<PAGE>
As filed with the Securities and Exchange Commission on May 6, 1997
Registration No. 333-23405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
----------
METLIFE CAPITAL EQUIPMENT LOAN TRUSTS
(Issuer of Securities)
METLIFE CAPITAL FUNDING CORP. III
(Originator of the Trusts described herein)
(Exact Name of Registrant as Specified in Its Articles of Incorporation)
Delaware 91-1788640
(State or Other Jurisdiction (I.R.S. Employer
of Organization) Identification Number)
MetLife Capital Funding Corp. III
10900 NE 4th Street
Suite 550
Bellevue, WA 98004
(206) 450-3590
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
John Reiner
Treasurer
15915 Katy Freeway
Suite 150
Houston, TX 77094
(281) 398-8881
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies to:
CAMERON L. COWAN, Esq. JULIE BABCOCK, Esq.
ORRICK, HERRINGTON & SUTCLIFFE LLP METLIFE CAPITAL CORPORATION
Washington Harbour 10900 NE 4th Street
3050 K Street, N.W. Suite 500
Washington, D.C. 20007 Bellevue, WA 98004
JEFFREY VAN DUZER, Esq.
DAVIS WRIGHT TREMAINE
2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101-1688
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If any of the securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================
Proposed Maximum
Proposed Maximum Aggregate Amount of
Title of Securities Amount to be Aggregate Offering Price Registration
to be Registered Registered Price Per Unit * Fee**
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<S> <C> <C> <C> <C>
Class A Asset-Backed Notes $700,000,000 100% $700,000,000 $212.121.21
==================================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
** 303.03 previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective and without delivery of a final prospectus supplement and accompanying
prospectus. This prospectus supplement and the accompanying 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.
SUBJECT TO COMPLETION, DATED MAY 6, 1997
Prospectus Supplement
(To Prospectus dated ____ __, 199__)
$[____________________]
METLIFE CAPITAL EQUIPMENT LOAN TRUST 199__-__
$__________ Class A [____%] Asset Backed Notes
METLIFE CAPITAL FUNDING CORP. III, Transferor
METLIFE CAPITAL CORPORATION, Servicer
---------------
Interest on the Class A [____%] Asset Backed Notes (the "Class A Notes"), issued
by MetLife Capital
(continued on the following page)
Potential investors should consider the information set forth in "Risk Factors"
commencing on page [____] in the Prospectus.
THE NOTES REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN METLIFE CAPITAL FUNDING CORP. III, METLIFE
CAPITAL CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE
SECURITIES NOR THE RECEIVABLES ARE ISSUED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY.
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.
================================================================================
Price to Underwriting Proceeds to
Public(1) Discount Issuer(2)
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Per Class A Note ____% ____% ____%
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Total $__________ $__________ $__________
================================================================================
(1) Plus accrued interest, if any, from ________ __, ____.
(2) Before deducting expenses, estimated to be $__________.
---------------
The Class A Notes are offered by the Underwriter[s], subject to prior
sale, when, as and if issued to and accepted by them and subject to their right
to reject orders in whole or in part. It is expected that delivery of the Class
A Notes will be made in book-entry form only through the Same Day Funds
Settlement System of The Depository Trust Company, or through Cedel Bank,
societe anonyme or the Euroclear System, on or about __________ __, 199__ (the
"Closing Date").
---------------
Underwriters of the Class A Notes
[Underwriters]
---------------
The date of this Prospectus Supplement is _______ __, 1997
<PAGE>
(continued from preceding page)
Equipment Loan Trust 199__-__ (the "Trust" or the "Issuer") will be payable
monthly on or about the [____] day of each month (each, a "Distribution Date")
commencing on __________, __, 199__. Principal on the Class A Notes will be
payable on each Distribution Date with respect to the Amortization Period
scheduled to commence on __________ __, ____. The final scheduled Distribution
Date for the Class A Notes will be the ________ ____ Distribution Date (the
"Class A Final Scheduled Distribution Date"). Concurrently with the issuance of
the Class A Notes, the Trust will issue the Class B [__%] Asset Backed Notes
(the "Class B Notes"; together with the Class A Notes, the "Notes"), which will
be retained by the Transferor (as holder of the Class B Notes, the "Class B
Noteholder"). Only the Class A Notes are being offered hereby. The rights of
Class B Noteholder to receive distributions with respect to the Class B Notes on
each Distribution Date will be subordinated to the rights of the Class A
Noteholders to receive payments of interest on and principal of the Class A
Notes. The actual payment in full of the Class A Notes could occur earlier than
the Class A Final Scheduled Distribution Date. The assets of the Trust will
include a pool of [fixed rate] [floating rate] commercial loan contracts
[and/or] [equipment finance lease contracts] (the "Receivables") secured by [new
and/or used commercial and/or industrial equipment,] and certain monies due or
received thereunder on or after the applicable Cut-off Date. From time to time
until the commencement of the Amortization Period, principal collections on the
Receivables will be reinvested in additional [fixed rate] [floating rate] loan
contracts and [finance leases], which at the time of reinvestment will become
assets of the Trust. The Transferor will purchase the Receivables from MetLife
Capital Corporation concurrently with the purchase by the Trust of the
Receivables from the Transferor. The Notes will be secured by the assets of the
Trust.
The Notes will be subject to prepayment in whole, but not in part, on any
Distribution Date on which the Transferor exercises its option to purchase the
Receivables when the Pool Balance is reduced to less than 10% of the Initial
Pool Balance.
The Issuer, a newly-created limited-purpose Delaware business trust, will
generally be prohibited from incurring any indebtedness other than the Notes and
its express obligations under the Basic Documents and its assets will include
the Receivables, the Collection Account, the Interest Payment Account, the
Principal Funding Account, the Note Distribution Account, and the Reserve
Account, as described herein.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CLASS A NOTES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS. PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CLASS A 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 CLASS A NOTES,
INCLUDING OVER-ALLOTMENT TRANSACTIONS,
S-2
<PAGE>
STABILIZING TRANSACTIONS, SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING" HEREIN.
REPORTS TO CLASS A NOTEHOLDERS
Unless and until Definitive Class A Notes are issued, periodic and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC"), and the registered
holder of the Class A Notes. See "Issuance of the Class A Notes--Book-Entry
Registration" and "Description of the Transaction Agreements--Reports to
Noteholders" in the accompanying Prospectus. Such reports will not constitute
financial statements that have been examined and reported upon by, with an
opinion expressed by, an independent or certified public accountant. The Trust
will file with the Securities and Exchange Commission (the "Commission") such
periodic reports as are required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder and as
are otherwise agreed to by the Commission. Copies of such periodic reports may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a public access site on the internet through the world wide
web, at which site reports, information statements and other information,
including all electronic filings, may be reviewed. The internet address of the
Commission's world wide web site is http://www.sec.gov.
S-3
<PAGE>
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SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used in the summary are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" beginning on page S-__
herein or, to the extent not defined herein, have the meanings assigned to such
terms in the Prospectus.
Issuer ..................... MetLife Capital Equipment Loan Trust 199__-__ (the
"Trust" or the "Issuer"), a Delaware business
trust created by the Transferor and the Owner
Trustee pursuant to (i) the filing of a
certificate of trust with the Secretary of State
of the State of Delaware, and (ii) the Trust
Agreement dated as of __________ __, 199__, (the
"Trust Agreement") between the Transferor and the
Owner Trustee, acting thereunder not in its
individual capacity but solely as Owner Trustee.
Transferor ................. MetLife Capital Funding Corp. III (the
"Transferor"), a Delaware corporation and a
wholly-owned subsidiary of MetLife Capital
Corporation. The principal executive offices of
the Transferor are located at 10900 NE 4th
Street, Suite 550, Bellevue, Washington 98004 and
its telephone number is (206) 450-3590.
Servicer ................... MetLife Capital Corporation (the "Servicer" or
"MCC"), a Delaware corporation.
Indenture Trustee .......... ______________________________, as indenture
trustee under the Indenture (the "Indenture
Trustee").
Owner Trustee .............. ______________________________, as owner trustee
under the Trust Agreement (the "Owner Trustee").
The Notes .................. Class A [____%] Asset Backed Notes (the "Class A
Notes") in the aggregate principal amount of
$__________.
Class B [____%] Asset Backed Notes (the "Class B
Notes"; together with the Class A
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S-4
<PAGE>
- --------------------------------------------------------------------------------
Notes, the "Notes") in the aggregate principal
amount of $ _______. Only the Class A Notes are
being offered hereby.
The Notes will be issued by the Trust pursuant to
an Indenture to be dated as of _____ __, ____
(the "Indenture"), between the Issuer and the
Indenture Trustee. The Notes will be secured by
the assets of the Trust.
The Class A Notes will be available for purchase
in book-entry form only in minimum denominations
of $1,000 and integral multiples thereof. The
Class A Noteholders will not be entitled to
receive Definitive Notes except in the limited
circumstances described herein. See "Description
of the Notes--General" and "Issuance of the
Notes--Book-Entry Registration" in the
Prospectus.
The Trust .................. The Trust is a statutory business trust created
under the laws of Delaware pursuant to (i) the
filing of a certificate of trust with the
Secretary of State of the State of Delaware, and
(ii) the Trust Agreement. The activities of the
Trust are limited by the terms of the Trust
Agreement to acquiring, owning and managing the
Receivables, issuing and making payments on the
Notes and other activities related thereto. The
Trust Property includes (i) the Receivables, (ii)
all monies (including accrued interest) due or
received thereunder on or after the related
Cut-off Date (as defined below), (iii) such
amounts as from time to time may be held in one
or more accounts established and maintained by
the Servicer and the Transferor pursuant to the
Transfer and Servicing Agreement, as described
below, (iv) the security interests in the
equipment financed by the Receivables (the
"Financed Equipment"), (v) the rights to proceeds
from claims on physical damage, credit life,
liability and disability insurance policies, if
any, covering Financed Equipment or Obligors with
respect to Financed Equipment, as the case may
be, (vi) any proceeds of repossessed Financed
Equipment (less any repossession
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S-5
<PAGE>
- --------------------------------------------------------------------------------
expenses), (vii) the rights of the Transferor
under the Contribution and Sale Agreement, (viii)
interest earned on short-term investments made by
the Trust and (ix) any proceeds of the foregoing.
Receivables ................ The Receivables will consist of [fixed rate]
[floating rate] [commercial loan contracts,
("Loan Contracts")] [and/or] [equipment finance
leases] ("Leases") secured by [new and/or used
commercial and/or industrial equipment],
including rights to receive certain payments made
with respect to such Loan Contracts and Leases
(the "Receivables"). On or prior to the Closing
Date, the Transferor will acquire receivables
(the "Initial Receivables") having an aggregate
Principal Balance of approximately $____________
(the "Initial Pool Balance") as of __________ __,
____ (the "Initial Cut-off Date") from MCC
pursuant to a Contribution and Sale Agreement to
be dated as of __________ __, ____ (the
"Contribution and Sale Agreement"), between MCC
and the Transferor. The Transferor will transfer
the Initial Receivables to the Trust pursuant to
a Transfer and Servicing Agreement to be dated as
of __________ __, ____ (the "Transfer and
Servicing Agreement") among the Transferor, the
Servicer and the Trust. Following the Closing
Date, from time to time during the Revolving
Period, the Transferor will be obligated to
acquire, subject only to the availability
thereof, additional receivables (each, a
"Subsequent Receivable") from MCC and to transfer
such Subsequent Receivables to the Trust. The
Trust will be obligated to accept the transfer of
such Subsequent Receivables subject only to
certain conditions set forth in the Transfer and
Servicing Agreement. Such Subsequent Receivables
will be identified by MCC on cut-off dates (each,
a "Subsequent Cut-off Date" and, together with
the Initial Cut-off Date, a "Cut-off Date")
relating to the transfer of such Subsequent
Receivables. During the Revolving Period,
payments made
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S-6
<PAGE>
- --------------------------------------------------------------------------------
on or in respect of the Receivables will be
reinvested in Subsequent Receivables to the
extent available. At the time of such
reinvestment, the related Subsequent Receivables
will become assets of the Trust. For further
information regarding the Subsequent Receivables.
See "Summary of Terms - The Revolving Period;
Subsequent Receivables."
The Receivables will arise from various
commercial loan and lease products originated by
MCC in its ordinary course of business and
subsequently conveyed to the Transferor. The
Receivables have been and will be selected from
the contracts owned by MCC based on the criteria
specified in the Contribution and Sale Agreement
and described herein. See "The Receivables Pool"
herein. As of the Initial Cut-off Date, the
weighted average annual percentage rate of
interest (the "APR") of the Initial Receivables
(based on their respective Principal Balances)
was approximately ___% (the "Initial Cut-off Date
APR"), the weighted average remaining maturity
(i.e., for each Initial Receivable, the period
from but excluding the Initial Cut-off Date to
and including such Receivable's maturity date) of
the Initial Receivables was approximately ____
months and the weighted average original maturity
of the Initial Receivables was approximately ___
months. As of the Initial Cut-off Date, no
Initial Receivable had a scheduled maturity later
than the date which is [_____] months prior to
the [_________] Distribution Date, which date is
the Final Scheduled Distribution Date. See "The
Receivables Pool."
The "Pool Balance" at any time will represent the
sum of (a) the aggregate Principal Balance of the
Receivables at the end of the preceding
Collection Period, after giving effect to all
payments received from or for the credit of
Obligors and Acquisition Amounts to be remitted
by the Transferor or the Servicer, as
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S-7
<PAGE>
the case may be, for such Collection Period, and
after giving effect to all Realized Losses on
Defaulted Receivables during such Collection
Period and (b) with respect to any date of
determination during the Revolving Period, the
sum of the Principal Funding Account Balance at
such time and, if such date of determination is
prior to the Distribution Date in the current
Collection Period, the Available Principal Amount
with respect to such preceding Collection Period
on deposit in the Collection Account. The
"Principal Balance" of a Receivable, as of the
close of business on the last day of a Collection
Period or as of the applicable Cut-off Date, as
applicable, means the aggregate amount of all
Scheduled Principal Payments that have not been
received by the Servicer (including all Scheduled
Principal Payments that are then due and
payable), calculated as of the applicable Cut-off
Date or as of the end of the preceding Collection
Period (as applicable); provided, that the
Principal Balance and, accordingly, the Scheduled
Principal Payments of Discounted Receivables will
be reduced by the amount specified by the
Transferor; provided further, that the Principal
Balance of each Defaulted Receivable is zero.
Discounted Receivables ..... The Transferor has the option to discount
Subsequent Receivables ("Discounted Receivables")
by indicating on the relevant Transfer Date the
amount by which such Receivables will be
discounted. A Discounted Receivable will be
discounted by reallocating a portion of the
Scheduled Principal Payments to interest, thereby
reducing the Principal Balance of such Receivable
and increasing its APR, reallocating Collections
on such Receivable from the Available Principal
Amount to the Available Interest Amount and
providing additional credit enhancement for the
benefit of the Class A Noteholders. The
Transferor may discount a Subsequent Receivable
so that its APR will be greater
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S-8
<PAGE>
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than or equal to the Minimum APR. See "The
Receivables Pool" herein.
Scheduled Principal ........ That portion of the regularly scheduled payment
Payment required to be paid in accordance with the terms
and conditions of a Receivable as in effect on
the applicable Cut-off Date (other than by reason
of acceleration of such Scheduled Principal
Payment in connection with a default under such
Receivable or any other event that causes a
payment to become due prior to its scheduled
payment date pursuant to the terms of such
Receivable as in effect on the applicable Cut-off
Date) that is allocable to principal.
Terms of the Notes ......... The principal terms of the Notes will be as
described below:
A. Interest Payments .... The Class A Notes will bear interest at the rate
of [____%] per annum (the "Class A Note Interest
Rate") [(calculated on the basis of a 360-day
year of twelve 30-day months).] Interest on the
outstanding principal amount of the Class A Notes
will accrue from the most recent Distribution
Date on which interest has been paid (or, in the
case of the initial Distribution Date, from and
including the Closing Date), to but excluding the
following Distribution Date and will be payable
on the [____] day of each calendar month (or if
any such date is not a business day, on the next
succeeding business day) (each, a "Distribution
Date") commencing ________ __, ____, to the
holders of record of the Class A Notes (the
"Class A Noteholders") as of the related Record
Date (as defined below). Notwithstanding the
Events of Default described in the Prospectus
under the caption "Description of the Notes - The
Indenture - Events of Default; Rights upon Event
of Default," the failure to pay interest due on
the Class B Notes will not be an Event of
Default.
Interest payments on the Class A Notes will be
generally derived from the Available Interest
Amount remaining after the payment of the
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S-9
<PAGE>
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Servicing Fee and the Administration Fee, and
from amounts on deposit in the Reserve Account.
If the amount of interest on the principal
balance of the Class A Notes payable on any
Distribution Date exceeds the sum of such
remaining portion of the Available Interest
Amounts and amounts on deposit in the Reserve
Account, the Class A Noteholders will receive
their ratable share (based upon the total amount
of interest due to the Class A Noteholders) of
the amount available to be distributed in respect
of interest on the Class A Notes.
With respect to any Distribution Date and the
Class A Notes, "Record Date" means (i) if the
Class A Notes are held in book-entry form, the
close of business on the calendar day immediately
preceding such Distribution Date or (ii) if the
Class A Notes are held in definitive form, the
last calendar day of the month preceding the
month in which such Distribution Date occurs.
B. Principal Payments ... Principal of each class of the Notes will be
payable on each Distribution Date with respect to
the Amortization Period in an amount calculated
as the applicable percentage set forth herein of
the Principal Distribution Amount (as defined
herein) for such Distribution Date to the extent
of funds available therefor as described herein.
No payments with respect to principal will be
made to holders of the Notes on any Distribution
Date with respect to the Revolving Period.
On each Distribution Date with respect to the
Amortization Period, before the Distribution Date
on which the Class A Notes have been paid in
full, principal of the Class A Notes will be
payable in an amount equal to the Class A
Noteholders' Principal Distributable Amount. In
addition, certain amounts from the Reserve
Account may be paid as principal of the Class A
Notes. See "Description of
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S-10
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the Transaction Agreements--Distributions" and
"--Reserve Account" herein.
The outstanding principal amount, if any, of the
Class A Notes will be payable in full on the
________ ____ Distribution Date (the "Final
Scheduled Distribution Date") from funds
available therefor (including amounts in the
Reserve Account). See "Description of the
Transaction Agreements--Reserve Account" herein.
C. Optional Prepayment .. The Notes may be prepaid in whole, but not in
part, in an amount equal to the principal amount
of the Notes redeemed plus accrued and unpaid
interest thereon at the Class A Note Interest
Rate or the Class B Note Interest Rate, as
applicable, to but excluding the Redemption Date
(the "Redemption Price"). "Redemption Date" means
the date on which the Notes are redeemed as
provided in the Indenture on the Distribution
Date on which the Transferor or MCC exercises its
option to purchase the Receivables when the Pool
Balance has been reduced to 10% or less of the
Initial Pool Balance (the "Redemption Date"). See
"Description of the Notes--the Class A Notes"
herein and "Description of the Notes--Principal
and Interest on the Notes" and "Description of
the Transaction Agreements--Termination" in the
Prospectus.
Priority of Distributions .. As more fully described in "Description of the
Transaction Agreements--Distributions" herein,
distributions of the Available Interest Amount
shall be made on each Distribution Date in the
following order of priority:
(a) to the Servicer, the Servicing Fee and all
unpaid Servicing Fees from prior Collection
Periods;
(b) to the Administrator, the Administration Fee
and all unpaid Administration Fees from prior
Collection Periods;
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S-11
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(c) to the Note Distribution Account (as defined
herein), the Noteholders' Class A Interest
Distributable Amount;
(d) to the Reserve Account, the positive
difference, if any, of (i) the Specified Reserve
Account Balance for such Distribution Date over
(ii) the amount on deposit in the Reserve Account
on such Distribution Date (not taking into
account this deposit);
(e) to the Principal Funding Account, the
positive difference, if any, between the
Principal Distribution Amount and the Available
Principal Amount (not taking into account this
deposit);
(f) to the Note Distribution Account, the
Noteholders' Class B Interest Distributable
Amount; and
(g) to the Transferor, the remaining Available
Interest Amount.
As more fully described in "Description of the
Transaction Agreements--Distributions" herein,
distributions of the Available Principal Amount
shall be made on each Distribution Date in the
following order of priority:
(a) on Distribution Dates with respect to the
Revolving Period, the Available Principal Amount
will be (i) to the extent described herein,
deposited into the Reserve Account and (ii)
amounts remaining will be retained in the
Principal Funding Account and will be paid to the
Transferor in connection with transfers of
Subsequent Receivables to the Issuer pursuant to
the Transfer and Servicing Agreement;
(b) on Distribution Dates with respect to the
Amortization Period, (a) first, to the Note
Distribution Account, the Class A Noteholders'
Principal Distributable Amount, (b) second, to
the extent described herein, to the Reserve
Account and (c) third, to the Note Distribution
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S-12
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Account, the Class B Noteholders' Principal
Distributable Amount; and
(c) on the first Distribution Date with respect
to the Amortization Period, from Available
Principal Amounts deposited in the Principal
Funding Account on prior Distribution Dates that
were not used to acquire Subsequent Receivables
from the Transferor on or prior to such
Distribution Date (the "Remaining Available
Principal Amounts"), in the following order of
priority: (a) to the Note Distribution Account,
the Class A Noteholders Percentage of the
Remaining Available Principal Amounts and (b) to
the Note Distribution Account, the Class B
Noteholders' Percentage of the Remaining
Available Principal Amounts.
Notwithstanding the foregoing, if an Event of
Default has occurred and the maturity of the
Notes has been accelerated, the Class B
Noteholders will not be entitled to receive any
distributions of interest or principal until the
Class A Notes have been paid in full.
Funds, to the extent available, will be withdrawn
from amounts on deposit in the Reserve Account,
with respect to each Distribution Date, to the
extent that (a) the Available Interest Amount is
insufficient to pay the sum of the Servicing Fee
for the immediately preceding Collection Period
and all unpaid Servicing Fees from prior
Collection Periods, the Administration Fee for
the immediately preceding Collection Period and
all unpaid Administration Fees from prior
Collection Periods and the Noteholders' Class A
Interest Distributable Amount for such
Distribution Date or (b) during the Amortization
Period, the Available Principal Amount is
insufficient to pay the Class A Noteholders'
Principal Distributable Amount and funds in the
amount of the sum of such deficiency, to the
extent available, will be deposited in the Note
Distribution Account.
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S-13
<PAGE>
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"Collection Period" means, with respect to the
first Distribution Date, the calendar month
ending on ________ __, ____, and with respect to
each subsequent Distribution Date, the preceding
calendar month. See "Description of the
Transaction Agreements--Distributions" herein.
On each Distribution Date, all amounts on deposit
in the Note Distribution Account will be
distributed to the Noteholders. See "Description
of the Transaction Agreements--Distributions"
herein for the definitions of certain terms used
above.
The Revolving Period;
Subsequent Receivables ... No principal will be payable on the Notes until
the ____ Distribution Date or, upon the
occurrence of an Early Amortization Event, until
the Distribution Date in the month immediately
following the month in which such Early
Amortization Event occurs. From the Closing Date
and ending on the day immediately preceding the
commencement of the Amortization Period (the
"Revolving Period"), Available Principal Amounts
will be reinvested in Subsequent Receivables. To
the extent Subsequent Receivables are not
available during the Revolving Period, if the
amount on deposit in the Principal Funding
Account exceeds $________, an Early Amortization
Event will occur and the Amortization Period will
commence. A discussion of all of the events that
might lead to the termination of the Revolving
Period prior to its scheduled termination date
are described under "Description of the
Transaction Agreements--Early Amortization
Events" herein.
On or prior to each Distribution Date (beginning
with the __________ ____ Distribution Date)
during the Revolving Period and (ii) if no Early
Amortization Event has occurred, in the month in
which the Scheduled Revolving Period Termination
Date
- --------------------------------------------------------------------------------
S-14
<PAGE>
- --------------------------------------------------------------------------------
occurs, on one or more days selected by the
Servicer (each, a "Transfer Date"), the Servicer
will direct the Indenture Trustee to reinvest
Available Principal Amounts remaining on deposit
in the Principal Funding Account (after making
the required deposit, if any, into the Reserve
Account) in Subsequent Receivables. Upon such
reinvestment, the related Subsequent Receivables
will become assets of the Trust. If, on the tenth
day following any Distribution Date with respect
to the Revolving Period, the portion of the
Principal Funding Account Balance relating to
prior Collection Periods that have not been
reinvested in Subsequent Receivables exceeds
[$________], an Early Amortization Event will
occur, the Revolving Period will terminate as of
such day and all Available Principal Amounts on
deposit in the Principal Funding Account will be
distributed as principal to the Noteholders on
the Distribution Date in the month immediately
following the month in which such Early
Amortization Event occurs. For further details
concerning the application of Available Principal
Amounts, see "Summary--Amortization Period;
Principal Payments" and "Description of the Class
A Notes - Distributions" herein.
The Subsequent Receivables will be selected from
MCC's portfolio of loan and lease contracts based
on the same criteria as are applicable to the
Initial Receivables and the other criteria
described herein and in the Prospectus. See "The
Receivables Pool."
Amortization Period;
Principal Payments ....... The "Amortization Period" shall commence on the
earlier of (i) __________ _____ (the "Scheduled
Revolving Period Termination Date") or (ii) the
day on which an Early Amortization Event occurs,
and will end when each Class of Notes has been
paid in full or when the Trust otherwise
terminates. During the Amortization Period,
Available Principal Amounts will no longer be
reinvested in
- --------------------------------------------------------------------------------
S-15
<PAGE>
- --------------------------------------------------------------------------------
Subsequent Receivables as described above.
Instead, on each Distribution Date beginning with
the Distribution Date in the month following the
month in which the Amortization Period commences
and ending on the Distribution Date on which the
Notes have been paid in full, all Available
Principal Amounts for the related Collection
Period will be distributed as principal payments
as described herein.
See "Description of the Transaction
Agreements--Early Amortization Events" for a
description of the events that might lead to the
commencement of the Amortization Period prior to
the Scheduled Revolving Period Termination Date.
Reserve Account ............ The Servicer, for the benefit of the Transferor
and the Class A Noteholders, will establish and
maintain in the name of the Indenture Trustee a
reserve account (the "Reserve Account") into
which funds will be deposited from time to time
as described herein. Funds on deposit in the
Reserve Account will be available on each
Distribution Date to cover shortfalls in
distributions of interest and principal on the
Class A Notes to the extent described herein. The
Reserve Account will be created with an initial
deposit by the Transferor of $__________. The
amount initially deposited in the Reserve Account
is referred to as the "Reserve Account Initial
Deposit." The Reserve Account Initial Deposit
will be augmented on each Distribution Date by
the deposit in the Reserve Account of amounts
remaining in the Interest Payment Account, if
any, after payment of the Servicing Fee and the
Administration Fee and the deposit in the Note
Distribution Account of the Noteholders' Class A
Interest Distributable Amount on such
Distribution Date and from amounts remaining in
the Principal Funding Account after deposit into
the Note Distribution Account of the Class A
Noteholders' Principal Distributable Amount, if
any, on such Distribution Date.
- --------------------------------------------------------------------------------
S-16
<PAGE>
- --------------------------------------------------------------------------------
Amounts in the Reserve Account (after giving
effect to all distributions to be made on such
Distribution Date) in excess of the Specified
Reserve Account Balance for such Distribution
Date will be released to the Transferor; provided
that if, after giving effect to all
payments made on the Notes on such Distribution
Date, the Pool Balance as of the end of the
preceding Collection Period is less than the
outstanding principal amount of the Notes, such
excess amount shall not be released to the
Transferor and shall be retained in the Reserve
Account for application as described above.
Amounts properly released to the Transferor
pursuant to the Transfer and Servicing Agreement
will be released from the Trust and the security
interest granted to the Indenture Trustee, and
the Transferor shall in no event be required to
refund any such released amounts. See
"Description of the Transaction
Agreements--Reserve Account" herein.
Funds, to the extent available, will be withdrawn
from amounts on deposit in the Reserve Account to
the extent that (a) the Available Interest Amount
is insufficient to pay the sum of the Servicing
Fee for the immediately preceding Collection
Period and all unpaid Servicing Fees from prior
Collection Periods, the Administration Fee for
the immediately preceding Collection Period and
all unpaid Administration Fees from prior
Collection Periods, the Noteholders' Class A
Interest Distributable Amount for such
Distribution Date and certain amounts to be
deposited into the Principal Funding Account, as
described herein or (b) during the Amortization
Period, the Available Principal Amount is
insufficient to pay the Class A Noteholders'
Principal Distributable Amount and funds in the
amount of such deficiency, to the extent
available, will be deposited in the Note
Distribution Account.
If the amount required to be withdrawn from the
Reserve Account to cover shortfalls in
- --------------------------------------------------------------------------------
S-17
<PAGE>
- --------------------------------------------------------------------------------
collections on the Receivables on any
Distribution Date exceeds the amount of cash in
the Reserve Account on such date, a shortfall in
the amounts distributed to the Class A
Noteholders could result, which could, in turn,
increase the average life of the Class A Notes,
as the case may be, or result in losses to Class
A Noteholders.
Collection Account ......... The Servicer will be required to remit
collections received with respect to the
Receivables during a Collection Period within two
days of receipt and identification thereof to one
or more accounts in the name of the Indenture
Trustee (collectively, the "Collection Account"),
except upon the occurrence of certain conditions
described in the Prospectus (in which case such
remittances may be required less frequently). See
"Description of the Transaction
Agreements--Payments on Receivables" in the
Prospectus. Pursuant to the Transfer and
Servicing Agreement, the Servicer will have the
revocable power to instruct the Indenture Trustee
to withdraw the Available Interest Amount on
deposit in the Collection Account for deposit in
the Interest Payment Account and to withdraw the
Available Principal Amount on deposit in the
Collection Account for deposit in the Principal
Funding Account. Pursuant to the Sales and
Servicing Agreement, the Servicer will also have
the revocable power to instruct the Indenture
Trustee to withdrawal the amounts on deposit in
the Interest Payment Account and the Principal
Funding Account on each Distribution Date for
application as set forth above in "Summary of
Terms--Priority of Distributions" and as more
fully described under "Description of the
Transaction Agreements--Distributions."
Maturity and Prepayment
Considerations ........... Each prepayment will shorten the weighted average
remaining term of the Receivables and, during the
Amortization Period, the weighted average life of
the Notes. Prepayments of principal will be
included in the Principal
- --------------------------------------------------------------------------------
S-18
<PAGE>
- --------------------------------------------------------------------------------
Distribution Amount and will be payable to the
Class A Noteholders in accordance with the Class
A Noteholders' Principal Distributable Amount and
to the Class B Noteholders in accordance with the
Class B Noteholders' Principal Distributable
Amount, as set forth herein. See "Description of
the Transaction Agreements--Distributions."
The rate of prepayments on the Receivables may be
influenced by a variety of economic, financial
and other factors, and under certain
circumstances relating to breaches of
representations, warranties or covenants, the
Transferor and/or the Servicer is obligated to
purchase Receivables from the Trust. A higher
than anticipated rate of prepayments during the
Amortization Period will reduce the aggregate
principal balance of the Receivables more quickly
than expected and thereby reduce anticipated
aggregate interest payments on the Notes. Any
reinvestment risks resulting from a faster or
slower incidence of prepayment of Receivables
during the Amortization Period will be borne
entirely by the Noteholders as set forth in the
priority of distributions herein. Such
reinvestment risks include the risk that interest
rates may be lower at the time such holders
received payments from the Trust than interest
rates would otherwise have been had such
prepayments not been made or had such prepayments
been made at a different time.
Holders of Class A Notes should consider, in the
case of Class A Notes purchased at a discount,
the risk that a slower than anticipated rate of
principal payments on the Receivables during the
Amortization Period could result in an actual
yield that is less than the anticipated yield
and, in the case of any Class A Notes purchased
at a premium, the risk that a faster than
anticipated rate of principal payments on the
Receivables during the Amortization Period could
result in an actual yield that is less than the
anticipated yield.
- --------------------------------------------------------------------------------
S-19
<PAGE>
- --------------------------------------------------------------------------------
Servicing Fee .............. The Servicer shall receive a fee for each
Collection Period (the "Servicing Fee") equal to
____% per annum (the "Servicing Fee Rate") of the
Pool Balance as of the first day of such
Collection Period, plus any Servicer's Yield for
such Collection Period. The "Servicer's Yield"
represents amounts actually collected by the
Servicer on account of late fees, indemnity
payments, make-whole amounts and other incidental
charges. All collections from an Obligor will be
applied first to any overdue scheduled payment,
then to the current scheduled payment and then to
late fees, taxes and other charges. The Servicing
Fee with respect to each Collection Period will
decline during the Amortization Period as the
Pool Balance decreases. See "Description of the
Transaction Agreements--Servicing Compensation
and Payment of Expenses" herein and in the
Prospectus.
Administration Agreement ... MCC, in its capacity as administrator (the
"Administrator"), will enter into an agreement
(the "Administration Agreement") with the Trust
and the Indenture Trustee. As compensation for
the performance of the Administrator's
obligations under the Administration Agreement
and as reimbursement for its expenses related
thereto, the Administrator will be entitled to a
monthly administration fee in an amount equal to
$__________ per month (the "Administration Fee").
See "Description of the Transaction
Agreements--Administration Agreement" in the
Prospectus.
[Clearance and Settlement .. Class A Noteholders may elect to hold their Class
A Notes through any of DTC (in the United States)
or Cedel or Euroclear (in Europe). Transfers
within DTC, Cedel or Euroclear, as the case may
be, will be in accordance with the usual rules
and operation procedures of the relevant system.
Cross-market transfers between persons holding
directly or indirectly through DTC, on the one
hand, and counterparties holding directly or
indirectly through Cedel or Euroclear, on the
other, will
- --------------------------------------------------------------------------------
S-20
<PAGE>
- --------------------------------------------------------------------------------
be effected in DTC through the relevant
Depositaries of Cedel or Euroclear. See "Issuance
of the Notes--Book-Entry Registration in the
Prospectus."]
Tax Status ................. Upon the issuance of the Class A Notes, Orrick,
Herrington & Sutcliffe LLP, as special tax
counsel to the related Trust, will deliver its
opinion to the effect that, for federal income
tax purposes: (i) the Class A Notes will be
characterized as debt and (ii) the Trust will not
be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
Each Class A Noteholder, by the acceptance of a
Class A Note, will agree to treat the Class A
Notes as indebtedness. See "Federal Income Tax
Considerations" in the Prospectus.
ERISA Considerations ....... Subject to the considerations described in "ERISA
Considerations" herein and in the Prospectus, the
Class A Notes are eligible for purchase with Plan
Assets of any Plan. A fiduciary or other person
contemplating purchasing the Class A Notes on
behalf of or with Plan Assets of any Plan should
consult with its counsel regarding whether the
purchase or holding of the Class A Notes could
give rise to a transaction prohibited or not
otherwise permissible under ERISA or Section 4975
of the Code. See "ERISA Considerations" herein
and in the Prospectus.
Rating of the Notes ........ It is a condition to the issuance of the Notes
that the Class A Notes be rated at least "AAA" or
its equivalent, in each case by at least two
nationally recognized rating organizations (each,
a "Rating Agency"). See "Ratings" in the
Prospectus.
