<PAGE>
As filed with the Securities and Exchange Commission on May 1, 1997
Registration No. 333-23679
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COPELCO CAPITAL FUNDING CORP. X
(Exact name of registrant as specified in its charter)
-------------------
<TABLE>
<S> <C> <C>
Delaware 6799 22-3261117
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Code Number) Identification No.)
</TABLE>
Copelco Capital Funding Corp. X
East Gate Drive
Mount Laurel, New Jersey 08054-5400
(609) 231-9600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------
Spencer N. Lempert, Esq.
Copelco Capital Funding Corp. X
East Gate Drive
Mount Laurel, New Jersey 08054-5400
(609) 231-9600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Peter Humphreys, Esq.
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
(212) 259-6730
Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the 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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Proposed maximum Proposed maximum
Title of each class of Amount to be offering aggregate offering Amount of
securities to be registered registered price per unit(1) price(1) registration fee
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Class A-1 Lease-Backed Notes.............. $1,000,000 100% $1,000,000 $303.03
==================================================================================================================================
Class A-2 Lease-Backed Notes $1,000,000 100% $1,000,000 $303.03
==================================================================================================================================
Class A-3 Lease-Backed Notes $1,000,000 100% $1,000,000 $303.03
==================================================================================================================================
Class A-4 Lease-Backed Notes.............. $1,000,000 100% $1,000,000 $303.03
==================================================================================================================================
Class B Lease-Backed Notes................ $1,000,000 100% $1,000,000 $303.03
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
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, as amended, or until the registration statement
shall become effective on such date as the commission, acting pursuant to said
section 8(a), may determine.
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<PAGE>
COPELCO CAPITAL FUNDING CORP. X
CROSS REFERENCE SHEET
(Pursuant to Rule 404(a) and Item 501 of Regulation S-K)
<TABLE>
<CAPTION>
Item
No. Name and Caption in Form S-1 Caption in Prospectus
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Forepart of the Registration Statement; Front Cover Page
Cover Page of Prospectus of Prospectus; Cross Reference Sheet
2. Inside Front and Outside Back Cover Pages of the Inside Front Cover and Outside Back Cover Pages of
Prospectus Prospectus; Terms of the Notes; Available Information;
Table of Contents
3. Summary Information; Risk Factors and Ratio of Prospectus Summary; Risk Factors; Certain Legal
Earnings to Fixed Charges Aspects; Prepayment and Yield Considerations
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Underwriting
9. Description of Securities to be Registered Prospectus Summary; Description of the Notes;
10. Interest of Named Experts and Counsel *
11. Material Changes *
12. Disclosure of Commission Position on Indemnification *
for Securities Act Liabilities
</TABLE>
* Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DATED May 1, 1997
PRELIMINARY PROSPECTUS
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$-----------
Copelco Capital Funding Corp. X, Issuer
Copelco Capital, Inc., Servicer
$___________ ____% Class A-1 Lease-Backed Notes, Series 1997-A
$___________ ____% Class A-2 Lease-Backed Notes, Series 1997-A
$___________ ____% Class A-3 Lease-Backed Notes, Series 1997-A
$___________ ____% Class A-4 Lease-Backed Notes, Series 1997-A
$___________ ____% Class B Lease-Backed Notes, Series 1997-A
The Copelco Lease-Backed Notes, Series 1997-A will consist of
the following classes (each, a "Class"): (i) the Class A-1 Notes (the "Class A-1
Notes"), the Class A-2 Notes (the "Class A-2 Notes"), the Class A-3 Notes (the
"Class A-3 Notes") and the Class A-4 Notes (the "Class A-4 Notes"; together with
the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes, the "Class A Notes"),
(ii) the Class B Notes (the "Class B Notes") and (iii) the Class C Notes (the
"Class C Notes"; and together with the Class A Notes and Class B Notes, the
"Notes"). Only the Class A Notes and the Class B Notes (together, the "Offered
Notes") will be offered hereby.
The Notes will represent debt obligations of Copelco Capital
Funding Corp. X (the "Issuer"), a special-purpose bankruptcy remote subsidiary
of Copelco Capital, Inc. ("Copelco Capital"). The assets of the Issuer securing
the Notes will include a pool of healthcare, manufacturing and business
equipment leases, and all of Copelco Capital's interest in the equipment
underlying the leases. The leases and the related interests in the equipment
were originated or acquired by Copelco Capital as described herein and sold or
contributed by Copelco Capital to the Issuer under a sales and servicing
agreement (the "Sales and Servicing Agreement") by and between Copelco Capital
and the Issuer.
(continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
An investment in the Offered Notes involves certain risks. See "Risk Factors"
commencing on page 18 for a discussion of certain factors that should be
considered in connection with an investment in the securities offered hereby.
THE OFFERED NOTES WILL NOT REPRESENT AN INTEREST IN OR AN OBLIGATION OF COPELCO
FINANCIAL SERVICES GROUP, INC., COPELCO CAPITAL, INC. OR ANY OF THEIR
AFFILIATES, OTHER THAN COPELCO CAPITAL FUNDING CORP. X, NOR WILL THE OFFERED
NOTES BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
===============================================================================================================================
Initial Public Offering Price Underwriting Discount Proceeds to Issuer(1)
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<S> <C> <C> <C>
Per Class A-1 Lease-Backed Note ________________% ____% _____________%
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Per Class A-2 Lease-Backed Note ________________% ____% _____________%
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Per Class A-3 Lease-Backed Note ________________% ____% _____________%
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Per Class A-4 Lease-Backed Note ________________% ____% _____________%
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Per Class B Lease-Backed Note.. ________________% ____% _____________%
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Total.......................... $______________ $__________ $________________
===============================================================================================================================
</TABLE>
(1) Before deducting expenses estimated to be $[__________].
The Offered Notes are offered subject to receipt and
acceptance by the Underwriters, to prior sale and to the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel, or modify any
order without notice. It is expected that delivery of the Offered Notes will be
made in book-entry form through the facilities of The Depository Trust Company,
Cedel Bank, S.A. or the Euroclear System on or about ____, 1997.
Lehman Brothers First Union Capital Markets Corp.
The date of this Prospectus is May __, 1997.
<PAGE>
(cover page continued)
Payments of principal and interest to the holders of the Class
A Notes (the "Class A Noteholders") will have the benefit of limited credit
support consisting of the subordination of the Class B Notes and the Class C
Notes, funds on deposit in the reserve account and amounts on deposit in certain
other accounts, if any. The holders of the Class B Notes (the "Class B
Noteholders") will have the benefit of limited credit support in the form of the
subordination of the Class C Notes, funds on deposit in the reserve account and
amounts on deposit in certain other accounts, if any. The Class C Notes are
being offered in a private placement and therefore are not being offered hereby.
Capitalized terms used herein will have the meanings ascribed to such terms
herein. The pages on which terms are defined are set forth on the Index of Terms
contained herein.
Interest on the Notes will be payable monthly in arrears on
the twentieth day of the month beginning on [________], 1997 (each, a "Payment
Date") with respect to the period from and including the immediately preceding
Payment Date (or with respect to the initial Payment Date, the Issuance Date) to
the day prior to such current Payment Date. Principal payments with respect to
the Offered Notes will be payable on each Payment Date beginning on [________],
1997. The stated maturity dates with respect to the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes and the Class B Notes are the Payment
Dates in _________, _________, _________, _________, and _________,
respectively. However, if all payments on the leases are made as scheduled,
final payment with respect to the Notes would occur prior to stated maturity. In
addition, should an Event of Default, an Early Lease Termination or a Casualty
(each, as described herein) occur, repayment of principal on the Offered Notes
may be earlier than would otherwise be the case.
The Issuer will have the option, subject to certain
conditions, to redeem all, but not less than all, of the Notes and thereby cause
early repayment of the Notes as of any Payment Date on which the Discounted
Present Value of the Performing Leases is less than or equal to 10% of the
Discounted Present Value of the Leases as of the Cut-Off Date (after giving
effect to the payment of principal on such Payment Date). The Issuer will give
notice of such redemption to each Noteholder and the Trustee at least 30 days
before the Payment Date fixed for such prepayment. Upon deposit of funds
necessary to effect such redemption, the Trustee shall pay the remaining unpaid
principal amount on the Notes and all accrued and unpaid interest as of the
Payment Date fixed for redemption. See "Description of the Notes--Redemption."
The Offered Notes offered hereby are being offered pursuant to
this Prospectus. Sales of the Offered Notes may not be consummated unless the
purchaser has received this Prospectus.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE
IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE OFFERED NOTES OFFERED HEREBY, INCLUDING PURCHASES OF OFFERED NOTES TO
STABILIZE THE MARKET PRICE AND THE IMPOSITION OF BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES SEE "UNDERWRITING" HEREIN.
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Notes offered pursuant to this Prospectus and described herein. For
further information, reference is made to the Registration Statement which may
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549;
Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of the
Registration Statement may be obtained from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov pursuant to
Item 502(a) under Regulation S-K as recently amended in SEC Release No. 33-7289
(May 9, 1996). The Issuer will file with the Commission such periodic reports
with respect to the Trust as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations of the
Commission thereunder.
2
<PAGE>
REPORTS TO NOTEHOLDERS
During such time as the Offered Notes remain in book-entry
form, any quarterly and annual reports, containing information concerning the
Issuer and the Offered Notes and required to be filed with the Commissioner will
be sent to Cede & Co. ("Cede"), as nominee of The Depository-Trust Company
("DTC"), the Euroclear System ("Euroclear") or Cedel Bank, S.A. ("CEDEL") as
registered holders of the Offered Notes pursuant to the Indenture. Such reports
will be made available by DTC, Euroclear or CEDEL and its participants to
holders of interests in the Offered Notes (the "Offered Noteholders") in
accordance with the rules, regulations and procedures creating and affecting
DTC, Euroclear and CEDEL, respectively. See "Description of the Notes-Book Entry
Registration Notes." Upon the issuance of fully registered, certificated Notes,
such reports will be sent directly to each Noteholder. Such reports will be
prepared in accordance with generally accepted accounting principles.
3
<PAGE>
OFFERED NOTES SUMMARY
The following table summarizes certain of the principal terms of the
Notes being offered hereby and is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Class A-1 Class A-2
<S> <C> <C>
Initial Principal Amount ...................... $___________ $__________
Expected Ratings
Moody's............................... _____ _____
Standard & Poor's..................... _____ _____
Duff & Phelps......................... _____ _____
Fitch................................. _____ _____
Interest Rate ____% ____%
Expected Average Life (0% CPR):
To Maturity........................... [____] years [____] years
To Optional Redemption................ ____ years ____ years
Expected Final Payment Date (0% CPR):
To Maturity........................... _________ __________
To Optional Redemption................ _________ __________
Stated Maturity ............................... __________ Payment Date __________ Payment Date
<CAPTION>
Class A-3 Class A-4 Class B
<S> <C> <C> <C>
Initial Principal Amount ...................... $___________ $___________ $___________
Expected Ratings
Moody's............................... _____ _____ _____
Standard & Poor's..................... _____ _____ _____
Duff & Phelps......................... _____ _____ _____
Fitch................................. _____ _____ _____
Interest Rate ____% ____% ____%
Expected Average Life (0% CPR):
To Maturity........................... [____] years [____] years [____] years
To Optional Redemption................ ____ years ____ years ____ years
Expected Final Payment Date (0% CPR):
To Maturity........................... __________ __________ __________
To Optional Redemption................ __________ __________ __________
Stated Maturity ............................... __________ Payment __________ Payment __________ Payment
Date Date Date
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. A listing of pages on which
some of such terms are defined can be found in the "Index of Terms" herein.
<TABLE>
<S> <C>
Issuer.............................. Copelco Capital Funding Corp. X (the "Issuer"), a Delaware
corporation. The Issuer's offices are located at East Gate Center,
700 East Gate Drive, Mount Laurel, New Jersey 08054-5400 and its
phone number is (609) 231-9600. The Issuer has been established
as a bankruptcy remote entity, wholly-owned by Copelco Capital,
Inc. ("Copelco Capital") and is intended to be a limited-purpose
corporation. Accordingly, the Issuer's operations have been
restricted so that (a) it does not engage in business with, or incur
liabilities to, any other entity which may bring bankruptcy
proceedings against the Issuer; and (b) the risk that it will be
consolidated into the bankruptcy proceedings of any other entity is
diminished. The Issuer will have no significant assets other than
the Trust Fund (as described below).
Securities Offered.................. $______________ aggregate principal amount of ____% Class A-1
Lease-Backed Notes, Series 1997-A, (the "Class A-1 Notes"),
$____________ aggregate principal amount of ____% Class A-2
Lease-Backed Notes, Series 1997-A (the "Class A-2 Notes"),
$_____________ aggregate principal amount of ____% Class A-3
Lease-Backed Notes, Series 1997-A (the "Class A-3 Notes"), and
$_______________ aggregate principal amount of ____% Class A-4
Lease-Backed Notes, Series 1997-A (the "Class A-4 Notes";
together with the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "Class A Notes") and $_____________ aggregate
principal amount of ____% Class B Lease-Backed Notes, Series
1997-A (the "Class B Notes"; together with the Class A Notes, the
"Offered Notes"). In addition, the Issuer will be issuing, through
a private placement, $____________ aggregate principal amount of
____% Class C Notes (the "Class C Notes"; together with the
Offered Notes, the "Notes"). The Class B Notes will be
subordinated to the Class A Notes to the extent provided in the
Indenture as described herein. The Class C Notes will be
subordinated to the Offered Notes to the extent provided in the
Indenture as described herein. The Class C Notes are not offered
hereby.
The combined aggregate principal amount of the Class A Notes, the
Class B Notes and the Class C Notes will comprise the initial
principal amount (the "Initial Principal Amount") of the Notes. The
aggregate principal amounts of the Class A Notes, the Class B
Notes and the Class C Notes set forth herein are based upon the
Discounted Present Value of the Leases (as defined herein) as of the
close of business on [____], 1997 (the "Cut-Off Date") calculated
at the Statistical Discount Rate (defined herein). The Initial
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Principal Amount of the Notes will be
calculated using the actual Discount
Rate.
Issuance Date....................... On or about _______, 1997.
Denominations....................... The Notes will be issued in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof, except that one Class
A Note, Class B Note and Class C Note may be issued in another
denomination.
Interest Rate....................... ____% per annum on the Class A-1 Notes (the "Class A-1 Interest
Rate"), ____% per annum on the Class A-2 Notes (the "Class A-2
Interest Rate"), ____% per annum on the Class A-3 Notes (the
"Class A-3 Interest Rate"), ____% per annum on the Class A-4
Notes (the "Class A-4 Interest Rate"), ____% per annum on the
Class B Notes (the "Class B Interest Rate") and ____% per annum
on the Class C Notes (the "Class C Interest Rate"), calculated on the
basis of a year of 360 days comprised of twelve 30-day months.
With respect to any particular Class, the "Interest Rate" refers to the
applicable rate indicated in the immediately preceding sentence.
Initial Principal
Amount.............................. $___________ for the Class A-1 Notes (the "Class A-1 Initial
Principal Amount"), $___________ for the Class A-2 Notes (the
"Class A-2 Initial Principal Amount"), $___________ for the Class
A-3 Notes (the "Class A-3 Initial Principal Amount"),
$___________ for the Class A-4 Notes (the "Class A-4 Initial
Principal Amount", together with the Class A-1 Initial Principal
Amount, Class A-2 Initial Principal Amount, and the Class A-3
Initial Principal Amount, the "Class A Initial Principal Amount"),
$__________ for the Class B Notes (the "Class B Initial Principal
Amount") and $_________ for the Class C Notes (the "Class C
Initial Principal Amount"). The Class A Initial Principal Amount
will be equal to ____% (the "Class A Percentage") of the
Discounted Present Value of the Leases (defined herein) as of the
Cut-Off Date, the Class B Initial Principal Amount will be equal to
____% (the "Class B Percentage") of the Discounted Present Value
of the Leases as of the Cut-Off Date and the Class C Initial
Principal Amount will be equal to ____% (the "Class C
Percentage") of the Discounted Present Value of the Leases as of
the Cut-Off Date. See "Description of the Notes."
Discounted Present
Value of the Leases................. The Discounted Present Value of the Leases (the "Discounted
Present Value of the Leases"), at any given time, shall equal the
future remaining scheduled payments (not including delinquent
amounts, Excess Copy Charges, Maintenance Charges and Fee Per
Scan Charges (defined below)) from the Leases (including
Non-Performing Leases), discounted at a rate equal to ____%
(the "Discount Rate"), which rate is equal to the sum of
(a) the weighted average Interest Rate of the Class A Notes
(utilizing the Class A-4 Interest Rate), the Class B Notes and the
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Class C Notes on the Issuance Date and (b) the Servicing Fee Rate
of [0.75%] per annum. The "Discounted Present Value of the
Performing Leases" equals the Discounted Present Value of the
Leases, reduced by all future remaining scheduled payments on the
Non-Performing Leases (not including delinquent amounts or Excess
Copy Charges), discounted at the Discount Rate. See "Description of
the Notes--General." Each of the Indenture and the Sales and
Servicing Agreements will provide that any calculation of future
remaining scheduled payments made on a Determination Date or with
respect to a Payment Date will be calculated after giving effect to
any payments received prior to such date of calculation to the
extent such payments relate to scheduled payments due and payable
by the Lessees with respect to the related Due Period (defined
herein) and all prior Due Periods. "Statistical Discounted Present
Value of the Leases" means an amount equal to the future remaining
scheduled payments (not including delinquent amounts or Excess Copy
Charges, Maintenance Charges and Fee Per Scan Charges) from the
Leases as of the Cut-off Date, discounted at a rate equal to
____% (the "Statistical Discount Rate"). The Statistical
Discounted Present Value of the Leases as of the Cut-Off Date is
$______________ and will not vary materially from the Discounted
Present Value of the Leases as of the Cut-Off Date. See "The
Series Pool--The Equipment." The aggregate Discounted Present
Value of the Leases as of the Cut-Off Date, calculated at the
Discount Rate is $___________.
"Non-Performing Leases" are (a) Leases that have become more
than [123] days delinquent or (b) Leases that have been accelerated
by the Servicer or Leases that the Servicer has determined to be
uncollectible in accordance with its customary practices. See "The
Series Pool--The Leases." The Seller will represent in the Sales and
Servicing Agreement that at the time of transfer of any Lease to the
Issuer, such Lease was not a Non-Performing Lease.
Stated Maturity..................... The stated maturity dates with respect to the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes and the Class B
Notes are the Payment Dates in _________, _________, _________,
_________, and _________, respectively. However, if all payments
on the Leases are made as scheduled, final payment with respect to
the Notes would occur prior to stated maturity.
The Notes........................... The Notes will represent obligations solely of the Issuer and are
secured by the Trust Fund.
Seller and Servicer................. Copelco Capital, Inc., a Delaware corporation ("Copelco Capital",
the "Seller," or in its capacity as servicer, the "Servicer"). Copelco
Capital will enter into a sales and servicing agreement (the "Sales
and Servicing Agreement") with the Issuer to sell and service the
Leases included in the Series Pool (defined below) and make
Servicer Advances (as defined herein). Concurrently with the sale
of the Leases by Copelco Capital to the Issuer, Copelco Capital's
interest in the Equipment (which is either an ownership interest or
a security interest) will be transferred to the Issuer as a contribution
of capital. Contemporaneously with the sale, the Issuer will transfer
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
its interests in the Leases and Equipment to the Trustee in
accordance with the provisions of the Indenture (as defined
herein).
Trust Fund.......................... The "Trust Fund" will consist of a pool (the "Series Pool") of
healthcare, manufacturing and business equipment lease contracts
(the "Lease Contracts"), including all payments due thereunder (the
"Lease Receivables"; together with the Lease Contracts, the
"Leases") and the interest in the related leased equipment (the
"Equipment") transferred by Copelco Capital to the Issuer. In
addition, the Trust Fund will include the funds on deposit in the
Reserve Account, if any, and to the limited extent provided in the
Indenture, amounts on deposit in the Residual Account, if any.
Trustee............................. Manufacturers and Traders Trust Company (the "Trustee"). The
Trustee's offices are located at One M&T Plaza, 7th Floor, Buffalo,
New York 14203.
Determination Date.................. The fifth day prior to each Payment Date (or the preceding business
day, if such day is not a business day). On such date (each, a
"Determination Date"), the Servicer will determine the amount of
payments received on the Leases in respect of the immediately
preceding calendar month (each such period, a "Due Period") which
will be available for distribution on the Payment Date. See
"Description of the Notes--Distributions on Notes."
Payment Date........................ Payments on the Notes will be made on the twentieth day of each
month (or if such day is not a business day, the next succeeding
business day), commencing on [_______], 1997 (each, a "Payment
Date"), to holders of record on the last day of the immediately
preceding calendar month (each, a "Record Date"). See
"Description of the Notes--Distributions on Notes."
