prepared certain statistics relating to the Contract Pool
as of the Cut-Off Date (the 'Cut-Off Date Contract Pool'). For purposes of
calculating statistics relating to the Contracts presented herein, the Contract
Principal Balance of any Contract was calculated using an assumed discount rate
of 8.00%. The actual discount rate could differ depending upon, among other
factors, the interest rates of the Notes. In any event, the aggregate of the
initial principal balances of the Notes will be no more than the Initial
Contract Pool Principal Balance.
The Initial Contract Pool Principal Balance is an amount equal to
$1,146,940,285 (which amount is based upon the Contract Pool Principal Balance
determined as of the Cut-Off Date, but also includes an amount in respect of
Scheduled Payments on the Contracts due prior to, but not received as of, the
Cut-Off Date). The total number of Contracts in the Cut-Off Date Contract Pool
is 75,662. The average Contract Principal Balance of the Contracts, as of the
Cut-Off Date, was approximately $15,159. Within the Cut-Off Date Contract Pool,
92.4% of the Contracts (by Initial Contract Pool Principal Balance) were
originated by the Originators (or by other affiliates of TCC) and 7.6% of such
Contracts (by Initial Contract Pool Principal Balance) were purchased by the
Originators (or by other affiliates of TCC) from unrelated third parties.
Certain tables may not total due to rounding.
COMPOSITION OF THE CUT-OFF DATE CONTRACT POOL
<TABLE>
<CAPTION>
INITIAL WEIGHTED WEIGHTED AVERAGE
CONTRACT AVERAGE AVERAGE CONTRACT
NUMBER POOL ORIGINAL REMAINING PRINCIPAL
OF PRINCIPAL TERM TERM BALANCE
CONTRACTS BALANCE (RANGE) (RANGE) (RANGE)
- --------------------- -------------- ---------------------- ---------------------- --------------
<S> <C> <C> <C> <C>
75,662 $1,146,940,285 53.7 months 46.6 months $ 15,159
(6 months to 96 (1 month to 95 ($0 to
months) months) $12,945,941)
</TABLE>
TYPE OF CONTRACTS
The following table shows the distribution of the Cut-Off Date Contract
Pool between Lease Contracts and Loan Contracts by indicating the number of
Contracts in each category, the aggregate Contract Principal Balance of such
Contracts, and the percentage (by number of Contracts and by aggregate Contract
Principal Balance) of such Contracts relative to all of the Contracts in the
Cut-Off Date Contract Pool:
<TABLE>
<CAPTION>
% OF TOTAL % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
TYPE OF CONTRACT CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------- --------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Lease Contracts......................... 71,400 94.4% $1,088,999,031 94.9%
Loan Contracts.......................... 4,262 5.6 57,941,254 5.1
--------- ----------- ------------------ ------
Totals............................. 75,662 100.0% $1,146,940,285 100.0%
--------- ----------- ------------------ ------
--------- ----------- ------------------ ------
</TABLE>
S-24
<PAGE>
<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 % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
STATE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------------------------------ --------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Alabama......................................... 792 1.0% $ 11,667,519 1.0%
Alaska.......................................... 90 0.1 1,122,130 0.1
Arizona......................................... 1,293 1.7 32,206,322 2.8
Arkansas........................................ 257 0.3 5,882,586 0.5
California...................................... 9,745 12.9 168,384,558 14.7
Colorado........................................ 1,649 2.2 19,755,005 1.7
Connecticut..................................... 1,204 1.6 18,332,565 1.6
Delaware........................................ 283 0.4 3,160,250 0.3
District of Columbia............................ 541 0.7 8,469,443 0.7
Florida......................................... 5,394 7.1 66,699,654 5.8
Georgia......................................... 2,274 3.0 40,989,038 3.6
Hawaii.......................................... 143 0.2 1,245,792 0.1
Idaho........................................... 430 0.6 3,369,615 0.3
Illinois........................................ 3,356 4.4 51,834,251 4.5
Indiana......................................... 939 1.2 12,340,833 1.1
Iowa............................................ 207 0.3 3,286,635 0.3
Kansas.......................................... 454 0.6 8,836,103 0.8
Kentucky........................................ 521 0.7 4,535,560 0.4
Louisiana....................................... 15 0.0 133,361 0.0
Maine........................................... 15 0.0 147,655 0.0
Maryland........................................ 1,448 1.9 25,014,051 2.2
Massachusetts................................... 3,642 4.8 53,285,728 4.6
Michigan........................................ 2,898 3.8 39,155,369 3.4
Minnesota....................................... 1,026 1.4 15,381,749 1.3
Mississippi..................................... 366 0.5 6,525,968 0.6
Missouri........................................ 813 1.1 11,581,669 1.0
Montana......................................... 237 0.3 1,840,717 0.2
Nebraska........................................ 284 0.4 3,888,659 0.3
Nevada.......................................... 468 0.6 6,759,271 0.6
New Hampshire................................... 539 0.7 7,431,249 0.6
New Jersey...................................... 4,838 6.4 88,018,465 7.7
New Mexico...................................... 471 0.6 3,898,610 0.3
New York........................................ 7,714 10.2 120,812,417 10.5
North Carolina.................................. 1,748 2.3 23,152,760 2.0
North Dakota.................................... 54 0.1 526,279 0.0
Ohio............................................ 2,086 2.8 26,839,832 2.3
Oklahoma........................................ 597 0.8 6,691,289 0.6
Oregon.......................................... 772 1.0 10,291,029 0.9
Pennsylvania.................................... 3,858 5.1 41,493,091 3.6
Rhode Island.................................... 325 0.4 4,563,031 0.4
South Carolina.................................. 769 1.0 10,593,104 0.9
South Dakota.................................... 82 0.1 1,134,913 0.1
Tennessee....................................... 1,326 1.8 18,252,076 1.6
Texas........................................... 4,450 5.9 77,084,179 6.7
Utah............................................ 511 0.7 7,430,293 0.6
Vermont......................................... 194 0.3 2,991,463 0.3
Virginia........................................ 1,866 2.5 26,973,723 2.4
Washington...................................... 1,397 1.8 16,167,303 1.4
West Virginia................................... 242 0.3 2,968,007 0.3
Wisconsin....................................... 889 1.2 22,810,251 2.0
Wyoming......................................... 150 0.2 984,866 0.1
--------- ----- ------------------ -----
Total....................................... 75,662 100.0% $1,146,940,285 100.0%
--------- ----- ------------------ -----
--------- ----- ------------------ -----
</TABLE>
S-25
<PAGE>
<PAGE>
Adverse economic conditions in States where a substantial number of
Obligors are located, such as California, Florida, New Jersey, New York and
Texas, 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 TOTAL % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
PAYMENT STATUS CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------- --------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Current(1).............................. 73,103 96.6% $1,095,219,786 95.5%
30 - 59 Days Delinquent................. 2,559 3.4 51,720,499 4.5
--------- ----------- ------------------ ------
Totals............................. 75,662 100.0% $1,146,940,285 100.0%
--------- ----------- ------------------ ------
--------- ----------- ------------------ ------
</TABLE>
- ------------
(1) Includes Contracts not more than 29 days delinquent.
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 TOTAL % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
TYPE OF EQUIPMENT CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------- --------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Telecommunications...................... 37,814 50.0% $ 537,252,893 46.8%
Manufacturing and Construction.......... 6,434 8.5 217,563,926 19.0
Computers and Point-of-Sale............. 20,506 27.1 178,591,409 15.6
General Office.......................... 8,205 10.8 114,517,082 10.0
Printing................................ 1,662 2.2 51,047,898 4.5
Medical................................. 874 1.2 26,931,648 2.3
Other................................... 167 0.2 21,035,429 1.8
--------- ----------- ------------------ ------
Totals............................. 75,662 100.0% $1,146,940,285 100.0%
--------- ----------- ------------------ ------
--------- ----------- ------------------ ------
</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:
S-26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
% OF TOTAL % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------- --------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
$ 0 to $ 5,000.00............ 38,024 50.3% $ 96,128,185 8.4%
$ 5,000.01 to $ 25,000.00............ 28,799 38.1 310,957,831 27.1
$ 25,000.01 to $ 50,000.00............ 4,491 5.9 155,882,308 13.6
$ 50,000.01 to $ 100,000.00............ 2,674 3.5 187,386,940 16.3
$100,000.01 to $ 500,000.00............ 1,572 2.1 272,376,626 23.7
$500,000.01 to $1,000,000.00............ 69 0.1 47,129,896 4.1
Over $1,000,000.00...................... 33 0.0 77,078,500 6.7
--------- ----------- ------------------ ------
Totals............................. 75,662 100.0% $1,146,940,285 100.0%
--------- ----------- ------------------ ------
--------- ----------- ------------------ ------
</TABLE>
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 TOTAL % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
REMAINING TERM OF CONTRACTS CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------- --------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
One Month to 12 Months.................. 3,364 4.4% $ 9,779,985 0.9%
13 Months to 24 Months.................. 10,424 13.8 57,600,345 5.0
25 Months to 36 Months.................. 26,871 35.5 229,058,338 20.0
37 Months to 48 Months.................. 11,598 15.3 177,118,922 15.4
49 Months to 60 Months.................. 22,737 30.1 616,180,704 53.7
Over 60 Months.......................... 668 0.9 57,201,991 5.0
--------- ----------- ------------------ ------
Totals............................. 75,662 100.0% $1,146,940,285 100.0%
--------- ----------- ------------------ ------
--------- ----------- ------------------ ------
</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 1.1% 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 TOTAL % OF INITIAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT CONTRACT POOL
TYPE OF OBLIGOR CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------------------- --------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Service Organizations................... 40,240 53.2% $ 444,051,541 38.7%
Manufacturing and Construction.......... 11,143 14.7 319,749,503 27.9
Retail and Wholesale Trade.............. 9,893 13.1 149,125,040 13.0
Financial Services...................... 4,297 5.7 78,793,477 6.9
Other................................... 2,663 3.5 54,699,364 4.8
Printing and Copy Centers............... 1,330 1.8 39,593,907 3.5
Professionals........................... 4,562 6.0 37,463,157 3.3
Medical................................. 1,534 2.0 23,464,296 2.0
--------- ----------- ------------------ ------
Totals............................. 75,662 100.0% $1,146,940,285 100.0%
--------- ----------- ------------------ ------
--------- ----------- ------------------ ------
</TABLE>
S-27
<PAGE>
<PAGE>
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 five years and as of September 30, 1997. 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
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
WHICH WERE DELINQUENT
GROSS RECEIVABLE ----------------------------------------------------------
DATE OF BALANCE OF 31 TO 60 61 TO 90 91 TO 120 OVER 120
CALCULATION CONTRACTS DAYS DAYS DAYS DAYS TOTAL
- ---------------------------------------- ---------------- -------- -------- --------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
12/31/92................................ $3,301,712 2.48% 0.61% 0.37% 1.27% 4.73%
12/31/93................................ $3,437,492 2.55% 0.82% 0.37% 0.49% 4.23%
12/31/94................................ $3,933,735 2.85% 0.79% 0.42% 0.55% 4.61%
12/31/95................................ $4,150,411 3.66% 0.87% 0.45% 0.81% 5.79%
12/31/96................................ $4,446,528 4.15% 1.10% 0.49% 0.88% 6.62%
9/30/97................................ $4,390,038 2.82% 0.92% 0.43% 0.76% 4.93%
</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 December 31 in each of the past five
years and as of September 30, 1997. 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>
DATE OF CALCULATION
- ------------------- AGGREGATE PERCENTAGE OF
NET AGGREGATE NET INVESTMENT
INVESTMENT OF OF CONTRACTS WHICH WERE
CONTRACTS ON NON-ACCRUAL
-------------- ------------------------
(IN THOUSANDS)
<S> <C> <C>
12/31/92................................................................ $3,037,128 2.79%
12/31/93................................................................ $3,150,606 1.69%
12/31/94................................................................ $3,592,699 1.37%
12/31/95................................................................ $3,786,436 1.63%
12/31/96................................................................ $4,312,343 1.47%
9/30/97................................................................ $4,254,647 1.33%
</TABLE>
S-28
<PAGE>
<PAGE>
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 five years and during the 12-month period ending September
30, 1997. 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 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>
GROSS LOSSES AS A NET LOSSES AS A
AGGREGATE NET PERCENTAGE OF NET PERCENTAGE OF NET
DATE OF CALCULATION INVESTMENT OF CONTRACTS INVESTMENT INVESTMENT
- ------------------- ----------------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
12/31/92............................................ $ 3,037,128 2.74% 2.21%
12/31/93............................................ $ 3,150,606 2.56% 1.97%
12/31/94............................................ $ 3,592,699 1.88% 1.29%
12/31/95............................................ $ 3,786,436 1.95% 1.43%
12/31/96............................................ $ 4,312,343 2.18% 1.73%
9/30/97............................................ $ 4,254,647 2.42% 1.88%
</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.
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 type of
Equipment, 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.
S-29
<PAGE>
<PAGE>
WEIGHTED AVERAGE LIFE OF THE NOTES
THE FOLLOWING INFORMATION IS GIVEN SOLELY TO ILLUSTRATE THE EFFECT OF
PREPAYMENTS ON THE CONTRACTS ON THE WEIGHTED AVERAGE LIFE OF THE NOTES UNDER THE
ASSUMPTIONS STATED BELOW AND IS NOT A PREDICTION OF THE PREPAYMENT RATE THAT
MIGHT ACTUALLY BE EXPERIENCED BY THE CONTRACTS.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Notes will be primarily
a function of the rate at which payments are made on the Contracts. Payments on
the Contracts may be in the form of Scheduled Payments or prepayments
(including, for this purpose, liquidations due to default).
The Constant Prepayment Rate prepayment model ('CPR') represents an assumed
constant rate of prepayment of Contracts outstanding as of the beginning of each
month expressed as a per annum percentage. There can be no assurance that
Contracts will experience prepayments at a constant prepayment rate or otherwise
in the manner assumed by the prepayment model. See 'Risk Factors -- Yield and
Prepayment Considerations.'
The weighted average lives in the following table were determined assuming
that (i) Scheduled Payments on the Contracts are received in a timely manner and
prepayments are made at the percentages of the prepayment model set forth in the
table; (ii) the Depositor does not exercise its right to purchase the Contracts
described under 'Description of the Notes -- Optional Purchase of the
Contracts'; (iii) the Initial Contract Pool Principal Balance is $ and the
Contracts have the characteristics described under 'The Contracts'; (iv)
payments are made on the Notes on the 15th day of each month commencing December
15, 1997; and (v) the Notes are issued on December , 1997. No representation
is made that these assumptions will be correct, including the assumption that
the Contracts will not experience delinquencies or losses.
In making an investment decision with respect to the Notes, investors
should consider a variety of possible prepayment scenarios, including the
limited scenarios described in the table below.
WEIGHTED AVERAGE LIFE OF THE NOTES
AT THE RESPECTIVE CPRS SET FORTH BELOW:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE LIFE (YEARS)
---------------------------------------------
% CPR % CPR % CPR % CPR % CPR
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Class A-1 Notes............................................
Class A-2 Notes............................................
Class A-3 Notes............................................
Class A-4 Notes............................................
Class A-5 Notes............................................
Class B Notes..............................................
Class C Notes..............................................
</TABLE>
DESCRIPTION OF THE NOTES
The following information supplements the information in the Prospectus
under the heading 'Description of the Notes.'
GENERAL
The Notes will be issued pursuant to the terms of the Indenture. A copy of
the execution form of the Indenture will be filed in a Current Report on Form
8-K with the Securities and Exchange Commission after the issuance of the Notes.
The summary does not purport to be complete and is subject to all the provisions
of the Notes and the Indenture. Bankers Trust Company will be the Indenture
Trustee.
Pursuant to the Indenture, the Owner Trust will issue seven classes of
notes (the 'Notes'), consisting of five classes of senior notes, designated as
the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Notes
(collectively, the 'Class A Notes'), and two classes of subordinate Notes,
designated as the Class B Notes and the Class C Notes (collectively, the
'Subordinate Notes').
S-30
<PAGE>
<PAGE>
The Class A Notes will be senior in right of payment to the Subordinate
Notes, and the Class B Notes will be senior in right of payment to the Class C
Notes.
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 under 'Description of
the Notes -- Definitive Notes' in the Prospectus, no Note Owner acquiring an
interest in any Class of Notes will be entitled to receive a certificate
representing such Note Owner's interest in such Notes. Until such time, all
references herein to actions by Noteholders of any Class of Notes will refer to
actions taken by the Depository upon instructions from its participating
organizations and all references herein to distributions, notices, reports and
statements to Noteholders of any Class of Notes will refer to distributions,
notices, reports and statements to the Depository or its nominee, as the
registered Holder of the Notes of such Class, for distribution to Note Owners of
such Class in accordance with the Depository's procedures. See 'Description of
the Notes -- Book-Entry Registration' and ' -- Definitive Notes' in the
Prospectus.
DISTRIBUTIONS
Principal of and interest on the Notes will be paid on each Payment Date,
after payment of the Servicing Fee, solely from, and secured by, the Amount
Available for such Payment Date, which is equal to the sum of (a) those Pledged
Revenues on deposit in the Collection Account as of the last Business Day
preceding the related Determination Date (the 'Deposit Date') (i) which were
received by the Servicer during the related Collection Period or which represent
amounts paid by TCC or the Depositor to purchase Contracts as of the end of such
Collection Period ('Related Collection Period Pledged Revenues'), or (ii) to the
extent necessary to pay interest on the Notes on such Payment Date, which were
received by the Servicer after the end of the related Collection Period but on
or prior to such Deposit Date ('Current Collection Period Pledged Revenues' and,
together with the Related Collection Period Pledged Revenues, the 'Available
Pledged Revenues'), (b) amounts permitted to be withdrawn therefor from the Cash
Collateral Account, as described under ' -- Cash Collateral Account' below, (c)
with respect to the Class A-5 Notes only, amounts, if any, paid to the Indenture
Trustee pursuant to the Class A-5 Swap Agreement, and (d) with respect to the
Class C Notes only, amounts on deposit in the Class C Funding Account. For
purposes of allocating the Amount Available on any Payment Date to the payment
of interest on the Class A-5 Notes, the Class A-5 Notes will be assumed to bear
interest at a fixed rate of % per annum (the 'Class A-5 Assumed Fixed Rate').
All interest at the Class A-5 Assumed Fixed Rate will be calculated on the basis
of a 360-day year comprised of twelve 30-day months. Any amounts on deposit in
the Class C Funding Account will be applied only to the payment of interest or
principal on the Class C Notes, and will not be available to make payments on
any other Class of Notes.
'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
S-31
<PAGE>
<PAGE>
('Prepayments') received on or after the Cut-Off Date under the Contracts,
provided that the amount, if any, by which any such Prepayment exceeds the
Required Payoff Amount of a Lease Contract will not constitute Pledged Revenues
but will be allocated to the Depositor; (iii) any amounts paid by TCC to
purchase Contracts due to a breach of representations and warranties with
respect thereto, as described under 'The Contracts -- Representations and
Warranties Made by TCC' herein and in the Prospectus, excluding, in the case of
a Lease Contract, any portion thereof allocable to the Depositor; (iv) any
amounts paid by the Depositor to purchase the Contracts as described under
' -- Optional Purchase of Contracts' below; (v) certain of the Liquidation
Proceeds derived from the liquidation of the Contracts and the disposition of
the related Equipment, as described under ' -- Liquidated Contracts' below; and
(vi) any earnings on the investment of amounts credited to the Collection
Account and the Class C Funding Account.
Interest and principal on the Notes (other than the Class C 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 December 15, 1997 (each, a
'Monthly Payment Date'), to persons in whose names the Notes are registered (the
'Holders' or 'Noteholders') as of the related Record Date. Interest and
principal on the Class C Notes will be paid on each Monthly Payment Date
occurring in February, May, August and November (each, a 'Quarterly Payment
Date'), commencing, in the case of interest, February 17, 1998, and, in the case
of principal, the first such date occurring on or after the Monthly Payment Date
on which the Principal Balance of the Class B Notes has been reduced to zero, in
each case to Holders of record as of the related Record Date. 'Payment Date'
shall generally mean each Monthly Payment Date; provided that, when used with
respect to payment of interest or principal on the Class C Notes, 'Payment Date'
shall mean each Quarterly Payment Date. 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 book-entry form), or the last day of the prior calendar month
(if Definitive Notes have been issued).
A Class C Funding Account will be established under the Indenture into
which deposits, and from which payments, are required to be made in respect of
the payment of interest and principal on the Class C Notes as described below.
On each Monthly 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 on such Monthly 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 'Description of the Notes -- Events of Default; Rights
Upon Event of Default' in the Prospectus):
(i) the Servicing Fee;
(ii) interest on the Notes in the following order of priority:
(a) interest on the Class A Notes (including any overdue interest
and interest thereon, and assuming the Class A-5 Notes bear interest at
the Class A-5 Assumed Fixed Rate),
(b) interest on the Class B Notes (including any overdue interest
and interest thereon), and
(c) interest on the Class C Notes (including any overdue interest
and interest thereon), which (1) for any Quarterly Payment Date, shall
be the interest payable on the Class C Notes on such date less any
amounts previously deposited in the Class C Funding Account in respect
of interest on the Class C Notes and available therefor, and (2) for any
other Monthly Payment Date, shall generally be deemed to be one-third of
the interest payable on the Class C Notes on the next succeeding
Quarterly Payment Date;
(iii) in respect of principal on the Notes in the priority described
under ' -- Principal' below:
(a) in the case of all Classes of Notes other than the Class C
Notes, an amount equal to the Monthly Principal Amount, as of such
Monthly Payment Date, and
(b) in the case of the Class C Notes, an amount equal to the
Monthly Principal Amount as of such Monthly Payment Date, less any
amounts deposited in the Class C Funding Account in respect of principal
of the Class C Notes on previous Monthly Payment Dates under this clause
and not previously distributed;
S-32
<PAGE>
<PAGE>
(iv) to the Cash Collateral Account, the amount, if any, necessary to
increase the balance therein to the Requisite Amount;
(v) to payment of certain amounts payable in connection with the Cash
Collateral Account;
(vi) to payment of any shortfalls in the payment of interest on the
Class A-5 Notes due to the failure of the Class A-5 Swap Counterparty to
pay amounts payable to the Indenture Trustee under the Class A-5 Swap
Agreement, together with interest on such shortfalls at the Class A-5
Interest Rate; and
(vii) the remainder, if any, to the Equity Certificateholder.
Any amount received by the Indenture Trustee on any Monthly Payment Date from
the Class A-5 Swap Counterparty pursuant to the Class A-5 Swap Agreement shall
be applied only to the payment of interest on the Class A-5 Notes. Any amount
described above in clause (ii)(c)(2) or, for any Monthly Payment Date other than
a Quarterly Payment Date, clause (iii)(b) shall be deposited in the Class C
Funding Account. On any Quarterly Payment Date, any amounts on deposit in the
Class C Funding Account shall only be applied to the payment of interest and
principal on the Class C Notes as described above in clauses (ii)(c)(1) and
(iii)(b).
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 Supplement, or at the floating rate described below for the Class A-5
Notes (in each case, the 'Interest Rate' for such Class), from and including the
Closing Date to but excluding December 15, 1997, and thereafter for each
successive Interest Period. The Class A-5 Interest Rate for each Interest Period
will be the rate of interest per annum equal to % plus the London interbank
offered rate for United States dollar deposits having a maturity of one month
('One-Month LIBOR'), determined on the basis of Telerate Page 3750 as of 11:00
a.m., London time, on the related LIBOR Determination Date, as defined below.