- --------------------------------------------------------------------------------
S-21
<PAGE>
CREATION OF THE TRUST
The Trust
The Issuer, MetLife Capital Equipment Loan Trust 199__-__, will be a
statutory business trust created under the laws of the State of Delaware
pursuant to (i) the filing of a certificate of trust with the Secretary of State
of the State of Delaware, and (ii) the Trust Agreement described in this
Prospectus Supplement. After its formation, the Trust will not engage in any
activity other than (i) acquiring, owning and managing the Receivables and the
other assets of the Trust and proceeds therefrom, (ii) issuing and making
payments on the Notes, and (iii) engaging in other activities that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith.
The owner of the certificate of beneficial ownership issued by the Trust
is a third party that is unaffiliated with the Transferor, the Servicer or the
Trust. The proceeds from the initial sale of the Notes will be used by the Trust
to acquire the Receivables from the Transferor pursuant to the Transfer and
Servicing Agreement. During the Revolving Period, the Available Principal Amount
remaining after certain deposits into the Reserve Account if any, on each
Distribution Date will be used to acquire Subsequent Receivables from the
Transferor pursuant to the Transfer and Servicing Agreement. The Servicer will
initially service the Receivables pursuant to the Transfer and Servicing
Agreement, and will be compensated for acting as the Servicer. See "Description
of the Transaction Agreements--Servicing Compensation and Payment of Expenses"
herein and in the Prospectus. UCC financing statements will be filed to perfect
the ownership or security interests of the Transferor, the Trust and the
Indenture Trustee described herein. To facilitate servicing and to minimize
administrative burden and expense, the Servicer will maintain possession of the
related Receivable Files on behalf of the Trust and the Indenture Trustee, but
the Servicer will not stamp the Loan Contracts or Leases to reflect the ultimate
assignment of the Receivables to the Trust or the Indenture Trustee. MCC will
not file UCC financing statements assigning or amending the UCC financing
statements filed to perfect the interest of MCC in the Financed Equipment. See
"Risk Factors-Risks Relating to Perfection of Interests in Receivables and in
Financed Equipment" in the Prospectus and "Certain Legal Aspects of the
Receivables-Sale and Transfer of Receivables" and "-Security Interest in
Equipment" in the Prospectus.
If the protection provided to Class A Noteholders in the Trust by the
subordination of the Class B Notes and the availability of the funds in the
Reserve Account is insufficient, the Trust must rely solely on the payments from
the Obligors on the Receivables, and the net proceeds from the repossession and
sale of Financed Equipment which secure defaulted Receivables. In such event,
certain factors, such as the Trust's not having first priority perfected
security interests in some of the Receivables or Financed Equipment as a result
of occurrences after the Closing Date, and the risk of fraud or negligence of
MCC, may affect the Trust's ability to realize on the collateral securing the
Receivables, and thus the proceeds to be distributed to Noteholders with respect
to the Notes may be reduced. See "Risk Factors-Risks Relating to Perfection of
Interests in Receivables and in Financed Equipment" in the Prospectus and
"Certain Legal Aspects of the Receivables" in the Prospectus.
The Trust's principal offices are in Delaware, in care of
______________________________, as Owner Trustee, at the address listed below
(under "--The Owner Trustee").
S-22
<PAGE>
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of the
Cut-off Date, as if the issuance and sale of the Notes offered hereby had taken
place on such date:
Certificate of Beneficial Ownership $ [1]
Class A ____% Asset Backed Notes $__________
Class B ____% Asset Backed Notes __________
Total $
==========
The Owner Trustee
______________________________ is the Owner Trustee under the Trust
Agreement. ______________________________ is a [__________ banking corporation]
and its principal offices are located at
__________________________________________________. The Transferor shall pay the
fees of the Owner Trustee and shall reimburse it for certain liabilities and
expenses.
THE RECEIVABLES POOL
As of the Closing Date, the pool of Receivables (the "Receivables Pool")
will include the Initial Receivables transferred to the Transferor pursuant to
the Contribution and Sale Agreement. During the Revolving Period, Available
Principal Amounts remaining after certain deposits into the Reserve Account, if
any, will be reinvested in Subsequent Receivables. The Receivables will consist
of [commercial loans, quasi leases and non-tax operating leases ("NTOOLS").] See
"The Receivables Pool--Servicing" in the Prospectus for a description of each of
these types of Receivables.
The Initial Receivables were, and the Subsequent Receivables will be,
selected from the Loan Contracts and Leases included within [MCC's Middle Market
Portfolio (the "Middle Market Portfolio")] [and] [MCC's Franchise Finance
Portfolio (the "Franchise Finance Portfolio"),] other than receivables
previously sold which MCC continues to service which are otherwise included in
the [Middle Market Portfolio][or][the Franchise Finance Portfolio], using
several criteria, some of which are set forth in the Prospectus under "The
Receivables Pools." [Furthermore, each Initial Receivable must satisfy the
additional criteria that it (i) has a stated maturity of more than [__] months
but not more than [___] months as of Initial Cut-off Date and (ii) has an annual
percentage rate of interest (based on its Principal Balance) ("APR") of at least
[the sum of the Class A Note Interest Rate] and the Servicing Fee Rate (the
"Minimum APR") and each Subsequent Receivable must satisfy the additional
criteria that it (i) has a stated maturity of more than [__] months but not more
than the difference between [___] months and the number of months that have
passed in the Revolving Period as of the applicable Subsequent Cut-off Date,
(ii) after its inclusion in the Receivables Pool along with all of the other
Subsequent Receivables being transferred on the related Transfer Date, the
weighted average remaining term to maturity of the Receivables Pool will not be
greater than [__] months, and (iii) has an APR (whether stated or based upon a
discounted Principal Balance) at least equal to the Minimum APR.] As of the
applicable Cut-off Date, no Obligor on any Receivable shall be noted in the
related records of the Servicer as being in default (other than a payment
default continuing for a period of not more than [__] days) under the related
Loan Contract or Lease or as being the subject of a bankruptcy proceeding. No
selection procedures believed by MCC or the Transferor to be adverse to the
Noteholders shall be used in selecting the Receivables. Subsequent Receivables
may be originated by MCC using different underwriting criteria than the
S-23
<PAGE>
criteria used to originate the Initial Receivables. For this reason, the
Subsequent Receivables may vary from those of the Initial Receivables.
The composition of the Initial Receivables and the distribution of the
Initial Receivables by APR, equipment type, industry application, payment
frequency and Principal Balance as of the Initial Cut-off Date are set forth in
the following tables. Amounts and percentages are based on the Principal Balance
of the Initial Receivables as of the Initial Cut-off Date. The "Principal
Balance" of a Receivable, as of the close of business on the last day of a
Collection Period or as of the applicable Cut-off Date, as applicable, means the
aggregate amount of all Scheduled Principal Payments that have not been received
by the Servicer (including all Scheduled Principal Payments that are then due
and payable), calculated as of the related Cut-off Date or as of the end of the
preceding Collection Period (as applicable); provided, that the Principal
Balance and, accordingly, the Scheduled Principal Payments of Discounted
Receivables will be reduced by the amount specified by the Transferor; provided
further, that the Principal Balance of each Defaulted Receivable is zero. As of
the Initial Cut-off Date, the aggregate Principal Balance of the Initial
Receivables is the Initial Pool Balance.
Composition of the Initial Receivables
<TABLE>
<CAPTION>
Weighted
Average APR Initial Number of Weighted Average Weighted Average
of Initial Pool Initial Original Term Remaining Term Average Principal
Receivables Balance Receivables (Range) (Range)(1) Balance (Range)
----------- ------- ----------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
% $ $
</TABLE>
- ----------
(1) Based on scheduled payments and assuming no prepayments of the Initial
Receivables.
Distribution by APR of the Initial Receivables
Percent of
Aggregate Aggregate
Number of Principal Principal
APR Range Receivables Balance Balance
----------- ------- -------
5.00% to 5.99% $ %
6.00% to 6.99%
7.00% to 7.99%
8.00% to 8.99%
9.00% to 9.99%
10.00% to 10.99%
11.00% to 11.99%
12.00% to 12.99%
Total
--------- ----------- -----------
$ %
========= =========== ===========
S-24
<PAGE>
Distribution of the Initial Receivables by Type of Financed Equipment
Percent of
Aggregate Aggregate
Number of Principal Principal
Type Receivables Balance Balance
---------------- ---------------- ---------------
$ %
----------- ------------- ---------
Total $ %
=========== ============= =========
Distribution by Industry Application of Financed Equipment
Percent of
Aggregate Aggregate
Number of Principal Principal
Industry Receivables Balance Balance
-------- ----------- ------- -------
$ %
--------------- ------------------- ------------
Total $ %
=============== =================== ============
Distribution of the Initial Receivables by Payment Frequency
<TABLE>
<CAPTION>
Percent of
Aggregate Aggregate
Number of Principal Principal
Type Receivables Balance Balance
---- ----------- ------- -------
<S> <C> <C> <C>
$ %
Annual
Semiannual
Quarterly
Monthly
Total $ %
</TABLE>
S-25
<PAGE>
Distribution of the Initial Receivables by Remaining Principal Balance as of the
Initial Cut-off Date
Percent of
Aggregate Aggregate
Number of Principal Principal
Remaining Principal Balance Range Receivables Balance Balance
- --------------------------------- ----------- ------- -------
Up to $
$0.00 to $100,000.00
$100,000.01 to 200,000.00
$200,000.01 to 300,000.00
$300,000.01 to 400,000.00
$400,000.01 to 500,000.00
$500,000.01 to 600,000.00
$600,000.01 to 700,000.00
$700,000.01 to 800,000.00
$800,000.01 to 900,000.00
$900,000.01 to 1,000,000.00
$1,000,000.01 to 1,250,000.00
$1,250,000.01 to 1,500,000.00
$1,500,000.01 to 1,750,000.00
$1,750,000.01 to 2,000,000.00
$2,000,000.01 to 2,250,000.00
$2,250,000.01 to 2,500,000.00
$2,500,000.01 to 2,750,000.00
$2,750,000.01 to 3,000,000.00
$3,000,000.01 to 3,250,000.00
$3,250,000.01 to 3,500,000.00
$3,500,000.01 to 3,750,000.00
$3,750,000.01 to 4,000,000.00
$4,000,000.01 to 4,250,000.00
$4,250,000.01 to 4,500,000.00
$4,500,000.01 to 4,750,000.00
$4,750,000.01 to 5,000,000.00
$5,000,000.01 and over
Total $ 100%
S-26
<PAGE>
Geographic Distribution of the Initial Receivables
Percent of
Aggregate Aggregate
Number of Principal Principal
State(1) Receivables Balance Balance
- -------- ----------- ------- -------
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
District of Columbia
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Nevada
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
Tennessee
Texas
Utah
Virginia
Wisconsin
Wyoming
Other
Total $ 100%
- ----------
(1) Based on billing addresses of Obligors.
S-27
<PAGE>
Unless otherwise specified herein, references herein to percentages of the
Initial Receivables refer in each case to the approximate percentage of the
Initial Pool Balance, based on the Principal Balances of the Initial Receivables
as of the Initial Cut-off Date, and after giving effect to all payments received
prior to the Initial Cut-off Date.
[____% of the Initial Receivables were Loan Contracts, and _____% of the
Receivables were Leases].
____% of the Initial Receivables were originated or arranged by MCC.
No single Obligor accounted for more than ____% of the Initial
Receivables, and the [five] largest Obligors accounted for approximately ____%,
____%, ____%, ____%, and ____% of the Initial Receivables respectively.
While there is no limit on the aggregate Principal Balance of Receivables
from the Franchise Finance Portfolio that may be included in the Receivables
Pool on any Transfer Date, the Concept Over-concentration Amount, which is a
component of the Specified Reserve Account Balance, has the effect of increasing
the Specified Reserve Account Balance by the amount by which the aggregate
Principal Balance of Receivables relating to any franchise concept (e.g.,
[____________________]) exceeds __% of the Pool Balance. If the Specified
Reserve Account Balance increases, on each Distribution Date Collections will be
deposited into the Reserve Account in the priorities specified herein until the
amount on deposit in the Reserve Account equals the Specified Reserve Account
Balance. See "Description of the Transaction Agreements--Distributions" herein.
Delinquencies and Net Losses
Set forth below is certain information concerning MetLife Capital's
experience pertaining to delinquencies and net losses on the Middle Market and
Franchise Finance Portfolios. Average accrual delinquencies for the Middle
Market Portfolio ranged from .__% in ____ to .__% in ____ and never exceeded
.__%. Average accrual delinquencies for the Franchise Finance Portfolio ranged
from .__% in ____ to .__% in ____ and never exceeded .__%. While delinquencies
have remained generally stable during the years shown below, minor fluctuations
in the level of delinquencies and net losses reflect changes in economic
conditions generally and economic conditions of the industries which MetLife
Capital's customers serve.
Although it is believed that the composition of receivables in the
aggregate is representative of the whole portfolio, there can be no assurance
that the delinquencies and net loss experience on the Receivables will be
comparable to that set forth below or that delinquencies and net losses in the
future will be comparable to those in the past.
S-28
<PAGE>
Delinquency Experience for the Middle Market Portfolio
(Dollars in Millions)
At December 31,
- --------------------------------------------------------------------------------
199[ ] 199[ ] 199[ ] 199[ ]
------ ------ ------ ------
$ $ $ $
At December 31, At , At ,
--------------- ---------- ------------
199[ ] 199[ ] 199[ ]
------ ------ ------
$ $ $
Delinquency Experience for the Franchise Finance Portfolio
(Dollars in Millions)
At December 31,
- --------------------------------------------------------------------------------
199[ ] 199[ ] 199[ ] 199[ ]
------ ------ ------ ------
$ $ $ $
At December 31, At , At ,
--------------- ------------ -------------
199[ ] 199[ ] 199[ ]
------ ------ ------
$ $ $
Credit Loss/Recovery Experience for the Middle Market Portfolio
(Dollars in Millions)
Three Months Ended
Year Ended December 31, March 31, ______
- ----------------------------------------------- ---------------------------
1996 1995 1994 1993 1992 1997(1) 1996(1)
---- ---- ---- ---- ---- ------- -------
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(1) Rates have been annualized.
Credit Loss/Recovery Experience for the Franchise Finance Portfolio
(Dollars in Millions)
Three Months Ended
Year Ended December 31, March 31, ______
- ------------------------------------------------ --------------------------
1996 1995 1994 1993 1992 1997(1) 1996(1)
---- ---- ---- ---- ---- ------- -------
(1) Rates have been annualized.
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WEIGHTED AVERAGE LIFE OF THE CLASS A NOTES
Information regarding certain maturity and prepayment considerations with
respect to the Class A Notes is set forth under "Weighted Average Life of the
Class A Notes" in the Prospectus. As the rate of payment of principal of the
Class A Notes depends primarily on the rate of payment (including prepayments)
of the aggregate Principal Balances of the Class A Receivables during the
Amortization Period, final payment of the Class A Notes could occur
significantly earlier than the Final Scheduled Distribution Date. During the
Amortization Period, Class A Noteholders will bear the risk of being able to
reinvest principal payments of the Class A Notes at yields at least equal to the
yield on their respective Class A Notes.
POOL FACTOR AND TRADING INFORMATION
The "Class A Note Pool Factor" is a seven-digit decimal which the Servicer
will compute each month, indicating the remaining outstanding principal amount
of the Class A Notes as of the related Distribution Date, as a fraction of the
initial outstanding principal balance of the Class A Notes. The Class A Note
Pool Factor will be 1.0000000 as of the Closing Date, and thereafter will
decline to reflect reductions in the outstanding principal balance of the Class
A Notes. A Class A Noteholder's portion of the aggregate outstanding principal
balance of the Class A Notes is the product of (i) the original denomination of
the Class A Noteholder's Note and (ii) the Class A Note Pool Factor.
Pursuant to the Indenture, the Class A Noteholders will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the Class A Note Pool Factor and various other items of information. Class A
Noteholders of record during any calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law. See
"Description of the Transaction Agreements--Reports to Noteholders" in the
Prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sources of Capital and Liquidity
The Trust's primary sources of capital will be the net proceeds of the
offering of the Class A Notes. See "Formation of the Trust--Capitalization of
the Trust" herein.
The Trust's primary sources of liquidity will be payments on the
Receivables plus amounts on deposit in the Reserve Account. For a discussion of
MCC's experience pertaining to delinquencies and net losses, see "The
Receivables Pool -- Delinquencies and Net Losses" herein.
Results of Operations
The Trust is newly formed and, accordingly, has no results of operations
as of the date of this Prospectus Supplement. Because the Trust does not have
any operating history, there has not been included in this Prospectus Supplement
any historical or pro forma ratio of earnings to fixed charges. The earnings on
the Receivables and other assets owned by the Trust, the interest costs of the
Notes and the related operating expenses will determine the Trust's results of
operations in the future. The income generated from the Trust's assets will be
used to pay principal and interest on the Notes and related
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operating costs and expenses of the Trust (to the extent not paid by the
Servicer). The principal operating expenses of the Trust are expected to be the
Servicing Fee and the Administration Fee.
USE OF PROCEEDS
The net proceeds from the sale of Class A Notes will be applied to the
purchase of the Receivables from the Transferor and to make the Transferor's
initial deposit to the Reserve Account. The Transferor will apply its net
proceeds to the acquisition of the Receivables from MCC.
THE TRANSFEROR AND THE SERVICER
For a general discussion of the Transferor and the Servicer, see "The
Transferor and the Servicer" in the Prospectus.
MetLife Capital Corporation
At [December 31], 199[_], MCC had ____ full-time employees and serviced
____ accounts, including approximately $____ [billion] in gross finance
receivables.
DESCRIPTION OF THE CLASS A NOTES
General
The Class A Notes will be issued pursuant to the terms of the Indenture, a
form of which has been filed as an exhibit to the Registration Statement. A copy
of the Indenture will be filed with the Commission following the issuance of the
Notes. The following, as well as other pertinent information included elsewhere
in this Prospectus Supplement and in the Prospectus, summarizes the material
terms of the Class A Notes and the Indenture. The summary does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Class A Notes and the Indenture. The following summary supplements, and to the
extent inconsistent therewith replaces, the description of the general terms and
provisions of the Class A Notes of any given series and the related Indenture
set forth in the Prospectus, to which description reference is hereby made.
The Class A Notes
Payments of Interest. [The Class A Notes will constitute Fixed Rate
Securities, as such term is defined under "Certain Information Regarding the
Securities --Fixed Rate Securities" in the Prospectus.] Interest on the
principal balance of the Class A Notes will accrue at the rate of[__%] per annum
(the "Class A Note Interest Rate") [(calculated on the basis of a 360 day year
of twelve 30 day months).] Interest on the outstanding principal amount of the
Class A Notes will accrue from the most recent Distribution Date on which
interest has been paid or, in the case of the initial Distribution Date, from
and including the Closing Date, to but excluding the initial Distribution Date
and will be payable to the Class A Noteholders monthly on each Distribution Date
commencing ________ __, ____. "Distribution Date" shall mean the [____] day of
each month or, if any such date is not a business day, the next succeeding
business day. Interest accrued as of any Distribution Date but not
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paid on such Distribution Date will be due on the next Distribution Date,
together with, to the extent permitted by law, interest on such amount at the
Class A Note Interest Rate. Interest payments on the Class A Notes will be
generally derived from the Available Interest Amount remaining after the payment
of the Servicing Fee and the Administration Fee, and from amounts on deposit in
the Reserve Account. If the amount of interest on the principal balance of the
Class A Notes payable on any Distribution Date exceeds the sum of such remaining
portion of the sum of the Available Interest Amounts and amounts on deposit in
the Reserve Account, the Class A Noteholders will receive their ratable share
(based upon the total amount of interest due to the Class A Noteholders) of the
amount available to be distributed in respect of interest on the Class A Notes.
Application of Principal; Revolving Period. No Principal will be payable
on the Notes on any Distribution Date with respect to the Revolving Period. On
or prior to the Distribution Date (i) in each month (beginning with the
___________ ____ Distribution Date) during the Revolving Period and (ii) if no
Early Amortization Event has occurred, in the month in which the Scheduled
Revolving Period Termination Date occurs, on one or more days selected by the
Servicer (each, a "Transfer Date"), the Servicer will direct the Indenture
Trustee to reinvest Available Principal Amounts remaining on deposit in the
Principal Funding Account (after making the required deposit, if any, into the
Reserve Account) in Subsequent Receivables. Upon such reinvestment, the related
Subsequent Receivables will become assets of the Trust. If, on the tenth day
following any Distribution Date with respect to the Revolving Period, the
portion of the Principal Funding Account Balance relating to prior Collection
Periods that have not been reinvested in Subsequent Receivables exceeds
[$________], an Early Amortization Event will occur, the Revolving Period will
terminate as of such day and all Available Principal Amounts on deposit in the
Principal Funding Account will be distributed as principal to the Noteholders on
the Distribution Date in the month immediately following the month in which such
Early Amortization Event occurs. For further details concerning the application
of Available Principal Amounts, see "Summary--Amortization Period; Principal
Payments" and Description of the Class A Notes --Distributions" herein.
The Subsequent Receivables will be selected from MCC's portfolio of loan
and lease contracts based on the same criteria as are applicable to the Initial
Receivables as described under herein and in the Prospectus. See "The
Receivables Pool" herein and in the Prospectus.
Payments of Principal; Amortization Period. Principal payments will be
made to the Class A Noteholders on each Distribution Date with respect to the
Amortization Period in an amount generally equal to the Class A Noteholders'
Principal Distributable Amount until the principal balance of the Class A Notes
is reduced to zero. Principal payments on the Class A Notes during the
Amortization Period will generally be derived from (i) Available Principal
Amounts on deposit in the Principal Funding Account and (ii) from funds, if any,
in the Reserve Account remaining after the payment of the Administration Fee,
the Servicing Fee and the Noteholders' Class A Interest Distributable Amount.
See "Description of the Transaction Agreements--Distributions" and "--Reserve
Account" herein. The outstanding principal amount, if any, of the Class A Notes
will be payable in full on the Class A Final Scheduled Distribution Date from
available funds therefor (including amounts in the Reserve Account).
Optional Prepayment. The Notes may be prepaid in whole, but not in part,
in an amount equal to the Redemption Price on any Distribution Date on which the
Transferor exercises its option to purchase the Receivables when the Pool
Balance has been reduced to 10% or less of the Initial Pool Balance. See
"Description of the Transaction Agreements--Termination" in the Prospectus.
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The Indenture Trustee. ______________________________ is the Indenture
Trustee under the Indenture. ______________________________ is a [__________
banking corporation] and its corporate trust offices are located at
_______________________________________________. [In the ordinary course of its
business, the Indenture Trustee and its affiliates have engaged and may in the
future engage in commercial banking or financial advisory transactions with MCC
and its affiliates.]
DESCRIPTION OF THE TRANSACTION AGREEMENTS
The following, as well as other information included elsewhere in this
Prospectus Supplement and in the Prospectus, summarizes the material terms of
the Transfer and Servicing Agreement, the Contribution and Sale Agreement, the
Administration Agreement, the Trust Agreement (collectively, the "Transaction
Agreements"), forms of which have been filed as exhibits to the Registration
Statement. Copies of the Transaction Agreements will be filed with the
Commission following the issuance of the Notes. The following summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Transaction Agreements. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Transaction Agreements
set forth under the heading "Description of the Transaction Agreements" in the
Prospectus, to which description reference is hereby made.
Transfer and Assignment of Receivables
Certain information with respect to the conveyances on the Closing Date
and each Transfer Date of the Receivables from MCC to the Transferor pursuant to
the Contribution and Sale Agreement and from the Transferor to the Trust
pursuant to the Transfer and Servicing Agreement is set forth under "Description
of the Transaction Agreements--Transfer and Assignment of Receivables" in the
Prospectus. Under certain circumstances the Transferor will be required to
repurchase Receivables from the Trust. See "Risk Factors-Risks Relating to
Perfection of Interests in Receivables and in Financed Equipment" and
"Description of the Transaction Agreements --Transfer and Assessment of
Receivables" in the Prospectus.
Accounts
In addition to the Accounts referred to in the Prospectus under
"Description of the Transaction Agreements--Accounts," the Transferor will also
establish and maintain the Reserve Account in the name of the Indenture Trustee
on behalf of the Noteholders. See "--Reserve Account" herein.
Servicing Compensation and Payment of Expenses
The Servicing Fee Rate with respect to the Servicing Fee to be paid to the
Servicer with respect to each Collection Period will be [____]% per annum of the
Pool Balance as of the first day of each Collection Period. The Servicing Fee
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid solely to the extent of the Available Interest
Amount, and, to the extent necessary, from funds available in the Reserve
Account. However the Servicing Fee will be paid prior to the distribution of any
portion of the Available Interest Amount to the Administrator and the
Noteholders, and deposits into the Collection Account shall be made net of such
amounts. The Servicer shall also be entitled to any Servicer's Yield, and
deposits into the Collection Account shall be made net of such amounts. See
"Description of the Transaction Agreements--Servicing Compensation and Payment
of Expenses" in the Prospectus.
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Distributions
Deposits to Collection Account. By the second business day prior to a
Distribution Date (each, a "Determination Date"), the Servicer will provide the
Indenture Trustee with certain information with respect to the related
Collection Period, including the amount of aggregate collections on the
Receivables and the aggregate Acquisition Amount of Receivables required to be
repurchased by the Transferor or required to be purchased by the Servicer.
The Servicer will deposit all amounts collected during each Collection
Period into the Collection Account within two business days of receipt and
identification thereof.
Withdrawals from the Collection Account, Interest Payment Account and
Principal Funding Account. On the second Business Day prior to each Distribution
Date, the Servicer shall instruct the Indenture Trustee, to withdraw from the
Collection Account the Available Interest Amount and the Available Principal
Amount for deposit in the Interest Payment Account and the Principal Funding
Account, respectively, and to make the following deposits and distributions for
receipt by the Servicer or for deposit in the Note Distribution Account by 12:00
noon (New York time) on such following Distribution Date to the extent of the
Available Interest Amount and the Available Principal Amount:
(i) from the Available Interest Amount on deposit in the Interest
Payment Account, in the following order of priority:
(A) to the Servicer, the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods;
(B) to the Administrator under the Administration Agreement, the
Administration Fee and all unpaid Administration Fees from prior
Collection Periods;
(C) to the Note Distribution Account, the Noteholders' Class A
Interest Distributable Amount;
(D) to the Reserve Account, the positive difference, if any, of (i)
the Specified Reserve Account Balance for such Distribution Date over (ii)
the amount on deposit in the Reserve Account on such Distribution Date
(not taking into account the amount deposited into the Reserve Account on
such Distribution Date described by this clause (D)).
(E) to the Principal Funding Account, the positive difference, if
any, between the Principal Distribution Amount and the Available Principal
Amount (not taking into account the amount of the Available Principal
Amount derived from clause (iii) of the definition thereof);
(F) to the Note Distribution Account, the Noteholders' Class B
Interest Distributable Amount; and
(G) to the Transferor, the remaining Available Interest Amount.
(ii) from the Available Principal Amount on deposit in the Principal
Funding Account, in the following order of priority:
(A) on each Distribution Date with respect to the Revolving Period
(1) first to the Reserve Account the positive difference, if any, of (a)
the Specified Reserve Account Balance
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for such Distribution Date over (b) the amount on deposit in the Reserve
Account (after taking into account the amount deposited into the Reserve
Account on such Distribution Date as described in clause (i)(D) above
but not taking into account the amount deposited into the Reserve Account
on such Distribution Date pursuant to this clause (ii)(A)) and (2) second
the Available Principal Amount remaining after the application of clause
(1) above in this clause (A) will be retained in the Principal Funding
Account and will be paid to the Transferor in connection with transfers
of Subsequent Receivables to the Issuer; and
(B) on Distribution Dates with respect to the Amortization Period,
(1) first, to the Note Distribution Account, the Class A Noteholders'
Principal Distributable Amount, (2) second, to the Reserve Account the
positive difference, if any, of (a) the Specified Reserve Account Balance
for such Distribution Date over (b) the amount on deposit in the Reserve
Account (after taking into account the amount deposited
into the Reserve Account on such Distribution Date pursuant to clause
(i)(D) above but not taking into account the amount deposited into the
Reserve Account on such Distribution Date pursuant to this clause (B)),
and (3) third, to the Note Distribution Account, the Class B Noteholders'
Principal Distributable Amount;
(iii) on the first Distribution Date with respect to the
Amortization Period, from Available Principal Amounts deposited in the Principal
Funding Account on prior Distribution Dates that were not used to purchase
Subsequent Receivables from the Transferor on or prior to such Distribution Date
("Remaining Available Principal Amounts"), in the following order of priority:
(A) to the Note Distribution Account, the Class A Noteholders'
Percentage of the Remaining Available Principal Amounts; and
(B) to the Note Distribution Account, the Class B Noteholders'
Percentage of the Remaining Available Principal Amounts.
Notwithstanding the foregoing, if an Event of Default has occurred and the
maturity of the Class A Notes has been accelerated the Class B Noteholders will
not be entitled to receive any distributions of interest or principal until the
Notes have been paid in full.
Funds will be withdrawn from amounts on deposit in the Reserve Account to
the extent described below. See "Reserve Account."
"Acquired Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to the
Transfer and Servicing Agreement or repurchased as of such time by the
Transferor pursuant to the Transfer and Servicing Agreement.
"Acquisition Amount" means the amount, as of the close of business on the
last day of a Collection Period, required to prepay in full the respective
Receivable under the terms thereof (including interest at the related APR to the
end of the month of purchase).
"Available Interest Amount" means, with respect to any Distribution Date,
the sum of the following amounts, without duplication, with respect to the
preceding Collection Period: (i) all the portion of all Collections received
during such Collection Period (including any such amounts received with respect
to prepayments and the discounted portion of any Discounted Receivable)
allocable to interest, (ii) all Investment Earnings with respect to such
Distribution Date, (iii) all Liquidation Proceeds and Recoveries received during
such Collection Period and (iv) the portion of all Acquisition Amounts received
during such Collection Period allocable to interest, but excluding in each case
(x)
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all payments and proceeds (including Liquidation Proceeds) of any Acquired
Receivables the principal portion of whichhas been included in the Principal
Distribution Amount in a prior Collection Period and (y) any Excluded Amounts.
"Available Principal Amount" means, with respect to any Distribution Date,
the sum of the following amounts, without duplication, with respect to the
preceding Collection Period: (i) that portion of all Collections received during
such Collection Period (including any such amounts received with respect to
prepayments but excluding the discounted portion of any Discounted Receivable)
allocable to principal, (ii) the portion of all Acquisition Amounts received
during such Collection Period allocable to principal, (iii) the portion of the
Available Interest Amount deposited in the Principal Funding Account as
described above, but excluding in each case (x) all payments and proceeds of any
Acquired Receivables the principal portion of which has been included in the
Principal Distribution Amount in a prior Collection Period and (y) and Excluded
Amounts.
"Class A Note Interest Rate" means [__%] per annum.
"Class B Note Interest Rate" means [__%] per annum.
"Class A Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date with respect to the Amortization Period, the
lesser of (a) the Class A Noteholders' Percentage of the Principal Distribution
Amount and (b) the outstanding principal balance of the Class A Notes.
"Class A Noteholders' Percentage" means the percentage equivalent of a
fraction, the numerator of which is the principal balance of the Class A Notes
and the denominator of which will be the Pool Balance, in each case as of the
close of business on the last day of the Revolving Period.
"Class A Noteholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date with respect to the Amortization Period, the
excess of (a) the sum of (i) the Class A Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and (ii) any outstanding Class A
Noteholders' Principal Carryover Shortfall as of the preceding Distribution Date
over (b) the amount in respect of principal that is actually deposited in the
Note Distribution Account and allocated to the Class A Notes for such
Distribution Date.
"Class A Noteholders' Principal Distributable Amount" means, with respect
to any Distribution Date with respect to the Amortization Period, the sum of (a)
the Class A Noteholders' Monthly Principal Distributable Amount for such
Distribution Date, (b) the Class A Noteholders' Principal Carryover Shortfall as
of the close of the preceding Distribution Date and (c) on each Distribution
Date with respect to the Amortization Period from and after which the Total
Enhancement shall be less than or equal to __% of the Initial Pool Balance
(after giving effect to all distributions and deposits on such date), an amount
equal to the positive difference, if any, between the Class B Noteholders'
Principal Distributable Amount calculated without giving effect to the proviso
in such definition and the Class B Noteholders' Principal Distributable Amount
calculated after giving effect to the proviso in such definition; provided,
however, that the sum of (a), (b) and (c) shall not exceed the outstanding
principal amount of the Class A Notes, and on the Class A Final Scheduled
Distribution Date, the Class A Noteholders' Principal Distributable Amount will
include the amount necessary (after giving effect to the other amounts to be
deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal amount of the Class
A Notes to zero.
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"Class B Noteholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date with respect to the Amortization Period, the
Class B Noteholders' Percentage of the Principal Distribution Amount.
"Class B Noteholders' Percentage" means 100% minus the Class A
Noteholders' Percentage (if any Class A Notes are outstanding); provided, that
after the Distribution Date on which the Class A Notes are paid in full, the
Class B Noteholders' Percentage shall equal 100%.
"Class B Noteholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date with respect to the Amortization Period, the
excess of (a) the sum of (i) the Class B Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and (ii) any outstanding Class B
Noteholders' Principal Carryover Shortfall as of the close of business on the
preceding Distribution Date over (b) the amount in respect of principal that is
actually deposited in the Principal Funding Account and allocated to the Class B
Notes.
"Class B Noteholders' Principal Distributable Amount" means, with respect
to any Distribution Date with respect to the Amortization Period, the sum of (a)
the Class B Noteholders' Monthly Principal Distributable Amount for such
Distribution Date and (b) the Class B Noteholders' Principal Carryover Shortfall
as of the close of the preceding Distribution Date; provided, that from and
after the Distribution Date on which the Total Enhancement shall be less than or
equal to __% of the Initial Pool Balance (after giving effect to all
distributions and deposits on such date without giving effect to this proviso)
until the Class A Notes are paid in full, the Class B Noteholders' Principal
Distributable Amount will be equal to (x) on the first Distribution Date on
which the Total Enhancement would be less than or equal to __% of the Initial
Pool Balance (after giving effect to all distributions and deposits on such date
without giving effect to this proviso), an amount equal to the amount that after
payment to the Class B Noteholders would cause the Total Enhancement to equal
__% of the Initial Pool Balance and (y) for each Distribution Date thereafter
until the Class A Notes are paid in full, 0.
"Collection Period" means, with respect to the first Distribution Date,
the calendar month ending on ________ __, ____, and with respect to each
subsequent Distribution Date, the preceding calendar month.
"Defaulted Receivable" means any Receivable as to which all or any portion
of any unpaid Scheduled Payment has been charged off as uncollectible on the
Servicer's computer system for servicing the Receivables in accordance with the
Servicer's customary and normal collection and servicing procedures or as to
which the Servicer has repossessed the related Financed Equipment; provided,
that the Servicer shall charge off a Receivables as uncollectible on its
computer system for servicing the Receivables no later than the date on which
such Receivable becomes ____ days delinquent. A receivable shall become a
Defaulted Receivable on the earlier to occur of (a) the date on which such
Receivable is recorded as charged off as uncollectible on the Servicer's
computer system for servicing the Receivables or (b) the date that the Servicer
has repossessed the related Financed Equipment.
"Excluded Amounts" means (i) any payments received from an Obligor in
connection with any insurance premiums or fees, or taxes or other charges
imposed by any governmental authority, (ii) any indemnity payments made by an
Obligor pursuant to any Receivable, (iii) any make-whole amounts paid to the
Servicer as a portion of Servicer's Yield and (iv) all late fees, extension
fees, and other incidental charges (from whatever source) collected with respect
to any Receivable.