Interest Payments................... On each Payment Date, the interest due (the "Interest Payments")
with respect to the Class A Notes, the Class B Notes and the Class
C Notes since the last Payment Date will be the interest that has
accrued on such Notes since the last Payment Date, or in the case
of the first Payment Date, since ______, 1997 (the "Issuance Date")
at the applicable Interest Rate applied to the then unpaid principal
amounts (the "Outstanding Principal Amounts") of the Class A
Notes, the Class B Notes and the Class C Notes, respectively, after
giving effect to payments of principal to the Class A Noteholders,
the Class B Noteholders and the Class C Noteholders, respectively,
on the preceding Payment Date. See "Description of the
Notes--General" and "Distributions on Notes."
Principal Payments.................. For each Payment Date, each of the Class A Noteholders, the Class
B Noteholders and the Class C Noteholders will be entitled to
receive payments of principal ("Principal Payments"), to the extent
funds are available therefor, in the priorities set forth in the
Indenture and described herein below and under "-Application of
Payments" and "Description of the Notes-Distributions on Notes."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
On each Payment Date, to the extent funds are available therefor,
the Principal Payment will be paid to the Noteholders in the
following priority: (a) (i) to the Class A-1 Noteholders only,
until the Outstanding Principal Amount on the Class A-1 Notes has
been reduced to zero, the amount necessary to reduce the aggregate
Outstanding Principal Amount on the Class A Notes to the Class A
Target Investor Principal Amount (as defined below) (the "Class A
Principal Payment"), then (ii) to the Class A-2 Noteholders only,
until the Outstanding Principal Amount on the Class A-2 Notes has
been reduced to zero, the Class A Principal Payment, then (iii) to
the Class A-3 Noteholders only, until the Outstanding Principal
Amount on the Class A-3 Notes has been reduced to zero, the Class A
Principal Payment, and finally, (iv) to the Class A-4 Noteholders,
until the Outstanding Principal Amount on the Class A-4 Notes has
been reduced to zero, the Class A Principal Payment, (b) to the
Class B Noteholders, the amount necessary to reduce the Outstanding
Principal Amount on the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor (the "Class
B Principal Payment"), (c) to the Class C Noteholders, the amount
necessary to reduce the Outstanding Principal Amount on the Class C
Notes to the greater of the Class C Target Investor Principal
Amount and the Class C Floor (the "Class C Principal Payment"), and
(d) to the extent that the Class B Floor exceeds the Class B Target
Investor Principal Amount and/or the Class C Floor exceeds the
Class C Target Investor Principal Amount, Additional Principal
(defined below) shall be distributed as a principal payment on the
Class A Notes then receiving the Class A Principal Payment, until
the Outstanding Principal Amount on all of Class A Notes has been
reduced to zero, then to the Class B Notes, until the Outstanding
Principal Amount of the Class B Notes has been reduced to zero, and
finally, to the Class C Notes until the Outstanding Principal
Amount of the Class C Notes has been reduced to zero.
"Additional Principal" with respect to each Payment Date is an
amount equal to (a) the difference between (i) the Discounted
Present Value of the Performing Leases as of the previous
Determination Date and (ii) the Discounted Present Value of the
Performing Leases as of the related Determination Date, less (b) the
Class A Principal Payment, the Class B Principal Payment and the
Class C Principal Payment to be paid on such Payment Date.
The "Class A Target Investor Principal Amount" with respect to
each Payment Date is an amount equal to the product of (a) the
Class A Percentage and (b) the Discounted Present Value of the
Performing Leases as of the related Determination Date.
The "Class B Target Investor Principal Amount" with respect to
each Payment Date is an amount equal to the product of (a) the
Class B Percentage and (b) the Discounted Present Value of the
Performing Leases as of the related Determination Date.
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The "Class C Target Investor Principal Amount" with respect to
each Payment Date is an amount equal to the product of (a) the
Class C Percentage and (b) the Discounted Present Value of the
Performing Leases as of the related Determination Date.
The "Class B Floor" with respect to each Payment Date means
(a) ____% of the initial Discounted Present Value of the Leases as
of the Cut-Off Date, plus (b) the Cumulative Loss Amount with
respect to such Payment Date, minus (c) the sum, as of the related
Determination Date, of the Outstanding Principal Amount on the
Class C Notes and the amount on deposit in the Reserve Account
after giving effect to withdrawals to be made on such Payment
Date.
The "Class C Floor" with respect to each Payment Date means
(a) ____% of the initial Discounted Present Value of the Leases as
of the Cut-Off Date, plus (b) the Cumulative Loss Amount with
respect to such Payment Date, minus (c) the amount on deposit in
the Reserve Account after giving effect to withdrawals to be made
on such Payment Date; provided, however, that if the Outstanding
Principal Amount on the Class B Notes is equal to the Class B
Floor, on such Payment Date, the Class C Floor will equal the
Outstanding Principal Amount on the Class C Notes utilized in the
calculation of the Class B Floor for such Payment Date.
The "Cumulative Loss Amount" with respect to each Payment Date
is an amount equal to the excess, if any, of (a) the total of (i) the
Outstanding Principal Amount of the Notes as of the immediately
preceding Payment Date after giving effect to all payments made on
such Payment Date, minus (ii) the lesser of (A) the Discounted
Present Value of the Performing Leases as of the Determination
Date relating to the immediately preceding Payment Date minus the
Discounted Present Value of the Performing Leases as of the related
Determination Date and (B) Available Funds remaining after the
payment of amounts owing the Servicer and in respect of interest
on the Notes on such Payment Date over (b) the Discounted Present
Value of Performing Leases as of the related Determination Date.
The Series Pool..................... The Series Pool will consist of the Leases as of the Cut-Off Date,
plus any Substitute Leases (as defined herein) and any Additional
Leases (as defined herein) excluding any Leases which have been
replaced by one or more Additional Leases or Substitute Leases
and, the interest of the Issuer in the related Equipment. See "The
Series Pool" and "Certain Legal Matters Affecting a Lessee's Rights
and Obligations."
Copelco Capital will represent and warrant that, as of the Cut-Off
Date, all Leases were current or less than ___ days delinquent and
that, as of the Issuance Date, the Lessees have made at least one
lease payment.
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Equipment........................... The Equipment is comprised primarily of computer systems for
healthcare professionals, medical diagnostic and examination
equipment for radiology, nuclear medicine, ultrasound and
laboratory analysis, industrial and business equipment such as
machine tools, graphic arts equipment, computers for businesses and
consumer and office products such as copiers, facsimile machines
and electronics testing equipment. As of the Cut-Off Date, the
Series Pool had approximately __ equipment categories with no
single equipment category accounting for more than __% of the
Statistical Discounted Present Value of the Leases. "Statistical
Discounted Present Value of the Leases" means an amount equal to
the future remaining scheduled payments from the Leases as of the
Cut-Off Date, discounted at a rate equal to __%. The Statistical
Discounted Present Value of the Leases will not vary materially
from the Discounted Present Value of the Leases as of the Cut-Off
Date. See "The Series Pool--The Equipment."
Lessees............................. Primarily hospitals, non-hospital medical facilities, physicians,
businesses and individual business owners (each, a "Lessee"; and
collectively, the "Lessees"). As of the Cut-Off Date, the Collateral
included ______ separate Leases and ______ Lessees. As of the
Cut-Off Date, Leases relating to Lessees in any one state did not
account for more than _____% of the Statistical Discounted Present
Value of the Leases. See "The Series Pool--The Leases."
Certain Lease Terms................. The Leases are triple-net leases, requiring the Lessee to pay all
taxes, maintenance and insurance associated with the Equipment.
The Leases are non-cancelable by the Lessees. All payments under
the Leases are absolute, unconditional obligations of the Lessees
without right of offset for any reason. Each Lessee entered into its
Lease for specified Equipment designated in schedules incorporated
into the Lease. The schedules, among other things, establish the
payments and the term of the Lease with respect to such
Equipment. The Leases have remaining terms to maturity,
calculated as of the Cut-Off Date, of between approximately 1 and
___ months and a weighted average term to stated maturity of ___
months. See "The Series Pool--The Leases."
Additions,
Substitutions
and Adjustments..................... Although the Leases will be non-cancelable by the Lessees, Copelco
Capital has, from time to time, permitted early termination by
Lessees ("Early Lease Termination") or other modifications of the
lease terms in certain circumstances more fully specified in the
Sales and Servicing Agreement, including, without limitation, in
connection with a full or partial buy-out or equipment upgrade.
In the event of an Early Lease Termination which has been prepaid
in full, the Issuer will have the option to reinvest the proceeds of
such Early Termination Lease in one or more Leases having similar
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characteristics for such terminated Lease (each, an "Additional
Lease").
In addition, Copelco Capital will have the option to substitute one
or more leases having similar characteristics (each, a "Substitute
Lease") for (a) Non-Performing Leases, (b) Leases subject to
repurchase as a result of a breach of representation and warranty
(each a "Warranty Lease") and (c) Leases following a modification
or adjustment to the terms of such Lease (each, an "Adjusted
Lease"). The aggregate Discounted Present Value of the Non-
Performing Leases for which Copelco Capital may substitute
Substitute Leases is limited to an amount not in excess of 10% of
the aggregate Discounted Present Value of the Leases as of the Cut-
Off Date. The aggregate Discounted Present Value of Adjusted
Leases and Warranty Leases for which Copelco Capital may
substitute Substitute Leases is limited to an amount not in excess of
10% of the aggregate Discounted Present Value of the Leases as of
the Cut-Off Date.
The terms of a Lease may be modified or adjusted for administrative
reasons or at the request of the lessee, vendor or lessor due to a
variety of circumstances, including changes to the delivery date of
equipment, the cost of equipment, the components of leased equipment
or to correct information when a Lease is logged onto the system. Such
modifications may result in adjustments to the lease commencement date,
the monthly payment date, the amount of the monthly payment or the
equipment subject to a Lease.
Additional Leases and Substitute Leases will be originated using the
same credit criteria as the initial Leases. To the extent material,
information with respect to such Additional or Substitute Leases will
be included in periodic reports filed with the Commission as are
required under the exchange Act.
In no event will the aggregate scheduled payments of the Leases,
after the inclusion of the Substitute Leases and Additional Leases
be materially less than the aggregate scheduled payments of the
Leases prior to such substitution or reinvestment. In addition, after
giving effect to such additions and substitutions, the aggregate
Booked Residual Value of the Leases will not be materially less
than the aggregate Booked Residual Value of the Leases
immediately prior to such substitutions or additions. Additionally,
either the final payment on such Substitute Lease or Additional
Lease will be on or prior to __________ or, to the extent the final
payment on such Lease is due subsequent to __________, only
scheduled payments due on or prior to such date may be included
in the Discounted Present Value of such Lease for the purpose of
making any calculation under the Indenture.
In the event that an Early Lease Termination is allowed by Copelco
Capital and an Additional Lease is not provided, the amount prepaid
will be equal to at least the Discounted Present Value of the
terminated Lease, plus any delinquent payments. See "The Series
Pool--The Leases."
Payments on Leases.................. All payments on Leases will be made by the Lessees to the order
of the Issuer to the address specified by the Servicer. The Servicer
will deposit the proceeds of such payments to the Collection
Account (as defined herein) within two Business Days of the receipt
thereof. See "Description of the Notes--Collection Account."
Advances by Servicer................ Prior to any Payment Date, the Servicer may, but will not be
required to, advance (each, a "Servicer Advance") to the Trustee, an
amount sufficient to cover delinquencies on Leases in the Trust
Fund with respect to the prior Due Period. The Servicer will be
reimbursed for Servicer Advances not recovered from late payments
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from Available Funds on the Payment Date following the date on
which the Servicer determined such Lease to be a Non-Performing
Lease. See "Description of the Notes--Advances by Servicer."
Servicing Fee....................... A Servicing Fee (the "Servicing Fee"), will be paid monthly to the
Servicer on each Payment Date from amounts in the Collection
Account and will be calculated by multiplying one-twelfth of
[0.75%] times the lesser of (i) the Outstanding Principal Amount
of the Notes or (ii) the Discounted Present Value of the Performing
Leases, each at the Determination Date for such Payment Date before
application of payments with respect thereto.
The Servicing Fee will be paid to the Servicer for servicing the
Series Pool and to pay certain administrative expenses in connection
with the Notes, including Trustee fees and expenses. See "Copelco
Capital's Underwriting and Servicing Practices."
Use of Proceeds..................... The net proceeds from the sale of the Offered Notes will be used
to purchase the Leases from Copelco Capital. In addition, the net
proceeds from the private placement of the Class C Notes will be
used for the same purpose. Copelco Capital will use such amounts
to repay bank indebtedness and for general corporate purposes.
The Indenture....................... The Notes are to be issued pursuant to, and are to be in such form,
bear interest and be payable on such terms as are prescribed in an
indenture (the "Indenture") to be executed between the Issuer and
the Trustee.
Available Funds..................... On each Payment Date, the Trustee will use such funds to make
required payments of principal and interest to Noteholders.
Funds received on or prior to the related Determination Date
("Available Funds") will be available for distribution by the Trustee
on a Payment Date and will include:
a) Lease Payments due during the prior Due Period (net of any
Excess Copy Charges, Maintenance Charges and Fee Per Scan
Charges);
b) Residual Realizations up to the Residual Amount Cap;
c) recoveries from Non-Performing Leases to the extent
Copelco Capital has not substituted Substitute Leases for
such Non-Performing Leases (except to the extent required
to reimburse unreimbursed Servicer Advances);
d) late charges received on delinquent Lease payments not
advanced by the Servicer;
e) proceeds from repurchases by Copelco Capital of Leases as
a result of breaches of representations and warranties to the
extent Copelco Capital has not substituted Substitute Leases
for such Leases;
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f) proceeds from investment of funds in the Collection
Account, the Reserve Account and the Residual Account, if
any;
g) Casualty Payments (as defined herein);
h) Servicer Advances;
i) Termination Payments;
j) funds, if any, on deposit in the Reserve Account; and
k) funds, if any, on deposit in the Residual Account to the
limited extent provided in the Indenture.
Application of
Payments............................ Monthly distributions will be made by the Trustee from Available
Funds in the following priority:
a) to pay the Servicing Fee;
b) to reimburse unreimbursed Servicer Advances in respect of
a prior Payment Date;
c) to make Interest Payments, owing on the Class A Notes
concurrently to the Class A-1 Noteholders, Class A-2
Noteholders, Class A-3 Noteholders and Class A-4
Noteholders;
d) to make Interest Payments owing on the Class B Notes;
e) to make Interest Payments owing on the Class C Notes;
f) to make the Class A Principal Payment (i) to the Class A-1
Noteholders only, until the Outstanding Principal Amount on
the Class A-1 Notes is reduced to zero, then (ii) to the Class
A-2 Noteholders only, until the Outstanding Principal
Amount on the Class A-2 Notes is reduced to zero, then
(iii) to the Class A-3 Noteholders only, until the Outstanding
Principal Amount on the Class A-3 Notes is reduced to zero
and finally, (iv) to the Class A-4 Noteholders until the
Outstanding Principal Amount on the Class A-4 Notes is
reduced to zero;
g) to make the Class B Principal Payment;
h) to make the Class C Principal Payment;
i) to pay the Additional Principal, if any, to the Class A
Noteholders then receiving the Class A Principal Payment as
provided in clause (f) above until the Outstanding Principal
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Amount on all of the Class A Notes has been reduced to
zero, then to the Class B Noteholders until the Outstanding
Principal Amount on the Class B Notes has been reduced to
zero and thereafter to the Class C Noteholders until the
Outstanding Principal Amount on the Class C Notes has been
reduced to zero;
j) to the Reserve Account, an amount equal to the excess of the
Required Reserve Amount over the Available Reserve
Amount;
k) following a Residual Event (defined below), to the Residual
Account an amount equal to Residual Realizations up to the
Residual Amount Cap; and
l) to the Issuer, the balance, if any.
See "Description of the Notes-Distribution on Notes."
Redemption.......................... The Issuer will have the option, subject to certain conditions, to
redeem all, but not less than all, of the Notes and thereby cause
early repayment of the Notes as of any Payment Date on which the
Discounted Present Value of the Performing Leases is less than or
equal to 10% of the Discounted Present Value of the Leases as of
the Cut-Off Date (after giving effect to the payment of principal on
such Payment Date). The Issuer will give notice of such redemption
to each Noteholder and the Trustee at least 30 days before the
Payment Date fixed for such prepayment. Upon deposit of funds
necessary to effect such redemption, the Trustee shall pay the
remaining unpaid principal amount on the Notes and all accrued and
unpaid interest as of the Payment Date fixed for redemption. See
"Description of the Notes--Redemption."
Residual Realizations............... Following the Issuance Date, aggregate cash flows realized from the
sale or re-lease of the Equipment following the scheduled expiration
dates of the Leases, other than Equipment subject to Non-
Performing Leases (the "Residual Realizations"), shall be deposited
into the Collection Account for distribution until the aggregate
Residual Realizations used (without duplication) to cover amounts
owing the Noteholders and the Servicer, deposited into the Reserve
Account, on deposit in the Residual Account, or withdrawn from
the Residual Account as a result of an Available Funds Shortfall,
equals $__________, which represents [__%] of the Discounted
Present Value of the Leases as of the Cut-Off Date (the "Residual
Amount Cap"), and will provide additional credit support to the
Notes. Actual Residual Realizations may be more or less than the
residual value of the Equipment recorded on the books of the Issuer
(the "Booked Residual Value"). Under certain limited
circumstances more fully described in the Indenture (a "Residual
Event"), the Residual Realizations not distributed to Noteholders,
paid to the Servicer or deposited into the Reserve Account will be
deposited in the Residual Account. As provided in the Indenture,
funds on deposit in the Residual Account will be available to cover
shortfalls in the amount available to pay the amounts owing the
Servicer and to make interest and principal payments on the Notes.
Following the termination of a Residual Event, amounts on deposit
in the Residual Account will be disbursed to the Issuer.
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The aggregate Booked Residual Value of the Leases as of the Cut-
Off Date equals $__________.
Subordination....................... The Class A Notes will be paid sequentially in accordance with the
provisions of the Indenture and as described in clause (f) under
"Application of Payments". The Class A Notes will be senior in
right of payment to the Class B Notes and the Class B Notes will
be senior in right to the Class C Notes to the extent described
herein. See "Description of the Notes--Distributions on Notes."
Reserve Account..................... The Noteholders will have the benefit of funds on deposit in an
account (the "Reserve Account") to the extent that there is a
shortfall in the amount available to pay amounts owing the Servicer
and to make interest and principal payments on the Notes, on any
Payment Date. The Reserve Account will be funded by an initial
deposit of [__%] of the Discounted Present Value of the Leases as
of the Cut-Off Date. Thereafter, to the extent provided in the
Indenture, additional deposits will be made to the Reserve Account
to the extent that the amount on deposit in the Reserve Account (the
"Available Reserve Amount") is less than the Required Reserve
Amount. [The "Required Reserve Amount" equals the greater of
(a) ____% of the Discounted Present Value of the Performing
Leases as of the related Payment Date and (b) ____% of the
Discounted Present Value of the Leases as of the Cut-Off Date, but
not more than the Outstanding Principal Amount of the Notes, (the
"Required Reserve Amount").] Amounts on deposit in the Reserve
Account in excess of the Required Reserve Amount will be
disbursed to the Issuer in accordance with the provisions of the
Indenture.
Federal Income Tax
Considerations...................... It is intended that the Class A Notes and the Class B Notes will be
characterized as indebtedness of the Issuer for federal income tax
purposes. If characterized as indebtedness, interest on such Notes
will be taxable as ordinary income when received by a Noteholder
on the cash method of accounting and when accrued by Noteholders
on the accrual method of accounting. See "Certain Federal Income
Tax Considerations."
ERISA
Considerations...................... The Employee Retirement Income Security Act of 1974, as
amended ("ERISA") places certain restrictions on those pension and
other employee benefits plans to which it applies. Pursuant to
regulations issued by the United States Department of Labor
defining "plan assets", if the Notes are considered to be
indebtedness without substantial equity features under local law, the
assets of the Issuer will not be considered assets of any ERISA plan
holding the Notes, thereby generally avoiding potential application
of ERISA's prohibited transaction rules. However, in certain
circumstances, the prohibited transaction rules may be applicable to
the purchase of the Notes even if the Notes are not deemed to have
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substantial equity features. Certain exemptions from the prohibited
transaction rules could be applicable, however, with respect to the
acquisition and holding of the Notes. Accordingly, the Notes may
be acquired by ERISA plans, subject to certain restrictions. Before
purchasing any of the Notes, fiduciaries of such plans should
determine whether an investment in the Notes is appropriate under
ERISA. See "ERISA Considerations."