Interest on the Class A-1 and Class A-5 Notes will be computed on the basis of
the actual number of days elapsed and a 360-day year. Interest on the Class A-2,
Class A-3 and Class A-4 Notes will be computed 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 Class A-Notes on each Payment Date will be the interest
accrued during the related Interest Period (computed on the basis described
above) and will be equal to the product of (i) the applicable Interest Rate,
(ii) the Principal Balance of the related Class as of the immediately preceding
Payment Date (after giving effect to reductions in Principal Balance on such
immediately preceding Payment Date) and (iii) a fraction equal to (a) in the
case of the Class A-2, Class A-3 and Class A-4 Notes, one-twelfth (or, for the
first Payment Date, divided by 360), and (b) in the case of the Class A-1 and
Class A-5 Notes, the number of days in such Interest Period divided by 360.
The Indenture Trustee will determine One-Month LIBOR with respect to the
Class A-5 Notes on , 1997, for the Interest Period from and including
the Closing Date to but excluding December 15, 1997, and, for each Interest
Period thereafter, on the second business day prior to the Monthly Payment Date
for the preceding Interest Period (each, a 'LIBOR Determination Date'). For
purposes of computing One-Month LIBOR, a business day is any business day on
which dealings in deposits in United States dollars are transacted in the London
interbank market.
In the event that, on any 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 case of the Class A-5
Notes, the determination of any such shortfall and allocation of Amount
Available will be based on the payment of interest thereon at the Class A-5
Assumed Fixed Rate, as discussed under 'Distributions' above, and will not
include in the Amount Available any amounts paid to the Indenture Trustee
pursuant to the Class A-5 Swap Agreement.
The 'Interest Periods' for each Class of Class A Notes will consist of an
initial period from and including the Closing Date to but excluding December 15,
1997, and thereafter each successive period (i) for the Class A-2, Class A-3 and
Class A-4 Notes, from and including the first day following completion of the
preceding
S-33
<PAGE>
<PAGE>
period to but excluding the 15th day of the following month (in each case
without respect to whether such days are Business Days) and (ii) for the Class
A-1 and Class A-5 Notes, from and including each Payment Date to but excluding
the following Payment Date, in each case until the Principal Balance of such
Class has been reduced to zero. The Payment Date with respect to each such
Interest Period will be the Monthly Payment Date next succeeding the end of such
Interest Period.
CLASS B INTEREST
Interest will be paid to the Holders of 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 Interest Rate for such Class specified on the cover of this
Prospectus Supplement, from and including the Closing Date to but excluding
December 15, 1997, and thereafter for each successive Interest Period. Interest
on the Class B Notes will be computed 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 and interest on the Class A Notes,
the amount of interest to be paid on the Class B Notes on each Payment Date will
be the interest accrued during the related Interest Period (computed on the
basis described above) and will be equal to the product of (i) the Class B
Interest Rate, (ii) the Class B Principal Balance as of the immediately
preceding Payment Date (after giving effect to reductions in Principal Balance
on such immediately preceding Payment Date) and (iii) a fraction equal to
one-twelfth (or, for the first Payment Date, divided by 360).
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 Class B Notes pro rata,
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
Class B Noteholders will be entitled to receive on the next Payment Date.
The 'Interest Periods' for the Class B Notes will consist of an initial
period from and including the Closing Date to but excluding December 15, 1997,
and thereafter each successive period from and including the first day following
completion of the preceding period to but excluding the 15th day of the
following month (in each case without respect to whether such days are Business
Days) until the Principal Balance of the Class B Notes has been reduced to zero.
The Payment Date with respect to each such Interest Period will be the Monthly
Payment Date next succeeding the end of such Interest Period.
CLASS C INTEREST
Interest will be paid to the Holders of Class C 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 Interest Rate for such Class specified on the cover of this
Prospectus Supplement, from and including the Closing Date to but excluding
February 15, 1998, and thereafter for each successive Interest Period. Interest
on the Class C Notes will be computed 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 and interest on the Class A and
Class B Notes, the amount of interest to be paid on the Class C Notes on each
Payment Date will be the interest accrued during the related Interest Period
(computed on the basis described above) and will be equal to the product of (i)
the Class C Interest Rate, (ii) the Class C Principal Balance as of the
immediately preceding Payment Date (after giving effect to reductions in
Principal Balance on such immediately preceding Payment Date) and (iii) a
fraction equal to one-fourth (or, for the first Payment Date, divided by
360).
In the event that, on a given Quarterly Payment Date, the Amount Available,
after payment of interest on the Class A and Class B Notes, is not sufficient to
make a full payment of interest to the Holders of Class C Notes, the amount of
interest to be paid on the Class C Notes will be allocated among the Class C
Notes pro rata, and the amount of such shortfall will be carried forward and,
together with interest thereon at the Class C Interest Rate, added to the amount
of interest Class C Noteholders will be entitled to receive on the next Payment
Date.
The 'Interest Periods' for the Class C Notes will consist of an initial
period from and including the Closing Date to but excluding February 15, 1998,
and thereafter each successive period from and including the first day following
completion of the preceding period to but excluding the 15th day of the third
following
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month (in each case without respect to whether such days are Business Days)
until the Principal Balance of the Class C Notes has been reduced to zero. The
Payment Date with respect to each such Interest Period will be the Monthly
Payment Date next succeeding the end of such Interest Period.
PRINCIPAL
To the extent the Amount Available is sufficient therefor after payment of
interest on the Notes, the aggregate amount of principal to be paid on the Notes
on each Payment Date (except in the case of the Class C Notes) will equal the
Monthly Principal Amount. Principal payable on the Notes will be paid on each
Payment Date in respect of principal on the Class A Notes until the Principal
Balance of each Class of Class A Notes has been reduced to zero, then in respect
of principal on the Class B Notes until the Class B Principal Balance has been
reduced to zero, and then in respect of principal on the Class C Notes until the
Class C Principal Balance has been reduced to zero. Principal paid on the Class
A Notes will be allocated % to the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes in the aggregate (paid first on the Class A-1 Notes until the Class
A-1 Principal Balance has been reduced to zero, then on the Class A-2 Notes
until the Class A-2 Principal Balance has been reduced to zero, then on the
Class A-3 Notes until the Class A-3 Principal Balance has been reduced to zero,
and then on the Class A-4 Notes until the Class A-4 Principal Balance has been
reduced to zero) and % to the Class A-5 Notes.
The 'Monthly Principal Amount' for any Monthly Payment Date will equal the
excess, if any, of (i) the sum of the Principal Balances of the Notes as of such
Monthly Payment Date (determined prior to the payment of any principal in
respect thereof on such Monthly 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 Monthly
Payment Date; provided that the amount referred to in clause (ii) shall be
deemed to be zero on any Payment Date on which the Contract Pool Principal
Balance is less than $1,000,000.
The 'Contract Principal Balance' of any Contract as of the last day of any
Collection Period is:
(1) in the case of any Contract that does not by its terms permit
prepayment or early termination, the present value of the unpaid Scheduled
Payments due on such Contract after such last day of the Collection Period
(excluding all Scheduled Payments due on or prior to, but not received as
of, such last day, as well as any Scheduled Payments due after such last
day and received on or prior thereto), after giving effect to any
Prepayments received on or prior to such last day, discounted monthly at
the rate of % per annum (assuming, for purposes of such calculation, that
each Scheduled Payment is due on the last day of the applicable Collection
Period);
(2) in the case of any Contract that permits prepayment or early
termination only upon payment of an amount that is at least equal to the
present value (calculated in the manner described in clause (1) above) of
the unpaid Scheduled Payments due on such Contract after the date of such
prepayment, the amount specified in clause (1) above; and
(3) in the case of any Contract that permits prepayment or early
termination without payment of an amount at least equal to the amount
specified in clause (2) above, the lesser of (a) the outstanding principal
balance of such 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 amount
specified in clause (1) above.
The Contract Principal Balance of any Contract which became a Liquidated
Contract during a given Collection Period or which TCC was obligated to purchase
as of the end of a given Collection Period due to a breach of representations
and warranties will, for purposes of computing the Monthly Principal Amount and
the Requisite Amount for the Cash Collateral Account, be deemed to be zero on
and after the last day of such Collection Period.
A 'Liquidated Contract' is any Contract (a) which the Servicer has charged
off as uncollectible in accordance with its credit and collection policies and
procedures (which shall be no later than the date as of which the Servicer has
repossessed and disposed of the related Equipment, or otherwise collected all
proceeds which, in the Servicer's reasonable judgment, can be collected under
such Contract), or (b) as to which 10% or more of a Scheduled Payment is
delinquent 180 days or more.
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The 'Collection Period' for any Payment Date will be the calendar month
preceding the month in which such Payment Date occurs.
The 'Initial Contract Pool Principal Balance' is $ (which amount is
based upon the Contract Pool Principal Balance determined as of the Cut-Off
Date, but also includes an amount in respect of Scheduled Payments on the
Contracts due prior to, but not received as of, the Cut-Off Date).
CLASS A-5 SWAP AGREEMENT
The Owner Trust will enter into a swap agreement (the 'Class A-5 Swap
Agreement') with GSMMDP (the 'Class A-5 Swap Counterparty') for the sole benefit
of the Class A-5 Notes, pursuant to which (1) the Owner Trust will agree to pay
to the Class A-5 Swap Counterparty on each Payment Date an amount equal to the
interest that would be payable on the Class A-5 Notes on such Payment Date if
such Notes bore interest at the Class A-5 Assumed Fixed Rate (but only from that
portion of the Amount Available for such Payment Date which would be available
to pay interest on the Class A-5 Notes at such rate), and (2) the Class A-5 Swap
Counterparty will agree to pay to the Indenture Trustee on each Payment Date an
amount equal to the interest payable on the Class A-5 Notes on such Payment Date
at the Class A-5 Interest Rate. To the extent that interest
calculated as aforesaid at the Class A-5 Interest Rate exceeds interest
calculated at the Class A-5 Assumed Fixed Rate, (a) the Class A-5 Swap
Counterparty will be obligated to pay an amount equal to such excess to the
Indenture Trustee, (b) such payment will constitute a portion of the Amount
Available (but only in respect of the Class A-5 Notes) and (c) the Class A-5
Notes will be dependent upon such payment for receipt of interest due thereon to
the extent of such excess. Likewise, to the extent that interest calculated as
aforesaid at the Class A-5 Assumed Fixed Rate exceeds interest calculated at the
Class A-5 Interest Rate, (i) the Owner Trust will be obligated to pay an amount
equal to such excess to the Class A-5 Swap Counterparty, (ii) such payment will
have the same priority, in terms of application of the Amount Available, as
payment of interest on the Class A-5 Notes, and (iii) any amount so payable will
reduce the Amount Available for payment of interest on the Subordinate Notes, as
well as principal on all Notes.
Any shortfall in the payment of interest on the Class A-5 Notes due to the
failure of the Class A-5 Swap Counterparty to make a required payment under the
Class A-5 Swap Agreement will not constitute an Event of Default under the
Indenture, and, except to the extent the Amount Available on any Payment Date
exceeds that which is necessary to pay the Servicing Fee, all interest and
principal on the Notes and all amounts payable in connection with the Cash
Collateral Account, no amounts in addition to those derived from the Class A-5
Swap Agreement will be available under the Indenture to make up such shortfall.
The only remedies in such circumstances will be those available to the Owner
Trust under the Class A-5 Swap Agreement.
CLASS A-5 SWAP COUNTERPARTY
The Class A-5 Swap Counterparty will be GSMMDP. GSMMDP was formed as a
Delaware limited partnership in October 1993 to act as principal in a broad
range of over-the-counter interest rate and currency derivative products. The
principal place of business of GSMMDP is 85 Broad Street, New York, New York
10004. GSMMDP currently has a 'AAA' financial program rating from Standard &
Poor's and a 'Aaa' counterparty rating from Moody's. GSMMDP is 50% owned by each
of The Goldman Sachs Group, L.P. and Mitsui Marine and Fire Insurance Co., Ltd.
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REDEMPTION OF NOTES
The Notes are subject to redemption in whole as referred to under
' -- Optional Purchase of Contracts' below.
OPTIONAL PURCHASE OF CLASS A-5 NOTES
The Depositor will have the right to purchase all of the Class A-5 Notes,
at par, on any Payment Date. Interest payable on the Class A-5 Notes on any such
Payment Date shall be paid to the Holders of record on the related Record Date
in the ordinary manner. Following such purchase, the Class A-5 Notes will not be
retired, but will continue to be entitled to interest and principal payments on
each Payment Date in the manner described above.
SUBORDINATION OF SUBORDINATE NOTES
The likelihood of payment of interest on each Class of Notes will be
enhanced by the application of the Amount Available, after payment of the
Servicing Fee, to the payment of such interest prior to the payment of principal
on any of the Notes, as well as by the preferential right of the Holders of
Class A and Class B Notes to receive such interest (1) in the case of the Class
A Notes, prior to the payment of any interest on the Subordinate Notes, and (2)
in the case of the Class B Notes, prior to the payment of any interest on the
Class C Notes. Likewise, the likelihood of payment of principal on the Class A
and Class B Notes will be enhanced by the preferential right of the Holders of
Notes of each such Class to receive such principal, to the extent of the Amount
Available, after payment of the Servicing Fee and interest on the Notes as
aforesaid, (i) in the case of the Class A Notes, prior to the payment of any
principal on the Subordinate Notes, and (ii) in the case of the Class B Notes,
prior to the payment of any principal on the Class C Notes.
CASH COLLATERAL ACCOUNT
The 'Cash Collateral Account' will be established on or prior to the
Closing Date and will be available to the Indenture Trustee. The Cash Collateral
Account will initially be funded in an amount equal to % of the Initial
Contract Pool Principal Balance (approximately $ ) (the 'Initial Amount').
Amounts on deposit from time to time in the Cash Collateral Account (up to, but
not in excess of, the Requisite Amount (as defined below), 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): (i)
to pay interest on the Notes in the following order of priority: (a) interest on
the Class A Notes (including any overdue interest and interest thereon, and
assuming the Class A-5 Notes bear interest at the Class A-5 Assumed Fixed Rate),
(b) interest on the Class B Notes (including any overdue interest and interest
thereon), and (c) interest on the Class C Notes (including any overdue interest
and interest thereon, and assuming deposits required to be made to the Class C
Funding Account on each Monthly Payment Date in respect of interest on the Class
C Notes constitute interest due and payable on the Class C Notes); (ii) to pay
any Principal Deficiency Amount (equal to the lesser of: (a) the aggregate
Liquidation Losses on all Contracts that became Liquidated Contracts during the
related Collection Period (the 'Current Realized Losses'), or (b) the excess, if
any, of (A) the aggregate Principal Balance of the Notes (less, with respect to
each Monthly Payment Date occurring after the Principal Balance of the Class B
Notes has been reduced to zero, that portion of the balance of the Class C
Funding Account, if any, deposited therein in respect of principal of the Class
C Notes (in each case, after giving effect to all distributions of principal, or
the deposit to the Class C Funding Account in respect thereof, from Available
Pledged Revenues on such Monthly 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 at the applicable
Stated Maturity Date thereof and on the first Payment Date on which the Contract
Pool Principal Balance is less than $1,000,000.
'Liquidation Loss' means, as to any Liquidated Contract, the excess, if
any, of (1) the Required Payoff Amount of such Contract for the Collection
Period during which such Contract became a Liquidated Contract, over (2) that
portion of the Liquidation Proceeds for such Liquidated Contract allocated to
the Owner Trust (as described under ' -- Liquidated Contracts' below).
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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 and not yet received, 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 otherwise be
payable from) any portion of a Prepayment on a Contract which exceeds the
Required Payoff Amount for such Contract.
If and to the extent that the amount on deposit in the Cash Collateral
Account as of any Monthly 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, as described under
' -- Distributions' above. The 'Requisite Amount' will be (i) for any Monthly
Payment Date on or prior to the Monthly Payment Date occurring in
, the Initial Amount, and (ii) for any Monthly Payment Date
thereafter, an amount equal to the greater of (a) the sum of (1) % of the
Contract Pool Principal Balance for such Monthly Payment Date, plus (2) the
excess, if any, of (A) the sum of the Principal Balances of the Notes less, with
respect to each Monthly Payment Date occurring after the Principal Balance of
the Class B Notes has been reduced to zero, that portion of the balance of the
Class C Funding Account, if any, deposited therein in respect of principal of
the Class C Notes (in each case, after giving effect to all distributions of
principal, or the deposit to the Class C Funding Account in respect thereof, on
such Monthly Payment Date), over (B) the Contract Pool Principal Balance for
such Payment Date, and (b) $ (which is % of the Initial Contract Pool
Principal Balance); provided that in no event will the Requisite Amount exceed
the sum of the Principal Balances of the Notes. 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.
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 'Description of the Notes -- Trust Accounts' in the
Prospectus).
LIQUIDATED CONTRACTS
Liquidation Proceeds (which will consist generally of all amounts received
by the Servicer in connection with the liquidation of a Contract and disposition
of the related Equipment, net of any related out-of-pocket liquidation expenses)
will be allocated as follows: (i) with respect to any Loan Contract, all such
Liquidation Proceeds will be allocated to the Owner Trust; and (ii) with respect
to any Lease Contract, such Liquidation Proceeds will be allocated on a pro rata
basis between the Depositor, on the one hand, and the Owner Trust, on the other,
based respectively on (a) the 'Book Value' of the Leased Equipment (which is a
fixed amount equal to the value of the Leased Equipment as shown on the
accounting books and records of TCC or the applicable Originator, as
appropriate, as of the Cut-Off Date) and (b) the Required Payoff Amount for such
Lease Contract (determined as of the Collection Period during which such Lease
Contract became a Liquidated Contract); provided that, in the event the
Liquidation Proceeds in respect of any Lease Contract and the related Leased
Equipment exceed the sum of the Required Payoff Amount for such Contract and the
Book Value of such Leased Equipment, any such excess shall be allocated solely
to the Depositor. By way of example, if the Servicer, in connection with a
defaulted Lease Contract, derived Liquidation Proceeds in the amount of $100
from the liquidation of such Lease Contract and disposition of the related
Leased Equipment, and if the Required Payoff Amount of such Lease Contract was,
as of the Collection Period during which such Lease Contract became a Liquidated
Contract, $120 and the Book Value of such Leased Equipment was $30, such
Liquidation Proceeds would be allocated to the Owner Trust in the amount of $80
and to the Depositor in the amount of $20. All Liquidation Proceeds which are so
allocable to the Owner Trust will be deposited in the Collection Account and
constitute Pledged Revenues to be applied to the payment of interest and
principal on the Notes in accordance with the priorities described under
' -- Distributions' above.
OPTIONAL PURCHASE OF CONTRACTS
The Depositor may purchase all of the Contracts on any Payment Date
following the date on which the unpaid Principal Balance of the Notes 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 as of such Payment Date plus interest to be paid
on the Notes on such Payment Date. The
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proceeds of such purchase shall be applied on such Payment Date to the payment
of the remaining Principal Balance of the Notes, together with accrued interest
thereon.
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 each Class of the Class A Notes,
including any unpaid interest from the prior Payment Date, and any
remaining unpaid interest on each Class of the Class A Notes;
(ii) the amount of interest paid on each Class of the Subordinate
Notes (or, for each Monthly Payment Date other than a Quarterly Payment
Date, the amount deposited in the Class C Funding Account in respect of
interest on the Class C Notes), including any unpaid interest from the
prior Payment Date, and any remaining unpaid interest on each Class of the
Subordinate Notes;
(iii) the amount of principal paid on each Class of the Class A Notes;
(iv) the amount of principal paid on each Class of the Subordinate
Notes;
(v) the Principal Deficiency Amount, if any, for such Payment Date;
(vi) 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); and
(vii) the amount on deposit in the Class C Funding Account.
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 in the Prospectus 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 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 1997.
THE INDENTURE TRUSTEE
Bankers Trust Company 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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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 Shearman & Sterling, counsel to the Underwriters (collectively,
'Counsel'), are each delivering their opinion regarding certain federal income
tax matters discussed below. The opinions of Counsel address only those issues
specifically identified below as being covered by such opinions; however, the
opinions of Counsel also state that the additional discussion set forth below
accurately sets forth Counsel's advice with respect to material tax issues. The
opinions of Counsel are not binding on the Internal Revenue Service (the 'IRS').
There can be no assurance that the IRS will take a similar view of such issues,
and no assurance can be given that the opinions of Counsel would be sustained if
challenged by the IRS. No ruling on any of the issues discussed below will be
sought from the IRS.
This summary does not purport to be a complete analysis of all the
potential federal income tax consequences relating to the purchase, ownership
and disposition of the Notes. Moreover, the discussion does not address all
aspects of taxation that may be relevant to particular purchasers in light of
their individual circumstances (including the effect of any foreign, state or
local tax laws) or to certain types of purchasers (including dealers in
securities, insurance companies, financial institutions and tax-exempt entities)
subject to special treatment under United States federal income tax laws. The
discussion below assumes that the Notes are held as capital assets.
The discussion of the United States federal income tax consequences set
forth below is based upon currently existing provisions of the Internal Revenue
Code of 1986, as amended (the 'Code'), judicial decisions and administrative
interpretations, all of which are subject to change, which changes may be
retroactive. Because individual circumstances may differ, each prospective
purchaser of the Notes is strongly urged to consult its own tax advisor with
respect to its particular tax situation and the tax effects of any state, local,
foreign, or other tax laws and possible changes in the tax laws.
As used herein, the term 'United States Holder' means a beneficial owner of
a Note who or which is for United States federal income tax purposes either (i)
a citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust, (A) with respect to which a court within the United States is able
to exercise primary supervision over its administration, and one or more United
States fiduciaries have the authority to control all of its substantial
decisions, or (B) otherwise, the income of which is subject to U.S. federal
income tax regardless of its source. The term also includes certain former
citizens of the United States whose income and gain on the Notes will be subject
to United States taxation. As used herein, the term 'United States Alien Holder'
means a beneficial owner of a Note that is not a United States Holder.
TREATMENT OF THE NOTES
In the opinion of Counsel, the Notes will be treated as indebtedness for
United States federal income tax purposes. Under the terms of the Notes and the
Indenture, each Noteholder agrees and acknowledges upon its purchase of the
Notes and by acceptance of the Notes that it will also treat the Notes as
indebtedness for such purposes.
TREATMENT OF THE OWNER TRUST
In the opinion of Counsel, the Owner Trust will not be characterized as an
'association' taxable as a corporation for United States federal income tax
purposes. In addition, in the opinion of Counsel, the Owner Trust will not be
characterized as a 'publicly traded partnership' taxable as a corporation for
United States federal income tax purposes, based on Counsel's opinion that the
Notes will be treated as indebtedness for federal income tax purposes. If the
Owner Trust were treated as either an association or a publicly traded
partnership taxable as a corporation, the resulting entity would be subject to
federal income taxes at corporate tax rates on its taxable income generated by
ownership of the Contracts, and certain distributions by the entity would not be
deductible in computing the entity's taxable income. Such an entity-level tax
could result in reduced distributions to Noteholders.
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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
0.25% of the stated redemption price at maturity of a Note multiplied by the
number of full years until its maturity date or, in the case of the Notes which
have more than one principal payment, the weighted average maturity date. It is
anticipated that the Notes will not be considered issued with more than de
minimis OID. Under the OID regulations, a holder of a Note issued with a de
minimis amount of OID must include an allocable portion of such OID in income as
principal payments are made on the Note.
While it is not anticipated that the Notes will be issued with more than de
minimis OID, it is possible that they will be so issued. If the Notes are issued
with more than de minimis OID, such OID would be includible in the income of
United States Holders 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 United States Holders using the accrual method of
accounting. Cash method United States Holders, 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 United States Holder should consult its
own tax advisor regarding the impact of the OID rules if the Notes are issued
with OID and the consequences to such holder as a result of special rules in the
Code which are applicable to debt instruments whose principal payments may be
accelerated by reason of prepayments of other obligations securing such debt
instruments.