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"Liquidation Proceeds" means, with respect to any Defaulted Receivable,
the moneys collected in respect thereof, from whatever source (including any
insurance proceeds) during the Collection Period in which such Receivable became
a Defaulted Receivable, net of the sum of any amounts expended by the Servicer
in connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Defaulted Receivable.
"Monthly Class A Note Interest" means, with respect to any Distribution
Date, an amount equal to one-twelfth of the product of (a) the Class A Note
Interest Rate and (b) the outstanding principal balance of the Class A Notes as
of the close of business on the preceding Distribution Date after giving effect
to all payments of principal made to the Class A Noteholders on such preceding
Distribution Date; provided, however, that with respect to the first
Distribution Date, interest on the outstanding principal balance of the Class A
Notes will accrue from and including the Closing Date to but excluding the
__________ ____ Distribution Date [and will be calculated on the basis of a
360-day year of twelve 30-day months.]
"Monthly Class B Note Interest" means, with respect to any Distribution
Date, an amount equal to [one-twelfth of] the product of (a) the Class B Note
Interest Rate and (b) the outstanding principal balance of the Class B Notes as
of the close of business on the preceding Distribution Date after giving effect
to all payments of principal made to the Class B Noteholders on such preceding
Distribution Date; provided, however, that with respect to the first
Distribution Date, interest on the outstanding principal balance of the Class B
Notes will accrue from and including the Closing Date to but excluding the
__________ ____ Distribution Date [and will be calculated on the basis of a
360-day year of twelve 30-day months.]
"Noteholders' Class A Interest Carryover Shortfall" means, with respect to
any Distribution Date, the sum of (a) the excess of (i) the sum of (A) the
Monthly Class A Note Interest for the preceding Distribution Date and (B) any
outstanding Noteholders' Class A Interest Carryover Shortfall on such preceding
Distribution Date, over (ii) the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution Date
and allocated to the Class A Notes for such Distribution Date, plus (b) interest
on the amount of interest due but not paid to the Class A Noteholders on the
preceding Distribution Date, to the extent permitted by law, at the Class A Note
Interest Rate from and including such preceding Distribution Date to but
excluding the current Distribution Date.
"Noteholders' Class A Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of (a) the Monthly Class A Note Interest for
such Distribution Date and (b) the Noteholders' Class A Interest Carryover
Shortfall for such Distribution Date.
"Noteholders' Class B Interest Carryover Shortfall" means, with respect to
any Distribution Date, the sum of (a) the excess of (i) the sum of (A) the
Monthly Class B Note Interest for the preceding Distribution Date and (B) any
outstanding Noteholders' Class B Interest Carryover Shortfall on such preceding
Distribution Date, over (ii) the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution Date
and allocated to the Class B Notes for such Distribution Date, plus (b) interest
on the amount of interest due but not paid to the Class B Noteholders on the
preceding Distribution Date, to the extent permitted by law, at the Class B Note
Interest Rate from and including such preceding Distribution Date to but
excluding the current Distribution Date.
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"Noteholders' Class B Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of (a) the Monthly Class B Note Interest for
such Distribution Date and (b) the Noteholders' Class B Interest Carryover
Shortfall for such Distribution Date.
"Realized Losses" means, with respect to any Collection Period, for any
Defaulted Receivable the Principal Balance of such Defaulted Receivable.
"Recoveries" means, with respect to any Defaulted Receivable, (a) monies
collected in respect thereof, from whatever source (including insurance
proceeds) during any Collection Period following the Collection Period in which
such Receivable became a Defaulted Receivable, net of (b) the sum of any
out-of-pocket costs and expenses of collection (including attorneys fees and
expenses deducted therefrom) expended by the Servicer in connection with such
Defaulted Receivable and any amounts required by law to be remitted to the
Obligor.
"Scheduled Payment" on a Receivable means the Scheduled Principal Payment
or that portion of the regularly scheduled payment required to be paid in
accordance with the terms and conditions of such Receivable as in effect on the
applicable Cut-Off Date.
"Total Enhancement" means the sum of (a) the outstanding principal balance
of the Class B Notes and (b) the principal amount on deposit in the Reserve
Account.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account will be distributed to the Noteholders.
Early Amortization Events
As described above, the Revolving Period will continue until the close of
business on __________ ____ at which time the Amortization Period will begin and
continue to the earlier of the payment in full of the Notes and the termination
of the Trust, unless an Early Amortization Event occurs prior to any of such
dates, thereby commencing the Amortization Period. An "Early Amortization Event"
will mean any of the following events:
(a) Failure on the part of the Transferor or the Servicer to make any
payment or deposit under the Transfer and Servicing Agreement or the
Contribution and Sale Agreement on or before the date occurring three Business
Days after such payment or deposit is required to be made.
(b) Failure on the part of the Transferor or the Servicer to duly observe
or perform in any material respect any other covenants or agreements of the
Transferor or the Servicer set forth in the Transfer and Servicing Agreement or
the Contribution and Sale Agreement, which failure materially and adversely
affects the rights of the Class A Noteholders and which continues unremedied for
a period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given (A) to the Transferor
or the Servicer (as the case may be) by the Owner Trustee or the Indenture
Trustee or (B) to the Servicer or the Transferor (as the case may be) and the
Owner Trustee and the Indenture Trustee by the Holders of Class A Notes
evidencing not less than 25% of the Outstanding Amount of the Class A Notes.
(c) Any representation or warranty made by MCC in the Contribution and
Sale Agreement or by the Transferor or the Servicer in the Transfer and
Servicing Agreement or any information
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<PAGE>
in the Receivables Schedule (y) shall prove to be incorrect in any material
respect when made or when delivered, which continues to be incorrect in any
material respect for a period of 60 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to (A)
MCC, the Transferor or the Servicer (as the case may be) by the Owner Trustee or
the Indenture Trustee or (B) MCC, the Transferor or the Servicer (as the case
may be) and the Owner Trustee and the Indenture Trustee by Holders of Class A
Notes evidencing not less than 25% of the Outstanding Amount of the Class A
Notes and (z) as a result of which the interest of the Class A Noteholders are
materially and adversely affected; provided, that an Early Amortization Event
shall not be deemed to occur pursuant to this subparagraph (c) if MCC, the
Transferor or the Servicer (as the case may be) shall have acquired the relevant
Receivable pursuant to the Contribution and Sale Agreement or the Transfer and
Servicing Agreement (as applicable) by depositing the related Acquisition Amount
in the Collection Account pursuant to the Transfer and Servicing Agreement.
(d) An Insolvency Event shall occur with respect to MCC or the Transferor.
(e) The Transferor or the Trust shall become subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended.
(f) On the tenth day following any Distribution Date, the portion of the
Principal Funding Account Balance relating to prior Collection Periods shall be
greater than $[__________].
(g) A Servicer Termination Event shall occur.
(h) The amount on deposit in the Reserve Account shall be less than the
Specified Reserve Account Balance for any three consecutive Distribution Dates.
(i) An Event of Default shall have occurred and be continuing and the
Notes shall be declared immediately due and payable.
(j) The average of the Trust Yields for any three consecutive Monthly
Periods is less than the average of the Base Rates for such period.
The Amortization Period will commence on the day as of which an Early
Amortization Event is deemed to have occurred (but, in the case of any event
described in paragraph (a), (b) or (c), after any applicable grace period). In
such event, distributions of principal to the Class A Noteholders will begin on
the Distribution Date in the month following the month in which the Early
Amortization Event occurs. If, because of the occurrence of an Amortization
Event, the Amortization Period begins earlier than the Amortization Date, Class
A Noteholders will begin receiving distributions of principal earlier than they
would otherwise have under the Agreement, which may shorten the final maturity
of the related Class of Class A Notes.
"Base Rate" shall mean, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the sum
of (a) the Noteholders' Class A Interest Distributable Amount and the
Noteholders' Class B Interest Distributable Amount, each for the related
Interest Period and (b) the Servicing Fee with respect to such Monthly Period
and the denominator of which is the Pool Balance as of the close of business on
the last day of such Monthly Period.
"Trust Yield" shall mean, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to the Available Interest Amount for the
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<PAGE>
related Distribution Date and the denominator of which is equal to the Pool
Balance as of the close of business on the last day of such Monthly Period.
Reserve Account
The rights of the Class B Noteholders to receive distributions with
respect to the Receivables generally will be subordinated to the rights of the
Class A Noteholders in the event of defaults and delinquencies on the
Receivables, as provided in the Indenture, the Trust Agreement and the Transfer
and Servicing Agreement. The protection afforded to the Class A Noteholders
through subordination will be effected by the preferential right of the Class A
Noteholders to receive both current distributions with respect to the
Receivables and withdrawals from the Reserve Account. The Reserve Account will
be created with an initial deposit by the Transferor on the Closing Date of the
Reserve Account Initial Deposit and will be augmented on each Distribution Date
by deposit therein of the Available Interest Amount remaining after the payment
of the Servicing Fee, the Administration Fee and the deposit of the Noteholders'
Class A Interest Distributable Amount, and the Available Principal Amount after
payment on any Distribution Date with respect to the Revolving Period of the
Class A Noteholders Monthly Principal Distributable Amount, in each case as
described above under "--Distributions." Amounts on deposit in the Reserve
Account will be released on each Distribution Date to the Transferor to the
extent that the amount on deposit in the Reserve Account (after giving effect to
withdrawals made on such Distribution Date) exceeds the Specified Reserve
Account Balance on such Distribution Date; provided, that if, after giving
effect to all payments made on the Notes on such Distribution Date, the Pool
Balance as of the end of the preceding Collection Period is less than the
outstanding principal balance of the Notes, any such excess amounts will be
retained in the Reserve Account for application as described herein.
"Specified Reserve Account Balance" with respect to any Distribution Date
means the sum of (a) the greater of (i) the product of (A) the Specified Reserve
Account Percentage with respect to such Distribution Date and (B) the Pool
Balance as of the close of business on the last day of the preceding Collection
Period and (ii) __% of the Initial Pool Balance and (b) the sum of [(i) the
aggregate of all Remaining Residual Amounts as of the close of business on the
last day of the preceding Collection Period, (ii) the aggregate of all Obligor
Over-concentration Amounts as of the close of business on the last day of the
preceding Collection Period and (iii) the aggregate of all Concept
Over-concentration Amounts as of the close of business on the last day of the
preceding Collection Period;] provided, that the Specified Reserve Account
Balance shall not exceed the outstanding principal balance of the Class A Notes.
"Specified Reserve Account Percentage" shall mean, with respect to any
Distribution Date, ___%; provided, however, that with respect to any
Distribution Date (i) if the Average Default Ratio relating to any such
Distribution Date exceeds ___%, then the Specified Reserve Account Percentage
for such Distribution Date will equal ___%; or (ii) if the Average Delinquency
Ratio relating to any such Distribution Date exceeds ___%, then the Specified
Reserve Account Percentage for such Distribution Date will equal ___%; provided
further, however, that, notwithstanding anything to the contrary contained
within this Agreement, the definition of Specified Reserve Account Percentage
may be modified at the Transferor's option at any time if the Rating Agency
Condition is satisfied with respect to such modification.
"Average Default Ratio" shall mean, with respect to any Distribution Date,
the average of the Default Ratios for the immediately preceding three Collection
Periods.
S-42
<PAGE>
"Average Delinquency Ratio" shall mean, with respect to any Distribution
Date, the average of the Delinquency Ratios for the immediately preceding three
Collection Periods.
"Default Ratio" shall mean, with respect to any Collection Period, the
annualized percentage equivalent of a fraction, the numerator of which is the
Realized Loss with respect to such Collection Period, and the denominator of
which is the Pool Balance as of the close of business on the last day of such
Collection Period.
["Concept Over-concentration Amount" means, with respect to any franchise
concept (as determined in accordance with the Servicer's customary and normal
classification procedures) as of any date of determination, an amount equal to
the product of (a) the positive difference, if any, of (i) the percentage
equivalent of a fraction, the numerator of which is the aggregate of the
Principal Balance of each Receivable relating to such franchise concept as of
such date of determination and the denominator of which is the Pool Balance as
of such date of determination over (ii) __% and (b) the Pool Balance as of such
date of determination.]
"Delinquency Ratio" shall mean, with respect to any Collection Period, the
percentage equivalent of a fraction, the numerator of which is the principal
amount of all outstanding Receivables (other than Acquired Receivables and
Defaulted Receivables with respect to such Collection Period) which are __ or
more days delinquent as of the end of such Collection Period, determined in
accordance with the Servicer's customary and normal practices, and the
denominator of which is the Pool Balance as of the close of business on the last
day of such Collection Period.
"Obligor Over-concentration Amount" means, with respect to any Obligor as
of any date of determination, an amount equal to the product of (a) the positive
difference, if any, of (i) the percentage equivalent of a fraction, the
numerator of which is the aggregate of the Principal Balance of each Receivable
relating to such Obligor as of such date of determination and the denominator of
which is the Pool Balance as of such date of determination over (ii) __% and (b)
the Pool Balance as of such date of determination.
["Remaining Residual Amount" means, with respect to any Lease that is an
NTOOL as of any date of determination, that portion of the amount financed with
respect to such Lease that the Obligor thereon has not guaranteed repayment.]
If the amount on deposit in the Reserve Account is greater than the
Specified Reserve Account Balance for such Distribution Date, the Servicer shall
instruct the Indenture Trustee to distribute the amount of the excess to the
Transferor; provided, however, that if, after giving effect to all payments made
on the Notes on such Distribution Date, the Pool Balance as of the end of the
preceding Collection Period is less than the sum of the outstanding principal
amount of the Notes, such excess amount shall not be distributed to the
Transferor and shall be retained in the Reserve Account available for
application in accordance with the Transfer and Servicing Agreement. Upon the
Class A Final Scheduled Distribution Date or the date of the optional purchase
of the Receivables by the Servicer (but only after payment of all interest and
principal of the Notes), the Servicer shall instruct the Indenture Trustee to
distribute the Reserve Account balance to the Transferor. Upon any distribution
to the Transferor of amounts from the Reserve Account, the Noteholders will not
have any rights in, or claims to, such amounts.
Funds will be withdrawn from the amount on deposit in the Reserve Account
to the extent that (a) the Available Interest Amount is insufficient to pay the
sum of the Servicing Fee for the immediately preceding Collection Period and all
unpaid Servicing Fees from prior Collection Periods, the
S-43
<PAGE>
Administration Fee for the immediately preceding Collection Period and all
unpaid Administrative Fees from prior Collection Periods and the Noteholders'
Class A Interest Distributable Amount for such Distribution Date or (b) during
the Amortization Period, the Available Principal Amount is insufficient to pay
the Class A Noteholders' Principal Distributable Amount and funds in the amount
of such deficiency, to the extent available, will be deposited in the Note
Distribution Account.
The availability of funds in the Reserve Account is intended to enhance
the likelihood of receipt by the Class A Noteholders of the full amount of
principal and interest due them and to decrease the likelihood that the Class A
Noteholders will experience losses. In addition, the subordination of the Class
B Notes to the Class A Notes is intended to provide the Class A Noteholders with
these same protections. However, because in certain circumstances the Reserve
Account could be depleted and/or the aggregate amount of Realized Losses could
exceed the amount of the Class B Notes, these protections are limited.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code, impose certain requirements on employee benefit
plans and certain other plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and certain collective investment funds or
insurance company general or separate accounts in which such plans, accounts or
arrangements are invested, that are subject to the fiduciary responsibility
provisions of ERISA and/or Section 4975 of the Code (collectively, "Plans"), and
on persons who are fiduciaries with respect to Plans, in connection with the
investment of "plan assets" of any Plan ("Plan Assets"). ERISA generally imposes
on Plan fiduciaries certain general fiduciary requirements, including those of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan.
Generally, any person who has discretionary authority or control respecting the
management or disposition of Plan Assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary with respect to
such Plan Assets.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ("Parties in Interest" under ERISA and
"Disqualified Persons" under the Code) who have certain specified relationships
to a Plan or its Plan Assets, unless a statutory or administrative exemption is
available. Parties in Interest or a Disqualified Person that participate in a
prohibited transaction may be subject to a penalty imposed under ERISA and/or an
excise tax imposed pursuant to Section 4975 of the Code, unless a statutory or
administrative exemption is available. These prohibited transactions generally
are set forth in Section 406 of ERISA and Section 4975 of the Code.
Subject to the considerations described below, the Class A Notes are
eligible for purchase with Plan Assets of any Plan.
Any fiduciary or other Plan investor considering whether to purchase the
Class A Notes with Plan Assets of any Plan should determine whether such
purchase is consistent with its fiduciary duties and whether such purchase would
constitute or result in a non-exempt prohibited transaction under ERISA and/or
Section 4975 of the Code because any of the Transferor or the Servicer, (as
subsidiaries of Metropolitan Life Insurance Company or as affiliates of New
England and The New England Investment Companies L.P.), the Indenture Trustee,
the Owner Trustee or any other party may be Parties in Interest or a
Disqualified Person with respect to the investing Plan and may be deemed to be
benefiting from the issuance of the Class A Notes. Any fiduciary or other Plan
investor considering
S-44
<PAGE>
whether to purchase or hold the Class A Notes should consult with its counsel
regarding (a) the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the Code to such investment,
and (b) if the Transferor or the Servicer is a Party in Interest or Disqualified
Person with respect to the investing Plan, the availability of exemptive relief
under U.S. Department of Labor ("DOL") Prohibited Transaction Class Exemption
("PTCE") 96-23 (relating to transactions determined by "in-house asset
managers"), 95-60 (relating to transactions involving insurance company general
accounts), 91-38 (relating to transactions involving bank collective investment
funds), 90-1 (relating to transactions involving insurance company pooled
separate accounts) or 84-14 (relating to transactions determined by independent
"qualified professional asset managers") or any other prohibited transaction
exemption issued by the DOL. A purchaser of the Class A Notes should be aware,
however, that even if the conditions specified in one or more of the
above-referenced exemptions are met, the scope of the exemptive relief provided
by the exemption might not cover all acts which might be construed as prohibited
transactions.
In addition, under DOL Regulation Section 2510.3-101 (the "Plan Asset
Regulation"), the purchase with Plan Assets of equity interests in the Trust
could, in certain circumstances, cause the Receivables and other assets of the
Trust to be deemed Plan Assets of the investing Plan which, in turn, would
subject the Trust and its assets to the fiduciary responsibility provisions of
ERISA and the prohibited transaction provisions of ERISA and Section 4975 of the
Code. Nevertheless, because the Class A Notes (a) will be treated as
indebtedness under local law and debt, rather than equity, for tax purposes (see
"Federal Income Tax Considerations -- Tax Consequences to Holders of the Notes
- --Treatment of the Class A Notes as Indebtedness" in the Prospectus, and (b)
should not be deemed to have any "substantial equity features," purchases of the
Class A Notes with Plan Assets should not be treated as equity investments and,
therefore, the Receivables and other assets included as assets of the Trust
should not be deemed to be Plan Assets of the investing Plans. Those conclusions
are based, in part, upon the traditional debt features of the Class A Notes,
including the reasonable expectation of purchasers of the Class A Notes that the
Class A Notes (which are highly rated by the Rating Agencies) will be repaid
when due, as well as the absence of conversion rights, warrants and other
typical equity features. Before purchasing or holding the Class A Notes, a
fiduciary or other Plan investor should itself confirm that the Class A Notes
constitute indebtedness, and have no substantial equity features, for purposes
of the Plan Asset Regulation.
The Class A Notes may not be purchased or held by any Plan, or any person
investing Plan Assets of any Plan, if any of the Transferor, the Servicer, the
Indenture Trustee, the Owner Trustee or any of their respective affiliates (a)
has investment or administrative discretion with respect to the Plan Assets used
to effect such purchase; (b) has authority or responsibility to give, or
regularly gives, investment advice with respect to such Plan Assets, for a fee
and pursuant to an agreement or understanding that such advice (1) will serve as
a primary basis for investment decisions with respect to such Plan Assets, and
(2) will be based on the particular investment needs of such Plan; or (c) is an
employer maintaining or contributing to such Plan. Each purchaser or holder of
the Class A Notes or any interest therein will be deemed to have represented by
its purchase and holding thereof that it is not subject to the foregoing
limitation.
Any fiduciary or other Plan investor considering whether to purchase any
Class A Notes on behalf of or with Plan Assets of any Plan should consult with
its counsel and refer to this Prospectus Supplement and the Prospectus for
guidance regarding the ERISA Considerations applicable to the Class A Notes
offered hereby.
For further information, see "ERISA Considerations" in the Prospectus.
S-45
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Class A Note Underwriting Agreement"), the Transferor has agreed to cause
the Trust to sell to the underwriters named below (the "Underwriters"), and each
of the Underwriters has severally agreed to purchase, the principal amount of
Class A Notes set forth opposite its name below:
Principal Amount
Underwriters of Class A Notes
Total
In the Class A Note Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions therein, to purchase all the Class A
Notes offered hereby if any of such Class A Notes are purchased. The Transferor
has been advised by the Underwriters that they propose initially to offer the
Class A Notes to the public at the prices set forth herein, and to certain
dealers at such price less a concession not in excess of ____% per Class A Note.
The Underwriters may allow and such dealers may re-allow a concession not in
excess of ____% per Class A Note to certain other dealers. After the initial
public offering, such prices and such concessions may be changed.
The Class A Note Underwriting Agreement provides that the Transferor and
MCC will indemnify the Underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
Underwriters may be required to make in respect thereof.
The Indenture Trustee and the Owner Trustee (on behalf of the Trust) may,
from time to time, invest the funds in the Trust Accounts in Eligible
Investments acquired from the Class A Underwriters.
[The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the securities in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriters to reclaim a
selling concession from a syndicate member when the securities originally sold
by such syndicate member are purchased in a syndicate covering transaction to
cover short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the securities to be higher
than it would otherwise be in the absence of such transactions.]
LEGAL OPINIONS
Certain legal matters relating to the Notes will be passed upon for the
Transferor and the Servicer by Davis Wright Tremaine LLP special counsel for the
Transferor and the Servicer and by Julie B. Babcock, Corporate Counsel for the
Servicer, and for the Class A Underwriters by Orrick,
S-46
<PAGE>
Herrington & Sutcliffe LLP, Washington, D.C. Certain federal income tax and
other matters will be passed upon for the Trust by Orrick, Herrington &
Sutcliffe LLP, Washington, D.C.
S-47
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and defined herein and the pages on which the definitions of such
terms may be found herein. Certain defined terms used in this Prospectus
Supplement are defined in the Prospectus. See "Index of Terms" in the
Prospectus.
Acquired Receivable.........................................................S-36
Acquisition Amount..........................................................S-36
Administration Agreement....................................................S-20
Administration Fee..........................................................S-20
Administrator...............................................................S-20
Amortization Date ..........................................................S-15
Amortization Period.........................................................S-15
APR..........................................................................S-7
Available Interest Amount...................................................S-36
Available Principal Amount..................................................S-37
Average Default Ratio.......................................................S-42
Average Delinquency Ratio...................................................S-42
Cede.........................................................................S-3
Class A Note Interest Rate...................................................S-9
Class A Note Pool Factor....................................................S-31
Class A Note Underwriting Agreement.........................................S-45
Class A Noteholders..........................................................S-9
Class A Noteholders' Monthly Principal Distributable Amount.................S-37
Class A Noteholders' Percentage.............................................S-37
Class A Noteholders' Principal Carryover Shortfall..........................S-37
Class A Noteholders' Principal Distributable Amount.........................S-37
Class A Notes...........................................................S-1, S-2
Class A-2 Notes..............................................................S-2
Class B Note Interest Rate..................................................S-37
Class B Note Pool Factor....................................................S-31
Class B Noteholder...........................................................S-2
Class B Noteholders' Monthly Principal Distributable Amount.................S-38
Class B Noteholders' Percentage.............................................S-38
Class B Noteholders' Principal Carryover Shortfall..........................S-38
Class B Noteholders' Principal Distributable Amount.........................S-38
Class B Notes................................................................S-2
Closing Date.................................................................S-1
Collection Account..........................................................S-17
Collection Period ....................................................S-13, S-38
Commission...................................................................S-3
Contribution and Sale Agreement..............................................S-6
Cut-off Date.................................................................S-6
Default Ratio...............................................................S-42
Defaulted Receivable........................................................S-38
Delinquency Ratio ..........................................................S-43
Determination Date..........................................................S-35
S-48
<PAGE>
Discounted Receivables.......................................................S-8
Distribution Date ................................................S-2, S-9, S-32
DOL.........................................................................S-44
DTC..........................................................................S-3
Early Amortization Event....................................................S-40
ERISA Considerations........................................................S-20
Exchange Act.................................................................S-3
Excluded Amounts............................................................S-38
Final Scheduled Distribution Date...........................................S-10
Financed Equipment...........................................................S-5
Indenture....................................................................S-5
Indenture Trustee............................................................S-4
Initial Cut-off Date....................................................S-2, S-6
Initial Cut-off Date APR.....................................................S-7
Initial Pool Balance.........................................................S-6
Issuer.......................................................................S-2
Leases.......................................................................S-6
Liquidation Proceeds........................................................S-38
Loan Contracts...............................................................S-6
MCC..........................................................................S-4
Minimum APR.................................................................S-23
Monthly Class A Note Interest...............................................S-39
Monthly Class B Note Interest...............................................S-39
Noteholders' Class A Interest Carryover Shortfall...........................S-39
Noteholders' Class A Interest Distributable Amount..........................S-39
Noteholders' Class B Interest Carryover Shortfall...........................S-39
Noteholders' Class B Interest Distributable Amount..........................S-39
Notes...................................................................S-2, S-4
Owner Trustee................................................................S-4
Plan Asset Regulation.......................................................S-45
Plan Assets.................................................................S-44
Plans.......................................................................S-44
Pool Balance.................................................................S-7
Principal Balance......................................................S-8, S-24
PTCE........................................................................S-44
Rating Agency...............................................................S-21
Realized Losses.............................................................S-40
Receivables.............................................................S-2, S-6
Receivables Pool............................................................S-23
Record Date.................................................................S-10
Recoveries..................................................................S-40
Redemption Date.............................................................S-11
Redemption Price............................................................S-11
Remaining Available Principal Amounts.................................S-12, S-36
Reserve Account.............................................................S-16
Reserve Account Initial Deposit.............................................S-16
Revolving Period............................................................S-14
Scheduled Payment...........................................................S-40
Scheduled Principal Payment..................................................S-8
Servicer.....................................................................S-4
S-49
<PAGE>
Servicer's Yield............................................................S-19
Servicing Fee...............................................................S-19
Servicing Fee Rate..........................................................S-19
Specified Reserve Account Percentage........................................S-42
Subsequent Cut-off Date......................................................S-6
Subsequent Receivables.......................................................S-6
Total Enhancement...........................................................S-40
Transfer and Sale Agreement..................................................S-6
Transferor...................................................................S-4
Trust...................................................................S-2, S-4
Trust Agreement..............................................................S-4
Underwriters................................................................S-45
S-50
<PAGE>
ANNEX 1
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered MetLife
Capital Equipment Loan Trust 199_-_ [Class A [_____]% Asset Backed Notes] (the
"Global Securities") will be available only in book-entry form. Investors in the
Global Securities may hold such Global Securities through any of The Depository
Trust Company ("DTC"), Cedel Bank, societe anonyme ("Cedel") or the Euroclear
System ("Euroclear"). The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel 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 (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery against payment basis
through the respective Depositaries of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. 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 Securities through Cedel 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 Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
A-1
<PAGE>
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and 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 U.S. corporate
debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date, calculated on the basis of a year of 360 days, in
each case for the actual number of days occurring in the period for which such
interest is payable. Payment will then be made by the respective Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedel Participant's or Euroclear Participant's account.
The securities credit will appear the next day (European time) and the cash
debit will be back-valued to, and the interest on the Global Securities 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 or Euroclear cash debit will be valued
instead as of the actual settlement date.
Cedel 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 pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon to finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear 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 Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the
A-2
<PAGE>
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 or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, calculated on the basis of a year of 360
days, in each case for the actual number of days occurring in the period for
which such interest is payable. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel 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
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 the 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 Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action was taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Securities
sufficient time to be reflected in their Cedel or Euroclear account in order to
settle the sale side of the trade; or
(c) 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 Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through Cedel
or Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
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 U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
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<PAGE>
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Notes that
are non-U.S. Persons 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-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
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-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Noteholders residing in a
country that has a tax treaty with the United States can obtain an exemption or
reduced tax rate (depending on the treaty terms) 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 Noteholder or his
agent.
Exemption for U.S. Persons (Form W-9). U.S. 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. The holder of a Global
Security 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 whom it 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.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities. Further, the IRS has recently proposed new regulations that
would revise some aspects of the current system for withholding on amounts paid
to foreign persons. Under these proposed regulations, interest or OID paid to a
nonresident alien would continue to be exempt from U.S. withholding taxes
(including backup withholding) provided that the holder complies with the new
certification procedures.
A-4
<PAGE>
SUBJECT TO COMPLETION, DATED MAY , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
METLIFE CAPITAL EQUIPMENT LOAN TRUSTS
CLASS A ASSET BACKED NOTES
METLIFE CAPITAL FUNDING CORP. III, TRANSFEROR
METLIFE CAPITAL CORPORATION, SERVICER
------------------
The Class A Asset Backed Notes (the "Class A Notes") described herein may be
issued from time to time in one or more series (each, a "Series"), in amounts,
at prices and on terms to be determined at the time of sale and to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement"). Each Series,
which will include one or more classes of Class A Notes (each, a "Class"), will
be issued by a limited purpose Delaware statutory business trust to be created
with respect to such Series (each, a "Trust"). Each Trust will be created
pursuant to (i) the filing of a certificate of trust with the Secretary of State
of the State of Delaware, and (ii) a Trust Agreement to be entered into between
MetLife Capital Funding Corp. III, as transferor (the "Transferor"), and the
owner trustee specified in the related Prospectus Supplement (the "Owner
Trustee"). The Class A Notes of each Series will be issued and secured pursuant
to an Indenture between a Trust and the indenture trustee specified in the
related Prospectus Supplement (the "Indenture Trustee") and will represent
indebtedness of the related Trust. Each Trust will also issue Class B Asset
Backed Notes (the "Class B Notes and, together with the Class A Notes, the
"Notes"). Only the Class A Notes will be offered by this Prospectus and any
related Prospectus Supplement. The property of each Trust will include a pool of
commercial loan contracts and/or equipment finance lease contracts, including
the rights to receive certain payments made with respect to such contracts
(collectively, the "Receivables") secured by new and/or used commercial and/or
industrial equipment (the "Financed Equipment"), certain monies due or received
thereunder on and after the applicable Cut-off Date set forth in the related
Prospectus Supplement and security interests in such Financed Equipment, all as
described herein and in the related Prospectus Supplement. In addition, if so
specified in the related Prospectus Supplement, the property of a Trust will
include monies on deposit in a trust account (the "Pre-Funding Account") to be
established in the name of the Indenture Trustee on behalf of the related
Noteholders, which will be used to acquire additional Receivables (the
"Subsequent Receivables") from the Transferor from time to time during the
Funding Period specified in the related Prospectus Supplement.
Each Class of Notes of any Series will represent the right to receive a
specified amount of payments of principal and interest determined with respect
to the related Receivables, at the rates, on the dates and in the manner
described herein and in the related Prospectus Supplement.
(CONTINUED ON FOLLOWING PAGE)
POTENTIAL INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN "RISK
FACTORS" COMMENCING ON PAGE 13 HEREIN.
---------------------
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.
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Class A Notes offered hereby unless accompanied by a
Prospectus Supplement.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
The right of each Class of Notes to receive payments may be senior or
subordinate to the rights of one or more of the other Classes of such Series.
Distributions on Class B Notes of a Series may be subordinated in priority to
payments due on the related Class A Notes to the extent described herein and in
the related Prospectus Supplement. A Series may include one or more Classes of
Class A Notes and one or more Classes of Class B Notes which differ as to the
timing and priority of payments, allocations of losses, interest rate or amount
of distributions in respect of principal or interest or both. A Series may also
include one or more Classes of Class A Notes and one or more Classes of Class B
Notes entitled to distributions in respect of principal, with disproportionate,
nominal or no interest distributions, or to distributions in respect of
interest, with disproportionate, nominal or no principal distributions. The rate
of payment in respect of principal of each Class of Notes will depend on the
length of the Revolving Period, if any, with respect to such Class, the priority
of payment of such Class and the rate and timing of payments (including
prepayments, defaults, liquidations and repurchases of Receivables) on the
related Receivables. A rate of payment on the related Receivables lower or
higher than that anticipated may affect the weighted average life of each Class
of Notes in the manner described herein and in the related Prospectus
Supplement.
The Notes of a given Series will represent obligations of the related Trust
only and will not represent recourse obligations of or interests in, and will
not be guaranteed or insured by, MetLife Capital Funding Corp. III or MetLife
Capital Corporation or any of their respective affiliates. Prospective investors
should consider the factors set forth under "Risk Factors" herein.
Certain capitalized terms used herein are defined elsewhere in this
Prospectus. A listing of the pages on which such terms are defined is found in
the "Index of Terms" beginning on page 60.
Each Series of Class A Notes offered hereby will be rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization.
2
<PAGE>
REPORTS TO NOTEHOLDERS
Unless and until Definitive Class A Notes are issued, periodic and annual
unaudited reports containing information concerning the Receivables of the
related Trust will be prepared by the Servicer and sent on behalf of such Trust
to Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC") and
registered holder of the related Class A Notes. To the extent specified in the
related Prospectus Supplement, such periodic and annual unaudited reports will
also be sent on behalf of any such Trust to any registered holders of the Class
A Notes. See "Issuance of the Notes--Book-Entry Registration" and "Description
of the Transaction Agreements--Reports to Noteholders" herein. Such reports will
not constitute financial statements that have been examined and reported upon
by, with an opinion expressed by, an independent public accountant or certified
public accountant. Each Trust will file with the Securities and Exchange
Commission (the "Commission") such periodic reports as are required under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (the "Exchange Act") or as are otherwise agreed to by
the Commission. Copies of such periodic reports may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W, Washington, D.C.
20549, at prescribed rates.
AVAILABLE INFORMATION
The Transferor, as originator of each Trust, has filed with the Commission a
Registration Statement (together with all amendments and exhibits thereto,
referred to herein as the "Registration Statement") under the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder
(the "Securities Act"), with respect to the Class A Notes offered pursuant to
this Prospectus. For further information, reference is made to the Registration
Statement which may be inspected and copied, at prescribed rates, at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W,
Washington, D.C. 20549; at the Commission's Midwest Regional Office at 500 West
Madison Street, Chicago, Illinois 60661-2511; and at the Commission's Northeast
Regional Office at 7 World Trade Center, 13th Floor, New York, New York 10048.
In addition, the Commission maintains a public access site on the Internet
through the world wide web, at which site reports, information statements and
other information, including all electronic filings, may be reviewed. The
internet address of the Commission's world wide web site is http://www.SEC.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed with the Commission by the Transferor, as originator of
any Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of any offering
of the Class A Notes made by this Prospectus shall be deemed to be incorporated
by reference in this Prospectus and to be a part of this Prospectus from the
date of the filing of such documents.
The Servicer on behalf of any Trust will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this Prospectus, other than exhibits
to such documents unless such exhibits are specifically requested. Such written
or oral requests should be directed to the Servicer at: MetLife Capital
Corporation, 10900 N.E. 4th Street, Suite 500, Bellevue, Washington 98004,
Attention Legal Department (telephone (206) 451-0090).