Rating.............................. It is a condition to the issuance of the Offered Notes that the Class
A-1 Notes be rated at least "____" and that the Class A-2, A-3 and
A-4 Notes be rated at least "____" and that the Class B Notes be
rated at least "____" by at least one nationally recognized statistical
ratings organization ("Rating Agency"). The ratings assess the
likelihood of timely payment of interest and the ultimate payment
of principal to the Noteholders by the Stated Maturity date. There
is no assurance that any rating will not be lowered or withdrawn if,
in the judgement of any Rating Agency, circumstances in the future
so warrant. See "Rating of the Notes."
Material Risks...................... Certain material risks may be present in an investment in the Notes.
See "Risk Factors."
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RISK FACTORS
Limited Liquidity. There is currently no public market for the
Offered Notes and there is no assurance that one will develop. The Underwriters
expect, but are not obligated, to make a market in the Offered Notes. There is
no assurance that any such market will be created or, if so created, will
continue. If no public market develops, the Offered Noteholders may not be able
to liquidate their investment in the Offered Notes prior to maturity.
Prepayments and Related Reinvestment Risk. Because the rate
of payment of principal on the Notes will depend, among other things, on the
rate of payment on the Leases, such rate of payments of principal on the Notes
cannot be predicted. Payments on the Leases will include scheduled payments as
well as prepayments permitted by Copelco Capital as the Servicer (to the
extent not replaced with Additional Leases), payments as a result of
Non-Performing Leases (to the extent not replaced by Substitute Leases),
Casualty Payments (as defined herein)(to the extent not replaced by Additional
Leases), and payments upon repurchases by Copelco Capital on account of a
breach of certain representations and warranties in the related Sales and
Servicing Agreement (to the extent not replaced by Substitute Leases)(any such
voluntary or involuntary prepayment, a "Prepayment"). The rate of early
terminations of Leases due to Prepayments and defaults may be influenced by a
variety of economic and other factors. For example, adverse economic conditions
and certain natural disasters such as floods, hurricanes, earthquakes, tornadoes
and riots may affect Prepayments. The risk of reinvesting unscheduled
distributions resulting from Prepayments, defaults and early terminations of
the principal of the Notes will be borne by the Noteholders. See "Prepayment
and Yield Considerations."
Additional Leases and Substitute Leases. As described herein,
pursuant to the Sales and Servicing Agreement, Copelco Capital has the option,
but not the obligation, to designate one or more leases in its portfolio to be
an Additional Lease as a replacement for any prepaid in full or upgraded lease,
in which event the scheduled payments from such Additional Lease will replace
(in whole or in part) the remaining scheduled payments on a prepaid in full
Lease. In the event (and only to the extent) that Copelco Capital makes such a
designation, the amount (or portion thereof) received by the Issuer with respect
to a Prepayment will be allocated directly to Copelco Capital and the payments
with respect to the related Notes will be dependent upon the scheduled payments
received on such Additional Leases. In addition, pursuant to the Sales and
Servicing Agreement, Copelco Capital has the option, but not the obligation to
substitute one or more leases as Substitute Leases in exchange for
Non-Performing Leases, Warranty Leases and Adjusted Leases. Accordingly,
payments of principal of and interest on the Notes may be dependent, in part,
upon payments received on such Substitute Leases. In addition, to the extent
that Copelco Capital does not designate one or more leases as Additional Leases
in connection with the prepayment of a Lease or Substitute Leases in the case of
partial prepayments, Non-Performing Leases, Warranty Leases or Adjusted Leases,
the Discounted Present Value of the Performing Leases will be decreased. See
"Prepayment and Yield Considerations."
Security Interests in the Equipment; Certain Security
Interests Not Perfected. The Leases will consist of either finance Leases
(where substantially all of the value of the Equipment is financed by the lease
payments) or operating leases (where substantially less than all of the value of
the Equipment is recovered through the lease payments). See "The Leases" herein.
Finance leases include Leases ("Nominal Buy-Out Leases") which contain a nominal
purchase option upon expiration or other terms which may be deemed effectively
to vest equitable ownership of the Equipment in the Lessee. Prior to the Cut-Off
Date, Copelco Capital will have filed Uniform Commercial Code ("UCC") financing
statements in its favor against Lessees in respect of Equipment, including
Equipment subject to Nominal-Buy-Out Leases, with an original Equipment cost in
excess of $25,000. No action will be taken to perfect the interest of Copelco
Capital in any Equipment to the extent the original Equipment cost of the
related Equipment is less than $25,000. In addition, the Indenture and the Sale
and Servicing Agreement will require UCC financing statements identifying
security interests in the Equipment as transferred to, or obtained by, the
Issuer or the Trustee and UCC financing statements identifying equipment owned
by Copelco Capital, transferred to the Issuer and pledged to the Trustee to be
filed in favor of the Issuer or the Trustee in states in which Equipment
relating to not less than 75% of the Discounted Present Value of the Leases as
of the Cut-Off Date is located (the "Filing
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Locations"). To the extent UCC financing statements evidencing Copelco
Capital's security interest in the Equipment have not been filed against the
Lessee (i.e., with respect to those Leases of Equipment originally costing
less than $25,000) and to the extent the Equipment is located in the states
other than the Filing Locations, any such security interests in the Equipment
will not be perfected in favor of Copelco Capital, the Issuer or the Trustee
and another party (such as other creditors of Copelco Capital) may acquire
rights in Copelco Capital's interest in the Equipment superior to those of the
Issuer or the Trustee. See "Certain Legal Matters Affecting a Lessee's Rights
and Obligations." The lack of a perfected security interest in certain
Equipment may adversely affect the ability of the Issuer to realize on such
Equipment.
Restrictions on Recoveries. State laws impose requirements and
restrictions relating to foreclosure sales and obtaining deficiency judgments
following such sales. In the event that the Issuer must rely on repossession and
disposition of Equipment to cover losses on Non-Performing Leases, the Issuer
may not realize the full amount due because of the application of those
requirements and restrictions. Other factors that may affect the ability of the
Issuer to realize the full amount due on a Lease include the failure to file
financing statements to perfect the Issuer's security interest in the Equipment
against a Lessee, depreciation, obsolescence, damage or loss of any item of
Equipment, and the application of federal and state bankruptcy and insolvency
laws. As a result, the Noteholders may be subject to delays in receiving
payments and losses. See "Certain Legal Matters Affecting a Lessee's Rights and
Obligations."
Insolvency of Copelco Capital. Copelco Capital believes that
each transfer of the Leases to the Issuer should be treated as an absolute and
unconditional sale or assignment. However, in the event of an insolvency of
Copelco Capital, a court could attempt to recharacterize the sale of the related
Leases by Copelco Capital to the Issuer as a loan to Copelco Capital from the
Issuer, secured by a pledge of such Leases or could allow the trustee in
bankruptcy to repudiate the Leases that are operating leases and all obligations
thereunder. Moreover, in the event of an insolvency of Copelco Capital, a court
could attempt to consolidate the assets of the Issuer with those of Copelco
Capital. Either attempt, even if unsuccessful, could result in delays in
payments of the related Notes. If such attempts were successful, such Notes
would be accelerated, and the Trustee's recovery on behalf of the Noteholders
could be limited to the then current value of the Leases or the underlying
Equipment. Thus, the Noteholders could lose the right to future payments and
might incur reinvestment losses on amounts recovered. See "Certain Legal Matters
Affecting a Lessee's Rights and Obligations."
Credit Enhancement. Credit enhancement with respect to the
Offered Notes will be provided by the subordination of Class C Notes and funds
on deposit in the Reserve Account and, to the limited extent provided in the
Indenture, the Residual Account. In addition, the Class A Notes have the benefit
of the subordination of the Class B Notes. However, on any Payment Date the
amount available to Noteholders is limited to the extent of funds on deposit in
the Collection Account, the Reserve Account and, to the limited extent provided
in the Indenture, the Residual Account. In addition, payment of principal and
interest on the Offered Notes will be supported by the Residual Realizations on
the Equipment up to the Residual Amount Cap. Therefore, if a Lease becomes a
non-performing lease at a time when total losses on the Leases is in excess of
the outstanding principal amount of any subordinated Class and, the amounts, if
any, available to be withdrawn from the Reserve Account and the Residual Account
are reduced to zero, the holders of Notes of any senior Class may be forced to
rely solely on the amount of Residual Realizations on the Equipment for ultimate
payment of principal and interest on such Class of Notes. The aggregate amount
of Residual Realizations available to Noteholders to pay (without duplication)
the amounts owing the Servicer, to be deposited in the Reserve Account, on
deposit in the Residual Account or withdrawn from the Residual Account as the
result of an Available Funds Shortfall after the Issuance Date will not exceed
the Residual Amount Cap.
Non-Recourse Obligations. The Notes represent debt obligations
of the Issuer secured by the Leases only and do not represent interests in or
recourse obligations of Copelco Capital or any of its affiliates other than the
Issuer. The Issuer is a special purpose corporation with limited assets.
Consequently, the Noteholders must rely solely upon the Leases, the Equipment
and funds in the Reserve Account and the Residual Account, if any, for payment
of principal of and interest on the Notes. If no funds are on deposit in the
Reserve Account or the Residual Account and the payments made on the Leases
19
<PAGE>
and the disposition proceeds of the Equipment are insufficient to make payments
on the Notes, no other assets will be available for the payment of the
deficiency.
Book-Entry Registration. The Notes offered hereby initially
will be represented by one or more Notes registered in the name of Cede & Co.
and will not be registered in the names of the beneficial owners or their
nominees. As a result of this, unless and until Definitive Notes are issued,
beneficial owners will not be recognized by the Issuer or the Trustee as
Noteholders, as that term is used in each Indenture. Hence, until such time,
beneficial owners will only be able to exercise the rights of Noteholders
indirectly, through DTC, Euroclear or CEDEL and their respective participating
organizations, and will receive reports and other information provided for under
the Indenture only if, when and to the extent provided by DTC, Euroclear or
CEDEL, as the case may be, and its participating organizations. See "Description
of the Notes--Book-Entry Registration."
Geographic Concentration of Leases. As of the Cut-Off Date,
lessees with respect to approximately _____% of the Leases (based on statistical
Discounted Present Value of the Leases) were located in _______, respectively.
No other state accounts for more than 5% of the Leases. See "The Series Pool."
Accordingly, adverse economic conditions or other factors particularly affecting
any of these [states] [regions] could adversely affect the delinquency, loss or
recoveries on the Leases.
Commingling of Funds. Under the Indenture, the Servicer is
required to deposit all Lease Payments, Casualty Payments and Termination
Payments received after the Cut-off Date to the Collection Account within two
Business Days of receipt thereof. If bankruptcy or reorganization proceedings
were commenced with respect to the Seller, those funds held by the Seller may be
subject to an automatic stay resulting in a delay in the transfer of such funds
to the Trust Fund.
Insolvency of Lessors. To the extent Lessees default on the
Leases, including through insolvency, Available Funds will be reduced.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to
purchase the Leases from Copelco Capital. Copelco Capital will utilize the
proceeds from the sale of the Leases to repay bank debt and for general
corporate purposes.
THE SERIES POOL
The Leases. As of the close of business on [____, 1997] (the
"Cut-Off Date"), the Notes will be secured by ______ Leases with ______ Lessees.
The Lessees are primarily hospitals, medical facilities, physicians and business
owners throughout the United States. The Leases were originated or acquired by
the Business Technology Division, the Healthcare Division and the Manufacturing
Technology Division (or their predecessors) (the "Origination Divisions"). See
"Risk Factors," "Security for the Notes" and "Certain Legal Matters Affecting a
Lessee's Rights and Obligations." The statistical information included herein
was computed using the Statistical Discounted Present Value of the Leases as of
the Cut-Off Date. The Statistical Discounted Present Value of the Leases will
not vary materially from the Discounted Present Value of the Leases as of the
Cut-Off Date.
The Leases are triple-net leases which impose no affirmative
obligations on the Lessor, and are non-cancelable by the Lessees. Under certain
conditions, however, Copelco Capital may consent to prepayment of the Leases.
Generally, Copelco Capital will consent to a prepayment of a Lease where the
Lessee is upgrading the Equipment. All payments under the Leases are absolute,
unconditional obligations of the Lessees without right of offset for any reason.
Such payments will be made by the Lessees to the Servicer for the account of the
Issuer.
Each Lessee entered into its Lease for specified Equipment
which may be designated in schedules incorporated into the Lease. To the extent
not set forth in the Lease Contract, the schedules, among other things,
establish the periodic payments and the term of the Lease with respect to such
Equipment. The Leases follow one of several different forms of lease agreement,
with occasional modifications which do not materially affect the basic terms of
the Leases. The weighted average remaining term of the Series Pool is ___
months. Copelco Capital will represent and warrant that, as of Cut-Off Date, all
Leases will be current or less than ___ days delinquent and, as of the Issuance
Date, all Lessees will have made at least one payment.
Lessees covenant to maintain the Equipment and install it at a
place of business agreed upon with Copelco Capital. Delivery, transportation,
repairs and maintenance are the obligation of the Lessees, and all Lessees are
required to carry, at their respective expense, liability and replacement cost
insurance under terms acceptable to Copelco Capital. Such insurance proceeds
will constitute Casualty Payments (as defined herein). Subject to certain
exceptions, if the Lessee does not provide evidence of insurance coverage within
90 days of the commencement of the Lease, Copelco Capital obtains such
20
<PAGE>
insurance and invoices the Lessee for the cost thereof. Any defaults under a
Lease (as such, a "Non-Performing Lease," as defined herein) permit a
declaration as immediately due and payable all remaining Lease payments under
the Lease and the immediate return of the Equipment. Generally, any payments
received six days after the scheduled payment date are subject to late charges.
"Non-Performing Leases" are (a) Leases that have become more
than [123] days delinquent or (b) Leases that have been accelerated by the
Servicer or Leases that the Servicer has determined to be uncollectible in
accordance with its customary practices.
At the end of the Lease term, the Lessee must return the
Equipment with certification from the manufacturer that the Equipment is in good
working order, normal wear and tear excepted, unless the Lease is renewed or the
Equipment is purchased by the Lessee.
Historically, approximately ___% of the Equipment leased by
the Origination Divisions is purchased or relet by the original lessee at the
expiration of the lease term. "Nominal Buy-Out" Leases comprise _____% of the
Leases. Pursuant to the terms of the Leases, the Lessee is required to advise
Copelco Capital at least 90 to 120 days prior to the Lease termination of its
intent to return the Equipment at the expiration of the Lease. In most cases,
the failure by a Lessee to so advise Copelco Capital results in an automatic
renewal of the Lease for a period ranging from four months to one year. For
Equipment which is returned to Copelco Capital by the lessees, Copelco Capital
participates in an active secondary market for the sale of used equipment.
The Equipment. As of the Cut-Off Date, the Series Pool had
approximately __ equipment categories with no single equipment category
accounting for more than __% of the Statistical Discounted Present Value of the
Leases. "Statistical Discounted Present Value of the Leases" means an amount
equal to the future remaining scheduled payments from the Leases as of the
Cut-Off Date, discounted at a rate equal to __%. The Statistical Discounted
Present Value of the Leases will not vary materially from the Discounted Present
Value of the Leases as of the Cut-Off Date. See "The Series Pool--The
Equipment."
Certain Information with Respect to the Leases and the
Lessees. The following tables summarize certain information with respect to the
Leases and the Lessees as of the Cut-Off Date.
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical
Number Percentage Number Percentage Discounted Discounted
of of Number of of Number Present Value Present Value
State Leases of Leases Lessees(1) of Lessees of the Leases of the Leases
----- ------ --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alabama ____ ____% ____ ____% $________ ____%
Alaska ____ ____ ____ ____ ________ ____
Arizona ____ ____ ____ ____ ________ ____
California ____ ____ ____ ____ ________ ____
Colorado ____ ____ ____ ____ ________ ____
Connecticut ____ ____ ____ ____ ________ ____
Delaware ____ ____ ____ ____ ________ ____
District of
Columbia ____ ____ ____ ____ ________ ____
Florida ____ ____ ____ ____ ________ ____
Georgia ____ ____ ____ ____ ________ ____
Hawaii ____ ____ ____ ____ ________ ____
Idaho ____ ____ ____ ____ ________ ____
<CAPTION>
Aggregate
Original Percentage of
Equipment Original
State Cost Equipment Cost
----- ------ --------------
<S> <C> <C>
Alabama $________ ____%
Alaska ________ ____
Arizona ________ ____
California ________ ____
Colorado ________ ____
Connecticut ________ ____
Delaware ________ ____
District of
Columbia ________ ____
Florida ________ ____
Georgia ________ ____
Hawaii ________ ____
Idaho ________ ____
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical
Number Percentage Number Percentage Discounted Discounted
of of Number of of Number Present Value Present Value
State Leases of Leases Lessees(1) of Lessees of the Leases of the Leases
----- ------ --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Illinois ____ ____ ____ ____ ________ ____
Indiana ____ ____ ____ ____ ________ ____
Iowa ____ ____ ____ ____ ________ ____
Kansas ____ ____ ____ ____ ________ ____
Kentucky ____ ____ ____ ____ ________ ____
Maine ____ ____ ____ ____ ________ ____
Maryland ____ ____ ____ ____ ________ ____
Massachusetts ____ ____ ____ ____ ________ ____
Michigan ____ ____ ____ ____ ________ ____
Minnesota ____ ____ ____ ____ ________ ____
Mississippi ____ ____ ____ ____ ________ ____
Missouri ____ ____ ____ ____ ________ ____
Montana ____ ____ ____ ____ ________ ____
Nebraska ____ ____ ____ ____ ________ ____
Nevada ____ ____ ____ ____ ________ ____
New Hampshire ____ ____ ____ ____ ________ ____
New Jersey ____ ____ ____ ____ ________ ____
New Mexico ____ ____ ____ ____ ________ ____
New York ____ ____ ____ ____ ________ ____
North Carolina ____ ____ ____ ____ ________ ____
North Dakota ____ ____ ____ ____ ________ ____
Ohio ____ ____ ____ ____ ________ ____
Oklahoma ____ ____ ____ ____ ________ ____
Oregon ____ ____ ____ ____ ________ ____
Pennsylvania ____ ____ ____ ____ ________ ____
Rhode Island ____ ____ ____ ____ ________ ____
South Carolina ____ ____ ____ ____ ________ ____
South Dakota ____ ____ ____ ____ ________ ____
Tennessee ____ ____ ____ ____ ________ ____
Texas ____ ____ ____ ____ ________ ____
Utah ____ ____ ____ ____ ________ ____
Vermont ____ ____ ____ ____ ________ ____
Virginia ____ ____ ____ ____ ________ ____
Washington ____ ____ ____ ____ ________ ____
West Virginia ____ ____ ____ ____ ________ ____
Wisconsin ____ ____ ____ ____ ________ ____
Wyoming ____ ____ ____ ____ ________ ____
- ----------------------------------------------------------------------------------------------------------------------
Total........... ____ ____% ____ ____% $________ ____%
======================================================================================================================
<CAPTION>
Aggregate
Original Percentage of
Equipment Original
State Cost Equipment Cost
----- ------ --------------
<S> <C> <C>
Illinois ____ ____
Indiana ____ ____
Iowa ____ ____
Kansas ____ ____
Kentucky ____ ____
Maine ____ ____
Maryland ____ ____
Massachusetts ____ ____
Michigan ____ ____
Minnesota ____ ____
Mississippi ____ ____
Missouri ____ ____
Montana ____ ____
Nebraska ____ ____
Nevada ____ ____
New Hampshire ____ ____
New Jersey ____ ____
New Mexico ____ ____
New York ____ ____
North Carolina ____ ____
North Dakota ____ ____
Ohio ____ ____
Oklahoma ____ ____
Oregon ____ ____
Pennsylvania ____ ____
Rhode Island ____ ____
South Carolina ____ ____
South Dakota ____ ____
Tennessee ____ ____
Texas ____ ____
Utah ____ ____
Vermont ____ ____
Virginia ____ ____
Washington ____ ____
West Virginia ____ ____
Wisconsin ____ ____
Wyoming ____ ____
- --------------------------------------------------------
Total.............. ____ ____%
========================================================
</TABLE>
(1) Total number of Lessees is greater than the total number of Lessees
appearing in the Distribution of Lessees by Lease Balance Table because
several Lessees have Leases in more than one state.
