<PAGE>
As filed with the Securities and Exchange Commission on June 10, 1997
Registration No. 333-23679
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 4 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)
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<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(2)
<S> <C> <C> <C> <C>
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Class A-1 Lease-Backed Notes.............. $141,857,000 100% $141,857,000 $42,986.97
==================================================================================================================================
Class A-2 Lease-Backed Notes $ 54,048,000 100% $ 54,048,000 $16,378.18
==================================================================================================================================
Class A-3 Lease-Backed Notes $212,334,000 100% $212,334,000 $64,343.64
==================================================================================================================================
Class A-4 Lease-Backed Notes.............. $127,476,000 100% $127,476,000 $38,629.09
==================================================================================================================================
Class B Lease-Backed Notes................ $ 22,626,000 100% $ 22,626,000 $ 6,856.36
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
(2) $1,515.15 of the total registration fee was paid on March 20, 1997 with the
original filing of this Registration Statement.
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 Experts
11. Information with Respect to the Registrant
(a) Description of Business The Issuer
(b) Description of Property *
(c) Legal Proceedings *
(d) Market Price of and Dividends on the Registrant's *
Common Equity and Related Stockholder Matters
(e) Financial Statements Index to Financial Statements
(f) Selected Financial Data *
(g) Supplementary Financial Information *
(h) Management's Discussion and Analysis of Management's Discussion and Analysis of Financial
Financial Condition and Results of Operations Condition
(i) Changes in and Disagreements with Accountants *
and Financial Disclosure
(j) Directors and Executive Officers Directors and Executive Officers of the Issuer
(k) Executive Compensation Directors and Executive Officers of the Issuer
(l) Security Ownership of Certain Beneficial Owners The Issuer
and Management
(m) Certain Relationships and Related Transactions The Issuer
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 June 9, 1997
PRELIMINARY PROSPECTUS
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$554,341,000 (Approximate)
Copelco Capital Funding Corp. X, Issuer
Copelco Capital, Inc., Servicer
$140,857,000 (Approximate) ____% Class A-1 Lease-Backed Notes, Series 1997-A
$ 53,048,000 (Approximate) ____% Class A-2 Lease-Backed Notes, Series 1997-A
$211,334,000 (Approximate) ____% Class A-3 Lease-Backed Notes, Series 1997-A
$126,476,000 (Approximate) ____% Class A-4 Lease-Backed Notes, Series 1997-A
$ 22,626,000 (Approximate) ____% 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 17 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>
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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.......................... $______________ $__________ $________________
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</TABLE>
(1) The Issuer has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting expenses estimated to be $610,000.
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.
Underwriters of the Class A Notes
Lehman Brothers First Union Capital Markets Corp.
Morgan Stanley Dean Witter
Underwriters of the Class B Notes
Lehman Brothers First Union Capital Markets Corp.
The date of this Prospectus is June __, 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, Residual Realizations 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, Residual Realizations 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 July 21, 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 July 21,
1997. The stated maturity date with respect to the Class A-1 Notes is the
Payment Date in July, 1998 and the stated maturity date with respect to the
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and the Class B Notes is the
Payment Date in July, 1998. However, if all payments on the leases are made as
scheduled, final payment with respect to the Notes would occur prior to stated
maturity and it is expected that the Notes will mature prior to stated maturity.
See "Prospectus Summary--Expected Maturity; 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 Commission 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." However, such reports will not be sent directly to each
Noteholder while the Notes are in book-entry form. 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>
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 08054-5404 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.................. $140,857,000 (approximate) aggregate principal amount of ____% Class A-1
Lease-Backed Notes, Series 1997-A, (the "Class A-1 Notes"),
$53,048,000 (approximate) aggregate principal amount of ____% Class A-2
Lease-Backed Notes, Series 1997-A (the "Class A-2 Notes"),
$211,334,000 (approximate) aggregate principal amount of ____% Class A-3
Lease-Backed Notes, Series 1997-A (the "Class A-3 Notes"), and
$126,476,000 (approximate) 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 $22,626,000 (approximate) 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"). The Class A-1 Notes will be an "eligible security"
within the meaning of Rule 2a-7 promulgated under the Investment Company
Act of 1940, as amended. In addition, the Issuer will be issuing, through
a private placement, $11,314,085 (approximate) 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 May 3, 1997, 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 Offered 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 and Class B 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.............................. $140,857,000 (approximate) for the Class A-1 Notes (the "Class A-1 Initial
Principal Amount"), $53,048,000 (approximate) for the Class A-2 Notes (the
"Class A-2 Initial Principal Amount"), $211,334,000 (approximate) for the Class
A-3 Notes (the "Class A-3 Initial Principal Amount"), $126,476,000 (approximate)
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"), $22,626,000 (approximate) for the Class B Notes
(the "Class B Initial Principal Amount") and $11,314,085 (approximate)
for the Class C Notes (the "Class C Initial Principal Amount").
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
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<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 Agreement 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
7.50% (the "Statistical Discount Rate"). The Statistical
Discounted Present Value of the Leases as of the Cut-Off Date is
$565,655,085.59 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.
Expected Maturity;
Stated Maturity..................... The expected 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 May 1998, October 1998, May 2000,
January 2002, and April 2002, respectively. The stated maturity date with
respect to the Class A-1 Notes will be the Payment Date in July 1998
and with respect to all other Notes will be the Payment Date in April 2005.
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
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<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 July 21, 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-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 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-1 Notes,
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 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
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<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 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 Class B Principal Payment, (c) to the
Class C Noteholders, 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.
The "Class A Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, (i) on all Payment Dates prior to the July 1998
Payment Date, the lesser of (1) the amount necessary to reduce the
Outstanding Principal Amount on the Class A-1 Notes to zero and (2) the
difference between (A) the Discounted Present Value of the Performing
Leases as of the previous Determination Date and (B) the Discounted
Present Value of the Performing Leases as of the related Determination
Date, and (ii) on the July 1998 Payment Date, the entire Outstanding
Principal Amount on the Class A-1 Notes and (b) after the Class A-1
Notes have been paid in full, 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 B Principal Payment" shall equal (a) while the Class A-1 Notes are
outstanding, zero and (b) after the Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor.
The "Class C Principal Payment" shall equal (a) while the Class A-1 Notes are
outstanding, zero and (b) after the Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class Notes to the greater of the Class C
Target Investor Principal Amount and the Class C Floor.
"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 A Percentage" will be equal to 92.01%. The Class B
Percentage will be equal to 5.33%. The "Class C Percentage" will be
equal to 2.66%
The "Class B Floor" with respect to each Payment Date means
(a) 2.50% 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) 1.00% 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 63 days delinquent and
that, as of the initial Determination 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 office products such as copiers, facsimile machines and
electronics testing equipment. As of the Cut-Off Date, the
Series Pool had approximately 60 equipment categories.
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 36,181 separate Leases and approximately 31,800 Lessees. As
of the Cut-Off Date, Leases relating to Lessees in any one state did
not account for more than 18.77% 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 7 and
82 months and a weighted average term to stated maturity of 44.27
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 or in part, 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 entered into Copelco Capital's
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 to the extent the Issuer does not reinvest
such Termination Payments in Additional Leases;
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, 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 8% 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 deposited into the Reserve Account
to the extent that the amount on deposit in the Reserve Account is
less than the required Reserve Amount and thereafter 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 $70,790,509.72.
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 lesser of
(a) ____% of the Discounted Present Value of the Performing
Leases as of the Cut-Off Date and (b) 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 "Material 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 "A-1+", "D-1", "P-1" and "F-1+/AAA" and that
the Class A-2, A-3 and A-4 Notes be rated at least "AAA", "AAA", "Aaa" and
"AAA" and that the Class B Notes be rated at least "A", "A+", "A2" and
"A+" by Standard & Poor's Ratings Group ("S&P"), Duff & Phelps Credit
Ratings Co. ("DCR"), Moody's Investors Service, Inc. ("Moody's") and Fitch
Investors Service, L.P. ("Fitch"), respectively (each a "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 and
tornadoes 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 full or partial prepayment of a Lease or Substitute
Leases in the case of Non-Performing Leases, Warranty Leases or Adjusted
Leases, the Discounted Present Value of the Performing Leases will be
decreased. See "Prepayment and Yield Considerations."
Copelco Capital is not required to designate one or more
leases as an Additional Lease or to substitute Substitute Leases. Accordingly,
Noteholders should not expect that Additional Leases or Substitute Leases will
be available.
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 Series Pool--
The Leases". 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. Financing statements in favor of
Copelco Capital with respect to approximately 58.87% of the Equipment relating
to the Leases by equipment cost will be filed. 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. Copelco
Capital does not have a perfected security interest in Equipment with an
original Equipment cost of less than or equal to $25,000, which is approximately
41.13% of the Equipment (by Equipment cost). In addition, the Indenture and the
Sales 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 as of
the Closing Date (i) Equipment relating to not less than 75% of the Discounted
Present Value of the Leases as of the Cut-Off Date is located and (ii)
Equipment relating to not less than 75% of the Booked Residual Value of such
Equipment as of the Cut-Off Date (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 relating to Equipment with an
original cost of 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 will result in claims against Lessees being unsecured and 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 since Copelco Capital will own all of the stock of the issuer. 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. Although Copelco Capital believes that the transfer of the
Leases to the Issuer should be treated as an absolute and unconditional sale or
assignment, for accounting and tax purposes, the Leases will be treated as
assets of Copelco Capital on its consolidated financial statements, and on the
tax return for its consolidated group, which might increase the risk of
recharacterization of the transfer to the Issuer as a financing. 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,
approximately 18.77%, 13.20%, 8.95%, 6.44%, 5.59% and 5.32% of the Leases (based
on statistical Discounted Present Value of the Leases) were located in
California, New York, Texas, Florida, Pennsylvania and New Jersey, 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 regions could adversely affect the performance 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 Lessees; Insolvency of Third Parties. To the
extent Lessees default on the Leases, including through insolvency, Lease
Payments deposited into the Collection Account will decrease and accordingly
Available Funds will be reduced.
Approximately 2% of the Leases were originated by a third
party who has sold the payment stream on the Leases to Copelco Capital but has
not sold its interest in the Equipment. In the event of a bankruptcy of such
third party, the trustee in bankruptcy may seek to repudiate the Leases and, if
successful, Lease Payments on such Leases will cease. Accordingly, 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 April 30 1997
"Cut-Off Date"), the Notes will be secured by 36,181 Leases with approximately
31,800 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 of Copelco Capital (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.
Approximately 2% of the Leases were originated by a third
party who has sold the payment stream on the Leases to Copelco Capital but has
not sold its interest in the Equipment. In the event of a bankruptcy of such
third party, the trustee in bankruptcy may seek to repudiate the Leases and, if
successful, Lease Payments on such Leases will cease. Accordingly, Available
Funds will be reduced.
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 44.27
months. Copelco Capital will represent and warrant that, as of Cut-Off Date, all
Leases will be current or less than 63 days delinquent and, as of the initial
Determination 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 90% 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 31.71% of the
Leases (by Statistical Discounted Present Value). 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. The Equipment subject to the Leases is
purchased by Copelco Capital under direct specifications and instructions from
the Lessees. As of the Cut-Off Date, the Series Pool had approximately 60
equipment categories.
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
Percentage Discounted Discounted Aggregate Percentage
Number of Number Present Value Present Value Original Equipment of Original
State of Leases of Leases of Leases of Leases Cost Equipment Cost
----- --------- ---------- ------------- ------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Alabama 232 0.64% $ 6,297,505.47 1.11% $ 7,944,691.01 1.22%
Alaska 14 0.04 165,534.80 0.03 182,360.91 0.03
Arizona 300 0.83 5,817,455.53 1.03 6,392,040.06 0.98
Arkansas 109 0.30 2,445,836.27 0.43 3,356,370.37 0.52
California 6,659 18.40 106,172,446.42 18.77 120,363,668.91 18.48
Colorado 847 2.34 7,720,995.16 1.36 8,760,015.32 1.35
Connecticut 743 2.05 11,134,311.90 1.97 12,594,520.83 1.93
Delaware 56 0.15 691,496.88 0.12 762,252.46 0.12
District of Columbia 342 0.95 5,084,674.88 0.90 5,578,337.52 0.86
Florida 2,006 5.54 36,403,648.63 6.44 41,854,423.13 6.43
Georgia 869 2.40 18,410,894.90 3.25 21,677,689.50 3.33
Hawaii 44 0.12 1,164,066.28 0.21 1,322,579.66 0.20
Idaho 104 0.29 1,285,031.37 0.23 1,396,646.57 0.21
Illinois 1,857 5.13 23,462,371.51 4.15 26,576,958.65 4.08
Indiana 380 1.05 4,248,873.30 0.75 4,655,800.99 0.71
Iowa 42 0.12 1,361,259.34 0.24 1,536,093.14 0.24
Kansas 167 0.46 1,820,745.58 0.32 2,145,215.92 0.33
Kentucky 273 0.75 6,038,347.95 1.07 7,600,579.53 1.17
Louisiana 327 0.90 6,365,099.11 1.13 7,694,605.31 1.18
Maine 383 1.06 3,854,904.63 0.68 4,843,572.34 0.74
Maryland 502 1.39 6,841,775.93 1.21 7,685,191.42 1.18
Massachusetts 1,049 2.90 13,703,995.06 2.42 15,686,021.48 2.41
Michigan 234 0.65 3,319,332.40 0.59 3,608,134.67 0.55
Minnesota 125 0.35 6,836,720.65 1.21 9,603,088.99 1.47
Mississippi 192 0.53 4,891,086.10 0.86 5,832,661.06 0.90
Missouri 361 1.00 5,674,441.13 1.00 6,276,442.82 0.96
Montana 45 0.12 564,222.00 0.10 627,773.50 0.10
Nebraska 50 0.14 1,591,810.56 0.28 1,681,488.20 0.26
Nevada 263 0.73 3,893,173.80 0.69 4,395,061.01 0.67
New Hampshire 114 0.32 1,828,285.84 0.32 2,077,037.85 0.32
New Jersey 2,202 6.09 30,082,852.17 5.32 35,008,904.56 5.38
New Mexico 141 0.39 1,862,164.41 0.33 2,150,996.68 0.33
New York 5,675 15.69 74,688,431.90 13.20 85,613,853.59 13.15
North Carolina 502 1.39 8,856,847.58 1.57 10,476,350.37 1.61
North Dakota 10 0.03 130,564.49 0.02 147,987.18 0.02
Ohio 1,199 3.31 17,005,587.17 3.01 18,774,261.90 2.88
Oklahoma 218 0.60 2,645,959.26 0.47 2,982,736.13 0.46
Oregon 383 1.06 5,312,754.15 0.94 6,125,993.59 0.94
Pennsylvania 1,441 3.98 31,610,664.49 5.59 36,183,706.38 5.56
Rhode Island 219 0.61 2,569,362.25 0.45 2,814,785.67 0.43
South Carolina 167 0.46 2,408,810.25 0.43 2,702,125.53 0.41
South Dakota 28 0.08 390,327.50 0.07 421,001.51 0.06
Tennessee 444 1.23 9,080,403.18 1.61 11,221,900.80 1.72
Texas 2,786 7.70 50,649,210.06 8.95 57,936,548.60 8.90
Utah 230 0.64 3,491,789.65 0.62 3,680,616.58 0.57
Vermont 64 0.18 1,481,093.38 0.26 2,574,162.68 0.40
Virginia 739 2.04 10,445,184.19 1.85 11,837,714.36 1.82
Washington 842 2.33 9,991,423.37 1.77 11,136,720.92 1.71
West Virginia 86 0.24 1,954,923.14 0.35 2,190,077.16 0.34
Wisconsin 92 0.25 1,626,460.46 0.29 2,240,304.90 0.34
Wyoming 24 0.07 279,929.13 0.05 321,000.41 0.05
- ----------------------------------------------------------------------------------------------------------------------------
Total ............. 36,181 100.00% $565,655,085.59 100.00% $651,253,072.63 100.00%
============================================================================================================================
</TABLE>
<PAGE>
DISTRIBUTION OF LEASES BY LEASE BALANCE
<TABLE>
<CAPTION>
Percentage of
Statistical
Statistical Discounted Aggregate Percentage
Statistical Discounted Percentage Discounted Present Original of Original
Present Value of the Number of Number Present Value Value Equipment Equipment
Leases of Leases of Leases of Leases of Leases Cost Cost
---------------------- --------- ---------- ------------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
$0.01 - 5,000.00 13,533 37.40% $39,867,304.66 7.05% $ 47,974,077.00 7.37%
5,000.01 - 10,000.00 9,755 26.96 69,787,042.79 12.34 80,756,741.17 12.40
10,000.01 - 15,000.00 4,681 12.94 57,514,040.64 10.17 65,074,865.57 9.99
15,000.01 - 20,000.00 2,640 7.30 45,629,712.44 8.07 50,833,160.08 7.81
20,000.01 - 25,000.00 1,512 4.18 33,756,924.66 5.97 37,664,237.06 5.78
25,000.01 - 30,000.00 910 2.52 24,771,367.51 4.38 27,523,529.11 4.23
30,000.01 - 35,000.00 558 1.54 18,061,048.39 3.19 20,318,456.66 3.12
35,000.01 - 40,000.00 421 1.16 15,740,520.81 2.78 17,672,933.16 2.71
40,000.01 - 45,000.00 321 0.89 13,617,782.83 2.41 15,514,877.02 2.38
45,000.01 - 50,000.00 285 0.79 13,518,876.64 2.39 15,154,155.25 2.33
50,000.01 - 60,000.00 369 1.02 20,181,694.54 3.57 22,459,251.58 3.45
60,000.01 - 70,000.00 226 0.62 14,545,593.02 2.57 16,623,966.44 2.55
70,000.01 - 80,000.00 156 0.43 11,587,395.89 2.05 13,009,170.00 2.00
80,000.01 - 90,000.00 122 0.34 10,339,656.07 1.83 11,603,485.94 1.78
90,000.01 - 100,000.00 86 0.24 8,198,792.28 1.45 9,362,306.20 1.44
100,000.01 - 125,000.00 163 0.45 18,258,998.96 3.23 20,894,698.21 3.21
125,000.01 - 150,000.00 87 0.24 11,897,187.98 2.10 13,539,535.79 2.08
150,000.01 - 175,000.00 69 0.19 11,193,307.82 1.98 13,467,135.02 2.07
175,000.01 - 200,000.00 45 0.12 8,412,676.69 1.49 10,019,809.70 1.54
200,000.01 - 300,000.00 101 0.28 24,506,511.85 4.33 28,381,997.70 4.36
300,000.01 - 400,000.00 42 0.12 14,573,578.55 2.58 17,812,561.94 2.74
400,000.01 - 500,000.00 32 0.09 14,244,881.64 2.52 17,513,070.56 2.69
500,000.01 - 600,000.00 20 0.06 11,007,462.31 1.95 13,749,093.75 2.11
600,000.01 - 700,000.00 8 0.02 5,208,181.70 0.92 6,677,981.71 1.03
700,000.01 - 800,000.00 9 0.02 6,553,797.53 1.16 7,489,257.37 1.15
800,000.01 - 900,000.00 4 0.01 3,371,335.72 0.60 3,604,710.89 0.55
900,000.01 - 1,000,000.00 8 0.02 7,604,605.74 1.34 9,520,606.05 1.46
1,000,000.01 - 1,500,000.00 10 0.03 12,913,279.18 2.28 14,657,652.68 2.25
1,500,000.01 - 2,000,000.00 4 0.01 6,958,267.06 1.23 7,409,721.40 1.14
greater than $2,000,000.01 4 0.01 11,833,259.70 2.09 14,970,027.62 2.30
- ----------------------------------------------------------------------------------------------------------------------------
Total .................. 36,181 100.00% $565,655,085.59 100.00% $651,253,072.63 100.00%
============================================================================================================================
</TABLE>
<PAGE>
DISTRIBUTION OF LEASES BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Discounted Original of Original
Number of Number Present Value Present Value Equipment Equipment
Remaining Term of Leases of Leases of Leases of Leases Cost Cost
- -------------- --------- ---------- ------------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 - 12 661 1.83% $ 4,199,546.04 0.74% $ 7,726,762.69 1.19%
13 - 24 3,570 9.87 28,627,463.25 5.06 45,220,651.00 6.94
25 - 36 15,225 42.08 147,067,301.14 26.00 180,560,205.07 27.73
37 - 48 6,821 18.85 125,132,337.46 22.12 144,025,565.48 22.12
49 - 60 9,822 27.15 251,039,650.34 44.38 264,378,132.99 40.60
61 - 72 61 0.17 7,068,514.11 1.25 6,958,894.24 1.07
73 - 84 21 0.06 2,520,273.25 0.45 2,382,861.16 0.37
- -------------------------------------------------------------------------------------------------------------------
Total ......... 36,181 100.00% $565,655,085.59 100.00% $651,253,072.63 100.00%
===================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage of
Percentage Discounted Discounted Original Original
Number of Number Present Value Present Value Equipment Equipment
Lease Type of Leases of Leases of Leases of Leases Cost Cost
- ---------- --------- ---------- ------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Finance Lease 36,046 99.63% $534,137,082.38 94.43% $604,070,058.96 92.76%
Operating Lease 135 0.37 31,518,003.21 5.57 47,183,013.67 7.24
- ---------------------------------------------------------------------------------------------------------------------
Total .............. 36,181 100.00% $565,655,085.59 100.00% $651,253,072.63 100.00%
=====================================================================================================================
</TABLE>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Discounted Original of Original
Number of Number Present Value Present Value Equipment Equipment
Lease Type of Leases of Leases of Leases of Leases Cost Cost
---------- --------- ---------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout 8,297 23.02% $179,349,643.31 33.58% $195,402,510.92 32.35%
Fair Market Value 22,800 63.25 246,104,603.30 46.08 288,673,529.91 47.79
Fixed Purchase Option 4,949 13.73 108,682,835.77 20.35 119,994,018.13 19.86
- ----------------------------------------------------------------------------------------------------------------------
Total .................. 36,046 100.00% $534,137,082.38 100.00% $604,070,058.96 100.00%
======================================================================================================================
</TABLE>
<PAGE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
BUSINESS TECHNOLOGY DIVISION
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Present Discounted Original of Original
Number of Number Value Present Value Equipment Equipment
Equipment Type of Leases of Leases of Leases of Leases Cost Cost
- -------------- --------- ---------- ------------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Computer 98 0.33% $ 999,074.29 0.33% $ 1,087,344.59 0.32%
Copiers 27,751 92.83 290,107,162.13 96.43 331,099,419.69 96.41
Facsimiles 1,651 5.52 5,521,050.37 1.84 6,492,657.76 1.89
Miscellaneous 132 0.44 1,231,677.32 0.41 1,399,024.24 0.41
Office Furniture & Equipment 241 0.81 2,537,156.18 0.84 2,899,569.73 0.84
Telephone 20 0.07 452,695.27 0.15 462,230.82 0.13
- ---------------------------------------------------------------------------------------------------------------------------------
Total ......................... 29,893 100.00% $300,848,815.56 100.00% $343,440,246.83 100.00%
=================================================================================================================================
</TABLE>
<PAGE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
HEALTHCARE AND MANUFACTURING TECHNOLOGY DIVISIONS
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Aggregate Percentage
Percentage Discounted Discounted Original of Original
Number of Number Present Value Present Value of Equipment Equipment
Equipment Type of Leases of Leases of Leases Leases Cost Cost
- -------------- --------- ---------- ------------- ---------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Anesthesia EQP 15 0.24% $ 943,540.96 0.36% $ 1,366,078.29 0.44%
Automated Chemistry Systems 394 6.27 9,952,781.21 3.76 11,141,351.86 3.62
Automated Hematology Systems 490 7.79 12,894,866.56 4.87 14,335,307.91 4.66
C.T. Systems 4 0.06 1,378,710.99 0.52 2,110,495.32 0.69
Carts, Stretchers, Wheel Chairs 9 0.14 98,083.68 0.04 115,193.31 0.04
Communication Equipment 28 0.45 319,890.24 0.12 436,050.07 0.14
Computer Systems-Doctors & 667 10.61 17,188,270.45 6.49 19,056,278.77 6.19
Hospitals
Computers 46 0.73 1,766,681.73 0.67 2,182,245.76 0.71
Copiers 24 0.38 503,496.68 0.19 625,002.42 0.20
Dental Operatory Equipment 1,147 18.24 24,853,327.45 9.39 25,824,865.19 8.39
ECG (EKG) and Defibrilators 118 1.88 1,264,729.78 0.48 1,416,130.09 0.46
EEG 5 0.08 96,881.25 0.04 118,215.00 0.04
Electronics Production Equipment 293 4.66 61,397,588.34 23.19 80,455,006.88 26.14
Environmental Control Equipment 1 0.02 20,988.07 0.01 32,691.54 0.01
Furniture and Fixtures 5 0.08 1,779,069.99 0.67 1,967,709.42 0.64
Gamma Cameras 52 0.83 9,788,496.70 3.70 11,295,323.14 3.67
Holter Monitors 55 0.87 735,594.20 0.28 785,793.89 0.26
Hosp Beds; Elec. Stryker FRMS, 16 0.25 718,324.11 0.27 878,285.05 0.29
Burn Beds
Industrial Production Equipment 1 0.02 276,642.92 0.10 335,600.00 0.11
Lasers 67 1.07 5,075,905.84 1.92 5,590,290.05 1.82
Laundry, Kitchen, Food Srvc Eqp., 1 0.02 332,969.62 0.13 387,332.00 0.13
Central Supply
Linear Accelerators 2 0.03 1,015,162.86 0.38 1,012,000.00 0.33
Lithotripters and Dialysis 12 0.19 4,381,342.45 1.65 5,022,070.22 1.63
Equipment
Machine Tools 1 0.02 44,742.36 0.02 59,320.00 0.02
Mammography 21 0.33 2,690,055.21 1.02 2,924,825.47 0.95
MBL X-Ray Systems; C-Arm; IMG 9 0.14 657,430.08 0.25 766,356.29 0.25
Intensifier
Misc Commercial & Industrial 91 1.45 5,454,040.50 2.06 6,565,079.98 2.13
Equipment
Misc Equipment 67 1.07 1,608,536.43 0.61 2,223,713.53 0.72
Misc Hospital Equipment 239 3.80 39,649,491.93 14.97 44,065,656.04 14.32
Misc Lab Eqp (Pthlgy, Gas, Chrmts, 18 0.29 480,518.95 0.18 487,300.14 0.16
Cntr, Spc)
Misc Vet Eqp; Cages, Scales, Tables 11 0.17 140,172.65 0.05 148,485.02 0.05
Misc X-Ray Eqp (Tnks, Driers, 15 0.24 271,950.15 0.10 297,965.99 0.10
Tbls, Procsrs)
Miscellaneous Computer Equipment 1 0.02 6,127.19 0.00 6,101.48 0.00
MRI Systems 8 0.13 5,449,423.33 2.06 6,340,899.50 2.06
Operating Microscopes 30 0.48 503,458.29 0.19 584,389.78 0.19
Opthlmc Diag Eqp (Slit Lamps, 183 2.91 3,809,097.76 1.44 3,979,297.96 1.29
Tonometers
Opt Eqp; Lens Grinding, Resurfacing 421 6.70 6,035,787.17 2.28 6,804,106.76 2.21
Other Copying Equipment 12 0.19 131,080.59 0.05 136,023.00 0.04
Packaging Equipment 1 0.02 13,866.16 0.01 18,916.00 0.01
Patient Monitoring Systems 222 3.53 4,490,387.19 1.70 4,900,883.02 1.59
Patient Room Furnishing & Fixtures 29 0.46 480,698.89 0.18 525,414.57 0.17
Personal Computers 3 0.05 39,700.86 0.01 44,244.20 0.01
Phone, TV, Comm Equipment 17 0.27 360,258.16 0.14 426,214.75 0.14
Photo Equipment 2 0.03 68,960.20 0.03 76,032.20 0.02
Photocopy Equipment 2 0.03 45,587.69 0.02 61,765.00 0.02
Phys Misc Medical EQP & Exam Tables 396 6.30 7,886,462.38 2.98 8,476,901.49 2.75
Phys Offc Furn, Fixtures and Phones 44 0.70 1,247,331.11 0.47 1,338,289.64 0.43
Podiatry Equipment 1 0.02 7,450.68 0.00 9,126.64 0.00
Processing Equipment 1 0.02 37,292.98 0.01 185,000.00 0.06
Pulse Oximetry Equipment 5 0.08 39,424.66 0.01 46,103.12 0.01
Radiographic Fluoroscopic Systems 10 0.16 902,255.67 0.34 1,153,849.57 0.37
Respiratory Therapy Equipment 692 11.01 11,638,431.80 4.40 12,508,368.17 4.06
Standard X-Ray Systems 43 0.68 1,261,955.37 0.48 1,328,277.96 0.43
Surgical EQP; Scopes, 25 0.40 370,693.58 0.14 410,527.67 0.13
Electrosurgical
Ultrasound 211 3.36 11,801,590.40 4.46 13,944,148.68 4.53
X-Ray Spec Procdrs Systems 5 0.08 398,663.58 0.15 479,926.00 0.16
Angiography
- ------------------------------------------------------------------------------------------------------------------------------
Total 6,288 100.00% $264,806,270.03 100.00% $307,812,825.80 100.00%
==============================================================================================================================
</TABLE>
<PAGE>
Historical Delinquency Information. Problem accounts are
reviewed by senior management when an account becomes 45 days past due. Lease
receivables are each specifically evaluated by Copelco Capital for write-down
when they become over 92 days delinquent. General delinquency information for
equipment leases in the Origination Divisions that are owned 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>
March 31, 1997 December 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
-------------- ----------------- ------------- ------------- ------------- -------------
$ % $ % $ % $ % $ % $ %
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total 1,547,595,255 1,503,055,810 1,238,424,241 1,000,488,313 736,373,700 562,181,909
Receivables
Balance(1)
- ----------------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 Days 29,359,133 1.90 34,481,668 2.29 26,255,335 2.12 14,846,559 1.48 9,184,216 1.25 7,503,126 1.33
60-89 Days 7,119,577 0.46 8,136,578 0.54 4,976,920 0.40 3,971,389 0.40 1,886,765 0.26 2,005,022 0.36
90 Days + 8,530,429 0.55 7,587,972 0.50 6,703,063 0.54 6,748,827 0.67 5,099,200 0.69 5,165,139 0.92
- ----------------------------------------------------------------------------------------------------------------------------------
Total
Delinquency $45,009,139 2.91% $50,206,218 3.34% $37,935,318 3.06% $25,566,775 2.56% $16,170,181 2.20% $14,673,287 2.61%
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent
owing on the leases.