MARKET DISCOUNT
If a United States Holder purchases a Note at a price that is less than its
remaining principal amount or, in the case of a Note issued with OID, its
adjusted issue price, by 0.25% or more of such amount multiplied by the number
of whole years to maturity, the Note will be considered to bear 'market
discount' in the hands of such United States Holder. In such case, principal
payments received by the United States Holder, or gain realized by the United
States Holder on the disposition of the Note, generally will be treated as
ordinary interest income to the extent of the market discount that accrued on
the Note while held by such United States Holder and that has not previously
been included in income. Market discount generally accrues on a straight-line
basis over the remaining term of a Note except that, at the election of the
United States Holder, market discount may accrue on a constant yield basis. A
United States Holder may not be allowed to deduct immediately all or a portion
of the interest expense on any indebtedness incurred or continued to purchase or
to carry such Note. A United States Holder may elect to include market discount
in income currently as it accrues (either on a straight-line basis or, if the
United States Holder so elects, on a constant yield basis), in which case the
interest deferral rule set forth in the preceding sentence will not apply. Such
an election will apply to all bonds acquired by the United States Holder on or
after the first day of the first taxable year to which such election applies and
may be revoked only with the consent of the IRS.
AMORTIZABLE BOND PREMIUM
If a United States Holder purchases a Note for an amount that is greater
than the amount payable at maturity, such holder will be considered to have
purchased such Note with 'amortizable bond premium' equal in amount to such
excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium using a constant yield method over the remaining term of
the Note. The amount amortized in any year will be treated as a reduction of the
United States Holder's interest income from the Note in such year. A United
States Holder that elects to amortize bond premium must reduce its tax basis in
the Note by the amount of the premium amortized in any year. An election to
amortize bond premium applies to all taxable debt obligations
S-41
<PAGE>
<PAGE>
held on the first day of the first taxable year to which the election applies or
thereafter acquired by the United States Holder and may be revoked only with the
consent of the IRS.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Upon the sale, exchange or retirement of a Note, a United States Holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (not including any amount
attributable to accrued but unpaid interest) and such holder's adjusted tax
basis in the Note. To the extent attributable to accrued but unpaid interest,
the amount realized by a United States Holder would be treated as a payment of
interest. A United States Holder's adjusted tax basis in a Note will equal the
cost of the Note to such holder, increased by the amount of any OID and market
discount previously included in income by such holder with respect to such Note
and reduced by any amortized bond premium and any principal payments received by
such holder.
Subject to the discussion of market discount above, gain or loss realized
on the sale, exchange or retirement of a Note by a United States Holder will be
capital gain or loss, and will be short-term, mid-term or long-term capital gain
or loss depending upon whether at the time of the sale, exchange or retirement,
the Note has been held for less than one year, more than one year or more than
eighteen months. Mid-term and long-term capital gains are taxed at a lower rate
than ordinary income for certain non-corporate taxpayers, but not for corporate
taxpayers. The distinction between capital gain or loss and ordinary income or
loss is also relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payments of principal of and interest on the Notes by the Trustee
or any paying agent to a beneficial owner of a Note that is a United States
Alien Holder, as defined above, will not be subject to United States
federal withholding tax, provided that, in the case of interest, (i) such
holder does not own, actually or constructively, 10 percent or more of the
total combined voting power of all classes of stock of the Depositor or TCC
entitled to vote, (ii) such holder is not, for United States federal income
tax purposes, a controlled foreign corporation related, directly or
indirectly, to the Depositor or TCC through stock ownership, (iii) such
holder is not a bank receiving interest described in Section 881(c)(3)(A)
of the Code, and (iv) the certification requirements under Section 871(h)
or Section 881(c) of the Code and Treasury regulations thereunder
(summarized below) are met;
(b) a United States Alien Holder of a Note will not be subject to
United States federal income tax on gain realized on the sale, exchange or
other disposition of such Note, unless (i) such holder is an individual who
is present in the United States for 183 days or more in the taxable year of
sale, exchange or other disposition, and certain conditions are met or (ii)
such gain is effectively connected with the conduct by such holder of a
trade or business in the United States; and
(c) a Note held by an individual who is not a citizen or resident of
the United States at the time of his death will not be subject to United
States federal estate tax as a result of such individual's death, provided
that, at the time of such individual's death, the individual does not own,
actually or constructively, 10 percent or more of the total combined voting
power of all classes of stock of the Depositor or TCC entitled to vote and
payments with respect to such Note would not have been effectively
connected to the conduct by such individual of a trade or business in the
United States.
Sections 871(h) and 881(c) of the Code and Treasury Regulations thereunder
require that, in order to obtain the exemption from withholding tax described in
paragraph (a) above, either (i) the beneficial owner of a Note must certify
under penalties of perjury to the Indenture Trustee or the paying agent, as the
case may be, that such owner is a United States Alien Holder and must provide
such owner's name and address, and United States taxpayer identification number,
if any, or (ii) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a 'Financial Institution') and holds the Note on behalf of the
beneficial owner thereof must certify under penalties of perjury to the
Indenture Trustee or the paying agent, as the case may be, that such certificate
has been received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and must furnish the payor with copy
thereof. A certificate described in this paragraph is effective only with
respect to payments of interest made to
S-42
<PAGE>
<PAGE>
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 the information shown on IRS Form
W-8 changes, a new IRS Form W-8 must be filed within 30 days of such change. IRS
Form W-8 is valid for the calendar year in which filed and the two succeeding
calendar years.
A United States Alien Holder residing in a country that has a tax treaty
with the United States may be eligible for an exemption or reduced rate
(depending upon the terms of the treaty) with respect to U.S. withholding tax.
In order to secure this exemption or reduced rate, the United States Alien
Holder (or his agent) must certify the holder's residence in the treaty country
by filing IRS Form 1001. If the treaty provides only for a reduced rate, U.S.
withholding tax will be imposed at the reduced rate unless the requirements set
forth in paragraph (a) above and the immediately preceding paragraph (including
filing of IRS Form W-8) are satisfied. IRS Form 1001 is valid for the calendar
year in which filed and the two succeeding calendar years.
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 effectively connected 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.
IRS Form 4224 is valid solely for the calendar year in which filed.
New Withholding Rules in 1999. Effective January 1, 1999, new withholding
tax regulations will take effect with respect to interest payments and certain
other categories of payments made to United States Alien Holders. Among other
things, these regulations generally will require any United States Alien Holder
that seeks the protection of an income tax treaty with respect to the imposition
of U.S. withholding tax to obtain a taxpayer identification number ('TIN') from
the IRS in advance and provide verification that such holder is entitled to the
protection of the relevant income tax treaty. Tax-exempt United States Alien
Holders will generally be required to provide verification of their tax-exempt
status. United States Alien Holders are urged to consult with their tax advisors
with respect to these new withholding rules.
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 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
S-43
<PAGE>
<PAGE>
above) or has otherwise established an exemption, provided in each case that the
Indenture Trustee or such paying agent, as the case may be, does not have actual
knowledge that the payee is a United States Holder.
Under current Treasury Regulations, if payments on a Note are made to or
through a foreign office of a custodian, nominee or other agent acting on behalf
of a beneficial owner of a Note, such custodian, nominee or other agent will not
be required to apply backup withholding to such payments made to such beneficial
owner.
Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. Payments to or through the United
States office of a broker will be subject to backup withholding and information
reporting unless the holder certifies under penalties of perjury that it is not
a United States Holder and that certain other conditions are met or otherwise
establishes an exemption.
Holders of Notes should consult their tax advisors regarding the
application of backup withholding in their particular situations, the
availability of an exemption therefrom and the procedure for obtaining such an
exemption, if available. Any amounts withheld from payment under the backup
withholding rules will be allowed as a credit against a holder's United States
federal income tax liability and may entitle such holder to a refund, provided
that the required information is furnished to the IRS.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
Counsel, the Service successfully asserted that one or more classes of Notes did
not represent indebtedness for federal income tax purposes, the Notes might be
treated as equity interests in the Owner Trust. If so treated, the Owner Trust
might be characterized as a publicly traded partnership taxable as a corporation
with the adverse consequences described above (and the taxable corporation would
not be able to reduce its taxable income by deductions for interest expense on
Notes recharacterized as equity). In addition, treatment of the Notes as equity
interests in such a partnership could have adverse tax consequences to certain
holders. For example, income to foreign holders generally would be subject to
federal tax and federal tax return filing and withholding requirements at a rate
as high as 30%, and individual holders might be subject to certain limitations
on their ability to deduct their share of Owner Trust expenses.
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 AND ESTATE TAX
LAWS AND ANY RECENT OR POSSIBLE CHANGES IN APPLICABLE TAX LAWS.
ERISA CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under 'ERISA
Considerations.'
Section 406 of the Employee Retirement Income Security Act ('ERISA'),
and/or Section 4975 of the Code, prohibits a pension, profit-sharing or other
employee benefit plan, as well as individual retirement accounts and certain
types of Keogh Plans (each a 'Benefit Plan') from engaging in certain
transactions with persons that are 'parties in interest' under ERISA or
'disqualified persons' under the Code with respect to such Benefit Plan. A
violation of these 'prohibited transaction' rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons. Title
I of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA
make investments that are prudent, diversified (except if prudent not to do so)
and in accordance with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code if assets of the Owner Trust were deemed to be assets of a Benefit Plan.
Under a regulation issued by the United States Department of Labor (the 'Plan
Assets Regulation'), the assets of the Owner Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquires an 'equity interest' in the Owner Trust and none of the
exceptions contained in the Plan Assets Regulation is applicable. An equity
interest is defined under the Plan Assets Regulation as an interest in an entity
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The Plan Assets Regulation
also provides that a beneficial interest in a trust is an equity interest.
Although there can be no assurances in this regard, it appears that the Notes
should be treated as debt without substantial equity features for purposes of
the Plan Assets
S-44
<PAGE>
<PAGE>
Regulation and that the Notes do not constitute beneficial interests in the
Owner Trust for purposes of the Plan Assets Regulation. However, without regard
to whether the Notes are treated as an equity interest for such purposes, the
acquisition or holding of Notes by or on behalf of a Benefit Plan could be
considered to give rise to a prohibited transaction if the Owner Trust, the
Owner Trustee or the Indenture Trustee, or any of their respective affiliates is
or becomes a party in interest or a disqualified person with respect to such
Benefit Plan. In such case, certain exemptions from the prohibited transaction
rules could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to acquire a Note. Included among these exemptions
are: Prohibited Transaction Class Exemption ('PTCE') 96-23, regarding
transactions effected by 'in-house asset managers'; PTCE 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 95-60, regarding
transactions effected by 'insurance company general accounts'; PTCE 91-38,
regarding investments by bank collective investment funds; and PTCE 84-14,
regarding transactions effected by 'qualified professional asset managers.'
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF ANY OF THE NOTES SHOULD
CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING WHETHER THE ASSETS OF THE OWNER
TRUST WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBILITY OF EXEMPTIVE RELIEF FROM
THE PROHIBITED TRANSACTION RULES AND OTHER ISSUES AND THEIR POTENTIAL
CONSEQUENCES.
RATINGS OF THE NOTES
It is a condition of issuance that each of Standard & Poor's Rating
Services, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. and
Fitch Investors Service, L.P. (i) rate the Class A-1 Notes in its highest
short-term rating category, (ii) rate the Class A-2, Class A-3, Class A-4 and
Class A-5 Notes in its highest long-term rating category, (iii) rate the Class B
Notes at least 'A,' 'A2,' 'A' and 'A,' respectively, and (iv) rate the Class C
Notes at least 'BBB,' 'Baa2,' 'BBB' and 'BBB,' respectively. The rating of each
Class of Notes addresses the likelihood of the timely receipt of interest and
payment of principal on such Class of Notes on or before the Stated Maturity
Date for such Class. The rating of the Notes will be based primarily upon the
Pledged Revenues, the Cash Collateral Account, the Class A-5 Swap Agreement (in
the case of the Class A-5 Notes) and the subordination provided by (1) the
Subordinate Notes, in the case of the Class A Notes and (2) the Class C Notes,
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.
The term 'United States Person' means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States or any political subdivision thereof, (iii) an estate the
income of which is includible in gross income for United States federal income
tax purposes, regardless of its source, or (iv) a trust, (A) with respect to
which a court within the United States is able to exercise primary supervision
over its administration, and one or more United States fiduciaries have the
authority to control all of its substantial decisions, or (B) otherwise, the
income of which is subject to U.S. federal income tax regardless of its source.
USE OF PROCEEDS
The proceeds from the offering and sale of the Notes, after funding a
portion of the Cash Collateral Account and paying the expenses of the Depositor,
will be used by the Depositor to pay down certain warehousing facilities, and
any remaining funds will be paid to the Originators.
S-45
<PAGE>
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the United States underwriting
agreement (the 'Underwriting Agreement'), the underwriters named below (the
'Underwriters'), through their representatives, Goldman, Sachs & Co. (the
'Representatives'), have severally agreed to purchase from the Depositor the
following respective initial principal amount of 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
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITERS CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
- ---------------------------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Goldman, Sachs & Co.....................
BZW Securities Inc......................
First Chicago Capital Markets, Inc......
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................
J.P. Morgan Securities Inc..............
Total..............................
</TABLE>
<TABLE>
<CAPTION>
INITIAL INITIAL INITIAL
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITERS CLASS A-5 NOTES CLASS B NOTES CLASS C NOTES
- ---------------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Goldman, Sachs & Co.....................
BZW Securities Inc......................
First Chicago Capital Markets, Inc......
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................
J.P. Morgan Securities Inc..............
Total..............................
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any of such Notes are purchased. The Depositor has been advised by the
Representatives that the Underwriters propose initially to offer the 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 % per Class A-1 Note, % per Class A-2 Note, % per Class
A-3 Note, % per Class A-4 Note, % per Class A-5 Note, % per Class B
Note and % per Class C Note. The Underwriters may allow and such dealers may
reallow to other dealers a discount not in excess of % per Class A-1 Note,
% per Class A-2 Note, % per Class A-3 Note, % per Class A-4 Note, %
per Class A-5 Note, % per Class B Note and % per Class C Note. After the
Notes are released for sale to the public, the offering prices and other selling
terms may be varied by the Representatives.
TCC and certain of its affiliates have agreed to indemnify the 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 Representatives that the Underwriters
intend to make a market in the Notes 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.
As described under 'Description of the Notes -- Class A-5 Swap
Counterparty,' the Goldman Sachs Group, L.P. has a 50% ownership interest in the
Class A-5 Swap Counterparty. Funds in the Cash Collateral Account and the Trust
Accounts may, from time to time, be invested in Eligible Investments acquired
from the Underwriters.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
Depositor by Dorsey & Whitney LLP. Shearman & Sterling will act as counsel to
the Underwriters. 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.
S-46
<PAGE>
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------------
<S> <C>
Administrative Fees............................................................................. S-16
Amount Available................................................................................ S-12
Available Pledged Revenues...................................................................... S-31
Benefit Plan.................................................................................... S-44
Book Value...................................................................................... S-15, S-38
Cash Collateral Account......................................................................... S-12
Class A Notes................................................................................... F, S-7, S-30
Class A-5 Assumed Fixed Rate.................................................................... S-31
Class A-5 Interest Rate......................................................................... S-3
Class A-5 Swap Agreement........................................................................ S-2, S-36
Class A-5 Swap Counterparty..................................................................... S-2, S-36
Class C Funding Account......................................................................... S-32
Closing Date.................................................................................... S-10
Code............................................................................................ S-40
Collection Period............................................................................... S-9, S-36
Commission...................................................................................... S-4
Contract Pool................................................................................... S-14
Contract Pool Principal Balance................................................................. S-8, S-35
Contract Principal Balance...................................................................... S-9
Contracts....................................................................................... S-2, S-11
Counsel......................................................................................... S-40
CPR............................................................................................. S-30
Credit Corp..................................................................................... S-14
Current Collection Period Pledged Revenues...................................................... S-12, S-31
Current Realized Losses......................................................................... S-37
Cut-Off Date.................................................................................... S-10
Cut-Off Date Contract Pool...................................................................... S-14, S-24
Delinquency..................................................................................... S-28
Deposit Date.................................................................................... S-12, S-31
Depositor....................................................................................... F, S-6
Depository...................................................................................... S-31
DTC............................................................................................. S-4, S-19
Equipment....................................................................................... S-6
Equity Certificate.............................................................................. S-22
ERISA........................................................................................... S-19, S-44
Exchange Act.................................................................................... S-4
Financial Institution........................................................................... S-42
Global Notes.................................................................................... S-31
Gross Losses.................................................................................... S-29
Holders......................................................................................... S-10, S-19, S-32
Indenture....................................................................................... F, S-6
Indenture Trustee............................................................................... F, S-6
Initial Amount.................................................................................. S-37
Initial Contract Pool Principal Balance......................................................... S-9, S-36
Interest Periods................................................................................ S-8, S-33, S-34
Interest Rate................................................................................... S-2, S-7, S-33
IRS............................................................................................. S-40
Lease Contract.................................................................................. S-11
Leased Equipment................................................................................ S-2, S-11
Leasing Services................................................................................ S-14
LIBOR Determination Date........................................................................ S-33
Liquidated Contract............................................................................. S-11, S-15, S-35
</TABLE>
S-47
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------------
<S> <C>
Liquidation Loss................................................................................ S-37
Liquidation Proceeds............................................................................ S-15
Loan Contracts.................................................................................. S-2, S-11
Monthly Principal Amount........................................................................ S-8, S-35
Monthly Payment Date............................................................................ S-3, S-10, S-32
NCR Credit...................................................................................... S-14
Non-Accrual..................................................................................... S-28
Note Owners..................................................................................... S-19
Noteholders..................................................................................... S-10, S-32
Notes........................................................................................... S-6, S-30
Obligor......................................................................................... S-11
OID............................................................................................. S-41
One-Month LIBOR................................................................................. S-3, S-7, S-33
Originators..................................................................................... S-14
Owner Trust..................................................................................... F, S-6
Owner Trustee................................................................................... S-6
Payment Date.................................................................................... S-2, S-10, S-32
Plan Assets Regulation.......................................................................... S-44
Pledged Revenues................................................................................ S-12, S-31
Prepayments..................................................................................... S-12, S-32
Prospectus...................................................................................... S-2
PTCE............................................................................................ S-45
Purchase Agreement.............................................................................. S-6
Quarterly Payment Date.......................................................................... S-3, S,10, S-32
Record Date..................................................................................... S-10, S-32
Related Collection Period Pledged Revenues...................................................... S-31
Required Payoff Amount.......................................................................... S-15, S-38
Requisite Amount................................................................................ S-38
Representatives................................................................................. S-46
Scheduled Payments.............................................................................. S-12, S-31
Servicer........................................................................................ S-6
Servicing Fee................................................................................... S-15
Stated Maturity Dates........................................................................... S-3, S-9
Subordinate Notes............................................................................... S-7, S-30
TCC............................................................................................. F, S-6
TIN............................................................................................. S-43
Transfer and Servicing Agreement................................................................ S-6
Trust Agreement................................................................................. S-6
Trust Assets.................................................................................... S-6, S-11
Underwriters.................................................................................... S-46
Underwriting Agreement.......................................................................... S-46
United States Alien Holder...................................................................... S-40
United States Holder............................................................................ S-40
United States Person............................................................................ S-45
</TABLE>
S-48
<PAGE>
<PAGE>
PROSPECTUS
ANTIGUA FUNDING CORPORATION
RECEIVABLE-BACKED NOTES
(ISSUABLE IN SERIES)
ANTIGUA FUNDING CORPORATION
DEPOSITOR
AT&T CAPITAL CORPORATION
SERVICER
Receivable-Backed Notes ('Notes') of one or more series (each, a 'Series')
may be sold from time to time under this Prospectus and a Prospectus Supplement
for each Series. Each Series, which may include one or more classes of Notes
(each, a 'Class'), will be issued by a trust (each, an 'Owner Trust') to be
formed with respect to such Series by Antigua Funding Corporation (the
'Depositor'), an indirect wholly owned subsidiary of AT&T Capital Corporation
('TCC'), pursuant to an Indenture (each, an 'Indenture') between the Owner Trust
and an indenture trustee (each, an 'Indenture Trustee'). Each Owner Trust may
also issue one or more additional Classes of Notes and/or certificates of
beneficial interest in the Trust, which will not be offered under this
Prospectus or the related Prospectus Supplement.
The proceeds from the issuance of each Series of Notes will be used to
acquire a pool of equipment leases, installment sale contracts, promissory
notes, loan and security agreements and similar types of receivables (the
'Contracts'). TCC will act as Servicer of the Contracts.
The right of each Class of Notes of a Series to receive payments may be
senior or subordinate to the rights of one or more of the other Classes of
Notes. The rate of payment in respect of principal of and interest on the Notes
of any Class will depend on the priority of payment of such Class and the rate
and timing of payments of the related Contracts.
There is currently no secondary market for any Series of Notes and there is
no assurance that one will develop. The Underwriters named in the Prospectus
Supplement relating to a Series of Notes may from time to time buy and sell
Notes of such Series, but there can be no assurance that an active secondary
market therefor will develop, and there is no assurance that any such market, if
established, will continue.
------------------------
THE NOTES OF A GIVEN SERIES WILL REPRESENT OBLIGATIONS OF THE RELATED 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.
------------------------
This Prospectus may not be used to consummate sales of a Series of Notes
unless accompanied by the Prospectus Supplement relating to such Series.
The date of this Prospectus is November 17, 1997.