22
<PAGE>
DISTRIBUTION OF LEASES BY LEASE BALANCE
<TABLE>
<CAPTION>
Percentage
of
Statistical Percentage
Statistical Discounted Aggregate of
Statistical Discounted Percentage Discounted Present Value Original Original
Present Value of the Number of Number Present Value of of Equipment Equipment
Leases of Leases of Leases Leases Leases Cost Cost
- ----------------------- --------- ---------- ---------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$0 - 5,000 ____ ____% $________ ____% $________ ____%
5,001 - 10,000 ____ ____ ________ ____ ________ ____
10,001 - 15,000 ____ ____ ________ ____ ________ ____
15,001 - 20,000 ____ ____ ________ ____ ________ ____
20,001 - 25,000 ____ ____ ________ ____ ________ ____
25,001 - 30,000 ____ ____ ________ ____ ________ ____
30,001 - 35,000 ____ ____ ________ ____ ________ ____
35,001 - 40,000 ____ ____ ________ ____ ________ ____
40,001 - 45,000 ____ ____ ________ ____ ________ ____
45,001 - 50,000 ____ ____ ________ ____ ________ ____
50,001 - 55,000 ____ ____ ________ ____ ________ ____
55,001 - 60,000 ____ ____ ________ ____ ________ ____
60,001 - 65,000 ____ ____ ________ ____ ________ ____
65,001 - 70,000 ____ ____ ________ ____ ________ ____
70,001 - 75,000 ____ ____ ________ ____ ________ ____
75,001 - 80,000 ____ ____ ________ ____ ________ ____
80,001 - 85,000 ____ ____ ________ ____ ________ ____
85,001 - 90,000 ____ ____ ________ ____ ________ ____
90,001 - 95,000 ____ ____ ________ ____ ________ ____
95,001 - 100,000 ____ ____ ________ ____ ________ ____
greater than $100,000 ____ ____ ________ ____ ________ ____
- ----------------------------------------------------------------------------------------------------------------------------------
Total................... ____ ____% $________ ____% $________ ____%
==================================================================================================================================
</TABLE>
23
<PAGE>
DISTRIBUTION OF LESSEES BY LEASE BALANCE
<TABLE>
<CAPTION>
Percentage of Percentage
Statistical Statistical Aggregate of
Statistical Percentage Discounted Discounted Original Original
Discounted Present Number of Number Present Value Present Value Equipment Equipment
Value of the Leases of Lessees of Lessees of Leases of Leases Cost Cost
-------------------- ---------- ---------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$0 - 5,000 ____ ____% $________ ____% $________ ____%
5,001 - 10,000 ____ ____ ________ ____ ________ ____
10,001 - 15,000 ____ ____ ________ ____ ________ ____
15,001 - 20,000 ____ ____ ________ ____ ________ ____
20,001 - 25,000 ____ ____ ________ ____ ________ ____
25,001 - 30,000 ____ ____ ________ ____ ________ ____
30,001 - 35,000 ____ ____ ________ ____ ________ ____
35,001 - 40,000 ____ ____ ________ ____ ________ ____
40,001 - 45,000 ____ ____ ________ ____ ________ ____
45,001 - 50,000 ____ ____ ________ ____ ________ ____
50,001 - 55,000 ____ ____ ________ ____ ________ ____
55,001 - 60,000 ____ ____ ________ ____ ________ ____
60,001 - 65,000 ____ ____ ________ ____ ________ ____
65,001 - 70,000 ____ ____ ________ ____ ________ ____
70,001 - 75,000 ____ ____ ________ ____ ________ ____
75,001 - 80,000 ____ ____ ________ ____ ________ ____
80,001 - 85,000 ____ ____ ________ ____ ________ ____
85,001 - 90,000 ____ ____ ________ ____ ________ ____
90,001 - 95,000 ____ ____ ________ ____ ________ ____
95,001 - 100,000 ____ ____ ________ ____ ________ ____
100,001 - 125,000 ____ ____ ________ ____ ________ ____
125,001 - 150,000 ____ ____ ________ ____ ________ ____
150,001 - 200,000 ____ ____ ________ ____ ________ ____
200,001 - 300,000 ____ ____ ________ ____ ________ ____
greater than $300,000 ____ ____ ________ ____ ________ ____
- ------------------------------------------------------------------------------------------------------------------------------------
Total.................. ____ ____% $________ ____% $________ ____%
====================================================================================================================================
</TABLE>
24
<PAGE>
DISTRIBUTION OF LEASES BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
Percentage Percentage
of Aggregate of
Number Percentage Statistical Discounted Statistical Original Original
Remaining of of Number Present Discounted Equipment Equipment
Term Leases of Leases Value of Leases Present Value Cost Cost
- ---- ------ --------- ----------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 - 12 ____ ____% $________ ____% $________ ____%
13 - 24 ____ ____ ________ ____ ________ ____
25 - 36 ____ ____ ________ ____ ________ ____
37 - 48 ____ ____ ________ ____ ________ ____
49 - 60 ____ ____ ________ ____ ________ ____
61 - 72 ____ ____ ________ ____ ________ ____
73 - 84 ____ ____ ________ ____ ________ ____
- -----------------------------------------------------------------------------------------------------------------------------------
Total.......... ____ ____% $________ ____% $________ ____%
===================================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
Statistical Percentage of
Percentage of Discounted Present Statistical Percentage of
Number Number Value of Discounted Aggregate Original Original
Lease Type of Leases of Leases Leases Present Value Equipment Cost Equipment Cost
---------- --------- ------------- ------------------ -------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Finance Lease ____ ____% $________ ____% $________ ____%
Operating Lease ____ ____ ________ ____ ________ ____
- ------------------------------------------------------------------------------------------------------------------------------
Total................. ____ ____% $________ ____% $________ ____%
==============================================================================================================================
</TABLE>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
Percentage
Percentage Percentage of Percentage
of of Statistical Statistical Aggregate of
Number Number Number Number Discounted Discounted Original Original
of of of of Present Present Equipment Equipment
Lease Type Leases Leases Lessees(1) Lessees Value Value Cost Cost
---------- ------- -------- ---------- --------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fair Market
Value ____ ____% ____ ____% $________ ____% $________ ____%
Fixed Purchase
Option ____ ____ ____ ____ ________ ____ ________ ____
Nominal
Buyout ____ ____ ____ ____ ________ ____ ________ ____
- -------------------------------------------------------------------------------------------------------------------------------
Total......... ____ ____% ____ ____% $________ ____% $________ ____%
===============================================================================================================================
</TABLE>
(1) Total number of Lessees is greater than the total number of Lessees
appearing in the Distribution of Lessees by Lease Balance Table because
several Lessees have numerous Leases, only a portion of which are Nominal
Buyout Leases.
25
<PAGE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
HEALTHCARE AND MANUFACTURING TECHNOLOGY DIVISION
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Percentage
Discounted Discounted Aggregate of
Number Percentage Present Present Original Original
of of Number Value of Value of Equipment Equipment
Equipment Type Leases of Leases Leases Leases Cost Cost
-------------- ------ --------- -------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Multiple Products % $ % $ %
Anesthesia EQP
Automated Chemistry Systems
Automated Hematology
Systems
Automated Test Equipment
Automobile Shop Equipment
Automobiles
C.T. Systems
Carts, Stretchers, Wheel Chairs
Commercial Trucks & Trailers
Communication Equipment
Computer Systems-Doctors
& Hospitals
[Computers]
[Construction Equipment]
Dental Operatory Equipment
ECG (EKG) and Defibrilators
EEG
Electronics Production
Equipment
Fabrication Equipment
Food Processing Equipment
Furniture and Fixtures
Gamma Cameras
Holter Monitors
Hosp Beds; Elec. Stryker
FRMS, Burn Beds
[Industrial Production
Equipment]
Lasers
Lathes
Laundry, Kitchen, Food Srvc Eqp.,
Central Supply
[Lift Trucks]
Lithotripters and Dialysis
Equipment
Machine Tools
Mammography
Materials Handling Equipment
MBL X-Ray Systems; C-Arm;
IMG Intensifier
Microfilm Equipment
Misc Commercial & Industrial
Equipment
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Percentage
Discounted Discounted Aggregate of
Number Percentage Present Present Original Original
of of Number Value of Value of Equipment Equipment
Equipment Type Leases of Leases Leases Leases Cost Cost
-------------- ------ ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Misc Hospital Equipment
Misc Lab Eqp (Pthlgy, Gas,
Chrmts, Cntr, Spc)
Misc Vet Eqp; Cages,
Scales, Tables
Misc X-Ray Eqp (Tnks,
Driers, Tbls, Procsrs)
MRI Systems
Operating Microscopes
Opthlmc Diag Eqp (Slit
Lamps, Tonometers
Opt Eqp; Lens Grinding,
Resurfacing
Patient Monitoring Systems
Patient Room Furnishing
& Fixtures
Phone, TV, Comm Equipment
Photo Equipment
Photocopy Equipment
Phys Misc Medical EQP
& Exam Tables
Phys Offc Furn, Fixtures
and Phones
Podiatry Equipment
Printing Equipment
Processing Equipment
Pulse Oximetry Equipment
Radiographic Fluoroscopic
Systems
Respiratory Therapy
Equipment
Sales Tax-PO
Security Systems
Standard Test & Measurement
Equipment
Standard X-Ray Systems
Surgical EQP; Scopes,
Electrosurgical
[Textile Equipment]
[Trucks, Trailers & Tractors]
Ultrasound
Vending Machines
[Woodworking Equipment]
X-Ray Spec Procdrs
Systems Angiography
Unknown
---- ---- -------- ---- -------- ----
- -----------------------------------------------------------------------------------------------------------------------------------
Total...................... ____ ____% $________ ____% $________ ____%
===================================================================================================================================
</TABLE>
27
<PAGE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
BUSINESS TECHNOLOGY DIVISION
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Percentage
Discounted Discounted Aggregate of
Number Percentage Present Present Original Original
of of Number Value of Value of Equipment Equipment
Equipment Type Leases of Leases Leases Leases Cost Cost
-------------- ------ ---------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Copiers _____ _____% $_______ _____% $________ _____%
Telephones _____ _____ ________ _____ ________ _____
Telex machines _____ _____ ________ _____ ________ _____
Facsimiles _____ _____ ________ _____ ________ _____
Computers _____ _____ ________ _____ ________ _____
Office Furniture _____ _____ ________ _____ ________ _____
Mailing Equipment _____ _____ ________ _____ ________ _____
Miscellaneous Equip _____ _____ ________ _____ ________ _____
- --------------------------------------------------------------------------------------------------------------------------------
Total................. _____ _____% $________ _____% $________ _____%
================================================================================================================================
</TABLE>
Historical Delinquency Information. Problem accounts are reviewed by senior
management when an account becomes 45 days past due. Lease receivables in the
Origination Divisions are evaluated for write-down when they become over ___
days delinquent. General delinquency information for equipment leases in the
Origination Divisions that are owned or serviced by Copelco Capital is set forth
below. Total receivables and delinquency balances as of December 31, 1995
exclude a portfolio of leases in an amount equal to approximately $30 million
which was sold on December 28, 1995.
HISTORICAL DELINQUENCY EXPERIENCE
COPELCO CAPITAL COMBINED PORTFOLIO
<TABLE>
<CAPTION>
No. of
Delinquent Days [December 31,] 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
- --------------- ------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ % $ % $ % $ % $ %
- - - - - - - - - -
- ----------------------------------------------------------------------------------------------------------------------
Total
Receivables
Balance1 _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
- ----------------------------------------------------------------------------------------------------------------------
30-59 Days _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
60-89 Days _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
90 Days + _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
- ----------------------------------------------------------------------------------------------------------------------
Total
Delinquency _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent owing on
the leases.
28
<PAGE>
HISTORICAL DELINQUENCY EXPERIENCE
HEALTHCARE AND MANUFACTURING TECHNOLOGY DIVISIONS
<TABLE>
<CAPTION>
No. of
Delinquent Days [December 31,] 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
- --------------- ------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ % $ % $ % $ % $ %
- - - - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Total
Receivables
Balance1 _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
- ---------------------------------------------------------------------------------------------------------------------
30-59 Days _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
60-89 Days _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
90 Days + _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
- ---------------------------------------------------------------------------------------------------------------------
Total
Delinquency _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent owing on
the leases.
HISTORICAL DELINQUENCY EXPERIENCE
BUSINESS TECHNOLOGY DIVISION
<TABLE>
<CAPTION>
No. of
Delinquent Days [December 31,] 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
- --------------- ------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ % $ % $ % $ % $ %
- - - - - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Total
Receivables
Balance1 _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
- ---------------------------------------------------------------------------------------------------------------------
30-59 Days _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
60-89 Days _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
90 Days + _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
- ---------------------------------------------------------------------------------------------------------------------
Total
Delinquency _____ ____ ____ ____ ____ ____ ____ ____ ____ ____
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent owing on
the leases.
Historical Default Experience. All accounts assessed over 92 days past due
automatically become non-accruing accounts. Any subsequent recoveries offset net
losses. General charge-off information for leases in the Origination Divisions
that are owned and serviced by Copelco Capital for the period January 1, 1992 to
December 31, 1996 is set forth below. The period end balances with respect to
the year ended December 31, 1995 utilized in the calculation of Average
Receivables Outstanding exclude a portfolio of leases in an amount equal to
approximately $30 million which was sold on December 28, 1995. Net losses for
the year ended December 31, 1995 includes losses associated with such portfolio.
29
<PAGE>
HISTORICAL CHARGE-OFF EXPERIENCE
COPELCO CAPITAL COMBINED PORTFOLIO
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding1.................. $__________ $ $ $ $
Net Losses...................... $__________ $ $ $ $
Net Losses as a Percentage of
Average Receivables........... ____% % % % %
</TABLE>
- -----------------------------
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
HISTORICAL CHARGE-OFF EXPERIENCE
HEALTHCARE AND MANUFACTURING TECHNOLOGY DIVISIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding1.................. $__________ $ $ $ $
Net Losses...................... $__________ $ $ $ $
Net Losses as a Percentage of
Average Receivables........... ____% % % % %
</TABLE>
- -----------------------------
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
HISTORICAL CHARGE-OFF EXPERIENCE
BUSINESS TECHNOLOGY DIVISION
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding1.................. $__________ $ $ $ $
Net Losses...................... $__________ $ $ $ $
Net Losses as a Percentage of
Average Receivables........... ____% % % % %
</TABLE>
- -----------------------------
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
30
<PAGE>
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the Leases in the future.
31
<PAGE>
COPELCO CAPITAL'S UNDERWRITING AND SERVICING PRACTICES
General. Copelco Capital, a Delaware corporation, was
incorporated in October 1986. Copelco Capital is a wholly-owned subsidiary of
Copelco Financial Services Group, Inc. ("Copelco Financial"). Copelco Capital's
primary business consists of originating and servicing leases to healthcare
providers, businesses, business owners and individuals in the United States and
Canada. Copelco Capital has multiple locations and is headquartered at One
International Boulevard, Mahwah, New Jersey 07430 and its phone number is (201)
828-5700. Copelco Financial is headquartered at 700 East Gate Drive, Mount
Laurel, New Jersey 08054-5400 and its phone number is (609) 231-9600.
In May 1993, Copelco Financial (which was incorporated in July
1982) reorganized its two primary operating subsidiaries, Copelco Credit
Corporation ("Copelco Credit") and Copelco Leasing Corporation ("Copelco
Leasing"), into six strategic business units (each, an "SBU"). Then effective
July 1, 1994, Copelco Leasing was merged into Copelco Credit with Copelco Credit
as the surviving legal entity; Copelco Credit then changed its name to Copelco
Capital, Inc. merging all of the Copelco Leasing and Copelco Capital leasing
operations.
Copelco Capital currently consists of three separate operating
divisions (each, a "Division"): the Business Technology Division, the Healthcare
Division and the Manufacturing Technology Division. The Business Technology,
Healthcare and Manufacturing Technology Divisions originated approximately
[__%], [__%], and [__%], respectively, of the Leases to be included in the
subject transaction.
The Business Technology Division leases small-ticket office
equipment, primarily photocopiers and computers, to businesses and business
owners throughout the United States and Canada through multiple manufacturer,
vendor and dealer programs. The Business Technology Division is the successor
division to Copelco Capital's Document Imaging, Major Accounts, Computer and
Canadian SBUs. Copelco Capital merged these four units in January 1997 in order
to achieve greater operating and marketing efficiencies.
The Healthcare Division provides a diversified range of
leasing services for the financing of healthcare equipment through multiple
manufacturer, vendor and dealer programs, with particular emphasis upon the
acquisition, leasing and remarketing of high technology medical equipment to
hospitals, other healthcare facilities, healthcare providers and physicians. The
Healthcare Division is the successor of the Hospital and Healthcare SBU and the
Healthcare Vendor SBU which were consolidated in June, 1995 and the Ambulatory
Care SBU which was merged into the Healthcare Division in November, 1996. The
rationale for the consolidation of the Healthcare Division was to achieve
greater operating efficiencies and eliminate certain operating and marketing
redundancies.
The Manufacturing Technology Division provides equipment
leasing services through multiple manufacturer, vendor and dealer programs,
primarily to mid-sized companies. Such equipment includes high technology
equipment for electronics manufacturing service industry, such as printed
circuit board assembly and test equipment. The Manufacturing Technology
Division grew out of a former division of Copelco Capital, the Commercial and
Industrial Division, which engaged in leasing diversified small-ticket
diversified equipment. The Commercial and Industrial Division was reorganized
in 1993 and assumed its current focus on leasing to the electronics
manufacturing service industry.
As of December 31, 1996, Copelco Capital had total assets of
$_______________ compared with $1,399,101,000 as of December 31, 1995, total
liabilities of $_____________ compared with $1,295,269,000 as of December 31,
1995, shareholder's equity of $_____________ compared with $103,832,000 as of
December 31, 1995 and total revenues and net income of $____________ and
$________________, respectively, for the year ended December 31, 1996, compared
with $155,034,000 and $17,304,000, respectively, for the year ended December 31,
1995.
Since 1986, Copelco Capital and its predecessors have
participated in [_______] equipment lease securitizations involving the issuance
of in excess of $2.5 billion in securities. Copelco Capital and its predecessors
performed all servicing functions in each of these prior transactions,
[_______] of which remain outstanding.
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<PAGE>
Originations. The Business Technology Division leases
small-ticket office equipment, primarily photocopiers and computers, to
businesses and business owners throughout the United States and Canada. The
Business Technology Division originates substantially all of its leases through
marketing programs which are directed at major manufacturers and various
distributors of copier equipment (each, a "Vendor") with the balance obtained
through new leases with existing lessees and referrals. The Business Technology
Division establishes both formal and informal relationships with Vendors,
several of which provide Copelco Capital with a right of first refusal on all
equipment leases with the Vendor's customers. This arrangement provides the
division with a steady flow of lease referrals from Vendors which frequently use
lease financing as a marketing tool. In the majority of these vendor programs,
Copelco Capital owns the equipment subject to each lease and bills and collects
lease payments in its own name. For some select private label vendor programs,
Copelco Capital will bill and collect in the vendor's name.
The Business Technology Division also offers a cost per copy
program ("Cost per Copy"), introduced in late 1990, pursuant to which lessees
pay a fixed monthly payment (the "Fixed Payment") for which they are allowed a
certain minimum monthly copy usage. The monthly Fixed Payment represents
equipment financing (the "Equipment Financing Portion") and a monthly
maintenance charge (the "Maintenance Charge"). Copelco Capital funds the Vendors
on the basis of the Equipment Financing Portion of the Fixed Payment and remits
the Maintenance Charge to the Vendors as it is collected every month. Copelco
Capital calculates usage monthly using automated dialed-in copier meter
readings. To the extent that the usage has exceeded the monthly copy allowance,
Copelco Capital bills the lessee incremental charges for the excess copy usage
("Excess Copy Charge"). This excess copy charge is remitted to the Vendors upon
collection by Copelco Capital. Only the Equipment Financing Portion will be
included in the Discounted Present Value of the Leases.
Vendors may choose to use a Copelco Capital lease form or they
may use their own lease agreement. In either case, the credit approval remains
with Copelco Capital. Lease documents for all leasing programs are either
identical to Copelco Capital's standard lease documents or are reviewed by
Copelco Capital to ensure substantial compliance with its standard terms. Terms
of Copelco Capital's lease documents are standard for virtually all leases, as
is documentation for virtually all private label programs.
The Healthcare Division provides a range of leasing services
for the financing of healthcare equipment with emphasis on the acquisition,
leasing and remarketing of high technology medical equipment to hospitals, other
healthcare facilities, healthcare providers and physicians. The Healthcare
Division originates leases through five sales groups: National Accounts, Medical
Business, Vendor Services, Home Care, and Ambulatory Care.
The National Accounts sales group solicits contractual
arrangements with major medical equipment manufacturers and distributors
throughout the United States. These contracts usually give Copelco exclusive
rights to handle the financing needs of the manufacturers' customers. Most
manufacturers are publicly-held or subsidiaries of international medical
conglomerates.
The Medical Business sales group provides leasing services
directly to hospitals and to physician group practices rather than through
vendors or manufacturers. The Medical Business marketing unit operates Copelco
Capital's Hospital Instant Lease Line ("HILL") program which grants hospitals a
pre-approved line of credit for the leasing of medium-ticket medical equipment
such as computed tomography scanners, radiographic and other imaging equipment,
laboratory and patient monitoring systems.
The Vendor Services sales group solicits exclusive contractual
arrangements and informal non-exclusive arrangements with local and regional
vendors. Such vendors sell medical equipment to physician group medical
practices and to individual physicians who finance the acquisition of the
equipment by leasing it from Copelco Capital. The Vendor Services marketing unit
operates Copelco Capital's Physician's Instant Lease Line ("PILL") program,
which grants individual physicians and physician group practices a pre-approved
line of credit for use in leasing small- and medium-ticket medical equipment.