HEALTHCARE AND MANUFACTURING TECHNOLOGY DIVISIONS
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
-------------- ----------------- ------------- ------------- ------------- -------------
$ % $ % $ % $ % $ % $ %
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Receivables
Balance(1) 706,849,321 690,335,858 568,624,186 457,291,099 350,535,081 305,143,665
- -----------------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 Days 11,476,498 1.62 10,409,069 1.51 7,956,503 1.40 6,209,723 1.36 3,782,475 1.08 3,364,810 1.10
60-89 Days 2,425,689 0.34 2,887,149 0.42 1,484,077 0.26 1,689,961 0.37 652,082 0.19 1,079,685 0.35
90 Days + 1,945,731 0.28 2,647,688 0.38 1,835,581 0.32 3,652,603 0.80 2,784,168 0.79 3,520,094 1.15
- -----------------------------------------------------------------------------------------------------------------------------------
Total
Delinquency $15,847,918 2.24% $15,943,906 2.31% $11,276,161 1.98% $11,552,287 2.53% $7,218,725 2.06% $7,964,589 2.61%
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent owing
on the leases.
<PAGE>
BUSINESS TECHNOLOGY DIVISION
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
-------------- ----------------- ------------- ------------- ------------- -------------
$ % $ % $ % $ % $ % $ %
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Receivables
Balance(1) 840,745,934 812,719,952 669,800,055 543,197,213 385,838,619 257,038,244
- -----------------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 Days 17,882,635 2.13 24,072,598 2.96 18,298,832 2.73 8,636,836 1.59 5,401,741 1.40 4,138,316 1.61
60-89 Days 4,693,888 0.56 5,249,429 0.65 3,492,843 0.52 2,281,428 0.42 1,234,684 0.32 925,338 0.36
90 Days + 6,584,698 0.78 4,940,285 0.61 4,867,482 0.73 3,096,224 0.57 2,315,032 0.60 1,645,045 0.64
- -----------------------------------------------------------------------------------------------------------------------------------
Total
Delinquency $29,161,221 3.47% $34,262,312 4.22% $26,659,157 3.98% $14,014,488 2.58% $8,951,457 2.32% $6,708,699 2.61%
</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 include losses associated with such portfolio.
HISTORICAL CHARGE-OFF EXPERIENCE
COPELCO CAPITAL COMBINED PORTFOLIO
<TABLE>
<CAPTION>
Three Months Year Ended December 31,
Ended -----------------------
March 31, 1997 1996 1995 1994 1993 1992
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)................. $1,525,326 $1,370,740 $1,119,456 $868,431 $649,278 $536,031
Net Losses....................... $ 5,230 $ 15,713 $ 11,457 $ 10,328 $ 8,842 $ 10,087
Net Losses as a Percentage of
Average Receivables............ 1.37%(2) 1.15% 1.02% 1.19% 1.36% 1.88%
</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.
(2) Annualized
<PAGE>
HEALTHCARE AND MANUFACTURING TECHNOLOGY DIVISIONS
<TABLE>
<CAPTION>
Three Months Year Ended December 31,
Ended -----------------------
March 31, 1997 1996 1995 1994 1993 1992
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)................. $698,593 $629,480 $512,958 $403,913 $327,839 $321,675
Net Losses....................... $ 1,629 $ 2,327 $ 1,488 $ 2,913 $ 3,535 $ 4,784
Net Losses as a Percentage of
Average Receivables............ 0.93%(2) 0.37% 0.29% 0.72% 1.08% 1.49%
</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.
(2) Annualized
BUSINESS TECHNOLOGY DIVISION
<TABLE>
<CAPTION>
Three Months Year Ended December 31,
Ended -----------------------
March 31, 1997 1996 1995 1994 1993 1992
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)................. $826,733 $741,260 $606,499 $464,518 $321,438 $214,356
Net Losses....................... $ 3,601 $ 13,386 $ 9,969 $ 7,415 $ 5,307 $ 5,303
Net Losses as a Percentage of
Average Receivables............ 1.74%(2) 1.81% 1.64% 1.60% 1.65% 2.47%
</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.
(2) Annualized
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.
<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 53.19%, 34.70% and
12.11% 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
$1,722,212,000 compared with $1,399,101,000 as of December 31, 1995, total
liabilities of $1,588,614,000 compared with $1,295,269,000 as of December 31,
1995, shareholder's equity of $133,598,000 compared with $103,832,000 as of
December 31, 1995 and total revenues and net income of $206,245,000 and
$29,655,000, 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 32 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,
14 of which remain outstanding.
32
<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.
33
<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 may 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
As of the date of this Prospectus, the Issuer has had no
operating history. The net proceeds of the sale of the Notes will be employed to
purchase the Leases. See "Use of Proceeds". The Issuer is prohibited by its
Certificate of Incorporation from engaging in business other than (i) the
purchase of equipment leases and lease receivables (including equipment) from
Copelco Capital and its affiliates, (ii) the issuance of notes collateralized by
its assets and (iii) engaging in acts incidental, necessary or convenient to the
foregoing and permitted under Delaware law. The issuer's ability to incur,
assume or guaranty indebtedness for borrowed money is also restricted by its
Certificate of Incorporation.
DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER
The following table sets forth the executive officers and
directors of the Issuer and their ages and positions as of May 12, 1997. Because
the Issuer is organized as a special purpose company and will be largely
passive, it is expected that the officers and directors in such capacity will
participate in the management of the Company to a limited extent. Most of the
actions related to maintaining and servicing the assets will be performed by
the Servicer.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ian J. Berg 55 Chairman of the Board (Principal Executive
Officer), Director
Robert J. Lemenze, Jr. 38 President, Chief Operating Officer
Michael C. Ritter 47 Senior Vice President, Chief Financial Officer
and Treasurer
John Hakemian 58 Director
John Fortunato 38 Director
Nicholas Antonaccio 50 Vice President - Finance
Vickie D. Sloan 43 Director
Tadeyuki Seki 47 Director
Stephen W. Shippie 47 President
Spencer Lempert 52 Secretary
</TABLE>
Ian J. Berg has served as Chairman of the Board (Principal
Executive Officer) and Director of the Issuer since being appointed/elected on
March 31, 1997. Mr. Berg founded Copelco Financial in October 1972 and has
continuously served as its President and CEO from inception. Prior to founding
Copelco, Mr. Berg served as Senior Vice President and Director of MCD
Corporation (an AMEX listed corporation) and as President and Director of MCD
Leasing corporation from 1967 through 1972. He is a past Vice President and
Director of the Equipment Leasing Association (the industry trade association)
and a founder, past officer and Director of the Eastern Association of Equipment
Lessors.
Robert J. Lemenze Jr. has served as President of the Issuer
since being appointed/elected on March 31, 1997. Mr. Lemenze was elected
President and Chief Operating Officer of Copelco Capital in January 1997. Prior
to this he served as Vice President of Sales and head of the Document Imaging
Sales Group since joining Copelco Capital in 1987.
Michael C. Ritter has served as Senior Vice President, Chief
Financial Officer and Treasurer since being elected in March 31, 1997. Mr.
Ritter is the Chief Financial Officer and Senior Vice President of Copelco
Capital and a senior officer of all of Copelco Financial's wholly-owned
subsidiaries.
John Hakemian has served as Director since being elected on
March 17, 1997. For the last five years, Mr. Hakemian has served, initially, as
the chief financial officer for a subsidiary of Itochu International (the
Issuer's ultimate parent company in the United States) and, more recently, as
the Chief Financial Officer of Itochu International.
John Fortunato has served as Director since being elected on
March 17, 1997. For the last five years, Mr. Fortunato has been employed by
Corporation Services Company, Mayer and Son, Inc. and Rollins International
Services, Inc.
Nicholas Antonaccio has served as Vice President-Finance since
beine elected on March 31, 1997. Mr. Antonaccio joined Copelco Capital as a
Senior Vice President and Chief Financial Officer in September 1995. He
formerly served as the Treasurer of Concord Leasing Company.
Vickie D. Sloan has served as Director since being elected on
March 17, 1997. For the last five years, Ms. Sloan has been employed bv
Corporation Service Company.
Tadeyuki Seki has served as Director since being elected on
March 17, 1997. For the last six months, Mr. Seki has served as the Vice
President and Treasurer of Itochu International and for the year and a half
prior, as Assistant Senior Manager and for the three years prior to that, as
General Manager of the Credit Finance Department of the Itochu Corporation in
Japan.
Stephen W. Shippie has served as Vice President since
being elected on March 31, 1997. For the last five years, Mr. Shippie has
served as the Vice President-Finance of Copelco Financial.
Spencer Lempert has served as Secretary since being elected on
March 31. 1997. For the last five years, Mr. Lempert has served as the General
Counsel for Copelco Financial.
None of the above-listed directors and offcers of the Issuer
will be compensated directly by the Issuer nor with any funds or assets of the
Issuer nor will any such directors and officers receive compensation in the
capacities in which they act for the Issuer.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Issuer pursuant to the foregoing provisions, or otherwise, the
Issuer 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 liabilties (other than the payment bv the Issuer of expenses
incurred or paid by a director, officer or controlling person of the Issuer 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 Issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
juridisction 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.
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 "Material 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
38
<PAGE>
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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<PAGE>
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 Material 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 to the extent the Issuer does
not reinvest such Termination Payments in Additional
Leases; 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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<PAGE>
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 lesser of (a) ____% of the Discounted Present Value
of the Performing Leases as of the Cut-Off Date and (b) 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"), Residual
Realizations will be deposited in the Residual Account up to the Residual Amount
Cap in accordance with the application of funds described herein under
"Distributions on the Notes." 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 deposited into the Reserve
Account to the extent that the amount on deposit in the Reserve Account is less
than the Required Reserve Amount and thereafter will be disbursed to the Issuer.
(Section 3.04(c)).
Distributions on Notes. Payments on the Notes will commence on
July 21, 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 92.01% (Section 1.01).
42
<PAGE>
The "Class A Principal Payment" means (a) while the Class A-1
Notes are outstanding, (i) on all Payment Dates prior to the July 1998 Payment
Date, the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the previous
Determination Date and (B) the Discounted Present Value of the Performing Leases
as of the related Determination Date, and (ii) on the July 1998 Payment Date,
the entire Outstanding Principal Amount on the Class A-1 Notes and (b) after the
Class A-1 Notes have been paid in full, the amount necessary to reduce the
aggregate Outstanding Principal Amount on the Class A Notes to the Class A
Target Investor Principal Amount.
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) 2.50% 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 5.33% (Section 1.01).
The "Class B Principal Payment" payable on each Payment Date
will be an amount equal to (a) while the Class A-1 Notes are outstanding, zero
and (b) after the Outstanding Principal Amount on the Class A-1 Notes has been
reduced to zero, the amount necessary to reduce the Outstanding Principal Amount
of the Class B Notes to the greater of the Class B Target Investor Principal
Amount and the Class B Floor (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) 1.00% 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 2.66% (Section 1.01).
The "Class C Principal Payment Amount" payable on each Payment
Date will be an amount equal to (a) while the Class A-1 Notes are outstanding,
zero and (b) after the Outstanding Principal Amount on the Class A-1 Notes has
been reduced to zero, the amount necessary to reduce the Outstanding Princpal
Amount of the Class C Notes to the greater of the Class C Target Investor
Principal Amount and the Class C Floor (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
43
<PAGE>
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;
44
<PAGE>
(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.
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.
Redemption. The Issuer may, at its option, redeem the Notes,
as a whole, at their principal amount, without premium, together with interest
accrued to the date fixed for redemption if on any payment date 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. (Sections 2.01
and 1.06). 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 "Descripton 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
45
<PAGE>
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-1 Notes,
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes, pro-rata 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-1 Interest Rate,
Class A-2 Interest Rate, Class A-3 Interest Rate and Class A-4
Interest Rate, respectively, second 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, third, 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,
fourth, to the payment of the Outstanding Principal Amount of the
Class A-1 Notes, fifth, to the payment of the Outstanding Principal
Amount of the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes
pro-rata to the date of payment thereof, sixth, to the payment of the
Outstanding Principal Amount of the Class B Notes to the date of
payment thereof, and seventh, 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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<PAGE>
The Indenture will provide that the holders of
66 2/3% in aggregate principal amount of the Class A Notes then outstanding (or
if the Class A Notes are no longer outstanding, the Class B Notes, or if the
Class B Notes are no longer oustanding, the Class C Notes) 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;
47
<PAGE>
(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 10% 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 10% 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.
48
<PAGE>
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 June 18, 1997 and the first Payment Date is
July 21, 1997.
49
<PAGE>
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
Payment ------------------------------------------------- -----------------------------------------------
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
July, 1997 91 100 100 100 100 87 100 100 100 100
August, 1997 82 100 100 100 100 74 100 100 100 100
September, 1997 73 100 100 100 100 62 100 100 100 100
October, 1997 64 100 100 100 100 49 100 100 100 100
November, 1997 55 100 100 100 100 37 100 100 100 100
December, 1997 46 100 100 100 100 25 100 100 100 100
January, 1998 37 100 100 100 100 13 100 100 100 100
February, 1998 28 100 100 100 100 1 100 100 100 100
March, 1998 18 100 100 100 100 0 74 100 100 96
April, 1998 9 100 100 100 100 0 46 100 100 93
May, 1998 0 100 100 100 100 0 19 100 100 89
June, 1998 0 77 100 100 97 0 0 98 100 85
July, 1998 0 55 100 100 94 0 0 91 100 82
August, 1998 0 32 100 100 91 0 0 85 100 78
September, 1998 0 9 100 100 88 0 0 78 100 75
October, 1998 0 0 97 100 85 0 0 72 100 71
November, 1998 0 0 91 100 81 0 0 66 100 68
December, 1998 0 0 85 100 78 0 0 60 100 65
January, 1999 0 0 79 100 75 0 0 54 100 61
February, 1999 0 0 74 100 72 0 0 48 100 58
March, 1999 0 0 68 100 69 0 0 42 100 55
April, 1999 0 0 62 100 66 0 0 37 100 52
May, 1999 0 0 56 100 63 0 0 31 100 49
June, 1999 0 0 51 100 60 0 0 26 100 46
July, 1999 0 0 45 100 57 0 0 21 100 44
August, 1999 0 0 40 100 54 0 0 16 100 41
September, 1999 0 0 35 100 51 0 0 11 100 38
October, 1999 0 0 29 100 48 0 0 6 100 36
November, 1999 0 0 24 100 46 0 0 2 100 33
December, 1999 0 0 20 100 43 0 0 0 96 31
January, 2000 0 0 15 100 40 0 0 0 90 29
February, 2000 0 0 10 100 38 0 0 0 84 27
March, 2000 0 0 6 100 36 0 0 0 78 25
April, 2000 0 0 2 100 33 0 0 0 71 25
May, 2000 0 0 0 97 31 0 0 0 66 25
June, 2000 0 0 0 90 29 0 0 0 60 25
July, 2000 0 0 0 85 27 0 0 0 55 25
August, 2000 0 0 0 79 25 0 0 0 50 25
September, 2000 0 0 0 72 25 0 0 0 46 25
October, 2000 0 0 0 66 25 0 0 0 41 25
November, 2000 0 0 0 60 25 0 0 0 37 25
December, 2000 0 0 0 54 25 0 0 0 32 25
January, 2001 0 0 0 48 25 0 0 0 28 25
February, 2001 0 0 0 43 25 0 0 0 24 25
March, 2001 0 0 0 37 25 0 0 0 20 25
April, 2001 0 0 0 32 25 0 0 0 17 25
</TABLE>
<PAGE>
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
Payment ------------------------------------------------- -----------------------------------------------
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>
May, 2001 0 0 0 27 25 0 0 0 14 25
June, 2001 0 0 0 22 25 0 0 0 11 25
July, 2001 0 0 0 18 25 0 0 0 8 25
August, 2001 0 0 0 14 25 0 0 0 5 25
September, 2001 0 0 0 10 25 0 0 0 3 25
October, 2001 0 0 0 7 25 0 0 0 1 25
November, 2001 0 0 0 4 25 0 0 0 0 21
December, 2001 0 0 0 1 25 0 0 0 0 12
January, 2002 0 0 0 0 19 0 0 0 0 5
February, 2002 0 0 0 0 10 0 0 0 0 0
March, 2002 0 0 0 0 3 0 0 0 0 0
April, 2002 0 0 0 0 0 0 0 0 0 0
May, 2002 0 0 0 0 0 0 0 0 0 0
June, 2002 0 0 0 0 0 0 0 0 0 0
July, 2002 0 0 0 0 0 0 0 0 0 0
August, 2002 0 0 0 0 0 0 0 0 0 0
September, 2002 0 0 0 0 0 0 0 0 0 0
October, 2002 0 0 0 0 0 0 0 0 0 0
November, 2002 0 0 0 0 0 0 0 0 0 0
December, 2002 0 0 0 0 0 0 0 0 0 0
January, 2003 0 0 0 0 0 0 0 0 0 0
February, 2003 0 0 0 0 0 0 0 0 0 0
March, 2003 0 0 0 0 0 0 0 0 0 0
April, 2003 0 0 0 0 0 0 0 0 0 0
May, 2003 0 0 0 0 0 0 0 0 0 0
June, 2003 0 0 0 0 0 0 0 0 0 0
July, 2003 0 0 0 0 0 0 0 0 0 0
August, 2003 0 0 0 0 0 0 0 0 0 0
September, 2003 0 0 0 0 0 0 0 0 0 0
October, 2003 0 0 0 0 0 0 0 0 0 0
November, 2003 0 0 0 0 0 0 0 0 0 0
December, 2003 0 0 0 0 0 0 0 0 0 0
January, 2004 0 0 0 0 0 0 0 0 0 0
February, 2004 0 0 0 0 0 0 0 0 0 0
March, 2004 0 0 0 0 0 0 0 0 0 0
April, 2004 0 0 0 0 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------
WEIGHTED
AVERAGE
LIFE(1)(YEARS) 0.51 1.15 2.08 3.64 2.68 0.38 0.87 1.71 3.29 2.37
====================================================================================================================
</TABLE>
(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 Principal Amount of the respective Offered Note by the number
of years from the Issuance Date to such Payment Date, (b) adding the
results, and (c) dividing the sum by the respective Initial Principal
Amount.
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 0.51
years and 0.38 years; 1.15 years and 0.87 years; 2.08 years and 1.71 years; 3.53
years and 3.15 years and 2.47 years and 2.11 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.
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.
51
<PAGE>
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,
52
<PAGE>
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 Offered Notes
is as indebtedness for federal income tax purposes.
Although it is the opinion of Tax Counsel that the Offered
Notes are properly characterized as indebtedness for federal income tax
purposes, no assurance can be given that such characterization of the Offered
Notes will prevail. If the Offered Notes were treated as an ownership interest
in the Leases, all income on such Leases would be income to the holders of the
Offered 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 Offered Notes.
If, alternatively, the Offered Notes were treated as an
equity interest in the Issuer, distributions on the Offered Notes probably
would not be deductible in computing the taxable income of the Issuer and all or
a part of distributions to
53
<PAGE>
the holders of the Offered 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 Offered 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
Offered 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
Offered 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 Offered 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 Offered 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
54
<PAGE>
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 Offered Notes. Payments of
interest and principal, together with payments of proceeds from the sale of
Offered 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 Offered Notes Certain U.S. Federal
Income Tax Documentation Requirements. A beneficial owner of Offered 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 Offered 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 Offered Notes. Investors are advised to
consult their own tax advisors for specific tax advice concerning their holding
and disposing of the Offered Notes.