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TABLE OF CONTENTS
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INCORPORATION BY REFERENCE................................................................................. 1
AVAILABLE INFORMATION...................................................................................... 1
REPORTS TO NOTEHOLDERS..................................................................................... 1
PROSPECTUS SUMMARY......................................................................................... 2
RISK FACTORS............................................................................................... 8
Limited Assets of the Owner Trust..................................................................... 8
Subordination of the Subordinate Notes................................................................ 8
Bankruptcy and Insolvency Risks....................................................................... 8
Yield and Prepayment Considerations................................................................... 10
Certain Legal Aspects of the Contracts................................................................ 10
THE DEPOSITOR.............................................................................................. 11
THE OWNER TRUSTS........................................................................................... 12
AT&T CAPITAL CORPORATION................................................................................... 13
THE ORIGINATORS............................................................................................ 14
AT&T Capital Leasing Services, Inc. .................................................................. 14
AT&T Credit Corporation and NCR Credit Corp........................................................... 14
AT&T Commercial Finance Corporation................................................................... 15
Underwriting and Servicing............................................................................ 16
Underwriting -- General............................................................................... 17
Underwriting -- Advanced Credit Scoring Systems....................................................... 17
Documentation......................................................................................... 18
Billing............................................................................................... 18
Portfolio Monitoring.................................................................................. 18
Collections........................................................................................... 19
Non-Accrual and Write-off Policy...................................................................... 19
THE CONTRACTS.............................................................................................. 19
Description of the Contracts.......................................................................... 19
The Forms of Contracts................................................................................ 20
Payments Generally.................................................................................... 20
Expenses Relating to Equipment........................................................................ 20
Insurance; Repair and Replacement..................................................................... 20
Assignment of Contracts............................................................................... 21
Hell-or-High-Water Lease Contracts.................................................................... 21
Events of Default and Remedies........................................................................ 21
Prepayments and Early Termination..................................................................... 22
Disclaimer of Warranties.............................................................................. 22
Additional Equipment.................................................................................. 23
Representations and Warranties Made by AT&T Capital Corporation....................................... 23
Delinquency, Non-Accrual and Net Loss Experience...................................................... 25
DESCRIPTION OF THE NOTES................................................................................... 26
General............................................................................................... 26
Distributions......................................................................................... 26
Credit Enhancement.................................................................................... 27
Liquidated Contracts.................................................................................. 27
Optional Purchase of Contracts........................................................................ 27
Trust Accounts........................................................................................ 27
Reports to Noteholders................................................................................ 28
Book-Entry Registration............................................................................... 28
Definitive Notes...................................................................................... 31
Modification of Indenture Without Noteholder Consent.................................................. 31
Modification of Indenture With Noteholder Consent..................................................... 32
Events of Default; Rights Upon Event of Default....................................................... 32
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Certain Covenants..................................................................................... 33
Annual Compliance Statement........................................................................... 34
Indenture Trustee's Annual Report..................................................................... 34
Satisfaction and Discharge of Indenture............................................................... 34
The Indenture Trustee................................................................................. 34
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................................................... 35
Transfer and Assignment of Contracts and Equipment.................................................... 35
Collections on Contracts.............................................................................. 35
Servicing............................................................................................. 37
Amendment............................................................................................. 39
Termination of the Transfer and Servicing Agreement................................................... 39
CERTAIN LEGAL ASPECTS OF THE CONTRACTS..................................................................... 39
Enforcement of Security Interests in the Equipment.................................................... 39
Insolvency Matters.................................................................................... 41
UNITED STATES TAXATION..................................................................................... 41
ERISA CONSIDERATIONS....................................................................................... 42
RATINGS OF THE NOTES....................................................................................... 42
USE OF PROCEEDS............................................................................................ 43
UNDERWRITING............................................................................................... 43
LEGAL MATTERS.............................................................................................. 43
INDEX OF PRINCIPAL TERMS................................................................................... 44
APPENDIX A: GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES.................................. 46
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INCORPORATION BY REFERENCE
All documents filed by the Servicer, on behalf of the applicable 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 the Prospectus
Supplement relating to the Series of Notes issued by such Owner Trust and prior
to the termination of the offering of such Series of Notes shall be deemed to be
incorporated by reference into this Prospectus and the related Prospectus
Supplement and to be a part hereof and thereof from the respective dates of
filing of such documents. Any statement contained herein or in a Prospectus
Supplement or in a document incorporated or deemed to be incorporated by
reference herein or in a Prospectus Supplement shall be deemed to be modified or
superseded for purposes of this Prospectus and such Prospectus Supplement 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 or
such Prospectus Supplement.
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, 44 Whippany Road, Morristown, New Jersey 07962,
Attention: Secretary.
AVAILABLE INFORMATION
The Depositor, as originator of each 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') with respect to
the Notes to be offered from time to time 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 otherwise provided in the related Prospectus Supplement, unless and
until Definitive Notes are ssued, monthly unaudited reports containing
information concerning each 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. 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. Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. See
'Description of the Notes -- Reports to Noteholders' and the related Prospectus
Supplement 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.
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 each Owner Trust to the extent required
under the Exchange Act and the rules and regulations of the Commission
thereunder.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
accompanying Prospectus Supplement. Certain capitalized terms used in this
Prospectus Summary are defined elsewhere in this Prospectus. See the 'Index of
Principal Terms.'
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Issuer.............................. With respect to each Series of Notes, a trust (the 'Owner Trust') will be
formed by the Depositor and governed by a Trust Agreement (the 'Trust
Agreement') between the Depositor and the Owner Trustee specified in the
related Prospectus Supplement. See 'The Depositor and the Owner
Trust -- The Owner Trust.'
Depositor........................... Antigua Funding Corporation (the 'Depositor'), a direct subsidiary of the
Originators, each of which is, in turn, a subsidiary of AT&T Capital
Corporation ('TCC'). The Depositor will have acquired the Contracts and
the Originators' interests in the equipment subject thereto (the
'Equipment') with respect to each Trust pursuant to one or more Purchase
and Sale Agreements (the 'Purchase Agreements') among the Depositor, TCC
and one or more of the Originators, and will transfer the Contracts and
the other Trust Assets to the Owner Trust pursuant to a Transfer and
Servicing Agreement (the 'Transfer and Servicing Agreement') among the
Depositor, TCC, as Servicer, the Indenture Trustee and the Owner Trust.
See 'The Depositor.'
Servicer............................ TCC will, pursuant to the Transfer and Servicing Agreement relating to each
Series, act as Servicer of the Contracts. See 'Description of the
Transfer and Servicing Agreements -- 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................... With respect to each Series, the Indenture Trustee specified in the related
Prospectus Supplement.
Owner Trustee....................... With respect to each Series, the Owner Trustee specified in the related
Prospectus Supplement.
The Notes........................... Pursuant to each Indenture, each Owner Trust will issue one or more classes
(each, a 'Class') of notes (the 'Notes'). The Owner Trust may also issue
one or more other Classes of Notes and/or securities representing
beneficial ownership interests in the Owner Trust (the 'Certificates'),
which will not be offered hereby.
Interest............................ Interest on the Notes of each Series will be paid on the dates specified in
the related Prospectus Supplement, commencing on the date specified in
the related Prospectus Supplement. The related Prospectus Supplement will
set forth for each Class of Notes the interest rate for each such Class.
See 'Description of the Notes.'
Principal........................... Except as otherwise set forth in the related Prospectus Supplement, to the
extent the Amount Available is sufficient therefor after payment of
interest on the Notes, the aggregate amount of principal to be paid on
the Notes on each Payment Date will equal the amount by which the present
value of future Scheduled Payments on the Contracts declined during the
related Collection Period. See 'Description of the Notes --
Distributions.'
Subordination....................... The likelihood of payment of interest on each Class of Notes of a Series
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 and, in the case of Senior
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Notes, by the preferential right of the Holders of Notes of each such
Class to receive such interest prior to the payment of any interest on
the Subordinate Notes. Likewise, the likelihood of payment of principal
on each Class of Notes of a Series may, if so specified in the related
Prospectus Supplement, be enhanced by the preferential right of the
Holders of Notes of each such Class to receive such principal, to the
extent of the Amount Available, after payment of the Servicing Fee and
interest on the Notes as aforesaid and, in the case of Senior Notes,
prior to the payment of any principal on the Subordinate Notes.
Ratings............................. It will be a condition of issuance of any Class of Notes that one or more
nationally recognized rating agencies (the 'Rating Agencies') rate each
Class of Notes in a category that signifies investment grade. 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. A rating is not a recommendation to
buy, sell or hold securities and may be subject to revision or withdrawal
at any time by the assigning Rating Agency. The ratings of the Notes do
not address the likelihood of payment of principal on any Class of Notes
prior to the Stated Maturity Date thereof, or the possibility of the
imposition of United States withholding tax with respect to non-United
States Persons. See 'Ratings of the Notes.'
Use of Proceeds..................... The proceeds from the offering and sale of each Series of the Notes, after
funding a portion of any cash collateral account or other form of credit
enhancement and paying the expenses of the Depositor, will be used by the
Depositor to pay down warehousing facilities or paid to the Originators
by the Depositor in connection with the transfer of the Contracts and the
Originators' interests in the Equipment.
Trust Assets........................ The Trust Assets with respect to any Series of Notes, as specified in the
related Prospectus Supplement, will consist of: (i) a pool of equipment
lease contracts, installment sale contracts, promissory notes, loan and
security agreements and other similar types of receivables (each, a
'Contract') with various lessees, borrowers or other obligors thereunder
(each, an 'Obligor'), as specified in the related Prospectus Supplement;
(ii) to the extent specified in the related Prospectus Supplement,
certain rights to proceeds from the disposition of Equipment following a
default under or expiration of a Contract; (iii) amounts on deposit in
(and Eligible Investments allocated to) certain accounts established in
connection with the establishment of such Trust; and (iv) certain other
property and assets as described in the related Prospectus Supplement.
The Trust Assets will secure payment of the Notes. See 'The Owner Trust.'
The Contracts....................... With respect to any Series of Notes, the aggregate of the Contracts
expected to be held by the Owner Trust as part of the Trust Assets, as of
any particular date, is referred to as the 'Contract Pool,' and the
Contract Pool, as of the Cut-Off Date, is referred to as the 'Cut-Off
Date Contract Pool.' The related Prospectus Supplement for each Series
will provide information with respect to: (i) the initial Contract Pool
Principal Balance; (ii) the number of Contracts; (iii) the average
Contract Principal Balance; (iv) the various types of Contract; (v) the
geographical distribution of the Contracts; (vi) the approximate
percentage amount of the Contracts originated by the Originators and
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by third parties and purchased by an Originator; (vii) the remaining term
of the Contracts; and (viii) the weighted average remaining term of the
Contracts.
Originators......................... The Contracts included in each Contract Pool will have been originated or,
in some cases, acquired by one or more of four subsidiaries of TCC: AT&T
Capital Leasing Services, Inc. ('Leasing Services'), AT&T Credit
Corporation ('Credit Corp.'), NCR Credit Corp. ('NCR Credit'), and the
Portland division of AT&T Commercial Finance Corporation (such division
is referred to herein as 'CFC') (collectively, the 'Originators'). See
'AT&T Capital Corporation' and 'The Originators.'
Contract Prepayments................ The Contracts may (i) not permit the Obligor thereunder to prepay the
amounts due under such Contract or otherwise terminate the Contract prior
to its scheduled expiration date, or (ii) allow for a prepayment or early
termination upon payment of an amount that is at least equal to the
present value of the future Scheduled Payments on such Contract
determined using a discount rate specified in the related Prospectus
Supplement, or (iii) allow for a prepayment or early termination without
the payment of such an amount. Some Contracts, often written as
installment sales contracts, promissory notes or loan and security
agreements, permit the Obligor thereunder to prepay the Contract, in
whole or in part, at any time at par plus accrued interest. The 'Contract
Principal Balance' for any Contract at any time will be computed (i) with
respect to any Contract that does not by its terms permit prepayment or
early termination, or that permits prepayment or early termination only
upon payment of an amount that has the effect of capturing the yield of
the Contract, as the present value of the future Scheduled Payments on
the Contract determined using a discount rate specified in the related
Prospectus Supplement, and (ii) with respect to any Contract that permits
prepayment without a premium, as the unpaid balance of such Contract.
Under each Transfer and Servicing Agreement, the Servicer will be
permitted to allow the prepayment of any Contract, but only if the amount
paid by or on behalf of the Obligor (or, in the case of a partial
prepayment, the sum of such amount and the remaining Contract Principal
Balance of the Contract after application of such amount) is at least
equal to the Required Payoff Amount for such Contract. 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 (as defined in the related Prospectus
Supplement) for a Series of Notes include (nor will the Notes 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 (which will consist generally of all amounts received
by the Servicer in connection with the liquidation of a Contract and
disposition of the related Equipment, net of any related out-of-pocket
liquidation expenses) will be allocated as described in the related
Prospectus Supplement.
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Servicing........................... The Servicer will be responsible for managing, administering, servicing and
making collections on the Contracts in each Contract Pool. 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 specified in the related Prospectus Supplement. 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 Agreements -- Servicing.'
Mandatory Purchase of Certain
Contracts......................... TCC will make certain representations and warranties regarding the
Contracts in each Contract Pool and the related Equipment, 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 'The Contracts -- Representations and
Warranties made by AT&T Capital Corporation.'
Leased Equipment.................... With respect to each Series, the proceeds from the disposition of Equipment
securing Contracts written as installment sales contracts, promissory
notes, loan and security agreements or other similar types of receivables
('Loan Contracts') will constitute part of the proceeds of a Contract
following a default under that Contract, but such Equipment and the
proceeds thereof will be owned by the related Obligor if the Contract is
paid in full and will not be part of the Trust Assets. The related
Prospectus Supplement will specify whether the Depositor will transfer to
the Owner Trust its ownership or security interest in the Equipment (the
'Leased Equipment') related to the Contracts structured as leases ('Lease
Contracts'), including the right to receive the Leased Equipment (or the
purchase price therefor or proceeds thereof) upon expiration of the
original term of the related Lease Contract. If and to the extent
specified in the related Prospectus Supplement, the Depositor may also
transfer to the Owner Trust the right to receive the following: (i) the
portion of certain Prepayments representing the value of the related
Leased Equipment; (ii) a portion of the Liquidation Proceeds derived from
the liquidation of any Lease Contract and disposition of the related
Leased Equipment; and (iii) the purchase price paid by TCC to purchase
any Leased Equipment due to a breach of any of TCC's representations and
warranties with respect to the related Lease Contract.
Servicing and Collection
Accounts.......................... The Indenture Trustee of each Trust 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 Contracts after the Cut-Off Date.
The Indenture Trustee of each Trust 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
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applicable to the Notes. See 'Description of the Transfer and Servicing
Agreements -- Collections on Contracts.'
Credit Enhancement.................. If and to the extent specified in the related Prospectus Supplement, credit
enhancement with respect to a Trust or any class of Notes may include any
one or more of the following: a cash collateral account, a financial
guaranty insurance policy issued by an insurer specified in the related
Prospectus Supplement, subordination of one or more other classes of
Notes, a reserve account, overcollateralization, letters of credit or
liquidity facilities, repurchase obligations, third party payments or
other support, cash deposits or other arrangements. Unless otherwise
specified in the related Prospectus Supplement, any form of credit
enhancement will have certain limitations and exclusions from coverage
thereunder, which will be described in the related Prospectus Supplement.
'Description of the Notes -- Credit Enhancement.'
Priority of Payments................ Except as otherwise specified in the related Prospectus Supplement, on each
Payment Date with respect to a Series of Notes, 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 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 or other form of credit enhancement as
described under 'Credit Enhancement' 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 (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; (iv)
to the cash collateral account or other form of credit enhancement (if
any), 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 or
other form of credit enhancement applicable to such Series; and (vi)
thereafter, to the Depositor.
Optional Purchase of Contracts...... The Depositor may purchase all of the Contracts in any Contract Pool on any
Payment Date following the date on which the unpaid principal balance of
the Notes and any other securities issued by the Owner Trust 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 other securities (if any) as of such
Payment Date plus interest to be paid on the Notes and such other
securities on such Payment Date. The proceeds of such purchase shall be
applied on such Payment Date to the payment of the remaining principal
balance of the Notes and such other securities together with accrued
interest thereon.
U.S. Taxation....................... In the opinion of counsel to the Depositor and the opinion of counsel to
the Underwriters, the Notes will be characterized as indebtedness and the
Owner Trust will not be characterized as an 'association' or
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'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
none of 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 of a Series 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. Although there can be no assurances in this regard, it
appears that the Notes should be treated as indebtedness without
substantial equity features for purposes of such regulation. As a result,
subject to the considerations described in 'ERISA Considerations' herein,
the Notes are eligible for purchase with plan assets of any Benefit Plan.
However, a fiduciary or other person contemplating purchasing the Notes
on behalf of or with plan assets of any Benefit Plan should carefully
review with its legal advisors whether the purchase or holding of the
Notes could give rise to a transaction prohibited or not otherwise
permissible under ERISA or Section 4975 of the Code. See 'ERISA
Considerations.'
Registration, Clearance and
Settlement of Notes............... Each of the Notes of each Series 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.'
Governing Law....................... Unless otherwise set forth in the related Prospectus Supplement, the
Transfer and Servicing Agreement, the Trust Agreement, the Purchase
Agreement, the Indenture and the Notes of each Series 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 of each Series are secured by the payments to be derived from the
Contracts and other Trust Assets of the related Owner Trust. Each Owner Trust
will have no assets other than the related Contracts (including proceeds derived
from the disposition of the Equipment securing Loan Contracts), certain rights
in the Equipment subject to Lease Contracts (as specified in the related
Prospectus Supplement), amounts on deposit from time to time in the related
Collection Account and the accounts established pursuant to the related Transfer
and Servicing Agreement and the right to certain amounts in the cash collateral
account or other form of credit enhancement. The Notes of each Series will
represent obligations solely of the related 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 any Series of Notes must
rely for payment of interest and principal thereon on a given Payment Date on
the Amount Available for such Series for such Payment Date.
SUBORDINATION OF THE SUBORDINATE NOTES
To the extent described in the Prospectus Supplement, payments of interest
and principal on the Subordinate Notes of a Series may be subordinated in
priority of payment to interest and principal, respectively, on the Senior Notes
of such Series. In addition, payments of principal on the Notes of a Series may
be subordinated in priority of payment to payments of interest on the Notes of
such Series.
Delinquencies and defaults on the Contracts included in the Trust Assets of
an Owner Trust could eliminate the protection afforded the Subordinate
Noteholders of such Series by the cash collateral account or other credit
enhancement for such Series, and the Subordinate Noteholders could incur losses
on their investment as a result. Further delinquencies and defaults on the
Contracts could eliminate the protection offered to the Senior Noteholders of a
Series by the subordination of the Subordinate Notes of such Series, and such
Noteholders could also incur losses on their investment as a result.
BANKRUPTCY AND INSOLVENCY RISKS
Dorsey & Whitney LLP, counsel to the Depositor, will deliver a legal
opinion to the effect that, subject to the qualifications and limitations
expressed therein, the transfer of the Contracts and the Leased Equipment from
the Originators to the Depositor constitutes a sale or absolute assignment,
rather than a pledge to secure indebtedness of TCC or the Originators; and that
in the event that TCC or any of the Originators were to become a debtor under
the federal bankruptcy code, a creditor or trustee in bankruptcy would be unable
to successfully challenge the transfer of the Contracts and the Leased Equipment
to the Depositor and the Contracts, payments thereunder and the Equipment would
not be property of the bankruptcy estate. However, if TCC or any of the
Originators were to become a debtor under the federal bankruptcy code or similar
applicable state laws (collectively, 'Insolvency Laws'), a creditor or trustee
in bankruptcy of TCC or such Originator, or TCC or such Originator or either of
them as debtor-in-possession, might argue that such transfer of the Contracts
and the Equipment from the Originators to the Depositor was (or should be
recharacterized as) a pledge of such assets rather than a sale. If this position
were accepted by a court, any Lease Contracts considered to be 'true' leases
under the applicable Insolvency Laws (as described under 'The Contracts --
Description of the Contracts'), and any other Contract considered to be
executory under such Insolvency Laws, could be rejected by such trustee in
bankruptcy or by TCC or such Originator as debtor-in-possession, which would
result in the termination of Scheduled Payments under any such Contracts and
reductions in distributions to Noteholders of the related Series, and such
Noteholders could incur a loss on their investment as a result. To reduce the
likelihood of such rejection, UCC financing statements perfecting a security
interest for the benefit of the Depositor in the Equipment, and assignments of
such perfected security interest to the Owner Trust and the Indenture Trustee,
will be filed against the Originators (unless otherwise specified in the related
Prospectus Supplement). Even if such Contracts were not so rejected in the event
of an insolvency of TCC or any of the Originators, the Owner Trust and the
Indenture Trustee could experience a delay in or reduction of collections on all
of the Contracts, and Noteholders could incur a loss on their investment as a
result. In addition, in the
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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, each Owner
Trust (and thus each Indenture Trustee) could experience a delay in or reduction
of collections on the Contracts, and Noteholders of such Series could incur a
loss on their investment as a result.
Dorsey & Whitney LLP will deliver a legal opinion to the effect that,
subject to the qualifications and limitations expressed therein, if any of the
Originators or TCC were to become a debtor in a bankruptcy case, a bankruptcy
court would not order that the assets and liabilities of the Depositor be
consolidated with those of such Originator or TCC. The Depositor has taken steps
in structuring the transactions described herein that are intended to prevent
the voluntary or involuntary application for relief by or on behalf of TCC or
any Originator under any Insolvency Law from resulting in the consolidation of
the assets and liabilities of the Depositor with those of TCC or such
Originator. Such steps include the maintenance of separate books and records and
the insistence on arm's-length terms in all agreements with TCC, the Originators
and affiliates thereof. Nevertheless, there can be no assurance that, in the
event of a bankruptcy or insolvency of TCC or any Originator, a court would not
order that the Depositor's or Owner Trust's assets and liabilities be
consolidated with those of TCC or such Originator. Any such order would
adversely affect each Owner Trust's and each Noteholders' ability to receive
payments on the related 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 related Contracts and
Equipment to the rights of creditors of TCC or the Originators, if a court were
to find, among other things, that TCC or the Originators received less than
reasonably equivalent value or fair consideration for the Contracts and the
Equipment and, at the time of any transfers, was insolvent or rendered insolvent
as a result of such transfer, and Noteholders could incur a loss on their
investment as a result.
While TCC is the Servicer, cash collections held by TCC may, subject to
certain conditions, be commingled and used for the benefit of TCC prior to the
date on which such collections are required to be deposited in a Collection
Account as described under 'Description of the Transfer and Servicing
Agreement -- Collections on Contracts' and, in the event of the insolvency or
receivership of TCC or, in 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 with respect
to each Series 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.' Its certificate of incorporation also
contains restrictions on the Depositor's ability to commence a voluntary case or
proceeding under any Insolvency Law without the affirmative vote of all its
directors, including its independent directors. The Indenture Trustee, on behalf
of the Noteholders of each Series, 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 AT&T Capital Corporation').
In the event that any such representation or warranty with regard to a specific
Contract is breached, is not cured within a specified period of time, and the
value of such Contract is materially and adversely affected by such breach, TCC
shall be required to purchase the Contract from the applicable Owner Trust at a
price equal to the Required Payoff Amount of such Contract, and, in the case of
a Lease Contract, shall be required to purchase
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the related Leased Equipment from the Depositor at a price equal to the Book
Value thereof. In the event of a bankruptcy or insolvency of TCC, each Indenture
Trustee's right to compel a purchase would both be impaired and have to be
satisfied out of the available assets, if any, of TCC's bankruptcy estate, and
Noteholders could incur a loss on their investment as a result.
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Notes of a Series will be reduced by
prepayments and early terminations of the related Contracts. Prepayments may
result from payments by Obligors, certain amounts received as a result of
default or early termination of a Contract, the receipt of proceeds from the
physical damage to the Equipment to the extent described herein under 'The
Contracts,' purchases by TCC of Contracts as a result of certain uncured
breaches of the representations and warranties made by it with respect thereto
(see 'The Contracts -- Representations and Warranties Made by TCC') or the
Depositor exercising its option to purchase all of the remaining Contracts held
by an Owner Trust (see 'Description of the Notes -- Optional Purchase of
Contracts'). Most Contracts do not permit prepayment or early termination.
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 with respect to each Series will permit the Servicer to
allow a voluntary prepayment of a 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 Contract after application of such amount) is at least equal to the
Required Payoff Amount for such Contract. The Required Payoff Amount received
from the prepayment or early termination of a Contract (or the amount of any
partial prepayment of a Contract) will be added to the Amount Available and
applied in the priority described in the related Prospectus Supplement. 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. See 'Weighted Average Life of the Notes' in
the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The transfer of the Contracts by the Originators to the Depositor and by
the Depositor to the Owner Trust, the perfection of the interest of the
Depositor and the Owner Trust in the Contracts and the right to receive payments
thereon, and the Owner Trust's and the Indenture Trustee's interest in such
Contracts and in the Equipment are subject to the requirements of the UCC as in
effect in New York and the states where the various Originators, the Depositor
and the Owner Trust are located and, with respect to certain of the Equipment,
in the various states in which the Equipment subject to the applicable Contract
is located from time to time. The Depositor will take or cause to be taken such
actions as are required to perfect the transfer to the Owner Trust of the
Depositor's rights in the Contracts and the right to receive payments thereunder
and to perfect the security interest of the Indenture Trustee in the Owner
Trust's rights in the Contracts and the right to receive payments thereunder.