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<PAGE>
The Home Care Sales group leases durable medical equipment
such as respiratory care equipment, patient monitoring devices and medication
delivery systems for use by people who are being treated on an out-patient or
in-home basis for either temporary or chronic health problems. Lessees are
typically wholesalers, distributors and service providers that rent the
equipment to patients who are reimbursed for the rental payments by their health
care insurers.
The Ambulatory Care sales group provides equipment leasing to
out-patient sites providing healthcare services such as diagnostic imaging,
surgical procedures and radiation therapy. Customers range from start-up centers
(typically managed by established organizations) to publicly-held companies.
Transactions may involve new equipment or refinancing of existing equipment,
often in conjunction with expansion or upgrading.
In addition to making fixed payments with respect to certain
health care equipment leases, lessees pay incremental monthly charges to the
extent the scan usage exceeds the monthly scan allowance ("Fee Per Scan
Charges"). Fee Per Scan Charges will not be included in the Discounted Present
Value of the Leases. The Fee Per Scan Charges are remitted to the Vendors upon
collection by Copelco Capital.
The Manufacturing Technology Division provides equipment
leasing services primarily to mid-sized companies. Since early 1993, the
division has focused on marketing through manufacturers and distributors in the
electronics manufacturing service industry. Currently, approximately 85% of the
leases in this division relate to the electronics manufacturing service industry
and approximately 15% represents machine tools and other production equipment.
Credit Review. Copelco Capital, in conjunction with the parent
holding company, provides organizational oversight for investment/risk
management policy, compliance, credit underwriting and due diligence standards,
and coordinates portfolio concentration guidelines and credit personnel training
for each of its Divisions. Within the parameters established by Copelco Capital,
each Division tailors its underwriting policies to reflect their unique
customers and markets.
Certain credit requests are evaluated under credit scoring
models utilized by Copelco Capital. All credit requests not subject to automated
credit scoring must be underwritten by a credit officer. Applicants declined by
credit scoring may be reviewed by a credit officer. Each credit officer has a
specific assigned lending limit based upon experience and seniority. Credit
approval limits, applicable to single transaction size and individual lessee
exposure, are also assigned to assistant credit managers, group credit officers,
the president of Copelco Capital, and the chief credit officer of Copelco
Capital. In general, transactions in excess of $2,000,000 must be approved by
the senior management of Copelco Financial.
Business Technology Division: Prior to a lease being approved
by the Business Technology Division, the vendor's sales personnel are required
to obtain from the prospect historical financial data and/or bank and trade
references. New and repeat applicants must either complete a comprehensive
credit application or provide bank and trade references.
Credit data are submitted for credit review in Mahwah, New
Jersey and Moberley, Missouri for copiers and Mahwah, New Jersey for computers.
Credit review is performed and lease approvals are given at these locations,
utilizing a computer system designed to handle applications which are telephoned
or telecopied from vendors. Using the computer system, the applicant's credit is
investigated and a credit decision is made.
Lessee evaluation includes an analysis of credit payment
history, business structure, banking history and relationships, and economic
conditions as they relate to the prospective lessee. In the case of a credit
request for equipment having a cost greater than approximately $40,000, the
information collected includes the prospect's most recent financial statements.
If individual guarantors are involved, a consumer credit bureau report is
generally obtained for the guarantors. Potential lessees should generally have
been in business for at least two years and a minimum of two trade references
are required.
The Business Technology Division has also implemented an
automated credit scoring system. The system, designed by Dun & Bradstreet
specifically for the Business Technology Division, was in development over a two
year period and was formally implemented on January 4, 1994. The system utilizes
various filters for adapting "approve" and "decline" threshold scores based upon
criteria such as credit exposure, payment history, industry (by SIC code),
Vendor and state. The model is consistent with the Business Technology
Division's traditional credit
34
<PAGE>
decision-making criteria (i.e., Dun & Bradstreet data, consumer credit bureau
information, and bank and trade references).
Healthcare Division: For leases originated by the Medical
Business sales group, full financial statements are required for credit review,
and a thorough history of past payment patterns is examined. Other items such as
a hospital's location, utility to its community and ownership (public or
private) are also considered. Certain of these transactions are credit scored
under HILL credit scoring parameters. The HILL credit scoring parameters
include, without limitation, the number of beds of the potential lessee, its
occupancy rate and Dun & Bradstreet Information Services ("Dun & Bradstreet")
financial highlight information.
Certain of the leases originated by the Vendor Services group
are credit scored under PILL credit scoring parameters. The PILL credit scoring
parameters include, without limitation, the length of time in practice of the
potential lessee, the potential lessee's medical specialty and a consumer
bankruptcy predictor model acquired by Copelco Capital. The credit review
process for physicians is similar to that of personal lending because the
lessees are predominantly individual physicians (or groups of physicians). Many
of the leases to physicians have personal guarantees associated with them and
spousal guarantees as well. Lessees are not required, however, to give Copelco
Capital liens on property. The predominant reason for delinquencies in such
leases is cash flow deficiencies and, to a lesser extent, death of the lessee,
in which case settlement with the lessee's estate can take several months. Such
leases are typically processed under the PILL program. For inexpensive
equipment, credit review of physician lessees involves analysis of credit bureau
reports, bank references, duration of practice and medical specialty. For more
expensive equipment, the credit review involves analysis of personal income tax
returns and financial statements of the practice in addition to credit bureau
reports and bank references. There is also a focus on the length of time that
the physician has maintained his or her private practice.
The PILL and the HILL programs afford Copelco Capital the
ability to analyze physician, physician group practice and hospital credit
quality in advance of the lease decision, thus providing a means by which
physicians in certain medical specialties and certain hospitals may be
pre-approved for a leasing line of credit. They also provide rapid turnaround of
a specific application when it is submitted.
National Accounts, Home Health and Ambulatory Care generally
utilize a combination of transactional credit analysis and credit scoring.
Transactions not eligible for credit scoring are reviewed by the Healthcare
Division's credit staff under the supervision of a senior credit officer.
Manufacturing Technology Division: All credit decisions for
leases originated by the Manufacturing Technology Division are made by credit
analysts. Credit scoring is not used. In general, transactions in excess of
$50,000 require financial statement disclosure consisting of at least the three
most recent fiscal year-end financial statements and interim financial
statements. Additionally, Dun & Bradstreet reports, bank and other credit
references, trade references, and other information may be evaluated.
Transactions involving small, privately held companies exhibiting limited
financial resources require the financial disclosure and personal guaranty of
the principals. Consideration will also be given to the value of the equipment
securing the transaction, based upon a review by the Division's Asset Management
group. An approval might contain restrictive conditions, including, but not
limited to, a reduced term, guaranties, security deposits, down payments, or a
letter of credit.
The terms of the Leases originated by each of the Divisions
require the lessees to maintain the equipment and install it at a place of
business approved by Copelco Capital. Delivery, transportation, repairs and
maintenance are obligations of lessees, and lessees are required to carry, at
their own expense, liability and replacement cost insurance under terms
acceptable to Copelco Capital. Any lease payment defaults permit Copelco Capital
to declare immediately due and payable all remaining lease payments. At the end
of a lease term, lessees must return the leased equipment to Copelco Capital in
good working order unless the lease is renewed or the leased equipment is
purchased by the lessee.
Residual Values. The Divisions have realized residual values
which, on average, exceeded the booked residual values in respect of such
leases. For Leases in which there is a pre-determined buy-out price, the
35
<PAGE>
buy-out price is the residual value recorded on Copelco Capital's books. To
recover residuals on the equipment which is returned, Copelco Capital utilizes
the services of its Vendors and also participates in an active secondary market
for the sale of used equipment.
Collections. Collection procedures have been instituted by
Copelco Capital and are uniformly utilized throughout Copelco Capital's
Divisions. A late charge is assessed to lessees 6 days after payment due date.
Telephone contact is normally initiated when an account is 15 days past due, but
may be initiated more quickly. All collection activity is entered into the
computerized collection system. Activity notes are input directly into the
collection system in order to facilitate routine collection activity. Collectors
have available at their computer terminals the latest status and collection
history on each account.
On the day on which a Lease becomes 10 days delinquent,
Copelco Capital's credit and collection review system automatically generates a
computerized late notice which is sent directly to the lessee. When an account
becomes 30 days past due, a default letter is sent out to the lessee and to
anyone providing personal guarantees on the Leases. An acceleration letter is
sent to all lessees and guarantors when a Lease becomes 45 days past due.
Telephone contact will be continued throughout the delinquency period. Accounts
which become over 90 days past due are subject to repossession of Equipment and
action by collection agencies and attorneys. Prior to being written down (which
is generally prior to the lease being 123 days delinquent), each lease is
evaluated on the merits of the individual situation, with equipment value being
considered as well as the current financial strength of the lessee.
Sales and Servicing Agreement. Copelco Capital will enter into
an agreement (the "Sales and Servicing Agreement") with the Issuer, pursuant to
which Copelco Capital will, among other things, sell and service the Leases,
make Servicer Advances and forward Excess Copy Charges and Fee Per Scan Charges
to Vendors. In the Sales and Servicing Agreement, Copelco Capital will make
certain representations and warranties regarding the Leases and the Equipment.
In the event that (a) any of such representations and warranties made by
Copelco Capital proves at any time to have been inaccurate in any material
respect as of the Issuance Date or (b) any Lease shall be terminated in whole
or in part by a Lessee, or any amounts due with respect to any Lease shall be
reduced or impaired, as a result of any action or inaction by Copelco Capital
(other than any such action or inaction of Copelco Capital, when acting as
Servicer, in connection with the enforcement of any Lease (other than an Early
Lease Termination) in a manner consistent with the provisions of the Sales and
Servicing Agreement) or any claim by any Lessee against Copelco Capital and,
in any such case, the event or condition causing such inaccuracy, termination,
reduction, impairment or claim shall not have been cured or corrected within
30 days after the earlier of the date on which Copelco Capital is given notice
thereof by the Issuer or the Trustee or the date on which Copelco Capital
otherwise first has notice thereof, Copelco Capital will repurchase such Lease
(a "Warranty Lease") and the Equipment subject thereto by paying to the Trustee
for deposit into the Collection Account, not later than the Determination Date
next following the expiration of such 30-day period, an amount equal to the
Discounted Present Value of such Lease plus any amounts previously due and
unpaid thereon. In addition, subject to the satisfaction of certain requirements
set forth in the Sales and Servicing Agreement, Copelco Capital will have the
option to substitute one or more Substitute Leases for such Warranty Lease. Any
inaccuracy in any representation or warranty with respect to (i) the priority of
the lien of the Indenture with respect to any Lease or (ii) the amount (if less
than represented) of the Lease Payments, Casualty Payments or Termination
Payments under any Lease shall be deemed to be material.
Servicing Fee. The Servicing Fee will be paid monthly on the
Payment Date from amounts in the Collection Account and will be calculated by
multiplying one-twelfth of 0.75% times the lesser of (i) the Outstanding
Principal Amount of the Notes or (ii) the Discounted Present Value of the
Performing Leases, each at such Payment Date before application of payments
with respect thereto.
The Servicing Fee will be paid to the Servicer for servicing
the Series Pool and for certain administrative expenses in connection with the
Notes, including Trustee Fees.
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<PAGE>
THE ISSUER
The Issuer is a wholly-owned bankruptcy-remote subsidiary of
Copelco Capital, formed solely for the purpose of acquiring from Copelco Capital
Leases and Equipment from time to time and issuing notes from time to time as
provided herein. As a bankruptcy-remote entity, the Issuer's operations will be
restricted so that (a) it does not engage in business with, or incur liabilities
to, any other entity (other than the Trustee on behalf of the Noteholders and
the trustee on behalf of the noteholders under indentures similar to the
Indenture) which may bring bankruptcy proceedings against the Issuer and (b) the
risk that it will be consolidated into the bankruptcy proceedings of any other
entity is diminished. The Issuer will have no other assets available to pay
amounts owing under the Indenture except the Trust Fund, including the Leases
and the interests in the Equipment, the proceeds thereof, and the amounts on
deposit in the Collection Account, the Reserve Account and the Residual Account.
The Issuer's address is East Gate Center, 700 East Gate Drive, Mount Laurel, New
Jersey 08054-5400 and its phone number is (609) 231-9600.
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the Indenture (the
"Indenture") between the Issuer and Manufacturers and Traders Trust Company, as
trustee (the "Trustee"). The following statements with respect to the Notes are
subject to the detailed provisions of the Indenture, the form of which is filed
as an exhibit to the registration statement of which this Prospectus forms a
part. Whenever any particular section of the Indenture or any term used therein
is referred to, the statement in connection with which such reference is made is
qualified in its entirety by such reference.
General. The Offered Notes represent secured debt obligations
of the Issuer secured by the Trust Fund and the privately placed Class C Notes
represent subordinated debt obligations of the Issuer only secured by the
related Trust Fund as provided in the related Indenture; and neither represents
an interest in or recourse obligation of Copelco Capital or any of its other
affiliates other than the Issuer. The Issuer is a special purpose corporation
with limited assets. Consequently, Noteholders must rely solely upon the Leases,
the interests in the Equipment, funds on deposit in the Collection Account, the
Reserve Account and the Residual Account for payment of principal of and
interest on the Notes.
The Initial Principal Amount of the Notes shall be equal to
the Discounted Present Value of the Leases as of the Cut-Off Date. Such
Discounted Present Value of the Leases, at any given time, shall equal the
future remaining scheduled payments from the related Leases (including
Non-Performing Leases), discounted at the Discount Rate, as set forth in the
Indenture.
Each Note will bear interest from the Issuance Date at the
applicable Interest Rate, calculated on the basis of a year of 360 days
comprised of twelve 30-day months, payable on the twentieth day of each month
(or if such day is not a business day the next succeeding business day), to the
person in whose name the Note was registered at the close of business on the
preceding Record Date. Principal will be payable as set forth under
"Distributions on Notes." Notes may be presented to the corporate trust office
of the Trustee for registration of transfer or exchange. (Section 2.03). Notes
may be exchanged without a service charge, but the Issuer may require payment to
cover taxes or other governmental charges. (Section 2.03).
Book-Entry Registration. Class A Noteholders and Class B
Noteholders may hold their Notes through DTC (in the United States) or Cedel or
Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations which are participants in such systems.
Cede, as nominee for DTC, will hold the global Class A Note or
Notes and the global Class B Note or Notes. Cedel and Euroclear will hold
omnibus positions on behalf of their participants through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
Depositaries (as defined herein) which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of
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<PAGE>
DTC. Citibank will act as depositary for Cedel and Morgan Guaranty Trust will
act as depositary for Euroclear (in such capacities, the "Depositaries").
DTC is a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the UCC and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the settlement of securities transactions
between Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of notes.
Participants include the Underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with
DTC rules. Transfers between Cedel Participants (as defined herein) and
Euroclear Participants (as defined herein) will occur in accordance with their
respective rules and operating procedures.
Cross-market transfers between persons holding or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected through
DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its Depositary. Cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities
received in Cedel or Euroclear as a result of a transaction with a Participant
will be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any transactions
in such securities settled during such processing will be reported to the
relevant Euroclear or Cedel Participants on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in DTC.
For information with respect to tax documentation procedures relating to the
Offered Notes, see "Certain Federal Income Tax Considerations."
Offered Noteholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Offered Notes may do so only through Participants and
Indirect Participants. In addition, Offered Noteholders will receive all
distributions of principal and interest on the Offered Notes from the Trustee
through DTC and its Participants. Under a book-entry format, Offered Noteholders
will receive payments after the related Distribution Date, as the case may be,
because, while payments are required to be forwarded to Cede, as nominee for
DTC, on each such date, DTC will forward such payments to its Participants which
thereafter will be required to forward them to Indirect Participants or holders
of beneficial interests in the Offered Notes. It is anticipated that the only
Class A Noteholder and Class B Noteholder will be Cede, as nominee of DTC, and
that holders of beneficial interests in the Class A Noteholders or Class B
Noteholders, respectively, under the Indenture will only be permitted to
exercise the rights of Class A Noteholders or Class B Noteholders, respectively,
under the Indenture indirectly through DTC and its Participants who in turn will
exercise their rights through DTC.
Under the rules, regulations and procedures creating and
affecting DTC and its operations, DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Offered Notes and
is required to receive and transmit distributions of principal of and interest
on the Offered Notes. Participants
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and Indirect Participants with which holders of beneficial interests in the
Offered Notes have accounts similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of these respective holders.
Because DTC can only act on behalf of Participants, who in
turn act on behalf of Indirect Participants and certain banks, the ability of
holders of beneficial interests in the Offered Notes to pledge Offered Notes to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such Offered Notes, may be limited due to the lack of a
Definitive Note for such Offered Notes.
DTC has advised the Issuer that it will take any action
permitted to be taken by a Class A Noteholder or Class B Noteholder under the
Indenture only at the direction of one or more Participants to whose account
with DTC the Class A Notes or Class B Notes are credited. Additionally, DTC has
advised the Issuer that it may take actions with respect to the applicable Class
A Interest or the Class B Interest that conflict with other of its actions with
respect thereto.
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 28 currencies, including United States dollars. Cedel
provides to 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. 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.
Euroclear was created in 1968 to hold securities for
participants of Euroclear ("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 any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 29 currencies,
including United States dollars. Euroclear includes various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator and all Euroclear securities clearance accounts and Euroclear
cash accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York
banking corporation which is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the
Euroclear Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and
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Conditions only on behalf of Euroclear Participants, and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions with respect to Offered Notes held through Cedel
or Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Considerations." Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by an Offered Noteholder under the Indenture on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Offered Notes among participants
of DTC, Cedel and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
Definitive Notes. The Offered Notes will be issued in fully
registered, authenticated form to Beneficial Owners or their nominees (the
"Definitive Notes"), rather than to DTC or its nominee, only if (a) the Issuer
advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to such
Notes, and the Trustee or the Issuer is unable to locate a qualified successor
or (b) the Issuer at its option elects to terminate the book-entry system
through DTC. (Section 2.06).
Upon the occurrence of any of the events described in the
immediately preceding paragraph, the Trustee is required to notify all
Beneficial Owners through DTC of the availability of Definitive Notes for such
Class. Upon surrender by DTC of the Definitive Note representing the Notes and
instructions for reregistration, the Trustee will issue such Definitive Notes,
and thereafter the Trustee will recognize the holders of such Definitive Notes
as Noteholders under the related Indenture (the "Holders"). (Section 2.07). The
Trustee will also notify the Holders of any adjustment to the Record Date with
respect to the Notes necessary to enable the Trustee to make distributions to
Holders of the Definitive Notes for such Class of record as of each Payment
Date.
Additionally, upon the occurrence of any such event described
above, distribution of principal of and interest on the Offered Notes will be
made by the Trustee directly to Holders in accordance with the procedures set
forth herein and in the Indenture. Distributions will be made by check, mailed
to the address of such Holder as it appears on the Note register. Upon at least
10 days' notice to Noteholders for such Class, however, the final payment on any
Note (whether the Definitive Notes or the Note for such Class registered in the
name of Cede representing the Notes of such Class) will be made only upon
presentation and surrender of such Note at the office or agency specified in the
notice of final distribution to Noteholders.
Definitive Notes of each Class will be transferable and
exchangeable at the offices of the Trustee or its agent in New York, New York,
which the Trustee shall designate on or prior to the issuance of any Definitive
Notes with respect to such Class. No service charge will be imposed for any
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith. (Section 2.03(e)).
Collection Account. The Trustee will establish and maintain an
Eligible Account (the "Collection Account") into which the Servicer will deposit
all Lease Payments, Casualty Payments, Termination Payments, Residual
Realizations, and recoveries from Non-Performing Leases to the extent Copelco
Capital has not substituted a Substitute Lease for such Non-Performing Lease
(except to the extent required to reimburse unreimbursed Servicer Advances)
(each as defined herein) on or in respect of each Lease included in the Series
Pool within two Business Days of receipt thereof. All Lease Payments, Casualty
Payments, Termination Payments and other payments relating to a Lease received
and so deposited in the Collection Account shall constitute property of the
Issuer, securing payments on the related Notes. (Section 3.02(a)).
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An "Eligible Account" means either (a) an account maintained
with a depository institution or trust company acceptable to the Rating Agency,
or (b) a trust account or similar account maintained with a federal or state
chartered depository institution, which may be an account maintained with the
Trustee.
A "Casualty Payment" is any payment pursuant to a Lease on
account of the loss, theft, condemnation, governmental taking, destruction, or
damage beyond repair (each, a "Casualty") of any item of Equipment subject
thereto which results, in accordance with the terms of the Lease, in a reduction
in the number or amount of any future Lease Payments due thereunder or in the
termination of the Lessee's obligation to make future Lease Payments thereunder.