State, Local and Other Taxes. Investors should consult their
own tax advisors regarding whether the purchase of the Offered 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 OFFERED 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 Offered 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 Offered 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 Offered Notes should be treated as indebtedness without
substantial equity features for purposes of the Plan Asset Regulations. However,
even if the Offered Notes are treated as indebtedness for such purposes, the
acquisition or holding of Offered 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 Offered Notes, or to whom the Offered Notes are transferred, will
be deemed to have represented that the acquisition and continued holding of the
Offered 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 Offered
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 Offered
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 Inc., First
Union Capital Markets Corp. and Morgan Stanley & Co. Incorporated (the
"Underwriters") have agreed to purchase the principal amount of the
Offered Notes set forth opposite their names.
<TABLE>
<CAPTION>
Underwriters of the Class A Notes Principal Amount of Class A Notes
- --------------------------------- ---------------------------------
<S> <C>
Lehman Brothers Inc. $___________
First Union Capital Markets Corp. $___________
Morgan Stanley & Co. Incorporated $___________
<CAPTION>
Underwriters of the Class B Notes Principal Amount of Class B Notes
- --------------------------------- ---------------------------------
<S> <C>
Lehman Brothers Inc. $___________
First Union Capital Markets Corp. $___________
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed to
purchase the Offered Notes in the amounts set forth above, 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 indemnify 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.
Lehman Brothers Inc. and First Union Capital Markets Corp.
are serving as the placement agents for the Class C Notes.
EXPERTS
The balance sheet of Copelco Capital Funding Corp. X as of May
21, 1997 has been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
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 "A-1+", "D-1", "P-1" and "F-1+/AAA" and
that the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes be rated at
least "AAA", "AAA", "Aaa" and "AAA" and that the Class B Notes be rated at
least "A", "A+", "A2" and "A+" by Standard & Poor's Ratings Group
("S&P"), Duff & Phelps Credit Ratings Co. ("DCR"), Moody's Investors Service,
Inc. ("Moody's") and Fitch Investors Service, L.P. ("Fitch"), respectively (each
a "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 .................................................................................... 10, 50
Additional Principal.................................................................................. 8, 44
Adjusted Lease .................................................................................... 10
Adjusted Leases .................................................................................... 17
Available Funds .................................................................................... 12, 43
Available Funds Shortfall............................................................................. 43
Available Reserve Amount.............................................................................. 15, 43
Bankruptcy Code .................................................................................... 54
Benefit Plan .................................................................................... 58
Booked Residual Value................................................................................. 14
Casualty .................................................................................... 42
Casualty Payment .................................................................................... 42
Cede .................................................................................... 2
CEDEL .................................................................................... 2
Cedel Participants.................................................................................... 41
Class .................................................................................... 1
Class A Initial Principal Amount...................................................................... 4
Class A Noteholders................................................................................... 2
Class A Notes .................................................................................... 1, 3
Class A Percentage.................................................................................... 44
Class A Principal Payment............................................................................. 7
Class A Target Investor Principal Amount.............................................................. 8, 44
Class A-1 Initial Principal Amount.................................................................... 4
Class A-1 Interest Rate............................................................................... 4
Class A-1 Notes .................................................................................... 1
Class A-2 Initial Principal Amount.................................................................... 4
Class A-2 Interest Rate............................................................................... 4
Class A-2 Notes .................................................................................... 1
Class A-3 Initial Principal Amount.................................................................... 4
Class A-3 Interest Rate............................................................................... 4
Class A-3 Notes .................................................................................... 1
Class A-4 Initial Principal Amount.................................................................... 4
Class A-4 Interest Rate............................................................................... 4
Class A-4 Notes .................................................................................... 1
Class B Floor .................................................................................... 8, 44
Class B Initial Principal Amount...................................................................... 4
Class B Interest Rate................................................................................. 4
Class B Noteholders................................................................................... 2
Class B Notes .................................................................................... 1, 3
Class B Percentage.................................................................................... 45
Class B Principal Payment............................................................................. 7, 45
Class B Target Investor Principal Amount.............................................................. 8
Class B Target Principal Amount....................................................................... 45
Class C Floor .................................................................................... 8, 45
Class C Initial Principal Amount...................................................................... 4
Class C Interest Rate................................................................................. 4
Class C Notes .................................................................................... 1, 2
Class C Percentage.................................................................................... 45
Class C Principal Payment............................................................................. 8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Term(s) Page(s)
- ------- -------
<S> <C>
Class C Principal Payment Amount...................................................................... 45
Class C Target Investor Principal Amount.............................................................. 8
Class C Target Principal Amount....................................................................... 45
Code .................................................................................... 55
Collection Account.................................................................................... 42
Commission .................................................................................... 2
Conditional Payment Rate.............................................................................. 50
Cooperative .................................................................................... 41
Copelco Capital .................................................................................... 1, 3, 5
Copelco Financial .................................................................................... 32
Cost per Copy .................................................................................... 33
Cumulative Loss Amount................................................................................ 9, 45
Cut-Off Date .................................................................................... 4
DCR .................................................................................... 16, 60
Default .................................................................................... 47
Definitive Notes .................................................................................... 42
Depositaries .................................................................................... 39
Determination Date.................................................................................... 6, 44
Discount Rate .................................................................................... 4
Discounted Present Value of the Leases................................................................ 4, 45
Discounted Present Value of the Performing Leases..................................................... 4, 45
DTC .................................................................................... 2
Due Period .................................................................................... 6
Early Lease Termination............................................................................... 10
Eligible Account .................................................................................... 42
Equipment .................................................................................... 6
Equipment Financing Portion........................................................................... 33
Equity Interest .................................................................................... 58
ERISA .................................................................................... 15, 58
Euroclear .................................................................................... 2
Euroclear Operator.................................................................................... 41
Euroclear Participants................................................................................ 41
Events of Default .................................................................................... 47
Excess Copy Charge.................................................................................... 33
Exchange Act .................................................................................... 2
Fee Per Scan Charges.................................................................................. 34
Filing Locations .................................................................................... 18
Fitch .................................................................................... 16, 60
HILL .................................................................................... 33
Holders .................................................................................... 42
Indenture .................................................................................... 12, 39
Indirect Participants................................................................................. 40
Initial Principal Amount.............................................................................. 3
Interest Payments .................................................................................... 6, 44
Interest Rate .................................................................................... 4
investment income .................................................................................... 55
IRS .................................................................................... 55
Issuance Date .................................................................................... 4, 6
Issuer .................................................................................... 1, 3
Lease Contracts .................................................................................... 6
Lease Payment .................................................................................... 42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Term(s) Page(s)
- ------- -------
<S> <C>
Lease Receivables .................................................................................... 6
Leases .................................................................................... 6
Lessee .................................................................................... 9
Lessees .................................................................................... 9
Maintenance Charge.................................................................................... 33
Moody's .................................................................................... 16, 60
Nominal Buy-Out .................................................................................... 21
Nominal Buy-Out Leases................................................................................ 17
Non-Performing Lease.................................................................................. 20
Non-Performing Leases................................................................................. 5, 21, 46
Non-U.S. Person .................................................................................... 57
Notes .................................................................................... 1, 3
Offered Noteholders................................................................................... 2
Offered Notes .................................................................................... 1, 3
OID .................................................................................... 55
Origination Divisions................................................................................. 20
Outstanding Class A Principal Amount.................................................................. 6
Outstanding Principal Amounts......................................................................... 6
Participants .................................................................................... 39
Payment Date .................................................................................... 2, 6
PILL .................................................................................... 33
Plan Asset Regulations................................................................................ 58
Prepayment .................................................................................... 17
Principal Payments.................................................................................... 6
PTCE .................................................................................... 58
Rating Agency .................................................................................... 16, 60
Record Date .................................................................................... 6
Registration Statement................................................................................ 2
Required Payments .................................................................................... 43
Required Reserve Amount............................................................................... 15, 43
Reserve Account .................................................................................... 15, 43
Residual Account .................................................................................... 44
Residual Amount Cap................................................................................... 14, 46
Residual Event .................................................................................... 14, 44, 46
Residual Realizations................................................................................. 14
S&P .................................................................................... 16, 60
Sales and Servicing Agreement......................................................................... 1, 5, 36
Securities Act .................................................................................... 2
Seller .................................................................................... 5
Series Cut-Off Date................................................................................... 20
Series Pool .................................................................................... 6
Series Pool Divisions................................................................................. 20
Servicer .................................................................................... 5
Servicer Advance .................................................................................... 11, 47
Servicer Events of Default............................................................................ 49
Servicing Fee .................................................................................... 11
Statistical Discount Rate............................................................................. 5
Statistical Discounted Present Value of the Leases.................................................... 5
Substitute Lease .................................................................................... 10, 50
Tax Counsel .................................................................................... 55
Termination Payment................................................................................... 43
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Term(s) Page(s)
- ------- -------
<S> <C>
Terms and Conditions.................................................................................. 41
Trust Fund .................................................................................... 6
Trustee .................................................................................... 6, 39
U.S. Person .................................................................................... 57
UCC .................................................................................... 17, 53
Underwriter .................................................................................... 59
Underwriting Agreement................................................................................ 59
Vendor .................................................................................... 33
Warranty Lease .................................................................................... 10, 36
Warranty Leases .................................................................................... 17
</TABLE>
iv
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Term(s) Page(s)
- ------- -------
<S> <C>
Independent Auditor's Report ..................................................................................F-2
Balance Sheet of the Issuer as of May 21, 1997 ................................................................F-3
Notes to Balance Sheet ........................................................................................F-4
</TABLE>
<PAGE>
Independent Auditor's Report
The Board of Directors
Copelco Capital Funding Corp. X:
We have audited the accompanying balance sheet of Copelco Capital Funding Corp.
X (a wholly owned subsidiary of Copelco Capital, Inc.) as of May 21, 1997. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit of a balance sheet includes examining, on a test basis, evidence
supporting the amounts and disclosures in that balance sheet. An audit of a
balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Copelco Capital Funding Corp. X as
of May 21, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
May 21, 1997
New York, New York
<PAGE>
COPELCO CAPITAL FUNDING CORP. X
(a wholly owned subsidiary of Copelco Capital, Inc.)
BALANCE SHEET
May 21, 1997
<TABLE>
<CAPTION>
Asset
<S> <C>
Cash $1,000
------
======
Stockholders' Equity
Stockholder's Equity
Common Stock (authorized
1,000 shares, $1 par value,
issued and outstanding 100
shares) 100
Additional paid-in capital 900
------
$1,000
======
</TABLE>
See accompanying notes to balance sheet.
<PAGE>
COPELCO CAPITAL FUNDING CORP. X
(a wholly owned subsidiary of Copelco Capital, Inc.)
Notes to Balance Sheet
May 21, 1997
(1) Organization
Copelco Capital Funding Corp. X ("Copelco Funding X"), a wholly owned
subsidiary of Copelco Capital, Inc., ("Copelco Capital"), was
incorporated in the State of Delaware on March 17, 1997. The Company has
been inactive since that date.
Copelco Funding X was organized to engage exclusively in the following
business and financial activities: to acquire equipment described in
certain equipment leases and to purchase equipment leases and lease
receivables from Copelco Capital and any of its affiliates; to issue
and sell notes collateralized by any or all of its assets pursuant to
one or more indentures between Copelco Funding X and an indenture
trustee; and to engage in any lawful act or activity and to exercise
any power that is incidental and is necessary or convenient to the
foregoing and permitted under Delaware law.
(2) Capital Contribution
Copelco Capital purchased 100 shares of common stock of the Company for
$1,000 on May 21, 1997.
<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
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION...................................... 2
REPORTS TO NOTEHOLDERS..................................... 3
PROSPECTUS SUMMARY......................................... 5
RISK FACTORS............................................... 18
USE OF PROCEEDS............................................ 20
THE SERIES POOL............................................ 21
COPELCO CAPITAL'S UNDERWRITING AND
SERVICING PRACTICES..................................... 33
THE ISSUER................................................. 37
DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER............. 37
DESCRIPTION OF THE NOTES................................... 38
PREPAYMENT AND YIELD CONSIDERATIONS........................ 49
SECURITY FOR THE NOTES..................................... 53
THE TRUSTEE................................................ 53
CERTAIN LEGAL MATTERS AFFECTING A
LESSEE'S RIGHTS AND OBLIGATIONS......................... 53
MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS.......................................... 55
ERISA CONSIDERATIONS....................................... 58
UNDERWRITING............................................... 59
RATING OF THE NOTES........................................ 60
INDEX OF TERMS............................................. 61
</TABLE>
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.
===============================================================
===============================================================
$554,341,000
Copelco Capital
Funding Corp. X
$140,857,000 ____% Class A-1
Lease-Backed Notes, Series 1997-A
$53,048,000 ____% Class A-2
Lease-Backed Notes, Series 1997-A
$211,334,000 ____% Class A-3
Lease-Backed Notes, Series 1997-A
$126,476,000 ____% Class A-4
Lease-Backed Notes, Series 1997-A
$22,626,000 ____% Class B
Lease-Backed Notes, Series 1997-A
___________________
P R O S P E C T U S
___________________
LEHMAN BROTHERS
FIRST UNION CAPITAL MARKETS CORP.
MORGAN STANLEY DEAN WITTER
(with respect to the
Class A Notes only)
Dated June __, 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)............................................................................. $169,194.00
Printing and Engraving Expenses(1).............................................................. $ 30,000.00
Trustee's Fees(1)............................................................................... $ 10,000.00
Legal Fees and Expenses(1)...................................................................... $100,000.00
Blue Sky Fees and Expenses(1)................................................................... $ 6,000.00
Accountants' Fees and Expenses(1)............................................................... $ 15,000.00
Rating Agency Fees(1)........................................................................... $275,000.00
Miscellaneous Fees(1)........................................................................... $ 5,000.00
Total.......................................................................................... $610,194.00
</TABLE>
(1) Estimated
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 --Amended and Restated 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.
*23.1 --Consent of Dewey Ballantine is included in the opinion filed as Exhibit 5.1
hereto.
*23.2 --Consent of Dewey Ballentine is included in the opinion filed as Exhibit 8.1 hereto.
**23.3 --Consent of KPMG Peat Marwick
*24.1 --Power of Attorney (Included on Page II-4 hereof).
*25.1 --Statement of Eligibility and Qualification of Trustee (Form T-1).
</TABLE>
* Previously filed.
** Filed herewith.
(b) Financial Statements***
Independent Auditor's Report
Balance Sheet of Issuer as of May 20, 1997
Notes to Balance Sheet
*** Financial Statements are included in the Prospectus filed herewith.
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. 4 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 June 9, 1997.
COPELCO CAPITAL FUNDING CORP. X,
Registrant
By /s/ Michael C. Ritter
---------------------------------
Name: Michael C. Ritter
Title: Senior Vice President,
Chief Financial Officer
and Treasurer (Principal
Accounting Officer)
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. 4 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 June 9, 1997
- --------------------------------- (Principal Executive
Officer)
Director
*Ian J. Berg
Director June 9, 1997
- ---------------------------------
*John Hakemian
Director June 9, 1997
- ---------------------------------
*John Fortunato
Director June 9, 1997
- ---------------------------------
*Vickie D. Sloan
Director June 9, 1997
- ---------------------------------
*Tadayuki Seki
/s/ Michael C. Ritter
- --------------------------------
*By Michael C. Ritter
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COPELCO CAPITAL
FUNDING CORP. X,
Issuer
AND
[MANUFACTURERS AND TRADERS TRUST COMPANY],
Trustee
-------------------------
FORM OF INDENTURE
Dated as of [May 1], 1997
-------------------------
$__________ in aggregate principal amount of
Lease-Backed Notes, Series 1997-A,
consisting of:
$__________ of ____% Class A-1 Lease-Backed Notes
$__________ of ____% Class A-2 Lease-Backed Notes
$__________ of ____% Class A-3 Lease-Backed Notes
$__________ of ____% Class A-4 Lease-Backed Notes
$__________ of ____% Class B Lease-Backed Notes
$__________ of ____% Class C Lease-Backed Notes
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
COPELCO CAPITAL FUNDING CORP. X
Reconciliation and Tie between the Indenture
dated as of [May 1], 1997 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
ss.310(a)(1) ss. 7.08
(a)(2) 7.08
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 7.08; 7.09; 6.07;
1.05; 1.06
(c) Not Applicable
311(a) 7.14
(b) 7.14
312(a) 2.11
(b) 12.02
(c) 12.02
313(a) 7.15
(b)(1) Not Applicable
(b)(2) 7.15
(c) 7.15; 1.06
(d) 7.15
314(a) 8.12; 8.09; 1.06
(b) Not Applicable
(c)(1) 12.03
(c)(2) 12.03
(c)(3) 12.01
(d) 12.01
(e) 12.04
(f) Not Applicable
315(a) 7.01(a)
(b) 7.02; 1.06
(c) 7.01(b)
(d) 7.01(c)
(e) 6.14
316(a) (last sentence) 2.12
(a)(1)(A) 6.12
(a)(1)(B) 6.13
(a)(2) Not Applicable
317(a)(1) 6.03(c)
(a)(2) 6.04
(b) 8.03(c)
318(a) 12.01
(c) 12.01
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1.
<S> <C>
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION............................................................. 3
SECTION 1.01. General Definitions........................................................................ 3
SECTION 1.02. Compliance Certificates and Opinions....................................................... 22
SECTION 1.03. Form of Documents Delivered to Trustee..................................................... 23
SECTION 1.04. Acts of Noteholders, etc................................................................... 24
SECTION 1.05. Notices, etc., to Trustee, Servicer and
Company.................................................................................... 25
SECTION 1.06. Notice to Noteholders; Waiver.............................................................. 26
SECTION 1.07. Effect of Headings and Table of Contents................................................... 27
SECTION 1.08. Successors and Assigns..................................................................... 27
SECTION 1.09. GOVERNING LAW.............................................................................. 27
SECTION 1.10. Legal Holidays............................................................................. 27
SECTION 1.11. Execution in Counterparts.................................................................. 28
SECTION 1.12. Inspection................................................................................. 28
SECTION 1.13. Survival of Representations and Warranties................................................. 28
ARTICLE 2.
THE NOTES................................................................... 28
SECTION 2.01. General Provisions......................................................................... 28
SECTION 2.02. Execution, Authentication, Delivery, and
Dating..................................................................................... 31
SECTION 2.03. Transfer and Exchange...................................................................... 32
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes................................................ 33
SECTION 2.05. Book-Entry Registration of Class A Notes and
Class B Notes.............................................................................. 34
SECTION 2.06. Notice to Clearing Agency.................................................................. 36
SECTION 2.07. Definitive Class A Notes and Definitive
Class B Notes.............................................................................. 36
SECTION 2.08. Payment of Interest and Principal; Rights
Preserved.................................................................................. 37
SECTION 2.09. Persons Deemed Owners...................................................................... 38
SECTION 2.10. Cancellation............................................................................... 38
SECTION 2.11. Noteholder Lists........................................................................... 39
SECTION 2.12. Treasury Securities........................................................................ 39
ARTICLE 3.
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS....................................................... 39
SECTION 3.01. Trust Accounts; Investments by Trustee..................................................... 39
SECTION 3.02. Collection of Moneys....................................................................... 42
SECTION 3.03. Collection Account; Payments............................................................... 43
SECTION 3.04. The Reserve Account and the Residual
Account.................................................................................... 46
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SECTION 3.05. Reports by Trustee; Notices of Certain
Payments................................................................................... 47
SECTION 3.06. Trustee May Rely on Certain Information from
Copelco and Servicer....................................................................... 48
ARTICLE 4.
RELEASE OF LEASES AND EQUIPMENT........................................................ 48
SECTION 4.01. Release of Equipment....................................................................... 48
SECTION 4.02. Release of Leases Upon Final Lease Payment................................................. 49
SECTION 4.03. Execution of Documents..................................................................... 49
ARTICLE 5.
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER................................................ 50
SECTION 5.01. Servicer Events of Default................................................................. 50
SECTION 5.02. Substitute Servicer........................................................................ 50
ARTICLE 6.
EVENTS OF DEFAULT; REMEDIES.......................................................... 51
SECTION 6.01. Events of Default.......................................................................... 51
SECTION 6.02. Acceleration of Maturity; Rescission and
Annulment.................................................................................. 52
SECTION 6.03. Remedies................................................................................... 54
SECTION 6.04. Trustee Shall File Proofs of Claim......................................................... 55
SECTION 6.05. Trustee May Enforce Claims Without
Possession of Notes........................................................................ 56
SECTION 6.06. Application of Money Collected............................................................. 56
SECTION 6.07. Limitation on Suits........................................................................ 58
SECTION 6.08. Unconditional Right of Noteholders to
Receive Principal and Interest............................................................. 59
SECTION 6.09. Restoration of Rights and Remedies......................................................... 59
SECTION 6.10. Rights and Remedies Cumulative............................................................. 59
SECTION 6.11. Delay or Omission Not Waiver............................................................... 59
SECTION 6.12. Control by Noteholders..................................................................... 60
SECTION 6.13. Waiver of Events of Default................................................................ 60
SECTION 6.14. Undertaking for Costs...................................................................... 61
SECTION 6.15. Waiver of Stay or Extension Laws........................................................... 61
SECTION 6.16. Sale of Trust Estate....................................................................... 61
ARTICLE 7.
THE TRUSTEE.................................................................. 63
SECTION 7.01. Certain Duties and Responsibilities........................................................ 63
SECTION 7.02. Notice of Defaults or Events of Default.................................................... 64
SECTION 7.03. Certain Rights of Trustee.................................................................. 65
SECTION 7.04. Not Responsible for Recitals or Issuance of
Notes...................................................................................... 66
SECTION 7.05. May Hold Notes............................................................................. 66
SECTION 7.06. Money Held in Trust........................................................................ 66
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SECTION 7.07. Compensation, Reimbursement, etc........................................................... 66
SECTION 7.08. Corporate Trustee Required; Eligibility.................................................... 67
SECTION 7.09. Resignation and Removal; Appointment of
Successor.................................................................................. 67
SECTION 7.10. Acceptance of Appointment by Successor..................................................... 68
SECTION 7.11. Merger, Conversion, Consolidation or
Succession to Business..................................................................... 69
SECTION 7.12. Co-trustees and Separate Trustees.......................................................... 69
SECTION 7.13. Acceptance by Trustee...................................................................... 71
SECTION 7.14. Preferential Collection of Claims Against
the Company................................................................................ 71
SECTION 7.15. Reports by Trustee to Noteholders.......................................................... 71
SECTION 7.16. No Proceedings............................................................................. 72
ARTICLE 8.
COVENANTS................................................................... 72
SECTION 8.01. Payment of Principal and Interest.......................................................... 72
SECTION 8.02. Maintenance of Office or Agency; Chief
Executive Office........................................................................... 72
SECTION 8.03. Money for Payments to Noteholders to be Held
in Trust................................................................................... 73
SECTION 8.04. Corporate Existence; Merger; Consolidation,
etc........................................................................................ 74
SECTION 8.05. Protection of Trust Estate; Further
Assurances................................................................................. 76
SECTION 8.06. [Reserved]................................................................................. 77
SECTION 8.07. Performance of Obligations; Sales and
Servicing Agreement........................................................................ 77
SECTION 8.08. Negative Covenants......................................................................... 77
SECTION 8.09. Information as to Company.................................................................. 78
SECTION 8.10. Taxes...................................................................................... 80
SECTION 8.11. Indemnification............................................................................ 80
SECTION 8.12. Commission Reports; Reports to Trustee;
Reports to Noteholders..................................................................... 80
ARTICLE 9.
SUPPLEMENTAL INDENTURES............................................................ 81
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders................................................................................ 81
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders................................................................................ 82
SECTION 9.03. Execution of Supplemental Indentures....................................................... 83
SECTION 9.04. Effect of Supplemental Indentures.......................................................... 83
SECTION 9.05. Reference in Notes to Supplemental
Indentures................................................................................. 84
SECTION 9.06. Compliance with Trust Indenture Act........................................................ 84
ARTICLE 10.
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SATISFACTION AND DISCHARGE........................................................... 84
SECTION 10.01. Satisfaction and Discharge of Indenture................................................... 84
SECTION 10.02. Application of Trust Money................................................................ 85
ARTICLE 11.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY................................................................. 86
SECTION 11.01. Corporate Organization and Authority...................................................... 86
SECTION 11.02. Pending Litigation........................................................................ 86
SECTION 11.03. Transactions Legal and Authorized......................................................... 87
SECTION 11.04. No Defaults............................................................................... 87
SECTION 11.05. Governmental Consent...................................................................... 87
SECTION 11.06. Use of Proceeds........................................................................... 88
SECTION 11.07. Compliance with Law....................................................................... 88
SECTION 11.08. Restrictions on Company................................................................... 88
SECTION 11.09. Legal, Valid and Binding Obligations...................................................... 88
SECTION 11.10. Perfected Security Interest............................................................... 89
SECTION 11.11. Taxes..................................................................................... 89
SECTION 11.12. Nonconsolidation.......................................................................... 89
ARTICLE 12.