It has been the general policy of TCC, depending on the dollar amount and
type of the particular Contract, the perceived credit quality of the particular
Obligor and the estimated repossession value of the particular related
Equipment, not to file or (in certain cases) not to obtain or file UCC financing
statements with respect to the Equipment relating to certain Contracts. See 'The
Originators -- Underwriting and Servicing -- Documentation.' With respect to any
such Contracts that were deemed to be loans or leases intended for security (as
described under 'The Contracts -- Description of the Contracts'), a purchaser
from the applicable Obligor of the related Equipment would acquire such
Equipment free and clear of the interest of the applicable Originator in such
Equipment, and a creditor of the Obligor which has taken a security interest in
such Equipment and filed a UCC financing statement with respect thereto or a
trustee in the bankruptcy of such Obligor would have priority over the interest
of the applicable Originator in such Equipment. Any such purchaser, creditor or
trustee would have an interest superior to the interest of the related Owner
Trust in such Equipment, which interest is derived
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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 each Owner Trust's interest in the related
Contracts or perfection of the related Indenture Trustee's interest in such
Contracts (including the related Originator's security interest in the related
Equipment), it does expose the related 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 related 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 related Owner Trust as described under 'Description of the
Notes -- Liquidated Contracts.' Additionally, statutory liens for repairs or
unpaid taxes and other liens arising by operation of law may have priority even
over prior perfected security interests in the Equipment assigned to the related
Indenture Trustee.
The Servicer will hold the Contracts and certain related documents on
behalf of the Owner Trust and Indenture Trustee. To facilitate servicing and
save administrative costs, the documents will not be physically segregated from
other similar documents that are in the Servicer's possession. UCC financing
statements will be filed in the appropriate jurisdictions reflecting the sale
and assignment of the Contracts and the Originators' interests in the Equipment
by the Originators to the Depositor, the transfer and assignment of the
Contracts by the Depositor to the applicable Owner Trust and the pledge of the
Contracts by such Owner Trust to the applicable 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 reflect that such Contracts have been sold to the Depositor,
transferred to such Owner Trust or pledged to such 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 such Owner Trust and such Indenture Trustee if the purchaser (or
secured party) acquired (or took a security interest in) such Contracts for new
value and without actual knowledge of such Owner Trust's or such Indenture
Trustee's interest. Such superior interest may include an ownership interest,
which would cut off all rights of such Owner Trust to such Contracts and
payments thereunder, or a security interest, which would be senior to the
security interest held by such Owner Trust; in either case, Noteholders could
incur a loss on their investment as a result.
THE DEPOSITOR
Antigua Funding Corporation is incorporated under the laws of the State of
Delaware, all of the stock of which is owned by the Originators, each of which
is, in turn, a subsidiary of TCC. On or before the Closing Date for a Series,
all of the related Contracts and the interests of the Originators in the related
Equipment will be transferred by the applicable Originators to the Depositor in
return for stock in the Depositor, pro rata in accordance with the value of the
Contracts and Equipment transferred by each Originator. The Depositor will pay
to the applicable Originators the net proceeds received from warehouse financing
of such Contracts prior to their transfer to an Owner Trust, or from the
offering and sale of the Notes of such Series.
The Depositor has been formed solely for the purposes of the transactions
described in this Prospectus and other similar transactions; and under its
incorporation documents and the Transfer and Servicing Agreement executed in
connection with each Trust, the Depositor is not permitted to engage in any
activity other than (i) acquiring Contracts and interests of the Originators in
the Equipment related thereto, (ii) transferring and conveying the Loan
Contracts and the security interests in the related Equipment to Owner Trusts
and other similar trusts, (iii) transferring and conveying the Lease Contracts
to Owner Trusts, (iv) executing and performing its obligations under the Trust
Agreements, the Purchase Agreements, and the Transfer and Servicing Agreements,
(v) holding or transferring other securities issued by each Owner Trust, (vi)
engaging in other transactions, including entering into agreements, that are
necessary, suitable or convenient to accomplish
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the foregoing or are incidental thereto or connected therewith, and (vii) other
transactions of the type described in this Prospectus. The Depositor is
prohibited from incurring any debt, issuing any obligations or incurring any
liabilities, except in connection with the formation of any Owner Trust, the
issuance of the related Series of securities issued by such Owner Trust, and
other transactions of the type described in this Prospectus. 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 Series of Notes.
THE OWNER TRUSTS
Each Owner Trust will be formed pursuant to a Trust Agreement between the
Depositor and the Owner Trustee, as described in the Prospectus Supplement. Each
Owner Trust may issue one or more other classes of other securities,
representing debt of or beneficial ownership interests in the Owner Trust
('Certificates') which will not be offered pursuant to this Prospectus.
The Trust Assets of each Owner Trust, as further specified in the related
Prospectus Supplement, will consist of:
(1) a pool of equipment lease contracts, installment sale contracts,
promissory notes, loan and security agreements and other similar types of
receivables (each, a 'Contract') with various lessees, borrowers or other
obligors thereunder (each, an 'Obligor'), including (a) all monies at any
time paid or payable thereon or in respect thereof from and after the
Cut-Off Date in the form of (i) Scheduled Payments (including all Scheduled
Payments due prior to, but not received as of, the Cut-Off Date, but
excluding any Scheduled Payments due on or after, but received prior to,
the Cut-Off Date), (ii) Prepayments (but excluding, in the case of a
Contract structured as a lease of the related Equipment (a 'Lease
Contract'), any portion thereof allocated to the Depositor, as described in
the related Prospectus Supplement), and (iii) Liquidation Proceeds
(including any derived from the disposition of the related Equipment)
received with respect to defaulted Contracts (excluding, in the case of a
Lease Contract, any portion thereof allocable to the Depositor, as
described in the related Prospectus Supplement), and (b) all rights of the
secured party in the Equipment related to the Contracts written as
installment sales contracts, promissory notes, loan and security agreements
or other similar types of receivables ('Loan Contracts'), but excluding the
rights of the lessor in the Equipment subject to a Lease Contract ('Leased
Equipment') (which rights, subject to the allocation of Liquidation
Proceeds received in respect thereof, may be retained by the Depositor to
the extent specified in the related Prospectus Supplement);
(2) amounts on deposit in (and Eligible Investments allocated to)
certain accounts established pursuant to the related Indenture and the
related Transfer and Servicing Agreement, including the Collection Account;
(3) the Depositor's rights under the related Purchase Agreements; and
(4) the Depositor's rights (but not its obligations) with respect to
any cash collateral account or other form of credit enhancement for such
Series.
No Owner Trust will engage in any business activity other than (i) issuing
the Notes and the Certificates (if any) (ii) holding and dealing with (including
disposing of) the Trust Assets, (iii) making payments on the Notes and other
securities issued thereby, (iv) entering into and performing the duties,
responsibilities and functions required under any of the related Transfer and
Servicing Agreement, Indenture, Contracts, and related documents, and (v)
matters related to the foregoing.
The Trust Assets of an Owner Trust will be separate from the Trust Assets
of all other Owner Trusts created by the Depositor, and the Trust Assets of one
Owner Trust will not be available to make payments on the securities issued by
any other Owner Trust.
The Owner Trustee for each Owner Trust will be specified in the related
Prospectus Supplement. The Owner Trustee's liability in connection with the
issuance and sale of any Series of Notes will be limited solely to the express
obligations of the Owner Trustee set forth in the related Trust Agreement and
Indenture. An 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 an Owner Trustee if such Owner Trustee ceases to be eligible to continue
as such under the related Trust Agreement or if the Owner Trustee becomes
insolvent. Any resignation or removal of an Owner Trustee will not become
effective until acceptance of the appointment of a successor Owner Trustee.
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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
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 12 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, 1996, TCC's total assets were $8.1
billion, a decrease of 15.2% over the prior year-end, due primarily to the $3.1
billion securitization of lease and loan receivables in October 1996; finance
volume for 1996 was $5.2 billion, an increase of 14.8% over 1995; total revenues
for 1996 were $2.0 billion, an increase of 23.8% over 1995; and net income of
$168.5 million for 1996 was 32.1% greater than the net income for 1995. Total
assets at the end of the third quarter of 1997 were $8.8 billion representing a
14.3% decrease over total assets at the end of the third quarter of 1996, and
net income of $35.8 million for the first nine months of 1997 represented a
decrease of 68.9% over the net income for the corresponding period in 1996. The
decrease in net income resulted primarily from lower capital lease revenue as a
result of the fourth quarter 1996 increase in securitization activity, higher
relative interest expense associated with higher leverage relating to the
additional debt incurred to finance the Merger (as defined below) and
distributions on Trust Originated Preferred Securities.
TCC's predecessor was founded in 1985 by AT&T Corp. ('AT&T') principally as
a captive finance company to assist its equipment marketing and sales efforts by
providing AT&T's customers with tailored financing. In 1993, AT&T sold
approximately 14% of TCC's common stock in an initial public offering. TCC's
common stock traded on the New York Stock Exchange under the symbol 'TCC.'
Although TCC's common stock has been delisted following the consummation of the
Merger (as described below), TCC will, from time to time, continue to issue
securities in the public market and, accordingly, will continue to be subject to
the informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission.
On September 20, 1995, AT&T announced plans to separate itself into three
publicly traded companies (AT&T, Lucent Technologies Inc. ('Lucent') and NCR
Corporation ('NCR')) and to sell its remaining equity interest in TCC in a
public or private sale. On October 1, 1996, Antigua Acquisition Corporation, a
newly formed Delaware corporation ('MergerCo.'), merged with and into TCC, with
TCC being the surviving company (the 'Merger'), and the outstanding common stock
of TCC was converted into the right to receive $45 per share. As a result of the
Merger, all of the outstanding equity capital of the surviving company is owned
by members of management and outside directors of TCC and by Hercules Holdings
(Cayman) Limited, a Cayman Islands corporation ('HoldCo.'). All of the
outstanding equity capital of HoldCo. is currently owned by a group of companies
led by GRS Holding Company Limited.
Under the terms of a Stock Purchase Agreement, dated as of November 17,
1997, Hercules Holdings (Cayman) Limited and certain management investors of TCC
have agreed to sell all of the outstanding capital stock of TCC to Newcourt
Credit Group.
The transaction is expected to close during February 1998. The closing is
subject to, among other things, the receipt by Newcourt of the proceeds of a
public offering of Newcourt common stock, expected to be consummated by
mid-December, and to the receipt of required regulatory approvals.
Newcourt Credit Group is an independent non-bank financial services company
which originates, sells and manages asset based financing of a broad range of
equipment and capital assets by way of secured loans,
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conditional sales contracts and financial leases. The Newcourt Credit Group's
loan origination activities focus on the commercial finance and corporate
finance segments of the asset based lending market. It is headquartered in
Toronto, with owned and managed loans of more the US$7.13 billion.
TCC has an experienced management team with a significant amount of
expertise in the equipment leasing and finance industry. At September 30, 1997,
TCC and its subsidiaries had approximately 3,120 members (employees). The
principal executive offices of TCC are located at 44 Whippany Road, Morristown,
New Jersey 07962.
The Contracts comprising the Trust Assets of any Owner Trust will have been
originated or, in some cases, purchased from third parties by one or more of
four subsidiaries of TCC: AT&T Capital Leasing Services, Inc. ('Leasing
Services'), AT&T Credit Corporation ('Credit Corp.'), NCR Credit Corp. ('NCR
Credit') and the Portland division of AT&T Commercial Finance Corporation (such
division is referred to as 'CFC') (collectively, the 'Originators').
THE ORIGINATORS
AT&T CAPITAL LEASING SERVICES, INC.
Leasing Services provides leasing and financing programs for certain
targeted manufacturers and distributors as well as leasing and financing to
existing customers. Leasing Services (formerly known as Eaton Financial
Corporation) was acquired by a predecessor of Credit Corp. in March 1989, and
became a subsidiary of a predecessor of TCC in connection with TCC's
reorganization in March 1990. It thereafter became a subsidiary of TCC in
connection with TCC's restructuring in March 1993.
Leasing Services is headquartered in Framingham, Massachusetts and
employed, as of September 30, 1997, approximately 463 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, automobile test/repair equipment, and
medical/dental equipment. At September 30, 1997, 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
21%, machine tool manufacturing equipment 26%, copiers 20%, medical/dental
equipment 9%, printing equipment 7%, automobile test/repair equipment 5%, and
other 12%.
At September 30, 1997, 95% of Leasing Services' portfolio of contracts
consisted of leases. Approximately 22% 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 September 30, 1997, 5% of Leasing Services' portfolio of
contracts consisted of loans, which are prepayable, in whole or in part, at any
time. Generally under Leasing Services' contracts, the obligor is responsible
for all maintenance, insurance and taxes.
Leasing Services' total portfolio of contracts has a customer base of over
132,000 customers (as of September 30, 1997), who are mainly small and
medium-sized companies. The portfolio is also broadly diversified; as of
September 30, 1997, the ten largest customers comprised only .78% of the
aggregate portfolio. As of September 30, 1997, the average exposure per customer
for the entire portfolio was approximately $16,500. In terms of geographical
distribution, five states accounted for approximately 49% of outstanding
receivables (California 18%, New York 9%, Florida 8%, Texas 7%, and New Jersey
7%) as of September 30, 1997.
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 September 30, 1997, Leasing Services had approximately 209 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,
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which is a subsidiary of Credit Corp., was established as a captive finance
company of NCR in 1980. In 1992, when AT&T acquired NCR, ownership of NCR Credit
was transferred to TCC. At that time Credit Corp. and NCR Credit operated as
separate business units of TCC. In 1995, TCC consolidated the operations of NCR
Credit and Credit Corp.; relocated the credit and collections operations
supporting NCR Credit from Dayton, Ohio, to Credit Corp.'s executive offices in
Parsippany, New Jersey; ceased using NCR Credit to originate new financings; and
began using Credit Corp. to originate business in that market segment. As of
September 30, 1997, Credit Corp. employed approximately 580 members.
Substantially all of Credit Corp.'s transactions are generated through
Lucent and NCR. Lucent and NCR each were, until recently, 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 September 30, 1997, 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 68%, retail point-of-sale systems 4%, ATMs 4%, computer equipment 6%,
and other 18%.
At September 30, 1997, 86% of the Combined Portfolio consisted of leases.
Approximately 85% 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
September 30, 1997, 14% of the Combined Portfolio consisted of loans, some 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 62,805 customers; average transaction
size of $13,746; comprising 47% of the Lucent equipment portfolio) and middle
market transactions (approximately 1,038 customers; average transaction size of
$609,878; comprising 35% of the Lucent equipment portfolio). In terms of
geographical distribution, five states accounted for approximately 53% of the
outstanding receivables in the Lucent equipment portfolio (New Jersey 24%,
California 12%, New York 8%, Massachusetts 5%, and Texas 4%) as of September 30,
1997. Transactions generated from the sales of NCR equipment historically are
large ticket transactions (approximately 31 customers; average transaction size
of $8,663,947; comprising 66% of the NCR equipment portfolio) and middle market
transactions (approximately 191 customers; average transaction size of $930,491;
comprising 29% of the NCR equipment portfolio). In terms of geographical
distribution, five states accounted for approximately 67% of the outstanding
receivables in the NCR equipment portfolio (New Jersey 24%, Illinois 23%, New
York 8%, Massachusetts 7%, and Oklahoma 5%) as of September 30, 1997.
Credit Corp.'s credit and collection operations are handled on a
centralized basis through its executive offices in Parsippany, New Jersey. As of
September 30, 1997, Credit Corp. had approximately 199 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 September 30, 1997 Credit Corp. had approximately 25 account
managers located in Lucent offices throughout the United States to help process
credit applications and documentation packages.
AT&T COMMERCIAL FINANCE CORPORATION
CFC provides financing and leasing programs for manufacturers and
distributors of material handling and construction equipment. CFC was formed in
December 1989 in connection with the acquisition of substantially all the assets
of two divisions of Pacificorp Credit, Inc.
CFC is headquartered in Portland, Oregon and employed as of September 30,
1997, approximately 60 members, including 9 regionally deployed sales
representatives. CFC's credit and collection operations are located in Portland,
Oregon. As of September 30, 1997, CFC had approximately 25 members responsible
for credit and collections activity.
At September 30, 1997, the CFC portfolio (which includes both contracts
owned by CFC and contracts serviced on behalf of others) related entirely to
construction and material handling equipment. At September 30,
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1997, 79% of CFC's portfolio consisted of leases and 21% consisted of loans.
Approximately 56% 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 end user portfolio has a diverse customer base, with over 6,500
customers (as of September 30, 1997) comprising businesses of varying sizes in a
wide variety of industries. As of September 30, 1997, the average exposure per
end user customer was approximately $63,000. The ten largest end user customers
comprised 17% of the aggregate end user portfolio. In terms of geographical
distribution, five states accounted for approximately 30% of the outstanding end
user receivables (California 9%, Texas 6%, Georgia 5%, New York 5%, and Michigan
5%) as of September 30, 1997.
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 Investment Committee, regularly monitors TCC's overall risk profile.
The control of credit losses is an important element of TCC's business. TCC
seeks to minimize its credit risk through diversification of its portfolio by
customer, industry segment, equipment type, geographic location and transaction
maturity. TCC's financing activities have been spread across a wide range of
equipment types (e.g., general equipment, telecommunications equipment, office
equipment, information technology and transportation equipment) and real estate
and a large number of end-users located throughout the United States and, to a
lesser extent, abroad.
Each SBU has a senior credit officer and a credit committee that together
are responsible for overseeing the quality, integrity and performance of their
respective credit portfolios. Before any transaction can be committed to, it
must first be credit approved by one of TCC's proprietary credit scoring models
or by a duly authorized credit officer in accordance with clearly defined
authorities, policies and procedures. Each SBU credit committee is charged with
the responsibility of establishing credit policies appropriate for its business
and periodically reviewing its credit personnel's exercise of credit authority
for adherence to the established credit policies. Credit authorities are an
important tool that TCC uses to manage and control its portfolio risk. Credit
authorities are set in order to enable individual credit officers (and SBUs) to
handle approximately 80-85% of the transactions flowing to them. This approach
results in approximately 15-20% of the transactions being reviewed by higher
credit authorities. This ensures oversight of an individual's judgment, credit
skills and compliance with credit policy by more senior credit officials. Each
SBU credit committee is empowered to establish credit authorities for qualified
members of their credit staff for up to $250,000. Approval of new credit
authorities up to $1,000,000 requires the approval of TCC's Chief Credit Officer
in addition to the approval of the SBU credit committee. Approval of new credit
authorities in excess of $1,000,000 also requires the approval of the Corporate
Leadership Team ('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 $1.5 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. The credit authorities of the SBU credit committees
are as follows: Credit Corp., $5.0 million or $7.5 million if the customer is
rated investment grade; Leasing Services, $2.0 million; NCR Credit, $4.0 million
or $6.0 million if the customer is rated investment grade; and CFC, $3.0
million. In addition, approval by TCC's Chief Credit 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
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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 and other credit bureaus. In the case of larger sized transactions
(generally over $100,000), TCC's credit officers will obtain and analyze
financial statements from the customer. Analysis will be conducted to determine
the reliability of the financial statements and to ascertain the financial
condition and operating performance of the potential customer. Asset quality is
carefully reviewed and stated liabilities are compared to the information
obtained from reference checking and credit reports. Cash flow is checked for
reliability and adequacy to service funded debt maturities and other fixed
charges. The financial analysis would typically involve a review of the
potential customer's leverage, profitability, liquidity and cash flow utilizing
a variety of financial ratios and comparing the company to other companies its
size in similar businesses. In this connection, various reference sources are
utilized such as Robert Morris Associates Annual Statement Studies.
Additionally, information may be obtained from rating agencies, securities
firms, Bloomberg and numerous other sources. A written analysis is then prepared
by the credit officer summarizing the amount and terms of the credit request and
setting forth the credit officer's recommendation including detailed supporting
rationale. Alternative exit strategies, including an analysis of the value of
the equipment as well as its essentiality of use, are also considered in the
event the customer fails to honor its payment obligations, but TCC does not
impose rigid loan-to-value ratios in its underwriting processes, nor is a
maximum loan-to-value ratio imposed. The credit approval will also set forth any
conditions of approval such as personal or corporate guarantees, shorter lease
terms, more advance payments or other credit enhancements, and it will dictate
the necessary documentation. Any subsequent modification of approval terms or
required documentation must be re-approved by one of TCC's authorized credit
officers. TCC also requires the credit personnel of each SBU to rate the
creditworthiness of each of such unit's customer accounts over $100,000 and, in
connection therewith, to take into account certain other factors affecting the
credit risk of a particular transaction, such as collateral value, credit
enhancement and duration of the credit.
UNDERWRITING -- ADVANCED CREDIT SCORING SYSTEMS
In 1992, TCC commissioned the Bell Laboratories Operations Research
Department ('Bell Labs') to design decision support systems and associated
strategies for credit risk management throughout the customer's financing life
cycle. This life cycle approach, while commonplace in the consumer credit field,
is not common in commercial leasing. Three sets of decision support systems were
developed and implemented, covering each stage of the small ticket leasing life
cycle; front-end credit decisions, credit line management, and delinquent
account collections (see ' -- Collections' below). Each system is comprised of a
suite of statistically derived risk prediction models, a sequential decision
strategy which determines the model to be used in each instance, and a risk
based strategy which determines the optimal decision based upon the model
results.
The current front-end credit decisioning systems follow a series of steps
including the selection and electronic retrieval of credit bureau information,
the quantification of credit risk and the decision to accept, reject or manually
review the credit applicant. While both Leasing Services and Credit Corp. have
been using credit application scoring models based on more traditional credit
scorecards since 1991 and 1989, respectively, Leasing Services implemented an
improved decisioning system in March 1993, while Credit Corp. implemented such
system in May 1995. Separate credit line management models have been developed
and implemented
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within Credit Corp. in May 1995. The credit scoring systems are monitored using
various reporting mechanisms and have been upgraded over time to incorporate the
value of more recent data and to take advantage of improved statistical
techniques. Overrides of credit scoring decisions by authorized credit officers
are permitted, but are discouraged unless additional information is uncovered
which materially strengthens the transaction or if sufficient credit
enhancements can be obtained to mitigate the risk. Overrides are tracked by the
operating units each month, and are more common at Credit Corp. than they are at
Leasing Services. Such advanced credit scoring systems are not used by CFC and
NCR Credit because the contracts originated by each of them have larger original
balances.
DOCUMENTATION
Prior to funding leasing and financing transactions, a complete
documentation package (including generally a credit application, signed
lease/installment sale or financing agreement, vendor invoice, initial
lease/advance payment, proof of insurance (where relevant), delivery and
acceptance acknowledgements and appropriate UCC financing statements) is
required. Filing of UCC financing statements typically is required by Leasing
Services unless the underlying equipment has a cost of less than $10,000 (or
$30,000 in the case of a lease contract with a fair market value purchase
option); by Credit Corp. unless the underlying equipment has a cost of less than
$20,000 (or $50,000 in the case of a lease contract with a fair market value
purchase option); by NCR Credit unless the underlying equipment has a cost of
less than $25,000; and by CFC in all transactions.
BILLING
Billing for the Originators is handled by third parties, which prepare and
mail monthly invoices. All customers are assigned a billing cycle and invoices
are sent either 19 days before the due date in the case of Credit Corp., 30 days
before the due date in the case of Leasing Services, 20 days before the due date
in the case of CFC, or 25 days before the due date in the case of NCR Credit.
From time to time to facilitate customer needs, the Originators will provide
manual invoices. Monthly invoices include the scheduled payment, taxes,
insurance and late charges, if any. The vast majority of contracts provide for
level payments throughout their term. Substantially all customers forward
payments to lockboxes with certain financial institutions.
PORTFOLIO MONITORING
Delinquency is tracked and calculated monthly for each major portfolio
segment, including segmentation by classification of days past due. In addition,
non-accruals (see ' -- Non-Accrual and Write-off Policy') are tracked monthly,
including the portion which is deemed to be at risk by the SBU credit officials.