3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus, and by reference to
the information with respect to the Notes of any Series contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of related Class A Notes. Certain capitalized terms used in this
summary are defined elsewhere in the Prospectus on the pages indicated in the
"Index of Terms" commencing on Page 60 herein.
<TABLE>
<S> <C>
Issuer....................... With respect to each Series of Notes, the Delaware statutory
business trust created by the Transferor and the Owner
Trustee specified in the related Prospectus Supplement
pursuant to (i) the filing of a certificate of trust with
the Secretary of State of the State of Delaware, and (ii)
a Trust Agreement (as amended and supplemented from time
to time, a "Trust Agreement") between the Transferor and
such Owner Trustee, acting thereunder not in its
individual capacity but solely as Owner Trustee for such
trust (the "Trust" or the "Issuer").
Transferor................... MetLife Capital Funding Corp. III (the "Transferor"), a
Delaware corporation and a wholly-owned subsidiary of
MetLife Capital Corporation. The principal executive
offices of the Transferor are located at 10900 NE 4th
Street, Suite 550, Bellevue, WA 98004 and its telephone
number is (206) 450-3590.
Servicer..................... MetLife Capital Corporation (the "Servicer" or "MCC"), a
Delaware corporation.
Indenture Trustee............ With respect to each Series of Notes, the Indenture Trustee
specified in the related Prospectus Supplement.
Owner Trustee................ With respect to each Series of Notes, the Owner Trustee
specified in the related Prospectus Supplement.
The Notes.................... Each Series of Notes will include one or more Classes of
Class A Notes and one or more Classes of Class B Notes,
which will be issued pursuant to an indenture between the
related Trust and Indenture Trustee (as amended and
supplemented from time to time, an "Indenture"). As more
fully described in the related Prospectus Supplement,
payments of interest and principal on the Class B Notes
may be subordinated to the related payments of principal
and interest on the Class A Notes. The Class B Notes may
either be initially retained by the Transferor or sold to
a third party in a private placement as more fully
described in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, the Class A Notes will be available for
purchase in denominations of $1,000 and integral multiples
thereof and will be available in book-entry form only.
Unless otherwise specified in the related Prospectus
Supplement, holders of Class A Notes ("Class A
Noteholders") will be able to receive Definitive Class A
Notes only under the limited circumstances described
herein or in the related
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Prospectus Supplement. See "Issuance of the
Notes--Definitive Notes."
Unless otherwise specified in the related Prospectus
Supplement, each Class of Notes will have a stated
principal amount specified in the related Prospectus
Supplement and will bear interest at a rate or at rates
(with respect to each Class of Notes, the "Interest Rate")
specified in the related Prospectus Supplement. Each Class
of Notes may have a different Interest Rate, which may be
a fixed, a variable or an adjustable Interest Rate, or any
combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate for each Class
of Notes, or the method for determining the Interest Rate.
With respect to a Series that includes two or more Classes
of Class A Notes and/or two or more Classes of Class B
Notes, each Class may differ as to the timing and priority
of payments, seniority, allocations of losses, Interest
Rate or amount of or method of determining payments of
principal or interest as described in the related
Prospectus Supplement. Payments of principal or interest
in respect of any such Class or Classes may or may not be
made upon the occurrence of specified events or on the
basis of collections from designated portions of the
Receivables in the related Trust. In addition, a Series
may include one or more Classes of Notes ("Strip Notes")
entitled to (i) principal payments with disproportionate,
nominal or no interest payments or (ii) interest payments
with disproportionate, nominal or no principal payments.
If the Transferor exercises its option to purchase the
Receivables of a Trust in the manner and on the respective
terms and conditions described under "Description of the
Transaction Agreements-- Termination," the related
outstanding Notes will be prepaid on the terms specified
in the related Prospectus Supplement, which terms will
include at least the full payment of all outstanding
principal and accrued interest. See "Summary of
Terms--Optional Prepayment" herein, "Summary of
Terms--Terms of the Notes" in the Prospectus Supplement.
In addition, if the related Prospectus Supplement provides
that the property of a Trust will include a Pre-Funding
Account, the outstanding Notes may be subject to partial
prepayment on or immediately following the end of the
related Funding Period (as such term is defined in the
related Prospectus Supplement, the "Funding Period") in an
amount and manner specified in the related Prospectus
Supplement. In the event of a partial prepayment, the
Noteholders may, but will not necessarily, be entitled to
receive a prepayment premium from the related Trust, in
the amount and to the extent provided in the related
Prospectus Supplement.
The Trust Property........... The property of each Trust will include a pool of
Receivables which may consist of (i) fixed and/or floating
rate commercial loan contracts (each, a "Loan Contract")
and/or equipment finance lease contracts (each, a "Lease")
secured by new and/or used commercial and/or industrial
equipment (the "Financed
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Equipment"), including rights to receive certain payments
made with respect to such contracts (collectively, the
"Receivables") and all monies (including accrued interest)
due or received thereunder on or after the applicable
Cut-off Date and (ii) security interests in the Financed
Equipment. The types of commercial and/or industrial
equipment making up the Financed Equipment may include
manufacturing equipment, medical equipment, production
equipment, point of sale equipment, office furniture,
store shelves, store furniture, store fixtures,
information systems, tractors, trucks and trailers. With
respect to each Trust as to which the related Trust
Property includes both Loan Contracts and Leases, the
related Prospectus Supplement will set forth the
percentages of the related Receivables constituting Loan
Contracts and Leases. MCC and the Transferor will
represent that all Leases are "net leases" and contain
provisions which unconditionally obligate each Obligor
thereunder (the "Obligor") to make all payments scheduled
under its Lease without any right of setoff. No Lease
contract requires any additional performance obligations
by MCC.
The property of each Trust will also include (i) amounts on
deposit in certain trust accounts, including a related
Collection Account, any Reserve Account, any Pre-Funding
Account and any other account identified in the related
Prospectus Supplement, and the proceeds thereof, (ii) the
rights to proceeds from claims on physical damage, credit
life, liability, and disability insurance policies, if
any, covering Financed Equipment or Obligors, as the case
may be, (iii) any net proceeds of repossessed Financed
Equipment, (iv) the rights of the Transferor under the
related Contribution and Sale Agreement (as defined
below), (v) the interest earned on short-term investments
made by such Trust and (vi) any proceeds of the foregoing.
On or prior to the Closing Date specified in the
Prospectus Supplement with respect to a Trust, MCC will
transfer and convey Receivables to the Transferor pursuant
to a Contribution and Sale Agreement (the "Contribution
and Sale Agreement"), between MCC and the Transferor, and
the Transferor will transfer the Receivables to the
related Trust pursuant to a Transfer and Servicing
Agreement (the "Transfer and Servicing Agreement") among
the Transferor, the Servicer and such Trust. Such
Receivables (the "Initial Receivables") shall have an
aggregate principal balance specified in the related
Prospectus Supplement as of a date specified therein (such
date, the "Initial Cut-off Date").
If and to the extent provided in the related Prospectus
Supplement, the Transferor will be obligated to transfer
and the related Trust will be obligated to acquire
(subject to the availability of Receivables, and to the
satisfaction of certain conditions described in the
related Transfer and Servicing Agreement), the Subsequent
Receivables from time to time during the Funding Period
specified in the related Prospectus Supplement, which
Subsequent Receivables will have an aggregate principal
balance as of the date determined therein (each, a
"Subsequent Cut-off Date", and together with the Initial
Cut-off Date, a "Cut-off Date") not in excess of the
amount
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
on deposit in the Pre-Funding Account (the "Pre-Funded
Amount") on the related Closing Date. If the related
Prospectus Supplement so provides for a Pre-Funding
Account, the funds on deposit in such Pre-Funding Account
on the related Closing Date will not exceed 25% of the
related Trust Property, and the related Pre-Funding Period
shall not exceed three months from the related Closing
Date.
If and to the extent provided in the related Prospectus
Supplement, the Transferor will be obligated to transfer
and the related Trust will be obligated to acquire
(subject to the availability of Receivables, and to the
satisfaction of certain conditions described in the
related Transfer and Servicing Agreement), the Subsequent
Receivables from time to time during the Revolving Period,
if any, specified in the related Prospectus Supplement,
which Subsequent Receivables will have an aggregate
principal balance as of the Subsequent Cut-off Date not in
excess of the amount available for such purpose on deposit
in the Principal Funding Account on the related
Distribution Date.
The Receivables will arise from various commercial loan
and/or lease products originated or acquired by MCC in its
ordinary course of business and subsequently conveyed to
the Transferor. The Receivables transferred to a Trust
will be selected from the portfolio of commercial loans
and leases owned by MCC based on criteria specified in the
related Contribution and Sale Agreement and Transfer and
Servicing Agreement and described herein and in the
related Prospectus Supplement. See "The Receivables Pool"
herein and "The Receivables Pool" in the related
Prospectus Supplement.
Credit and Cash Flow
Enhancement................ If and to the extent provided in the related Prospectus
Supplement, credit enhancement with respect to a Trust or
any Class or Classes of Notes may include any one or more
of the following: subordination of one or more Classes of
Notes to other Classes of Notes, Reserve Accounts, over
collateralization, letters of credit, credit or liquidity
facilities, surety bonds, guaranteed investment contracts,
swaps or other interest rate protection agreements,
repurchase obligations, other agreements with respect to
third party payments or other support, cash deposits or
other arrangements. Any form of credit enhancement may
have certain limitations and exclusions from coverage
thereunder, which will be described in the related
Prospectus Supplement, and may be replaced with another
form of credit enhancement, provided that the Rating
Agency Condition has been satisfied with respect to such
substitution. See "Description of the Transaction
Agreements--Credit and Cash Flow Enhancement" herein.
Reserve Account.............. Unless otherwise specified in the related Prospectus
Supplement, a Reserve Account will be established and
maintained by the Transferor for each Trust in the name of
the Indenture Trustee with an initial deposit, if any, by
the Transferor of cash or certain
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
investments having a value equal to the amount specified
in the related Prospectus Supplement. To the extent
specified in the related Prospectus Supplement, funds in
the Reserve Account will thereafter be supplemented by the
deposit of amounts remaining on any Distribution Date
after making all other distributions required on such date
and, if applicable, any amounts deposited from time to
time from the Pre-Funding Account in connection with the
acquisition of Subsequent Receivables. Amounts in the
Reserve Account may be available to cover shortfalls in
amounts due to the holders of those Classes of Notes
specified in the related Prospectus Supplement, in the
manner and under the circumstances specified therein. The
related Prospectus Supplement will also specify to whom
and the manner and circumstances under which amounts on
deposit in the Reserve Account (after giving effect to all
other required distributions to be made by the related
Trust) in excess of the "Specified Reserve Account
Balance" (as defined in the related Prospectus Supplement)
will be distributed.
Principal and Interest
Funding Accounts........... Collections or other amounts (or the portion thereof)
allocable to each Series or Class will be deposited in one
or more trust accounts established for the benefit of
Noteholders and used to make interest payments and
principal payments to Noteholders of such Series or Class
on the appropriate Distribution Date.
Revolving Period............. The Revolving Period, if any, (the "Revolving Period") for
each Trust will be the period beginning on the related
Initial Cut-Off Date and ending at the commencement of the
Amortization Period. The purpose of the Revolving Period
is to postpone the date on which principal payments on the
Notes will commence while retaining Receivables in the
related Trust to provide for the planned repayment of the
Notes. During the Revolving Period, no payments of
principal will be made on the Notes and no amounts will be
set aside for such purposes. During the Revolving Period,
principal amounts received by the Servicer will be
reinvested in Subsequent Receivables, to the extent
available. See "Description of the Transaction
Agreements--Principal Collections--Revolving Period"
herein and "Description of the Transaction Agreements--
Distributions--Withdrawals from the Collection Account,
Interest Payment Account and Principal Funding Account" in
the related Prospectus Supplement.
Amortization Period.......... With respect to each Trust, that has a Revolving Period, the
related Amortization Period will commence upon the earlier
of (a) the occurrence of any event listed in the related
Prospectus Supplement (an "Early Amortization Event")
which commences the Amortization Period for such Trust and
(b) the date specified in the related Prospectus
Supplement (the "Scheduled Revolving Period Termination
Date"). Once commenced, the Amortization Period will
continue until the earlier of (a) the maturity or other
liquidation of the last related Receivables and the
disposition of any amounts received upon liquidation of
any such remaining
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Receivables and (b) the payment to Noteholders of the
related Series of all amounts required to be paid to them
pursuant to the related Indenture. With respect to each
Trust that has a Revolving Period, when the related
Amortization Period begins, the Revolving Period will
terminate, and Available Trust Principal will thereafter
be paid to the related Noteholders to the extent described
in the related Prospectus Supplement on each Distribution
Date beginning with the Distribution Date in the month
following the commencement of the Amortization Period. See
"Description of the Transaction Agreements--Early
Amortization Events" in the related Prospectus Supplement.
Pre-Funding Account.......... If so specified in the related Prospectus Supplement, the
related Trust Property may include monies on deposit in a
trust account (the "Pre-Funding Account") to be
established by the Transferor in the name of the Indenture
Trustee on behalf of the related Noteholders, which monies
will be used to acquire Subsequent Receivables from the
Transferor from time to time during the Funding Period
specified in the related Prospectus Supplement. If the
related Prospectus Supplement provides for a Pre-Funding
Account, the funds on deposit in such Pre-Funding Account
on the related Closing Date will not exceed 25% of the
related Trust Property, and the related Pre-Funding Period
shall not exceed three months from the related Closing
Date.
Transaction Agreements....... With respect to each Trust, pursuant to a Contribution and
Sale Agreement, MCC will transfer and convey and, pursuant
to the Transfer and Servicing Agreement, the Transferor
will transfer the related Receivables, together with its
rights under the Contribution and Sale Agreement, to such
Trust. In addition, the Servicer will agree with such
Trust to be responsible for servicing, managing and making
collections on the Receivables. The rights and benefits of
the Transferor under the Contribution and Sale Agreement
and of such Trust under the Transfer and Servicing
Agreement will be assigned to the related Indenture
Trustee as collateral for the Notes. The obligations of
the Transferor and the Servicer under such Transaction
Agreements include those specified below. See "Risk
Factors--Risks Relating to Perfection of Interests in
Receivables and in Financed Equipment" herein.
Unless otherwise specified in the related Prospectus
Supplement, the Transferor will be obligated to reacquire
any Receivable if (i) such Receivable is materially
adversely affected by a breach of any representation or
warranty made by the Transferor or MCC with respect to
such Receivable (other than certain specified
representations and warranties) and (ii) such breach has
not been cured within the time period specified herein
following the discovery by or notice to the Transferor of
the breach. See "Description of the Transaction
Agreements--Transfer and Assignment of Receivables"
herein. If such breach arises from a representation or
warranty made by MCC in the Contribution and Sale
Agreement, MCC will be obligated to reacquire such
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Receivable from the Transferor pursuant to the related
Contribution and Sale Agreement contemporaneously with the
Transferor's reacquisition from such Trust. The obligation
of the Transferor to reacquire any Receivable with respect
to which MCC has breached a representation or warranty is
subject to MCC's reacquisition of such Receivable.
Consistent with its normal servicing procedures, the
Servicer may, in its discretion, arrange with the Obligor
on a Receivable to extend or modify its payment schedule.
To the extent provided in the related Prospectus
Supplement, some of such extensions or modifications may
result in the Servicer acquiring such Receivable. See
"Risk Factors--Risk Relating to Payment of Principal other
than at Expected Maturity" and "Description of the
Transaction Agreements--Servicing Procedures".
Unless otherwise specified in the related Prospectus
Supplement, the Servicer shall receive a servicing fee for
each Collection Period (the "Servicing Fee"), which
Servicing Fee shall equal the sum of (a) a fixed
percentage per annum to be specified in the related
Prospectus Supplement (the "Servicing Fee Rate") of the
Pool Balance as of the first day of such Collection
Period, plus (b) any late fees, extension fees, prepayment
penalties and other administrative fees or similar charges
allowed by applicable law with respect to such Receivables
(collectively, the "Servicer's Yield"). With respect to
each Trust, the Servicing Fee for each Collection Period
will decline over the term of the related Notes as the
aggregate principal balance of the related Receivables
decreases. See "Description of the Transaction
Agreements--Servicing Compensation and Payment of
Expenses" herein and in the related Prospectus Supplement.
Administration Agreement..... With respect to each Trust, MCC, in its capacity as
administrator (the "Administrator"), will enter into an
agreement (an "Administration Agreement") with such Trust
and the related Indenture Trustee pursuant to which the
Administrator will agree, to the extent provided in such
Administration Agreement, to provide the notices and to
perform certain other administrative obligations required
by the related Indenture. As compensation for the
performance of the Administrator's obligations under its
Administration Agreement and as reimbursement for its
expenses related thereto, the Administrator will be
entitled to a monthly administration fee in an amount to
be set forth in the related Prospectus Supplement (the
"Administration Fee").
Certain Legal Aspects of the
Receivables; Repurchase
Obligations................ With respect to any Trust, unless the related Prospectus
Supplement specifies otherwise, the transfer of the
Receivables from MCC to the Transferor and from the
Transferor to such Trust, and the granting of the security
interest in the related Receivables by such Trust to the
related Indenture Trustee, will in each case be perfected
by filing Uniform Commercial Code ("UCC") financing
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statements. To facilitate servicing and reduce
administrative costs, the Receivables Files will be
retained by the Servicer and will not be physically
segregated from other similar documents that are in the
Servicer's possession or otherwise stamped or marked to
reflect the transfer to the related Trust so long as MCC
is servicing the Receivables. The Servicer's accounting
records and computer files will be marked to reflect such
sales and assignments. Because the Receivables Files will
remain in the Servicer's possession and will not be
stamped or otherwise marked to reflect the assignment to
the Indenture Trustee, if a subsequent purchaser were able
to take physical possession of the Receivables Files
without knowledge of such assignment, the Indenture
Trustee's interest in the Receivables could be defeated.
In such event, distributions to Noteholders may be
adversely affected. See "Risk Factors--Risks relating to
Perfection of Interests in Receivables and in Financed
Equipment" herein.
With respect to each Series of Notes, in connection with the
transfer of the Receivables to the related Trust, security
interests in the Financed Equipment securing the
Receivables will be assigned by MCC to the Transferor and
by the Transferor to such Trust. Unless otherwise
specified in the related Prospectus Supplement, the
Transferor will be obligated to reacquire any Receivable
transferred to the related Trust (subject to MCC's
acquisition thereof) in the event it is determined that a
first perfected security interest in the name of MCC in
the Financed Equipment securing such Receivable did not
exist as of the related Closing Date or, if applicable,
any related Transfer Date, if (i) such breach shall
materially adversely affect the interest of such Trust in
such Receivable and (ii) such failure or breach shall not
have been cured by the last day of the second (or, if the
Transferor elects, the first) month following the
discovery by or notice to the Transferor of such breach,
and MCC will be obligated to reacquire such Receivable
from the Transferor contemporaneously with the
Transferor's reacquisition from such Trust. To the extent
the security interest of MCC in the related Financed
Equipment is perfected, subject to the exceptions set
forth in the following sentence, such Trust will have a
prior claim over subsequent purchasers of such Financed
Equipment and holders of subsequently perfected security
interests. However, as against liens for repairs
("Mechanics' Liens") or other non-consensual liens on an
item of Financed Equipment or for taxes unpaid by an
Obligor under a Receivable, or through fraud or negligence
of MCC or such Trust could lose the priority of its
security interest or its security interest in the related
Financed Equipment. Neither the Transferor nor the
Servicer will have any obligation to reacquire a
Receivable if liens for repairs or taxes unpaid by an
Obligor result in such Trust losing the priority of its
security interest or its security interest in such
Financed Equipment after the related Closing Date or, if
applicable, any related Transfer Date. See "Risk
Factors--Risks Relating to Perfection in Interests
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in Receivables and in Financed Equipment" and "Certain
Legal Aspects of the Receivables."
Optional Prepayments......... If the Transferor exercises its option to purchase the
Receivables of a Trust in the manner and on the respective
terms and conditions described under "Description of the
Transaction Agreements-- Termination," the related
outstanding Notes will be prepaid on the terms specified
in the related Prospectus Supplement, which terms will
include at least the full payment of all outstanding
principal and accrued interest with respect to the Class A
Notes. See "Summary of Terms--Terms of the Notes--Optional
Prepayment" and Description of the Class A Notes--The
Class A Notes--Optional Prepayment" in the Prospectus
Supplement.
Ratings of the Notes......... Each Class of Notes of a Series offered pursuant to this
Prospectus and a related Prospectus Supplement will be rated
at its initial issuance in one of the four highest
categories by at least one nationally recognized
statistical rating organization (each, a "Rating Agency").
See "Risk Factors--Limited Scope of Note Rating" and
"Ratings."
Tax Status................... Upon the issuance of each Series of Notes, Orrick,
Herrington & Sutcliffe LLP, as special tax counsel to the
related Trust, will deliver its opinion to the effect
that, for federal income tax purposes: (i) the Notes of
such Series will be characterized as debt and (ii) such
Trust will not be characterized as an association (or a
publicly traded partnership) taxable as a corporation. See
"Federal Income Tax Considerations" for additional
information concerning the application of federal tax
laws.
ERISA Considerations......... See "ERISA Considerations" herein and in the applicable
Prospectus Supplement.
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RISK FACTORS
Investors should consider, among other things, the matters discussed, under
"Risk Factors" in the Prospectus Supplement, if any, and the following risk
factors in connection with the purchase of the Class A Notes of any Series.
RISKS RELATING TO PERFECTION OF INTERESTS IN RECEIVABLES AND IN FINANCED
EQUIPMENT. With respect to any Trust, unless the related Prospectus Supplement
specifies otherwise, the transfer of the Receivables from MCC to the Transferor
and from the Transferor to such Trust, and the granting of the security interest
in the related Receivables by such Trust to the related Indenture Trustee, will
in each case be perfected by filing Uniform Commercial Code ("UCC") financing
statements. To facilitate servicing and reduce administrative costs, the
documentation constituting the Loan Contracts and/or Leases (together, the
"Receivables Files") will be retained by the Servicer and will not be physically
segregated from other similar documents that are in the Servicer's possession or
otherwise stamped or marked to reflect the transfer to the related Trust so long
as MCC is servicing the Receivables. However, the Servicer's accounting records
and computer files will be marked to reflect such sales and assignments. Because
the Receivables Files will remain in the Servicer's possession and will not be
stamped or otherwise marked to reflect the assignment to the Indenture Trustee,
if a subsequent purchaser were able to take physical possession of the
Receivables Files without knowledge of such assignment, the Indenture Trustee's
interest in the Receivables could be defeated. In such event, distributions to
Noteholders may be adversely affected.
In connection with the transfer of the Receivables to any Trust, MCC's
security interests in Financed Equipment securing the Receivables, will be
assigned by MCC to the Transferor and by the Transferor to such Trust.
Some of the Financed Equipment may constitute "fixtures" under the real
estate or UCC provisions of the jurisdiction in which such Financed Equipment is
located. In order to perfect a security interest in such Financed Equipment, the
holder of the security interest must file either a "fixture filing" under the
provisions of the UCC or a real estate mortgage under the real estate laws of
the state where the Financed Equipment is located. These filings must be made in
the real estate records office of the county in which such Financed Equipment is
located. So long as the Obligor does not permanently attach the Financed
Equipment to the real estate, a security interest in the Financed Equipment will
be governed by the UCC, and the filing of a UCC-1 financing statement will be
effective to maintain the priority of MCC's security interest in the Financed
Equipment. Except for a small portion of such Financed Equipment, MCC does not
believe that any of the Financed Equipment will be permanently affixed to the
related real estate. If, however any Financed Equipment is permanently attached
to the real estate in which it is located, other parties could obtain an
interest in the Financed Equipment which is prior to the security interest
originally obtained by MCC and transferred to the Transferor. With respect to a
Series of Notes and as described in the related Prospectus Supplement, the
Servicer may be required to perfect a security interest in the Financed
Equipment under applicable real estate laws. Based on the representation of MCC,
the Transferor, however, believes that with respect to Financed Equipment which
constitutes a "fixture", it has obtained a perfected first priority security
interest by proper filing of UCC-1 financing statements in the real estate
records office of the county in which the Financed Equipment is located.
Some of the Financed Equipment may constitute "motor vehicles" under the UCC
provisions of the jurisdiction in which such Financed Equipment is located (such
Financed Equipment, a "Titled Vehicle"). Perfection of security interests in the
Titled Vehicles acquired by the Transferor is generally governed by the motor
vehicle registration laws of the state in which the Titled Vehicle is located.
In all states in which the Receivables have been originated, a security interest
in Titled Vehicles is perfected by notation of the secured party's lien on the
Titled Vehicles' certificate of title [(in addition, in Louisiana, a copy of the
loan or lease contract must be filed with the appropriate governmental recording
office)]. To the extent that the Receivables are secured by a Titled Vehicle,
the Transferor believes, based on a representation of MCC,
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that MCC takes all actions necessary under the laws of the state in which the
Titled Vehicle is located to perfect MCC's security interest in the Titled
Vehicle, including, where applicable, having a notation of its lien recorded on
such Titled Vehicle's certificate of title. Because MCC continues to service the
contracts, the obligors on the contracts will not be notified of the
contribution and sale from MCC to the Transferor or the transfer from the
Transferor to the Trust, and no action will be taken to record the transfer of
the security interest from MCC to the Transferor or from the Transferor to the
Trust by amendment of the certificates of title for the Titled Vehicles or
otherwise. See "Certain Legal Aspects of the Receivables-- Security Interest in
Financed Equipment."
The Transferor will be obligated to reacquire any Receivable transferred to
any Trust (subject to MCC's reacquisition thereof) in the event it is determined
that a first priority perfected security interest in the name of MCC in the
Financed Equipment securing such Receivable did not exist as of the related
Closing Date or, if a Subsequent Receivable, any related Transfer Date if (i)
such breach shall materially adversely affects such Receivable and (ii) such
failure or breach shall not have been cured by the last day of the second (or,
if the Transferor elects, the first) month following the discovery by or notice
to the Transferor of such breach, and MCC will be obligated to reacquire such
Receivable from the Transferor contemporaneously with the Transferor's
reacquisition from such Trust. If there is any Financed Equipment as to which
MCC failed to perfect its security interest, MCC's security interest, and the
security interests of the Transferor and the related Trust, would be subordinate
to, among others, subsequent purchasers of the Financed Equipment and holders of
perfected security interests with respect thereto. To the extent the security
interest of MCC in the related Financed Equipment is perfected, subject to the
exceptions set forth in the following sentence, the related Trust will have a
prior claim over subsequent purchasers from the Obligor of such Financed
Equipment and holders of subsequently perfected security interests granted by
Obligors. However, as against Mechanics' Liens or liens for taxes and other non-
consensual liens unpaid by an Obligor under a Receivable, or in the event of
fraud or negligence of MCC, such Trust could lose the priority of its security
interest or its security interest in such Financed Equipment following the
pledge of the related Receivable. See "Certain Legal Aspects of the
Receivables." Neither the Transferor nor the Servicer will have any obligation
to reacquire a Receivable if any of the occurrences described in the foregoing
sentence (other than fraud or negligence of MCC) result in such Trust's losing
the priority of its security interest or its security interest in such Financed
Equipment after the related Closing Date or, if applicable, any related Transfer
Date.
RISKS RELATING TO SUBSTANTIVE CONSOLIDATION OF MCC AND THE TRANSFEROR. The
Transferor has taken and will take steps in structuring the transactions
contemplated hereby and in any related Prospectus Supplement that are intended
to ensure that a voluntary or involuntary petition for relief by or against MCC
under the United States Bankruptcy Code or similar applicable state laws
("Insolvency Laws") will not result in the substantive consolidation of the
assets and liabilities of the Transferor with those of MCC. These steps will
include the creation of the Transferor as a separate, limited-purpose entity
pursuant to articles of incorporation containing (i) certain limitations
(including restrictions on the nature of the Transferor's business and a
restriction on the Transferor's ability to commence a voluntary case or
proceeding under any Insolvency Law without the prior unanimous affirmative vote
of all its directors) and (ii) a requirement that at least one of the
Transferor's directors be independent of MCC and its affiliates. However, there
can be no assurance that the activities of the Transferor would not result in a
court's concluding that the assets and liabilities of the Transferor should be
substantively consolidated with those of MCC in a proceeding under any
Insolvency Law.
RISKS RELATING TO THE TRANSFER OF ASSETS FROM MCC TO THE TRANSFEROR. With
respect to any Trust, MCC will warrant to the Transferor in the related
Contribution and Sale Agreement that the sale of the related Receivables by it
to the Transferor is an absolute sale of such Receivables to the Transferor. In
addition, MCC and the Transferor will treat the transactions described herein
and in the related Prospectus Supplement as a sale of such Receivables to the
Transferor, and the Transferor has taken and will take all actions (other than
delivering the original contract) that are required to perfect the Transferor's
ownership
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interest in such Receivables by filing UCC financing statements. Notwithstanding
the foregoing, if MCC were to become a debtor in a bankruptcy case, and a
creditor or trustee-in-bankruptcy of MCC or MCC itself were to take the position
that the sale of Receivables to the Transferor should be recharacterized as a
pledge of such Receivables to secure a borrowing of MCC, then delays in payments
of collections of Receivables to the Transferor could occur or, should the court
rule in favor of any such trustee, debtor or creditor, reductions in the amount
of such payments, or a reduction in the amount of Receivables securing such a
borrowing, could result. If the transactions contemplated herein and in the
related Prospectus Supplement are treated as a sale, the related Receivables
would not be part of MCC's bankruptcy estate and would not be available to MCC's
creditors.
The U.S. Court of Appeals for the Tenth Circuit issued an opinion in OCTAGON
GAS SYSTEM, INC. V. RIMMER (IN RE MERIDIAN RESERVE, INC.) (decided May 27, 1993)
in which it concluded (noting that its position is in contrast to that taken by
another court) that "accounts" (as defined under the UCC) sold by the debtor
prior to the filing for bankruptcy remain property of the debtor's bankruptcy
estate. Although the Receivables relating to any Series are likely to be viewed
as "chattel paper," as defined under the UCC, rather than as accounts, the
rationale behind the OCTAGON ruling could be applied to chattel paper. The
circumstances under which the OCTAGON ruling would apply are not fully known,
and the extent to which the OCTAGON decision will be followed by other courts or
outside of the Tenth Circuit, if at all, is not certain. If the holding in the
OCTAGON case were applied in a MCC bankruptcy, however, even if the transfers of
Receivables to the Transferor and to a Trust were treated as sales, the
Receivables could be considered part of MCC's bankruptcy estate and would be
subject to claims of certain creditors and delays and reductions in payments to
the Transferor and holders of the related Notes, or a reduction in the amount of
Receivables supporting such Notes, could result. The Transferor will warrant in
each Transfer and Servicing Agreement that the transfer of the Receivables to
the related Trust is either an absolute sale of such Receivables or the grant of
a perfected security interest to such Trust. For a further discussion of certain
consequences of characterization of the transaction as a sale or a pledge, see
"Certain Legal Aspects of the Receivables--Bankruptcy" herein.
RISK RELATING TO COMMINGLING. Unless the related Prospectus Supplement so
provides, and the below described conditions are met, the Servicer will deposit
all amounts collected with respect to the Receivables during each Collection
Period into the related Collection Account within two business days of receipt
and identification thereof. Normally, collections are identified within one day
of receipt. The Servicer will also deposit any Acquisition Amounts (as defined
herein) into the Collection Account when due. With respect to each Trust, if MCC
is the Servicer and provided that (i) there exists no Servicer Default (as
defined herein) and (ii) each other condition to making monthly or less frequent
deposits as may be specified by the Rating Agencies and described in the related
Prospectus Supplement is satisfied, the Servicer will not be required to deposit
payments on the related Receivables (from whatever source) and all proceeds of
such Receivables collected during each Collection Period into the related
Collection Account until on or before the business day preceding each related
Distribution Date. Pending deposit into such Collection Account, the Servicer
will be under no obligation to segregate collections from its funds and such
collections may be invested by the Servicer at its own risk, for its own benefit
and without being subject to any investment restrictions and will not be
segregated from the funds of the Servicer. If the Servicer were unable to remit
such funds, or if the Servicer became insolvent, the holders of Notes might
incur a loss with respect to collections not deposited in the Collection
Account. To the extent set forth in the related Prospectus Supplement, the
Servicer may, in order to satisfy the requirements for monthly remittances
described above, obtain a letter of credit or other security for the benefit of
the related Trust to secure timely remittances of collections on the related
Receivables and payment of the aggregate Acquisition Amount with respect to
Receivables purchased by the Servicer.
RISKS RELATING TO A SERVICER DEFAULT. In the event a Servicer Default
occurs, the related Indenture Trustee or Class A Noteholders of the related
Series evidencing not less than 25% of the outstanding principal amount of the
Class A Notes with respect to such Series (without the consent of the related
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Indenture Trustee), as described under "Description of the Transaction
Agreements--Rights Upon Servicer Default" herein, may remove the Servicer
without the consent of the related Owner Trustee. The related Owner Trustee will
not have the ability to remove the Servicer if a Servicer Default occurs. In
addition, Class A Noteholders of such Series evidencing not less than a majority
of the outstanding principal amount of the related Class A Notes will have the
ability (without the consent of the related Indenture Trustee), with certain
specified exceptions, to waive defaults by the Servicer, including defaults that
could materially adversely affect the Class B Noteholders. See "Description of
the Transaction Agreements--Waiver of Past Defaults" herein.
RISKS RELATING TO TRUSTS' RELATIONSHIP TO THE TRANSFEROR AND MCC. Neither
the Transferor nor MCC will generally be obligated to make any payments in
respect of the Notes or the Receivables of a given Trust. However, if MCC were
to cease acting as Servicer, delays in processing payments on the Receivables of
the related Trust and information in respect thereof could occur and result in
delays in payments and distribution of reports to the Noteholders of such Trust.
In addition, under certain circumstances the Servicer may be required to
purchase Receivables, and therefore if MCC were to cease acting as Servicer,
delays in repurchases and consequently the receipt by such Trust of funds
respecting such Receivables could result.
In connection with the sale of Receivables by MCC to the Transferor, MCC
will make representations and warranties with respect to the characteristics of
such Receivables. In certain circumstances, MCC and the Transferor will be
required to reacquire Receivables with respect to which such representations and
warranties have been breached. See "Description of the Transaction
Agreements--Transfer and Assignment of Receivables."
If the related Prospectus Supplement provides for a Pre-Funding Account, the
Transferor will be required to transfer Subsequent Receivables to the related
Trust in an amount up to the amount then on deposit in the Pre-Funding Account
(the "Pre-Funded Amount"). If the related Prospectus Supplement provides for a
Revolving Period, the Transferor will be required to transfer Subsequent
Receivables to the related Trust in an amount not in excess of the amount
available for such purpose on deposit in the Principal Funding Account on the
related Distribution Date. The ability of the Transferor to convey Subsequent
Receivables on Transfer Dates will be completely dependent on the generation of
additional receivables by MCC. There can be no assurance that MCC will continue
to generate receivables at the same rate as in prior years or that Subsequent
Receivables will be generated in an amount up to the amount required to be
transferred pursuant to the related Transfer and Servicing Agreement. If the
related Prospectus Supplement provides for a Pre-Funding Account, the funds on
deposit in such Pre-Funding Account on the related Closing Date will not exceed
25% of the related Trust Property, and the related Pre-Funding Period shall not
exceed three months from the related Closing Date.