MISCELLANEOUS................................................................. 90
SECTION 12.01. Trust Indenture Act Controls.............................................................. 90
SECTION 12.02. Communication by Noteholders with Other
Noteholders............................................................................... 90
SECTION 12.03. Officers' Certificate and Opinion of
Counsel as to Conditions Precedent........................................................ 91
SECTION 12.04. Statements Required in Certificate or
Opinion................................................................................... 91
SCHEDULES
SCHEDULE 1 Leases
EXHIBITS
EXHIBIT A Forms of Notes and Form of Trustee's
Certificate of Authentication
EXHIBIT B Form of Investor Letter
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INDENTURE
This INDENTURE dated as of [May 1], 1997, is between COPELCO CAPITAL
FUNDING CORP. X, a Delaware corporation (herein called the "Company"), and
[MANUFACTURERS AND TRADERS TRUST COMPANY], a New York banking corporation, as
trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the issuance of $__________________ in
aggregate principal amount of its Lease-Backed Notes, Series 1997-A, consisting
of $__________ aggregate principal amount of ______% Class A-1 Lease-Backed
Notes (the "Class A-1 Notes"), $__________ aggregate principal amount of ______%
Class A-2 Lease-Backed Notes (the "Class A-2 Notes"), $__________ aggregate
principal amount of ______% Class A-3 Lease-Backed Notes (the "Class A-3
Notes"), $__________ aggregate principal amount of ______% Class A-4
Lease-Backed 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"), $__________
aggregate principal amount of ______% Class B Lease-Backed Notes (the "Class B
Notes"), $__________ aggregate principal amount of ______% Class C Lease-Backed
Notes (the "Class C Notes"; the Class A Notes, the Class B Notes and the Class C
Notes are referred to collectively as the "Notes"), of substantially the tenor
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture. The Class A Notes, the Class B
Notes and the Class C Notes shall be entitled to payments of interest and
principal as set forth herein.
All things necessary to make the Notes, when executed by the Company and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid agreement of the Company, in accordance with its
terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes by
the holders thereof, it is mutually covenanted and agreed, for the benefit of
all Noteholders, as follows:
GRANTING CLAUSE
The Company hereby Grants to the Trustee on the Issuance Date, for the
benefit and security of the
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Noteholders, all of the Company's right, title and interest in and to (a) the
Leases and all Lease Payments, Casualty Payments, Termination Payments and other
amounts now due or becoming due with respect thereto since the Cut-Off Date
(other than any prepayments of rent required pursuant to the terms of any Lease
at or before the commencement of the Lease and any payments due before the
Cut-Off Date) and all Additional Leases and Substitute Leases and all Lease
Payments, Casualty Payments, Termination Payments and other amounts due or
becoming due with respect thereto since the effective date of their respective
addition or substitution (other than any prepayments of rent required by the
terms of any Lease at or before the commencement of the Lease and any payments
due before the effective date of such addition or substitution), (b) all rights
of the Company to or under any guarantees of or collateral (including all rights
of the Company in any security deposits and the Company's right to repayment by
Copelco Capital, Inc. ("Copelco") of any inter-company loans pursuant to Section
13.01 of the Sales and Servicing Agreement) for the Lessee's obligations under
any Lease, (c) all interests of the Company in the Equipment at any time subject
to any Lease, (d) all moneys from time to time held by the Trustee pursuant to
Section 3.01(a) hereof pending deposit in one of the accounts referred to
therein, (e) all moneys from time to time on deposit in any of the Trust
Accounts, including all investments and income from the investment of such
moneys, (f) all rights of the Company under the Sales and Servicing Agreement,
and (g) all proceeds of the conversion, whether voluntary or involuntary, of any
of the foregoing into cash or other property (collectively, the Granted Assets).
Such Grant is made in trust to secure (i) the payment of all amounts due on the
Class A Notes, the Class B Notes and the Class C Notes, in accordance with their
terms, equally and ratably without prejudice, priority, or distinction among any
of the Class A Notes, the Class B Notes and the Class C Notes, respectively, by
reason of differences in time of issuance or otherwise, (ii) the payment of all
other sums payable under this Indenture with respect to the Notes and (iii)
compliance with the provisions of this Indenture with respect to the Notes.
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof, and agrees to perform the duties herein
required to the best of its ability and to the end that the interests of the
Noteholders may be adequately and effectively protected as hereinafter provided.
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ARTICLE 1.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01. General Definitions.
Except as otherwise specified or as the context may otherwise require, the
following terms have the meanings set forth below for all purposes of this
Indenture, and the definitions of such terms are applicable to the singular as
well as to the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.
Act: with respect to any Noteholder, as defined in Section 1.04.
Additional Lease: as defined in Section 12 of the Sales and Servicing
Agreement.
Additional Principal: with respect to each Payment Date, 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-1 Principal Payment, Class A-2 Principal Payment, Class A-3
Principal Payment, Class A-4 Principal Payment, Class B Principal Payment and
the Class C Principal Payment to be paid on such Payment Date.
Affiliate: of any specified Person: any other Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
specified Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
Authorized Officer: with respect to any matter, any officer of or other
Person representing the Company, Copelco or the Servicer, as the case may be,
who is authorized to act for the Company, Copelco or the Servicer, as the case
may be.
Available Reserve Amount: the amount on deposit in the Reserve Account.
Available Funds: With respect to any Payment Date, the amount on deposit in
the Collection Account with respect to the immediately preceding Due Period,
including,
3
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without limitation, (a) Lease Payments due during the immediately preceding Due
Period (net of any Excess Copy Charges and Fee Per Scan Charges), (b) Residual
Realizations up to the Residual Amount Cap; (c) recoveries from Non-Performing
Leases to the extent the Seller has not substituted Substitute Leases for such
Non-Performing Leases (except to the extent required to reimburse unreimbursed
Servicer Advances pursuant to Section 4 of the Sales and Servicing Agreement);
(d) proceeds from repurchases by Copelco of Leases as a result of breaches of
representations and warranties by Copelco to the extent Copelco has not
substituted Substitute Leases for such Leases; (e) proceeds from the investment
of funds in the Collection Account, the Residual Account and the Reserve
Account; (f) Casualty Payments; (g) Servicer Advances; (h) Termination Payments;
and late charges on delinquent Lease Payments not advanced by the Servicer.
Available Funds Shortfall: as defined in Section 3.04(b).
Available Residual Amount: the excess of (a) the Residual Amount Cap over
(b) the Utilized Residual Amount.
Book-Entry Class A-1 Notes: beneficial interests in the Class A-1 Notes,
the ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05.
Book-Entry Class A-2 Notes: beneficial interests in the Class A-2 Notes,
the ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05.
Book-Entry Class A-3 Notes: beneficial interests in the Class A-3 Notes,
the ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05.
Book-Entry Class A-4 Notes: beneficial interests in the Class A-4 Notes,
the ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05.
Book-Entry Class B Notes: beneficial interests in the Class B Notes, the
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05.
Business Day: any day that is not a Saturday, Sunday or other day on which
commercial banking institutions in the city in which the Corporate Trust Office
and the
4
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Servicer is located are authorized or obligated by law or executive order to
remain closed.
Casualty Payment: any payment pursuant to a Lease on account of the loss,
theft, condemnation, governmental taking, destruction, or damage beyond repair
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.
Casualty Pay-Through Amount: with respect to any Lease (or portion thereof)
with respect to which a Casualty Payment has been made, an amount equal to the
Discounted Present Value of such Lease (or portion thereof) as of the Payment
Date immediately preceding the date on which such Casualty Payment is made.
Cede & Co.: the initial registered holder of the Class A Notes and the
Class B Notes, acting as nominee of The Depository Trust Company.
Class A Notes: as defined in the Recitals hereto.
Class A Percentage: 94.00%.
Class A Principal Payment: (a) while the Class A-1 Notes are
outstanding, (i) on all Payment Dates prior to the June 1998 Payment
Date, the lesser of (1) the amount necessary to reduce the Outstanding
Principal Amount on the Class A-1 Notes to zero and (2) the difference
between (A) the Discounted Present Value of the Performing Leases as of
the previous Determination Date and (B) the Discounted Present Value of
the Performing Leases as of the related Determination Date, and (ii) on
the June 1998 Payment Date and thereafter, the entire Outstanding
Principal Amount on the Class A-1 Notes, and (b) after the Class A-1
Notes have been paid in full, the amount necessary to reduce the
aggregate Outstanding Principal Amount on the Class A Notes to the Class
A Target Investor Principal Amount.
Class A Target Investor Principal Amount: with respect to each Payment
Date, 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.
Class A-1 Note Interest Rate: the rate at which interest accrues on the
Class A-1 Notes, which rate with respect to each Due Period shall be at a rate
per annum equal to ____%.
Class A-1 Note Owner: with respect to a Book-Entry Class A-1 Note, the
Person who is the beneficial owner of such Book-Entry Class A-1 Note, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
5
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Class A-1 Noteholder: Cede & Co. or a holder of a Definitive Class A-1
Note.
Class A-1 Notes: as defined in the Recitals hereto.
Class A-2 Note Interest Rate: the rate at which interest accrues on the
Class A-2 Notes, which rate with respect to each Due Period shall be at a rate
per annum equal to ____%.
Class A-2 Note Owner: with respect to a Book-Entry Class A-2 Note, the
Person who is the beneficial owner of such Book-Entry Class A-2 Note, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
Class A-2 Noteholder: Cede & Co. or a holder of a Definitive Class A-2
Note.
Class A-2 Notes: as defined in the Recitals hereto.
Class A-3 Note Interest Rate: the rate at which interest accrues on the
Class A-3 Notes, which rate with respect to each Due Period shall be at a rate
per annum equal to ____%.
Class A-3 Note Owner: with respect to a Book-Entry Class A-3 Note, the
Person who is the beneficial owner of such Book-Entry Class A-3 Note, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
Class A-3 Noteholder: Cede & Co. or a holder of a Definitive Class A-3
Note.
Class A-3 Notes: as defined in the Recitals hereto.
Class A-4 Note Interest Rate: the rate at which interest accrues on the
Class A-4 Notes, which rate with respect to each Due Period shall be at a rate
per annum equal to ____%.
Class A-4 Note Owner: with respect to a Book-Entry Class A-4 Note, the
Person who is the beneficial owner of such Book-Entry Class A-4 Note, as
reflected on the books of the Clearing Agency, or on the books of a Person
6
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maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
Class A-4 Noteholder: Cede & Co. or a holder of a Definitive Class A-4
Note.
Class A-4 Notes: as defined in the Recitals hereto.
Class B Floor: with respect to each Payment Date, an amount equal to the
total of (a) 2.50% 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.
Class B Note Interest Rate: the rate at which interest accrues on the Class
B Notes, which rate shall be ____% per annum.
Class B Note Owner: with respect to a Book-Entry Class B Note, the Person
who is the beneficial owner of such Book-Entry Class B Note, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in accordance
with the rules of such Clearing Agency).
Class B Noteholder: Cede & Co. or a holder of a Definitive Class B Note.
Class B Notes: as defined in the Recitals hereto.
Class B Percentage: 400%.
Class B Principal Payment: (a) while the Class A-1 Notes are outstanding,
zero and (b) after the Outstanding Principal Amount on the Class A-1 Notes has
been reduced to zero, the amount necessary to reduce the Outstanding Principal
Amount of the Class B Notes to the greater of the Class B Target Investor
Principal Amount and the Class B Floor.
Class B Target Investor Principal Amount: with respect to each Payment
Date, 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.
7
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Class C Floor: with respect to each Payment Date, an amount equal to the
total of (a) 1.00% 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.
Class C Note Interest Rate: the rate at which interest accrues on the Class
C Notes, which rate shall be ____% per annum.
Class C Noteholder: a holder of a Class C Note.
Class C Notes: as defined in the Recitals hereto.
Class C Percentage: 200%.
Class C Principal Payment: (a) while the Class A-1 Notes are outstanding,
zero and (b) after the Outstanding Principal Amount on the Class A-1 Notes has
been reduced to zero, the amount necessary to reduce the Outstanding Principal
Amount of the Class C Notes to the greater of the Class C Target Investor
Principal Amount and the Class C Floor.
Class C Target Investor Principal Amount: with respect to each Payment
Date, 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 Payment Date.
Clearing Agency: an organization registered as a "clearing agency" pursuant
to Section 17A of the Securities Exchange Act of 1934, as amended.
Clearing Agency Participant: a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
Collection Account: the account or accounts by that name established and
maintained by the Trustee pursuant to Section 3.01.
Commission: the Securities and Exchange Commission.
8
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Company: the Person named as the "Company" in the first paragraph of this
instrument.
Company Order or Company Request: a written order or request delivered to
the Trustee and signed in the name of the Company by an Authorized Officer.
Copelco: Copelco Capital, Inc., a corporation organized and existing under
the laws of the State of Delaware, and its successors.
Corporate Trust Office: the principal corporate trust office of the Trustee
located at [One M&T Plaza, 7th Floor, Buffalo, New York 14203,] or at such other
address as the Trustee may designate from time to time by notice to the
Noteholders, the Company and Copelco.
Cumulative Loss Amount: with respect to each Payment Date, 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 for such Payment Date (including any funds withdrawn from the
Reserve Account or the Residual Account as a result of an Available Funds
Shortfall) 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.
Cut-Off Date: the close of business on April 30, 1997.
DCR: Duff & Phelps Credit Rating Co, and any such successor.
Default: any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
Definitive Class A-1 Note: a definitive, fully registered Class A-1 Note
issued pursuant to Section 2.07.
Definitive Class A-2 Note: a definitive, fully registered Class A-2 Note
issued pursuant to Section 2.07.
Definitive Class A-3 Note: a definitive, fully registered Class A-3 Note
issued pursuant to Section 2.07.
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Definitive Class A-4 Note: a definitive, fully registered Class A-4 Note
issued pursuant to Section 2.07.
Definitive Class B Note: a definitive, fully registered Class B Note issued
pursuant to Section 2.07.
Delinquent Lease: as of any Determination Date, any Lease (other than a
Lease which became a Non-Performing Lease prior to such Determination Date) with
respect to which the Lessee has not paid all Lease Payments then due.
Depository Agreement: the letter of representations, between the Company
and the Depository Trust Company, as Clearing Agency.
Determination Date: with respect to any Payment Date, the fifth Business
Day immediately preceding such Payment Date.
Discount Rate: with respect to any Determination Date, ____%, which equals
the sum of (a) the weighted-average interest rate of the Class A Notes
(utilizing the Class A-4 Note Interest Rate), Class B Note Interest Rate and the
Class C Note Interest Rate on the Issuance Date and (b) the Servicing Fee rate
of 0.75% per annum.
Discounted Present Value of the Leases: with respect to any Lease as of the
Cut-Off Date or any date thereafter, an amount equal to the net present value of
all Lease Payments (not including delinquent amounts) to become due thereunder
following the Cut-Off Date or the Due Period preceding the following Payment
Date, as the case may be (determined by discounting on a monthly basis (assuming
a calendar year consisting of twelve 30-day months), at a rate equal to the
Discount Rate, each such Lease Payment from the Payment Date following such
Lease Payment to such date). In determining the Discounted Present Value of the
Leases on any Determination Date or with respect to a Payment Date, the future
remaining Lease Payments will be calculated after giving effect to any payments
received prior to such date of calculation to the extent such payments relate to
Lease Payments due and payable by the Lessees with respect to the related Due
Period and any prior Due Period.
Discounted Present Value of the Delinquent Leases: with respect to any
Payment Date or Determination Date, the Discounted Present Value of the Leases
that are not Non-Performing Leases as to which a Lease Payment, or any portion
thereof, was 63 or more days overdue as of the last day of the Due Period
immediately preceding such Payment Date.
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Discounted Present Value of the Performing Leases: the Discounted Present
Value of the Leases, reduced by the Discounted Present Value of the Leases that
are Non-Performing Leases. In determining the Discounted Present Value of the
Performing Leases on any Determination Date or with respect to a Payment Date,
the future remaining Lease Payments will be calculated after giving effect to
any payments received prior to such date of calculation to the extent such
payments relate to Lease Payments due and payable by the Lessees with respect to
the related Due Period and any prior Due Period.
Due Period: with respect to any Payment Date and the Determination Date
with respect thereto, the period beginning on the first day and ending on the
last day of the calendar month prior to the month in which such Payment Date and
such Determination Date occurs.
Eligible Account: 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 in the corporate trust department with a
federal or state chartered depository institution, which may be an account
maintained with the Trustee.
Eligible Investments: any one or more of the following obligations or
securities:
(a) direct non-callable obligations of, and non- callable obligations
fully guaranteed by, the United States of America, or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America;
(b) demand and time deposits in, certificates of deposits of, and
bankers' acceptances issued by, any depository institution or trust company
(including the Trustee acting in its commercial capacity) incorporated
under the laws of the United States of America or any state thereof, having
a combined capital and surplus of at least $100,000,000, and subject to
supervision and examination by federal and/or state banking authorities, so
long as at the time of such investment or contractual commitment providing
for such investment the commercial paper or other short-term debt
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obligations of such depository institution or trust company (or, in the
case of a depository institution that is the principal subsidiary of a
holding company, the commercial paper or other short-term debt obligations
of such holding company) have the highest short-term credit ratings
available from S&P, Moody's and, to the extent rated by DCR and Fitch, DCR
and Fitch;
(c) repurchase obligations with respect to and collateralized by (i)
any security described in clause (a) above or (ii) any other security
issued or guaranteed by an agency or instrumentality of the United States
of America, in each case entered into with a depository institution or
trust company (acting as principal) of the type described in clause (b)
above, provided that the Trustee has taken delivery of such security;
(d) commercial paper (including both non-interest bearing discount
obligations and interest-bearing obligations) payable on demand or on a
specified date not more than one year after the date of issuance thereof
having the highest short-term credit ratings from S&P, Moody's and, to the
extent rated by DCR and Fitch, DCR and Fitch at the time of such
investment;
(e) money market funds that redeem their shares on demand, invest only
in other Eligible Investments, and are rated AAAm or AAAm-G by S&P and Aaa
by Moody's; and
(f) such other investments as may be approved by S&P, Moody's, DCR and
Fitch.
Equipment: each item of personal property, together with any replacement
parts, additions, and repairs thereto, any replacements thereof, and any
accessories incorporated therein and/or affixed thereto, subject to a Lease or,
following expiration or termination of the Lease to which the same was
previously subject, remaining subject to the lien of this Indenture in
accordance with the provisions hereof.
Event of Default: as defined in Section 6.01.
Exchange Act: the Securities Exchange Act of 1934, as amended.
Excess Copy Charge: with respect to any Lease, means the amount owing by
such Lessee under such Lease reflecting usage of the related Equipment in excess
of a specified copy amount per month.
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Fee Per Scan Charge: with respect to any Lease, means the amount owing by
such Lessee under such Lease reflecting usage of the related Equipment in excess
of a specified scan amount per month.
Financing Statement: as defined in Section 12 of the Sales and Servicing
Agreement.
Fitch: Fitch Investors Service, L.P.
Grant: grant, bargain, sell, convey, assign, transfer, mortgage, pledge,
create and grant a security interest in and right of set-off against, deposit,
set over and confirm. The Grant of the Trust Estate effected by this Indenture
shall include all rights, powers, and options (but none of the obligations) of
the Company with respect thereto, including, without limitation, the immediate
and continuing right to claim for, collect, receive, and give receipts for Lease
Payments in respect of the Leases and all other moneys payable thereunder, to
give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring judicial proceedings in
the name of the Company or otherwise, and generally to do and receive anything
that the Company is or may be entitled to do or receive thereunder or with
respect thereto.
Granted Assets: as defined in the Granting Clause.
Holder: a holder of a Class A Note, Class B Note or a Class C Note.
Indenture: this instrument as originally executed and as from time to time
supplemented or amended pursuant to the applicable provisions hereof.
Initial Payment Date: July 21, 1997.
Inter-Company Loans: as defined in Section 13 of the Sales and Servicing
Agreement.
Interest Payments: as defined in Section 2.01(c).
Issuance Date: May __, 1997.
Lease: at any time, each separate lease agreement and each lease schedule
or supplement (and each master lease agreement insofar as the same relates to
any such schedule or supplement) described in Schedule 1 hereto, as the same may
be amended or modified from time to time in accordance with the provisions
hereof and thereof unless and until released from the lien of this Indenture.
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Lease Delinquency Payment: any payment made with respect to a Lease in an
amount equal to all or part of any specific Lease Payment due with respect to
such Lease (a) by the Servicer pursuant to Section 4.01 of the Sales and
Servicing Agreement, (b) by a transfer from the Reserve Account pursuant to
Section 3.04, or (c) by the Company in its sole discretion.
Lease Payment: 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 on or before the 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 shall not be Lease Payments hereunder. For purposes of
calculating the Discounted Present Value of the Leases and the Discounted
Present Value of the Performing Leases, the amount of any Excess Copy Charges
and Fee Per Scan Charges that may be payable under such Lease shall not be
included in such calculation.
Lease Repurchase Amount: as defined in Section 12 of the Sales and
Servicing Agreement.
Lessee: with respect to any Lease, the lessee thereunder.
Lien: as defined in Section 12 of the Sales and Servicing Agreement.
Maintenance Charges: with respect to any Lease, the amount owing by the
Lessee under the terms of the related Lease in respect of maintenance services
being provided in connection therewith.
Maturity: with respect to any installment of principal of or interest on
any Note, the date on which such installment is due and payable as therein or
herein provided, whether at the Stated Maturity, by declaration of acceleration,
or otherwise.
Moody's: Moody's Investor Services, Inc. and any successors thereto.
Monthly Delinquency Percentage: with respect to any Payment Date, the
percentage equivalent of a fraction (a) the numerator of which is the Discounted
Present Value of the Delinquent Leases determined as of the related
Determination Date and (b) the denominator of which is the
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Discounted Present Value of the Performing Leases as of the related
Determination Date.
Monthly Servicer Realization Percentage: with respect to any Payment Date,
the percentage equivalent of a fraction (a) the numerator of which is the
aggregate amount of Servicer Residual Realizations collected during the
immediately preceding Due Period and (b) the denominator of which is equal to
the aggregate Servicer Booked Residual Values with respect to the leases for
which Servicer Residual Realizations have been collected in respect of such
immediately preceding Due Period.
Nominal Buy-Out Lease: as defined in Section 12 of the Sales and Servicing
Agreement.
Non-Performing Lease: as of any Determination Date, any Lease with respect
to which at any time following the Cut-Off Date or related Transfer Date, as the
case may be, either (a) a Lease Payment, or any portion thereof, was 123 or more
days overdue as of the last day of the Due Period with respect to such
Determination Date, unless on or before such Determination Date such Lease
Payment (or portion thereof) has been paid or (b) the Servicer has accelerated
the remaining payments or has determined such Lease to be uncollectible in
accordance with the Servicer's customary practices prior to the last day of the
Due Period with respect to such Determination Date.
Non-Performing Lease Pay-Through Amount: with respect to any Lease with
respect to which a Lease Payment is made or due, an amount equal to the
Discounted Present Value of such Lease as of the Payment Date immediately
following the first Determination Date on which such Lease was a Non-Performing
Lease.
Noteholder: at any time, any Person in whose name a Note is registered in
the Note Register.
Note Interest Rate: the Class A-1 Note Interest Rate, the Class A-2 Note
Interest Rate, the Class A-3 Note Interest Rate, the Class A-4 Interest Rate,
the Class B Note Interest Rate or the Class C Note Interest Rate, as the case
may be.
Note Owner: a Class A-1 Note Owner, Class A-2 Note Owner, Class A-3 Note
Owner, Class A-4 Note Owner or Class B Note Owner, as the case may be.
Note Register: as defined in Section 2.03.
Notes: any notes authorized by, and authenticated and delivered under, this
Indenture.
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Officers' Certificate: a certificate delivered to the Trustee and signed by
the Chairman, the President, or a Vice President of the Company, and by another
Vice President, the Treasurer, and Assistant Treasurer, the Secretary, or an
Assistant Secretary of the Company who is not the same Person as the other
officer signing such certificate.
Opinion of Counsel: a written opinion, which shall be satisfactory in form
and substance to the Trustee, of counsel who may, except as otherwise expressly
provided in this Indenture, be inside or outside counsel for the Company and who
shall be satisfactory to the Trustee.
Other Lease Payments: all payments on or in respect of leases which are not
Lease Payments, Lease Delinquency Payments, Casualty Payments, Termination
Payments, Similar Transaction Payments or Residual Realizations.
Outstanding: with respect to the Notes, as of any date of determination,
all Notes theretofore authenticated and delivered under this Indenture except:
(a) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes or portions thereof for whose payment money in the necessary
amount has been theretofore irrevocably deposited with the Trustee in trust
for the holders of such Notes; and
(c) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
Person in whose hands the Note is a valid obligation;
provided, however, that in determining whether the holders of the requisite
percentage of the Outstanding Principal Amount of the Notes have given any
request, demand, authorization, direction, notice, consent, or waiver hereunder,
Notes owned by the Company or any Affiliate of the Company shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Notes that a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded.
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Outstanding Class A Principal Amount: The aggregate principal amount of the
Class A Notes Outstanding at any time.
Outstanding Class A-1 Principal Amount: the aggregate principal amount of
the Class A-1 Notes Outstanding at any time.
Outstanding Class A-2 Principal Amount: the aggregate principal amount of
the Class A-2 Notes Outstanding at any time.
Outstanding Class A-3 Principal Amount: the aggregate principal amount of
the Class A-3 Notes Outstanding at any time.
Outstanding Class A-4 Principal Amount: the aggregate principal amount of
the Class A-4 Notes Outstanding at any time.
Outstanding Class B Principal Amount: the aggregate principal amount of the
Class B Notes Outstanding at any time.
Outstanding Class C Principal Amount: the aggregate principal amount of the
Class C Notes Outstanding at any time.