Similarly, credit losses are monitored each month and are compared with credit
losses for previous months and the corresponding month in a number of prior
years. TCC also employs other techniques in evaluating the performance of its
portfolio. These techniques include roll rate analysis (a type of portfolio
analysis examining the rate at which accounts in various stages of delinquency
become, or 'roll' into, losses), a type of vintage analysis (another type of
portfolio analysis in which TCC's assets are classified by age and then compared
across different years (e.g., comparing loss experience for two-year-old
portfolio in 1996 with that in 1995)) as well as other types of analysis. For
transactions over $1,000,000, TCC conducts annual reviews of customer financial
condition and risk rating. Such annual reviews are conducted on transactions
over $500,000 in the event of certain higher risk ratings. All other
transactions are monitored via the normal collection process, meaning that they
would receive individual attention only if they became delinquent or for some
other reason came to the attention of the company's credit and collections
personnel -- for example, a material adverse change in the financial condition
of the obligor in the transaction.
In addition to providing an initial credit review, ongoing credit review
procedures exist to identify at an early stage those customers that may be
experiencing financial difficulty. Once identified, these customers are
monitored by credit personnel, who periodically make recommendations to the SBU
Credit Committee and/or the Investment Committee 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.
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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 was implemented company-wide in September 1996
following a testing period in several of Credit Corp.'s units. The collection
management systems prioritize delinquent accounts into automated queues using
delinquent account scoring systems (also referred to as behavioral scoring).
Telephone calls to delinquent accounts are automatically dialed by the system
eliminating no answer and busy line calls (which are automatically rescheduled).
Accounts are ranked using a suite of statistically derived risk prediction
indicators (behavioral scoring) for handling in order of risk weighted exposure.
The collection management systems utilize different account collection
strategies as a function of risk level and account balance. Accounts with low
balances and/or low risk are assigned to a low impact collection strategy which
involve greater reliance upon letters in the early stages of delinquency and
less reliance on telephone calls until the later stages of delinquency. Also,
the number of days between actions are greater for a low risk account than in
the case of a high risk account. A high impact collection strategy is assigned
to accounts with high balances and/or high risk scores. In this case, telephone
calls are commenced sooner in the collection process and collection actions are
more closely spaced.
At NCR Credit and CFC, account collections are undertaken in a more manual
fashion with prioritization being principally driven by the number of days past
due. Accounts are typically assigned to individuals or groups who will be
responsible to ensure appropriate collection activities are undertaken to
effectuate customer payment. The collection process is undertaken using computer
generated reminder notices which are generally sent once an account is 10-15
days past due, individually tailored collection letters and telephone contact,
as appropriate.
Outside collection agencies and attorneys are frequently used to supplement
collection activity. Typically an account is placed with an outside collection
agency or attorney when it is 180 days or more past due. However, accounts past
due less than 180 days may be placed with a collection agency or attorney
depending upon the circumstances of its delinquency. Equipment may be
repossessed at any time after the contractual default but repossession typically
is not made until the account is past due between 90 and 180 days, or earlier if
the equipment is determined to be at risk.
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
All of the Contracts in each Owner Trust will be commercial, rather than
consumer, leases or loans. The following description of the Contracts generally
describes the material terms of the Contracts to be included in each Contract
Pool, although an immaterial number of Contracts in a Contract Pool may differ
in one or more provisions from the description below.
The Lease Contracts in a Owner Trust will include both true leases and
leases intended for security, as such terms are described 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
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purchase or renewal at fair market value. Under leases intended for security,
the lessor in effect finances the 'purchase' of the leased assets by the lessee
and retains a security interest in the leased assets. The lessee retains the
leased property for substantially all its economic life and the lessor retains
no significant residual interest. These leases are considered conditional sales
type leases for federal tax purposes, and, accordingly, the lessor does not take
any federal tax benefits. End of lease options for such leases depend on the
terms of the related Lease Contract, although generally these terms provide for
purchase of the Equipment at a prestated price. The inclusion of true leases in
the Contract Pool will have no income tax impact on Noteholders since the Notes
are treated as debt for income tax purposes. See 'United States Taxation.'
However, true leases are treated differently under the Bankruptcy Code from
leases intended for security. See 'Risk Factors -- Bankruptcy and Insolvency
Risks' and 'Certain Legal Aspects of the Contracts -- Insolvency Matters' for a
discussion of these differences.
THE FORMS OF CONTRACTS
The Lease Contracts will generally be 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 form.
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 for any Owner Trust, will not be 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 for any Owner Trust,
will not be 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. relating to equipment with a
cost of $100,000 or less, and for Lease Contracts originated after March 4, 1997
by Leasing Services relating to equipment with a cost of $250,000 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
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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 (in
the case of Lease Contracts originated by Credit Corp.) or $250,000 (in the case
of Lease Contracts originated by Leasing Services after March 4, 1997),
insurance coverage generally is verified and tracked by the respective
Originator and the failure to maintain such insurance constitutes an event of
default under the applicable Lease Contract. Generally, either pursuant to the
Specific Lease Form or the Master Form Lease, the Obligor also agrees to
indemnify the Originator for all liability and expenses arising from the use,
condition or ownership of the Equipment.
Under each Lease Contract, if the Equipment is damaged or destroyed, the
Obligor is required to (i) repair such Equipment, (ii) make a termination
payment to the lessor in an amount not less than the Required Payoff Amount, or
(iii) in some cases, replace such damaged or destroyed Equipment with other
equipment of comparable use and value. Under the Transfer and Servicing
Agreement, the Servicer is permitted (in the case of the destruction of the
Equipment related to a particular Lease Contract) either to allow the Lessee to
replace such Equipment (provided that the replacement equipment is, in the
judgment of the Servicer, of comparable use and at least equivalent value to the
value of the Equipment which was destroyed) or to accept the termination payment
referred to above.
ASSIGNMENT OF CONTRACTS
The Contracts permit the assignment of the Contract by the lessor or
secured party without the consent of the Obligor, except for a small number of
Contracts which require notification of the assignment to, or the consent of,
the Obligor (and TCC will represent and warrant in the applicable Purchase
Agreement that such notices have been given, or such approvals will have been
received, not more than ten days following the Closing Date). The Contracts do
not permit the assignment thereof (or the Equipment related thereto) by the
Obligor without the prior consent of the lessor or secured party, other than
Contracts which (i) may permit assignments to a parent, subsidiary or affiliate,
(ii) permit the assignment to a third party, provided the Obligor remains liable
under the Contract, or (iii) permit assignment to a third party with a credit
standing (determined by TCC in accordance with its underwriting policy and
practice at the time for an equivalent contract type, term and amount) equal to
or better than the original Obligor. Under the Transfer and Servicing Agreement,
the Servicer may permit an assignment of a particular Contract from an Obligor
to a third party only if the Servicer (utilizing the current underwriting
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
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circumstances. See 'Description of the Transfer and Servicing
Agreements -- 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, the extension is necessary to avoid a termination and liquidation of
such Contract and will maximize the amount to be received by the Owner Trust
with respect to such Contract.
PREPAYMENTS AND EARLY TERMINATION
Any Contract may either (i) not permit the Obligor thereunder to prepay the
amounts due under such Contract or otherwise terminate the Contract prior to its
scheduled expiration date, or (ii) allow for a prepayment or early termination
upon payment of an amount that is at least equal to the present value of the
future Scheduled Payments on such Contract (determined using a discount rate
specified in the related Prospectus Supplement), or (iii) allow for a prepayment
or early termination without the payment of such an amount. Some Contracts,
often written as installment sales contracts, promissory notes or loan and
security agreements, permit the Obligor thereunder to prepay the Contract, in
whole or in part, at any time at par plus accrued interest. The 'Contract
Principal Balance' of any Contract as of the last day of any Collection Period
will be: (1) in the case of any Contract that does not by its terms permit
prepayment or early termination, the present value of the unpaid Scheduled
Payments due on such Contract after such last day of the Collection Period
(excluding all Scheduled Payments due on or prior to, but not received as of,
such last day, as well as any Scheduled Payments due after such last day and
received on or prior thereto), after giving effect to any Prepayments received
on or prior to such last day, discounted monthly at the rate specified in the
related Prospectus Supplement (assuming, for purposes of such calculation, that
each Scheduled Payment is due on the last day of the applicable Collection
Period); (2) in the case of any Contract that permits prepayment or early
termination only upon payment of an amount that is at least equal to the present
value (calculated in the manner described in clause (1) above) of the unpaid
Scheduled Payments due on such Contract after the date of such prepayment, the
amount specified in clause (1) above; and (3) in the case of any Contract that
permits prepayment or early termination without payment of an amount at least
equal to the amount specified in clause (2) above, the lesser of (a) the
outstanding principal balance of such 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 amount
specified in clause (1) above.
Under each Transfer and Servicing Agreement, the Servicer will be permitted
to allow the prepayment of any Contract, but only if the amount paid by or on
behalf of the Obligor (or, in the case of a partial prepayment, the sum of such
amount and the remaining Contract Principal Balance of the Contract after
application of such amount) is at least equal to the Required Payoff Amount for
such Contract. 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 and not yet received, 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 otherwise be payable from) any portion of a Prepayment on a Contract that
exceeds the Required Payoff Amount for such Contract.
In no event will Pledged Revenues (as defined in the related Prospectus
Supplement) for a Series of Notes include (nor will the Notes otherwise be
payable from) any portion of a Prepayment on a Contract that exceeds the
Required Payoff Amount for such Contract.
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.
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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 AT&T CAPITAL CORPORATION
Except as otherwise specified in the related Prospectus Supplement, TCC
will make the following representations and warranties regarding the Contracts
(and the related Equipment) included in each Contract Pool as of the related
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), and (ii) 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 provisions of any Contract have been waived, altered or
modified in any material respect, except as indicated in the Contract File;
(C) No Lease Contract is a 'consumer lease' as defined in Article 2A
of the Uniform Commercial Code;
(D) 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;
(E) 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;
(F) There is no known default, breach, violation or event permitting
cancellation or termination of the Contract by the lessor (in the case of
Lease Contracts) or by the secured party (in the case of Loan Contracts)
under the terms of any Contract (other than Scheduled Payment delinquencies
(in excess of 10% of the Scheduled Payment due) of not more than 59 days),
and (except for payment extensions and waivers of Administrative Fees in
accordance with TCC's servicing and collection policies and procedures)
there has been no waiver of any of the foregoing; and as of the Cut-Off
Date, no related Equipment had been repossessed;
(G) 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;
(H) 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;
(I) 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);
(J) Each Contract may be sold, assigned and transferred by the
Originator to the Depositor, and may be assigned and transferred by the
Depositor to the Owner Trust, without the consent of, or prior approval
from, or any notification to, the applicable Obligor, other than (i)
certain Contracts (which, in proportion to the aggregate of all of the
Contracts, are not material) that require notification of the assignment to
the Obligor, which notification will be given by the Servicer not later
than 10 days following the Closing Date, and (ii) Contracts (which, in
proportion to the aggregate of all of the Contracts, are not material) that
require the consent of the Obligor, which consent will be obtained by the
Servicer not later than 10 days following the Closing Date;
(K) 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
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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;
(L) 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;
(M) 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;
(N) 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);
(O) 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;
(P) Each Contract either (i) does not permit the Obligor to terminate
the Contract prior to the latest Stated Maturity Date or to otherwise
prepay the amounts due and payable thereunder, or (ii) allows for an early
termination or prepayment upon payment of an amount which is not less than
the Required Payoff Amount;
(Q) It is not a precondition to the valid transfer or assignment of
the Originator's interest in any of the Equipment related to any Contract
that title to such Equipment be transferred on the records of any
governmental or quasi-governmental agency, body or authority;
(R) Each Contract 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. Immediately prior to the sale,
assignment and conveyance of such Contract by the Originator to the
Depositor, such Originator had good title to such Contract and the
Originator's interest in the related Equipment (subject to the terms of
such Contract) and was the sole owner thereof, free of any Lien. Such
Contract has been duly and properly sold, assigned and conveyed by the
applicable Originator to the Depositor pursuant to a Purchase Agreement.
Immediately prior to the transfer and conveyance of such Contract to the
Owner Trust, the Depositor had the right to transfer such Contract and such
interest in the related Equipment free of any Lien (other than the rights
of the Obligor under the related Contract). Such Contract has been duly and
properly transferred and conveyed by the Depositor to the Owner Trust
pursuant to the Transfer and Servicing Agreement free of any Lien (other
than the rights of the Obligor under the related Contract);
(S) 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;
(T) The sale, transfer and assignment of such Contract and the
Originators' interest in the related Equipment to the Depositor under the
Purchase Agreement, and the transfer and conveyance of such Contract from,
and the grant of a security interest in the related Equipment by, the
Depositor to the Owner Trust under the Transfer and Servicing Agreement,
are not unlawful, void or voidable under the laws of the jurisdiction
applicable to such Contract;
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(U) All filings and other actions required to be made, taken or
performed by any person in any jurisdiction to give the Owner Trust a first
priority perfected lien or ownership interest in the Contracts and a first
priority perfected security interest in the Originator's interest in the
Equipment have been made, taken or performed;
(V) There exists a Contract File pertaining to each Contract, and such
Contract File contains the Contract or a facsimile copy thereof;
(W) 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;
(X) The Contracts constitute chattel paper within the meaning of the
UCC as in effect in the States where the Originators are located (other
than those Contracts in which the lessor is financing exclusively the
Obligor's software license or maintenance contract for leased Equipment,
which Contracts, in proportion to the Initial Contract Pool Principal
Balance, are not material);
(Y) By the Closing Date, the portions of the electronic master record
of TCC and each Originator relating to the Contracts will have been clearly
and unambiguously marked to show that the Contracts constitute part of the
Trust Assets and are owned by the Owner Trust in accordance with the terms
of the Transfer and Servicing Agreement;
(Z) The computer tape containing information with respect to the
Contracts that was made available by the Depositor to the Owner Trustee and
the Indenture Trustee on the Closing Date and was used to select the
Contracts was complete and accurate in all material respects as of the
Cut-Off Date and includes a description of the same Contracts that are
described in the Schedule of Contracts to the Transfer and Servicing
Agreement;
(AA) The information with respect to the Contracts listed on the
Schedule of Contracts attached to the Transfer and Servicing Agreement is
true, correct and complete in all material respects;
(BB) Each Contract was originated or purchased by an Originator and
was sold and assigned by such Originator to the Depositor without any fraud
or misrepresentation on the part of such Originator or TCC; and
(CC) No selection procedures adverse to the Noteholders were utilized
(i) in selecting those Contracts transferred by the Originators to the
Depositor from those lease and loan contracts available therefore or (ii)
in selecting those Contracts transferred by the Depositor to the Owner
Trust from those lease and loan contracts available therefore.
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 related
Indenture Trustee or the Servicer of such breach, will be obligated to purchase
the Contract and, in the case of a Lease Contract, the related Leased Equipment.
Any such purchase shall be made on the Deposit Date immediately following the
end of such second Collection Period at a price equal to the Required Payoff
Amount applicable to such Contract (which will be allocated to the related Owner
Trust) plus, if applicable, the Book Value of the related Leased Equipment
(which will be allocated to the Depositor). This purchase obligation may be
enforced by the related Indenture Trustee on behalf of the holders of the Notes
of the related Series, and will constitute the sole remedy available to the
Noteholders against TCC for any such uncured breach, except that pursuant to the
applicable Transfer and Servicing Agreement, TCC will indemnify the related
Indenture Trustee, the related Owner Trustee, the related Owner Trust and the
related Noteholders against losses, damages, liabilities and claims which may be
asserted against any of them as a result of third-party claims arising out of
the facts giving rise to such breach.
Upon the purchase by TCC of a Contract (and, in the case of a Lease
Contract, any related Leased Equipment), such Contract and related Leased
Equipment will be released to TCC.
DELINQUENCY, NON-ACCRUAL AND NET LOSS EXPERIENCE
Statistics relating to the delinquency, non-accrual and net loss experience
on lease and/or loan contracts within the Originators' owned and managed
portfolios of receivables similar to the Contracts in a Contract Pool will be
set forth in the related Prospectus Supplement.
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DESCRIPTION OF THE NOTES
GENERAL
Each Series of Notes will be issued pursuant to the terms of an Indenture,
a form of which was filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement of which this Prospectus is a part. In
addition, a copy of the Indenture for a Series of Notes will be filed with the
Securities and Exchange Commission following the issuance of such Series. The
following summary describes certain terms expected to be common to each
Indenture and the related Notes, but does not purport to be complete and is
subject to all of the provisions of the Indenture, the related Notes and the
description set forth in the related Prospectus Supplement.
The Notes of each Series will be issued in fully registered form only and
will represent the obligations of a separate Owner Trust created pursuant to the
related Trust Agreement.
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'). Unless otherwise specified in the related
Prospectus Supplement, 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). 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 a
successor Servicer or Indenture Trustee, are open for regular business.
Each Class of Notes initially will be represented by one or more global
Notes (the 'Global Notes') registered in the name of the nominee of DTC
(together with any successor depository selected by the Indenture Trustee, the
'Depository'), except as set forth below. Beneficial interests in each Class of
Notes will be available for purchase in minimum denominations of $10,000 and
integral multiples thereof in book-entry form only. The Depositor has been
informed by DTC that DTC's nominee will be Cede & Co. Accordingly, Cede & Co. is
expected to be the Holder of record of the Notes. Unless and until Definitive
Notes are issued under the limited circumstances described herein, no Note Owner
acquiring an interest in any Class of Notes will be entitled to receive a
certificate representing such Note Owner's interest in such Notes. Until such
time, all references herein to actions by Noteholders of any Class of Notes will
refer to actions taken by the Depository upon instructions from its
participating organizations and all references herein to distributions, notices,
reports and statements to Noteholders of any Class of Notes will refer to
distributions, notices, reports and statements to the Depository or its nominee,
as the registered Holder of the Notes of such Class, for distribution to Note
Owners of such Class in accordance with the Depository's procedures. See
' -- Book-Entry Registration' and ' -- Definitive Notes.'
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any paying agent in trust under the Indenture for
the payment of any amount due with respect to any Note and remaining unclaimed
for two years after such amount has become due and payable shall be discharged
from such trust and, upon request of the Owner Trustee, shall be deposited by
the Indenture Trustee in the Collection Account; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Owner Trust
for payment thereof, and all liability of the Indenture Trustee or such paying
agent with respect to such money shall thereupon cease.
DISTRIBUTIONS
The timing and priority of distributions, seniority, allocations of loss,
Interest Rate and amount or method of determining distributions with respect to
principal and interest on the Notes of any Series will be described in the
related Prospectus Supplement. Principal of and interest on the Notes will be
paid on the Payment Date specified in the related Prospectus Supplement. The
related Prospectus Supplement will specify the Interest Rate for each class of
Notes. Unless otherwise specified in the related Prospectus Supplement, interest
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Distributions in respect of principal and interest on the Notes of any
Class will be made on a pro rata basis among all of the Noteholders of such
class.
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CREDIT ENHANCEMENT
As further specified in the related Prospectus Supplement, a cash
collateral account or other form of credit enhancement will be established on or
prior to the Closing Date and may be available to the Indenture Trustee to pay
interest and principal on the Notes in the manner and to the extent specified in
the Prospectus Supplement.
LIQUIDATED CONTRACTS
Liquidation Proceeds (which will consist generally of all amounts received
by the Servicer in connection with the liquidation of a Contract and disposition
of the related Equipment, net of any related out-of-pocket liquidation expenses)
will be allocated as follows: (i) with respect to any Loan Contract, all such
Liquidation Proceeds will be allocated to the Owner Trust; and (ii) with respect
to any Lease Contract, such Liquidation Proceeds will (unless otherwise
specified in the related Prospectus Supplement) be allocated on a pro rata basis
between the Depositor, on the one hand, and the Owner Trust, on the other, based
respectively on (a) the 'Book Value' of the Leased Equipment (which is a fixed
amount equal to the value of the Leased Equipment as shown on the accounting
books and records of TCC or the applicable Originator, as appropriate, as of the
Cut-Off Date) and (b) the Required Payoff Amount for such Lease Contract
(determined as of the Collection Period during which such Lease Contract became
a Liquidated Contract); provided that, in the event the Liquidation Proceeds in
respect of any Lease Contract and the related Leased Equipment exceed the sum of
the Required Payoff Amount for such Contract and the Book Value of such Leased
Equipment, any such excess shall be allocated solely to the Depositor. By way of
example, if the Servicer, in connection with a defaulted Lease Contract, derived
Liquidation Proceeds in the amount of $100 from the liquidation of such Lease
Contract and disposition of the related Leased Equipment, and if the Required
Payoff Amount of such Lease Contract was, as of the Collection Period during
which such Lease Contract became a Liquidated Contract, $120 and the Book Value
of such Leased Equipment was $30, such Liquidation Proceeds would be allocated
to the Owner Trust in the amount of $80 and to the Depositor in the amount of
$20. All Liquidation Proceeds which are so allocable to the Owner Trust will be
deposited in the Collection Account and constitute Pledged Revenues to be
applied to the payment of interest and principal on the Notes in accordance with
the priorities described under ' -- Distributions' above.
OPTIONAL PURCHASE OF CONTRACTS
The Depositor may purchase all of the Contracts owned by an Owner Trust on
any Payment Date following the date on which the unpaid principal balance of the
related Notes 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 related Notes as of such Payment
Date plus interest to be paid on the related Notes on such Payment Date. The
proceeds of such purchase shall be applied on such Payment Date to the payment
of the remaining principal balance of the related Notes, together with accrued
interest thereon.
TRUST ACCOUNTS
Except as otherwise specified in the related Prospectus Supplement, the
applicable Indenture Trustee will establish and maintain under each Indenture
segregated trust accounts (which need not be deposit accounts, but which must be
'Eligible Accounts'), consisting of the 'Collection Account,' the 'Servicing
Account' and the 'Note Distribution Account' (collectively, the 'Trust
Accounts'). An 'Eligible Account' means any account which is (i) an account
maintained with an Eligible Institution (as defined below); (ii) an account or
accounts the deposits in which are fully insured by either the Bank Insurance
Fund or the Savings Association Insurance Fund of the FDIC; (iii) a 'segregated
trust account' maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Indenture Trustee, which
depository institution or trust company has capital and 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 any Series of Notes, as confirmed in writing by such Rating Agency.
'Eligible Institution' means any depository institution organized under the laws
of the United
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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 of any Series, 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
by any Rating Agency.
REPORTS TO NOTEHOLDERS
With respect to each Series of Notes, the Servicer will furnish to the
applicable Indenture Trustee, and such Indenture Trustee will include with each
distribution to a Noteholder, a statement, as specified in the related
Prospectus Supplement, in respect of the related Payment Date setting forth,
among other things:
(i) the amount of interest paid on each Class of the Notes, including
any unpaid interest from the prior Payment Date, and any remaining unpaid
interest on each Class of the Notes;
(ii) the amount of principal paid on each Class of the Notes;
(iii) the Principal Deficiency Amount, if any, for such Payment Date;
and
(iv) information regarding any credit enhancement with respect to such
Series.
With respect to any Series, 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 related 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 to the extent required under the Exchange Act
and the rules and regulations of the Commission thereunder.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each Class
of Notes in any Series 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 for each Series of Notes will be Cede & Co. Noteholders
may hold their Notes through DTC (in the United States) or, if so specified in
the related Prospectus Supplement, through 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. If the related Prospectus Supplement states that the Notes of such
Series may be held through Cedel Bank or Euroclear, Cedel Bank and Euroclear
will hold omnibus positions on behalf of the Cedel Bank Participants and the
Euroclear Participants, respectively, through customers' securities accounts in
Cedel Bank's and Euroclear's names on the books of their respective depositories
(collectively, the 'International Depositories') which in turn will hold such
positions in customers' securities accounts in the International Depositories'
names on the books of DTC.