A "Lease Payment" is each periodic installment of rent payable
by a Lessee under a Lease. Casualty Payments, Termination Payments, prepayments
of rent required pursuant to the terms of a Lease at or before the commencement
of the Lease, payments becoming due before the applicable Cut-Off Date and
supplemental or additional payments required by the terms of a Lease with
respect to taxes, insurance, maintenance (including, without limitation any
Maintenance Charges), or other specific charges, (including, without limitation,
any Excess Copy Charges and Fee Per Scan Charges), shall not be Lease Payments
hereunder.
A "Termination Payment" is a payment payable by a Lessee under
a Lease upon the early termination of such lease (but not on account of a
casualty or a Lease default) which may be agreed upon by the Servicer, acting in
the name of the Issuer, and the Lessee.
The Trustee shall deposit the following funds into the
Collection Account (Section 3.03(a)), which funds received on or prior to the
related Determination Date with respect to the related Due Period, including any
funds deposited into the Collection Account from the Reserve Account and the
Residual Account, shall be available for distribution ("Available Funds"),
pursuant to the Indenture, on the next succeeding Payment Date:
<TABLE>
<S> <C>
a) Lease Payments (net of any Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges), due
during the prior Due Period;
b) Residual Realizations up to the Residual Amount Cap;
c) recoveries from Non-Performing Leases to the extent Copelco Capital has not substituted
Substitute Leases for such Non-Performing Leases (except to the extent required to
reimburse unreimbursed Servicer Advances);
d) late charges received on delinquent Lease payments not advanced by the Servicer;
e) proceeds from repurchases by Copelco Capital of Leases as a result of breaches of
representations and warranties to the extent Copelco Capital has not substituted Substitute
Leases for such Leases;
f) proceeds from investment of funds in the Collection Account, the Reserve Account and
the Residual Account;
g) Casualty Payments;
h) Termination Payments; and
i) Servicer Advances.
</TABLE>
Reserve Account. The Trustee will establish and maintain an
Eligible Account (the "Reserve Account"). On the Closing Date, the Issuer will
make an initial deposit in an amount equal to ___% of the
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Discounted Present Value of the Leases as of the Cut-Off Date into the Reserve
Account. In the event that Available Funds (exclusive of amounts on deposit in
the Reserve Account and the Residual Account) are insufficient to pay the
amounts owing the Servicer, Interest Payments on the Notes and the Class A
Principal Payment, the Class B Principal Payment and the Class C Principal
Payment (such payments, the "Required Payments" and such Shortfall, an
"Available Funds Shortfall"), the Trustee will withdraw from the Reserve Account
an amount equal to the lesser of the funds on deposit in the Reserve Account
(the "Available Reserve Amount") and such deficiency. In addition, on each
Payment Date, Available Funds remaining after the payment of the Required
Payments will be deposited into the Reserve Account to the extent that the
Required Reserve Amount exceeds the Available Reserve Amount. [The "Required
Reserve Amount" equals the greater of (a) ____% of the Discounted Present Value
of the Performing Leases as of the related Payment Date and (b) ____% of the
Discounted Present Value of the Leases as of the CutOff Date, but not more than
the Outstanding Principal Amount of the Notes (the "Required Reserve Amount").]
Any amounts on deposit in the Reserve Account in excess of the Required Reserve
Amount will be released to the Issuer. (Section 3.04(c)).
Residual Account. The Trustee will establish and maintain an
Eligible Account (the "Residual Account"). Under certain limited circumstances
more fully described in the Indenture (a "Residual Event"), after the Issuance
Date, Residual Realizations included in Available Funds and not previously
disbursed to the Servicer or the Noteholders, or deposited in the Reserve
Account will be deposited in the Residual Account up to the Residual Amount Cap.
Following the termination of a Residual Event, amounts on deposit in the
Residual Account will be disbursed to the Issuer and will no longer be available
to Noteholders. To the limited extent provided in the Indenture, funds on
deposit in the Residual Account will be available to cover shortfalls in the
amount available to pay amounts owing the Servicer and to make interest and
principal payments on the Notes to the extent that funds on deposit in the
Reserve Account are insufficient to cover an Available Funds Shortfall. (Section
3.04(c)).
Distributions on Notes. Payments on the Notes will commence on
[_____], 1997. On or before the fifth day prior to each Payment Date (or the
preceding business day, if such day is not a business day) (each, a
"Determination Date"), the Servicer will determine the Available Funds and the
Required Payments.
For each Payment Date, the interest due with respect to the
Notes will be the interest that has accrued on such Notes since the last Payment
Date, or, in the case of the first Payment Date, since the Issuance Date, at the
applicable Interest Rates applied to the Outstanding Principal Amount of each
Class, after giving effect to payments of principal to Noteholders on the
preceding Payment Date, plus all previously accrued and unpaid interest on the
Notes (the "Interest Payments"). (Section 2.01(c)). Funds in the Collection
Account, together with reinvestment earnings thereon, will be used by the
Trustee to make required payments of principal and interest on the related
Notes. (Section 3.03(b)).
For each Payment Date, Principal Payments due with respect to
the Class A Notes, the Class B Notes and the Class C Notes will be the Class A
Principal Payment, the Class B Principal Payment and the Class C Principal
Payment, respectively. In addition, to the extent that the Class B Floor exceeds
the Class B Target Investor Principal Amount and/or the Class C Floor exceeds
the Class C Target Investor Principal Amount, Additional Principal shall be
distributed, sequentially, as an additional principal payment on the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, the Class B Notes and
the Class C Notes until the Outstanding Principal Amount of each Class has been
reduced to zero (Section 3.03(b)).
"Additional Principal" with respect to each Payment Date is an
amount equal to (a) the difference between (i) the Discounted Present Value of
the Performing Leases as of the previous Determination Date and (ii) the
Discounted Present Value of the Performing Leases as of the related
Determination Date, less (b) the Class A Principal Payment, the Class B
Principal Payment and the Class C Principal Payment to be paid on such Payment
Date (Section 1.01).
The "Class A Percentage" equals _____% (Section 1.01).
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The "Class A Principal Payment" means the lesser of (a) the
amount necessary to reduce the Outstanding Principal Amount on the Class A Notes
to the Class A Target Investor Amount and (b) funds available therefor (Section
1.01).
The "Class A Target Investor Principal Amount" means the
product of (a) the Class A Percentage and (b) the Discounted Present Value of
the Performing Leases as of the related Determination Date.
The "Class B Floor" with respect to each Payment Date means
(a) [____]% of the initial Discounted Present Value of the Leases as of the
Cut-Off Date, plus (b) the Cumulative Loss Amount with respect to such Payment
Date, minus (c) the sum, as of the related Determination Date, of the
Outstanding Principal Amount of the Class C Notes and the amount on deposit in
the Reserve Account after giving effect to any withdrawals to be made on such
Payment Date (Section 1.01).
The "Class B Percentage" equals _____% (Section 1.01).
The "Class B Principal Payment" payable on each Payment Date
will be an amount equal to the amount necessary to reduce the Outstanding Class
B Principal Amount to the greater of Class B Target Investor Principal Amount
and the Class B Floor and (b) funds available therefor (Section 1.01).
The "Class B Target Investor Principal Amount" with respect to
each Payment Date will be an amount equal to the product of (a) the Class B
Percentage and (b) the Discounted Present Value of the Performing Leases as of
the related Determination Date (Section 1.01).
The "Class C Floor" with respect to each Payment Date means
(a) [____]% of the initial Discounted Present Value of the Leases as of the
Cut-Off Date, plus (b) the Cumulative Loss Amount with respect to such Payment
Date, minus (c) the amount on deposit in the Reserve Account after giving effect
to withdrawals to be made on such Payment Date; provided, however, that if the
Outstanding Class B Principal Amount is equal to the Class B Floor on such
Payment Date, the Class C Floor will equal the Outstanding Class C Principal
Amount utilized in the calculation of the Class B Floor Amount for such Payment
Date (Section 1.01).
The "Class C Percentage" equals _____% (Section 1.01).
The "Class C Principal Payment Amount" payable on each Payment
Date will be an amount equal to the lesser of (a) the amount necessary to reduce
the Outstanding Class C Principal Amount to the greater of the Class C Target
Investor Principal Amount and the Class C Floor and (b) funds available therefor
(Section 1.01).
The "Class C Target Investor Principal Amount" with respect to
each Payment Date will be an amount equal to the product of (a) the Class C
Percentage and (b) the Discounted Present Value of the Performing Leases as of
the related Determination Date (Section 1.01).
The "Cumulative Loss Amount" with respect to each Payment Date
is an amount equal to the excess, if any, of (a) the total of (i) the
Outstanding Principal Amount of the Notes as of the immediately preceding
Payment Date after giving effect to all payments made on such Payment Date,
minus (ii) the lesser of (A) the Discounted Present Value of the Performing
Leases as of the Determination Date relating to the immediately preceding
Payment Date minus the Discounted Present Value of the Performing Leases as of
the related Determination Date and (B) Available Funds remaining after the
payment of amounts owing the Servicer and in respect of interest on the Notes on
such Payment Date over (b) the Discounted Present Value of Performing Leases as
of the related Determination Date (Section 1.01).
The "Discounted Present Value of the Leases", with respect to
the Trust Fund at any given time, shall equal the future remaining scheduled
payments (not including delinquent amounts) from the related Leases (including
Non-Performing Leases (as defined herein)), discounted at the Discount Rate. The
Discount Rate will
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be equal to the sum of (a) the weighted average Interest Rate of the Class A
Notes (utilizing the Class A-4 Interest Rate), the Class B Notes and the Class C
Notes on the Issuance Date and (b) the Servicing Fee Rate (Section 1.01).
The "Discounted Present Value of the Performing Leases", with
respect to the Trust Fund at any given time equals the Discounted Present Value
of the Leases, including any Substitute Leases, reduced by all future remaining
scheduled payments on the related Non-Performing Leases (not including
delinquent amounts), discounted at the Discount Rate. See "Description of the
Notes--General" (Section 1.01).
"Non-Performing Leases" are (a) Leases that are more than
[123] days delinquent or (b) Leases that have been accelerated by the Servicer.
See "The Series Pool--The Leases" (Section 1.01).
The "Residual Amount Cap" is $__________, which represents __%
of the Discounted Present Value of the Leases as of the Cut-off Date (Section
1.01).
A "Residual Event" has the meaning specified in the Indenture
(Section 1.01).
Unless an Event of Default and acceleration of the Notes has
occurred, on or before each Payment Date, the Servicer will instruct the Trustee
to apply or cause to be applied the Available Funds to make the following
payments in the following priority (Section 3.03(b)):
(a) to pay the Servicing Fee;
(b) to reimburse unreimbursed Servicer Advances in
respect of a prior Payment Date;
(c) to make Interest Payments, owing on the Class A Notes
concurrently to the Class A-1 Noteholders, Class A-2
Noteholders, Class A-3 Noteholders and Class A-4
Noteholders;
(d) to make Interest Payments on the Class B Notes;
(e) to make Interest Payments on the Class C Notes;
(f) to make the Class A Principal Payment to (i) the
Class A-1 Noteholders only, until the Outstanding
Principal Amount on the Class A-1 Notes is reduced to
zero, then (ii) to the Class A-2 Noteholders only,
until the Outstanding Principal Amount on the Class
A-2 Notes is reduced to zero, then (iii) to the Class
A-3 Noteholders only, until the Outstanding Principal
Amount on the Class A-3 Notes is reduced to zero, and
finally (iv) to the Class A-4 Noteholders, until the
Outstanding Principal Amount on the Class A-4 Notes
is reduced to zero;
(g) to make the Class B Principal Payment to the Class B
Noteholders;
(h) to make the Class C Principal Payment to the Class C
Noteholders;
(i) to pay the Additional Principal, if any, as an
additional reduction of principal, to the Class A
Noteholders then receiving the Class A Principal
Payment, until the Outstanding Principal Amount as
provided in Clause (f) above on all of the Class A
Notes has been reduced to zero, then to Class B
Noteholders until the Outstanding Principal Amount on
the Class B Notes has been reduced to zero, and
finally to Class C Noteholders, until the Outstanding
Principal Amounts on the Class C Notes has been
reduced to zero;
(j) to make a deposit to the Reserve Account in an amount
equal to the excess of the Required Reserve Amount
over the Available Reserve Amount;
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(k) during such time as a Residual Event has occurred and
is continuing, to make a deposit to the Residual
Account in an amount equal to the balance of the
remaining Residual Realizations on deposit in the
Collection Account and included in Available Funds
after giving effect to the allocations in clauses (a)
through (j) above on such Payment Date; and
(l) to the Issuer, the balance, if any.
Amounts will be considered due and payable to the Noteholders
only to the extent funds are available therefor as described above.
Advances by the Servicer. Prior to any Payment Date, the
Servicer may, but will not be required to, advance (each, a "Servicer Advance")
to the Trustee an amount sufficient to cover delinquencies on all Leases with
respect to the prior Due Period. The Servicer will be reimbursed for Servicer
Advances from Available Funds on the second following Payment Date. See
"Distribution on Notes" above.
The Issuer will have the option, subject to certain
conditions, to redeem all, but not less than all, of the Notes and thereby
cause early repayment of the Notes as of any Payment Date on which the
Discounted Present Value of the Performing Leases is less than or equal
to 10% of the Discounted Present Value of the Leases as of the Cut-Off
Date (after giving effect to the payment of principal on such Payment
Date). The Issuer will give notice of such redemption to each
Noteholder and the Trustee at least 30 days before the Payment Date
fixed for such prepayment. Upon deposit of funds necessary to effect
such redemption, the Trustee shall pay the remaining unpaid principal
amount on the Notes and all accrued and unpaid interest as of the
Payment Date fixed for redemption. See "Description of the
Notes--Redemption."
Events of Default and Notice Thereof. The following events
will be defined in the Indenture as "Events of Default":
(a) default in making Principal Payments or Interest Payments
when such become due and payable;
(b) default in the performance, or breach, by the Issuer of
certain negative covenants limiting its actions;
(c) default in the performance, or breach, of any other
covenant of the Issuer in the Indenture or the Sales and Servicing
Agreement, and continuance of such default or breach for a period of 30
days after the earliest of (i) any officer of the Issuer first
acquiring the knowledge thereof, (ii) the Trustee's giving written
notice thereof to the Issuer or (iii) the holders of a majority of the
then Outstanding Principal Amount of the Notes giving written notice
thereof to the Issuer and the Trustee;
(d) if any representation or warranty of the Issuer or Copelco
Capital made in the Indenture or the Sales and Servicing Agreement or
any other writing provided to the holders of the Notes proves to be
incorrect in any material respect as of the time when the same has been
made; provided, however, that the breach of any representation or
warranty made by Copelco Capital in the Sales and Servicing Agreement
will be deemed to be "material" only if it negatively affects the
Noteholders, the enforceability of the Indenture or of the Notes; and
provided, further, that a material breach of any representation or
warranty made by Copelco Capital in the Sales and Servicing Agreement
with respect to any of the Leases or the Equipment subject thereto will
not constitute an Event of Default if Copelco Capital repurchases or
substitutes for such Lease and Equipment in accordance with the Sales
and Servicing Agreement; or
(e) insolvency or bankruptcy events relating to the Issuer.
(Section 6.01)
The Indenture will provide that the Trustee shall give the
Noteholders notice of all uncured defaults known to it (the term "default" to
include the events specified above without grace periods). (Sections 6.03 and
7.02).
If an Event of Default under an Indenture of the kind
specified in clause (e) above occurs, the unpaid principal amount of the related
Notes shall automatically become due and payable together with all accrued
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and unpaid interest thereon. If any other Event of Default occurs and is
continuing, then the Trustee will, if so directed by the holders of 66 2/3% (33
1/3% in the case of a payment default) of the then Outstanding Principal Amount
of the Class A Notes (or if the Class A Notes are no longer outstanding, the
Class B Notes or if the Class B Notes are no longer outstanding the Class C
Notes), or the holders of such percentages of the then Outstanding Principal
Amount of such Notes may declare the unpaid principal amount of all the Notes to
be due and payable immediately, together with all accrued and unpaid interest
thereon. (Section 6.02). The Trustee may, however, if the Event of Default
involves other than non-payment of principal or interest on the Notes, not sell
the related Leases and Equipment unless such sale is for an amount greater than
or equal to the Outstanding Principal Amount of the Notes unless directed to do
so by the holders of 66 2/3% (33 1/3% in the case of a payment default) of the
then Outstanding Principal Amount of the Class A Notes (or if the Class A Notes
are no longer outstanding, the Class B Notes or if the Class B Notes are no
longer outstanding the Class C Notes). (Section 6.03).
Subsequent to an Event of Default and following any
acceleration of the Notes pursuant to the Indenture, any moneys that may then be
held or thereafter received by the Trustee shall be applied in the following
order of priority, at the date or dates fixed by the Trustee and, in case of the
distribution of the entire amount due on account of principal or interest, upon
presentation of the Notes and surrender thereof:
First to the payment of all costs and expenses of collection
incurred by the Trustee and the Noteholders (including the reasonable
fees and expenses of any counsel to the Trustee and the Noteholders);
Second if the person then acting as Servicer under the Sales
and Servicing Agreement is not Copelco Capital or an affiliate of
Copelco Capital, to the payment of all Servicer's Fees then due to such
person;
Third first to the payment of all accrued and unpaid
interest on the Outstanding Principal Amount of the Class A Notes to
the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of such installment to the date of payment
thereof at the rate per annum equal to the Class A Interest Rate, and
to the payment of the Outstanding Principal Amount of the Class A
Notes to the date of payment thereof, and then to the payment of all
accrued and unpaid interest on the Outstanding Principal Amount of the
Class B Notes to the date of payment thereof, including (to the extent
permitted by applicable law) interest on any overdue installment of
interest and principal from the maturity of such installment to the
date of payment thereof at the rate per annum equal to the Class B
Interest Rate, and to the payment of the Outstanding Principal Amount
of the Class B Notes and then to the payment of all accrued and unpaid
interest on the Outstanding Principal Amount of the Class C Notes to
the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of such installment to the date of payment
thereof at the rate per annum equal to the Class C Interest Rate, and
to the payment of the Outstanding Principal Amount of the Class C
Notes; provided, that the Noteholders may allocate such payments for
interest, principal and premium at their own discretion, except that
no such allocation shall affect the allocation of such amounts or
future payments received by any other Noteholder;
Fourth to the payment of amounts then due the Trustee under
the Indenture; and
Fifth to the payment of the remainder, if any, to the
Issuer or any other Person legally entitled thereto. (Section 6.06).
The Issuer will be required to furnish annually to the
Trustee, a statement of certain officers of the Issuer to the effect that to the
best of their knowledge the Issuer is not in default in the performance and
observance of the terms of the Indenture or, if the Issuer is in default,
specifying such default. (Section 8.09).
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The Indenture will provide that the holders of 66 2/3% in
aggregate principal amount of all Notes then outstanding under such Indenture
will have the right to waive certain defaults and, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee. (Sections 6.12 and 6.13). The Indenture will provide
that in case an Event of Default shall occur (which shall not have been cured or
waived), the Trustee will be required to exercise such of its rights and powers
under such Indenture and to use the degree of care and skill in their exercise
that a prudent man would exercise or use in the conduct of his own affairs.
(Section 7.01(b)). Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under such Indenture at the
request of any of the Noteholders unless they shall have offered to the Trustee
reasonable security or indemnity. (Section 6.12).
Modification of the Indenture. With certain exceptions, under
the Indenture, the rights and obligations of the Issuer and the rights of the
Noteholders may be modified by the Issuer with the consent of the holders of not
less than 66 2/3% in aggregate principal amount of the Notes then outstanding
under the Indenture; but no such modification may be made which would (a) extend
the fixed maturity of any Note, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of principal or interest thereon,
without the consent of the holder of each Note so affected or (b) reduce the
above-stated percentage of Notes, without the consent of the holders of all
Notes then outstanding under such Indenture. (Section 9.02).