Outstanding Principal Amount: the aggregate unpaid principal amount of the
Notes Outstanding at any time.
Paying Agent: each agent of the Company appointed for the purpose of making
payments on the Notes, including the Trustee.
Payment Date: the 20th day of each month, commencing on the Initial Payment
Date, and ending on the latest Stated Maturity.
Person: any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
Placement Agent Agreement: the Placement Agent Agreement, among the
Company, Copelco, Lehman Brothers Inc. and First Union Capital Markets Corp.
Predecessor Notes: with respect to any particular Note, every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and,
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for the purpose of this definition, any Note authenticated and delivered under
Section 2.04 in lieu of a lost, destroyed or stolen Note (or a mutilated Note
surrendered to the Trustee) shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note (or a mutilated Note surrendered to the Trustee).
Principal Payments: as defined in Section 2.01(b).
Rating Agency: DCR, Moody's, Fitch and S&P.
Record Date: with respect to any Payment Date, the last day of the calendar
month immediately preceding such Payment Date.
Required Deposit Date: as defined in Section 3.03(a).
Required Payment: as defined in Section 3.04(b).
Required Reserve Amount: shall equal the lesser of (a) 1.00% of the
Discounted Present Value of the Leases as of the Cut-off Date and (b) the
Outstanding Principal Amount of the Notes.
Reserve Account: the account or accounts by that name established and
maintained by the Trustee pursuant to Section 3.01.
Residual Account: the account or accounts by that name established and
maintained by the Trustee pursuant to Section 3.01.
Residual Amount Cap: an amount equal to $_________ which equals 8% of the
Discounted Present Value of the Leases as of the Cut-Off Date.
Residual Event: means the occurrence of one or more of the following: (a)
Copelco is no longer the Servicer, (b) with respect to the __________, 1997 Due
Period and each Due Period thereafter, the Three-Month Servicer Realization
Percentage calculated on any Determination Date is less than 100%; or (c) with
respect to the _________, 1997 Due Period and each Due Period thereafter, the
Three-Month Delinquency Percentage is greater than 5%; provided, however, that
the Residual Event referred to in clause (b) may be cured if the Three-Month
Servicer Realization Percentage is greater than or equal to 100% for three
consecutive months thereafter and the Residual Event referenced in clause (c)
may be cured if the Three-Month Delinquency Percentage for any Due Period
thereafter is less than or equal to 5%.
Residual Realizations: the aggregate cash flows realized from the sale
(including pursuant to a Lessee's
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purchase option) or reletting of any Equipment following the termination of the
related Lease. Amounts received in respect of Non-Performing Leases shall only
be included as Residual Realizations to the extent such amounts exceed the
related Non-Performing Lease Pay-Through Amount.
Responsible Officer: with respect to the Trustee, any person regularly
engaged in the administration or supervision of corporate trust accounts
(including, in the case of the original Trustee hereunder, any officer in its
Corporate Trust Administration) and also, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
S&P: Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies Inc. and any successor thereto.
Sales and Servicing Agreement: the Sales and Servicing Agreement dated as
of the date hereof between the Company and Copelco, as the same may be amended
or modified from time to time in accordance with the provisions hereof and
thereof.
Securities Act: the Securities Act of 1933, as amended.
Servicer: Copelco and any successor Servicer appointed pursuant to the
terms hereof and of the Sales and Servicing Agreement and, to the extent that it
at any time is performing the functions of the Servicer, the Trustee, subject to
the terms of Section 5.01 hereof.
Servicer Advance: a payment by the Servicer under clause (a) of the
definition of Lease Delinquency Payment.
Servicer Booked Residual Values: the estimated residual value of the
equipment included in the Servicing Portfolio and recorded on the books of the
Seller or its subsidiaries.
Servicer Event of Default: as defined in Section 8.01 of the Sales and
Servicing Agreement.
Servicer Order: a written order or request delivered to the Trustee and
signed in the name of the Servicer by an Authorized Officer.
Servicer Residual Realizations: the aggregate cash flows realized from the
sale (including pursuant to a Lessee's purchase option) or releasing of any
Equipment
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following the termination of the related lease for leases in the Servicing
Portfolio.
Servicing Fee: with respect to any Payment Date, the Servicing Fee payable
at a rate of 0.75% per annum to the Servicer on such Payment Date pursuant to
the Sales and Servicing Agreement.
Servicing Portfolio: the leases and the related equipment owned by the
Seller and its subsidiaries or serviced by the Servicer (including Danka leases)
to the extent such leases were originated or acquired by the Seller in its
Business Technology Division, its Healthcare Division, or their predecessors or
successors.
Servicing Report: as defined in Section 5.01(b) of the Sales and Servicing
Agreement.
Similar Transaction Agreement: an indenture between the Trustee and a
wholly-owned special purpose subsidiary of Copelco other than the Company,
substantially similar to this Indenture, pursuant to which notes, substantially
similar to the Notes, have been issued.
Similar Transaction Amount: for each Required Deposit Date, the amount of
all Similar Transaction Payments received by the Servicer and deposited in the
Collection Account pursuant to Section 3.02(a) and reported by the Servicer for
such Required Deposit Date pursuant to Section 5.03(a) of the Sales and
Servicing Agreement.
Similar Transaction Payments: all payments on or in respect of leases
subject to the lien of any Similar Transaction Agreement.
Stated Maturity: the date on which the entire remaining unpaid Outstanding
Principal Amount of each class of Notes is due and payable, which date is the
___________ Payment Date, ________ Payment Date, _________ Payment Date,
________ Payment Date, _________ Payment Date and ________ Payment Date for the
Class A- 1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B
Notes and the Class C Notes, respectively.
Substitute Lease: as defined in Section 12 of the Sales and Servicing
Agreement.
Termination Payment: 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
Company, and the Lessee in accordance with the provisions of Section 3.02 of the
Sales and Servicing
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Agreement.
Three-Month Delinquency Percentage: with respect to any Payment Date, the
percentage equivalent of fraction, (a) the numerator of which is the sum of the
Monthly Delinquency Percentage for such Payment Date and the two immediately
preceding Payment Dates and (b) the denominator of which is three.
Three-Month Servicer Realization Percentage: with respect to any Payment
Date, the percentage equivalent of a fraction, (a) the numerator of which is the
sum of the Monthly Servicer Realization Percentage for such Payment Date and the
two immediately preceding Payment Dates and (b) the denominator of which is
three.
Transaction Payment Amount: for each Required Deposit Date, the amount of
all Lease Payments, Lease Delinquency Payments, Non-Performing Lease Payments,
Casualty Payments, Termination Payments and other payments on or in respect of a
Lease received by the Servicer and deposited in the Collection Account pursuant
to Section 3.02(a) and reported by the Servicer for such Required Deposit Date
in accordance with Section 5.03(a) of the Sales and Servicing Agreement.
Trust Accounts: the Collection Account, the Reserve Account and the
Residual Account.
Trust Estate: all money, instruments and other property subject to or
intended to be subject to the lien of this Indenture including all proceeds
thereof.
Trustee: the Person named as the "Trustee" in the first paragraph of this
instrument until a successor Person shall have become the Trustee pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Person; provided, that the provisions of Section 7.07 and Section
8.11, as applicable to any Person at any time serving as Trustee hereunder,
shall survive the termination of such Person's status as Trustee hereunder and
the succession of any other Person to such status.
Trust Indenture Act: the Trust Indenture Act of 1939 as in effect on the
date on which this Indenture is qualified under the Trust Indenture Act, except
as provided in Section 9.06 hereof.
Underwriting Agreement: the Underwriting Agreement, among the Company,
Copelco, Lehman Brothers Inc.
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and First Union Capital Markets Corp and, with respect to the Class A Notes,
Morgan Stanley & Co. Incorporated.
Uniform Commercial Code: with respect to a particular jurisdiction, the
Uniform Commercial Code, as in effect from time to time in such jurisdiction, or
any successor statute thereto.
Utilized Residual Amount: on any day of determination, the sum of (a) the
total Residual Realizations applied to make payments of amounts owing the
Servicer and the Noteholders (including any such amounts withdrawn from the
Reserve Account and the Residual Account) and (b) the amount on deposit in the
Reserve Account and the Residual Account on such date allocable to Residual
Realizations.
Vice President: with respect to the Company, any vice president, whether or
not designated by a number or a word or words added before or after the title
"vice president."
Warranty Lease: a Lease subject to repurchase by the Seller as a result of
a breach of a representation or warranty in accordance with the provisions of
Section 4 of the Sales and Servicing Agreement.
SECTION 1.02. Compliance Certificates and Opinions.
Upon any written application or request (or oral application with prompt
written or telecopied confirmation) by the Company to the Trustee to take any
action under any provision of this Indenture, other than any request that (a)
the Trustee authenticate the Notes specified in such request, (b) the Trustee
invest moneys in any of the Trust Accounts pursuant to the written directions
specified in such request, or (c) the Trustee pay moneys due and payable to the
Company hereunder to the Company's assignee specified in such request, the
Trustee shall require the Company to furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and that the
request otherwise is in accordance with the terms of the Indenture, and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such requested action as to which other evidence of satisfaction of the
conditions precedent thereto is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
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SECTION 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company delivered to the
Trustee may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such officer's certificate or opinion and
any Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Company as to such factual matters unless such officer or counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous. Any
Opinion of Counsel may be based on the written opinion of other counsel, in
which event such Opinion of Counsel shall be accompanied by a copy of such other
counsel's opinion and shall include a statement to the effect that such counsel
believes that such counsel and the Trustee may reasonably rely upon the opinion
of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Company shall
deliver any document as a condition of the granting of such application, or as
evidence of compliance with any term hereof, it is intended that the truth and
accuracy, at the time of the granting of such application or at the effective
date of such certificate or report (as the case may be), of the facts and
opinions stated in such document shall in such case be conditions precedent to
the right of the Company to have such application granted or to the sufficiency
of such
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certificate or report. The foregoing shall not, however, be construed to affect
the Trustee's right to rely upon the truth and accuracy of any statement or
opinion contained in any such document as provided in Section 7.01(a)(ii).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default or Servicer Event
of Default is a condition precedent to the taking of any action by the Trustee
at the request or direction of the Company, then, notwithstanding that the
satisfaction of such condition is a condition precedent to the Company's right
to make such request or direction, the Trustee shall be protected in acting in
accordance with such request or direction if it does not have knowledge of the
occurrence and continuation of such Default or Event of Default or Servicer
Event of Default. For all purposes of this Indenture, the Trustee shall not be
deemed to have knowledge of any Default or Event of Default nor shall the
Trustee have any duty to monitor or investigate to determine whether a default
has occurred (other than an Event of Default of the kind described in Section
6.01(a)) or Servicer Event of Default unless a Responsible Officer of the
Trustee shall have actual knowledge thereof or shall have been notified in
writing thereof by the Company, the Servicer, or any Noteholder.
SECTION 1.04. Acts of Noteholders, etc.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Noteholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by agents duly appointed
in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 7.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section
1.04.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged
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to him the execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the holder of any Note shall bind every future holder of the
same Note and the holder of every Note issued upon the registration of transfer
thereof or in exchange therefore or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Note.
(d) By accepting the Notes issued pursuant to this Indenture, each
Noteholder irrevocably appoints the Trustee hereunder as the special
attorney-in-fact for such Noteholder vested with full power on behalf of such
Noteholder to effect and enforce the rights of such Noteholder and the revisions
pursuant hereto for the benefit of such Noteholder; provided that nothing
contained in this Section 1.04(d) shall be deemed to confer upon the Trustee any
duty or power to vote on behalf of the Noteholders with respect to any matter on
which the Noteholders have a right to vote pursuant to the terms of this
Indenture.
SECTION 1.05. Notices, etc., to Trustee, Servicer and Company.
Any request, demand, authorization, direction, notice, consent, waiver, Act
of Noteholders, or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with, the Trustee, the Company or the
Servicer shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-class postage prepaid
or certified mail return receipt requested, or sent by private courier or
confirmed telecopy. Unless otherwise specifically provided herein, no such
request, demand, authorization, direction, notice, consent, waiver, Act of
Noteholders or other document shall be effective until received and any
provision hereof requiring the making, giving, furnishing, or filing of the same
on any date shall be interpreted as requiring the same to be sent or delivered
in such fashion that it will be received on such date. Any such request, demand,
authorization, direction, notice, consent, waiver, Act of Noteholders, or other
document shall be sent or delivered to the following addresses:
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(a) if to the Trustee, at the Corporate Trust Office, Attention:
Corporate Trust Administration (Number for telecopy: (716) 842-4474), or
at any other address previously furnished in writing to the Company and the
Servicer by the Trustee; or
(b) if to the Company, at East Gate Center, 700 East Gate Drive, Mount
Laurel, New Jersey 08054-5400, Attention: President (Number for telecopy:
609-273-9288), or at any other address previously furnished in writing to
the Trustee and the Servicer by the Company; or
(c) if to the Servicer, at East Gate Center, 700 East Gate Drive,
Mount Laurel, New Jersey 08054-5400, Attention: Michael Ritter (Number for
telecopy: 609-273-9288), or at any other address previously furnished in
writing to the Trustee and the Company by the Servicer.
SECTION 1.06. Notice to Noteholders; Waiver.
(a) Where this Indenture provides for notice to Noteholders of any event,
or the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid or certified mail return receipt
requested, or sent by private courier or confirmed telecopy to each Noteholder
affected by such event or to whom such report is required to be mailed, at its
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice or
the mailing of such report. In any case where a notice or report to Noteholders
is mailed, neither the failure to mail such notice or report, nor any defect in
any notice or report so mailed, to any particular Noteholder shall affect the
sufficiency of such notice or report with respect to other Noteholders. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Noteholders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.
(b) In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to mail or send notice to
Noteholders, in accordance with Section 1.06(a), of any event or any report to
Noteholders when such notice or report is required to be delivered pursuant to
any provision
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of this Indenture, then such notification or delivery as shall be made with the
approval of the Trustee shall constitute a sufficient notification for every
purpose hereunder.
SECTION 1.07. Effect of Headings and Table of Contents.
The Article and Section headings herein and in the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.08. Successors and Assigns.
All covenants and agreements in this Indenture by the Company or the
Trustee shall bind its respective successors and permitted assigns, whether so
expressed or not.
SECTION 1.09. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS INDENTURE IS SUBJECT TO
THE TRUST INDENTURE ACT OF 1939 AND SHALL BE GOVERNED THEREBY AND CONSTRUED IN
ACCORDANCE THEREWITH.
SECTION 1.10. Legal Holidays.
In any case where any Payment Date or the Stated Maturity or any other date
on which principal of or interest on any Note is proposed to be paid shall not
be a Business Day, then (notwithstanding any other provision of this Indenture
or of the Notes) such payment need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
such Payment Date, Stated Maturity, or other date on which principal of or
interest on any Note is proposed to be paid, provided that no interest shall
accrue for the period from and after such Payment Date, Stated Maturity, or any
other date on which principal of or interest on any Note is proposed to be paid,
as the case may be, until such next succeeding Business Day.
SECTION 1.11. Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
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SECTION 1.12. Inspection.
The Company agrees that, on reasonable prior notice, it will permit the
representatives of the Trustee or any Noteholder holding Notes, or a beneficial
interest therein, evidencing at least 25% of the Outstanding Principal Amount of
the Notes, during the Company's normal business hours, to examine all of the
books of account, records, reports and other papers of the Company, to make
copies thereof and extracts therefrom, to cause such books to be audited by
independent accountants selected by the Company and reasonably acceptable to the
Trustee or such Noteholder, as the case may be, and to discuss its affairs,
finances and accounts with its officers, employees and independent accountants
(and by this provision the Company hereby authorizes its accountants to discuss
with such representatives such affairs, finances and accounts), all at such
reasonable times and as often as may be reasonably requested for the purpose of
reviewing or evaluating the financial condition or affairs of the Company or the
performance of and compliance with the covenants and undertakings of the Company
in this Indenture, the Sales and Servicing Agreement or any of the other
documents referred to herein or therein. Any expense incident to the exercise by
the Trustee at any time or any Noteholder during the continuance of any Default
or Event of Default, of any right under this Section 1.12 shall be borne by the
Company.
SECTION 1.13. Survival of Representations and Warranties.
The representations, warranties and certifications of the Company made in
this Indenture or in any certificate or other writing delivered by the Company
pursuant hereto shall survive the authentication and delivery of the Notes
hereunder.
ARTICLE 2.
THE NOTES
SECTION 2.01. General Provisions.
(a) The Notes shall consist of $_________ principal amount of Class A-1
Notes, $_________ principal amount of Class A- 2 Notes, $_________ principal
amount of Class A-3 Notes, $________ principal amount of Class A-4 Notes,
$_________ principal amount of Class B Notes and $_________ principal amount
of Class C Notes, and the forms thereof and of the Trustee's certificate of
authentication shall be in substantially the forms set forth in Exhibit A
hereto, with such appropriate insertions, omissions,
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substitutions, and other variations as are required or permitted by this
Indenture.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $549,743,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 2.03, 2.04, or 9.05. The
Notes shall be issuable only in registered form and only in minimum
denominations of at least $100,000 and integral multiples of $1,000, in excess
thereof; provided that the foregoing shall not restrict or prevent the transfer
in accordance with Section 2.03 of any Note having a remaining Outstanding
Principal Amount of other than an integral multiple of $1,000, or the issuance
of a single Class A Note, a single Class B Note and a single Class C Note with a
denomination less than $100,000.
(b) For each Payment Date, payments of principal (the "Principal Payments")
on the Notes will be made in accordance with Sections 3.03(b) or 6.06, as
applicable. Except as otherwise provided in Section 6.02, no part of the
principal of any Note shall be paid prior to the Payment Date on which such
principal is due in accordance with the preceding provisions of this Section
2.01(b), except that the Company may redeem the Notes in their entirety, without
premium, as of any Payment Date on which the Discounted Present Value of the
Performing Leases is less than or equal to ten percent (10%) of the aggregate
Discounted Present Value of the Leases as of the Cut-Off Date (after giving
effect to all Principal Payments on such Payment Date). The Company will give
notice of any such redemption to each Noteholder and the Trustee at least 30
days before the Payment Date fixed for such prepayment by certified mail return
receipt requested, hand delivery or overnight courier. Notice of such prepayment
having been so given, the remaining unpaid principal as of the Payment Date
fixed for prepayment together with all interest accrued and unpaid to such
Payment Date, shall become due and payable on such Payment Date.
(c) For each Payment Date, the interest due and payable (the "Interest
Payments") with respect to 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 will be the
interest that has accrued on the respective Notes since the last Payment Date
or, in the case of the first Payment Date, since the Closing Date, at the Class
A-1 Interest Rate, Class A-2 Interest Rate, Class A-3 Interest Rate, Class A-4
Interest Rate, Class B Interest Rate and Class C Interest Rate, respectively,
applied to the then Outstanding Principal Amounts of the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, and the Class C
Notes
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respectively, on the preceding Payment Date. Interest Payments will be made in
accordance with Sections 3.03(b) and 6.06, as applicable.
(d) All payments made with respect to any Note shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts and shall be applied first to the
interest then due and payable on such Notes, then to the principal thereof, and
finally to premium, if any.
(e) All Class A-1 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-1 Notes shall be made pro rata
among all Outstanding Class A-1 Notes, without preference or priority of any
kind.
(f) All Class A-2 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-2 Notes shall be made pro rata
among all Outstanding Class A-2 Notes, without preference or priority of any
kind.
(g) All Class A-3 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-3 Notes shall be made pro rata
among all Outstanding Class A-3 Notes, without preference or priority of any
kind.
(h) All Class A-4 Notes issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Indenture.
Payments of principal and interest on the Class A-4 Notes shall be made pro rata
among all Outstanding Class A-4 Notes, without preference or priority of any
kind.
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(i) The Class B Notes shall be subordinated to the Class A Notes to the
extent set forth herein. All Class B Notes issued under this Indenture shall be
in all respects equally and ratably entitled to the benefits hereof without
preference, priority or distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and provisions of
this Indenture. Payments of principal and interest on the Class B Notes shall be
made pro rata among all Outstanding Class B Notes, without preference or
priority of any kind.
(j) The Class C Notes shall be subordinated to the Class A Notes and the
Class B Notes to the extent set forth herein. All Class C Notes issued under
this Indenture shall be in all respects equally and ratably entitled to the
benefits hereof without preference, priority or distinction on account of the
actual time or times of authentication and delivery, all in accordance with the
terms and provisions of this Indenture. Payments of principal and interest on
the Class C Notes shall be made pro rata among all Outstanding Class C Notes,
without preference or priority of any kind.
SECTION 2.02. Execution, Authentication, Delivery, and Dating.
(a) The Notes shall be manually executed on behalf of the Company by its
President or one of its Vice Presidents, under its corporate seal reproduced
thereon.
(b) Any Note bearing the signature of an individual who was at the time of
execution thereof a proper officer of the Company shall bind the Company,
notwithstanding that such individual ceases to hold such office prior to the
authentication and delivery of such Note or did not hold such office at the date
of such Note.
(c) No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein,
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Each Note shall be dated the date of
its authentication.
(d) The Notes may from time to time be executed by the Company and
delivered to the Trustee for authentication together with a Company Request to
the Trustee directing the authentication and delivery of such Notes and
thereupon the same shall be authenticated and delivered by the Trustee in
accordance with such Company Request.
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SECTION 2.03. Transfer and Exchange.
(a) The Company shall cause to be kept at the Corporate Trust Office a
register (the "Note Register") in which, subject to such reasonable regulations
as the Trustee may prescribe, the Company shall provide for the registration of
Notes and of transfers of Notes. The Trustee is hereby appointed "Note
Registrar" for the purpose of registering Notes and transfers of Notes as herein
provided.
No transfer of any Class C Note may be made unless that transfer is made
pursuant to an effective registration statement under the Securities Act and an
effective registration or a qualification under applicable state securities
laws, or is made in a transaction that does not require such registration or
qualification because the transfer satisfies one of the following: (i) such
transfer is in compliance with Rule 144A under the Securities Act, to a person
who the transferor reasonably believes is a Qualified Institutional Buyer (as
defined in Rule 144A) that is purchasing for its own account or for the account
of a Qualified Institutional Buyer and to whom notice is given that such
transfer is being made in reliance upon Rule 144A under the Securities Act as
certified by such transferee in a letter in the form of Exhibit B hereto; (ii)
after the appropriate holding period, such transfer is pursuant to an exemption
from registration under the Securities Act provided by Rule 144 under the
Securities Act; (iii) such transfer is to a transferee who is an accredited
investor in a transaction exempt from the registration requirements of the
Securities Act, in each case in accordance with any applicable securities laws
of any State of the United States or (iv) such transfer is otherwise exempt from
the registration requirements of the Securities Act. The Trustee will require,
in order to assure compliance with such laws, that the Class C Noteholder's
prospective transferee referred to in the preceding clauses (iii) or (iv)
deliver an investment letter certifying to the Company and the Trustee as to the
facts surrounding such transfer in the form of Exhibit B hereto. Except in the
case of a transfer of Class C Notes to a transferee referred to in the preceding
clause (i) or, in general, a transfer that is to be made after three years from
the Issuance Date, the Trustee shall require an opinion of counsel satisfactory
to it to the effect that such transfer may be made pursuant to an exemption from
the Securities Act without such registration (which opinion of counsel shall not
be an expense of the Trustee or the Servicer or the Company). None of the
Company, the Servicer or the Trustee is obligated to register or qualify the
Class C Notes under the Securities Act or any other securities law or to take
any
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action not otherwise required under this Indenture to permit the transfer of any
Class C Note without registration.
(b) Subject to Section 2.03(a), upon surrender for registration of transfer
of any Note at the office of the Company designated pursuant to Section 8.02 for
such purpose, the Company shall execute and the Trustee upon request shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate original principal amount. The Trustee shall make a notation on any
such new Note of the amount of principal, if any, that has been paid on such
Note.
(c) All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(d) Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed, by the holder thereof or his attorney
duly authorized in writing.
(e) No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company or the Trustee may require payment by the
transferor of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Notes, other than exchanges pursuant to Section 9.05 not involving any
transfer.
SECTION 2.04. Mutilated, Destroyed, Lost and Stolen Notes.
(a) If any mutilated Note is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefore a
replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
(b) If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Note and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of actual notice to
the Company or the Trustee that such Note has been acquired by a bona fide
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purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a
replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
(c) In case the final installment of principal on any such mutilated,
destroyed, lost or stolen Note has become or will at the next Payment Date
become due and payable, the Company in its discretion may, instead of issuing a
replacement Note, pay such Note.
(d) Upon the issuance of any replacement Note under this Section, the
Company or the Trustee may require the payment by the Noteholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed as
a result of the issuance of such replacement Note.
(e) Every replacement Note issued pursuant to this Section 2.04 in lieu of
any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
(f) The provisions of this Section 2.04 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.05. Book-Entry Registration of Class A Notes and Class B Notes.