For additional information regarding the Transferor and MCC, see "The
Transferor and the Servicer" herein and in the related Prospectus Supplement.
RISKS RELATING TO LIMITED ASSETS. No Trust will have, nor will any Trust be
permitted or expected to have, any significant assets or sources of funds other
than the related Receivables and, to the extent set forth in the related
Prospectus Supplement, the Trust Accounts. The Notes of a Series will represent
obligations solely of the related Trust, and the Notes of any such Series will
not be insured or guaranteed by MCC, the Transferor, the Servicer, the related
Owner Trustee, the related Indenture Trustee or any other person or entity.
Consequently, holders of the Notes of a Series must rely for repayment upon
payments received by the Servicer relating to the related Receivables and, if
and to the extent available, amounts on deposit in the Reserve Account (if any),
the Pre-Funding Account (if any) and any other credit enhancement, all as
specified in the related Prospectus Supplement. Amounts to be deposited in any
Reserve Account with respect to any Trust will be limited in amount, and the
amount required to be on deposit in such Reserve Account will be reduced as the
Pool Balance is reduced. In addition, funds in any such Reserve Account will be
available on each Distribution Date to cover shortfalls in distributions of
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interest and principal on the related Notes. If such Reserve Account is
depleted, the related Trust will depend solely on current payments on its
Receivables to make payments on the related Notes. Although each Trust will
covenant to sell the Receivables if directed to do so by the related Indenture
Trustee in accordance with the related Indenture following an acceleration of
the related Notes upon an Event of Default, there is no assurance that the
market value of such Receivables will at any time be equal to or greater than
the aggregate principal amount of such outstanding Notes. Therefore, upon an
Event of Default with respect to the Notes of any Series, there can be no
assurance that sufficient funds will be available to repay the related
Noteholders in full. In addition, the amount of principal required to be
distributed to Noteholders under each Indenture will generally be limited to
amounts available therefor in the related Note Distribution Account, and the
failure to pay principal on the Notes of any Series may not result in the
occurrence of an Event of Default until the Final Scheduled Distribution Date of
such Notes; provided, that principal of the Notes of any Series is immediately
due and payable upon any acceleration of such Notes. To the extent specified in
the related Prospectus Supplement, the Class B Notes of any Series will be
subordinated to the Class A Notes of such Series.
POSSIBLE EARLY TERMINATION OF REVOLVING PERIOD. If the Prospectus
Supplement with respect to any Series provided for a Revolving Period, no
principal will be paid to the Class A Noteholders until the Distribution Date in
the month following the commencement of the Amortization Period, as described in
the related Prospectus Supplement. During the Revolving Period, Principal
Collections will be reinvested in Subsequent Receivables, to the extent
available. Accordingly, the continuation of the Revolving Period will be
dependent, in part, upon the continued origination and assignment to the related
Trust of Loan Contracts and Leases meeting the eligibility criteria described in
the related Prospectus Supplement. An unexpectedly high rate of collections with
respect to principal (including prepayments) received during the Revolving
Period or a significant decline in the number of qualifying Loan Contracts or
Leases available to be assigned to the related Trust could result in the
occurrence of an Early Amortization Event and the commencement of the
Amortization Period prior to the Scheduled Revolving Period Termination Date.
The commercial loan and lease business in the United States may be affected by a
variety of social, economic and geographic factors. Economic factors include
interest rates, unemployment levels, the rate of inflation and customer
perception of economic conditions. However, it is not possible to determine or
predict whether or to what extent economic, geographic or social factors will
affect commercial loan and lease business in general, or that of MCC in
particular. As a result, there can be no assurance that the Revolving Period
will not terminate prior to the Scheduled Revolving Period Termination Date due
to the occurrence of an Early Amortization Event. Since an Early Amortization
Event would result in the commencement of distributions of principal to Class A
Noteholders on the Distribution Date in the month following the month in which
the Amortization Period commences, it could shorten the final maturity of and
affect the yield on each class of Class A Notes. See "Description of the
Transaction Agreements-- Early Amortization Events" in the related Prospectus
Supplement for a description of the events that might lead to the early
commencement of the Amortization Period and a description of the results of an
Early Amortization Event.
RISK RELATING TO PAYMENT OF PRINCIPAL OTHER THAN AT EXPECTED
MATURITY. Loans are not optionally prepayable during the first year or two of
the Loan. Loans are prepayable after that "lock-out period" upon payment of the
outstanding principal balance and accrued interest, plus a prepayment premium.
Although the Receivables relating to Leases are generally not optionally
prepayable by their terms, lessees generally are permitted to prepay a Lease
upon payment of the aggregate remaining lease scheduled payments due (which
amount would include an implicit interest amount) in the case of a fixed rate
transaction, plus a prepayment premium. Each prepayment will shorten the
weighted average remaining term of the Receivables of any Trust and the weighted
average life of the related Notes. (For this purpose the term "prepayments"
includes voluntary prepayments, liquidations due to default, receipts of
proceeds from insurance policies and Receivables acquired for administrative or
other reasons, and the term "weighted average life" means the average amount of
time in which each dollar of principal is repaid.) With respect to any Trust,
the related Prospectus Supplement will set forth the allocations of prepayments
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of principal among the related Noteholders. See "Description of the Transaction
Agreements--Distributions" in the related Prospectus Supplement.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, financial, climatic and other factors. In addition, under certain
circumstances, MCC will be obligated to reacquire Receivables pursuant to the
Contribution and Sale Agreement, and the Transferor will be obligated to
reacquire Receivables pursuant to the Transfer and Servicing Agreement, in each
case as a result of breaches of representations and warranties, and under
certain circumstances, the Servicer will be obligated to acquire Receivables
pursuant to the Transfer and Servicing Agreement as a result of breaches of
certain covenants. Consistent with its normal procedures, the Servicer may, in
its discretion and on a case-by-case basis, arrange with the Obligor respecting
a Receivable to extend or modify the payment schedule. Some of such arrangements
(including, without limitation, any extension of the payment schedule beyond the
applicable Final Scheduled Distribution Date set forth in the related Prospectus
Supplement) will result in the Servicer's acquiring the Receivable for the
Acquisition Amount. See "Description of the Transaction Agreements--Transfer and
Assignment of Receivables" and "--Servicing Procedures" herein. A higher than
anticipated rate of prepayments will reduce the aggregate principal balance of
the Receivables more quickly than expected and thereby reduce anticipated
aggregate interest payments respecting the related Notes. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Receivables will be
borne entirely by the related Noteholders as set forth in the priority of
distributions in the related Prospectus Supplement. Such reinvestment risks may
include the risk that interest rates are lower at the time such holders receive
payments from the related Trust than interest rates would otherwise have been
had such prepayments not been made or had such prepayments been made at a
different time. See "Description of the Transaction Agreements--Termination"
herein regarding the Servicer's option to purchase the Receivables of a Trust.
If the related Prospectus Supplement provides for a Reserve Account, and if
the amount required to be withdrawn from such Reserve Account to cover
shortfalls in collections on the Receivables exceeds the amount of cash in such
Reserve Account, a temporary shortfall in the amounts distributed to the
Noteholders of the related Series could result, which could, in turn, increase
the average life of such Notes.
Noteholders of any Series should consider, in the case of Notes purchased at
a discount, the risk that a slower than anticipated rate of principal payments
on the related Receivables could result in an actual yield that is less than the
anticipated yield and, in the case of any Notes purchased at a premium, the risk
that a faster than anticipated rate of principal payments on the related
Receivables could result in an actual yield that is less than the anticipated
yield.
RISKS RELATING TO REIMBURSEMENT OF CERTAIN LOSSES. In the event that
Realized Losses are incurred in respect of the Receivables during a monthly
period, certain amounts of collections with respect to interest will be treated
as principal collections, to the extent available, as described in the related
Prospectus Supplement. If the related Prospectus Supplement provides for a
Revolving Period, and Realized Losses are incurred in respect of the Receivables
during a monthly period relating to the Revolving Period, interest collections
treated as principal collections will be available for reinvestment in
Subsequent Receivables. If the related Prospectus Supplement does not provide
for a Revolving Period or, with respect to a Series that has a Revolving Period,
if such Realized Losses are incurred during a monthly period with respect of the
Amortization Period, such amounts of collections with respect to interest which
are treated as principal collections will be available to make principal
payments with respect to the Notes as described in the related Prospectus
Supplement. To the extent that collections with respect to interest are not
available to reimburse certain losses with respect to the Receivables and no
amounts with respect to the related Reserve Account, if any, are available to
reimburse such losses, the Noteholders will bear such losses as described in the
related Prospectus Supplement.
RISKS RELATING TO CERTAIN LITIGATION INVOLVING MCC. MCC is currently a
defendant in The Commonwealth of Puerto Rico et al. v. The M/V Emily S and the
Barge Morris J. Berman, in rem; MetLife Capital
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Corporation et al., in personam. In this suit the plaintiffs seek to recover
from MCC and numerous other defendants certain damages and costs resulting from
or relating to the grounding of a barge and an oil spill off the coast of Puerto
Rico. At the time of the grounding, MCC was the finance lessor of the tug Emily
S, which was bare boat chartered to an MCC customer. The tug was towing a barge
filled with oil when the tow line between the tug and the barge parted. The
barge ran aground on a reef and spilled oil into the waters off Puerto Rico.
The Commonwealth of Puerto Rico is seeking to recover at least Eighteen
Million Seven Hundred Ten Thousand Dollars ($18,710,000) in compensatory
damages. The United States has alleged cleanup costs in an amount to be proven
by the U.S. at trial, but which the U.S. has stated is expected to exceed Ninety
Two Million Dollars ($92,000,000). The plaintiffs also seek to recover natural
resource and other damages, so the precise total dollar amount sought by the
plaintiffs is as yet unspecified. MCC is vigorously contesting its liability in
this case. At this time, MCC is unable to predict the ultimate outcome or
estimate the financial consequences of the account on the results of operations
or financial position of MCC.
As with any other large business, MCC is frequently involved in litigation, but
currently, no other matters are considered to be material.
RISK RELATING TO CERTAIN UCC CONSIDERATIONS. Certain 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 precedent
regarding how Article 2A will be interpreted, it may, among other things, limit
enforceability of any "unconscionable" lease or "unconscionable" provision in a
lease, provide a lessee with remedies, including the right to cancel the lease
contract, for certain lessor breaches or defaults, and may add to or modify the
terms of "consumer leases" and leases where the lessee is a "merchant lessee."
However, with respect to each Lease conveyed to a Trust, MCC will represent that
(i) such Lease is not a "consumer lease" and (ii) to the best of its knowledge,
the related Obligor has accepted the related Financed Equipment leased to it
and, after reasonable opportunity to inspect and test, has not notified MCC of
any defects therein. Article 2A also recognizes typical commercial lease "hell
or high water" rental payment clauses that require an obligor to make scheduled
rental payments regardless of intervening circumstances and validates reasonable
liquidated damages provisions in the event of lessor or lessee defaults.
Moreover, Article 2A recognizes the concept of freedom of contract and permits
the parties in a commercial context a wide degree of latitude to vary provisions
of the law.
RISKS ASSOCIATED WITH GEOGRAPHIC CONCENTRATION. If a Trust contains a high
concentration of Receivables relating to Obligors located within a single state
or region in the United States, events in that state or region may have a
magnified effect on the Trust due to such concentration. The Prospectus
Supplement relating to a Series to be offered thereby and hereby will set forth
a then-current detailed geographic breakdown of the number of Receivables and
the amount of Receivables each, relating to Obligors with addresses in each
applicable state containing a concentration of Obligors. See "The Receivables
Pool-- Geographic Distribution of Initial Receivables" in the related Prospectus
Supplement. The Transferor, however, is unable to determine and has no basis to
predict, with respect to any state or region, whether any such events have
occurred or may occur, or to what extent such events may affect the Receivables
or the payment of the Notes.
LIMITED SCOPE OF NOTE RATING. Any rating assigned to the Notes of a Series
or a Class by a Rating Agency will reflect such Rating Agency's assessment of
the likelihood that Noteholders of such Series or Class will receive the
payments of interest and principal required to be made under the Agreement
(including amounts payable from any Pre-Funding Account) and will be based
primarily on the value of the Trust Property with respect to such Series or
Class. However, any such rating will not, unless otherwise specified in the
related Prospectus Supplement with respect to any Class or Series offered
hereby, address the likelihood that the principal of, or interest on, any Notes
of such Class or Series will be paid on a scheduled date. The rating will not be
a recommendation to purchase, hold or sell Notes of such Series or Class, and
such rating will not comment as to the marketability of such Notes, any market
price or
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suitability for a particular investor. There is no assurance that any rating
will remain for any given period of time or that any rating will not be reduced
or withdrawn entirely by a Rating Agency if in such Rating Agency's judgment
circumstances so warrant. Such a reduction or withdrawal may affect the price or
marketability of the Notes. However, the Transferor has no basis to determine
what specific effects such a reduction or withdrawal might have on any
particular Noteholder or Note Owner.
The Transferor will request a rating of the Notes offered hereby of each
Series by at least one Rating Agency. There can be no assurance as to whether
any rating agency not requested to rate the Notes will nonetheless issue a
rating with respect to any Series of Notes or Class thereof, and, if so, what
such rating would be. A rating assigned to any Series of Notes or Class thereof
by a rating agency that has not been requested by the Transferor to do so may be
lower than the rating assigned by a Rating Agency pursuant to the Transferor's
request.
RISKS RELATING TO BOOK-ENTRY REGISTRATION. As may be set forth in the
related Prospectus Supplement, the Class A Notes may be initially represented by
one or more physical notes registered in the name of Cede or any successor
nominee for DTC and will not be registered in the names of the beneficial owners
of such Class A Notes or their nominees. Accordingly, unless and until
Definitive Notes are issued for such Class A Notes, holders of beneficial
interests in such Class A Notes will not be recognized by the applicable
Indenture Trustees as Noteholders and will only be able to exercise the rights
of Noteholders indirectly through DTC Cedel or Euroclear and their respective
participating organizations and its Participants. See "Issuance of the
Notes--Book-Entry Registration" herein.
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THE TRUSTS
GENERAL
With respect to each Series of Notes, the Transferor will create a separate
Trust for the transactions described herein and in the related Prospectus
Supplement. After its creation, each Trust will not engage in any activity other
than (i) acquiring, holding and managing the Receivables and the other assets of
such Trust and proceeds therefrom, (ii) issuing and making payments on the
related Notes, and (iii) engaging in other activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith. On the related Closing Date, simultaneously with the
issuance of the Notes of a given Series, the Transferor will transfer the
Initial Receivables and its security interests in any Financed Equipment to the
related Trust. To the extent so provided in the related Prospectus Supplement,
Subsequent Receivables may, if at all, be conveyed to the related Trust as
frequently as daily during the related Funding Period, if any, or the related
Revolving Period, if any. Any Subsequent Receivables so conveyed also will be
assets of the related Trust, subject to the prior rights of the related
Indenture Trustee and Noteholders therein. The amount that may be initially
deposited into a Pre-Funding Account, and the length of a Pre-Funding Period, if
any, with respect to a Trust, shall be limited as described herein. The length
of a Revolving Period, if any, with respect to a Trust, will be described in the
related Prospectus Supplement.
The Servicer will continue to service the Receivables held by each Trust and
will receive fees for such services. See "Description of the Transaction
Agreements--Servicing Compensation and Payment of Expenses" herein and in the
related Prospectus Supplement. To facilitate servicing and to minimize
administrative burden and expense, the Servicer will maintain possession of the
related Receivables Files as custodian on behalf of such Trust and the related
Indenture Trustee, but the Servicer will not stamp the related Loan and/or
Leases to reflect the ultimate assignment of the Receivables to such Trust.
Financing statements previously filed to perfect the security interests in the
Financed Equipment in favor of MCC will not be assigned to such Trust or
amended. See "Certain Legal Aspects of the Receivables" and "Description of the
Transaction Agreements--Transfer and Assignment of Receivables" herein.
If the credit enhancement provided to the investment of the Class A
Noteholders of a given Series by the subordination of the related Class B Notes
and the protection provided to the holders of the Notes by the availability of
the funds in the related Reserve Account or any other credit enhancement is
insufficient, the related Trust and such Noteholders must rely solely on the
payments from the Obligors on the related Receivables, and the proceeds from the
repossession and sale of Financed Equipment which secure defaulted Receivables.
In such event, certain factors, such as such Trust's not having first perfected
security interests in some of the Financed Equipment and the risk of fraud or
negligence of MCC, may affect such Trust's ability to realize on the collateral
securing the Receivables, and thus the proceeds to be distributed to Noteholders
with respect to the Notes, may be reduced. See "Description of the Transaction
Agreements--Distributions", "--Credit and Cash Flow Enhancement" and "Certain
Legal Aspects of the Receivables" herein and "Description of the Transaction
Agreements--Distributions" in the related Prospectus Supplement.
The principal offices of each Trust and of the related Owner Trustee will be
specified in the related Prospectus Supplement.
THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related Prospectus
Supplement. An Owner Trustee's liability in connection with the issuance and
sale of the Notes of the related Series will be limited solely to the express
obligations of such Owner Trustee set forth in the related Trust Agreement and
the related Transfer and Servicing Agreement. An Owner Trustee may resign at any
time, in which event the Servicer will be obligated to appoint a successor owner
trustee. The Administrator of a trust may also remove the Owner Trustee if the
Owner Trustee ceases to be eligible to continue as Owner Trustee under
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the related Trust Agreement or if the Owner Trustee becomes insolvent. In such
circumstances, the Administrator will be obligated to appoint a successor owner
trustee. Any resignation or removal of an Owner Trustee and appointment of a
successor owner trustee will not become effective until acceptance of the
appointment by the successor owner trustee.
THE TRUST PROPERTY
The Notes of any Series will be collateralized by the assets of the related
Trust (the "Trust Property"). The Trust Property of any Trust will include (i)
the Receivables, (ii) all monies (including accrued interest) due or received
thereunder on or after the applicable Cut-off Date, (iii) such amounts as from
time to time may be held in one or more accounts established and maintained by
the Servicer pursuant to the related Transfer and Servicing Agreement, as
described below and in the related Prospectus Supplement, (iv) security
interests in the Financed Equipment, (v) the rights to proceeds from claims on
physical damage, credit life, liability and disability insurance policies, if
any, covering such Financed Equipment or Obligors, as the case may be, (vi) the
net proceeds of any repossessed Financed Equipment, (vii) the rights of the
Transferor under the related Contribution and Sale Agreement, (viii) interest
earned on short-term investments made by such Trust and (ix) any proceeds of the
foregoing. The Receivables will be originated directly by MCC and/or acquired by
MCC from certain vendors who originate loans and leases. Subject to the
provisions of the related Transfer and Servicing Agreement, the related
Receivables will continue to be serviced by the Servicer and will evidence
direct or indirect financing made available by MCC to the Obligors. Unless
otherwise specified in the related Prospectus Supplement, the related Reserve
Account, if any, and any other Trust Accounts, shall be maintained in the name
of the Indenture Trustee on behalf of the Noteholders of the related Series.
THE RECEIVABLES POOL
The Receivables of any Trust will either be originated by MCC in the
ordinary course of its commercial loan and lease transactions business or will
be purchased by MCC from vendors which originated the Receivables in the
ordinary course of business in connection with various commercial loan and/or
lease transactions. MCC purchases or originates contracts in accordance with its
credit standards which are based primarily on the Obligor's credit and only
secondarily on the value of MCC's security interest in the related equipment.
The Receivables to be held by each Trust will be selected from MCC's
portfolio of loan contracts and leases not previously sold meeting several
criteria. As of the applicable Cut-off Date, among the criteria to be met
(except as described under "Certain Legal Aspects of the Receivables" herein)
are that each Receivable: (i) will be secured by a first priority perfected
security interest in the related Financed Equipment (which Financed Equipment is
located in the United States), (ii) will have been originated in the United
States, (iii) will have an Obligor which has a United States billing address,
(iv) in the case of a Loan Contract, will provide for scheduled payments (which
may include balloon payments) that fully amortize the amount borrowed over its
original term to maturity, (v) will not be more than 61 days past due, and (vi)
will satisfy the other criteria, if any, set forth in the related Prospectus
Supplement. As of the applicable Cut-off Date, no Obligor on any related
Receivable will be noted on the related records of the Servicer as being in
default under the related Loan Contract or Lease or as being the subject of a
bankruptcy proceeding. No selection procedures believed by the Transferor to be
adverse to the Noteholders of any Series will be used in selecting the related
Receivables.
Information with respect to each pool of Receivables will be set forth in
the related Prospectus Supplement, including, to the extent appropriate, the
composition of the Receivables, the distribution by annual percentage rate
("APR") (as such term is defined in the related Prospectus Supplement), type of
equipment, Principal Balance of the Receivables and the geographic location of
each Obligor of the Receivables, industry application and payment frequency. See
"The Receivables Pool" in the related Prospectus Supplement.
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If the related Prospectus Supplement provides for a Pre-Funding Period or a
Revolving Period, each Subsequent Receivable of the related Trust must satisfy
the eligibility criteria specified in the related Transfer and Servicing
Agreement at the time of its addition. However, except for such criteria, there
will be no required characteristics of such Subsequent Receivables. Therefore,
following the transfer of Subsequent Receivables to the related Trust, the
characteristics of the entire Receivables Pool (as defined in the related
Prospectus Supplement) included in such Trust may vary from those of the Initial
Receivables.
MIDDLE MARKET CREDIT REVIEW AND UNDERWRITING PROCESS
Members of the credit department in MCC's corporate headquarters in
Bellevue, Washington perform a thorough credit review of all prospective
obligors. The credit review process relies on the extensive credit experience of
MCC's management and staff. Credit scoring is not used.
MCC's credit philosophy is that of a cash flow lender and, accordingly, a
prospective customer's historical and projected operating cash flows are
generally the primary consideration for credit approval decisions. Typically,
the credit review process begins when an account executive has bid and won a
transaction. The information reviewed typically includes (i) 3 to 5 years of
audited financial statements, (ii) information regarding the equipment to be
financed (obtained in consultation with MCC's Asset Management department),
(iii) information regarding the purpose of the funds, (iv) various third party
sources of information, internal industry studies as well as Internet sources,
and (v) a description of the proposed transaction structure. (Occasionally the
credit analyst is asked to pre-screen a potential obligor before a bid goes out.
The review for such pre-screens is more cursory in nature, but a complete review
of the credit is conducted once the transaction has been bid and won.)
After a thorough analysis of the proposed transaction and obligor, the
Credit Analyst then makes the decision whether to approve the transaction as
submitted, approve the transaction with changes, recommend approval of the
transaction (if over the individual Analyst's credit authority), or to recommend
the transaction be declined. Authority to make credit decisions is based on
seniority and lending experience.
Each transaction on MCC's books is assigned a quality code (a "Quality
Code") based on the financial health of the obligor. MCC uses a scale of 1
through 6, with 1 being the highest credit quality and 6 being the lowest. All
new loans originated by MCC will begin in category 1 or 2. Loans in category 1
are "superior" credits that surpass MCC's standard credit criteria. Loans in
category 2 are "standard" credits that meet MCC's standard credit criteria.
Loans with a quality code of 3 are being watched because of obligor specific
problems or industry concerns. Loans in categories 4, 5 and 6 are "classified
credits" and are assigned to a specific credit analyst for close monitoring,
administration and reporting.
All obligors are required to submit financial statements annually. Each
middle market customer's financial condition, payment history, and compliance
with applicable covenants is reviewed by junior level credit personnel. The work
of these individuals is reviewed by the credit manager responsible for managing
the annual review process. Accounts that are in good standing and have a balance
under $2 million, are subject to a short form review which consists of summary
cash flow, liquidity and ratio analysis along with a brief written summary of
the information. Accounts with a balance under $1 million that are in good
standing get what is called a "signature review," which consists of an
abbreviated short form review. Accounts that have deteriorated and accounts over
$2 million are subject to long form review which consists of full financial
statement, cash flow, earnings trend, payment history and ratio analysis along
with a full written analysis of the financial condition of the borrower based on
such information. If the status of an account has deteriorated between annual
reviews, a credit review will commence immediately.
FRANCHISE FINANCE CREDIT REVIEW AND UNDERWRITING PROCESS
The credit review and underwriting process for Franchise Finance is similar
to the process for Middle Market. A credit scoring tool is in place solely for
loans to obligors that are McDonald's franchisees. For
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those obligors, credit scoring is not used to make a final credit decision, but
rather as a tool to make an initial determination as to the amount of due
diligence required on any given transaction.
In addition to reviewing 3-5 years of financial statements and other
information similar to that reviewed by Middle Market credit analysts, the
Franchise Finance credit analyst will review sales histories of all stores
involved in the proposed transaction, proforma financial statements on new or
acquired stores, and an outline of the obligor's experience with the franchise
concept.
LOAN/LEASE DOCUMENTATION
Once a credit has been approved and the obligor has agreed to MCC's proposed
terms, the credit application is passed on to contract administration. Contract
administration determines what documents will be required and what filings will
need to be made.
SERVICING
Servicing the loan portfolio is the responsibility of Portfolio
Administration.
Most of the loans in MCC's portfolio are monthly pay and all of the
Receivables to be included in any Trust are monthly pay obligations. Monthly due
dates are dispersed throughout the month with roughly one third falling between
the 25th and 30th day of each month. MCC sends invoices to each obligor
approximately 25 days before each due date. One invoice will be sent to each
obligor for each product that has the same due date (for example, if a customer
has a loan and a lease with the same due date, they will receive one invoice; if
the loan and lease have different due dates, two invoices will be sent).
Obligors are granted a 10 day grace period after the due date within which
to make their payments without incurring any penalties. If an obligor fails to
make its payment by the end of the grace period, one of five collectors will
begin to call the delinquent obligor. Calls will be placed each day until the
collector extracts a promise to pay from the obligor. All discussions with
delinquent obligors are documented and are stored on-line. Obligors are charged
a late fee for all payments received after the end of the grace period. The late
fee is generally 5% of the payment due. As policy, MCC does not grant to
delinquent customers extensions on the due date for any payment relating to a
Receivable for the sole purpose of bringing that Receivable into current payment
status.
Once an Obligor has become 30 to 60 days delinquent, the credit analyst that
initially reviewed and approved the loan will become involved. It is the credit
analyst's decision to continue to work with the delinquent obligor or to default
the account and attempt to repossess the equipment. An account will not be
written off until the credit analyst has determined that there is no other way
for MCC to recover its investment. Once a decision has been made to default an
account, the credit analyst prepares a default letter and the Asset Management
group is called upon to assist in the valuation and disposal of the equipment.
COMMERCIAL LOANS. MCC offers loans to commercial obligors with a variety of
repayment schedules tailored to the obligor's anticipated cash flows. These
commercial loans are secured by the equipment purchased with the proceeds of
such loans. In connection with the equipment, the obligor is required to provide
all physical damage insurance on the equipment, including loss by burglary,
theft and malicious mischief. Such insurance must be for full replacement value
and name MCC as the payee.
While the terms of the commercial loans vary, generally the term of each
loan is from between two and seven years. Interest accrues on the loans at
either a fixed or a floating rate and each loan may be scheduled as a fully
amortizing loan or as a balloon loan. Under the terms of each loan the obligor
may prepay the loan by paying any amount equal to the unpaid principal balance
of the loan plus accrued and unpaid interest and the applicable prepayment
premium, if any.
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QUASI-LEASES. MCC offers quasi-leases, which are essentially loan contracts
that are structured as direct finance leases, to commercial obligors. For
federal tax purposes, quasi-leases are treated by MCC and by the obligor as a
secured loan from MCC to the obligor, and the obligor, at its own expense, is
required to maintain the equipment and pay all fees, property and use taxes and
other expenses of a similar nature relating to the leased equipment.
Quasi-leases are secured by the leased equipment and the obligor is required to
provide all physical damage insurance on the equipment, including loss by
burglary, theft and malicious mischief. Such insurance must be for full
replacement value and name MCC as the payee.
While the terms of these quasi-leases vary, generally the term of each loan
is from between two and seven years. Quasi-leases may be structured (i) to
amortize the cost of the leased equipment to a nominal amount (equivalent to a
fully amortizing loan) or (ii) to only partially amortize the cost of the
equipment (equivalent to a balloon loan). In either case, at the end of the
quasi-lease term, the obligor is required to purchase the leased equipment. The
lessee may terminate a quasi-lease prior to the end of the scheduled lease term
by paying an amount equal to the sum of the unamortized equipment cost, accrued
and unpaid rentals, plus a prepayment premium.
NON-TAX ORIENTED OPERATING LEASES. MCC offers non-tax oriented operating
leases (each, a "NTOOL") that, like quasi-leases described above, are
essentially loan contracts structured as direct finance leases. For federal tax
purposes, NTOOLs are treated as a secured loan by MCC and as either a loan or an
operating lease by the obligor. The obligor, at its own expense, is required to
maintain the equipment and pay all fees, property and use taxes and other
expenses of a similar nature relating to the leased equipment. NTOOLs are
secured by the leased equipment and the obligor is required to provide all
physical damage insurance on the equipment, including loss by burglary, theft
and malicious mischief. Such insurance must be for full replacement value and
name MCC as the payee.
While the terms of the NTOOLs vary, generally the initial term is for three
years with the option for the obligor to renew annually for a term of seven
years. At the end of each lease term, other than the end of the maximum term,
the obligor has the option to (i) purchase the leased equipment (in which case
the underlying lease would be equivalent to a balloon loan) or (ii) extend the
lease for another one-year term. At the end of the maximum term, the lessee must
either purchase or sell the equipment for a predetermined minimum price.
If the obligor does not extend the lease to its maximum term, the obligor
will make a payment to MCC similar to a prepayment premium. The lessee may
terminate a NTOOL prior to the scheduled lease term by paying an amount equal to
the sum of the unamortized equipment cost, accrued and unpaid rentals and the
applicable prepayment premium.
WEIGHTED AVERAGE LIFE OF THE NOTES
The weighted average life of the Notes of any Series will generally be
influenced by the rate at which the principal balances of the related
Receivables are paid and the rate at which such payments are paid to the
Noteholders. (For this purpose, the term "prepayments" includes prepayments in
full, partial prepayments, liquidations due to default, and receipts of proceeds
from physical damage and term life insurance policies and the reacquisition of
Receivables by the Transferor or the Servicer or for other administrative
reasons set forth herein). Loans are not optionally prepayable during the first
year or two of the Loan. Loans are prepayable after that "lock-out period" upon
payment of the outstanding principal balance and accrued interest, plus a
prepayment premium. Although Leases are generally not optionally prepayable by
their terms, Obligors generally are permitted to prepay a Lease upon payment of
the aggregate remaining lease scheduled payments due (which amount would include
an implicit interest amount) in the case of a fixed rate transaction, plus a
prepayment premium. Each prepayment will shorten the weighted average remaining
term of the Receivables and, during any period in which the Noteholders are
receiving principal payments on the related Notes, the weighted average life of
the related Notes. The related Prospectus Supplement will set forth the
allocation of prepayments among the various Classes of Notes of the related
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Series. See "Description of the Transaction Agreements--Distributions" in the
related Prospectus Supplement.
The rate of prepayments on the Receivables is influenced by a variety of
economic, financial, climatic and other factors. In addition, under certain
circumstances, the Transferor will be obligated to reacquire Receivables from a
Trust pursuant to the related Transfer and Servicing Agreement, as a result of
breaches of representations and warranties, and the Servicer will be obligated
to purchase Receivables from a Trust pursuant to the related Transfer and
Servicing Agreement, as a result of breaches of certain covenants. See
"Description of the Transaction Agreements--Transfer and Assignment of
Receivables" and "--Servicing Procedures" herein. See also "Description of the
Transaction Agreements--Termination" herein regarding the Servicer's option to
purchase the Receivables from a Trust. On the other hand, the payment schedule
under a contract related to a Receivable may be extended or revised by the
Servicer under certain circumstances. An extension or revision may lengthen the
weighted average remaining term of the Receivables and the weighted average life
of the Notes.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes on a given Series on each
Distribution Date, since such amount will depend, in part, on the amount of
principal collected on the related Receivables during the applicable Collection
Period. Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables will be borne entirely by the Noteholders of a given
Series, as set forth in the related Prospectus Supplement. Such reinvestment
risks may include the risk that interest rates are lower at the time such
holders receive payments from the related Trust than interest rates would
otherwise have been had such prepayments not been made or had such prepayments
been made at a different time.
The related Prospectus Supplement may set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to the particular Receivables and any Class of Notes of the related
Series.
POOL FACTORS AND TRADING INFORMATION
With respect to each Series, the Noteholders of record will receive reports
on or about each Distribution Date concerning the Receivables, the "Pool
Balance" (as such term is defined in the related Prospectus Supplement), each
Note Pool Factor and various other items of information. In addition,
Noteholders of record during any calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law.
With respect to each Series of Notes, the related Prospectus Supplement will
set forth the calculation of each "Note Pool Factor", as applicable, with
respect to each Class of related Notes.
USE OF PROCEEDS
The net proceeds from the sale of the Notes of a given Series will be
applied by the related Trust (i) to acquire the Receivables from the Transferor,
(ii) to make the initial deposit into the Reserve Account, if any, and (iii) to
make the deposit of the Pre-Funded Amount into the Pre-Funding Account, if any.
The amount that may be initially deposited into a Pre-Funding Account, and the
length of a Pre-Funding Period, are limited as described herein. Unless
otherwise specified in the related Prospectus Supplement, the Transferor will
use that portion of such net proceeds paid to it with respect to any such Trust
to purchase the related Receivables from MCC.
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THE TRANSFEROR AND THE SERVICER
METLIFE CAPITAL FUNDING CORP. III
The Transferor is a wholly-owned subsidiary of MCC. The Transferor was
incorporated in the State of Delaware on March 7, 1997. The Transferor is
organized for the limited purpose of purchasing receivables from MCC,
transferring such receivables, to third parties and any activities incidental to
and necessary or convenient for the accomplishment of the foregoing purposes.
The principal executive offices of the Transferor are located at 10900 NE 4th
Street, Suite 550, Bellevue, WA 98004 and its telephone number is (206)
450-3590.
The Transferor has taken and will take steps in structuring the transactions
contemplated hereby that are intended to ensure that a voluntary or involuntary
petition for relief by or against MCC under any Insolvency Law will not result
in the substantive consolidation of the assets and liabilities of the Transferor
with those of MCC. These steps include the creation of the Transferor as a
separate limited-purpose entity pursuant to articles of incorporation containing
(i) certain limitations (including restrictions on the nature of the
Transferor's business and a restriction on the Transferor's ability to commence
a voluntary case or proceeding under any Insolvency Law without the prior
unanimous affirmative vote of all of its directors) and (ii) a requirement that
at least one of the Transferor's directors be independent of MCC and its
affiliates. However, there can be no assurance that the activities of the
Transferor would not result in a court's concluding that the assets and
liabilities of the Transferor should be substantively consolidated with those of
MCC in a proceeding under any Insolvency Law. See "Risk Factors--Risks Relating
to Substantive Consolidation of MCC and the Transferor" herein.