Servicer Events of Default. The following events and
conditions shall be defined in the Sales and Servicing Agreement as "Servicer
Events of Default":
(a) failure on the part of the Servicer to remit to the
Trustee within three Business Days following the receipt thereof any
monies received by the Servicer required to be remitted to the Trustee
under the Sales and Servicing Agreement;
(b) so long as Copelco Capital is the Servicer, failure on the
part of Copelco Capital to pay to the Trustee on the date when due, any
payment required to be made by Copelco Capital pursuant to the Sales
and Servicing Agreement;
(c) default on the part of either the Servicer or (so long as
Copelco Capital is the Servicer) Copelco Capital in its observance or
performance in any material respect of certain covenants or agreements
in the Sales and Servicing Agreement;
(d) if any representation or warranty of Copelco Capital made
in the Sales and Servicing Agreement shall prove to be incorrect in any
material respect as of the time made; provided, however, that the
breach of any representation or warranty made by Copelco Capital in
such Sales and Servicing Agreement will be deemed to be "material" only
if it affects the Noteholders, the enforceability of the Indenture or
of the Notes; and provided, further, that such material breach of any
representation or warranty made by Copelco Capital in such Sales and
Servicing Agreement with respect to any of the Leases or the Equipment
subject thereto will not constitute a Servicer Event of Default if
Copelco Capital repurchases such Lease and Equipment in accordance with
the Sales and Servicing Agreement to the extent provided therein;
(e) certain insolvency or bankruptcy events relating to the
Servicer;
(f) the failure of the Servicer to make one or more payments
due with respect to aggregate recourse debt or other obligations
exceeding $1,000,000, or the occurrence of any event or the existence
of any condition, the effect of which event or condition is to cause
(or permit one or more persons to cause) more than $1,000,000 of
aggregate recourse debt or other obligations of the Servicer to become
due before its (or their) stated maturity or before its (or their)
regularly scheduled dates of payment so long as such failure, event or
condition shall be continuing and shall not have been waived by the
Person or Persons entitled to performance;
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(g) a final judgment or judgments (or decrees or orders) for
the payment of money aggregating in excess of $1,000,000 and any one of
such judgments (or decrees or orders) has remained unsatisfied and in
effect for any period of 60 consecutive days without a stay of
execution.
Servicer Termination. So long as a Servicer Event of Default
under the Sales and Servicing Agreement is continuing, the Trustee shall, upon
the instructions of the holders of 66 2/3% in principal amount of the Notes, by
notice in writing to the Servicer terminate all of the rights and obligations of
the Servicer (but not Copelco Capital's obligations which shall survive any such
termination) under Sales and Servicing Agreement (Section 5.01). On the receipt
by the Servicer of such written notice, all authority and power of the Servicer
under the Sales and Servicing Agreement to take any action with respect to any
Lease or Equipment will cease and the same will pass to and be vested in the
Trustee pursuant to and under the Sales and Servicing Agreement and the
Indenture.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate
amount of each interest payment on such Notes and the yield to maturity of such
Notes are directly related to the rate of payments on the underlying Leases. The
payments on such Leases may be in the form of scheduled payments, Prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Any such payments may result in distributions to
Noteholders of amounts which would otherwise have been distributed over the
remaining term of the Leases. In general, the rate of such payments may be
influenced by a number of other factors, including general economic conditions.
The rate of Principal Payments with respect to any Class may also be affected by
any repurchase of the underlying Leases by Copelco Capital pursuant to the Sales
and Servicing Agreement. In such event, the repurchase price will decrease the
Discounted Present Value of the Performing Leases, causing the corresponding
weighted average life of the Notes to decrease. See "Risk Factors--Prepayments."
In the event a Lease becomes a Non-Performing Lease, a
Warranty Lease or an Adjusted Lease, Copelco Capital will have the option to
substitute for the terminated lease another of similar characteristics (a
"Substitute Lease") in an aggregate amount not to exceed __% of the Discounted
Present Value of the Leases as of the Cut-Off Date with respect to
Non-Performing Leases and in an aggregate amount not to exceed 8% of the
Discounted Present Value of the Leases as of the Cut-Off Date with respect to
Adjusted Leases and Warranty Leases. In addition, in the event of an Early Lease
Termination which has been prepaid in full, Copelco Capital will have the option
to transfer an additional lease of similar characteristics (an "Additional
Lease"). The Substitute Leases and Additional Leases will have a Discounted
Present Value of the Leases equal to or greater than that of the Leases being
modified and replaced and the monthly payments on the Substitute Leases or
Additional Leases will be at least equal to those of the terminated Leases
through the term of such terminated Leases. In the event that an Early Lease
Termination is allowed by Copelco Capital and a Substitute Lease is not
provided, the amount prepaid will be equal to at least the Discounted Present
Value of the terminated Lease, plus any delinquent payments. In addition,
following the transfer of any Lease to the Series Pool, there may be adjustments
to such Lease which modify one or more terms of such Lease, such as payment
amount or payment date. Such administrative adjustments may result in a
re-booking of such Lease, but will not be considered to be a substitution or
prepayment of such Lease. The Modified Leases and the Replacement Leases will
have a Discounted Present Value of the Leases equal to or greater than that of
the Leases subject to such modification or adjustment and the monthly payments
on the Substitute Leases or Additional Leases will be at least equal to those of
the terminated Leases through the term of such terminated Leases. See "Risk
Factors--Additional Leases."
The effective yield to holders of the Notes will depend upon,
among other things, the amount of and rate at which principal is paid to such
Noteholders. The after-tax yield to Noteholders may be affected by lags between
the time interest income accrues to Noteholders and the time the related
interest income is received by the Noteholders.
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The following chart sets forth the percentage of the Initial
Principal Amount of the Class A and Class B Notes which would be outstanding on
the Payment Dates set forth below assuming a CPR of 0% and [12]%, respectively
and were calculated using the Statistical Discount Rate. Such information is
hypothetical and is set forth for illustrative purposes only. The CPR
("Conditional Payment Rate") assumes that a fraction of the outstanding Series
Pool is prepaid on each Distribution Date, which implies that each Lease in the
Series Pool is equally likely to prepay. This fraction, expressed as a
percentage, is annualized to arrive at the Conditional Payment Rate for the
Contract Pool. The CPR measures prepayments based on the outstanding Discounted
Present Value of the Leases, after the payment of all Scheduled Payments on the
Leases during such Due Period. The CPR further assumes that all Leases are the
same size and amortize at the same rate and that each Lease will be either paid
as scheduled or prepaid in full. The amounts set forth below are based upon the
timely receipt of scheduled monthly Lease payments as of the Cut-Off Date,
assumes that the Issuer does not exercise its option to redeem the Notes and
assumes the Issuance Date is _______, 1997.
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PERCENTAGE OF THE INITIAL CLASS A-1, A-2, A-3 AND A-4
PRINCIPAL AMOUNTS AND THE INITIAL CLASS B PRINCIPAL
AMOUNT AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
==============================================================================================================================
0% CPR [12]% CPR
----------------------------------------------------------------------------------------------------------------
Date Class A-1 Class A-2 Class A-3 Class A-4 Class B Class A-1 Class A-2 Class A-3 Class A-4 Class B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
6/20/97 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
7/20/97 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
8/20/97 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
9/20/97 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
10/20/97 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
11/20/97 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
12/20/97 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
1/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
2/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
3/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
4/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
5/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
6/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
7/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
8/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
9/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
10/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
11/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
12/20/98 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
1/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
2/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
3/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
4/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
5/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
6/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
7/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
8/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
9/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
10/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
11/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
12/20/99 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
1/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
2/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
3/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
4/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
5/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
6/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
7/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
8/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
9/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
10/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
11/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
12/20/00 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
1/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
2/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
3/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
4/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
</TABLE>
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<TABLE>
<CAPTION>
==============================================================================================================================
0% CPR [12]% CPR
----------------------------------------------------------------------------------------------------------------
Date Class A-1 Class A-2 Class A-3 Class A-4 Class B Class A-1 Class A-2 Class A-3 Class A-4 Class B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
6/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
7/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
8/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
9/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
10/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
11/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
12/20/01 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
WEIGHTED
AVERAGE
LIFE(1)(YEARS) ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
</TABLE>
* equals less than 0.5%.
(1) The weighted average life of a Class A Note or a Class B Note is determined
by (a) multiplying the amount of cash distributions in reduction of the
Outstanding Class A Principal Amount or the Outstanding Class B Principal
Amount, as the case may be, by the number of years from the Issuance Date
to such Payment Date, (b) adding the results, and (c) dividing the sum by
the Initial Class A Principal Amount or the Initial Class B Principal
Amount, as the case may be.
For the 0% CPR and [12]% CPR scenarios, if the Issuer
exercises its option to redeem the Notes, the average life of the Class A-1
Notes; Class A-2 Notes; Class A-3 Notes; Class A-4 Notes and Class B Notes would
be _____ years and _____ years; _____ years and _____ years; _____ years and
_____ years; _____ years and _____ years and _____ years and _____ years,
respectively.
SECURITY FOR THE NOTES
General. Repayment of the Notes will be secured by (a) a first
priority security interest in the underlying Leases perfected both by filing UCC
financing statements against the Issuer and Copelco Capital and by taking
possession of the respective Lease documents, (b) an unperfected security
interest in the related Equipment owned by the Issuer and an assignment of the
Issuer's security interest in such Equipment subject to Nominal Buy-Out Leases,
which security interest was originally perfected by Copelco Capital (for
Equipment with an original cost in excess of $25,000 which assignment will be
recorded in the manner described below) and (c) all funds in the Collection
Account, the Reserve Account and Residual Account.
Copelco Capital has filed UCC financing statements in its
favor against Lessees in respect of all Equipment in the Series Pool (for
Equipment with an original cost in excess of $25,000) and will record
assignments of such UCC filings in favor of the Issuer or the Trustee, in the
Filing Locations. See "Certain Legal Matters Affecting a Lessee's Rights and
Obligations."
Residual Realizations. Upon receipt of the final Lease Payment
on a performing Lease, the Equipment subject to that Lease shall be sold or
re-let by the Servicer, with any proceeds from such sale or lease constituting
Residual Values for deposit into the Collection Account for the benefit of the
Noteholders up to the Residual Amount Cap. Actual Residual Realizations may be
more or less than the Booked Residual Value of the related Equipment.
THE TRUSTEE
[Manufacturers & Traders] will be the Trustee under the
Indenture. Copelco Capital, as Seller or Servicer, and its affiliates may from
time to time enter into normal banking and trustee relationships with the
Trustee and its affiliates. The Trustee, the Servicer and any of their
respective affiliates may hold Notes in their own names.
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In addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a co-trustee or a
separate trustee under each Indenture. In the event of such appointment, all
rights, powers, duties and obligations conferred or imposed upon the Trustee by
the Indenture will be conferred or imposed upon the Trustee and such separate
trustee or co-trustee jointly, or in any jurisdiction in which the Trustee shall
be incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee, who shall exercise and perform such rights, powers,
duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Issuer
will be obligated to appoint a successor Trustee. The Issuer may also remove
each Trustee if such Trustee ceases to be eligible to continue as such under the
Indenture, fails to perform in any material respect its obligations under such
Indenture, or becomes insolvent. In such circumstances, the Issuer will be
obligated to appoint a successor Trustee. Any resignation or removal of a
Trustee and appointment of a successor Trustee will not become effective until
acceptance of the appointment by the successor Trustee.
CERTAIN LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
General. The Leases are triple-net leases, requiring the
Lessees to pay all taxes, maintenance and insurance associated with the
Equipment, and are primarily non-cancelable by the Lessees.
The Leases are "hell or high water" leases, under which the
obligations of the Lessee are absolute and unconditional, regardless of any
defense, setoff or abatement which the Lessee may have against Copelco Capital,
as Seller or Servicer, the Issuer, or any other person or entity whatsoever.
Events of default under the Leases are generally the result of
failure to pay amounts when due, failure to observe other covenants in the
Lease, misrepresentations by, or the insolvency, bankruptcy or appointment of a
trustee or receiver for the Lessee under a Lease. The remedies of the lessor
(and the Issuer as assignee) following a notice and cure period are generally to
seek to enforce the performance by the Lessee of the terms and covenants of the
Lease (including the Lessee's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the Lessee under such Lease.
Although the Leases permit the lessor to repossess and dispose of the related
Equipment in the event of a lease default, and to credit such proceeds against
the Lessee's liabilities thereunder, such remedies may be limited where the
Lessee thereunder is subject to bankruptcy, or other insolvency proceedings.
UCC and Bankruptcy Considerations. Pursuant to the Sales and
Servicing Agreement, Copelco Capital will sell the Leases to the Issuer, make a
capital contribution to the Issuer of Equipment owned by Copelco Capital and
subject to the Leases, and assign its security interests in the Equipment
subject to Nominal Buy-Out Leases. Copelco Capital will warrant that the sale of
the Leases to the Issuer is a true sale, that the contributions of its rights in
the Equipment is a valid transfer of Copelco Capital's title to the Equipment
and that Copelco Capital is either the owner of the Equipment or has a valid
perfected first priority security interest in the Equipment (for Leases with
leased Equipment having an original equipment cost in excess of $25,000),
including Equipment, subject to Nominal Buy-Out Leases, and accordingly, Copelco
Capital has filed UCC financing statements in its favor against Lessees in
respect of all Equipment in the Series Pool with an original Equipment cost in
excess of $25,000. No action will be taken to perfect the interest of Copelco
Capital in any Equipment in the Series Pool with an original Equipment cost of
less than $25,000. In addition, UCC financing statements identifying security
interests in the Equipment as transferred to, or obtained by, the Issuer or the
Trustee and UCC Financing Statements identifying equipment owned by Copelco
Capital, transferred to the Issuer and pledged to the Trustee will be filed in
favor of the Issuer or the Trustee in the Filing Locations. In the event of the
repossession and resale of Equipment subject to a superior lien, the senior
lienholder would be entitled to be paid the full amount of the indebtedness owed
to it out of the sale proceeds before such proceeds could be applied to the
payment of claims by the Servicer on behalf of the Issuer. Certain statutory
provisions, including federal and state bankruptcy and insolvency laws, may
limit the ability of the Servicer to repossess and resell collateral or obtain a
deficiency judgment in the event of a Lessee default. In the event of the
bankruptcy or reorganization of a Lessee, or Copelco Capital, as Seller or
Servicer,
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various provisions of the Bankruptcy Code of 1978, 11 U.S.C. ss.ss. 101-1330
(the "Bankruptcy Code"), and related laws may interfere with, delay or eliminate
the ability of Copelco Capital or the Issuer to enforce its rights under the
Leases.
In the case of operating leases, the Bankruptcy Code grants to
the bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of such a lease
or contract constitutes a breach of such lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described
herein. Upon the bankruptcy of a Lessee, if the bankruptcy trustee or
debtor-in-possession elected to reject a Lease, the flow of scheduled payments
to Noteholders would cease. In the event that, as a result of the bankruptcy of
a Lessee, the Servicer is prevented from collecting scheduled payments with
respect to Leases and such Leases become Non-Performing Leases, no recourse
would be available against Copelco Capital (except for misrepresentation or
breach of warranty) and the Noteholders could suffer a loss with respect to the
Notes. Similarly, upon the bankruptcy of the Issuer, if the bankruptcy trustee
or debtor-in-possession elected to reject a Lease, the flow of Lease payments to
the Issuer and the Noteholders would cease. As noted above, however, the Issuer
has been structured so that the filing of a bankruptcy petition with respect to
it is unlikely. See "The Issuer."
These UCC and bankruptcy provisions, in addition to the
possible decrease in value of a repossessed item of Equipment, may limit the
amount realized on the sale of Equipment to less than the amount due on the
related Lease.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of material federal
income tax consequences to the original purchasers of the Notes of the purchase,
ownership and disposition of the Notes. It does not purport to discuss all
federal income tax consequences that may be applicable to investment in the
Notes or to particular categories of investors, some of which may be subject to
special rules. In particular, this discussion applies only to institutional
investors that purchase Notes directly from the Issuer and hold the Notes as
capital assets.
The discussion that follows, and the opinion set forth below
of Dewey Ballantine, special tax counsel to the Issuer ("Tax Counsel"), are
based on the provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and treasury regulations promulgated thereunder as in effect on the date
hereof and on existing judicial and administrative interpretations thereof.
These authorities are subject to change and to differing interpretations, which
could apply retroactively. The opinion of Tax Counsel is not binding on the
courts or the Internal Revenue Service (the "IRS"). Potential investors should
consult their own tax advisors in determining the federal, state, local, foreign
and any other tax consequences to them of the purchase, ownership and
disposition of the Notes.
Tax Counsel has prepared the following discussion and is of
the opinion that such discussion is correct in all material respects.
Characterization of the Notes as Indebtedness. In the opinion
of Tax Counsel, although no transaction closely comparable to that contemplated
herein has been the subject of any treasury regulation, revenue ruling or
judicial decision, based on the application of existing law to the facts as set
forth in the applicable agreements, the proper treatment of the Notes is as
indebtedness for federal income tax purposes.
Although it is the opinion of Tax Counsel that the Notes are
properly characterized as indebtedness for federal income tax purposes, no
assurance can be given that such characterization of the Notes will prevail. If
the Notes were treated as an ownership interest in the Leases, all income on
such Leases would be income to the holders of the Notes, and related fees and
expenses would generally be deductible (subject to certain limitations on the
deductibility of miscellaneous itemized deductions by individuals) and certain
market discount and premium provisions of the Code might apply to a purchase of
the Notes.
If, alternatively, the Notes were treated as an equity
interest in the Issuer, distributions on the Notes probably would not be
deductible in computing the taxable income of the Issuer and all or a part of
distributions to
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the holders of the Notes probably would be treated as dividend income to those
holders. Such an Issuer-level tax could result in a reduced amount of cash
available for distributions to the holders of the Notes.
Taxation of Interest Income of Noteholders. If characterized
as indebtedness, interest on the Notes will be taxable as ordinary income for
federal income tax purposes when received by Noteholders using the cash method
of accounting and when accrued by Noteholders using the accrual method of
accounting. Interest received on the Notes also may constitute "investment
income" for purposes of certain limitations of the Code concerning the
deductibility of investment interest expense.
Original Issue Discount. It is not anticipated that the Notes
will have any original issue discount ("OID") other than possibly OID within a
de minimis exception and that accordingly the provisions of sections 1271
through 1273 and 1275 of the Code generally will not apply to the Notes. OID
will be considered de minimis if it is less than 0.25% of the principal amount
of Note multiplied by its expected weighted average life.
Market Discount. A subsequent purchaser who buys a Note for
less than its principal amount may be subject to the "market discount" rules of
Sections 1276 through 1278 of the Code. If a subsequent purchaser of a Note
disposes of such Note (including certain nontaxable dispositions such as a
gift), or receives a principal payment, any gain upon such sale or other
disposition will be recognized, or the amount of such principal payment will be
treated, as ordinary income to the extent of any "market discount" accrued for
the period that such purchaser holds the Note. Such holder may instead elect to
include market discount in income as it accrues with respect to all debt
instruments acquired in the year of acquisition of the Notes and thereafter.
Market discount generally will equal the excess, if any, of the then-current
unpaid principal balance of the Note over the purchaser's basis in the Note
immediately after such purchaser acquired the Note. In general, market discount
on a Note will be treated as accruing over the term of such Note in the ratio of
interest for the current period over the sum of such current interest and the
expected amount of all remaining interest payments, or at the election of the
holder, under a constant yield method. At the request of a holder of a Note,
information will be made available that will allow the holder to compute the
accrual of market discount under the first method described in the preceding
sentence.
The market discount rules also provide that a holder who
incurs or continues indebtedness to acquire a Note at a market discount may be
required to defer the deduction of all or a portion of the interest on such
indebtedness until the corresponding amount of market discount is included in
income.
Notwithstanding the above rules, market discount on a Note
will be considered to be zero if it is less than a de minimis amount, which is
0.25% of the remaining principal balance of the Note multiplied by its expected
weighted average remaining life. If OID or market discount is de minimis, the
actual amount of discount must be allocated to the remaining principal
distributions on the Note and, when each such distribution is received, capital
gain equal to the discount allocated to such distribution will be recognized.
Market Premium. A subsequent purchaser who buys a Note for
more than its principal amount generally will be considered to have purchased
the Note at a premium. Such holder may amortize such premium, using a constant
yield method, over the remaining term of the Note and, except as future
regulations may otherwise provide, may apply such amortized amounts to reduce
the amount of interest income reportable with respect to such Note over the
period from the purchase date to the date of maturity of the Note. Legislative
history to the Tax Reform Act of 1986 indicates that the amortization of such
premium on an obligation that provides for partial principal payments prior to
maturity should be governed by the methods for accrual of market discount on
such an obligation (described above). A holder that elects to amortize such
premium must reduce tax basis in the related obligation by the amount of the
aggregate deductions (or interest offsets) allowable for amortizable premium. If
a debt instrument purchased at a premium is redeemed in full prior to its
maturity, a purchaser who has elected to amortize premium should be entitled to
a deduction for any remaining unamortized premium in the taxable year of
redemption.
Sale or Exchange of Notes. If a Note is sold or exchanged, the
seller of the Note will recognize gain or loss equal to the difference between
the amount realized on the sale or exchange and the adjusted basis of
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the Note. The adjusted basis of a Note will generally equal its cost, increased
by any OID or market discount includible in income with respect to the Note
through the date of sale and reduced by any principal payments previously
received with respect to the Note, any payments allocable to previously accrued
OID or market discount and any amortized market premium. Subject to the market
discount rules, gain or loss will generally be capital gain or loss if the Note
was held as a capital asset. Capital losses generally may be used only to offset
capital gains.
Backup Withholding with Respect to Notes. Payments of interest
and principal, together with payments of proceeds from the sale of Notes, may be
subject to the "backup withholding tax" under Section 3406 of the Code at a rate
of 31% if recipients of such payments fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from such tax. Any amounts deducted and withheld from
a payment to a recipient would be allowed as a credit against such recipient's
federal income tax. 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.