Each of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes and the Class B Notes, upon original issuance, shall be issued in the form
of one or more typewritten Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes and one or more typewritten Class B Notes, respectively, (the
"Book-Entry Class A-1 Notes," "Book-Entry Class A-2 Notes," "Book-Entry Class
A-3 Notes," Book-Entry Class A-4 Notes" and "Book-Entry Class B Notes",
respectively) to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Company. Each of the Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and the Class B Notes shall
initially be registered on the Note Register in the name of Cede & Co., the
nominee of The Depository Trust Company, as the initial Clearing Agency, and no
Class A-1 Note Owner, Class A-2 Note Owner, Class A-3 Note Owner, Class A-4 Note
Owner or Class B Note Owner will receive a definitive note representing such
Note Owner's interest in the Class A-1
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Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes or Class B Notes, as
the case may be, except as provided in Section 2.07. Unless and until Definitive
Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3 Notes,
Definitive Class A-4 Notes and/or Definitive Class B Notes have been issued to
the applicable Note Owners pursuant to Section 2.07:
(a) the provisions of this Section 2.05 shall be in full force and effect
with respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes or the Class B Notes, as the case may be;
(b) the Company, the Servicer and the Trustee may deal with the Clearing
Agency and the Clearing Agency Participants for all purposes with respect to the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes or Class B
Notes, as the case may be, (including the making of distributions on the Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and the Class B
Notes, as the case may be) as the authorized representatives of the respective
Note Owners;
(c) to the extent that the provisions of this Section 2.05 conflict with
any other provisions of this Indenture, the provisions of this Section 2.05
shall control; and
(d) the rights of the respective Note Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and shall be
limited to those established by law and agreements between such respective Note
Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Depository Agreement, unless and until Definitive Class A-1 Notes,
Definitive Class A-2 Notes, Definitive Class A-3 Notes, Definitive Class A-4
Notes or Definitive Class B Notes, as the case may be, are issued pursuant to
Section 2.07, the initial Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit distributions of
principal and interest on the related Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes and Class B Notes, as the case may be, to such
Clearing Agency Participants.
For purposes of any provision of this Indenture requiring or permitting
actions with the consent of, or at the direction of, holders of Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes or Class B Notes, as the case
may be, evidencing a specified percentage of the Outstanding Principal Amount of
the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes or the
Class B Notes, respectively, such direction or consent may be given
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by Note Owners (acting through the Clearing Agency and the Clearing Agency
Participants) owning Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes or Class B Notes evidencing the requisite percentage of the
Outstanding Principal Amount of such Notes, respectively.
SECTION 2.06. Notice to Clearing Agency.
Whenever notice or other communication to the Class A-1 Noteholders, Class
A-2 Noteholders, Class A-3 Noteholders, Class A-4 Noteholders or Class B
Noteholders is required under this Agreement, unless and until Definitive Class
A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3 Notes, Definitive
Class A-4 Notes or Definitive Class B Notes shall have been issued to the
related Note Owners pursuant to Section 2.07, the Trustee shall give all such
notices and communications specified herein to be given to such Noteholders to
the applicable Clearing Agency which shall give such notices and communications
to the related Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note
Owners, Class A-4 Note Owners and Class B Note Owners in accordance with its
applicable rules, regulations and procedures.
SECTION 2.07. Definitive Class A Notes and Definitive Class B Notes. If (a)
(i) the Company advises the Trustee in writing that the Clearing Agency is no
longer willing or able to properly discharge its responsibilities under the
Depository Agreement with respect to the Class A-1 Notes, Class A-2 Notes, Class
A-2 Notes, Class A-4 Notes and/or the Class B Notes and (ii) the Trustee or the
Company is unable to locate a qualified successor, (b) the Company, at its
option, advises the Trustee in writing that it elects to terminate the
book-entry system with respect to the Class A-1 Notes, Class A-2 Notes, Class
A-2 Notes, Class A-4 Notes and/or the Class B Notes through the Clearing Agency
or (c) after the occurrence of a Servicer Event of Default, Class A-1 Note
Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note Owners and
Class B Note Owners, with respect to the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes and Class B Notes evidencing not less than 50% of the
aggregate unpaid Outstanding Principal Amount of the Class A- 1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes and Class B Notes, respectively, advise
the Trustee and the Clearing Agency through the Clearing Agency Participants in
writing that the continuation of a book-entry system with respect to the Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes or the Class B
Notes, respectively, through the Clearing Agency is no longer in the best
interests of the Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note
Owners, Class A-4 Note Owners or Class B Note Owners, as the case may be, the
Trustee shall notify all Class A-1 Note
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Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note Owners and
Class B Note Owners with respect to the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes and Class B Notes, respectively, through the Clearing
Agency, of the occurrence of any such event and of the availability of
Definitive Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3
Notes, Definitive Class A-4 Notes and Definitive Class B Notes to Class A-1 Note
Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note Owners and
Class B Note Owners, respectively, requesting the same. Upon surrender to the
Trustee of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes or Class B Notes, as the case may be, by the Clearing Agency, accompanied
by registration instructions from the Clearing Agency for registration, the
Company shall execute and the Trustee shall authenticate and deliver the
Definitive Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3
Notes, Definitive Class A-4 Notes or Definitive Class B Notes, as the case may
be. Neither the Company nor the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Class A-1 Notes, Definitive Class A-2 Notes, Definitive Class A-3 Notes,
Definitive Class A-4 Notes or Definitive Class B Notes, as the case may be, all
references herein to obligations imposed upon or to be performed by the Clearing
Agency shall be deemed to be imposed upon and performed by the Trustee, to the
extent applicable with respect to such Definitive Class A-1 Notes, Definitive
Class A-2 Notes, Definitive Class A-3 Notes, Definitive Class A-4 Notes or
Definitive Class B Notes, respectively, and the Trustee shall recognize the
holders of the Definitive Class A-1 Notes as Class A-1 Noteholders, holders of
the Definitive Class A-2 Notes as Class A-2 Noteholders, holders of the
Definitive Class A-3 Notes as Class A-3 Noteholder, holders of the Definitive
Class A-4 Notes as Class A-4 Noteholders and/or the holders of the Definitive
Class B Notes as Class B Noteholders hereunder.
SECTION 2.08. Payment of Interest and Principal; Rights Preserved.
(a) Any installment of interest or principal, payable on any Note that is
punctually paid or duly provided for by the Company on the applicable Payment
Date shall be paid to the Person in whose name such Note was registered at the
close of business on the Record Date for such Payment Date by wire transfer of
federal funds to the account and number specified in the Note Register on such
Record Date for such Person (which shall be, as to each original purchaser of
the Notes, the account and number specified below such purchaser's signature to
the Note Agreement until such time as such purchaser notifies the Trustee in
writing
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of a change therein) or, if no such account or number is so specified, then by
check mailed to such Person's address as it appears in the Note Register on such
Record Date.
(b) All reductions in the principal amount of a Note effected by payments
of installments of principal made on any Payment Date shall be binding upon all
holders of such Note and of any Note issued upon the registration of transfer
thereof or in exchange therefore or in lieu thereof, whether or not such payment
is noted on such Note. All payments on the Notes shall be paid without any
requirement of presentment but each holder of any Note shall be deemed to agree,
by its acceptance of the same, to surrender such Note at the Corporate Trust
Office against payment of the final installment of principal of such Note (or in
the case of the Class C Notes promptly thereafter).
SECTION 2.09. Persons Deemed Owners.
Prior to due presentment of a Note for registration of transfer, the
Company, the Trustee, and any agent of the Company or the Trustee may treat the
registered Noteholder as the owner of such Note for the purpose of receiving
payment of principal of and interest on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the Company, the
Trustee, nor any agent of the Company or the Trustee shall be affected by notice
to the contrary.
SECTION 2.10. Cancellation.
All Notes surrendered for registration of transfer or exchange or following
final payment shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company may
at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Notes held by the Trustee may be disposed of in the
normal course of its business or as directed by a Company Order.
SECTION 2.11. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall otherwise comply with Section 3.12(a) of the Trust
Indenture Act. In the event the Trustee no longer serves as the Note
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Registrar, the Company (or any other obligor upon the Notes) shall furnish to
the Trustee at least five Business Days before each interest payment date (and
in all events in intervals of not more than 6 months) and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of Noteholders,
and the Company shall otherwise comply with Section 3.12(a) of the Trust
Indenture Act.
SECTION 2.12. Treasury Securities.
In determining whether the Noteholders of the required Outstanding
Principal Amount of the Notes have concurred in any direction, waiver or
consent, Notes owned by the Company, any other obligor upon the Notes or an
Affiliate of the Company shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes which a Responsible
Officer knows are so owned shall be so disregarded.
ARTICLE 3.
ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION
AND APPLICATION OF MONEYS; REPORTS
SECTION 3.01. Trust Accounts; Investments by Trustee.
(a) On or before the Issuance Date, the Trustee shall establish in the name
of the Trustee for the benefit of the Noteholders and the Company to the extent
of their interests therein as provided in this Indenture and in the Sales and
Servicing Agreement, the following accounts, which accounts shall be Eligible
Accounts maintained at the Corporate Trust Office:
(i) Collection Account;
(ii) Reserve Account; and
(iii) Residual Account
Subject to the further provisions of this Section 3.01(a), the Trustee shall,
upon receipt or upon transfer from another account, as the case may be, deposit
into such accounts all amounts received by it which are required to be deposited
therein in accordance with the provisions of this Indenture. All such amounts
and all investments made with such amounts, including all income and other gain
from such
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investments, shall be held by the Trustee in such accounts as part of the Trust
Estate as herein provided, subject to withdrawal by the Trustee in accordance
with, and for the purposes specified in the provisions of, this Indenture.
(b) The Trustee shall hold in trust but shall not be required to deposit in
any account specified in Section 3.01(a) any payment received by it until such
time as the Trustee shall have identified to its reasonable satisfaction the
nature of such payment and, on the basis thereof, the proper account or accounts
into which such payment is to be deposited. In determining into which of the
accounts, if any, referred to above any amount received by the Trustee is to be
deposited, the Trustee may conclusively rely (in the absence of bad faith on the
part of the Trustee) on the advice of the Servicer. Unless the Trustee is
advised differently in writing by the Lessee making the payment or by the
Servicer in writing (with the Servicer's instruction controlling), the Trustee
shall assume that any amount remitted to it by such Lessee is to be deposited
into the Collection Account pursuant to Section 3.03. The Trustee may establish
from time to time such deadline or deadlines as it shall determine are
reasonable or necessary in the administration of the Trust Estate after which
all amounts received or collected by the Trustee on any day shall not be deemed
to have been received or collected until the next succeeding Business Day.
(c) Neither the Servicer, Trustee nor the institution then acting as
Trustee shall have any right of set-off with respect to the Collection Account,
the Reserve Account or the Residual Account, or any investment therein.
(d) So long as no Event of Default shall have occurred and be continuing,
all or a portion of the amounts in the Collection Account, the Reserve Account
and the Residual Account shall be invested and reinvested by the Trustee
pursuant to a Company Order or Servicer Order in one or more Eligible
Investments. Subject to the restrictions on the maturity of investments set
forth in Section 3.01(f), each such Company Order or Servicer Order may
authorize the Trustee to make the specific Eligible Investments set forth
therein, to make Eligible Investments from time to time consistent with the
general instructions set forth therein, or to make specific Eligible Investments
pursuant to instructions received in writing or by telegraph or facsimile
transmission from the employees or agents of the Company or the Servicer, as the
case may be, identified therein, in each case in such amounts as such Company
Order or Servicer Order shall specify. The Company agrees to report as income
for financial reporting and tax purposes (to the extent reportable) all
investment earnings on amounts in the Collection Account, the Reserve Account or
the Residual Account. Each of the Company and the Servicer agrees to give
appropriate and timely investment directions to the Trustee so that there will
not be more than two Business Days in any one calendar year at the end of which
funds in the Collection Account, the Reserve Account or
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the Residual Account are not invested, directly or indirectly, pursuant to a
Company Order or a Servicer Order in Eligible Investments that mature on or
after the opening of business on the next Business Day.
(e) In the event that either (i) the Company or the Servicer, as the case
may be, shall have failed to give investment directions to the Trustee by 9:30
A.M., New York City time on any Business Day on which there may be uninvested
cash or (ii) an Event of Default shall be continuing, the Trustee shall promptly
invest and reinvest the funds then in the Collection Account, the Reserve
Account or the Residual Account, as the case may be, to the fullest extent
practicable in one or more Eligible Investments. All investments made by the
Trustee shall mature no later than the maturity date therefore permitted by
Section 3.01(f) unless the Trustee shall have received written confirmation from
each Rating Agency, that the liquidation of such Eligible Investments prior to
their respective maturity dates, will not result in the reduction or withdrawal
of such Rating Agency's then-current rating of the Notes.
(f) No investment of any amount held in the Collection Account, the Reserve
Account or the Residual Account shall mature later than the Business Day
immediately preceding the Payment Date which is scheduled to occur immediately
following the date of investment. All income or other gains (net of losses) from
the investment of moneys deposited in the Collection Account, the Reserve
Account and the Residual Account shall be deposited by the Trustee in such
account immediately upon receipt.
(g) Any investment of any funds in the Collection Account, the Reserve
Account and the Residual Account and any sale of any investment held in such
accounts, shall be made under the following terms and conditions:
(i) each such investment shall be made in the name of the Trustee or
in the name of a nominee of the Trustee, in each case in such manner as
shall be necessary to maintain the identity of such investments as assets
of the Trust Estate;
(ii) any certificate or other instrument evidencing such investment
shall be delivered directly to the Trustee or its agent and the Trustee
shall have
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sole possession of such instrument, and all income on such investment; and
(iii) the proceeds of any sale of an investment shall be remitted by
the purchaser thereof directly to the Trustee for deposit in the account in
which such investment was held.
(h) If any amounts are needed for disbursement from the Collection Account,
the Reserve Account or the Residual Account and sufficient uninvested funds are
not collected and available therein to make such disbursement, in the absence of
a Company Order or Servicer Order for the liquidation of investments held
therein in an amount sufficient to provide the required funds, the Trustee shall
select and cause to be sold or otherwise converted to cash a sufficient amount
of the investments in such accounts.
(i) The Trustee shall not in any way be held liable by reason of any
insufficiency in the Collection Account, the Reserve Account or the Residual
Account resulting from losses on investments made in accordance with the
provisions of this Section 3.01 (but the institution serving as Trustee shall at
all times remain liable for its own debt obligations, if any, constituting part
of such investments). The Trustee shall not be liable for any investment made by
it in accordance with this Section 3.01 on the grounds that it could have made a
more favorable investment or a more favorable selection for sale of an
investment.
SECTION 3.02. Collection of Moneys.
(a) On or before the Issuance Date, the Servicer shall designate an address
for the receipt directly from Lessees of all Lease Payments, Casualty Payments
and Termination Payments on or in respect of each Lease (which payments may be
aggregated by the Lessee paying the same with Similar Transaction Payments and
Other Lease Payments and which designated address may be the same designated
address to which such Similar Transaction Payments and Other Lease Payments may
be sent). The Servicer shall, within two Business Days of receipt of any payment
at such designated address, deposit such payment in the Collection Account. All
Lease Payments, Casualty Payments, Termination Payments and other payments
relating to a Lease received at such designated address and so deposited in the
Collection Account shall constitute part of the Trust Estate. Any Similar
Transaction Payments and Other Lease Payments from time to time received at such
designated address or otherwise received by the Servicer or deposited in the
Collection Account shall not constitute part of the Trust Estate.
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(b) The Trustee shall from time to time, in accordance with instructions of
the Servicer and the provisions of the Similar Transaction Agreements, withdraw
from the Collection Account any amounts in the Collection Account which the
Servicer advises the Trustee are (i) Similar Transaction Payments and apply such
payments in accordance with the Similar Transaction Agreements and (ii) Other
Lease Payments. Prior to such payment, the Trustee shall have rights to and an
interest in such amounts to the extent (but only to the extent) it is determined
that such amounts actually constitute Transaction Payment Amounts.
(c) If at any time the Company shall receive any payment on or in respect
of any Lease, it shall hold such Payment in trust for the benefit of the Trustee
and the holders of the Notes, shall segregate such payment from the other
property of the Company, and shall, promptly (but in no event later than the
next following Business Day) upon receipt, deliver such payment in the form
received to the Trustee.
SECTION 3.03. Collection Account; Payments.
(a) The Servicer shall within two Business Days of receipt (a "Required
Deposit Date") deposit the following funds, as received, into the Collection
Account:
(i) Lease Payments (net of any Excess Copy Charges and Fee Per Scan
Charges);
(ii) Residual Realizations up to the Residual Amount Cap;
(iii) recoveries from Non-Performing Leases to the extent Copelco has
not substituted Substitute Leases for such Non-Performing Leases (except to
the extent required to reimburse unreimbursed Servicer Advances);
(iv) late charges on delinquent Lease payments not advanced by the
Servicer;
(v) proceeds from repurchases by Copelco of Leases as a result of
breaches of representations and warranties by Copelco to the extent Copelco
has not substituted Substitute Leases for such Leases;
(vi) proceeds from investment of funds in the Collection Account, the
Reserve Account and the Residual Account;
(vii) Casualty Payments;
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(viii) Servicer Advances;
(ix) Termination Payments; and
(x) payments from the Seller to effect a redemption pursuant to
Section 2.01(b).
(b) Unless the Notes have been declared due and payable pursuant to Section
6.02 and moneys collected by the Trustee are being applied in accordance with
Section 6.06, Available Funds on deposit in the Collection Account and the
amounts, if any, deposited into the Collection Account from the Reserve Account
and the Residual Account in accordance with the provisions of Section 3.04 shall
be withdrawn on or before each Payment Date from the Collection Account, in the
amounts required, for application in the following order of priority, to make
the following required payments:
(i) to pay the Servicing Fee;
(ii) to reimburse unreimbursed Servicer Advances in respect of a prior
Payment Date;
(iii) concurrently: (A) to make Interest Payments on the Class A-1
Notes; (B) to make Interest Payments on the Class A- 2 Notes; (C) to make
Interest payments on the Class A-3 Notes; (D) to make Interest payments on
the Class A-4 Notes;
(iv) to make Interest Payments on the Class B Notes;
(v) to make Interest Payments on the Class C Notes;
(vi) 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;
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(vii) to pay the Class B Principal Payment to the Class B Noteholders;
(viii) to pay the Class C Principal Payment to the Class C
Noteholders;
(ix) to pay the Additional Principal, if any, as an additional
reduction of principal, first to the Class A-2 Noteholders until the
Outstanding Class A-2 Principal Amount has been reduced to zero, second to
the Class A-3 Noteholders until the Outstanding Class A-3 Principal Amount
has been reduced to zero, third to the Class A-4 Noteholders until the
Outstanding Class A-4 Principal Amount has been reduced to zero, thereafter
to the Class B Noteholders as an additional reduction of principal until
the Outstanding Class B Principal Amount has been reduced to zero and,
thereafter to the Class C Noteholders until the Outstanding Class C
Principal Amount has been reduced to zero;
(x) 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;
(xi) 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 up to the Residual
Amount Cap after giving effect to the allocations in clauses (i) through
(x) above on such Payment Date; and
(xii) to the Company, the balance, if any.
Notwithstanding the foregoing, the Trustee shall retain in the Collection
Account an amount equal to all Lease Payments received that were due since the
prior Due Period, and all Casualty Payments and Termination Payments received by
the Trustee after the Determination Date for such Payment Date and shall not
distribute any such amounts on such Payment Date. If at any time any amount or
portion thereof previously distributed pursuant to this Section 3.03(b) shall
have been recovered, or shall be subject to recovery, in any proceeding with
respect to the Company or otherwise, then for purposes of determining future
distributions pursuant to this Section 3.03(b) such amount
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or portion thereof shall be deemed to have not been previously so distributed.
(c) The total amount of Residual Realizations which are required to be
deposited into the Collection Account on any day, is an amount up to the
Available Residual Amount on such date.
SECTION 3.04. The Reserve Account and the Residual Account.
(a) On each Payment Date, the Trustee shall transfer (i) to the Reserve
Account from the Collection Account such amounts as shall be required by Section
3.03(b)(x) and (ii) to the Residual Account from the Collection Account such
amounts as shall be required by Section 3.03(b)(xi).
(b) If by 12:00 noon, New York City time, on the third Business Day
preceding any Payment Date, the amount of collected funds on deposit in the
Collection Account available for distribution under Section 3.03(b) is
insufficient to permit on such Payment Date all distributions required by
Section 3.03(b)(i) through 3.03(b)(ix) (such payments, the "Required Payments"
and such shortfall, an "Available Funds Shortfall") , then, to the extent of the
Available Reserve Amount on deposit in the Reserve Account, the Trustee shall
transfer, not later than the end of such Business Day, from the Reserve Account
to the Collection Account such amount as shall be necessary to make on such
Payment Date all Required Payments. In addition, in the event that the Available
Funds Shortfall is greater than the Available Reserve Amount, then, the Trustee
shall transfer, not later than the end of such Business Day, from the Residual
Account to the Collection Account, an amount equal to the lesser of (i) the
remaining Available Funds Shortfall and (ii) the amount, if any, on deposit in
the Residual Account and available therefore.
(c) In the event that after giving effect to all the disbursements required
to be made on any Payment Date, the Available Reserve Amount exceeds the
Required Reserve Amount, the Trustee shall transfer, not later than the end of
business on such Payment Date, an amount equal to such excess to the Company.
(d) In the event that there are funds on deposit in the Residual Account,
the Trustee shall transfer, not later than the close of Business on such Payment
Date after making required withdrawals, if any on such Payment Date pursuant to
Section 3.04(b), an amount equal to the amount on deposit in the Residual
Account to the Reserve Account to the extent that the amount on deposit in the
Reserve Account is less than the Required Reserve Amount and thereafter, to the
Company. Funds on deposit in the Residual Account shall only be available for
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allocation pursuant to Section 3.04(b) during such time as a Residual Event has
occurred and is continuing.
(e) Upon termination of this Indenture, any balance remaining in the
Reserve Account and the Residual Account, after all obligations to the
Noteholders hereunder have been fully satisfied, shall be paid to reimburse the
Trustee for any amounts owing to it arising from the performance of its
obligations under this Indenture and, then, to the Company.
SECTION 3.05. Reports by Trustee; Notices of Certain Payments.
(a) The Trustee shall within two Business Days after the request of the
Company, the Servicer or any Noteholder, deliver to the requesting person a
written report setting forth the amounts on deposit in the Collection Account,
the Reserve Account and the Residual Account and identifying the investments
included therein.
(b) Within five Business Days following each Payment Date or as promptly as
possible thereafter but in no event later than two Business Days following the
receipt of the Monthly Status Report from the Servicer pursuant to Section 5.01
of the Sales and Servicing Agreement, the Trustee shall mail to the Company,
Copelco, each Rating Agency and the Servicer and make available to each
Noteholder the following information:
(i) the principal amount of all Outstanding Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, and Class C Notes,
respectively, and of the Outstanding Class A-1 Notes, Class A-2, Class A-3
Notes, Class A-4 Notes, Class B Notes and Class C Notes, respectively, held
by each Noteholder on the Record Date with respect to such Payment Date;
(ii) the amount of Interest Payments and payments in reduction of
principal paid on such Payment Date with respect to all Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class
C Notes, respectively, and with respect to the Notes held by each
Noteholder;
(iii) the amount of the Servicing Fee and unreimbursed Servicer
Advances paid on such Payment Date pursuant to Section 3.03(b)(i) and
Section 3.03(b)(ii);
(iv) the Available Residual Amount and the Utilized Residual Amounts
as of the date of the most
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recent Monthly Status Report delivered pursuant to Section 5.01 of the
Sales and Servicing Agreement;
(v) the amounts, if any, paid to the Servicer or Copelco pursuant to
the last paragraph of Section 3.03(b); and
(vi) the amount on deposit in the Collection Account, the Reserve
Account and the Residual Account, in each case after giving effect to all
of the withdrawals and applications or transfers required on or before such
Payment Date pursuant to Sections 3.02, 3.03 and 3.04.
With each report of the Trustee furnished pursuant to this Section 3.05(b)
following any Payment Date, the Trustee shall enclose a copy of the Servicing
Report and the report required to be furnished to the Trustee by the Servicer
following such Payment Date pursuant to Section 5.01 of the Sales and Servicing
Agreement or, if such reports have not been received, a statement to such
effect.
SECTION 3.06. Trustee May Rely on Certain Information from Copelco and
Servicer.
Pursuant to Sections 3.01, 4.05 and 5.01 through 5.03 of the Sales and
Servicing Agreement and Section 3.02 hereof, the Servicer is required to furnish
to the Trustee from time to time certain information and make various
calculations which are relevant to the performance of the Trustee's duties in
this Article Three and in Article Four of this Indenture. The Trustee shall be
entitled to rely in good faith on such information or calculations in the
performance of its duties hereunder (i) unless and until a Responsible Officer
of the Trustee has actual knowledge, or is advised by any Noteholder (either in
writing or orally with prompt written or telecopied confirmation), that such
information or calculations is or are incorrect, or (ii) unless there is a
manifest error in any such information.
ARTICLE 4.
RELEASE OF LEASES AND EQUIPMENT
SECTION 4.01. Release of Equipment.