In addition, each Owner Trustee, each Indenture Trustee and all Noteholders
will covenant that they will not at any time institute against the Transferor
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
MCC will warrant to the Transferor in each Contribution and Sale Agreement
that the transfer and conveyance of the related Receivables by it to the
Transferor is an absolute transfer and conveyance of such Receivables to the
Transferor. In addition, MCC and the Transferor will treat the transactions
described herein and in the related Prospectus Supplement as an absolute
transfer and conveyance of the related Receivables to the Transferor, and the
Transferor has taken and will take all actions (other than delivering the
original contract) that are required to perfect the Transferor's ownership
interest in the related Receivables by the Transferor filing UCC financing
statements. Notwithstanding the foregoing, if MCC were to become a debtor in a
bankruptcy case, and a creditor or trustee-in-bankruptcy of MCC or MCC itself
were to take the position that a transfer and conveyance of Receivables to the
Transferor should be recharacterized as a pledge of such Receivables to secure a
borrowing of MCC, then delays in payments of collections of such Receivables to
the Transferor could occur or, should the court rule in favor of any such
trustees, debtor or creditor, reductions in the amount of such payments, or a
reduction in the amount of Receivables securing such a borrowing, could result.
If the transactions contemplated herein and in the related Prospectus Supplement
are treated as a transfer and conveyance, the related Receivables would not be
part of MCC's bankruptcy estate and would not be available to MCC's creditors.
See "Risk Factors--Risks Relating to the Transfer of Assets from MCC to the
Transferor" herein.
METLIFE CAPITAL CORPORATION
MCC is an indirectly and wholly owned subsidiary of the Metropolitan Life
Insurance Company, engaged in the business of secured lending principally to
middle market American businesses. MCC operates as a separate investment
subsidiary of the Metropolitan Life Insurance Company. The principal executive
offices of MCC are located at 10900 NE 4th Street, Suite 500, Bellevue WA 98004
and its telephone number is (206) 451-0090.
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MCC is a Delaware corporation which was formed in 1983 when Metropolitan
Life Insurance Company acquired the leasing division of a national banking
association which was formed in 1974. MCC's products include loans secured by
equipment, equipment leases, and loans secured by commercial real estate. MCC
has approximately 4,100 customers. Approximately 97% of MCC's assets represent
obligations of companies based throughout the United States.
Certain current information regarding MCC will be set forth in the related
Prospectus Supplement.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust, one or more Classes of Class A Notes and one or
more Classes of Class B Notes of a given Series will be issued pursuant to the
terms of an indenture between the related Trust and the related indenture
trustee (the "Indenture Trustee"), which Indenture will be substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The following summary, as well as other pertinent information
included elsewhere in this Prospectus and in the related Prospectus Supplement,
describes the material terms generally applicable to the Notes, but does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the provisions of the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, the Class A
Notes will initially be represented by one or more Class A Notes registered in
the name of the nominee of DTC (together with any successor depositors selected
by the related Trust, the "Depository") except as set forth below. Unless
otherwise specified in the related Prospectus Supplement, the Class A Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof and will be available in book-entry form only. See "Issuance of the
Notes--Definitive Notes" and "--Book-Entry Registration" herein. Unless
otherwise specified in the related Prospectus Supplement, the Class B Notes will
be issued in fully registered certificated form.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payments, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal and
interest on each Class of Notes of a given Series will be as described in the
related Prospectus Supplement. The rights of Noteholders to receive payments of
principal and interest may be senior or subordinate to the rights of Noteholders
of another Class or Series, as described in the related Prospectus Supplement.
As provided in the related Prospectus Supplement, payments of interest on the
Notes of such Series will be made prior to payments of principal thereon. To the
extent provided in the related Prospectus Supplement, a Series may include one
or more Classes of Strip Notes entitled to (i) principal payments with
disproportionate, nominal or no interest payments or (ii) interest payments with
disproportionate, nominal or no principal payments. Each Class of Notes may have
a different Interest Rate, which may be a fixed, variable or adjustable Interest
Rate (and which may be zero for certain Classes of Strip Notes), or any
combination of the foregoing. The related Prospectus Supplement will specify the
Interest Rate for each Class of Notes of a given Series or the method for
determining such Interest Rate. See also "Certain Information Regarding the
Notes--Fixed Rate Notes" and "--Floating Rate Notes." One or more Classes of
Notes of a Series may be prepayable in whole or in part under the circumstances
specified in the related Prospectus Supplement, including at the end of the
Funding Period (if any) or as a result of the Servicer's exercising its option
to purchase the Receivables of the related Trust in the manner and on the
respective terms and conditions described under "Description of the Transaction
Agreements--Termination" herein.
To the extent specified in any Prospectus Supplement, one or more Classes of
Notes of a given Series may have fixed principal payment schedules. Noteholders
of such Notes would be entitled to receive
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as payments of principal on any given Distribution Date the applicable amounts
set forth on such schedule with respect to such Notes, in the manner and to the
extent set forth in the related Prospectus Supplement.
Under certain circumstances, the amount available for payments to
Noteholders in respect of interest could be less than the amount of interest
payable on the Notes on any of the dates specified for payments on Notes in the
related Prospectus Supplement (each, a "Distribution Date"), in which case, each
Class of Noteholders will receive its ratable share (based upon the aggregate
amount of interest due to such Class of Noteholders) of the aggregate amount
available to be distributed in respect of interest on the Notes of such Series.
See "Description of the Transaction Agreements--Distributions" in the related
Prospectus Supplement.
In the case of a Series of Notes which includes two or more Classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such Class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
Class of Notes will be made on a pro rata basis among all the Noteholders of
such Class.
If the Servicer exercises its option to purchase the Receivables of a Trust
in the manner and on the respective terms and conditions described under
"Description of the Transaction Agreements--Termination" herein, the related
outstanding Notes will be prepaid as set forth in the related Prospectus
Supplement. In addition, if the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding Account, the related outstanding
Notes may be subject to partial prepayment on or immediately following the end
of the related Funding Period in an amount and manner specified in the related
Prospectus Supplement. In the event of such partial prepayment, the Noteholders
of the related Series may be entitled to receive a prepayment premium from the
related Trust, in the amount and to the extent provided in the related
Prospectus Supplement.
THE INDENTURE
MODIFICATION OF INDENTURE. With respect to each Trust, with the consent of
the holders of a majority of the outstanding principal amount of the Class A
Notes of the related Series, the related Indenture Trustee and the related Trust
may execute a supplemental indenture to add provisions to, or change in any
manner or eliminate any provisions of, the Indenture with respect to the Notes,
or to modify (except as provided below) in any manner the rights of the
Noteholders.
Notwithstanding the foregoing, unless otherwise specified in the related
Prospectus Supplement, without the consent of the holder of each outstanding
Note of the related Series affected thereby, no supplemental indenture shall (i)
change the due date of any installment of principal of or interest on any Note
of such Series or reduce the principal amount thereof, the interest rate
specified thereon or the prepayment price with respect thereto or change 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 related Indenture regarding payment,
(iii) reduce the percentage of the aggregate amount of the outstanding Notes of
such Series the consent of the holders of which is required for any such
supplemental indenture or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the related Indenture or of
certain defaults thereunder and their consequences as provided for in such
Indenture, (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the related Trust, the Transferor, an
affiliate of either of them or any obligor on such Notes, (v) reduce the
percentage of the aggregate outstanding amount of the Notes of such Series the
consent of the holders of which is required to direct the related Indenture
Trustee to sell or liquidate the related Receivables if the proceeds of such
sale would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes of such Series, (vi) decrease the percentage
of the aggregate principal amount of such Notes required to amend the sections
of the related Indenture which specify the applicable percentage of the
aggregate principal amount of the Notes
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of such Series necessary to amend the related Indenture or certain of the other
Transaction Agreements or (vii) permit the creation of any lien ranking prior to
or on a parity with the lien of the related Indenture with respect to any of the
collateral for such Notes or, except as otherwise permitted or contemplated in
the Indenture, terminate the lien of the related Indenture on any such
collateral or deprive the holder of any such Note of the security afforded by
the lien of such Indenture.
A Trust and the related Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of Noteholders of the related Series,
for the purpose of, among other things, adding any provisions to or changing in
any manner or eliminating any of the provisions of the related Indenture or of
modifying in any manner the rights of such Noteholders, including curing any
ambiguity or correcting or supplementing any inconsistent provision therein:
PROVIDED, HOWEVER, that such action will not, in the opinion of counsel
satisfactory to the Indenture Trustee, materially and adversely affect the
interest of any such Noteholder.
In addition, a Trust and the related Indenture Trustee may enter into
supplemental indentures, without obtaining the consent of the Noteholders of the
related Series, to substitute credit enhancement for any Class of Notes,
provided the Rating Agencies confirm in writing that such substitution will not
result in the reduction or withdrawal of the rating for such Class of Notes or
any other Class of Notes of the related Series.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes
of a given Series, unless otherwise specified in the related Prospectus
Supplement, an "Event of Default" with respect to such Notes will be defined in
the related Indenture as being: (i) a default for five days or more in the
payment of any interest on any Class A Note of such Series; (ii) a default in
the payment of the principal of or any installment of the principal of any such
Note when the same becomes due and payable; (iii) a default in the observance or
performance of any covenant or agreement of the related Trust made in the
related Indenture and the continuation of any such default for a period of 30
days after notice thereof is given to such Trust by the related Indenture
Trustee or to such Trust and such Indenture Trustee by the holders of at least
25% in principal amount of the Class A Notes of such Series then outstanding;
(iv) any representation or warranty made by such Trust in the related Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect in a material respect as of the time made, and such breach
not having been cured within 30 days after notice thereof is given to such Trust
by such Indenture Trustee or to such Trust and such Indenture Trustee by the
holders of at least 25% in principal amount of the Class A Notes of such Series
then outstanding; or (v) certain events of bankruptcy, insolvency, receivership
or liquidation of the Transferor or the related Trust. However, the amount of
principal required to be distributed to the Noteholders of such Series under the
related Indenture will be generally limited to amounts available therefor in the
related Note Distribution Account absent acceleration of such Notes. Therefore,
unless otherwise specified in the related Prospectus Supplement, the failure to
pay principal on such Notes may not result in the occurrence of an Event of
Default until the applicable Final Scheduled Distribution Date.
If an Event of Default should occur and be continuing with respect to the
Notes of any Series, the related Indenture Trustee or holders of a majority in
principal amount of such Class A Notes then outstanding may declare the
principal of such Notes to be immediately due and payable. Unless otherwise
specified in the related Prospectus Supplement, such declaration may, under
certain circumstances, be rescinded by the holders of a majority in principal
amount of such Class A Notes then outstanding.
Subject to the conditions specified below, if the Notes of any Series have
been declared to be due and payable following an Event of Default with respect
thereto, the related Indenture Trustee may, in its discretion, to the extent
permitted by applicable law, either sell the related Receivables or elect to
have the related Trust maintain possession of such Receivables and continue to
apply distributions on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
the related Indenture Trustee is prohibited from selling the related Receivables
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following an Event of Default, other than a default in the payment of any
principal or a default for five days or more in the payment of any interest on
any such Note, unless (i) all the holders of the outstanding Notes of such
Series consent to such sale, (ii) the proceeds of such sale are sufficient to
pay in full the principal of and the accrued interest on the outstanding Notes
of such Series at the date of such sale or (iii) such Indenture Trustee
determines that the proceeds of the related Receivables would not be sufficient
on an ongoing basis to make all payments on such Notes as such payments would
have become due if such obligations had not been declared due and payable, and
such Indenture Trustee obtains the consent of the holders of 66 2/3% of the
aggregate outstanding amount of such Class A Notes.
Subject to the provisions of the related Indenture relating to the duties of
the related Indenture Trustee, in case an Event of Default shall occur and be
continuing with respect to a Series of Notes, such Indenture Trustee shall be
under no obligation to exercise any of the rights or powers under such Indenture
if requested or directed by any of the holders of such Notes if such 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 such provisions for indemnification and certain
limitations contained in the related Indenture, the holders of a majority (or
66 2/3% if an Event of Default has occurred and is continuing) in principal
amount of the outstanding Class A Notes of a Series will have the right to
direct the time, method and place of conducting any proceeding or any remedy
available to the related Indenture Trustee, and the holders of a majority in
principal amount of such Class A Notes then outstanding 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 such
Indenture that cannot be modified without the waiver or consent of all of the
holders of such outstanding Class A Notes.
Unless otherwise specified in the related Prospectus Supplement, no Class A
Noteholder of any Series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such Class A Noteholder previously
has given to the related Indenture Trustee written notice of a continuing Event
of Default, (ii) the holders of not less than 25% in principal amount of the
outstanding Class A Notes of such Series have made written request of such
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such Class A Noteholder or Class A Noteholders have offered such
Indenture Trustee reasonable indemnity, (iv) such Indenture Trustee has for 60
days failed to institute such proceeding and (v) no direction inconsistent with
such written request has been given to such Indenture Trustee during such 60-day
period by the holders of a majority in principal amount of the outstanding Class
A Notes.
In addition, with respect to any Trust, the related Indenture Trustee and
the related Noteholders will covenant that they will not at any time institute
against such Trust any bankruptcy, reorganization or other proceeding under any
federal or state bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Owner Trustee in its individual capacity, nor any holder of an ownership
interest in such Trust, nor any of their respective owners, beneficiaries,
agents, officers, directors, employees, successors or assigns shall, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the Notes or for the agreements of
such Trust contained in the related Indenture.
CERTAIN COVENANTS. With respect to any Trust, the related Indenture will
provide that such 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, any state thereof or the District
of Columbia, (ii) such entity expressly assumes such Trust's obligation to make
due and punctual payments upon the Notes of the related Series and the
performance or observance of every agreement and covenant of such Trust under
the related Indenture, (iii) no Event of Default shall have occurred and be
continuing immediately after such merger or consolidation, (iv) such Trust has
been advised that the ratings of the Notes of such Series will not be reduced or
withdrawn by the applicable Rating Agencies as a result of such merger or
consolidation, (v) such Trust has received an opinion of counsel to the effect
that such
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consolidation or merger would have no material adverse tax consequence to such
Trust or to any related Noteholder, (vi) any action as is necessary to maintain
the lien and security interest created by the related Indenture shall have been
taken and (vii) such Trust has received an opinion of counsel and officer's
certificate each stating that such consolidation or merger satisfies all
requirements under the related Indenture.
Each Trust will not, among other things (i) except as expressly permitted by
the related Indenture, the related Transaction Agreements or certain related
documents (collectively, the "Related Documents"), sell, transfer, exchange or
otherwise dispose of any of the assets of such Trust, (ii) claim any credit on
or make any deduction from the principal and interest payable in respect of the
Notes of the related Series (other than amounts withheld under the Code or
applicable state law) or assert any claim against any present or former holder
of Notes because of the payment of taxes levied or assessed upon such Trust,
(iii) except as contemplated by the Related Documents, dissolve or liquidate in
whole or in part or (iv) (y) permit the validity or effectiveness of the related
Indenture to be impaired or permit any person to be released from any covenants
or obligations with respect to such Notes under such Indenture except as may be
expressly permitted thereby or (z) 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 such Trust or any part thereof,
or any interest therein or the proceeds thereof, except as may be created by the
terms of the related Indenture.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "Formation of the Trust."
No Trust will 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 Documents.
If so specified in the related Prospectus Supplement, the related Trust will
not make any payments, distributions or dividends to Class B Noteholders in
respect of their Class B Notes for any Collection Period unless the conditions
set forth in such Prospectus Supplement have been satisfied.
Each Trust will or will cause the Servicer to deliver to the related
Indenture Trustee on each Determination Date the Servicer's certificate as
required by the related Transaction Agreement.
LIST OF NOTEHOLDERS. Three or more holders of the Class A Notes of any
Series (each of whom has owned a Class A Note for at least six months) may, by
written request to the related Indenture Trustee, obtain access to the list of
all Class A Noteholders of such Series maintained by such Indenture Trustee for
the purpose of communicating with other Class A Noteholders of such Series with
respect to their rights under such Indenture or such Class A Notes. Such
Indenture Trustee may elect not to afford the requesting Class A Noteholders
access to the list of such Class A Noteholders if it agrees to mail the desired
communication or proxy, on behalf and at the expense of the requesting Class A
Noteholders, to all Class A Noteholders of record.
ANNUAL COMPLIANCE STATEMENT. The Administrator on behalf of each Trust will
be required to file annually with the related Indenture Trustee a written
statement as to the fulfillment of its obligations under the related Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. If required by law, the Indenture
Trustee for each Trust will mail each year to all related Noteholders a brief
report relating to its eligibility and qualification to continue as the
Indenture Trustee under the related Indenture, any amounts advanced by it under
such Indenture, the amount, interest rate and maturity date of certain
indebtedness owing by such Trust to such Indenture Trustee in its individual
capacity, the property and funds physically held by such Indenture Trustee as
such and any action taken by it that materially affects such Notes and that has
not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged
with respect to the Trust Property securing the related Notes upon the delivery
to such Indenture Trustee for cancellation of all such
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Notes or, with certain limitations, upon deposit with such Indenture Trustee of
funds sufficient for the payment in full of all of such Notes.
THE INDENTURE TRUSTEE. The Indenture Trustee for a Series of Notes will be
specified in the related Prospectus Supplement. The Indenture Trustee for any
Series may resign at any time, in which event the related Trust will be
obligated to appoint a successor Indenture Trustee for such Series. A Trust may
also remove the related Indenture Trustee if such Indenture Trustee ceases to be
eligible to continue as such under the related Indenture or if such Indenture
Trustee becomes insolvent in such circumstances, such Trust will be obligated to
appoint a successor Indenture Trustee for the related Series of Notes. Any
resignation or removal of an Indenture Trustee and appointment of a successor
Indenture Trustee for any Series of Notes does not become effective until
acceptance of the appointment by the successor Indenture Trustee for such
Series.
THE INDENTURE;
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. In these circumstances,
the Indenture will provide for a successor trustee to be appointed for one or
both of the Class A Notes and the Class B Notes if the Indenture Trustee is
deemed to have a conflict of interest with respect to the Class A Notes and the
Class B Notes, in order that there be separate trustees for each of the Class A
Notes and the Class B Notes. So long as any amounts remain unpaid with respect
to the Class A Notes, only the indenture trustee for the Class A Noteholders
will have the right to exercise remedies under the Indenture (but the Class B
Noteholders will be entitled to their shares of any proceeds of enforcement,
subject to the subordination of the Class B Notes to the Class A Notes as
described herein), and only the Class A Noteholders will have the right to
direct or consent to any action to be taken, including sale of the Receivables,
until the Class A Notes are paid in full. Upon repayment of the Class A Notes in
full, all rights to exercise remedies under the Indenture will transfer to the
trustee for the Class B Notes. Any resignation of the original Indenture Trustee
as described above with respect to any class of Notes will become effective only
upon the appointment of a successor trustee for such class of Notes and such
successor's acceptance of such appointment.
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CERTAIN INFORMATION REGARDING THE NOTES
FIXED RATE NOTES
Each Class of Notes (other than certain Classes of Strip Notes) may bear
interest at a fixed rate per annum ("Fixed Rate Notes") or at a variable or
adjustable rate per annum ("Floating Rate Notes"), as more fully described below
and in the related Prospectus Supplement. Each Class of Fixed Rate Notes will
bear interest at the applicable per annum Interest Rate or Pass-Through Rate, as
the case may be, specified in the related Prospectus Supplement. Unless
otherwise set forth in the related Prospectus Supplement, interest on each Class
of Fixed Rate Notes will be computed on the basis of a 360-day year of twelve
30-day months. See "Description of the Notes--Principal and Interest on the
Notes" herein.
FLOATING RATE NOTES
Each Class of Floating Rate Notes will bear interest for each applicable
Interest Reset Period (with respect to a Class of Floating Rate Notes, the
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the related Prospectus Supplement as being applicable to such
Class, and the "Spread Multiplier" is the percentage that may be specified in
the related Prospectus Supplement as being applicable to such Class.
The related Prospectus Supplement will designate a Base Rate for a given
Floating Rate Note based on LIBOR, commercial paper rates, federal funds rates,
U.S. Government treasury securities rates, negotiable certificates of deposit
rates or another rate as set forth in such Prospectus Supplement.
As specified in the related Prospectus Supplement, Floating Rate Notes of a
given Class may also have either or both of the following (in each case
expressed as a rate per annum): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period and (ii) a minimum
limitation, or floor, on the rate at which interest may accrue during any
interest period. In addition to any maximum interest rate that may be applicable
to any Class of Floating Rate Notes, the interest rate applicable to any Class
of Floating Rate Notes will in no event be higher than the maximum rate
permitted by applicable law, as the same may be modified by United States law of
general application.
Each Trust with respect to which a Class of Floating Rate Note will be
issued will appoint, and enter into agreements with, a calculation agent (each,
a "Calculation Agent") to calculate interest rates on each such Class of
Floating Rate Notes issued with respect thereto. The related Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
Class of Floating Rate Notes of a given Series, which may be either the Owner
Trustee or Indenture Trustee with respect to such Series. All determinations of
interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate Notes of
a given Class. Unless otherwise specified in the related Prospectus Supplement,
all percentages resulting from any calculation of the rate of interest on a
Floating Rate Note will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point rounded upward.
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ISSUANCE OF THE NOTES
DEFINITIVE NOTES
The Prospectus Supplement related to each Series will specify whether the
various Classes of Notes of such Series will be issued in fully registered,
certificated form ("Definitive Notes") to the Noteholders or their respective
nominees.
Distributions of principal of and interest on such Definitive Notes will be
made by the Indenture Trustee in accordance with the procedures set forth in the
related Indenture or the related Trust Agreement, as applicable, directly to
holders of Definitive Notes in whose names the Definitive Notes were registered
at the close of business on the applicable "Record Date" (as defined in the
related Prospectus Supplement) specified for such Notes in the related
Prospectus Supplement. Such distributions will be made by check mailed to the
address of such holder as it appears on the register maintained by the Indenture
Trustee. The final payment on any such Definitive Note, however, will be made
only upon presentation and surrender of such Definitive Note at the office or
agency specified in the notice of final distribution to the applicable
Noteholders.
Definitive Notes will be transferable and exchangeable at the offices of the
applicable Indenture Trustee or of a certificate registrar named in a notice
delivered to holders of Definitive Notes. No service charge will be imposed for
any registration of transfer or exchange, but the applicable Indenture Trustee
may require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
BOOK-ENTRY REGISTRATION
The Prospectus Supplement related to a given Series will specify whether the
holders of the Notes of such Series may hold their Notes through DTC (in the
United States) or Cedel Bank, societe anonyme ("Cedel") or Euroclear (as defined
below) (in Europe) if they are participants of such systems, or indirectly
through organizations that are participants in such systems ("Book-Entry
Notes").
The Transferor has been informed by DTC that DTC's nominee will be Cede,
unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the Notes of
any Series held through DTC. Cede, as nominee for DTC, or such other nominee
specified in the related Prospectus Supplement, will hold the global Notes.
Cedel and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's names on the books of their
respective depositories (collectively the "Depositaries"), which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York UCC and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its participants ("Participants") and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
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Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel 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
Participant or Euroclear Participant on such business day. Cash received by
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
The Noteholders that are not Participants or Indirect Participants but who
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
from the applicable Indenture Trustee through the Participants who in turn will
receive them from DTC. Under a book-entry format, Noteholders may experience
some delay in their receipt of payments, since such payments will be forwarded
by the applicable Indenture Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its Participants, which thereafter will forward them to
Indirect Participants or Noteholders. To the extent the related Prospectus
Supplement provides that Book-Entry Notes will be issued, the only "Noteholder"
will be Cede, as nominee of DTC. Noteholders will not be recognized by the
applicable Indenture Trustee as "Noteholders" as such term is used in the
related Indenture, as applicable, and Noteholders 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 principal of, and interest on, the
Notes. Participants and Indirect Participants with which the Noteholders have
accounts with respect to their respective Notes similarly are required to make
book-entry transfers and receive and transmit such payments on behalf of their
respective Noteholders. Accordingly, although the Noteholders will not possess
their respective Notes, the Rules provide a mechanism by which Participants will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Noteholder
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 will advise the Administrator in respect of each Trust that it will take
any action permitted to be taken by a Noteholder under the related Indenture or
Trust Agreement, as applicable, only at the direction of one or more
Participants to whose accounts with DTC such 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.
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Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 34
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel 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 with respect to any Series of
Notes. Indirect access to Cedel is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System ("Euroclear" or the "Euroclear System") was created in
1968 to hold securities for its participants ("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 certificates and the risk from transfers of
securities and cash that are not simultaneous.
The Euroclear System has subsequently been extended to clear and settle
transactions between Euroclear Participants and counterparties both in Cedel and
in many domestic securities markets. Transactions may be settled in any of 34
settlement currencies. In addition to safekeeping (custody) and securities
clearance and settlement the Euroclear System includes securities lending and
borrowing and money transfer services. The Euroclear System is operated by the
Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the
"Euroclear Operator"), under contract with Euroclear Clearance System S.C., a
Belgian cooperative corporation that establishes policy on behalf of Euroclear
Participants. 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.
All operations are conducted by the Euroclear Operator and all Euroclear
securities clearance accounts and cash accounts are accounts with the Euroclear
Operator. They 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 all transfers of securities and cash, both within the
Euroclear System and receipts and withdrawals of securities and cash. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include any of the Underwriters of any Series of Notes. 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 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.
Unless and until Definitive Notes are issued under the limited circumstances
described herein or in the related Prospectus Supplement, no Noteholder will be
entitled to receive a physical certificate representing a Book-Entry Note. All
references herein and in the related Prospectus Supplement to actions by
Noteholders shall refer to actions taken by DTC upon instructions from its
Participants, and all references herein and in the related Prospectus Supplement
to distributions, notices, reports and statements to Noteholders shall refer to
distributions, notices, reports and statements to DTC or its nominee as
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the registered holder of the Book-Entry Notes, as the case may be, for
distribution to Book-Entry Noteholders in accordance with DTC's procedures with
respect thereto.
If (i) (A) the Administrator advises the applicable Indenture Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to such Notes and (B) the
Administrator is unable to locate a qualified successor, (ii) the Administrator,
at its option, elects to terminate the book-entry system through DTC or (iii)
after the occurrence of an Event of Default or a Servicer Default, Class A
Noteholders representing at least a majority of the outstanding principal amount
of the Class A Notes of such Series advise the applicable Indenture Trustee
through DTC in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interest of such Noteholders
of such Series, then any Notes held in book-entry form will be issued as
Definitive Notes to the applicable Noteholders or their respective nominees.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Indenture Trustee will be required to notify all
applicable Noteholders through Participants of the availability of Definitive
Notes. Upon surrender by DTC of the definitive certificates representing the
corresponding Notes and receipt of instructions for re-registration, the
applicable Indenture Trustee will reissue such Notes as Definitive Notes to such
Noteholders.
Except as required by law, neither the Administrator nor the applicable
Indenture Trustee with respect to any Trust will have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Notes held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
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DESCRIPTION OF THE TRANSACTION AGREEMENTS
The following summary, as well as other pertinent information included
elsewhere in this Prospectus and the related Prospectus Supplement, describes
the material terms with respect to each Series of Notes relating to each of (i)
the Transfer and Servicing Agreement pursuant to which a Trust will acquire
Receivables from the Transferor and the Servicer will undertake to service such
Receivables, (ii) the Contribution and Sale Agreement pursuant to which the
Transferor will acquire such Receivables from MCC, (iii) the Administration
Agreement pursuant to which MCC will undertake certain administrative duties
with respect to such Trust and (iv) the Trust Agreement pursuant to which such
Trust will be created collectively, the "Transaction Agreements"). Forms of the
Transaction Agreements have been filed as exhibits to the Registration Statement
of which this Prospectus forms a part. This summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the applicable provisions of the related Transaction Agreements.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
On the initial Closing Date specified in the related Prospectus Supplement
with respect to a Trust (the "Closing Date"), MCC will contribute, sell and
assign to the Transferor, without recourse, its entire interest in the related
Receivables (the "Initial Receivables"), including its security interests in the
related Financed Equipment, pursuant to a Contribution and Sale Agreement (the
"Contribution and Sale Agreement"). On such Closing Date, the Transferor will
assign to the related Trust, without recourse, its interest in such Receivables,
including its security interests in the related Financed Equipment, pursuant to
the related Transfer and Servicing Agreement. Each such Receivable will be
identified in a schedule (each, a "Schedule of Receivables") appearing as an
exhibit to the Transfer and Servicing Agreement. The related Owner Trustee, on
behalf of such Trust, will, concurrently with such transfer and assignment on
the related Closing Date, execute, and the Indenture Trustee will authenticate
and deliver the related Notes. The net proceeds received from the sale of such
Notes will be applied to the acquisition of the related Initial Receivables and,
if so specified in the Prospectus Supplement, to the deposit of the Pre-Funded
Amount into the Pre-Funding Account and to the initial deposit into the Reserve
Account. If applicable, the related Prospectus Supplement for a given Trust will
specify the terms, conditions and manner under which subsequent Receivables
("Subsequent Receivables") will be transferred by the Transferor to the related
Trust from time to time during the Revolving Period, if any, or the Funding
Period on each date specified as a transfer date in the related Prospectus
Supplement (each, a "Transfer Date"). If the related Prospectus Supplement so
provides for a Pre-Funding Account, the funds on deposit in such Pre-Funding
Account on the related Closing Date will not exceed 25% of the related Trust
Property, and the related Pre-Funding Period shall not exceed three months from
the related Closing Date.
In each Contribution and Sale Agreement, MCC will represent and warrant to
the Transferor, among other things, that (i) the information provided with
respect to the related Receivables is correct in all material respects; (ii) the
Obligor on each Receivable is required to maintain physical damage insurance
and/or liability insurance, as applicable, covering the Financed Equipment in
accordance with MCC's normal requirements; (iii) as of the related Closing Date
or related Transfer Date, if any, the related Receivables are free and clear of
all security interests, liens, charges and encumbrances and no offsets,
defenses, or counterclaims have been asserted or threatened; (iv) as of the
related Closing Date or related Transfer Date, if any, each of such Receivables
is secured by a first perfected security interest in the Financed Equipment in
favor of MCC; (v) each Receivable, at the time it was originated, complied and,
as of the related Closing Date or related Transfer Date, if any, complies in all
material respects with applicable federal and state laws including, without
limitation, truth in lending, equal credit opportunity and disclosure laws, in
each case to the extent applicable to non-consumer transactions; and (vi) each
Lease, if any, (A) is a "lease intended as security" under the UCC, (B) is not a
"consumer lease" within the meaning of Article 2A of the UCC in any jurisdiction
where said Article 2A has been adopted and governs the construction thereof, and
(C) constitutes "chattel paper", as defined under the UCC. Unless otherwise
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specified in the related Prospectus Supplement, if the Transferor breaches any
of its representations and warranties made in the related Transfer and Servicing
Agreement, and such breach has not been cured by the last day of the second (or,
if the Transferor elects, the first) month following the discovery by or notice
to the Transferor of such breach, the Transferor will reacquire any Receivable
materially and adversely affected by such breach from the related Trust, and if
such breach arises from the breach of a representation and warranty by MCC in
the related Contribution and Sale Agreement, MCC will reacquire such Receivable
from the Transferor, in each case at a price (the "Acquisition Amount") at least
equal to the "Principal Balance" (as such term is defined in the related
Prospectus Supplement) plus interest thereon at the respective "Cut-off Date
APR" (as such term is defined in the related Prospectus Supplement). The
obligation of the Transferor to reacquire any Receivable with respect to which
any such representation or warranty of MCC has been breached is subject to MCC's
reacquisition of such Receivable for the Acquisition Amount. The reacquisition
obligation will constitute the sole remedy available to the Noteholders, the
Indenture Trustee or the Owner Trustee in respect of such Trust for any such
uncured breach.
MCC's accounting records and computer systems will reflect the assignments
described above, and the Servicer will maintain possession of the related Loan
and/or Leases to facilitate servicing and to minimize administrative burden and
expense. The Servicer will not stamp the Loan and/or Leases to reflect
assignment of the Receivables to the related Trust or Indenture Trustee.
ACCOUNTS
With respect to each Trust, the Servicer will establish and maintain at the
office of the related Indenture Trustee one or more accounts, in the name of
such Indenture Trustee on behalf of the related Noteholders, into which all
payments made on or with respect to the related Receivables will be deposited
(collectively, the "Collection Account"). The Servicer will also establish and
maintain at the office of such Indenture Trustee an account, in the name of such
Indenture Trustee on behalf of the related Noteholders, into which amounts of
principal collections released from the Collection Account will be deposited
(the "Principal Funding Account") and from which (i) payments to the Transferor
with respect to Subsequent Receivables during the Revolving Period, if any, will
be made and (ii) principal amounts due to Noteholders will be withdrawn for
deposit into the Note Distribution Account. The Servicer will establish and
maintain at the office of such Indenture Trustee an account, in the name of such
Indenture Trustee on behalf of the related Noteholders, in which amounts of
interest collections released from the Collection Account will be deposited (the
"Interest Payment Account") and from which interest amounts due to Noteholders
will be withdrawn for deposit into the Note Distribution Account. The Servicer
will establish and maintain at the office of such Indenture Trustee an account,
in the name of such Indenture Trustee on behalf of the related Noteholders, in
which amounts released from the Interest Payment Account, the Principal Funding
Account and the Reserve Account, if any, or any other credit enhancement for
payment to Noteholders will be deposited and from which all payments to
Noteholders will be made (the "Note Distribution Account"). If so specified in
the related Prospectus Supplement, the Transferor may also establish and
maintain a Pre-Funding Account, in the name of such Indenture Trustee on behalf
of the related Noteholders, which will be used to acquire Subsequent Receivables
from the Transferor from time to time during the Funding Period. The amount that
may be initially deposited into the Pre-Funding Account, and the length of a
Pre-Funding Period, shall be limited as described herein.
Any other accounts to be established with respect to a Trust will be
described in the related Prospectus Supplement.
With respect to any Series of Notes, funds in the Collection Account, the
Note Distribution Account, any Reserve Account, any Pre-Funding Account,
Interest Payment Account, Principal Funding Account and in any accounts
identified as such in the related Prospectus Supplement (collectively, the
"Trust Accounts") shall be invested as provided in the related Transfer and
Servicing Agreement in Eligible Investments. "Eligible Investments" are
generally limited to investments acceptable to the Rating Agencies as being
consistent with the ratings of such Notes. Except as described below or in the
related Prospectus
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Supplement, Eligible Investments are limited to obligations or securities that
mature on or before the business day preceding the day of the next distribution.
However, to the extent permitted by the Rating Agencies and provided in the
related Transfer and Servicing Agreement, funds in any Reserve Account may be
invested in securities that will not mature prior to the next Distribution Date
and will not be sold to meet any shortfalls. Thus, the amount of cash in any
Reserve Account at any time available for withdrawal may be less than the
balance of the Reserve Account at such time. If the amount required to be
withdrawn from any Reserve Account to cover shortfalls in collections on the
related Receivables (as provided in the related Prospectus Supplement) exceeds
the amount of cash in such Reserve Account, a temporary shortfall in the amounts
distributed to the related Noteholders could result, which could, in turn,
increase the average life of the related Notes. Except as otherwise specified in
the related Prospectus Supplement, investment earnings on funds deposited in the
Trust Accounts, net of losses and investment expenses (collectively, "Investment
Earnings"), shall be deposited in the related Collection Account on each
Distribution Date and shall be treated as collections of interest on the related
Receivables.