Foreign Investors in Notes Certain U.S. Federal Income Tax
Documentation Requirements. A beneficial owner of Notes holding securities
through CEDEL of 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 (as defined below), 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:
Exemption for Non-U.S. Persons (Form W-8). Beneficial Owners
of Notes that are Non-U.S. Persons (as defined below) 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 (as defined below), 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 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 Certificate Owners or their 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 Owner of a
Note 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.
On April 22, 1996 the IRS issued proposed regulations relating
to withholding, backup withholding and information reporting that, if adopted in
their current form would, among other things, unify current certification
procedures and forms and clarify certain reliance standards. The regulations are
proposed to be effective for payments made after December 31, 1997 but provide
that certificates issued on or before the date that is 60 days after
55
<PAGE>
the proposed regulations are made final will continue to be valid until they
expire. Proposed regulations, however, are subject to change prior to their
adoption in final form.
The term "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof, (iii)
an estate that is subject to U.S. federal income tax regardless of the source of
its income. The term "Non-U.S. Person" means any person who is not a U.S. Person
or (iv) a trust if a court within the United States can exercise primary
supervision over its administration and at least one United States fiduciary has
the authority to control all substantial decisions of the trust. This summary
does not deal with all aspects of U.S. Federal income tax withholding that may
be relevant to foreign holders of the Notes. Investors are advised to consult
their own tax advisors for specific tax advice concerning their holding and
disposing of the Notes.
State, Local and Other Taxes. Investors should consult their
own tax advisors regarding whether the purchase of the Notes, either alone or in
conjunction with an investor's other activities, may subject an investor to any
state or local taxes based on an assertion that the investor is either "doing
business" in, or deriving income from a source located in, any state or local
jurisdiction. Additionally, potential investors should consider the state, local
and other tax consequences of purchasing, owning or disposing of a Note. State
and local tax laws may differ substantially from the corresponding federal tax
law, and the foregoing discussion does not purport to describe any aspect of the
tax laws of any state or other jurisdiction. Accordingly, potential investors
should consult their own tax advisors with regard to such matters.
THE FEDERAL AND STATE INCOME TAX DISCUSSIONS SET FORTH ABOVE
ARE 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 OR IN THE INTERPRETATIONS THEREOF.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), imposes certain requirements and restrictions on those
pension and other employee benefits plans to which it applies and on those
persons who are fiduciaries with respect to such plans. In accordance with
ERISA's fiduciary standards, before purchasing the Notes, a fiduciary should
determine whether such an investment is permitted under the documents and
instruments governing the plan and is appropriate for the plan in view of its
overall investment policy and the composition of its portfolio.
Section 406 of ERISA and Section 4975 of the Code prohibit
certain transactions involving the assets of certain plans subject thereto (each
"Benefit Plan") and persons who are "parties in interest", within the meaning of
ERISA, or "disqualified persons", within the meaning of the Code. Certain
transactions involving the purchase, holding or transfer of the Notes might be
deemed to constitute prohibited transactions under ERISA and the Code if assets
of the Issuer were deemed to be assets of a Benefit Plan. Under regulations
issued by the United States Department of Labor set forth in 29 C.F.R. ss.
2510.3101 (the "Plan Asset Regulations"), the assets of the Issuer would be
treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code
only if the Benefit Plan acquires an "Equity Interest" in the Issuer and none of
the exceptions contained in the Plan Asset Regulations is applicable. An Equity
Interest is defined under the Plan Asset Regulations as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. It is anticipated that the Notes
should be treated as indebtedness without substantial equity features for
purposes of the Plan Asset Regulations. However, even if the Notes are treated
as indebtedness for such purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Issuer, the Trustee, the Underwriter or any of their
respective affiliates is or becomes a party in interest or
56
<PAGE>
disqualified person with respect to such Benefit Plan. In this event, certain
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the plan fiduciary making the decision to
acquire a Note. Included among these exemptions are: Prohibited Transaction
Class Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38 regarding investments by bank collective
investment funds; PTCE 84-14, regarding transactions effected by "qualified
professional asset managers"; PTCE 95-60, regarding investments by insurance
company general accounts and PTCE 96-23 regarding transactions effected by
In-House Asset Managers. Each investor using assets of a Benefit Plan which
acquires the Notes, or to whom the Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Notes will be
covered by one of the exemptions listed above or another Department of Labor
class exemption.
Insurance companies considering the purchase of the Notes
should also consult their own counsel as to the application of the recent
decision by the United States Supreme Court in John Hancock Mutual Life
Insurance Co. v. Harris Trust and Savings Bank (114 S. Ct. 517 (1993)) to such a
purchase. Under that decision, assets held in an insurance company's general
account may be deemed assets of ERISA plans under certain circumstances.
Due to the complexity of these rules and the penalties imposed
upon persons involved in prohibited transactions, it is particularly important
that a fiduciary investing assets of an ERISA plan consult with counsel
regarding the consequences under ERISA of the acquisition and holding of Notes,
including the availability of any administrative exemptions from the prohibited
transaction rules.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement (the "Underwriting Agreement") for the sale of the
Offered Notes, the Issuer has agreed to sell and Lehman Brothers and First Union
(the "Underwriters") has agreed to purchase the entire principal amount of the
Offered Notes.
In the Underwriting Agreement, the Underwriters have agreed to
purchase the Offered Notes, subject to the terms and conditions set forth
therein.
The Issuer has been advised that the Underwriters propose to
initially offer the Offered Notes directly to the public at the price set forth
on the cover page hereof. After the initial public offering, the public offering
price may be changed.
The Underwriters will each represent and agree that:
(a) it has not offered or sold, and, prior to the expiry of
six months from the Closing Date, will not offer or sell, any Offered
Notes to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for purposes of their
business, or otherwise in circumstances which have not resulted and
will not result in an offer to the public in the United Kingdom within
the meaning of the Public Offers of Securities Regulations 1995;
(b) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything
done by it in relation to the Offered Notes in, from or otherwise
involving the United Kingdom; and
(c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection
with the issue of the Offered Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or persons to whom
such document may otherwise lawfully be issued, distributed or passed
on.
57
<PAGE>
The Issuer has agreed to indemnity the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Issuer has been advised by the Underwriters that the
Underwriters presently intend to make a market in the Offered Notes, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Offered Notes and any such market
making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Offered Notes.
In connection with the offering of the Offered Notes,
certain Underwriters and selling group members and their respective affiliates
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the Offered Notes. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M, pursuant to
which such person may bid for or purchase the Offered Notes for the purpose of
stabilizing its market price. In addition, Lehman Brothers, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in the offering) for the account of the other Underwriters, the
selling concession with respect to the Offered Notes that it distributed in the
offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Offered Notes at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are taken, may be discontinued at
any time withour notice.
The Underwriters are serving as the placement agents for the
Class C Notes.
RATING OF THE NOTES
It is a condition to the issuance of the Offered Notes that
the Class A-1 Notes be rated at least "____" and that the Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes be rated at least "____" by at least one Rating
Agency.
Such rating will reflect only the views of the Rating Agency
and will be based primarily on the amount of subordination, the availability of
funds on deposit in the Reserve Account and the value of the Leases and
Equipment. The ratings are not a recommendation to purchase, hold or sell the
related Offered Notes, inasmuch as such ratings do not comment as to market
price or suitability for a particular investor. There is no assurance that any
such rating will continue for any period of time or that it will not be lowered
or withdrawn entirely by the Rating Agency if, in its judgment, circumstances so
warrant. A revision or withdrawal of such rating may have an adverse affect on
the market price of the Offered Notes. The rating of the Offered Notes addresses
the likelihood of the timely payment of interest and the ultimate payment of
principal on the Offered Notes by the Stated Maturity date. The rating does not
address the rate of Prepayments that may be experienced on the Leases and,
therefore, does not address the effect of the rate of Lease Prepayments on the
return of principal to the Offered Noteholders.
58
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Term(s) Page(s)
- ------- -------
<S> <C>
Additional Lease ...........................................................................................12, 48
Additional Principal..........................................................................................9, 42
Adjusted Lease ...............................................................................................12
Adjusted Leases ...............................................................................................18
Available Funds ...........................................................................................13, 41
Available Funds Shortfall........................................................................................43
Available Reserve Amount.....................................................................................16, 43
Bankruptcy Code ...............................................................................................54
Benefit Plan ...............................................................................................57
Booked Residual Value............................................................................................16
Casualty ...............................................................................................42
Casualty Payment ...............................................................................................42
Cede ................................................................................................4
CEDEL ................................................................................................4
Cedel Participants...............................................................................................40
Class ................................................................................................1
Class A Initial Principal Amount..................................................................................6
Class A Noteholders...............................................................................................2
Class A Notes .............................................................................................1, 5
Class A Percentage............................................................................................6, 43
Class A Principal Payment.........................................................................................9
Class A Target Investor Principal Amount......................................................................9, 44
Class A-1 Initial Principal Amount................................................................................6
Class A-1 Interest Rate...........................................................................................6
Class A-1 Notes ................................................................................................1
Class A-2 Initial Principal Amount................................................................................6
Class A-2 Interest Rate...........................................................................................6
Class A-2 Notes ................................................................................................1
Class A-3 Initial Principal Amount................................................................................6
Class A-3 Interest Rate...........................................................................................6
Class A-3 Notes ................................................................................................1
Class A-4 Initial Principal Amount................................................................................6
Class A-4 Interest Rate...........................................................................................6
Class A-4 Notes ................................................................................................1
Class B Floor ...........................................................................................10, 44
Class B Initial Principal Amount..................................................................................6
Class B Interest Rate.............................................................................................6
Class B Noteholders...............................................................................................2
Class B Notes .............................................................................................1, 5
Class B Percentage............................................................................................6, 44
Class B Principal Payment.....................................................................................9, 44
Class B Target Investor Principal Amount.........................................................................10
Class B Target Principal Amount..................................................................................44
Class C Floor ...........................................................................................10, 44
Class C Initial Principal Amount..................................................................................6
Class C Interest Rate.............................................................................................6
Class C Notes .............................................................................................1, 2
Class C Percentage............................................................................................6, 43
Class C Principal Payment.........................................................................................9
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Term(s) Page(s)
- ------- -------
<S> <C>
Class C Principal Payment Amount.................................................................................44
Class C Target Investor Principal Amount.........................................................................10
Class C Target Principal Amount..................................................................................44
Code ...............................................................................................54
Collection Account...............................................................................................41
Commission ................................................................................................2
Conditional Payment Rate.........................................................................................50
Cooperative ...............................................................................................40
Copelco Capital ..........................................................................................1, 5, 7
Cost per Copy ...............................................................................................34
Cumulative Loss Amount.......................................................................................10, 44
Cut-Off Date ................................................................................................5
Default ...............................................................................................47
Definitive Notes ...............................................................................................41
Depositaries ...............................................................................................39
Determination Date............................................................................................8, 43
Discount Rate ................................................................................................6
Discounted Present Value of the Leases........................................................................6, 44
Discounted Present Value of the Performing Leases.............................................................7, 45
DTC ................................................................................................4
Due Period ................................................................................................8
Early Lease Termination..........................................................................................11
Eligible Account ...............................................................................................42
Equipment ................................................................................................8
Equipment Financing Portion......................................................................................34
Equity Interest ...............................................................................................57
ERISA ...........................................................................................17, 57
Euroclear ................................................................................................4
Euroclear Operator...............................................................................................40
Euroclear Participants...........................................................................................40
Events of Default ...............................................................................................46
Excess Copy Charge...............................................................................................34
Exchange Act ................................................................................................3
Fee Per Scan Charge..............................................................................................35
Filing Locations ...............................................................................................19
HILL ...............................................................................................34
Holders ...............................................................................................41
Indenture ...........................................................................................13, 38
Indirect Participants............................................................................................39
Initial Principal Amount..........................................................................................5
Interest Payments ............................................................................................8, 43
Interest Rate ................................................................................................6
investment income ...............................................................................................55
IRS ...............................................................................................54
Issuance Date .............................................................................................6, 8
Issuer .............................................................................................1, 5
Lease Contracts ................................................................................................8
Lease Payment ...............................................................................................42
Lease Receivables ................................................................................................8
Leases ................................................................................................8
Lessee ...............................................................................................11
Lessees ...............................................................................................11
Maintenance Charge...............................................................................................34
Nominal Buy-Out ...............................................................................................21
Nominal Buy-Out Leases...........................................................................................18
Non-Performing Lease.............................................................................................21
Non-Performing Leases.....................................................................................7, 21, 45
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Term(s) Page(s)
- ------- -------
<S> <C>
Non-U.S. Person ...............................................................................................57
Notes .............................................................................................1, 5
Offered Noteholders...............................................................................................4
Offered Notes .............................................................................................1, 5
OID ...............................................................................................55
Outstanding Class A Principal Amount..............................................................................8
Outstanding Principal Amounts.....................................................................................8
Participants ...............................................................................................39
PILL ...............................................................................................34
Payment Date .............................................................................................2, 8
Plan Asset Regulations...........................................................................................57
Prepayment ...............................................................................................18
Principal Payments................................................................................................9
PTCE ...............................................................................................58
Rating Agency ...............................................................................................17
Record Date ................................................................................................8
Registration Statement............................................................................................2
Required Payments ...............................................................................................43
Required Reserve Amount......................................................................................16, 43
Reserve Account ...........................................................................................16, 43
Residual Account ...............................................................................................43
Residual Amount Cap..........................................................................................16, 45
Residual Event .......................................................................................16, 43, 45
Residual Realizations............................................................................................16
Sales and Servicing Agreement..............................................................................1, 7, 37
Securities Act ................................................................................................2
Seller ................................................................................................7
Series Cut-Off Date..............................................................................................20
Series Pool ................................................................................................8
Series Pool Divisions............................................................................................20
Servicer ................................................................................................7
Servicer Advance ...........................................................................................13, 46
Servicer Events of Default.......................................................................................48
Servicing Fee ...............................................................................................13
Statistical Discount Rate.........................................................................................7
Statistical Discounted Present Value of the Leases................................................................7
Substitute Lease ...........................................................................................12, 49
Tax Counsel ...............................................................................................54
Termination Payment..............................................................................................42
Terms and Conditions.............................................................................................40
Trust Fund ................................................................................................8
Trustee ............................................................................................8, 38
U.S. Person ...............................................................................................57
UCC ...........................................................................................18, 52
Underwriter ...............................................................................................58
Underwriting Agreement...........................................................................................58
Vendor ...............................................................................................34
Warranty Lease ...........................................................................................12, 36
Warranty Leases ...............................................................................................18
</TABLE>
<PAGE>
===============================================================
No dealer, salesman or any other person has been
authorized to give any information or to make any
representations other than those contained in this
Prospectus in connection with the offer made by this
Prospectus and, if given or made, such information or
representations must not be relied upon. Neither the
delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create an implication that
there has been no change in the affairs of the Seller or
the Issuer or any affiliate thereof or the Leases since the
date hereof. This Prospectus does not constitute an
offer or solicitation by anyone in any state in which
such offer or solicitation by anyone in any state in
which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not
qualified to do so to anyone to whom it is unlawful to
make such offer or solicitation.
----------------------
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION...................................... 2
REPORTS TO NOTEHOLDERS..................................... 3
OFFERED NOTES SUMMARY...................................... 4
PROSPECTUS SUMMARY......................................... 5
RISK FACTORS............................................... 18
USE OF PROCEEDS............................................ 20
THE SERIES POOL............................................ 20
COPELCO CAPITAL'S UNDERWRITING AND
SERVICING PRACTICES..................................... 33
THE ISSUER................................................. 38
DESCRIPTION OF THE NOTES................................... 38
PREPAYMENT AND YIELD CONSIDERATIONS........................ 49
SECURITY FOR THE NOTES..................................... 52
THE TRUSTEE................................................ 52
CERTAIN LEGAL MATTERS AFFECTING A
LESSEE'S RIGHTS AND OBLIGATIONS......................... 53
MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS.......................................... 54
ERISA CONSIDERATIONS....................................... 57
UNDERWRITING............................................... 58
RATING OF THE NOTES........................................ 59
INDEX OF TERMS............................................. 60
Until _____________, 1997 (90 days after the date of this
Prospectus), all dealers effecting transactions in the Notes,
whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
===============================================================
===============================================================
$___________
Copelco Capital
Funding Corp. X
$__________ ____% Class A-1
Lease-Backed Notes, Series 1997-A
$__________ ____% Class A-2
Lease-Backed Notes, Series 1997-A
$__________ ____% Class A-3
Lease-Backed Notes, Series 1997-A
$__________ ____% Class A-4
Lease-Backed Notes, Series 1997-A
$__________ ____% Class B
Lease-Backed Notes, Series 1997-A
___________________
P R O S P E C T U S
___________________
FIRST UNION
LEHMAN CAPITAL
BROTHERS MARKETS CORP.
Dated May __, 1997
===============================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. 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.
<TABLE>
<S> <C>
Registration Fee................................................................................ $1,515.15
Printing and Engraving Expenses................................................................. *
Trustee's Fees.................................................................................. *
Legal Fees and Expenses......................................................................... *
Blue Sky Fees and Expenses...................................................................... *
Accountants' Fees and Expenses.................................................................. *
Rating Agency Fees.............................................................................. *
Miscellaneous Fees.............................................................................. *
Total.......................................................................................... $ *
</TABLE>
* To be filed by Amendment
Item 14. Indemnification of Directors and Officers
The General Corporation Law of Delaware (Section 145) gives
Delaware corporations broad powers to indemnify their present and former
directors and officers and those affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by reason
of being or having been such directors or officers, subject to specified
conditions and exclusions; gives a director or officer who successfully defends
an action the right to be so indemnified; and authorizes said corporation to buy
director's and officers' liability insurance. The Issuer will indemnify its
directors and officers to the fullest extent permitted by such law. Such
indemnification is not exclusive of any other right to which those indemnified
may be entitled under any bylaw, agreement, vote of stockholders or otherwise.
Copelco Financial Services Group, Inc. has also purchased
liability policies which indemnify the Registrant's officers and directors
against loss arising from claims by reason of their legal liability for acts as
officers and directors, subject to limitations and conditions as set forth in
the policies.
Pursuant to agreements which the Registrant may enter into
with underwriters or agents (forms of which will be included as exhibits to this
Registration Statement), officers and directors of the Registrant, and
affiliates thereof, may be entitled to indemnification by such underwriters or
agents against certain liabilities, including liabilities under the Securities
Act of 1933, arising from information which has been or will be furnished to the
Registrant by such underwriters or agents that appears in the Registration
Statement or any Prospectus.
II-1
<PAGE>
Item 16. Exhibits and Financial Statements
(a) Exhibits
<TABLE>
<S> <C>
1.1* --Form of Underwriting Agreement for the Offered Notes.
3.1* --Certificate of Incorporation of the Issuer.
3.2* --By-laws of the Issuer.
4.1* --Form of Indenture, including forms of the Notes and certain other related
agreements as Exhibits thereto.
5.1* --Opinion of Dewey Ballantine regarding the securities being registered.
8.1* --Opinion of Dewey Ballantine regarding the tax treatment of the Notes.
10.1* --Form of Sales and Servicing Agreement.
10.2* --Form of Placement Agent Agreement for the Class B Notes.
10.3* --Form of Swap Agreement.
23.1* --Consent of Dewey Ballantine is included in the opinion filed as Exhibit 5.1
hereto.
24.1 --Power of Attorney (Included on Page II-4 hereof).
25.1* --Statement of Eligibility and Qualification of Trustee (Form T-1).
</TABLE>
* To be filed by amendment.
(b) All financial statements, schedules and historical
financial information have been omitted as they are not applicable.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(a) 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 14 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 Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the act and
will be governed by the final adjudication of such issue.
(b) 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 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.
(c) 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mount Laurel, State of New Jersey, on May 1, 1997.
COPELCO CAPITAL FUNDING CORP. X,
Registrant
By /s/ Michael C. Ritter
---------------------------------
Name: Michael C. Ritter
Title: Senior Vice President,
Chief Financial Officer
and Controller
Each person whose signature appears below constitutes and appoints
Michael C. Ritter and Stephen W. Shippie and each or any of them (with full
power to act alone), as his/her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him/her in his/her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Form S-1 and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto each such attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he/she might or could do in person, hereby ratifying and confirming all that
such attorneys-in-fact and agents or their substitutes may lawfully do or cause
to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No.1 to the Registration Statement on Form S-1 has been signed by
the following persons in the capacities indicated on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Chairman of the Board May 1, 1997
- --------------------------------- Director
*Ian J. Berg
Director May 1, 1997
- ---------------------------------
*John Hakemian
Director May 1, 1997
- ---------------------------------
*John Fortunato
Director May 1, 1997
- ---------------------------------
*Vickie D. Sloan
Director May 1, 1997
- ---------------------------------
*Tadayuki Seki
/s/ Steve Shippie
- --------------------------------
*By Steve W. Shippie
</TABLE>