DTC is a New York-chartered limited-purpose trust company, a member of the
Federal Reserve System, a 'clearing corporation' within the meaning of the UCC
in effect in the State of New York, and a 'clearing agency' registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities for
its Participants ('DTC Participants') and facilitates the clearance and
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities. Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. Indirect
access to the DTC system is also available to others such as securities brokers
and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or
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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.
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.
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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.
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
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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.
If the related Prospectus Supplement states that the Notes of a Series will
be listed on the Luxembourg Stock Exchange, a paying agent shall be maintained
in respect of the Notes in Luxembourg (the 'Luxembourg Paying Agent') for so
long as the Notes of such Series are listed on the Luxembourg Stock Exchange. In
such event, Kredietbank S.A. Luxembourgeoise will be appointed as the initial
Luxembourg Paying Agent. In addition, Kredietbank S.A. Luxembourgeoise would be
appointed transfer agent in Luxembourg, with respect to the Notes of such
Series, in case the Global Notes for any Series are replaced by Definitive
Notes.
DEFINITIVE NOTES
The Notes of each Class of a Series 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 of a Series will be
made by the Indenture Trustee directly to Noteholders in accordance with the
procedures set forth herein and in the Indenture. Interest payments and any
principal payments on each Payment Date will be made to Noteholders in whose
names the Definitive Notes were registered at the close of business on the
related Record Date. Distributions will be made by check mailed to the address
of such Noteholder as it appears on the register maintained by the Indenture
Trustee. The final payment on any Note, however, will be made only upon
presentation and surrender of such Note at the office or agency specified in the
notice of final distribution to Noteholders. The Indenture Trustee will provide
such notice to registered Noteholders mailed not later than the fifth day of the
month of such final distributions.
Definitive Notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which initially will be the Indenture Trustee
(in such capacity, the 'Transfer Agent and Registrar') and, if the Notes of such
Series are listed on the Luxembourg Stock Exchange, 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
Unless otherwise specified in the related Prospectus Supplement, with
respect to a Series of Notes, 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
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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 no such supplemental
indenture may (a) result in a reduction, qualification or withdrawal of the
then-current ratings of the Notes, or (b) as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of any Noteholder.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT
Unless otherwise specified in the related Prospectus Supplement, with the
consent of the Holders representing a majority of the principal balance of each
Class of the related Series of Notes then outstanding (a 'Note Majority'), the
Owner Trustee and the Indenture Trustee may execute a supplemental indenture to
add provisions to change in any manner or eliminate any provisions of, the
Indenture, or modify in any manner the rights of the Noteholders.
Without the consent of the Holder of each outstanding Note affected
thereby, however, no supplemental indenture may: (i) change the date, timing or
method of determination of any installment of principal of or interest on any
Note or reduce the principal amount thereof, the interest rate specified thereon
or the redemption price with respect thereto or change the manner of calculating
any such payment or any place of payment where, or the coin or currency in
which, any Note or any interest thereon is payable; (ii) impair the right to
institute suit for the enforcement of certain provisions of the Indenture
regarding payment; (iii) reduce the percentage of each Class of the Notes then
outstanding the consent of the Holders of which is required for any such
supplemental indenture or for any waiver of compliance with certain provisions
of the Indenture or of certain defaults thereunder and their consequences; (iv)
modify or alter the provisions of the Indenture regarding the voting of Notes
held by the Owner Trust, any other obligor on the Notes, the Depositor or an
affiliate of any of them; (v) reduce the percentage of the Notes the consent of
the Holders of which is required to direct the Indenture Trustee to sell or
liquidate the Pledged Revenues if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid interest on the
outstanding Notes; (vi) reduce the percentage of each Class of the Notes then
outstanding required to amend the sections of the Indenture which specify the
applicable percentage of each Class of the Notes then outstanding necessary to
amend the Indenture or certain other related agreements; (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the Holder of any Note of the
security afforded by the lien of the Indenture; or (viii) result in a reduction,
qualification or withdrawal of the rating of any Class of Notes by a Rating
Agency, as confirmed in writing by each Rating Agency.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
'Events of Default' under each Indenture will consist of: (i) a default for
five calendar days or more in the payment of interest due on any Note of such
Series; (ii) failure to pay the unpaid principal amount of any Class of Notes of
such Series on the Stated Maturity Date or any redemption date for such Class;
(iii) a default in the observance or performance in any material respect of any
covenant or agreement of the Owner Trust made in the Indenture, or any
representation or warranty made by the Owner Trust in the Indenture or in any
certificate delivered pursuant thereto or in connection therewith having been
incorrect as of the time made, and the continuation of any such default or the
failure to cure such breach of a representation or warranty for a period of 30
calendar days after notice thereof is given to the Owner Trust by the Indenture
Trustee or to the Owner Trust and the Indenture Trustee by the Holders of at
least 25% in principal amount of the Notes then outstanding; or (iv) certain
events of bankruptcy, insolvency, receivership or liquidation of the Owner Trust
or the Depositor.
If an Event of Default should occur and be continuing with respect to the
Notes of a Series, the applicable Indenture Trustee or a Note Majority may
declare the principal of the Notes of such Series to be immediately due and
payable. Such declaration may, under certain circumstances, be rescinded by a
Note Majority.
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If the Notes of a Series have been declared due and payable following an
Event of Default, the applicable Indenture Trustee may institute proceedings to
collect amounts due or foreclose on Pledged Revenues, exercise remedies as a
secured party, sell the related Pledged Revenues or elect to have the Owner
Trust maintain possession of the Pledged Revenues and continue to apply
collections on the Pledged Revenues as if there had been no declaration of
acceleration. The Indenture Trustee, however, will be prohibited from selling
the Pledged Revenues following an Event of Default, unless (i) the Holders of
all the outstanding Notes consent to such sale; (ii) the proceeds of such sale
distributable to Holders of the Notes are sufficient to pay in full the
principal of and the accrued interest on all the outstanding Notes at the date
of such sale; or (iii) the Indenture Trustee determines that the Pledged
Revenues would not be sufficient on an ongoing basis to make all payments on the
Notes as such payments would have become due if such obligations had not been
declared due and payable, and the Indenture Trustee obtains the consent of the
Holders of 66 2/3% of the aggregate outstanding amount of the Notes. Following a
declaration upon an Event of Default that the Notes are immediately due and
payable, any proceeds of liquidation of the Pledged Revenues will be applied in
the following order of priority: (i) to the reimbursement of the Trustee for its
expenses; (ii) to the payment of interest and then principal on the Senior
Notes; (iii) to the payment of interest and then principal on the Subordinate
Notes; (iv) to the payment of interest and then principal on the Certificates
(if any); and (v) the remainder, if any, to payment of certain amounts payable
in connection with any credit enhancement with respect to such Series and
thereafter to the Equity Certificateholders.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing, the
Indenture Trustee will be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the Holders of
the Notes, if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the Indenture, a Note
Majority will have the right to direct the time, method and place of conducting
any proceeding or any remedy available to the Indenture Trustee, and a Note
Majority may, in certain cases, waive any default with respect thereto, except a
default in the payment of principal or interest or a default in respect of a
covenant or provision of the Indenture that cannot be modified without the
waiver or consent of all of the Holders of such outstanding Notes.
No Holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such Holder previously has given to the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
Holders of not less than 25% in principal amount of the outstanding Notes have
made written request of the Indenture Trustee to institute such proceeding in
its own name as Indenture Trustee, (iii) such Holder or Holders have offered the
Indenture Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60
days failed to institute such proceeding, and (v) no direction inconsistent with
such written request has been given to the Indenture Trustee during such 60-day
period by the Holders of a majority in principal amount of such outstanding
Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the Noteholders.
In addition, the Indenture Trustee and the Noteholders, by accepting the
Notes, will covenant that they will not at any time institute against the
Depositor or the Owner Trust any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law.
Neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor any Holder of a Note including, without limitation, the Depositor,
nor any of their respective owners, beneficiaries, 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
Each Indenture will provide that the related 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
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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 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.
Each Owner Trust will not, among other things, (i) except as expressly
permitted by the related Indenture or Trust Agreement, sell, transfer, exchange
or otherwise dispose of any of the assets of such Owner Trust, (ii) claim any
credit on or make any deduction from the principal and interest payable in
respect of the related Notes (other than amounts withheld under the Code or
applicable state law) or assert any claim against any present or former Holder
of such Notes because of the payment of taxes levied or assessed upon the Owner
Trust, (iii) dissolve or liquidate in whole or in part, (iv) permit the validity
or effectiveness of the Indenture to be impaired or permit any person to be
released from any covenants or obligations with respect to the Notes under the
Indenture except as may be expressly permitted thereby, or (v) except as
expressly permitted by the Indenture, the Transfer and Servicing Agreement or
the Trust Agreement, permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or otherwise arise
upon or burden the assets of the Owner Trust or any part thereof, or any
interest therein or proceeds thereof.
Each Owner Trust may not engage in any activity other than as specified
under 'The Owner Trusts.' Each Owner Trust will not incur, assume or guarantee
any indebtedness other than indebtedness incurred pursuant to the related Notes
and the related Indenture or otherwise in accordance with the related Indenture,
Trust Agreement and Transfer and Servicing Agreement.
ANNUAL COMPLIANCE STATEMENT
Each Owner Trust will be required to file annually with the applicable
Indenture Trustee a written statement as to the fulfillment of its obligations
under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
Each Indenture Trustee will be required to mail each year to all
Noteholders of the related Series 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
An Indenture will be discharged with respect to the collateral securing the
Notes of such Series 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 Indenture Trustee for any Series will be specified in the related
Prospectus Supplement. An 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 an Indenture Trustee if such Indenture Trustee ceases
to be eligible to continue as such under the Indenture, if such Indenture
Trustee becomes insolvent or if the rating assigned to the long-term unsecured
debt obligations of such 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 an 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 AGREEMENTS
The following is a summary of the material terms of each Transfer and
Servicing Agreement, a form of which was filed with the Registration Statement
of which this Prospectus is a part. In addition, a copy of the Transfer and
Servicing Agreement relating to a Series of Notes will be filed with the
Securities and Exchange Commission following the issuance of such Series. The
following summary describes certain terms expected to be common to each Transfer
and Servicing Agreement, but does not purport to be complete and is subject to
all of the provisions of the Transfer and Servicing Agreement relating to a
particular Series and the description set forth in the related Prospectus
Supplement.
TRANSFER AND ASSIGNMENT OF CONTRACTS AND EQUIPMENT
On or before the applicable Closing Date, the Originators will transfer to
the Depositor pursuant to one or more Purchase Agreements all of their right,
title and interest in the Contracts and the related Equipment, including all
security interests created thereby and therein, the right to receive all
Scheduled Payments and Prepayments received on the Contracts on or after the
Cut-Off Date (including all Scheduled Payments due prior to, but not received as
of, the Cut-Off Date, but excluding any Scheduled Payments due on or after, but
received prior to, the Cut-Off Date), all rights under insurance policies
maintained on the Equipment pursuant to the Contracts, all documents contained
in the Contract Files and all proceeds derived from any of the foregoing.
Pursuant to the Transfer and Servicing Agreement, on the Closing Date, the
Depositor will transfer all of its rights in the Contracts and certain rights in
the Equipment (including, to the extent specified in the related Prospectus
Supplement, (i) the Depositor's ownership or security interest in the Leased
Equipment, (ii) Prepayments received on Contracts and (iii) Liquidation Proceeds
received with respect to the liquidation of defaulted Lease Contracts and the
disposition of the related Leased Equipment), together with all its rights under
the Purchase Agreements, to the Owner Trust.
Each Transfer and Servicing Agreement will designate the Servicer as
custodian to maintain possession, as the Owner Trust's agent, of the Contracts
and all documents related thereto. To facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in TCC's possession. UCC financing statements will be
filed on the Closing Date in the applicable jurisdictions reflecting the
transfer of the Contracts and the Equipment by the Originators to the Depositor,
the transfer by the Depositor to the Owner Trust, and the pledge by the Owner
Trust to the Indenture Trustee, and the Originators' accounting records and
computer systems will also reflect such assignments and pledge. The Contracts
will not, however, be stamped or otherwise physically marked to reflect their
assignment to the Owner Trust. If, through fraud, negligence or otherwise, a
subsequent purchaser were able to take physical possession of the Contracts
without knowledge of the assignment, the Owner Trust's interest in the Contracts
could be defeated. See 'Risk Factors -- Certain Legal Aspects of the Contracts'
and 'Certain Legal Aspects of the Contracts.'
COLLECTIONS ON CONTRACTS
The applicable Indenture Trustee will establish and maintain a Servicing
Account, into which the Servicer will deposit, no later than the second Business
Day after receipt thereof, all Scheduled Payments, Prepayments, Liquidation
Proceeds and other amounts received by the Servicer in respect of the Contracts
after the Cut-Off Date. The Servicer will thereafter transfer to the Collection
Account, no later than the third Business Day after deposit thereof in the
Servicing Account, the following amounts:
(i) all Scheduled Payments made by or on behalf of Obligors under the
Contracts;
(ii) all Prepayments, excluding any portion thereof allocable to the
Depositor, as specified in the related Prospectus Supplement;
(iii) amounts constituting Liquidation Proceeds on Liquidated
Contracts, to the extent specified in the related Prospectus Supplement;
(iv) any and all payments made by TCC pursuant to the Transfer and
Servicing Agreement in connection with the purchase of any Contracts as a
result of a breach of a representation or warranty with respect thereto, as
described under 'The Contracts -- Representations and Warranties Made by
AT&T Capital Corporation,' excluding, in the case of a Lease Contract, any
portion thereof allocable to the Depositor as specified in the related
Prospectus Supplement; and
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(v) the amount paid by the Depositor to purchase the Contracts, as
described under 'Description of the Notes -- Optional Purchase of
Contracts.'
So long as no Event of Termination shall have occurred and be continuing
with respect to the Servicer, the Servicer may make the remittances to be made
by it to the Collection Account net of amounts (which amounts may be netted
prior to any such remittance for a Collection Period) otherwise to be
distributed to it in payment of its Servicing Fee.
The Servicer will be entitled to withdraw from the Collection Account any
amounts deposited therein in error or required to be repaid to an Obligor, based
on the Servicer's good-faith determination that such amount was deposited in
error or must be returned to the Obligor.
Under the Transfer and Servicing Agreement, the Servicer is required to
establish in its own name one or more 'Insurance, Maintenance and Tax Accounts,'
into which are to be deposited any payments made by or on behalf of Obligors
which constitute (a) insurance charges paid by an Obligor to the lessor or
secured party under a Contract (unless such payments are made directly by the
Obligor to the applicable insurance company, or TCC or the Originator has
previously paid such charges), (b) any insurance payments or recoveries paid by
an insurance company or comparable third party and related to the damage to, or
destruction of, the Equipment related to such Contract (unless paid directly by
such insurance company or comparable third party directly to the Obligor), (c)
any payments made by or on behalf of Obligors which constitute amounts paid by
an Obligor to the lessor or secured party under a Contract in respect of the
maintenance of the related Equipment, and (d) taxes paid by the Obligor and
related to the applicable Contract or the Equipment related thereto (unless such
payment is made directly by the Obligor to the applicable taxing authority or
authorities, or TCC or the Originator has previously paid such taxes). The
Servicer may withdraw amounts from the Insurance, Maintenance and Tax Accounts,
when and if appropriate, to pay when due (or may pay from its own funds and
thereafter reimburse itself from amounts in the Insurance, Maintenance and Tax
Accounts) (1) all insurance charges in the amounts received under clause (a)
above, (2) any amounts payable under any applicable maintenance contract or
otherwise with respect to the maintenance of the related Equipment in the
amounts received under clause (c) above, and (3) all taxes in the amounts
received under clause (d) above. Amounts on deposit in the Insurance,
Maintenance and Tax Accounts which represent amounts received by the Servicer
pursuant to clause (b) above shall be applied by the Servicer as follows: if
equipment is purchased to replace the Equipment that was damaged or destroyed,
and such replacement equipment is (in the reasonable opinion of the Servicer) of
comparable use and equivalent value to the Equipment that was damaged or
destroyed, or if the Equipment is to be repaired, the Servicer shall release
such amount so received from the insurance company or comparable third party in
payment or reimbursement for such replacement equipment or such repair; and if
this replacement option is not exercised and the Equipment is not to be
repaired, then the Servicer shall treat such amount as Liquidation Proceeds and
transfer that portion thereof which would be allocable to the Notes (as
described in 'Description of the Notes -- Liquidated Contracts') from the
Insurance, Maintenance and Tax Account to the Collection Account.
The Servicer will pay to the Depositor, no later than the third Business
Day after deposit thereof in the Servicing Account, all proceeds from the
disposition of Leased Equipment, to the extent allocable to the Depositor,
including amounts paid by Obligors to exercise purchase options under Lease
Contracts and the allocable portion of Liquidation Proceeds (as described under
'Description of the Notes -- Liquidated Contracts').
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 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 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 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 or other form of credit enhancement 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
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Date for any Class of Notes, the remaining unpaid principal balance of such
Class of Notes (after giving effect to previous application of Available Pledged
Revenues as aforesaid).
SERVICING
Pursuant to each Transfer and Servicing Agreement, TCC will be engaged to
act as Servicer on behalf of the related Owner Trust and the Depositor. The
Servicer is generally obligated under each 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 related Owner Trust and the Depositor for the proper
performance of all such servicing responsibilities.
The Servicer is generally obligated to act in a commercially reasonable
manner with respect to the repossession and disposition of Equipment following a
Contract default with a view to realizing proceeds at least equal to the fair
market value thereof. The Servicer may, in its discretion, choose to dispose of
Equipment through a new lease or in some other manner which provides for payment
for the Equipment over time. In any such event, the Servicer will be required to
pay from its own funds an amount which, in its reasonable judgment, is equal to
the fair market value of such Equipment (less any related out-of-pocket
liquidation expenses), and the Servicer will be entitled to all payments
received thereafter in respect of such Equipment. Any such amounts so paid by
the Servicer will be deemed to constitute additional Liquidation Proceeds with
respect to the related Contract and Equipment and will be allocated as described
under 'Description of the Notes -- Liquidated Contracts.'
Under the Transfer and Servicing Agreement, the Servicer is responsible
for, among other things: reviewing and certifying that the Contract Files are
complete; monitoring and tracking any property and sales taxes to be paid by
Obligors; billing, collection and recording of payments from Obligors;
communicating with and providing billing records to Obligors; deposit of funds
into the Collection Account; receiving payments as the Owner Trust's agent on
the insurance policies maintained by the Obligors and communicating with
insurers with respect thereto; issuance of reports to the Indenture Trustee
specified in the Indenture and in the Transfer and Servicing Agreement;
repossession and remarketing of Equipment following Obligor defaults; and paying
the fees and ordinary expenses of the Indenture Trustee and the Owner Trustee.
The Servicer shall, to the extent the proceeds of such liquidation are
sufficient therefor, be entitled to recover all reasonable out-of-pocket
expenses incurred by it in the course of liquidating a Contract and disposing of
the related Equipment, which amounts may be retained by the Servicer from such
proceeds to the extent of such expenses. The Servicer is entitled under the
Transfer and Servicing Agreement to retain, from liquidation proceeds, a reserve
for out-of-pocket liquidation expenses in an amount equal to such expenses, in
addition to those previously incurred, as it reasonably estimates will be
incurred. Upon completion of such liquidation, the remainder of any such
reserve, after reimbursement to the Servicer of all out-of-pocket liquidation
expenses, shall constitute Liquidation Proceeds and be deposited in the
Collection Account. Under the Transfer and Servicing Agreement, the Servicer,
subject to certain limitations, is permitted to grant payment extensions on a
Contract in accordance with its credit and collection policies and procedures if
the Servicer believes in good faith that such extension is necessary to avoid a
termination and liquidation of such Contract and will maximize the amount to be
received by the Owner Trust with respect to such Contract. Under the Transfer
and Servicing Agreement, the Servicer, subject to certain limitations, is
permitted to grant modifications or amendments to a Contract in accordance with
its credit and collection policies and procedures.
Prepayments. The Servicer may in its discretion allow a prepayment of any
Lease Contract, but only if the amount paid by or on behalf of the Obligor (or,
in the case of a partial prepayment, the sum of such amount and the remaining
Contract Principal Balance of the Lease Contract after application of such
amount) is at least equal to the Required Payoff Amount of such Lease Contract.
To the extent any prepayment exceeds the Required Payoff Amount of a Lease
Contract, such excess will be paid to the Depositor.
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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 statement from a nationally recognized
accounting firm to the effect that such firm has (i) audited the financial
statements of the Servicer and issued its report thereon and that such audit was
made in accordance with generally accepted auditing standards, which require
that such accounting firm plan and perform the audit to obtain reasonable
assurance as to whether the financial statements of the Servicer are free of
material misstatement, and (ii) examined management's assertion that the
Servicer maintained effective control over the servicing of equipment lease
contracts, installment sales contracts, promissory notes, loan and security
agreements and/or other similar types of receivables under servicing agreements
substantially similar one to another, in accordance with established or stated
criteria, and that such examination was performed in accordance with standards
established by the American Institute of Certified Public Accountants.
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 an insurance policy or financial guarantee bond covering
errors and omissions by the Servicer. Such policy or 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 1.25% per annum multiplied by the
Contract Pool Principal Balance as of the last day of the second preceding
Collection Period (or, in the case of the Servicing Fee with respect to the
Collection Period commencing on the Cut-Off Date, the Contract Pool Principal
Balance as of the Cut-Off Date), plus any late fees, late payment interest,
documentation fees, insurance administration charges and other administrative
fees and charges and a portion of any extension fees (collectively, the
'Administrative Fees') collected with respect to the Contracts during the prior
Collection Period and any investment earnings on collections prior to deposit
thereof in the Collection Account. Up to one-fifth 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 or Noteholders, 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 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 or Noteholders, 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 Noteholder. The Servicer is
required under the Transfer and Servicing Agreement to give the Indenture
Trustee, the Owner Trustee and each Rating Agency notice of an Event of
Termination promptly after having obtained knowledge of such event.
Federal bankruptcy laws limit the termination of contracts solely by reason
of the fact that the party obligated to provide such performance is subject to
federal bankruptcy proceedings. In such a circumstance, the
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Indenture Trustee may be unable to terminate the Servicer unless it could
demonstrate that independent grounds (whether or not arising from the same facts
causing the Servicer to be subject to bankruptcy proceedings) exist to declare
an Event of Termination and the court supervising the bankruptcy proceeding
determines that such grounds warrant termination of the Servicer.
Rights upon Event of Termination. So long as an Event of Termination
remains unremedied, the Indenture Trustee may, and at the written direction of
(i) a Note Majority, or (ii) at such time as the Notes of such Series are no
longer Outstanding, Certificateholders representing a majority of the aggregate
principal balance of the Certificates of such Owner Trust (a '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 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
Any 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. Any Transfer and
Servicing Agreement may also be amended by the parties thereto with the consent
of a Note 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; 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 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, 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.
TERMINATION OF THE TRANSFER AND SERVICING AGREEMENT
The obligations created by any Transfer and Servicing Agreement will
terminate (after distribution of all interest and principal then due to
Noteholders and the holders of the Certificates) on the earlier of (i) the
Payment Date next succeeding the later of the final payment or other liquidation
of the last Contract or the disposition of all Equipment acquired upon
termination of any Contract; or (b) the Payment Date on which the Depositor
repurchases the Contracts as described under 'Description of the
Notes -- Optional Purchase of Contracts.' However, TCC's representations,
warranties and indemnities will survive any termination of the Transfer and
Servicing Agreement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
ENFORCEMENT OF SECURITY INTERESTS IN THE EQUIPMENT
Due to the administrative burden and expense, no assignments of the UCC
financing statements evidencing the security interest of the Originators in the
Equipment (to the extent that such financing statements have been filed against
the Obligor, as discussed under 'The Originators -- Underwriting and
Servicing -- Documentation')
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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 as described
under 'Description of the Notes -- Liquidated Contracts.' Additionally,
statutory liens for repairs or unpaid taxes and other liens arising by operation
of law may have priority even over prior perfected security interests assigned
to the Indenture Trustee in the Equipment.