The Trust Accounts of all Series will be maintained as Eligible Deposit
Accounts. "Eligible Deposit Account" means either (a) a segregated account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution have a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade. "Eligible Institution" means, with respect to any Series, (a) the
corporate trust department of the related Indenture Trustee, the related Owner
Trustee or such other institution acceptable to the Rating Agencies, or (b) a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any domestic
branch of a foreign bank), (i) (A) which has either a long-term or short-term
unsecured debt rating acceptable to the Rating Agencies and (B) whose deposits
are insured by the Federal Deposit Insurance Corporation or (ii) (A) the parent
corporation of which has either a long-term or short-term unsecured debt rating
acceptable to the Rating Agencies and (B) whose deposits are insured by the
Federal Deposit Insurance Corporation.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and, in a manner consistent with
the related Transfer and Servicing Agreement will continue such collection
procedures as the Servicer follows with respect to loan contracts and leases it
services for itself and others. Consistent with its normal procedures, the
Servicer may, in its discretion and on a case-by-case basis, arrange with the
Obligor of a Receivable to extend or modify the payment schedule. Some of such
arrangements (including, without limitation, any extension of the payment
schedule beyond the latest Final Scheduled Distribution Date specified for the
related Series of Notes in the related Prospectus Supplement) will result in the
Servicer purchasing the Receivable for the Acquisition Amount. The Servicer may
sell the Financed Equipment securing the respective Receivable at a public or
private sale, or take any other action permitted by applicable law. See "The
Receivables Pool--Middle Market Credit Review and Underwriting
Process;--Franchise Finance Credit Review and Underwriting Process;" and
"Certain Legal Aspects of the Receivables" herein.
PAYMENTS ON RECEIVABLES
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each Collection Period specified in the related Prospectus
Supplement into the related Collection Account (net of certain amounts including
the Servicing Fee and Servicer's Yield); PROVIDED, HOWEVER, that when a
Receivable becomes a Defaulted Receivable (as defined in the related Prospectus
Supplement), the Receivable will be reassigned to the
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Transferor (to the extent of receipt by the holders of Notes on the related
Distribution Date of an amount representing the principal balance with respect
to such Defaulted Receivable), and any proceeds after such date (deficiency
proceeds) would not be proceeds of Receivables in the related Trust. Unless the
related Prospectus Supplement so provides, and the below described conditions
are met, the Servicer will deposit all such amounts collected during each
Collection Period into the related Collection Account within two business days
of receipt and identification thereof. Normally, collections are identified
within one day of receipt. The Servicer will also deposit any Amounts (as
defined herein) into the Collection Account when due. With respect to each
Trust, if MCC is the Servicer and provided that (i) there exists no Servicer
Default (as defined herein) and (ii) each other condition to making monthly or
less frequent deposits as may be specified by the Rating Agencies and described
in the related Prospectus Supplement is satisfied, the Servicer will not be
required to deposit payments on the related Receivables (from whatever source)
and all proceeds of such Receivables collected during each Collection Period
into the related Collection Account until on or before the business day
preceding each related Distribution Date. Pending deposit into the Collection
Account, regardless of frequency of deposit, collections may be invested by the
Servicer at its own risk, for its own benefit and without being subject to any
investment restrictions, and will not be segregated from funds of the Servicer.
If the Servicer were unable to remit such funds, or if the Servicer were to
become insolvent, the Noteholders might incur a loss. To the extent set forth in
the related Prospectus Supplement, the Servicer, in order to satisfy the
requirements described above for monthly remittances, may obtain a letter of
credit or other security for the benefit of the related Trust to secure the
timely remittances of collections on the related Receivables and the payment of
the aggregate Acquisition Amount with respect to such Receivables purchased by
the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to any
Trust, the Servicer will be entitled to receive a Servicing Fee for each
Collection Period in an amount equal to a specified percentage per annum (as set
forth in the related Prospectus Supplement, the "Servicing Fee Rate") of the
Pool Balance as of the first day of the related Collection Period (the
"Servicing Fee"). The Servicing Fee with respect to any Trust (together with any
portion of such Servicing Fee that remains unpaid from prior Distribution Dates)
will be paid solely to the extent of the funds available therefor as set forth
in the related Prospectus Supplement under "Description of the Transaction
Agreements--Distributions." However, the Servicing Fee will be paid prior to the
distribution of any portion of the "Total Distribution Amount" (as such term is
defined in the related Prospectus Supplement) to the related Noteholders and
prior to payment of the related Administration Fee. The Servicing Fee with
respect to each Collection Period will decline over the life of the Notes as the
Pool Balance decreases.
Unless otherwise specified in the Prospectus Supplement with respect to any
Trust, the Servicer will also collect any late fees, extension fees, prepayment
penalties and other administrative fees or similar charges allowed by applicable
law with respect to the related Receivables (collectively, the "Servicer's
Yield"), and will be entitled to amounts of Servicer's Yield collected as such
amounts are received. Payments by or on behalf of Obligors will be allocated
first to interest, second to principal, third to taxes, and fourth to other
charges (including late fees), all in accordance with the Servicer's normal
practices and procedures.
The Servicing Fee with respect to any Trust will compensate the Servicer for
performing the functions of a third party servicer of receivables, including
collecting and posting all payments, responding to inquiries of Obligors on the
related Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting tax information to Obligors, paying costs of disposition of
defaults, and policing the collateral. Such Servicing Fee also will compensate
the Servicer for administering the related Receivables, accounting for
collections and furnishing monthly and annual statements to the Transferor, the
related Owner Trustee and the related Indenture Trustee with respect to
distributions. Such Servicing Fee also will
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reimburse the Servicer for certain taxes, accounting fees, outside auditor fees,
data processing costs and other costs incurred in connection with administering
the Receivables of each Trust.
DISTRIBUTIONS
With respect to each Series of Notes, beginning on the Distribution Date
specified in the related Prospectus Supplement, distributions of principal and
interest (or, where applicable, of principal or interest only) on each Class of
such Notes entitled thereto will be made by the applicable Indenture Trustee to
the Noteholders of such Series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each Class of
Noteholders of such Series will be set forth in the related Prospectus
Supplement.
With respect to each Trust, on each Distribution Date, collections on the
related Receivables will be transferred from the related Collection Account to
the Interest Payment Account and Principal Funding Account, respectively, and
from there, to the related Note Distribution Account for distribution to
Noteholders of the related Series to the extent provided in the related
Prospectus Supplement. Credit enhancement, such as a Reserve Account, will be
available to cover any shortfalls in the amount available for distribution on
such date to the extent specified in the related Prospectus Supplement. As more
fully described in the related Prospectus Supplement, and unless otherwise
specified therein, distributions in respect of principal of a Class of Notes of
a given Series will be subordinate to distributions in respect of interest on
such Class, and distributions in respect of the Class B Notes of such Series may
be subordinate to payments in respect of the Class A Notes of such Series.
PRINCIPAL COLLECTIONS
REVOLVING PERIOD.
During the Revolving Period for a Trust, if any, no amount is required to be
set aside to make principal payments on the Notes. Accordingly, all Trust
principal collections processed on any date during the Revolving Period, if any,
will be available (a) for deposit into the Reserve Account, if applicable, and
(b) thereafter, for reinvestment in Subsequent Receivables to be acquired from
the Transferor. Such amounts will be so deposited into the Reserve Account, if
applicable, and paid to the Transferor to the extent so reinvested, provided
that such amounts will be held by the Trust to the extent Subsequent Receivables
are not available.
AMORTIZATION PERIOD. During an Amortization Period for any Trust, Trust
principal collections will be retained by the Trust and not paid to Transferor
to the extent required to be set aside for the purpose of making payments of
principal on the related Notes, all as more fully set forth in the related
Prospectus Supplement. During an Amortization Period for a Trust, Trust
principal collections will be applied to make the required payments of principal
on the related Notes, all as more fully set forth in the related Prospectus
Supplement. The relative priorities of such payments for any Distribution Date
will be set forth in the related Prospectus Supplement.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit enhancement arrangements and the provider
thereof, if applicable, with respect to each Class of Notes of a given Series,
if any, will be set forth in the related Prospectus Supplement. If and to the
extent provided in the related Prospectus Supplement, credit enhancement may be
in the form of subordination of one or more Classes of Notes, Reserve Accounts,
over-collateralization, letters of credit, credit or liquidity facilities,
surety bonds, guaranteed investment contracts, swaps or other interest rate
protection agreements, repurchase obligations, other agreements with respect to
third party payments or other support, cash deposits or such other arrangements
as may be described in the related Prospectus Supplement or any combination of
two or more of the foregoing. If specified in the related Prospectus Supplement,
credit enhancement for a Class of Notes may cover one or more other Classes of
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Notes of the same Series, and credit enhancement for a Series of Notes may cover
one or more other Series of Notes. In addition, if specified in the related
Prospectus Supplement, credit enhancement for one or more Classes of Notes of a
Series may cover all or a portion of the outstanding amount of such Classes or
may cover losses incurred from all or a portion of the related Receivables.
The presence of a Reserve Account and other forms of credit enhancement for
the benefit of all or any portion of any Class or Series of Notes is intended to
enhance the likelihood of receipt by the Noteholders of such Class or Series of
the full amount of principal and interest due thereon and to decrease the
likelihood that such Noteholders will experience losses. Unless otherwise
specified in the related Prospectus Supplement the credit enhancement for all or
any portion of a Class or Series of Notes will not provide protection against
all risks of loss and will not guarantee repayment of the entire principal
balance and interest thereon. If losses occur which exceed the amount covered by
any credit enhancement or which are not covered by any credit enhancement,
Noteholders of any Class or Series will bear their allocable share of
deficiencies, as described in the related Prospectus Supplement. In addition, if
a form of credit enhancement covers more than one Series of Notes, Noteholders
of any such Series will be subject to the risk that such credit enhancement will
be exhausted by the claims of Noteholders of other Series.
The Transferor may replace the credit enhancement for any Class of Notes
with another form of credit enhancement without the consent of Noteholders,
provided the applicable Rating Agencies confirm in writing that substitution
will not result in the reduction or withdrawal of the rating of such Class of
Notes or any other Class of Notes of the related Series.
RESERVE ACCOUNT. If so provided in the related Prospectus Supplement,
pursuant to the related Transfer and Servicing Agreement, the Transferor will
establish for a Series or Class of Notes an account, as specified in the related
Prospectus Supplement (the "Reserve Account"), which will be maintained in the
name of the related Indenture Trustee. The Reserve Account will be funded by an
initial deposit, if any, by the Transferor on the related Closing Date in the
amount set forth in the related Prospectus Supplement. As further described in
the related Prospectus Supplement, the amount on deposit in the Reserve Account
will be increased on each Distribution Date thereafter up to the "Specified
Reserve Account Balance" (as such term is defined in the related Prospectus
Supplement) by the deposit therein of the amount of collections on the related
Receivables remaining on each such Distribution Date after the payment of all
other required payments and distributions on such date and, if applicable, any
amounts deposited from time to time from the Pre-Funding Account in connection
with the acquisition of Subsequent Receivables. The related Prospectus
Supplement will describe the circumstances and manner under which distributions
may be made out of the Reserve Account, either to holders of the Notes covered
thereby, to the Transferor or to any transferee or assignee of the Transferor.
The Transferor may at any time, without consent of the Noteholders, sell,
transfer, convey or assign in any manner its rights to and interests in
distributions from the Reserve Account, including interest earnings thereon,
provided that (i) the Rating Agencies confirm in writing that such action will
not result in a reduction or withdrawal of the rating of any Class of Notes,
(ii) the Transferor provides to the related Owner Trustee and the related
Indenture Trustee an opinion of counsel from independent counsel that such
action will not cause the related Trust to be treated as an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes or cause Notes properly characterized as debt at the time of their
issuance to not be so characterized for such purposes and (iii) such transferee
or assignee agrees in writing to take positions for tax purposes consistent with
the tax positions agreed to be taken by the Transferor.
REPORTS TO NOTEHOLDERS
With respect to each Series of Notes, on or prior to each Distribution Date,
the Servicer will prepare and provide to the related Indenture Trustee a
statement to be delivered to the related Noteholders on such Distribution Date.
With respect to each Series of Notes, each such statement to be delivered to
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Noteholders will include (to the extent applicable) the following information
(and any other information so specified in the related Prospectus Supplement) as
to the Notes of such Series with respect to such Distribution Date or the period
since the previous Distribution Date, as applicable.
(i) the amount of the distribution allocable to principal of each Class of
Notes of such Series;
(ii) the amount of the distribution allocable to interest on or with respect
to each Class of Notes of such Series;
(iii) the Pool Balance as of the close of business on the last day of the
preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool Factor
for each Class of such Notes, each after giving effect to all payments reported
under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect to the
related Collection Period;
(vi) the Interest Rate or Pass-Through Rate for the next period for any
Class of Notes of such Series with variable or adjustable rates;
(vii) the amount of the Administration Fee paid to the Administrator in
respect of the related Collection Period;
(viii) the amount of the aggregate "Realized Losses" (as defined in the
related Prospectus Supplement), if any, for such Collection Period;
(ix) the aggregate Acquisition Amounts for Receivables, if any, that were
reacquired or purchased in such Collection Period;
(x) the balance of the Reserve Account (if any) on such Distribution Date,
after giving effect to withdrawals therefrom and deposits thereto on such
Distribution Date, and the Specified Reserve Account Balance on such date;
(xi) for each such date during the Funding Period (if any), the remaining
Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following the end of
the Funding Period (if any), the amount of any remaining Pre-Funded Amount that
has not been used to fund the acquisition of Subsequent Receivables and is being
passed through as payments of principal on the Notes of such Series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (vii) and
allocable to the Class A Notes of any Series will be expressed as a dollar
amount per $1,000 of the initial principal balance of such Class A Notes.
Within the prescribed period of times for tax reporting purposes after the
end of each calendar year during the term of each Trust, the Indenture Trustee
will mail to each person who at any time during such calendar year has been a
Noteholder with respect to such Trust and received any payment thereon, a
statement containing certain information for the purposes of such Noteholder's
preparation of federal income tax returns. See "Federal Income Tax
Considerations" herein.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date with respect to each Series of Notes, the
Servicer will provide to the related Indenture Trustee and the related Owner
Trustee as of the close of business on the last day of the preceding Collection
Period a statement setting forth substantially the same information as is
required to be provided in the periodic reports provided to Noteholders of such
Series described under "--Reports to Noteholders" above.
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EVIDENCE AS TO COMPLIANCE
Each Transfer and Servicing Agreement will provide that a firm of
independent public accountants will furnish to the related Trust and Indenture
Trustee annually a statement as to compliance by the Servicer during the
preceding 12 months ended [December 31] (or, in the case of the first such
certificate, the period from the related Closing Date to [December 31] of the
same year) with certain standards relating to the servicing of the related
Receivables, the Servicer's accounting records with respect thereto (including,
if necessary, any computer files) and certain other matters.
Each Transfer and Servicing Agreement will also provide for delivery to the
related Trust and Indenture Trustee, substantially simultaneously with the
delivery of the accountants' statement referred to above, of a certificate
signed by an officer of the Servicer stating that the Servicer either has
fulfilled its obligations under such Transfer and Servicing Agreement in all
material respects throughout the preceding 12 months ended [December 31] (or, in
the case of the first such certificate, the period from the related Closing Date
to [December 31] of the same year) or, if there has been a default in the
fulfillment of any such obligation in any material respect, describing each such
default. The Servicer will agree to give each Indenture Trustee and each Owner
Trustee notice of certain Servicer Defaults under the related Transfer and
Servicing Agreement.
Copies of such statements and certificates may be obtained by Noteholders by
a request in writing addressed to the applicable Indenture Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Transfer and Servicing Agreement will provide that MCC may not resign
from its obligations and duties as Servicer thereunder, except upon
determination that MCC's performance of such duties is no longer permissible
under applicable law. No such resignation will become effective until the
related Indenture Trustee or a successor servicer has assumed MCC's servicing
obligations and duties under such Transfer and Servicing Agreement.
Each Transfer and Servicing Agreement will further provide that neither the
Servicer nor any of its directors, officers, employees and agents shall be under
any liability to the related Trust, the related Noteholders for taking any
action or for refraining from taking any action pursuant to such Transfer and
Servicing Agreement, or for errors in judgment; PROVIDED, HOWEVER, that neither
the Servicer nor any such person will be protected against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. In addition, such Transfer and Servicing
Agreement will provide that the Servicer is under no obligation to appear in,
prosecute, or defend any legal action that is not incidental to its servicing
responsibilities under such Transfer and Servicing Agreement and that, in its
opinion, may cause it to incur any expense or liability.
Under the circumstances specified in such Transfer and Servicing Agreement
(including confirmation by the Rating Agencies that such succession will not
result in the reduction or withdrawal of the rating of any Class of Notes of the
related Series) (a) any entity into which the Servicer may be merged or
consolidated, (b) any entity resulting from any merger or consolidation to which
the Servicer is a party, (c) any entity succeeding to the business of the
Servicer or, (d) any corporation 50% or more of the voting stock of which is
owned, directly or indirectly, by MetLife, which corporation or other entity in
each of the foregoing cases assumes the obligations of the Servicer, will be the
successor of the Servicer under such Transfer and Servicing Agreement.
SERVICER DEFAULT
With respect to each Trust, "Servicer Default" under each Transfer and
Servicing Agreement will consist of (i) any failure by the Servicer to make any
required payment or deposit required under the
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related Transfer and Servicing Agreement which failure continues unremedied for
three business days after written notice from such Indenture Trustee or the
related Owner Trustee is received by the Servicer or after discovery by the
Servicer; (ii) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement in any Transfer and Servicing
Agreement, which failure materially and adversely affects the rights of Class A
Noteholders of the related Series and which continues unremedied for 60 days
after the giving of written notice of such failure (A) to the Servicer by such
Indenture Trustee or such Owner Trustee or (B) to the Servicer and to such
Indenture Trustee and such Owner Trustee by holders of Class A Notes of such
Series, as applicable, evidencing not less than 25% in aggregate principal
amount of the outstanding Class A Notes of the related Series; (iii) certain
events of insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings with respect to the Servicer and certain
actions by the Servicer indicating its insolvency, reorganization pursuant to
bankruptcy proceedings, or inability to pay its obligations (each an "Insolvency
Event"); and (iv) with respect to any Trust, the additional event or events, if
any, specified in the related Prospectus Supplement.
RIGHTS UPON SERVICER DEFAULT
As long as a Servicer Default under a Transfer and Servicing Agreement
remains unremedied, the related Indenture Trustee or the Class A Noteholders of
the related Series (without the consent of the related Indenture Trustee)
evidencing not less than 25% of the outstanding principal amount of such Class A
Notes may terminate all the rights and obligations of the Servicer under such
Transfer and Servicing Agreement, whereupon a successor servicer appointed by
such Indenture Trustee or such Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under such Transfer and
Servicing Agreement and will be entitled to similar compensation arrangements.
If, however, a bankruptcy trustee or similar official has been appointed for the
Servicer, and no Servicer Default other than such appointment has occurred, such
trustee or official may have the power to prevent such Indenture Trustee or such
Noteholders from effecting a transfer of servicing. In the event that the
Indenture Trustee is unwilling or unable to so act, it may appoint, or petition
a court of competent jurisdiction for the appointment of, a successor servicer
with a net worth of at least $50,000,000 and whose regular business includes the
servicing of receivables similar to the related Receivables. Such Indenture
Trustee may make such arrangements for compensation to be paid, which in no
event may be greater than the servicing compensation payable to the Servicer
under such Transfer and Servicing Agreement. An Owner Trustee does not have the
right to remove the Servicer if a Servicer Default occurs.
WAIVER OF PAST DEFAULTS
With respect to each Trust, the holders of Class A Notes evidencing not less
than a majority of the outstanding principal amount of the then outstanding
Class Notes of the related Series may, on behalf of all Noteholders of such
Series waive any default by the Servicer in the performance of its obligations
under the related Transfer and Servicing Agreement and its consequences, except
a default in making any required deposits to or payments from any of the Trust
Accounts in accordance with such Transfer and Servicing Agreement. Therefore,
the Class A Noteholders of any Series have the ability, as limited above, to
waive defaults by the Servicer which could materially and adversely affect the
related Class B Noteholders. With respect to any Series, no such waiver shall
impair the Noteholders' rights with respect to subsequent defaults.
AMENDMENT
Each of the Transaction Agreements may be amended by the parties thereto,
without the consent of the related Noteholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
any such Transaction Agreement or of modifying in any manner the rights of such
Noteholders; PROVIDED HOWEVER, that such action will not, in the opinion of
counsel satisfactory to the related Indenture Trustee, materially and adversely
affect the interest of any such
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Noteholder. In addition, each of the Transaction Agreements may be amended by
the parties thereto, without the consent of the related Noteholders, to
substitute credit enhancement for any Class of Notes, provided the applicable
Rating Agencies confirm in writing that such will not result in a reduction or
withdrawal of the rating of such Class of Notes or any Class of Notes of the
related Series. In addition, each of the Transaction Agreements may be amended
by the Transferor, the Servicer, the related Owner Trustee and the related
Indenture Trustee with the consent of the holders of Class A Notes evidencing at
least a majority of the then outstanding principal amount of such Class A Notes
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Transaction Agreements or of modifying
in any manner the rights of Noteholders of the related Series; provided,
however, that no such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or payments or distributions that are required to be made for the
benefit of the Noteholders or (ii) reduce the aforesaid percentage of the Notes
of such Series which are required to consent to any such amendment, without the
consent of the holders of all the outstanding Notes, as the case may be, of such
Series.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given Series and the
satisfaction and discharge of the related Indenture, the related Owner Trustee
will succeed to all the rights of the related Indenture Trustee under the
related Transfer and Servicing Agreement, except as otherwise provided therein.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Transferor,
the related Owner Trustee and the related Indenture Trustee pursuant to the
related Transaction Agreements will terminate upon (i) the maturity or other
liquidation of the last related Receivables and the disposition of any amounts
received upon liquidation of any such remaining Receivables or (ii) the payment
to Noteholders of the related Series of all amounts required to be paid to them
pursuant to such Transaction Agreements.
With respect to each Trust, in order to avoid excessive administrative
expense, if as of the last day of any Collection Period after the payment in
full of the Class A Notes, the then outstanding Pool Balance with respect to the
Receivables held by such Trust is 10% or less of the "Initial Pool Balance" (as
such term is defined in the related Prospectus Supplement), the Transferor shall
have the option to purchase all remaining related Receivables as of such last
day at a price equal to the aggregate Acquisition Amount for the Receivables
(including defaulted Receivables).
As more fully described in the related Prospectus Supplement, any
outstanding Class B Notes of the related Series will be prepaid concurrently
upon either of the events specified above.
ADMINISTRATION AGREEMENT
MCC, in its capacity as administrator (the "Administrator"), will enter into
an agreement (as amended and supplemented from time to time, the "Administration
Agreement") with each Trust and the related Indenture Trustee pursuant to which
the Administrator will agree, to the extent provided in such Administration
Agreement, to provide the notices and to perform on behalf of the related Trust
certain other administrative obligations required by the related Indenture. As
compensation for the performance of the Administrator's obligations under the
Administration Agreement and as reimbursement for its expenses related thereto
the Administrator will be entitled to a monthly administration fee in an amount
to be set forth in the related Prospectus Supplement (the "Administration Fee").
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SALE AND TRANSFER OF RECEIVABLES
Unless the related Prospectus Supplement provides otherwise the transfer of
the Receivables of each Trust from MCC to the Transferor and from the Transferor
to such Trust, and the granting of the security interest in such Receivables by
such Trust to the related Indenture Trustee, will in each case be perfected by
filing UCC financing statements. If UCC financing statements are filed to
perfect such transfers of ownership or grants of security interests, to
facilitate servicing and reduce administrative costs, the Receivables Files will
be retained by the Servicer and will not be physically segregated from other
similar documents that are in the Servicer's possession or otherwise stamped or
marked to reflect the transfer to the related Trust so long as MCC is servicing
the Receivables. However, UCC financing statements will be filed reflecting the
sale and assignment of the Receivables by MCC to the Transferor, and the
transfer by the Transferor to such Trust, and the Servicer's accounting records
and computer files will be marked to reflect such sales and assignments. Because
the Receivables Files will remain in the Servicer's possession and will not be
stamped or otherwise marked to reflect the assignment to the Indenture Trustee,
if a subsequent purchaser were able to take physical possession of the
Receivables Files without knowledge of such assignment, the Indenture Trustee's
interest in the Receivables could be defeated. In such event, distributions to
Noteholders may be adversely affected.
BANKRUPTCY
The Transferor has taken and will take steps in structuring the transactions
contemplated hereby that are intended to ensure that a voluntary or involuntary
petition for relief by or against MCC under any Insolvency Law will not result
in the substantive consolidation of the assets and liabilities of the Transferor
with those of MCC. These steps include the creation of the Transferor as a
separate limited-purpose entity pursuant to Articles of Incorporation containing
(i) certain limitations (including restrictions on the nature of the
Transferor's business and a restriction on the Transferor's ability to commence
a voluntary case or proceeding under any Insolvency Law without the prior
unanimous affirmative vote of all of its directors) and (ii) a requirement that
at least one of the Transferor's directors be independent of MCC and its
affiliates. However, there can be no assurance that the activities of the
Transferor would not result in a court's concluding that the assets and
liabilities of the Transferor should be substantively consolidated with those of
MCC in a proceeding under any Insolvency Law.
MCC will warrant to the Transferor in each Contribution and Sale Agreement
that the sale of the related Receivables by it to the Transferor is an absolute
sale of such Receivables to the Transferor. In addition, MCC and the Transferor
will treat the transactions described herein and in the related Prospectus
Supplement as a sale of the related Receivables to the Transferor, and the
Transferor has taken and will take all actions (other than delivering the
original contract) that are required to perfect the Transferor's ownership
interest in the related Receivables by the Transferor filing UCC financing
statements. Notwithstanding the foregoing, if MCC were to become a debtor in a
bankruptcy case, and a creditor or trustee-in-bankruptcy of MCC or MCC itself
were to take the position that a sale of Receivables to the Transferor should be
recharacterized as a pledge of such Receivables to secure a borrowing of MCC,
then delays in payments of collections of such Receivables to the Transferor
could occur or, should the court rule in favor of any such trustees, debtor or
creditor, reductions in the amount of such payments, or a reduction in the
amount of Receivables securing such a borrowing, could result. If the
transactions contemplated herein and in the related Prospectus Supplement are
treated as a sale, the related Receivables would not be part of MCC's bankruptcy
estate and would not be available to MCC's creditors.
However, the U.S. Court of Appeals for the Tenth Circuit issued its opinion
in OCTAGON GAS SYSTEMS, INC. V. RIMMER (IN RE MERIDIAN RESERVE, INC.) (decided
May 27, 1993) in which it concluded (noting that its position is in contrast to
that taken by another court) that accounts receivable sold by the debtor prior
to
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the filing for bankruptcy remain property of the debtor's bankruptcy estate.
Although the Receivables are likely to be viewed as "chattel paper," as defined
under the UCC, rather than as accounts, the rationale behind the OCTAGON ruling
could be applied to chattel paper. The circumstances under which the OCTAGON
ruling would apply are not fully known, and the extent to which the OCTAGON
decision will be followed in other courts or outside of the Tenth Circuit is not
certain. If the holding in the OCTAGON case were applied in a MCC bankruptcy,
however, even if the transfers of Receivables to the Transferor and to a Trust
were treated as sales, the related Receivables would be part of MCC's bankruptcy
estate and would be subject to claims of certain creditors and delays and
reductions in payments to the Transferor and holders of the related Notes, or a
reduction in the amount of Receivables supporting such Notes, could result. The
Transferor will warrant in each Transfer and Servicing Agreement that the
transfer of the related Receivables to the related Trust is either an absolute
sale of such Receivables or the grant of a perfected security interest to such
Trust.
SECURITY INTEREST IN FINANCED EQUIPMENT
The documents contained in the Receivables Files will constitute personal
property security agreements and will include or constitute grants of security
interests in the related Financed Equipment under the applicable UCC. Perfection
of security interests in the equipment is generally governed by the laws of the
state in which such equipment (or the Obligor, if the equipment constitutes
mobile goods under the UCC) is located. The UCC generally governs the perfection
of such interests.
All of such Loans and Leases originated or acquired by MCC will name MCC as
obligee or assignee and as the secured party of a first priority security
interest in the related Financed Equipment. Pursuant to the Transaction
Agreements, MCC will contractually agree to take all actions (other than
delivering the original contract) necessary under the laws of the state in which
the Financed Equipment is located to perfect its security interests in the
Financed Equipment in its name, including the filing of UCC financing statements
in the appropriate offices. However, because the Servicer continues to service
the Loan and Leases, the Obligors will not be notified of the sale from MCC to
the Transferor and, in the ordinary course, no action will be taken to record
the transfer of the security interest from MCC to the Transferor by amendment or
assignments of the UCC financing statements or otherwise.
Pursuant to each Contribution and Sale Agreement, MCC will sell and assign
its security interests in the Financed Equipment securing Receivables to the
Transferor and, pursuant to each Transfer and Servicing Agreement, the
Transferor will assign its security interests in the Financed Equipment to the
related Trust. However, because of the administrative burden and expense, none
of the Transferor, the Servicer, MCC or the related Owner Trustee will amend or
file any UCC financing statement to identify the related Trust as the new
secured party on the financing statement relating to the Financed Equipment. See
"Description of the Transaction Agreements--Transfer and Assignment of
Receivables" herein. There are certain limited circumstances under the UCC and
applicable federal law in which prior or subsequent transferees of Receivables
could have an interest in such Receivables with priority over the related
Trust's interest. In addition, while MCC is the Servicer, cash collections on
the Receivables of any Trust will, under certain circumstances, be commingled
with the funds of MCC prior to deposit into the related Collection Account and
in the event of the bankruptcy of MCC, such Trust may not have a perfected
interest in such collections.
In most states, an assignment of a security interest in Financed Equipment
such as that under a Contribution and Sale Agreement and a Transfer and
Servicing Agreement is an effective conveyance of a security interest without
amendment of any UCC financing statement relating to such Financed Equipment,
and the assignee succeeds thereby to the assignor's rights as secured party. By
not identifying a Trust as the secured party on the financing statement, the
security interest of such Trust in the related Financed Equipment could be
defeated through fraud or negligence by MCC. In the absence of error, fraud or
forgery by the related Obligor or administrative error by state or local
agencies, the proper initial filing of the financing statement relating to such
Financed Equipment will be sufficient to protect a Trust against
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the rights of subsequent purchasers of such Financed Equipment or subsequent
lenders who take a security interest in the Financed Equipment. If there is any
Financed Equipment as to which the original secured party, if any, failed to
obtain and assign to MCC a perfected security interest, the security interest of
MCC would be subordinated to, among others, subsequent purchasers of the
equipment and holders of perfected security interests. Such a failure, however,
would constitute a breach of the warranties of MCC under each Contribution and
Sale Agreement and would create an obligation of MCC to reacquire the related
Receivables unless the breach is cured. The Transferor will assign its rights
pursuant to each Contribution and Sale Agreement to the related Trust. See
"Description of the Transaction Agreements--Transfer and Assignment of
Receivables" herein.
Some of the Financed Equipment may constitute "fixtures" under the real
estate or UCC provisions of the jurisdiction in which such Financed Equipment is
located. In order to perfect a security interest in such Financed Equipment, the
holder of the security interest must file either a "fixture filing" under the
provisions of the UCC or a real estate mortgage under the real estate laws of
the state where the Financed Equipment is located. These filings must be made in
the real estate records office of the county in which such Financed Equipment is
located. So long as the Obligor does not permanently attach the Financed
Equipment to the real estate, a security interest in the Financed Equipment will
be governed by the UCC, and the filing of a UCC-1 financing statement will be
effective to maintain the priority of MCC's security interest in the Financed
Equipment. Except for a small portion of such Financed Equipment, MCC does not
believe that any of the Financed Equipment will be permanently affixed to the
related real estate. If, however, any Financed Equipment is permanently attached
to the real estate in which it is located, other parties could obtain an
interest in the Financed Equipment which is prior to the security interest
originally obtained by MCC and transferred to the Transferor. With respect to a
Series of Notes and as described in the related Prospectus Supplement, the
Servicer may be required to perfect a security interest in the Financed
Equipment under applicable real estate laws. Based on the representation of MCC,
the Transferor, however, believes that with respect to Financed Equipment which
constitutes a "fixture", it has obtained a perfected first priority security
interest by proper filing of UCC-1 financing statements in the real estate
records office of the county in which the Financed Equipment is located.
Some of the Financed Equipment may constitute "motor vehicles" under the UCC
provisions of the jurisdiction in which such Financed Equipment is located (such
Financed Equipment, a "Titled Vehicle"). Perfection of security interests in the
Titled Vehicles acquired by the Transferor is generally governed by the motor
vehicle registration laws of the state in which the Titled Vehicle is located.
In all states in which the Receivables have been originated, a security interest
in Titled Vehicles is perfected by notation of the secured party's lien on the
Titled Vehicles' certificate of title [(in addition, in Louisiana, a copy of the
loan or lease contract must be filed with the appropriate governmental recording
office)].
To the extent that any Receivables are secured by a Titled Vehicle, MCC
takes all actions necessary under the laws of the state in which the Titled
Vehicle is located to perfect MCC's security interest in the Titled Vehicle,
including, where applicable, having a notation of its lien recorded on such
Titled Vehicle's certificate of title. Because MCC continues to service the
Receivables, the obligors on the Receivables will not be notified of the
contribution and sale from MCC to the Transferor or the transfer from the
Transferor to the Trust, and no action will be taken to record the transfer of
the security interest from MCC to the Transferor or from the Transferor to the
Trust by amendment of the certificates of title for the Titled Vehicles or
otherwise. Also, MCC will continue to hold any certificates of title relating to
the Titled Vehicles in its possession as custodian for the Transferor and such
Trust pursuant to the related Transfer and Servicing Agreement. See "Description
of the Transaction Agreements--Transfer and Assignment of Receivables".
In most states, an assignment such as that under each Contribution and Sale
Agreement and Transfer and Servicing Agreement is an effective conveyance of a
security interest without amendment of any lien noted on a Titled Vehicle's
certificate of title, and the assignee succeeds thereby to the assignor's rights
as secured party. However, even in such states, by not identifying the
Transferor or the Trust as the secured
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party on the certificate of title, the security interest of the Transferor or
the Trust in the Titled Vehicle could be defeated through fraud or negligence.
In such states, in the absence of fraud or forgery by the vehicle owner or MCC
or administrative error by state or local agencies, the notation of MCC's lien
on the certificates of title will be sufficient to protect the Transferor or the
Trust against the rights of subsequent purchasers of a Titled Vehicle or
subsequent lenders who take a security interest in a Titled Vehicle. If there
are any Titled Vehicles as to which MCC failed to obtain and assign to the
Transferor a perfected security interest, the security interest of the
Transferor would be subordinate to, among others, subsequent purchasers of the
Titled Vehicles and holders of perfected security interests. Such a failure,
however, would constitute a breach of the warranties of MCC under the related
Contribution and Sale Agreement and the Transferor under the related Transfer
and Servicing Agreement and would create an obligation of MCC and the
Transferor, respectively, to repurchase the related Receivables unless the
breach is cured. Pursuant to each Transfer and Servicing Agreement, the
Transferor will assign its right to require MCC to reacquire such Receivables to
the related Trust. See "Description of the Transfer and Servicing Agreements--
Transfer and Assignment of Receivables".