Subject to the satisfaction of the provisions of Section 4.02, the Trustee
shall release Equipment from the Lien of the Indenture upon the occurrence of
any of the following events: (a) the sale of such Equipment pursuant to Section
3.03(b) of the Sales and Servicing Agreement (unless retained by the Company for
re-leasing), (b) the expiration
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of the related Lease upon the payment of the final Lease Payment due and payable
under such Lease and the deposit of any Residual Realization in respect thereof
subject to the Residual Amount Cap, (c) the repurchase of the related Lease in
accordance with the provisions of Section 4 of the Sales and Servicing
Agreement, (d) the addition of an Additional Lease to the extent new Equipment
is provided in replacement of such Equipment in accordance with the provisions
of Section 9 of the Sales and Servicing Agreement and (e) upon the substitution
of a Substitute Lease in accordance with the provisions of Section 9 of the
Sales and Servicing Agreement. The proceeds of any such sale, repurchase or
releasing shall be deposited in the Collection Account for disposition under
this Indenture.
SECTION 4.02. Release of Leases Upon Final Lease Payment.
In the event that the Trustee shall have received notice (either in writing
or orally with prompt written or telecopied confirmation) from the Servicer that
the Trustee has received from amounts paid by the Lessee, from the Lease
Repurchase Amount or from the proceeds of the Equipment subject to any Lease (i)
the final Lease Payment due and payable under such Lease and the deposit of any
Residual Realization in respect thereof, (ii) a Termination Payment in respect
of such Lease and the deposit of any Residual Realization in respect thereof,
(iii) a Casualty Payment under such Lease (and, following such final Lease
Payment, Casualty Payment or Termination Payment, no further payments on or in
respect of such Lease are or will be due and payable), or (iv) the full amount
of any Non-Performing Lease Pay-Through Amount with respect to such Lease, such
Lease shall be released from the lien of this Indenture.
SECTION 4.03. Execution of Documents.
The Trustee shall promptly execute and deliver such documents, including
without limitation partial releases and termination statements (which shall be
furnished to the Trustee by the Company), and take such other actions as the
Company, by Company Request, may reasonably request (including the return of any
Lease which has been released) to fully effectuate the release from this
Indenture of any Lease and interests in the related Equipment required to be so
released pursuant to Sections 4.01 or 4.02.
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ARTICLE 5.
SERVICER EVENTS OF DEFAULT; SUBSTITUTE SERVICER
SECTION 5.01. Servicer Events of Default.
If a Servicer Event of Default shall have occurred and be continuing, the
Trustee shall, upon the written request of the holders of 66-2/3% of the then
Outstanding Principal Amount of the Notes, give notice in writing to the
Servicer of the termination of all of the rights and obligations of the Servicer
under the Sales and Servicing Agreement (but none of Copelco's obligations
pursuant to Section 4 of the Sales and Servicing Agreement, which shall survive
such termination). On and after the giving of such written notice, all rights
and obligations of the Servicer under the Sales and Servicing Agreement,
including, without limitation, the Servicer's right thereunder to receive the
Servicing Fee, but none of the Servicer obligations pursuant to Section 4
thereof, shall pass to, be vested in, and be assumed by the Trustee, and the
Trustee shall be authorized to, and shall, execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such termination and of such passing,
vesting, and assumption; provided that in performing the duties of the Servicer
under the Sales and Servicing Agreement the Trustee shall at all times be deemed
to be acting as the Trustee hereunder and shall be entitled to the full benefit
of all the protections, benefits, immunities and indemnities provided in this
Indenture for or with respect to the Trustee, including without limitation those
set forth in Article Seven hereof.
SECTION 5.02. Substitute Servicer.
Notwithstanding the provisions of Section 5.01, the Trustee may, if it
shall be unwilling to continue to act as the successor to the Servicer in
accordance with Section 5.01, or shall, if it is unable to continue to so act or
is so instructed in writing by the holders of 66-2/3% of the then Outstanding
Principal Amount of the Notes, appoint a successor to the Servicer in accordance
with the provisions of Section 8.03 of the Sales and Servicing Agreement.
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ARTICLE 6.
EVENTS OF DEFAULT; REMEDIES
SECTION 6.01. Events of Default.
"Event of Default," wherever used herein, means any one of the following
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in making of Principal Payments or Interest Payments when
such become due and payable;
(b) default in the performance, or breach, of any covenant set forth
in Section 8.07(b) and Section 8.08;
(c) default in the performance, or breach, of any covenant of the
Company in this Indenture (other than a covenant dealing with a default in
the performance of which or the breach of which is specifically dealt with
elsewhere in this Section 6.01) 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 Company first acquiring knowledge
thereof, (ii) the Trustee's giving written notice thereof to the Company or
(iii) the holders of a majority of the then Outstanding Principal Amount of
the Notes giving written notice thereof to the Company and the Trustee;
(d) if any representation or warranty of the Company or Copelco made
in this Indenture or the Sales and Servicing Agreement or any other writing
provided to the holders of the Notes shall prove to be incorrect in any
material respect as of the time when the same shall have been made;
provided, however, that the breach of any representation or warranty made
by Copelco or the Company in the Sales and Servicing Agreement shall be
deemed to be "material" for purposes of this Section 6.01(d) only if the
facts or circumstances causing such representation or warranty to be
incorrect shall negatively affect the Trust Estate in some material
respect, the enforceability hereof or of the Notes and provided further,
that a material breach of any representation or warranty made by Copelco in
Section 2.04 or 2.05(b) of the Sales and Servicing Agreement with respect
to any of the Leases or the interests in the Equipment subject thereto
shall not constitute an Event of Default if Copelco repurchases such Lease
and interests in the related
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Equipment in accordance with Section 4.05(a) of the Sales and Servicing
Agreement;
(e) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (ii) a decree or order adjudging
the Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment, or composition of
or in respect of the Company under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(f) the commencement by the Company of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or
similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
Company's failure to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of any such
action.
SECTION 6.02. Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default of the kind specified in Section 6.01(e) or
Section 6.01(f) occurs, the unpaid principal amount of the Notes shall
automatically become due and payable at par together with all accrued and unpaid
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interest thereon, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Company. If an Event of Default (other
than an Event of Default of the kind described in Section 6.01 (e) and Section
6.01(f)) occurs and is continuing, then and in every such case the Trustee
shall, if so directed by the holders of Notes evidencing 66-2/3% (33-1/3% in the
case of an Event of Default of the kind described in Section 6.01(a)) of the
then Outstanding Class A Principal Amount (or if the Class A Notes are no longer
Outstanding, the holders of Notes evidencing 66-2/3% of the then Outstanding
Class B Principal Amount or if the Class A Notes and Class B Notes are no longer
outstanding, the holders of Notes evidencing 66-2/3% of the then Outstanding
Class C Principal Amount), or the holders of such percentages of the then
Outstanding Principal Amount of Notes may, declare the unpaid principal amount
of all the Notes to be due and payable immediately, by a notice in writing to
the Company (and to the Trustee if given by Noteholders), and upon any such
declaration such principal amount shall become immediately due and payable
together with all accrued and unpaid interest thereon, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company.
(b) At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the holders of Notes
evidencing 66-2/3% of the then Outstanding Class A Principal Amount of the Class
A Notes (or if the Class A Notes are no longer Outstanding, the holders of Notes
evidencing 66-2/3% of the then Outstanding Class B Principal Amount of the Class
B Notes or if the Class A Notes and Class B Notes are no longer outstanding, the
holders of Notes evidencing 66-2/3% of the then Outstanding Class C Principal
Amount), by written notice to the Company and the Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all Principal Payments on any Class A Notes, Class B Notes
and Class C Notes which have become due otherwise than by such
declaration of acceleration and interest thereon from the date when
the same first became due until the date of payment or deposit at the
appropriate Note Interest Rate,
(B) all Interest Payments due with respect to any Class A Notes,
Class B Notes and the Class C Notes and, to the extent that payment of
such
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interest is lawful, interest upon overdue interest from the date when
the same first became due until the date of payment or deposit at a
rate per annum equal to the appropriate Note Interest Rates, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements, and advances of the
Trustee, its agents and counsel;
and
(ii) all Events of Default, other than the non-payment of the
Outstanding Principal Amount of the Notes which has become due solely by
such declaration of acceleration, have been cured or waived as provided in
Section 6.13.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 6.03. Remedies.
(a) If an Event of Default occurs and is continuing of which a Responsible
Officer has actual knowledge, the Trustee shall immediately give notice to each
Noteholder as set forth in Section 7.02 and shall solicit the Noteholders for
advice. The Trustee shall then take such action as so directed by the holders of
Notes evidencing 66-2/3% (33-1/3% in the case of an Event of Default of the kind
described in Section 6.01(a)) of the then Outstanding Class A Principal Amount
(or if the Class A Notes are no longer outstanding, the holders of Notes
evidencing 66-2/3% of the then Outstanding Class B Principal Amount or if the
Class A Notes and Class B Notes are no longer outstanding, the holders of Notes
evidencing 66-2/3% of the then Outstanding Class C Principal Amount).
(b) Following any acceleration of the Notes, the Trustee shall have all of
the rights, powers and remedies with respect to the Trust Estate as are
available to secured parties under the Uniform Commercial Code or other
applicable law. Such rights, powers and remedies may be exercised by the Trustee
in its own name as trustee of an express trust.
(c) If an Event of Default specified in Section 6.01(a) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid.
(d) In exercising its rights and obligations under this Section 6.03, the
Trustee may sell the Trust Estate; provided that if the Event of Default
involves other than non-payment of principal or interest on the Notes, then such
sale must be for an amount greater than or equal to amounts due under clauses
first through fourth in Section 6.06. Neither the Trustee nor any Noteholder
shall have any rights against the Company other than to enforce the Lien
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against the Leases and the Equipment and to sell the Trust Estate.
SECTION 6.04. Trustee Shall File Proofs of Claim.
(a) In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition, or other
judicial proceeding relative to the Company, Copelco, the Servicer or any other
obligor upon the Notes or the other obligations secured hereby or relating to
the property of the Company, Copelco, the Servicer or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of the Notes
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company, Copelco or the Servicer for the payment of overdue principal or
interest or any such other obligation) shall by intervention in such proceeding
or otherwise,
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and any other obligation
secured hereby and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Noteholders allowed in such judicial proceeding, and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Noteholders
to pay to the Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07.
(b) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any holder thereof or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceeding.
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SECTION 6.05. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the holders
of the Notes in respect of which such judgment has been recovered.
SECTION 6.06. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article, and any moneys
that may then be held or thereafter received by the Trustee shall be applied in
the following order, 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, pro-rata to the payment of all accrued and unpaid
interest on the Outstanding Class A-1 Principal Amount, Outstanding Class
A-2 Principal Amount, Outstanding Class A-3 Principal Amount and
Outstanding Class A-4 Principal Amount, respectively, 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-1 Note Interest Rate, Class A-2 Note Interest
Rate and Class A-3 Note Interest Rate and Class A-4 Note Interest Rate,
respectively, second, to the payment of all accrued and unpaid interest on
the Outstanding Class B Principal Amount 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 Note Interest Rate, third, to the payment of all accrued and
unpaid interest on the Outstanding Class C Principal Amount 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 Note Interest Rate, fourth, to the payment of
the Outstanding Class A-1 Principal Amount, fifth, to the payment of the
Outstanding Class A-2 Principal Amount, Outstanding Class A-3 Principal
Amount and Outstanding Class A-4 Principal Amount pro-rata, sixth, to the
payment of the Outstanding Class B Principal Amount and seventh, to the
payment of the Outstanding Class C Principal Amount; 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;
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Fourth to the payment of amounts then due the Trustee hereunder;
Fifth if the person then acting as Servicer is Copelco Capital or an
Affiliate of Copelco Capital, to the payment of all Servicer's Fees then
due to such Person; and
Sixth to the payment of the remainder, if any, to the Company or any
other Person legally entitled thereto.
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SECTION 6.07. Limitation on Suits.
None of the Noteholders shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(i) such Noteholder has previously given written notice to the Trustee
of a continuing Event of Default;
(ii) the holders of not less than 25% of the then Outstanding Class A
Principal Amount of the Class A Notes (or if the Class A Notes are no
longer outstanding, the holders of Notes evidencing 66-2/3% of the then
Outstanding Class B Principal Amount of the Class B Notes or if the Class A
Notes and Class B Notes are no longer outstanding, the holders of Notes
evidencing 66-2/3% of the then Outstanding Class C Principal Amount) shall
have made written request to the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to the Trustee
adequate indemnity (which the Trustee agrees, in the case of the original
purchasers of the Notes, need only be the written promise of such Person)
against the costs, expenses and liabilities to be incurred in compliance
with such request;
(iv) the Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(v) so long as any of the Notes remain Outstanding, no direction
inconsistent with such written request has been given to the Trustee during
such 30-day period by the holders of a majority of the then Outstanding
Principal Amount of the Notes;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb, or prejudice the rights of any other
Noteholders, or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Noteholders. It is further understood and intended that so long as any portion
of the Notes remains Outstanding, Copelco shall not have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture (other
than for the enforcement of Sections 3.03(b), 3.04, 4.01 and 4.02 hereof) or for
the appointment of a receiver or trustee (including without limitation a
proceeding under the Bankruptcy Code), or for any other remedy hereunder.
Nothing in this Section 6.07 shall be construed as limiting the rights of
otherwise qualified
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Noteholders to petition a court for the removal of a Trustee pursuant to Section
7.09(h) hereof.
SECTION 6.08. Unconditional Right of Noteholders to Receive Principal and
Interest.
Notwithstanding any other provision in this Indenture, other than the
provisions hereof limiting the right to recover amounts due on the Notes to
recoveries from the property of the Trust Estate, the holder of any Note shall
have the absolute and unconditional right to receive payment of the principal of
and interest on such Note on the Maturities for such payments, including the
Stated Maturity, and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Noteholder.
SECTION 6.09. Restoration of Rights and Remedies.
If the Trustee or any Noteholder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Noteholders
shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the Trustee and the Noteholders
continue as though no such proceeding had been instituted.
SECTION 6.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost, or stolen Notes in the last paragraph of Section
2.04, no right or remedy herein conferred upon or reserved to the Trustee or to
the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by
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this Article or by law to the Trustee or to the Noteholders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Noteholders, as the case may be.
SECTION 6.12. Control by Noteholders.
Except as may otherwise be provided in this Indenture, until such time as
the conditions specified in Sections 10.01(a)(i) and (ii) have been satisfied in
full, the holders of 66-2/3% of the then Outstanding Class A Principal Amount
of the Class A Notes (or if the Class A Notes are no longer outstanding, the
holders of Notes evidencing 66-2/3% of the then Outstanding Class B Principal
Amount of the Class B Notes or if the Class A Notes and Class B Notes are no
longer outstanding, the holders of Notes evidencing 66-2/3% of the then
Outstanding Class C Principal Amount) shall have the right 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.
Notwithstanding the foregoing,
(i) no such direction shall be in conflict with any rule of law or
with this Indenture;
(ii) the Trustee shall not be required to follow any such direction
which the Trustee reasonably believes might result in any personal
liability on the part of the Trustee for which the Trustee is not
adequately indemnified; and
(iii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with any such direction; provided that
the Trustee shall give notice of any such action to each Noteholder.
SECTION 6.13. Waiver of Events of Default.
(a) The holders of 66-2/3% of the then Outstanding Class A Principal
Amount of the Class A Notes (or if the Class A Notes are no longer outstanding,
the holders of Notes evidencing 66-2/3% of the then Outstanding Class B
Principal Amount of the Class B Notes or if the Class A Notes and Class B Notes
are no longer outstanding, the holders of Notes evidencing 66-2/3% of the then
Outstanding Class C Principal Amount) may, by one or more instruments in
writing, waive any Event of Default hereunder and its consequences, except a
continuing Event of Default:
(i) in respect of the payment of the principal of or premium or
interest on any Note (which may only be waived by the holder of such Note),
or
(ii) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the holder of
each Outstanding Note affected (which only may be waived by the holders of
all Outstanding Notes affected).
(b) A copy of each waiver pursuant to Section 6.13(a) shall be furnished by
the Company to the Trustee. Upon any such waiver, such Event of Default shall
cease to exist and shall be deemed to have been cured, for every
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purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Event of Default or impair any right consequent thereon.
SECTION 6.14. Undertaking for Costs.
All parties to this Indenture agree (and each holder of any Note by its
acceptance thereof shall be deemed to have agreed) that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Noteholder, or group of Noteholders,
holding in the aggregate more than 10% of the then Outstanding Principal Amount
of the Notes, or to any suit instituted by any Noteholder for the enforcement of
the payment of the principal of or interest on any Note on or after the
Maturities for such payments, including the Stated Maturity as applicable.
SECTION 6.15. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 6.16. Sale of Trust Estate.
(a) The power to effect any sale of any portion of the Trust Estate
pursuant to Section 6.03 shall not be exhausted by any one or more sales as to
any portion of the Trust Estate remaining unsold, but shall continue unimpaired
until the entire Trust Estate shall have been sold or all amounts payable on the
Notes shall have been paid. The Trustee may from time to time, upon directions
in accordance
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with Section 6.12, postpone any public sale by public announcement made at the
time and place of such sale. For any public sale of the Trust Estate, the
Trustee shall have provided each Noteholder with notice of such sale at least
two weeks in advance of such sale which notice shall specify the date, time and
location of such sale.
(b) To the extent permitted by applicable law, the Trustee shall not in any
private sale sell to a third party the Trust Estate, or any portion thereof
unless,
(i) until such time as the conditions specified in Sections
10.01(a)(i) and (ii) have been satisfied in full, the holders of 66-2/3% of
the then Outstanding Principal Amount of each Class of the Notes voting
separately consent to or direct the Trustee in writing to make such sale;
or
(ii) the proceeds of such sale would be not less than the sum of all
amounts due to the Trustee hereunder and the entire unpaid principal amount
of the Notes and interest due or to become due thereon in accordance with
Section 6.06 on the Payment Date next succeeding the date of such sale.
The foregoing provisions shall not preclude or limit the ability of the Trustee
to purchase all or any portion of the Trust Estate at a private sale.
(c) In connection with a sale of all or any portion of the Trust Estate:
(i) any one or more Noteholders may bid for and purchase the property
offered for sale, and upon compliance with the terms of sale may hold,
retain, and possess and dispose of such property, without further
accountability, and any Noteholder may, in paying the purchase money
therefore, deliver in lieu of cash any Outstanding Notes or claims for
interest thereon for credit in the amount that shall, upon distribution of
the net proceeds of such sale, be payable thereon, and the Notes, in case
the amounts so payable thereon shall be less than the amount due thereon,
shall be returned to the Noteholders after being appropriately stamped to
show such partial payment;
(ii) the Trustee shall execute and deliver an appropriate instrument
of conveyance transferring its interest in any portion of the Trust Estate
in connection with a sale thereof;
(iii) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Company to transfer and convey its interest in any
portion of the Trust Estate in connection with a sale thereof, and to take
all action necessary to effect such sale; and
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(iv) no purchaser or transferee at such a sale shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(d) The method, manner, time, place and terms of any sale of all or any
portion of the Trust Estate shall be commercially reasonable.
(e) The provisions of this Section 6.16 shall not be construed to restrict
the ability of the Trustee to exercise any rights and powers against the Company
or the Trust Estate that are vested in the Trustee by this Indenture, including,
without limitation, the power of the Trustee to proceed against the collateral
subject to the lien of this Indenture and to institute judicial proceedings for
the collection of any deficiency remaining thereafter.
ARTICLE 7.
THE TRUSTEE
SECTION 7.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default known to the
Trustee,
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing to the
actual knowledge of a Responsible Officer of the Trustee, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as
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a prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved, subject to
Section 7.03(f) hereof, that the Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Noteholders in accordance with Section 6.12 relating to the time,
method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 7.02. Notice of Defaults or Events of Default.
Within two Business Days after a Responsible Officer obtaining knowledge of
the occurrence of any Default or Event of Default hereunder, the Trustee shall
transmit, by certified mail return receipt requested, hand delivery or overnight
courier, to all Noteholders, as their names and addresses appear in the Note
Register, and the Rating Agencies notice of such Default or Event of Default
hereunder known to the Trustee, unless such Default or Event of Default shall
have been cured or waived.
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SECTION 7.03. Certain Rights of Trustee.
Subject to the provisions of Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
note, debenture, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any action
of the Company may be sufficiently evidenced by a Company Order;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel as to legal matters and the
written advice of any such counsel selected by the Trustee with due care
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Noteholders pursuant to this Indenture, unless such
Noteholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
note, debenture, other evidence of indebtedness, or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled
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to examine the books, records and premises of the Company, personally or by
agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 7.04. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Notes. The Trustee shall not be accountable for the use or application by
the Company of the proceeds of the Notes.
SECTION 7.05. May Hold Notes.
The Trustee, in its individual or any other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Company with the same rights
it would have if it were not Trustee.
SECTION 7.06. Money Held in Trust.
Money and investments held by the Trustee shall be held in trust in one or
more trust accounts hereunder, but need not be segregated from other funds
except to the extent required by law.
SECTION 7.07. Compensation, Reimbursement, etc.
Subject to Section 3.04(c) of the Sales and Servicing Agreement, the
Company agrees:
(a) to pay to the Trustee from time to time, solely from and only to
the extent that amounts are available, such compensation for all services
rendered by it hereunder as the Company and the Trustee may agree in
writing (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request, solely from and only to the extent that amounts
are available under clause twelfth of Section 3.03(b) or
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clause first of Section 6.06(a), for all reasonable expenses,
disbursements, and advances incurred or made by the Trustee in accordance
with any provision of this Indenture (including the reasonable compensation
and the expenses and disbursements of its agents and counsel), except any
such expense, disbursement, or advance as may be attributable to its
negligence or bad faith.
SECTION 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall (a) be a
corporation organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers; (b) have a combined capital and surplus
of at least $100,000,000; (c) be subject to supervision or examination by
federal or state authority; and (d) at the time of appointment, shall have
long-term debt obligations (or, if the Trustee does not have outstanding
long-term debt obligations and is a subsidiary of a holding company, which
holding company shall have long-term obligations) having a credit rating of at
least "A-" from S&P and Baa3 from Moody's.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
This Indenture shall always have a Trustee who satisfies the requirements
of Section 310(a)(1) of the Trust Indenture Act. The Trustee is subject to the
provisions of Section 310(b) of the Trust Indenture Act regarding
disqualification of a trustee upon acquiring any conflicting interest.
SECTION 7.09. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.10.
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(b) The Trustee may resign at any time by giving written notice thereof to
the Company and by mailing notice of resignation by first-class mail, postage
prepaid, to Noteholders at their addresses appearing on the Note Register.
(c) The Trustee may be removed at any time by Act of the holders of not
less than a majority of the then Outstanding Principal Amount of the Notes,
delivered to the Trustee and the Company.
(d) If the Trustee shall resign, be removed, or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
with the consent of the holders of 66-2/3% of the Outstanding Principal Amount
of the Notes, by an act of the Company, shall promptly appoint a successor
Trustee.
(e) If no successor Trustee shall have been so appointed by the Company or
the Noteholders as hereinbefore provided and accepted appointment in the manner
hereinafter provided within 30 days after any such resignation or removal,
existence of incapability, or occurrence of such vacancy, the Trustee or any
Noteholder may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to all Noteholders,
as their names and addresses appear in the Note Register and each Rating Agency.
Each notice shall include the name of the successor Trustee and the address of
its Corporate Trust Office.
(g) The Company may remove the Trustee if the Trustee fails to comply with
Section 7.08 of this Indenture.
(h) If the Trustee after written request by any Noteholder who has been a
Noteholder for at least six months fails to comply with Section 3.10(b) of the
Trust Indenture Act, such Noteholder may petition any court of competent
jurisdiction, for the removal of the Trustee and the appointment of a successor
Trustee.
SECTION 7.10. Acceptance of Appointment by Successor.
(a) Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the
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retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges and expenses, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
(b) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 7.11. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Notes shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion, or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes. The Trustee shall provide prompt written notice to
each Rating Agency of any event referenced in this Section 7.11.
SECTION 7.12. Co-trustees and Separate Trustees.
(a) At any time or times, if the Company, the Trustee or any Noteholder
determines that it is necessary for the purpose of meeting the legal
requirements of any jurisdiction in which any of the Trust Estate may at the
time be located, the Company and the Trustee shall have power to appoint, and,
upon the written request of the Trustee or the holders of a majority of the then
Outstanding Principal Amount of the Notes, the Company shall for such purpose
join with the Trustee in the execution, delivery,
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and performance of all instruments and agreements necessary or proper to appoint
one or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, of all or any part of such Trust Estate, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Company does
not join in such appointment within 15 days after the receipt by it of a request
so to do, or in case an Event of Default has occurred and is continuing, the
Trustee, or the holders of a majority of the then Outstanding Principal Amount
of the Notes, alone shall have power to make such appointment.
(b) Should any written instrument from the Company be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Company.
(c) Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(i) The Notes shall be authenticated and delivered and all rights,
powers, duties, and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised,
solely by the Trustee.
(ii) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed
by the Trustee or by the Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co--trustee
or separate trustee, except to the extent that, under any law of any
jurisdiction in which any particular act is to be performed, the Trustee
shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(iii) The Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Company evidenced by a Company Order, may
accept the
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resignation of or remove any co-trustee or separate trustee appointed under
this Section, and, in case an Event of Default has occurred and is
continuing, the Trustee shall have power to accept the resignation of, or
remove, any such co-trustee or separate trustee without the concurrence of
the Company. Upon the written request of the Trustee, the Company shall
join with the Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee
so resigned or removed may be appointed in the manner provided in this
Section.