In the event of a default by the Obligor under a Loan Contract or a Lease
Contract intended for security, the Servicer on behalf of the Owner Trust and
the Depositor may take action to enforce the Originator's interest in the
related Equipment by repossession and resale or re-lease of the Equipment. Under
the UCC in most states, a creditor can, without prior notice to the debtor,
repossess assets securing a defaulted contract by the Obligor's voluntary
surrender, or by 'self-help' repossession that does not involve a breach of the
peace and by judicial process. In the event of bankruptcy or insolvency of the
Obligor these remedies may require the permission of a bankruptcy court or may
otherwise not be immediately available. See ' -- Insolvency Matters' below.
In the event of a default by the Obligor under a Loan Contract or a Lease
Contract intended for security, some jurisdictions require that the Obligor be
notified of the default and be given a time period within which it may cure the
default prior to repossession. Generally, this right of reinstatement may be
exercised on a limited number of occasions in any one-year period.
The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the debtor with reasonable
notice of the date, time and place of any public sale and/or the date after
which any private sale of the collateral may be held and that any such sale be
conducted in a commercially reasonable manner.
Under most state laws, an Obligor under a Loan Contract or a Lease Contract
intended for security has the right to redeem collateral for its obligations
prior to actual sale by paying the lessor or secured party the unpaid balance of
the obligation plus reasonable expenses for repossessing, holding and preparing
the collateral for disposition and arranging for its sale, plus, to the extent
provided for in the written agreement of the parties, reasonable attorneys'
fees.
In addition, because the market value of equipment of the type subject to
the Contracts generally declines with age, due to obsolescence, the net
disposition proceeds of Equipment at any time during the term of the Contracts
may not equal or exceed the Contract Principal Balance on the related Contract.
Because of this, and because other creditors may in certain cases have rights in
the related Equipment superior to those of the Owner Trust, the Servicer may not
be able to recover the entire amount due on a defaulted Contract in the event
that the Servicer elects to repossess and dispose of such Equipment at any time.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from an Obligor under a Loan Contract or a Lease
Contract intended for security for any deficiency on repossession and resale of
the asset securing the unpaid balance of such Obligor's Contract. However, some
states impose prohibitions or limitations on deficiency judgments. In most
jurisdictions, the courts, in interpreting the UCC, would impose upon a creditor
an obligation to repossess the equipment in a commercially reasonable manner and
to 'mitigate damages' in the event of an Obligor's failure to cure a default.
The creditor would be required to exercise reasonable judgment and follow
acceptable commercial practice in seizing, selling or re-leasing the equipment
and to offset the net proceeds of such disposition against its claim. In
addition, an Obligor may successfully invoke an election of remedies defense to
a deficiency claim in the event that the Servicer's repossession and sale of the
Equipment is found to be a retention discharging the Obligor from all further
obligations under the UCC. If a deficiency judgment were granted, the judgment
would be a personal judgment against the Obligor for the shortfall, but a
defaulting Obligor may have limited assets or sources of income available
following repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
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Many states have adopted a version of Article 2A of the UCC ('Article 2A').
Article 2A purports to codify many provisions of existing common law. Although
there is little precedental authority regarding how Article 2A will be
interpreted, it may, among other things, limit enforceability of any
'unconscionable' provision in a Lease Contract, provide an Obligor with remedies
including the right to cancel the Lease Contract for any lessor breach or
default, and may add to or modify the terms of 'consumer leases' and leases
where the Obligor is a 'merchant lessee.' However, each Lease Contract contains
an acknowledgement by the Obligor that the Equipment was acquired for business
purposes, and TCC will represent in the Purchase Agreement that no Lease
Contract is a 'consumer lease' under Article 2A. Article 2A, moreover,
recognizes typical commercial lease 'hell or high water' rental payment clauses
and validates reasonable liquidated damages provisions in the event of lessor or
Obligor defaults. Article 2A also recognizes the concept of freedom of contract
and permits the parties in a commercial context a wide latitude to vary
provisions of the law.
INSOLVENCY MATTERS
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may also limit the ability of the Servicer to repossess and
resell or re-lease Equipment or obtain a deficiency judgment. In the event of
the bankruptcy or reorganization of an Obligor, various provisions of the
Bankruptcy Code of 1978 (the 'Bankruptcy Code') and related laws may interfere
with or eliminate the ability of the Servicer to enforce the Owner Trust's
rights under the Contracts. For example, although the bankruptcy or
reorganization of an Obligor would constitute an event of default under such
Contract, the Bankruptcy Code provides generally that rights and obligations
under an unexpired lease or an executory contract may not be terminated or
modified solely because of a provision in the lease or executory contract
conditioned upon the commencement of a case under the Bankruptcy Code. If
bankruptcy proceedings were instituted in respect of an Obligor under such a
Contract, the Owner Trust could be prevented from continuing to collect payments
due from or on behalf of such Obligor or exercising any remedies assigned to the
Owner Trust without the approval of the bankruptcy court, and, with respect to a
Loan Contract or a Lease Contract intended as security, the bankruptcy court
could permit the Obligor, as owner of the Equipment, to use or dispose of the
Equipment and provide the Owner Trust with a lien on substitute collateral, so
long as the court held that such substitute collateral constituted 'adequate
protection' within the meaning of the Bankruptcy Code.
In the case of a Lease Contract that is deemed not to be intended as
security, the Bankruptcy Code grants to the bankruptcy trustee or the
debtor-in-possession a right to elect to assume or reject any executory contract
or unexpired lease. Any such rejection by the lessee would result in the return
of the leased equipment to the lessor. Any rejection of such a lease or contract
constitutes a breach of such lease or contract, entitling the non-breaching
party to a claim for breach of contract, which claim would be payable only from
the assets of the debtor's bankruptcy estate. The net proceeds from any
resulting judgment would be allocated by the Servicer between the Owner Trust
and the Depositor as described under 'Description of the Notes -- Liquidated
Contracts.'
In the event that, as a result of the bankruptcy or reorganization of an
Obligor, the related Contract becomes a defaulted Contract, the amount available
to be withdrawn from, or drawn on, the cash collateral account or other form of
credit enhancement for the related Series has been reduced to zero and the
Contract has become a defaulted Contract without breach of any representation or
warranty of TCC or the Depositor, no recourse would be available against TCC or
the Depositor and the Noteholders 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 anticipated federal income tax consequences of the purchase, ownership
and disposition of each series of Notes will be discussed in the related
Prospectus Supplement. Such discussion will not deal with federal income tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. Investors should consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Notes.
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ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act ('ERISA'),
and/or Section 4975 of the Code, prohibits a pension, profit-sharing or other
employee benefit plan, as well as individual retirement accounts and certain
types of Keogh Plans (each a 'Benefit Plan') from engaging in certain
transactions with persons that are 'parties in interest' under ERISA or
'disqualified persons' under the Code with respect to such Benefit Plan. A
violation of these 'prohibited transaction' rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons. Title
I of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA
make investments that are prudent, diversified (except if prudent not to do so)
and in accordance with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code if assets of the Owner Trust were deemed to be assets of a Benefit Plan.
Under a regulation issued by the United States Department of Labor (the 'Plan
Assets Regulation'), the assets of the Owner Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquires an 'equity interest' in the Owner Trust and none of the
exceptions contained in the Plan Assets Regulation is applicable. An equity
interest is defined under the Plan Assets Regulation as an interest in an entity
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The Plan Assets Regulation
also provides that a beneficial interest in a trust is an equity interest.
Although there can be no assurances in this regard, it appears that the Notes
should be treated as debt without substantial equity features for purposes of
the Plan Assets Regulation and that the Notes do not constitute beneficial
interests in the Owner Trust for purposes of the Plan Assets Regulation.
However, without regard to whether the Notes are treated as an equity interest
for such purposes, the acquisition or holding of Notes by or on behalf of a
Benefit Plan could be considered to give rise to a prohibited transaction if the
Owner Trust, the Owner Trustee or the Indenture Trustee, or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a Note.
Included among these exemptions are: Prohibited Transaction Class Exemption
('PTCE') 96-23, regarding transactions effected by 'in-house asset managers';
PTCE 90-1, regarding investments by insurance company pooled separate accounts;
PTCE 95-60, regarding transactions effected by 'insurance company general
accounts'; PTCE 91-38, regarding investments by bank collective investment
funds; and PTCE 84-14, regarding transactions effected by 'qualified
professional asset managers.'
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF ANY OF THE NOTES SHOULD
CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING WHETHER THE ASSETS OF THE OWNER
TRUST WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBILITY OF EXEMPTIVE RELIEF FROM
THE PROHIBITED TRANSACTION RULES AND OTHER ISSUES AND THEIR POTENTIAL
CONSEQUENCES.
RATINGS OF THE NOTES
It will be a condition of issuance that at least one Rating Agency rate the
Notes in a rating category that signifies investment grade. 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.
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USE OF PROCEEDS
The proceeds from the offering and sale of the Notes of each Series, after
funding a portion of the cash collateral account or other form of credit
enhancement for such Series and paying the expenses of the Depositor, will be
used by the Depositor to pay down certain warehousing facilities, and any
remaining funds may be distributed to the Originators.
UNDERWRITING
The Company may sell Notes of each Series to or through underwriters (the
'Underwriters') by a negotiated firm commitment underwriting and public
reoffering by the Underwriters, and also may sell and place Notes directly to
other purchasers or through agents. The Company intends that Notes will be
offered through such various methods from time to time and that offerings may be
made concurrently through more than one of these methods or that an offering of
a particular Series of Notes may be made through a combination of such methods.
TCC, the Company and certain of its affiliates may agree to indemnify the
Underwriters and agents who participate in the distribution of the Notes against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
Funds in cash collateral accounts and the Trust Accounts may, from time to
time, be invested in Eligible Investments acquired from the Underwriters.
LEGAL MATTERS
Certain legal matters with respect to the Notes of each Series will be
passed upon for the Depositor by Dorsey & Whitney LLP. Owen C. Marx and Michael
E. Reeslund, partners in Dorsey & Whitney LLP, serve as directors of HoldCo. See
'AT&T Capital Corporation.' The Indenture, the Transfer and Servicing Agreement,
the Trust Agreement, the Purchase Agreement and the Notes of each Series will be
governed by the laws of the State of New York.
43
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<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------
<S> <C>
Administrative Fees...................................................................................... 38
Article 2A............................................................................................... 41
AT&T..................................................................................................... 13
ATMs..................................................................................................... 15
Bankruptcy Code.......................................................................................... 41
Bell Labs................................................................................................ 17
Benefit Plan............................................................................................. 42
Book Value............................................................................................... 27
Business Day............................................................................................. 26
Cedel Bank............................................................................................... 30
Cedel Bank Participants.................................................................................. 30
Certificate Majority..................................................................................... 39
Certificates............................................................................................. 2, 12
CFC...................................................................................................... 4, 14
CLT...................................................................................................... 16
Code..................................................................................................... 7
Collection Account....................................................................................... 27
Combined Portfolio....................................................................................... 15
Commission............................................................................................... 1
Contract Pool............................................................................................ 3
Contract Principal Balance............................................................................... 4, 22
Contracts................................................................................................ 3, 12
Cooperative.............................................................................................. 30
Credit Corp. ............................................................................................ 4,14
Cut-Off Date Contract Pool............................................................................... 3
Definitive Notes......................................................................................... 31
Depositor................................................................................................ 2
Depository............................................................................................... 26
Determination Date....................................................................................... 36
DTC...................................................................................................... 1, 7
DTC Participants......................................................................................... 28
Eligible Accounts........................................................................................ 27
Eligible Investments..................................................................................... 28
Equipment................................................................................................ 2
ERISA.................................................................................................... 7, 42
Euroclear................................................................................................ 30
Euroclear Operator....................................................................................... 30
Euroclear Participants................................................................................... 30
Euroclear System......................................................................................... 30
Events of Default........................................................................................ 32
Exchange Act............................................................................................. 1
Global Notes............................................................................................. 26, 47
Holders.................................................................................................. 26
Indenture Trustee........................................................................................ 2
Indirect Participants.................................................................................... 29
Insolvency Laws.......................................................................................... 8
Insurance, Maintenance and Tax Accounts.................................................................. 36
Interest Shortfall....................................................................................... 36
International Depositories............................................................................... 28
Lease Contract........................................................................................... 12
Leased Equipment......................................................................................... 5, 12
Leasing Services......................................................................................... 4, 14
</TABLE>
44
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<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ------
<S> <C>
Liquidated Contract...................................................................................... 4
Liquidation Proceeds..................................................................................... 4
Loan Contracts........................................................................................... 5, 12
Lucent................................................................................................... 13
Luxembourg Paying Agent.................................................................................. 31
Luxembourg Transfer Agent................................................................................ 31
Master Form Lease........................................................................................ 20
NCR...................................................................................................... 13
NCR Credit............................................................................................... 4, 14
Note Distribution Account................................................................................ 27
Note Majority............................................................................................ 32
Note Owners.............................................................................................. 7
Noteholders.............................................................................................. 26
Notes.................................................................................................... 2
Obligor.................................................................................................. 3, 12
Originators.............................................................................................. 4, 14
Owner Trust.............................................................................................. 2
Owner Trustee............................................................................................ 2
Participants............................................................................................. 28
Plan Assets Regulation................................................................................... 42
Pledged Revenues......................................................................................... 4
PTCE..................................................................................................... 42
Purchase Agreement....................................................................................... 2
Rating Agencies.......................................................................................... 3
Repurchase Event......................................................................................... 25
Required Payoff Amount................................................................................... 4, 22
Rules.................................................................................................... 29
SBU...................................................................................................... 16
Securities Act........................................................................................... 1
Servicing Account........................................................................................ 27
Servicing Fee............................................................................................ 5, 38
Specific Lease Form...................................................................................... 20
TCC...................................................................................................... 2, 13
Terms and Conditions..................................................................................... 30
Transfer and Servicing Agreement......................................................................... 2
Trust Accounts........................................................................................... 27
Trust Agreement.......................................................................................... 2
Trust Assets............................................................................................. 3
UCC...................................................................................................... 9
Underwriters............................................................................................. 43
United States Person..................................................................................... 49
</TABLE>
45
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<PAGE>
APPENDIX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Notes will be available only
in book-entry form (the 'Global Notes'). Investors in the Global Notes may hold
such Global Notes through DTC or, if applicable, Cedel Bank or Euroclear. The
Global Notes will be tradeable as home-market instruments in both the European
and United States domestic markets. Initial settlement and all secondary trades
will settle in same-day funds.
Secondary market trading between investors holding Global Notes through
Cedel Bank and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice.
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedures applicable to United
States corporate debt obligations.
Secondary cross-market trading between Cedel Bank or Euroclear participants
and DTC participants holding Notes will be effected on a
delivery-against-payment basis through the respective depositaries of Cedel Bank
and Euroclear and as participants in DTC.
Non-United States holders of Global Notes will be exempt from United States
withholding taxes, provided that such holders meet certain requirements and
deliver appropriate United States tax documents to the securities clearing
organizations or their participants. See 'United States Taxation' in the
Prospectus.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedel Bank and Euroclear will hold
positions on behalf of their participants through their respective depositaries,
which in turn will hold such positions in accounts as participants of DTC.
Investors electing to hold their Global Notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through Cedel Bank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no 'lock-up' or restricted period. Global Notes will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and the seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to United States
corporate debt issues in same-day funds.
Trading between Cedel Bank and/or Euroclear participants. Secondary market
trading between Cedel Bank participants and/or Euroclear participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
Trading between DTC seller and Cedel Bank or Euroclear purchaser. When
Global Notes are to be transferred from the account of a DTC participant to the
account of a Cedel Bank participant or a Euroclear participant, the purchaser
will send instructions to Cedel Bank or Euroclear through a participant at least
one business day prior to settlement. Cedel Bank or Euroclear will instruct the
respective depositary to receive the Global Notes against payment. Payment will
include interest accrued on the Global Notes from and including the last coupon
payment date to and excluding the settlement date. Payment will then be made by
the respective depositary to the DTC participant's account against delivery of
the Global Notes. After settlement has been
46
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completed, the Global Notes will be credited to the respective clearing system
and by the clearing system, in accordance with its usual procedures, to the
Cedel Bank participant's or Euroclear participant's account. The Global Notes
credit will appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the Global Notes will accrue from, the value
date (which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Cedel Bank or Euroclear cash debit will be valued instead as of the actual
settlement date.
Cedel Bank participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedel Bank or Euroclear. Under
this approach, they may take on credit exposure to Cedel Bank or Euroclear until
the Global Notes are credited to their accounts one day later.
As an alternative, if Cedel Bank or Euroclear has extended a line of credit
to them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, Cedel Bank
participants or Euroclear participants purchasing Global Notes would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Global Notes were credited to their accounts. However, interest on the Global
Notes would accrue from the value date. Therefore, in many cases the investment
income on the Global Notes earned during the one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result will
depend on each participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending Global Notes to the
respective depositary for the benefit of Cedel Bank participants or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
Trading between Cedel Bank or Euroclear seller and DTC purchaser. Due to
time-zone differences in their favor, Cedel Bank participants and Euroclear
participants may employ their customary procedures for transactions in which
Global Notes are to be transferred by the respective clearing system, through
the respective depositary, to a DTC participant. The seller will send
instructions to Cedel Bank or Euroclear through a participant at least one
business day prior to settlement. In this case, Cedel Bank or Euroclear will
instruct the respective depositary to deliver the Notes to the DTC participant's
account against payment. Payment will include interest accrued on the Global
Notes from and including the last coupon payment date to and excluding the
settlement date. The payment will then be reflected in the account of the Cedel
Bank participant or Euroclear participant the following day, and receipt of the
cash proceeds in the Cedel Bank participant's or Euroclear participant's account
would be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the Cedel Bank participant or Euroclear
participant have a line of credit with its respective clearing system and elect
to be in debit in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date (i.e.,
the trade fails), receipt of the cash proceeds in the Cedel Bank or Euroclear
participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel Bank or Euroclear and that purchase
Global Notes from DTC participants for delivery to Cedel Bank participants or
Euroclear participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
1. borrowing through Cedel Bank or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel Bank or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
2. borrowing the Global Notes in the United States from a DTC
participant no later than one day prior to settlement, which would give the
Global Notes sufficient time to be reflected in their Cedel Bank or
Euroclear account in order to settle the sale side of the trade; or
3. staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the Cedel Bank
participant or Euroclear participant.
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<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A holder of Global Notes holding securities through Cedel Bank or Euroclear
(or through DTC if the holder has an address outside the United States) will be
subject to 30% United States withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
United States Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
United States entity required to withhold tax complies with applicable
certification requirements and (ii) such holder takes one of the following steps
to obtain an exemption or reduced tax rate:
Exemption for non-United States Person (Form W-8). Non-United States
Persons that are beneficial owners can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status).
If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exemption for non-United States Persons with effectively connected
income (Form 4224). A non-United States Person, including a non-United
States corporation or bank with a United States branch, for which the
interest income is effectively connected with its conduct of a trade or
business in the United States, can obtain an exemption from the withholding
tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-United States Persons resident in
treaty countries (Form 1001). Non-United States Persons that are beneficial
owners residing in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate (depending on the terms of the
treaty) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding
tax will be imposed at that rate unless the filer alternatively files Form
W-8. Form 1001 may be filed by the beneficial owner or his agent.
Exemption for United States Persons (Form W-9). United States Persons
can obtain a complete exemption from the withholding tax by filing Form W-9
(Payer's Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. A holder of Global Notes
or, in the case of a Form 1001 or a Form 4224 filer, his agent, files by
submitting the appropriate form to the person through which he holds (the
clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year. See
'United States Taxation' in the Prospectus.
The term 'United States Person' means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States or any political subdivision thereof or (iii) an estate the
income of which is includible in gross income for United States federal income
tax purposes, regardless of its source, or (iv) a trust, (A) with respect to
which a court within the United States is able to exercise primary supervision
over its administration, and one or more United States fiduciaries have the
authority to control all of its substantial decisions, or (B) otherwise, the
income of which is subject to U.S. federal income tax regardless of its source.
THIS SUMMARY DOES NOT DEAL WITH ALL ASPECTS OF UNITED STATES FEDERAL INCOME
TAX WITHHOLDING THAT MAY BE RELEVANT TO FOREIGN HOLDERS OF THE GLOBAL NOTES.
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR SPECIFIC TAX ADVICE
CONCERNING THEIR HOLDING AND DISPOSING OF THE GLOBAL NOTES.
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__________________________________ __________________________________
__________________________________ __________________________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEPOSITOR, THE SERVICER, THE
OWNER TRUST, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE OR THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHALL 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 SUPPLEMENT NOR THE
PROSPECTUS, NOR ANY SALE MADE HEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
----------------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation by Reference........................ S-4
Reports to Noteholders............................ S-4
Table of Contents................................. S-5
Prospectus Supplement Summary..................... S-6
Risk Factors...................................... S-21
The Owner Trust................................... S-22
The Contracts..................................... S-23
Weighted Average Life of the Notes................ S-30
Description of the Notes.......................... S-30
United States Taxation............................ S-40
ERISA Considerations.............................. S-44
Ratings of the Notes.............................. S-45
Use of Proceeds................................... S-45
Underwriting...................................... S-46
Legal Matters..................................... S-46
Index of Principal Terms.......................... S-47
PROSPECTUS
Incorporation by Reference........................ 1
Available Information............................. 1
Reports to Noteholders............................ 1
Prospectus Summary................................ 2
Risk Factors...................................... 8
The Depositor..................................... 11
The Owner Trusts.................................. 12
AT&T Capital Corporation.......................... 13
The Originators................................... 14
The Contracts..................................... 19
Description of the Notes.......................... 26
Description of the Transfer and
Servicing Agreements............................ 35
Certain Legal Aspects of the Contracts............ 39
United States Taxation............................ 41
ERISA Considerations.............................. 42
Ratings of the Notes.............................. 42
Use of Proceeds................................... 43
Underwriting...................................... 43
Legal Matters..................................... 43
Index of Principal Terms.......................... 44
Appendix A: Global Clearance, Settlement and Tax
Documentation Procedures........................ 46
</TABLE>
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UNTIL FEBRUARY 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS ACTING AS UNDERWRITERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND PROSPECTUS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CAPITA EQUIPMENT
RECEIVABLES TRUST 1997-1
$ % RECEIVABLE-BACKED NOTES,
CLASS A-1
$ % RECEIVABLE-BACKED NOTES,
CLASS A-2
$ % RECEIVABLE-BACKED NOTES,
CLASS A-3
$ % RECEIVABLE-BACKED NOTES,
CLASS A-4
$ FLOATING RATE RECEIVABLE-
BACKED NOTES, CLASS A-5
$ % RECEIVABLE-BACKED NOTES,
CLASS B
$ % RECEIVABLE-BACKED NOTES,
CLASS C
ANTIGUA FUNDING CORPORATION
DEPOSITOR
[LOGO]
SERVICER
-----------------
PROSPECTUS SUPPLEMENT
-----------------
GOLDMAN, SACHS & CO.
BZW SECURITIES INC.
FIRST CHICAGO
CAPITAL MARKETS, INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
__________________________________ __________________________________
__________________________________ __________________________________
<PAGE>