Under the laws of most states, the perfected security interest in a Titled
Vehicle would continue for four months after the Titled Vehicle is moved to a
state other than the state in which it is initially registered and thereafter
until the owner thereof re-registers the Titled Vehicle in the new state. A
majority of states generally require surrender of a certificate of title to re-
register a Titled Vehicle. Accordingly, a secured party must surrender
possession if it holds the certificate of title to the Titled Vehicle or, in the
case of a Titled Vehicle registered in a state providing for the notation of a
lien on the certificate of title but not possession by the secured party, the
secured party would receive notice of surrender if the security interest is
noted on the certificate of title. Thus, the secured party would have the
opportunity to re-perfect its security interest in the Titled Vehicle in the
state of relocation. In states that do not require a certificate of title for
registration of a Titled Vehicle, re-registration could defeat perfection. In
the ordinary course of servicing Titled Vehicle receivables, MCC takes steps to
effect re-perfection upon receipt of notice of re-registration or information
from the obligor as to relocation. Similarly, when an obligor sells a Titled
Vehicle, MCC must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Receivable before release
of the lien. Under each Transfer and Servicing Agreement, the Servicer is
obligated to take appropriate steps, at the Servicer's expense, to maintain
perfection of security interests in the Financed Equipment and is obligated to
purchase the related Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a Titled
Vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a Titled Vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of Titled Vehicles by governmental
authorities under certain circumstances if used in unlawful activities, which
may result in the loss of a secured party's perfected security interest in the
confiscated Titled Vehicle. Under each Transfer and Servicing Agreement, the
Transferor will represent to the related Trust that, as of the date the related
Receivable is sold to such Trust, each security interest in Financed Equipment
is or will be prior to all other present liens (other than tax liens and other
liens that arise by operation of law) upon and security interests in such
Financed Equipment. However, liens for repairs or taxes could arise, or the
confiscation of a Financed Equipment consisting of a Titled Vehicle could occur,
at any time during the term of a Receivable. No notice will be given to the
Owner Trustee, the Indenture Trustee, the Noteholders or the Certificateholders
in respect of a given Trust if such a lien arises or confiscation occurs.
Under each Transfer and Servicing Agreement, the Servicer will be obligated
to take appropriate steps, at its own expense, to maintain perfection of
security interests in each item of Financed Equipment and is obligated to
reacquire the related Receivable if it fails to do so.
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Under the laws of most states, liens for repairs performed on the equipment
and liens for unpaid taxes may take priority over even a perfected security
interest in such goods. The Servicer will represent that, as of the related
Closing Date or Transfer Date, as applicable, each security interest in Financed
Equipment is prior to all other present liens upon and security interests in
such Financed Equipment. However, liens for repairs or taxes unpaid by an
Obligor could arise at any time during the term of a Receivable. Neither the
Transferor nor the Servicer will have any obligation to reacquire a Receivable
if any such lien results in a Trust losing the priority of its security interest
or its security interest in any Financed Equipment after the related Closing
Date, or, if applicable, any related Transfer Date. No notice will be given to
the related Owner Trustee, Indenture Trustee or Noteholders of any Series in the
event such a lien arises.
REPOSSESSION
In the event of default by the obligor, the holder of the loan contract or
finance lease has all the remedies of a secured party under the UCC, except
where specifically limited by other state laws. Among the UCC remedies the
secured party has the right to perform self-help repossession unless such act
would constitute a breach of the peace. Self-help is the method employed by the
Servicer in most cases and is accomplished simply by retaking possession of the
financed equipment. In the event of default by the obligor some jurisdictions
require that the obligor be notified of the default and be given a time period
within which he may cure the default prior to repossession. In cases where the
obligor objects or raises a defense to repossession or if otherwise required by
applicable state law, a court order must be obtained from the appropriate state
court, and the equipment must then be repossessed in accordance with that order.
In the event of default by an Obligor under a Receivable relating to a
Titled Vehicle, the holder of the motor vehicle contract relating to the
Receivable has all the remedies of a secured party under the UCC, except where
specifically limited by other state laws. Among the UCC remedies, the secured
party has the right to perform self-help repossession unless such act would
constitute a breach of the peace. Self-help is the method employed by MCC in
most cases and is accomplished simply by retaking possession of the financed
vehicle. In the event of default by the Obligor, some jurisdictions require that
the Obligor be notified of the default and be given a time period within which
to cure the default prior to repossession. Generally, the right of reinstatement
may be exercised on a limited number of occasions in any one-year period. In
cases where the Obligor objects or raises a defense to repossession, or if
otherwise required by applicable state law, a court order must be obtained from
the appropriate state court, and the vehicle must then be repossessed in
accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws generally require the secured party to provide
the obligor 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.
The obligor generally has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing holding and preparing the collateral
for disposition and arranging for its sale, plus, in some jurisdictions,
reasonable attorneys' fees. In some states, the obligor may cure the default or
reinstate the loan contract or finance lease by payment of delinquent amounts or
the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of any Financed Equipment generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the indebtedness. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness a deficiency judgment can be sought in those states
that do not prohibit or limit such judgments. However, the deficiency judgment
would be a personal judgment against the obligor for the shortfall, and a
defaulting obligor can be expected to have very little capital or sources of
income
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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.
Occasionally, after resale of the equipment and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the lender to remit the surplus to any holder of a junior lien with respect to
the equipment or, if no such lienholder exists or there are remaining funds, the
UCC requires the lender to remit the surplus to the obligor.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
In several cases, debtors have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to debtors.
MCC will warrant under each Contribution and Sale Agreement that each
Receivable complies with all requirements of applicable law in all material
respects. Accordingly, if an Obligor has a claim against a Trust for violation
of any law and such claim materially and adversely affects such Trust's interest
in a Receivable, such violation would constitute a breach of the warranties of
MCC under the related Contribution and Sale Agreement and would create an
obligation of MCC to reacquire such Receivable unless the breach is cured. See
"Description of the Transaction Agreements--Transfer and Assignment of
Receivables" herein.
LEASES
Certain 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 precedent regarding how Article 2A will be interpreted,
it may, among other things, limit enforceability of any "unconscionable" lease
or "unconscionable" provision in a lease, provide a lessee with remedies,
including the right to cancel the lease, for certain lessor breaches or
defaults, and may add to or modify the terms of "consumer leases" and leases
where the lessee is a "merchant lessee." However, with respect to any Lease
conveyed to a Trust, MCC will represent in the related Contribution and Sale
Agreement that (i) such Lease is a "lease intended for security" under the UCC,
(ii) such Lease contract is not a "consumer lease" and (iii) to the best of its
knowledge, the related Obligor has accepted the related Financed Equipment
leased to it and, after reasonable opportunity to inspect and test, has not
notified MCC of any defects therein. Article 2A also recognizes typical
commercial lease "hell or high water" rental payment clauses and validates
reasonable liquidated damages provisions in the event of lessor or lessee
defaults. Moreover, Article 2A recognizes the concept of freedom of contract and
permits the parties in a commercial context a wide degree of latitude to vary
provisions of the law.
OTHER
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a case
under the federal bankruptcy law, a court may prevent a lender from repossessing
the equipment, and, as part of the rehabilitation plan, reduce the amount of the
secured indebtedness to the market value of the equipment at the time of
bankruptcy (as determined by the court), leaving the party providing financing
as a general unsecured creditor for the remainder of the indebtedness. A
bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the
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indebtedness. For a discussion of other legal aspects relating to Receivables of
a Trust, if any, see "Certain Legal Aspects of the Receivables" in the related
Prospectus Supplement.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes United States federal income tax
consequences of an investment in the Notes as of the date hereof. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), and
existing final, temporary and proposed Treasury Regulations, Revenue Rulings and
judicial decisions, all of which are subject to prospective and retroactive
changes. The summary is addressed only to original purchasers of the Notes,
deals only with Notes held as capital assets within the meaning of Section 1221
of the Code and does not address tax consequences of holding Notes that may be
relevant to investors in special tax situations, such as certain financial
institutions, tax-exempt organizations, life insurance companies, dealers in
securities or currencies, or investors holding the Notes as part of a conversion
transaction, as part of a hedge or hedging transaction, or as a position in a
straddle for tax purposes. Each Trust will be provided with an opinion of
counsel to each Trust by Orrick, Herrington & Sutcliffe LLP, Washington, D.C.
("Special Tax Counsel") regarding certain federal income tax matters discussed
below. An opinion of Special Tax Counsel, however, is not binding on the
Internal Revenue Service ("IRS") or the courts, and no ruling on any of the
issues discussed below will be sought from the IRS. Moreover, there are no
authorities on similar transactions involving interests issued by a trust with
terms similar to those of the Notes described herein and in the related
Prospectus Supplement. Accordingly, persons considering the purchase of Notes
should consult their own tax advisors with regard to the United States federal
income tax consequences of an investment in the Notes and the application of
United States federal income tax laws, as well as the laws of any state, local
or foreign taxing jurisdictions, to their particular situations.
FOR PURPOSES OF THE FOLLOWING SUMMARY, REFERENCES TO THE TRUST, THE NOTES
AND RELATED TERMS, PARTIES AND DOCUMENTS SHALL BE DEEMED TO REFER, UNLESS
OTHERWISE SPECIFIED HEREIN, TO EACH TRUST AND THE NOTES AND RELATED TERMS,
PARTIES AND DOCUMENTS APPLICABLE TO SUCH TRUST.
TAX CHARACTERIZATION OF THE TRUST
Special Tax Counsel will deliver its opinion that the Trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation for United States federal income tax purposes. This opinion is based
on the assumption that the terms of the Trust Agreement and related documents
will be complied with.
If the Trust were taxable as a corporation for United States federal income
tax purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Receivables and other assets of the Trust, reduced by allowable deductions and
possibly reduced by its interest expense on the Notes. Any such corporate income
tax could materially reduce cash available to make payments on the Notes.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Transferor will agree by
entering into the Transfer and Servicing Agreement, and the Noteholders will
agree by their purchase of Notes, to treat the Notes as debt for United States
federal income tax purposes. Special Tax Counsel will advise the Trust that the
Notes will be classified as debt for United States federal income tax purposes.
The discussion below assumes that the characterization of the Notes as debt is
correct.
OID, STRIP NOTES, ETC. The discussion below assumes that the payments on
the Notes are denominated in U.S. dollars, and the Notes are not Strip Notes.
Moreover, the discussion assumes that the interest formula for the Notes meets
the requirements for "qualified stated interest" under Treasury regulations (the
"OID Regulations") relating to original issue discount ("OID"), and that any OID
on the Notes (I.E.,
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any excess of the principal amount of the Notes over their issue price) does not
exceed a DE MINIMIS amount (IE., 1/4% of their principal amount multiplied by
their weighted average life, calculated using the prepayment assumption used in
pricing the Notes and weighting each payment by reference to the number of
complete years from the issue date to the day of such payment, all within the
meaning of the OID Regulations). If these conditions are not satisfied with
respect to any given Series of Notes and, as a result, the Notes are treated as
issued with OID, additional tax considerations with respect to such Notes will
be disclosed in the related Prospectus Supplement.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed below, the Notes will not be considered to have been issued with
original issue discount. Accordingly, the stated interest on a Note will be
taxable to a Noteholder as ordinary interest income at the time it accrues or is
received in accordance with the Noteholder's regular method of accounting for
tax purposes. A purchaser who buys a Note for more or less than its principal
amount will generally be subject, respectively, to the premium amortization or
market discount rules of the Code.
However, because a failure to pay interest currently on the Notes is not a
default and does not give rise to a penalty, under Treasury Regulations relating
to the treatment of debt instruments issued with OID, the Notes might be viewed
as having been issued with original issue discount. Holders of the Notes would
be required to include the original issue discount in gross income for federal
income tax purposes as it accrues, in accordance with a constant interest method
based on a compounding of interest, in advance of receipt of the cash payments
attributable to such income.
SALE OF THE NOTES. Upon the sale of a Note, the Noteholder will recognize
taxable gain or loss in an amount equal to the difference between the amount
realized on the sale (other than amounts attributable to accrued interest) and
the Noteholder's adjusted tax basis in the Note. The Noteholder's adjusted tax
basis in the Note will equal the cost of the Note to such Noteholder, increased
by any market discount previously included in income by such Noteholder with
respect to the Note, and decreased by the amount of any bond premium previously
amortized and any principal payments previously received by such Noteholder with
respect to such Note. Any such gain or loss will be capital gain or loss, except
to the extent of accrued market discount not previously included in income (or,
in the case of a prepayment or redemption, any OID not yet accrued), and will be
long term capital gain or loss if at the time of sale the Note has been held for
more than one year.
FOREIGN HOLDERS. Under United States federal income tax law now in effect,
payments of interest by the Trust to a Noteholder who, as to the United States,
is a nonresident alien individual, a foreign corporation or other non-United
States person (a "foreign person") generally will be considered "portfolio
interest," and generally will not be subject to United States federal income tax
and withholding tax, provided the interest is not effectively connected with the
conduct of a trade or business within the United States by the foreign person
and the foreign person (i) is not actually or constructively a "10 percent
shareholder" of the Trust or the Transferor, is not for United States federal
income tax purposes a "controlled foreign corporation" with respect to which the
Trust or the Transferor is a "related person" within the meaning of the Code, or
is not a bank extending credit pursuant to a loan agreement entered into in the
ordinary course of its trade or business, and (ii) provides the person who is
otherwise required to withhold United States tax with respect to the Notes with
an appropriate statement (on IRS Form W-8 or a substitute form), signed under
penalties of perjury, certifying that the beneficial owner of the Note is a
foreign person and providing the foreign person's name and address. If a Note is
held through a securities clearing organization or certain other financial
institutions (as is expected to be the case unless Definitive Notes are issued),
the organization or institution may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement must be
accompanied by an IRS Form W-8 or substitute form provided by the foreign person
that owns the Note. If such interest is not portfolio interest, then it will be
subject to United States federal income and withholding tax at a rate of 30%,
unless reduced or eliminated pursuant to an applicable tax treaty or such
interest is effectively connected with the
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conduct of a trade or business within the United States and, in either case, the
appropriate statement has been provided.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
BACKUP WITHHOLDING. Payments of principal and interest, as well as payments
of proceeds from the sale, retirement or disposition of a Note, may be subject
to "backup withholding" tax under Section 3406 of the Code at a rate of 31% if a
recipient of such payments fails to furnish to the payor certain identifying
information. Any amounts deducted and withheld would be allowed as a credit
against such recipient's United States federal income tax, provided appropriate
proof is provided under rules established by the IRS. Furthermore, certain
penalties may be imposed by the IRS on a recipient of payments that is required
to supply information but that does not do so in the proper manner. Backup
withholding will not apply with respect to payments made to certain exempt
recipients, such as corporations and financial institutions. Noteholders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Special Tax Counsel, the IRS successfully asserted that one or more Classes
of the Notes did not represent debt for United States federal income tax
purposes, the Notes might be treated as equity interests in the Trust. If so
treated, the Trust might be 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). Further, treatment of the Notes as equity interests
in a partnership could have other adverse tax consequences to certain holders.
For example, income to foreign persons generally would be subject to United
States tax and United States tax return filing and withholding requirements, and
individual holders might be subject to certain limitations on their ability to
deduct their share of Trust expenses.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE NOTES INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
STATE TAX CONSIDERATIONS
BECAUSE EACH STATE'S INCOME TAX LAWS VARY, IT IS IMPOSSIBLE TO PREDICT THE
INCOME TAX CONSEQUENCES TO THE HOLDERS OF THE NOTES IN ALL OF THE STATE TAXING
JURISDICTIONS IN WHICH SUCH HOLDERS WILL BE SUBJECT TO TAX. FURTHER, IT IS
IMPOSSIBLE TO PREDICT THE INCOME TAX CONSEQUENCES TO THE TRUST IN ALL TAXING
JURISDICTIONS. NOTEHOLDERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX AND OTHER
ADVISORS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
impose certain requirements on employee benefit plans and certain other plans
and arrangements, including individual retirement accounts and annuities, Keogh
plans and certain collective investment funds or insurance company general or
separate
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accounts in which such plans, accounts or arrangements are invested, that are
subject to the fiduciary responsibility provisions of ERISA and/or Section 4975
of the Code (collectively, "Plans"), and on persons who are fiduciaries with
respect to Plans, in connection with the investment of "plan assets" of any Plan
("Plan Assets"). ERISA generally imposes on Plan fiduciaries certain general
fiduciary requirements, including those of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan. Generally, any person who
provides investment advice with respect to Plan Assets for a fee, is a fiduciary
with respect to such Plan Assets.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ("Parties in Interest" under ERISA and
"Disqualified Persons" under the Code) who have certain specified relationships
to a Plan or its Plan Assets, unless a statutory or administrative exemption is
available. Parties in Interest or Disqualified Persons that participate in a
prohibited transaction may be subject to a penalty imposed pursuant to Section
4975 of the Code, unless a statutory or administrative exemption is available.
These prohibited transactions generally are set forth in Section 406 of ERISA
and Section 4975 of the Code.
ANY FIDUCIARY OR OTHER PLAN INVESTOR CONSIDERING WHETHER TO PURCHASE ANY
NOTES ON BEHALF OF OR WITH PLAN ASSETS OF ANY PLAN SHOULD CONSULT WITH ITS
COUNSEL AND REFER TO THE RELATED PROSPECTUS SUPPLEMENT FOR GUIDANCE REGARDING
THE ERISA CONSIDERATIONS APPLICABLE TO THE NOTES OFFERED THEREBY.
Certain employee benefit plans, such as 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 the requirements of ERISA or Section 4975 of the
Code. Accordingly, assets of such plans may be invested in the Notes of any
Series without regard to the ERISA considerations described herein and in the
applicable Prospectus Supplement, subject to the provisions or other applicable
federal and state law. However, any such plan that is qualified and exempt from
taxation under Sections 401(a) and 501(a) of the Code is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
PLAN OF DISTRIBUTION
The Notes of each Series may be sold to or through underwriters (the
"Underwriters") by a negotiated firm commitment underwriting and public
reoffering by the Underwriters or such other underwriting arrangement as may be
specified in the related Prospectus Supplement or may be placed either directly
or through agents. The Transferor intends that the Notes will be offered through
such various methods from time to time and that offerings may be made
concurrently through more than one of such methods or that an offering of a
particular Series of Notes may be made through a combination of such methods.
Each Prospectus Supplement will set forth the price at which each Class of
Notes being offered thereby will be offered to the public and any concessions
that may be offered to certain dealers participating in the offering of such
Notes. After the initial public offering of any such Notes, such public offering
prices and such concessions may be changed.
Each Underwriting Agreement (as defined in the related Prospectus
Supplement) will provide that the Transferor and MCC will indemnify the related
Underwriters against certain civil liabilities, including liabilities under the
Securities Act, or contribute to payments the several underwriters may be
required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts in
Eligible Investments acquired from such underwriters.
Pursuant to each of the Underwriting Agreements with respect to a given
Series of Notes, the closing of the sale of each Class of Notes will be
contingent on the closing of the sale of all other such Classes. The place and
time of delivery for the Securities in respect of which this Prospectus is
delivered will be set forth in the related Prospectus Supplement.
58
<PAGE>
RATINGS
Each Class of Notes of a Series offered pursuant to this Prospectus and a
related Prospectus Supplement will be rated at its initial issuance in one of
the four highest categories by at least one nationally recognized statistical
rating organization (each, a "Rating Agency").
A security rating is not a recommendation to buy, sell or hold Notes and may
be subject to revision or withdrawal at any time by the assigning Rating Agency.
No person is obligated to maintain the rating on any Note, and, accordingly,
there can be no assurance that the ratings assigned to a Note upon initial
issuance will not be lowered or withdrawn by a Rating Agency at any time
thereafter. In general, ratings address credit risk and do not represent any
assessment of the likelihood of rate of principal prepayments.
LEGAL OPINIONS
Certain legal matters relating to the Notes will be passed upon for each
Trust, the Transferor and the Servicer by Davis Wright Tremaine LLP, Seattle, WA
and with respect to certain federal tax matters, by Orrick, Herrington &
Sutcliffe LLP, Washington, D.C.. Certain legal matters relating to the Notes
will be passed upon for the Underwriters by Orrick, Herrington & Sutcliffe LLP,
Washington, D.C.
59
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found herein:
<TABLE>
<S> <C>
Acquisition Amount................................................................. 40
Administration Agreement........................................................... 10, 48
Administration Fee................................................................. 10, 48
Administrator...................................................................... 10, 48
APR................................................................................ 22
Article 2A......................................................................... 19, 54
Base Rate.......................................................................... 34
Book-Entry Notes................................................................... 35
Calculation Agent.................................................................. 34
Cede............................................................................... 3
Cedel.............................................................................. 35
Cedel Participants................................................................. 37
Class.............................................................................. 1
Class A Notes...................................................................... 1
Class A Noteholders................................................................ 4
Closing Date....................................................................... 39
Code............................................................................... 55, 62
Collection Account................................................................. 40
Commission......................................................................... 3
Contribution and Sale Agreement.................................................... 6
Cut-off Date....................................................................... 6
Cut-off Date APR................................................................... 41
Definitive Notes................................................................... 35
Depositaries....................................................................... 35
Depository......................................................................... 28
Distribution Date.................................................................. 29
DTC................................................................................ 3
Early Amortization Event........................................................... 8
Eligible Deposit Account........................................................... 41
Eligible Institution............................................................... 41
Eligible Investments............................................................... 40
ERISA.............................................................................. 57
Euroclear.......................................................................... 37
Euroclear Operator................................................................. 37
Euroclear Participants............................................................. 37
Euroclear System................................................................... 37
Event of Default................................................................... 30
Exchange Act....................................................................... 3
Financed Equipment................................................................. 1, 5
Fixed Rate Notes................................................................... 34
Floating Rate Notes................................................................ 34
Funding Period..................................................................... 5
Indenture.......................................................................... 4
Indenture Trustee.................................................................. 1, 28
Indirect Participants.............................................................. 35
Initial Cut-off Date............................................................... 6
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
Initial Pool Balance............................................................... 48
Initial Receivables................................................................ 6, 34
Insolvency Event................................................................... 47
Insolvency Laws.................................................................... 14
Interest Payment Account........................................................... 40
Interest Rate...................................................................... 5
Interest Reset Period.............................................................. 34
Investment Earnings................................................................ 41
IRS................................................................................ 55
Issuer............................................................................. 4
Lease.............................................................................. 5
Loan Contract...................................................................... 5
MCC................................................................................ 4
Mechanics' Liens................................................................... 11
Note Distribution Account.......................................................... 40
Note Pool Factor................................................................... 26
Noteholder......................................................................... 36
Noteholders........................................................................ 36
Notes.............................................................................. 7
NTOOL.............................................................................. 25
Obligor............................................................................ 6
OID................................................................................ 55
OID Regulations.................................................................... 55
Owner Trustee...................................................................... 1
Participants....................................................................... 35
Parties in Interest................................................................ 58
Plan Assets........................................................................ 58
Plans.............................................................................. 58
Pool Balance....................................................................... 26
Pre-Funded Amount.................................................................. 7, 8, 16
Pre-Funding Account................................................................ 1, 9
Principal Balance.................................................................. 40
Principal Funding Account.......................................................... 40
Prospectus Supplement.............................................................. 1
Quality Code....................................................................... 23
Rating Agency...................................................................... 12, 59
Realized Losses.................................................................... 45
Receivables........................................................................ 1, 6
Receivables Files.................................................................. 13
Record Date........................................................................ 35
Registration Statement............................................................. 3
Related Documents.................................................................. 32
Reserve Account.................................................................... 44
Revolving Period................................................................... 8
Rules.............................................................................. 36
Schedule of Receivables............................................................ 39
Scheduled Revolving Period Termination Date........................................ 8
Securities Act..................................................................... 3
Series............................................................................. 1
Servicer........................................................................... 4
Servicer Default................................................................... 46
</TABLE>
61
<PAGE>
<TABLE>
<S> <C>
Servicer's Yield................................................................... 10, 42
Servicing Fee...................................................................... 10
Servicing Fee Rate................................................................. 10, 42
Special Tax Counsel................................................................ 55
Specified Reserve Account Balance.................................................. 8, 44
Spread............................................................................. 34
Spread Multiplier.................................................................. 34
Strip Notes........................................................................ 5
Subsequent Cut-off Date............................................................ 6
Subsequent Receivables............................................................. 1, 39
Terms and Conditions............................................................... 37
Titled Vehicle..................................................................... 13, 51
Total Distribution Amount.......................................................... 42
Transaction Agreements............................................................. 39
Transfer and Servicing Agreement................................................... 6
Transfer Date...................................................................... 39
Transferor......................................................................... 1, 4
Trust.............................................................................. 1
Trust Accounts..................................................................... 40
Trust Agreement.................................................................... 4
Trust Property..................................................................... 22
UCC................................................................................ 10, 13
Underwriters....................................................................... 58
</TABLE>
62
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement or in the accompanying
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Transferor, the Servicer or the
Underwriters. This Prospectus Supplement and the accompanying Prospectus do not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized by anyone in any state i which such offer or
solicatation 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 or the accompanying Prospectus, nor any sale made hereunder or
thereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Transferor or the Receivables since the
date hereof or thereof or that the information contained or incorporated by
reference herein or therein is correct as of any time subsequent to to its date.
----------
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Reports to Class A Noteholders.............................................S-3
Summary of Terms...........................................................S-4
Creation of the Trust.....................................................S-22
The Receivables Pool......................................................S-23
Weighted Average Life of the Class A Notes................................S-31
Pool Factor and Trading Information.......................................S-31
Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................S-31
Use of Proceeds...........................................................S-32
The Transferor and the Servicer...........................................S-32
Description of the Class A Notes..........................................S-32
Description of the Transaction Agreements.................................S-34
ERISA Considerations......................................................S-44
Underwriting .............................................................S-45
Legal Opinions............................................................S-46
Index of Terms............................................................S-47
Annex I - Global Clearance, Settlement and
Tax Documentation Procedures.............................................A-1
Prospectus
Page
----
Reports to Noteholders ......................................................3
Available Information........................................................3
Incorporation of Certain Documents by Reference..............................3
Summary of Terms.............................................................4
Risk Factors................................................................13
The Trusts..................................................................21
The Trust Property..........................................................22
The Receivables Pool........................................................22
Weighted Average Life of the Notes..........................................25
Pool Factors and Trading Information........................................26
Use of Proceeds.............................................................26
The Transferor and the Servicer.............................................27
Description of the Notes....................................................28
Certain Information Regarding the Notes.....................................34
Issuance of the Notes.......................................................35
Description of the Transaction Agreements...................................39
Certain Legal Aspects of the Receivables....................................49
Federal Income Tax Considerations...........................................55
State Tax Considerations....................................................57
ERISA Considerations........................................................57
Plan of Distribution .......................................................58
Ratings.....................................................................59
Legal Opinions..............................................................59
Index of Terms..............................................................60
[Until _________ __, ____ (90 days after the date of this Prospectus
Supplement), all dealers effecting transactions in the Securities, whether or
not participating in this distribution, may be required to deliver a Prospectus
Supplement and a Prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a Prospectus Supplement and a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.]
METLIFE CAPITAL
FUNDING CORP. III
Transferor
METLIFE CAPITAL CORPORATION
Servicer
PROSPECTUS SUPPLEMENT
[Underwriters]
---------- --, ----
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
Registration Statement Fee................................... *
Printing and Engraving Expenses.............................. *
Trustee's Fees and Expenses.................................. *
Legal Fees and Expenses...................................... *
Blue Sky Fees and Expenses................................... *
Accountants' Fees and Expenses............................... *
Rating Agency Fees........................................... *
Miscellaneous Fees and Expenses.............................. *
--------
Total..................................................... $ *
==========
--------------
* To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
The Transfer and Servicing Agreement will provide that any director,
officer, employee or agent of the Registrant will be indemnified by the Servicer
from and against (a) certain liabilities arising in connection with the Financed
Equipment, (b) taxes levied against such person in connection with the
transaction (including costs and expenses in defending against the same) and (c)
certain liabilities arising in connection with the Servicer's gross negligence,
willful misfeasance or bad faith in the performance of its duties.
Article XI of the Certificate of Incorporation for MetLife Capital Funding
Corp. III (the "Corporation") provides that the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended, a director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director. Any repeal or modification of this Article XI shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
Article V of the By-Laws of the Corporation provides:
Indemnification of Officers, Directors and Others
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary, or agent of another Corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the Corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to
II-1
<PAGE>
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment) against all expense, liability and loss
(including attorneys' fees actually and reasonably incurred by such person in
connection with such proceeding) and such indemnification shall inure to the
benefit of his heirs, executors and administrators; provided, however, that,
except as provided in Section 2 hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by such
person only if such proceeding was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this Article V shall be a
contract right and, subject to Sections 2 and 5 hereof, shall include the right
to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition. The Corporation may, by action
of its board of directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
Section 2. Procedure for indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V or
advance of expenses under Section 5 of this Article V shall be made promptly,
and in any event within thirty (30) days, upon the written request of the
director or officer. If a determination by the Corporation that the director or
officer is entitled to indemnification pursuant to this Article V is required,
and the Corporation fails to respond within sixty (60) days to a written request
for indemnity, the Corporation shall be deemed to have approved the request. If
the Corporation denies a written request for indemnification or advancing of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within thirty (30) days, the right to indemnification or advances as
granted by this Article V shall be enforceable by the director or officer in any
court of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of such defense shall be on the Corporation. Neither the failure of the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the Corporation or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the Corporation would have the power to indemnify such
person against such liability under this Article V.
II-2
<PAGE>
Section 5. Expenses. Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the Corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
Corporation. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the Corporation, or who are or were serving at the request of the Corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the Corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the Corporation" shall include, in addition to the resulting
Corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under Article V with
respect to the resulting or surviving corporation as he or she would have with
respect to such constituent corporation if its separate existence had continued.
Item 16. Exhibits.
1.1 -Form of Underwriting Agreement for the Notes.*
3.1 -Form of Certificate of Trust of a Trust.**
4.1 -Form of Indenture (including Form of Asset Backed Note).**
4.2 -Form of Trust Agreement.**
4.3 -Form of Transfer and Servicing Agreement.**
5.1 -Opinion of Orrick, Herrington & Sutcliffe with respect to legality.**
8.1 -Opinion of Orrick, Herrington & Sutcliffe with respect to federal tax
matters.**
10.1 -Form of Contribution and Sale Agreement.**
10.2 -Form of Administration Agreement.**
23.1 -Consents of Orrick, Herrington & Sutcliffe (included in its opinions
filed as Exhibits 5.1 and 8.1).
23.2 -Consent of Davis Wright Tremaine LLP.*
24.1 -Powers of Attorney.**
25.1 -Statement of eligibility of trustee.
- ---------------
* To be filed by amendment.
** Previously filed.
II-3
<PAGE>
Item 17. Undertakings.
The undersigned Registrant on behalf of the MetLife Capital Equipment Loan
Trusts (the "Trusts") hereby undertakes as follows:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement; (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (a)(1)(i) and
(a)(1)(ii) will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering hereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) with respect to any Trust that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of each
issue.
(d) (1) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
II-4
<PAGE>
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) To file an application for the purpose of determining the eligibility
of the Indenture Trustee for each Trust to act under subsection (a) of Section
310 of the Trust Indenture Act of 1939 in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of such Act.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bellevue, State of Washington, on May 6, 1997.
METLIFE CAPITAL FUNDING CORP. III
as originator of the Trusts and as Registrant
By: /s/ Linda Foley
--------------------------------------------
Name: Linda Foley
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed on May 6, 1997 by the following
persons in the capacities indicated.
Signature Title
--------- -----
/s/ Joseph G. Rooney* Director, President
- ----------------------------- (Chief Executive Officer)
Joseph G. Rooney
/s/ Paul J. Graf* Director
- -----------------------------
Paul J. Graf
/s/ Cynthia L. Pope* Director
- -----------------------------
Cynthia L. Pope
/s/ John J. Reiner* Vice President, Treasurer,
- ----------------------------- (Chief Financial Officer)
John J. Reiner
/s/ Linda Foley Vice President
- ----------------------------- (Chief Accounting Officer)
Linda Foley
*By:/s/ Linda Foley
- -----------------------------
Linda Foley
Attorney-in Fact
- ---------------------
*Note: Powers of Attorney appointing Joseph G. Rooney and Linda Foley, or
either of them acting singly, to execute the Registration
Statement and any amendments thereto on behalf of the above-named
individuals, were previously filed with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Description Number
- ------- ----------- ----------
1.1 -Form of Underwriting Agreement for the Notes.*
3.1 -Form of Certificate of Trust of a Trust.**
4.1 -Form of Indenture (including Form of Asset Backed
Note).**
4.2 -Form of Trust Agreement.**
4.3 -Form of Transfer and Servicing Agreement.**
5.1 -Opinion of Orrick, Herrington & Sutcliffe with respect to
legality.**
8.1 -Opinion of Orrick, Herrington & Sutcliffe with respect to
federal tax matters.**
10.1 -Form of Contribution and Sale Agreement.**
10.2 -Form of Administration Agreement.**
23.1 -Consents of Orrick, Herrington & Sutcliffe (included in its
opinions filed as Exhibits 5.1 and 8.1).
23.2 -Consent of Davis Weight Tremaine LLP.*
24.1 -Powers of Attorney.**
25.1 -Statement of eligibility of trustee.
- ---------------
* To be filed by amendment.
** Previously filed.
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
Metlife Capital Equipment Loan Trusts
(Exact name of obligor as specified in its charter)
Delaware 91-1788640
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
10900 N.E. 4th Street Suite 550
Bellevue, WA 98004
(Address of principal executive offices) (Zip Code)
---------------------------------------------
Class A Asset-Backed Notes
(Title of the indenture securities)
---------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 2nd day of May, 1996.
THE CHASE MANHATTAN BANK
By /s/ John Mynttinen
----------------------------
Second Vice President
- 3 -
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, in accordance
with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .......................................... $ 11,509
Interest-bearing balances .................................. 8,457
Securities:
Held to maturity securities ..................................... 3,128
Available for sale securities ................................... 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ......................................... 9,222
Securities purchased under agreements to resell ............ 422
Loans and lease financing receivables:
Loans and leases, net of unearned income ......... $133,935
Less: Allowance for loan and lease losses ........ 2,789
Less: Allocated transfer risk reserve ............ 16
--------
Loans and leases, net of unearned income,
allowance, and reserve ..................................... 131,130
Trading Assets .................................................. 49,876
Premises and fixed assets (including capitalized
leases) .................................................... 2,877
Other real estate owned ......................................... 290
Investments in unconsolidated subsidiaries and
associated companies ....................................... 124
Customer's liability to this bank on acceptances
outstanding ................................................ 2,313
Intangible assets ............................................... 1,316
Other assets .................................................... 11,231
TOTAL ASSETS .................................................... $272,429
========
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<PAGE>
LIABILITIES
Deposits
In domestic offices ............................................ $ 87,006
Noninterest-bearing ...................................$ 35,783
Interest-bearing ........................................51,223
------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ...................................................... 73,206
Noninterest-bearing ...................................$ 4,347
Interest-bearing ........................................68,859
Federal funds purchased and securities sold under agree-
ments to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased ........................................ 14,980
Securities sold under agreements to repurchase ................. 10,125
Demand notes issued to the U.S. Treasury ............................ 1,867
Trading liabilities ................................................. 34,783
Other Borrowed money:
With a remaining maturity of one year or less .................. 14,639
With a remaining maturity of more than one year ................ 425
Mortgage indebtedness and obligations under capitalized
leases.......................................................... 40
Bank's liability on acceptances executed and outstanding 2,267
Subordinated notes and debentures ................................... 5,471
Other liabilities.................................................... 11,343
TOTAL LIABILITIES ................................................... 256,152
--------
Limited-Life Preferred stock and related surplus 550
EQUITY CAPITAL
Common stock ........................................................ 1,251
Surplus.............................................................. 10,243
Undivided profits and capital reserves .............................. 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities .................................... (309)
Cumulative foreign currency translation adjustments ................. 16
TOTAL EQUITY CAPITAL ................................................ 15,727
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ....................................... $272,429
========
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
THOMAS G. LABRECQUE )