(iv) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee or any other such
trustee hereunder and the Trustee shall not be personally liable by reason
of any act or omission of any co-trustee or other such separate trustee
hereunder selected by the Trustee with due care or appointed in accordance
with directions to the Trustee pursuant to Section 6.12.
(v) Any Act of Noteholders delivered to the Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
SECTION 7.13. Acceptance by Trustee.
The Trustee hereby acknowledges the conveyance of the Granted Assets and
the receipt of the Leases and the other Granted Assets granted by the Company
hereunder and declares that the Trustee, through a custodian, will hold such
Leases and other Granted Assets conveyed by the Company in trust, for the use
and benefit of all Noteholders subject to the terms and provisions hereof.
SECTION 7.14. Preferential Collection of Claims Against the Company.
The Trustee is subject to Trust Indenture Act Section 311(a), excluding
any creditor relationship listed in Trust Indenture Act Section 311(b). A
Trustee who has resigned or been removed shall be subject to Trust Indenture Act
Section 311(a) to the extent indicated therein.
SECTION 7.15. Reports by Trustee to Noteholders.
To the extent required by the Trust Indenture Act, within 60 days after
each May 15, following the date of this Indenture, the Trustee shall mail to
Noteholders a brief report dated as of such reporting date that complies with
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Trust Indenture Act Section 313(a), if such a report is required pursuant to
Trust Indenture Act Section 313(a). The Trustee also shall comply with Trust
Indenture Act Section 313(b). The Trustee shall also transmit by mail all
reports as required by Trust Indenture Act Section 313(c).
A copy of each such report required under Trust Indenture Act Section 3.13
shall, at the time of such transmission to Noteholders be filed with the
Commission and with each stock exchange or other market system on which the
Notes are listed. The Company or any other obligor upon the Notes shall notify
the Trustee if the Notes become listed on any stock exchange or market trading
system.
SECTION 7.16. No Proceedings. The Trustee hereby agrees that it will not,
with respect to its fees and expenses, directly or indirectly institute, or
cause to be instituted, against the Company any proceeding of the type referred
to in Section 6.01(e) or (f) so long as there shall not have elapsed one year
plus one day since the latest maturing Notes have been paid in full in cash.
ARTICLE 8.
COVENANTS
SECTION 8.01. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and interest on
the Notes in accordance with the terms of the Notes and this Indenture.
SECTION 8.02. Maintenance of Office or Agency; Chief Executive Office.
(a) The Company will maintain at the Corporate Trust Office an office or
agency where Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices and demands.
(b) The chief executive office of the Company, and the office at which the
Company maintains its records with respect to the Leases, the interests in the
Equipment, and the transactions contemplated hereby, is currently located in
Mahwah, New Jersey; records with respect to certain of the Leases are maintained
in Mt. Laurel, New Jersey. The Company will not change the location of such
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offices without giving the Trustee at least 30 days prior written notice
thereof.
SECTION 8.03. Money for Payments to Noteholders to be Held in Trust.
(a) All payments of amounts due and payable with respect to any Notes that
are to be made from amounts withdrawn from the Collection Account pursuant to
Section 3.03(b) or Section 6.06 shall be made on behalf of the Company by the
Trustee, and no amounts so withdrawn from the Collection Account for payments of
Notes shall be paid over to the Company under any circumstances except as
provided in this Section 8.03 or in Section 3.03(b) or Section 6.06.
(b) In making payments hereunder, the Trustee will:
(i) allocate all sums received for payment to the Noteholders on each
Payment Date among such Noteholders, first to the Class A Noteholders on a
pro rata basis, second to the Class B Noteholders on a pro rata basis and
then to the Class C Noteholders on a pro rata basis in accordance with the
information known to the Trustee;
(ii) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
and
(iii) comply with all requirements of the Internal Revenue Code of
1986, as amended (or any successor statutes), and all regulations
thereunder, with respect to the withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection therewith.
(c) If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the Notes,
segregate and hold in trust for the benefit of the Noteholders entitled thereto
a sum sufficient to pay the principal or interest so becoming due until such
sums shall be paid to such Noteholders or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the principal of
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or interest on any Notes, deposit with a Paying Agent a sum sufficient to pay
the principal or interest so becoming due, such sum to be held in trust for the
benefit of the Noteholders entitled to such principal or interest, and (unless
such Paying Agent is the Trustee) the Company will promptly notify the Trustee
of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(1) hold all sums held by it for the payment of the principal of or
interest on Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided, and
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal or interest.
(d) Except as required by applicable law, any money held by the Trustee in
trust for the payment of any amount due with respect to any Note and remaining
unclaimed for three years after such amount has become due and payable to the
Noteholder shall be discharged from such trust and, subject to applicable
escheat laws, paid to the Company upon request; and such Noteholder shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof (but only to the extent of the amounts so paid to the Company),
and all liability of the Trustee with respect to such trust money shall
thereupon cease.
SECTION 8.04. Corporate Existence; Merger; Consolidation, etc.
(a) The Company will keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware, and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Indenture, the Notes or any of
the Leases.
(b) The Company shall at all times observe and comply in all material
respects with (i) all laws applicable to it, (ii) all requirements of law in the
declaration and payment of dividends on its capital stock, and (iii) all
requisite and appropriate corporate and other formalities (including without
limitation meetings of the Company's
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board of directors and, if required by law, its charter or otherwise, meetings
and votes of the shareholders of the Company to authorize corporate action) in
the management of its business and affairs and the conduct of the transactions
contemplated hereby and by the Underwriting Agreement and the Sales and
Servicing Agreement.
(c) The Company shall not issue or register the transfer of any of its
capital stock to any Person other than Copelco and will deliver any certificate
of such stock so issued to the Trustee in accordance with Section 7.02 of the
Sales and Servicing Agreement.
(d) The Company shall not (i) consolidate or merge with or into any other
Person or convey or transfer its properties and assets substantially as an
entirety to any other Person or (ii) commingle its assets with those of any
other Person.
(e) At least one director of the Company shall at all times be a person who
is not, and for five years prior to such individual's election as a director
shall not have been, a director, officer, employee or 10% beneficial owner of
the outstanding shares of common stock of its parent institution or any of its
Affiliates.
(f) The Company will, at all times, (i) maintain (A) corporate books and
records separate from those of any other Person and (B) minutes of the meetings
and other proceedings of its shareholders and board of directors; (ii)
continuously maintain the resolutions, agreements and other instruments
underlying the transactions contemplated hereby and by the Sales and Servicing
Agreement as official records of the Company; (iii) act solely in its corporate
name and through its duly authorized officers or agents to maintain an
arm's-length relationship with Copelco and its Affiliates and (iv) pay all of
its operating expenses and liabilities from its own funds.
(g) The Company shall conduct its business solely in its own name so as to
not mislead others as to the identity of the corporation with which those others
are concerned, and particularly will use its best efforts to avoid the
appearance of conducting business on behalf of Copelco or any of its Affiliates
or that the assets of the Company are available to pay the creditors of Copelco
or any of its Affiliates. Without limiting the generality of the foregoing, all
oral and written communications, including without limitation letters, invoices,
purchase orders, contracts, statements and loan applications, will be made
solely in the name of the Company.
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SECTION 8.05. Protection of Trust Estate; Further Assurances.
The Company will from time to time execute and deliver all such supplements
and amendments hereto and all such Financing Statements, continuation
statements, instruments of further assurance, and other instruments, and will
take such other action as may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the Lien of this Indenture or carry out more
effectively the purposes hereof;
(iii) publish notice of, or protect the validity of, any Grant made or
to be made by this Indenture and perfect the security interest contemplated
hereby in favor of the Trustee in each of the Leases, in the Equipment and
all other property included in the Trust Estate; provided, that the Company
shall not be required to file Financing Statements with respect to the
interests in the Equipment in addition to those contemplated by Section
3.01(c) of the Sales and Servicing Agreement;
(iv) enforce or cause the Servicer to enforce any of the Leases; or
(v) preserve and defend title to the Leases (including the right to
receive all payments due or to become due thereunder), the interests in the
Equipment, or other property included in the Trust Estate and preserve and
defend the rights of the Trustee and the Noteholders in such Leases
(including the right to receive all payments due or to become due
thereunder), interests in the Equipment and other property against the
claims of all Persons and parties.
The Company, upon the Company's failure to do so, hereby designates the Trustee
its agent and attorney-in-fact to execute any Financing Statement or
continuation statement required pursuant to this Section 8.05; provided,
however, that such designation shall not be deemed to create a duty in the
Trustee to monitor the compliance of the Company with the foregoing covenants,
and provided, further, that the duty of the Trustee to execute any instrument
required pursuant to this Section 8.05 shall arise only if a Responsible Officer
of the Trustee has actual knowledge of any failure of the Company to comply with
the provisions of this Section 8.05.
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SECTION 8.06. [Reserved].
SECTION 8.07. Performance of Obligations; Sales and Servicing Agreement.
(a) The Company will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Notes and the Underwriting
Agreement.
(b) The Company will not take any action or permit any action to be taken
by others which would release any Person from any of such Person's covenants or
obligations under any Lease or any other instrument included in the Trust
Estate, or which would result in the amendment, hypothecation, subordination,
termination, or discharge of, or impair the validity or effectiveness of, any
Lease or such other instrument, except as expressly provided in this Indenture
or the Sales and Servicing Agreement.
(c) If any Authorized Officer shall have knowledge of the occurrence of a
default under the Sales and Servicing Agreement, the Company shall promptly
notify the Trustee and the Noteholders thereof, and shall specify in such notice
the action, if any, the Company is taking in respect of such default. Unless
consented to by the holders of 66 2/3% of the then Outstanding Principal Amount
of the Notes, the Company may not waive any default under or amend the Sales and
Servicing Agreement.
SECTION 8.08. Negative Covenants.
The Company will not:
(a) sell, transfer, exchange or otherwise dispose of any portion of
the Trust Estate except as expressly permitted by this Indenture;
(b) claim any credit on, or make any deduction from, the principal of,
or interest on, any of the Notes by reason of the payment of any taxes
levied or assessed upon any portion of the Trust Estate;
(c) engage in any business or activity other than in connection with,
or relating to the ownership of, the Leases and the interests in the
Equipment, the issuance of the Notes, and the specific transactions
contemplated hereby;
(d) become liable for, issue, incur, assume, or allow to remain
outstanding any indebtedness, or guaranty any indebtedness of any Person,
other than the Notes, except as contemplated by this Indenture, the
registration statement filed with respect to the
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Class A Notes and Class B Notes (and any registration statement for similar
securities), and the Sales and Servicing Agreement;
(e) seek dissolution or liquidation in whole or in part or
reorganization of its business or affairs;
(f) (i) permit the validity or effectiveness of this Indenture or any
Grant hereby to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenants or obligations under this
Indenture, except as may be expressly permitted hereby, (ii) permit any
lien, charge, security interest, mortgage or other encumbrance to be
created on or to extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds thereof
other than the lien of this Indenture, or (iii) subject to Section 3.01(c)
of the Sales and Servicing Agreement, permit the lien of this Indenture not
to constitute a valid first priority security interest in the Trust Estate;
or
(g) make any loan or advance to any Affiliate of the Company or to any
other Person; provided that the Company may from time to time make
Inter-Company Loans on the terms and conditions set forth in Section 13 of
the Sales and Servicing Agreement.
SECTION 8.09. Information as to Company.
The Company shall deliver to the Trustee and, the Trustee shall deliver to
each Rating Agency and to each holder of outstanding Notes (and,
upon the request of any Noteholder, to any prospective transferee of any Notes):
(a) Quarterly Statements - within 45 days after the end of each of the
first three quarterly fiscal periods in each fiscal year of the Company, one
copy of:
(i) a balance sheet of the Company as at the end of such quarter, and
(ii) statements of income, retained earnings and cash flow of the
Company for that quarter and for the portion of the fiscal year ending with
such quarter, setting forth in each case in comparative form the figures
for the corresponding periods in the previous fiscal year,
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all in reasonable detail and accompanied by a certificate signed by a principal
financial officer of the Company stating that such financial statements present
fairly the financial condition of the Company and have been audited and prepared
in accordance with generally accepted accounting principles consistently
applied;
(b) Annual Statements - within 135 days after the end of each fiscal year
of the Company, one copy of:
(i) a balance sheet of the Company, as at the end of that year, and
(ii) statements of income, retained earnings and cash flow of the
Company for that year, setting forth in each case in comparative form the
figures for the previous fiscal year,
all in reasonable detail and accompanied by a certificate signed by a principal
financial officer of the Company stating that such financial statements present
fairly the financial condition of the Company and have been audited and
prepared in accordance with generally accepted accounting principles
consistently applied;
(c) Officer's Certificate - with each set of financial statements delivered
pursuant to Section 8.09(a) or 8.09(b), the Company will deliver an Officer's
Certificate stating that such officer has reviewed the relevant terms of this
Indenture (including without limitation Section 8.04 hereof) and the Sales and
Servicing Agreement and has made, or caused to be made, under such officer's
supervision, a review of the transactions and conditions of the Company during
the period covered by the income statements then being furnished and that the
review has not disclosed the existence of any Event of Default or, if an Event
of Default exists, describing its nature.
(d) Notice of Event of Default - immediately upon becoming aware of the
existence of any condition or event which constitutes a Default or an Event of
Default, a written notice describing its nature and period of existence and what
action the Company is taking or proposes to take with respect thereto; and
(e) Report on Proceedings - promptly upon the Company's becoming aware of
(i) any proposed or pending investigation of it by any governmental
authority or agency, or
(ii) any pending or proposed court or administrative proceeding which
involves or may involve
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the possibility of materially and adversely affecting the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company
a written notice specifying the nature of such investigation or proceeding and
what action the Company is taking or proposes to take with respect thereto and
evaluating its merits.
SECTION 8.10. Taxes.
The Company shall pay all taxes when due and payable or levied against its
assets, properties or income, including any property that is part of the Trust
Estate.
SECTION 8.11. Indemnification.
The Company agrees to indemnify and hold harmless the Trustee and each
Noteholder (each an "Indemnified Party") against any and all liabilities,
losses, damages, penalties, costs and expenses (including costs of defense and
legal fees and expenses) which may be incurred or suffered by such Indemnified
Party without negligence or willful misconduct on its part as a result of
claims, actions, suits or judgments asserted or imposed against it and arising
out of the transactions contemplated hereby or by the Sales and Servicing
Agreement, including without limitation, any claims resulting from any use,
operation, maintenance, repair, storage or transportation of any item of
Equipment, whether or not in the Company's possession or under its control, and
any tort claims and any fines or penalties arising from any violation of the
laws or regulations of the United States or any state or local government or
governmental authority; provided that, all amounts payable pursuant to this
Section 8.11 shall be fully subordinated to amounts payable under the Notes,
shall be without recourse to the Company except to the extent that all amounts
otherwise due and payable under the terms of this Indenture have been fully paid
and shall not, to the extent that such amounts are unpaid, constitute a claim
against the Company except to the extent that all amounts otherwise due and
payable under the terms of this Indenture have been fully paid.
SECTION 8.12. Commission Reports; Reports to Trustee; Reports to
Noteholders.
To the extent it has not satisfied the following requirements by reporting
under Section 8.09 hereof, the Company shall:
(a) file with the Trustee, within 15 days after the Company is required to
file the same with the
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Commission, copies of the annual reports and of the information, documents and
other reports which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act (or copies of such
portions thereof as may be prescribed by rules and regulations of the
Commission); or, if the Company is not required to file with the Commission
information, documents or reports pursuant to either Section 13 or Section 15(d)
of the Exchange Act, then the Company will file with the Trustee and with the
Commission, in accordance with rules and regulations prescribed by the
Commission, such of the supplementary and periodic information, documents and
reports required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the rules
and regulations prescribed by the Commission, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Indenture as may be required by
such rules and regulations, including, in the case of annual reports, if
required by such rules and regulations, certificates or opinions of independent
public accountants, conforming to the requirements of Sections 12.03 and 12.04
hereof, as to compliance with conditions or covenants, compliance with which is
subject to verification by accountants; and
(c) furnish to the Trustee for distribution to the Noteholders, as the
names and addresses of such Noteholders appear in the Note Register, in the
manner and to the extent provided in Section 7.15 hereof, such summaries of any
information, documents and reports required to be filed with the Trustee
pursuant to the provisions of Subsections (a) and (b) of this Section 8.12 as
may be required to be provided to such Noteholders by the rules and regulations
of the Commission under the provisions of the Trust Indenture Act.
ARTICLE 9.
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of any Noteholders, the Company, by a Company
Order, and the Trustee, at any time and from time to time, may enter into one or
more indentures
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supplemental hereto, in form satisfactory to the Trustee, for any of the
following purposes:
(i) to add to the covenants of the Company for the benefit of the
Noteholders, or to surrender any right or power herein conferred upon the
Company;
(ii) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein; or
(iii) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or to better assure, convey and
confirm unto the Trustee any property subject or required to be subjected
to the lien of this Indenture;
provided such action pursuant to this Section 9.01(a) shall not adversely affect
the interests of the Noteholders in any respect.
(b) The Trustee shall promptly deliver to each Noteholder and each Rating
Agency a copy of any supplemental indenture entered into pursuant to Section
9.01(a).
SECTION 9.02. Supplemental Indentures with Consent of Noteholders.
(a) With the consent of the holders of not less than 66-2/3% of the then
Outstanding Principal Amount of the Notes and by Act of said Noteholders
delivered to the Company and the Trustee, the Company, by a Company Order, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Noteholders under this Indenture; provided, that no supplemental
indenture shall, without the consent of the holder of each Outstanding Note
affected thereby,
(i) change the Stated Maturity of any Note or the Principal Payments
or Interest Payments due or to become due on any Payment Date with respect
to any Note, or change the priority of payment thereof as set forth herein,
or reduce the principal amount thereof or the Note Interest Rate thereon,
or change the place of payment where, or the coin or currency in which, any
Note or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Maturity
thereof;
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(ii) reduce the percentage of the Outstanding Principal Amount of the
Notes the consent of whose Noteholders is required for any such
supplemental indenture, for any waiver of compliance with provisions of
this Indenture or Events of Default and their consequences, or for any Act
of Noteholders;
(iii) modify any of the provisions of this Section or Section 6.13
except to increase any percentage or fraction set forth therein or to
provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of the holder of each Outstanding Note
affected thereby;
(iv) modify or alter the provisions of the proviso to the definition
of the term "Outstanding"; or
(v) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust
Estate or, except as provided in Sections 4.01 or 4.02, terminate the lien
of this Indenture on any property at any time subject hereto or deprive any
Noteholder of the security afforded by the lien of this Indenture.
(b) The Trustee shall promptly deliver to each Noteholder and each Rating
Agency a copy of any supplemental indenture entered into pursuant to Section
9.02(a).
SECTION 9.03. Execution of Supplemental Indentures.
In executing any supplemental indenture (a) pursuant to Article 9.01 of
this Indenture or (b) pursuant to Section 9.02 of this Indenture without the
consent of each holder of the Notes to the execution of the same, the Trustee
shall be entitled to receive, and (subject to Section 7.01) shall be, fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any supplemental
indenture which affects the Trustee's own rights, duties, projections, or
immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes, and every
Noteholder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
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SECTION 9.05. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
SECTION 9.06. Compliance with Trust Indenture Act.
Every amendment, supplement or waiver to this Indenture or the Notes shall
comply with the Trust Indenture Act as then in effect.
ARTICLE 10.
SATISFACTION AND DISCHARGE
SECTION 10.01. Satisfaction and Discharge of Indenture.
(a) This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(i) 100 days shall have elapsed since either
(A) all Notes theretofore authenticated and delivered (other than
(1) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.04 and (2) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section
8.03(c)) have been delivered to the Trustee for cancellation; or
(B) the final installments of principal on all such Notes not
theretofore delivered to the Trustee for cancellation
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(1) have become due and payable, or
(2) will become due and payable at their Stated Maturity,
as applicable, within one year,
and the Company has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Trustee for cancellation, for
principal and interest to the date of such deposit (in the case of
Notes which have become due and payable) or to the Stated Maturity
thereof;
(ii) the Company has paid or caused to be paid all other sums payable
hereunder by the Company for the benefit of the Noteholders; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
At such time, the Trustee shall deliver to the Company or, upon Company Order,
its assignee, all cash, securities and other property held by it as part of the
Trust Estate other than funds deposited with the Trustee pursuant to Section
10.01(a)(i)(B), for the payment and discharge of the Notes.
(b) Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Sections 7.07 and 8.11, and, if
money shall have been deposited with the Trustee pursuant to Section
10.01(a)(i)(B), the obligations of the Trustee under Section 10.02 and Section
8.03(c) shall survive.
(c) The Trustee shall provide prompt written notice to each Rating Agency
of any satisfaction and discharge of this Indenture pursuant to this Article 10.
SECTION 10.02. Application of Trust Money.
Subject to the provisions of Section 8.03(c), all money deposited with the
Trustee pursuant to Sections 10.01 and 8.03 shall be held in trust and applied
by it, in accordance with the provisions of the Notes and this Indenture, to the
payment to the Persons entitled thereto, of the principal and interest for whose
payment such money has been deposited with the Trustee.
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ARTICLE 11.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants as follows:
SECTION 11.01. Corporate Organization and Authority.
The Company:
(a) is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary licenses and
permits to own and operate its properties and to carry on its business as now
conducted (except where the failure to have such licenses and permits would not
have a material adverse effect on the business or condition (financial or
otherwise) of the Company or impair the enforceability of any Lease) and to
enter into and perform its obligations under this Indenture and the Sales and
Servicing Agreement, and the transactions contemplated hereby and thereby,
including the issuance and sale of the Notes and the performance of its
obligations thereunder; and
(c) has duly qualified and is authorized to do business and is in good
standing as a foreign corporation in each jurisdiction where the character of
its properties or the nature of its activities makes such qualification
necessary (except where the failure to be so qualified or in good standing would
not have a material adverse effect on the business or condition (financial or
otherwise) of the Company or impair the enforceability of any Lease).
SECTION 11.02. Pending Litigation.
There are no proceedings or investigations pending, or to the knowledge of
the Company (after due inquiry) threatened, against or affecting the Company in
or before any court, governmental authority or agency or arbitration board or
tribunal, including but not limited to any such proceeding or investigation with
respect to any environmental or other liability resulting from the ownership or
use of any of the Equipment, which, individually or in the aggregate, involve
the possibility of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the Company, or the
ability of the Company to perform its obligations hereunder or under the Sales
and Servicing
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Agreement or the Notes. The Company is not in default with respect to any order
of any court, governmental authority or agency or arbitration board or tribunal.
SECTION 11.03. Transactions Legal and Authorized. The sale of the Notes by
the Company, the purchase of the Leases (including the right to receive all
payments due or to become due thereunder) and the acquisition of the interests
in the Equipment pursuant to the Sales and Servicing Agreement, the granting of
the Liens created by the Indenture, and compliance by the Company with all of
the provisions of this Indenture, the Sales and Servicing Agreement and the
Notes:
(a) have been duly authorized by all necessary corporate action on the part
of the Company, and do not require any stockholder approval, or approval or
consent of any trustee or holders of any indebtedness or obligations of the
Company except such as have been duly obtained;
(b) are within the corporate powers of the Company; and
(c) are legal and will not conflict with, result in any breach of any of
the provisions of, constitute a default under, or result in the creation of any
Lien upon any property of the Company (except as contemplated by this Indenture)
under the provisions of any agreement, charter instrument, by-law or other
instrument to which the Company is a party or by which it or its property may be
bound or result in the violation of any law, regulation, rule, order or judgment
applicable to the Company or its properties, or any order to which the Company
or its properties is subject, of or by any government or governmental agency or
authority.
SECTION 11.04. No Defaults.
No event has occurred and no condition exists which, upon the issue of the
Notes or with the lapse of time and/or the giving of notice, would constitute a
Default or an Event of Default. The Company is not in violation in any material
respect of any term of any agreement, charter instrument, by-law or other
instrument to which it is a party or by which it is or may be bound.
SECTION 11.05. Governmental Consent.
No consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required for the
issue and sale of the Notes or the consummation by the Company of the
transactions contemplated by this Indenture, except such
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consents, approvals, authorizations, registrations or qualifications as may be
required under the Securities Act and under state securities or Blue Sky laws in
connection with the purchase and distribution of the Notes pursuant to the
Underwriting Agreement.
SECTION 11.06. Use of Proceeds.
The proceeds from the sale of the Notes will be used by the Company to
purchase the Leases from the Seller pursuant to the Sales and Servicing
Agreement.
SECTION 11.07. Compliance with Law.
The Company:
(a) is not in violation of any laws, ordinances, governmental rules or
regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its business; and
(c) is not in violation in any material respect of any term of any
agreement, charter instrument, by-law or other instrument to which it is a party
or by which it may be bound, which violation or failure to obtain might
materially adversely affect the business or condition (financial or otherwise)
of the Company or the transactions contemplated by the Sales and Servicing
Agreement, the Notes, or this Indenture.
SECTION 11.08. Restrictions on Company.
The Company is not a party to any contract or agreement, or subject to any
charter or other corporate restriction, which materially and adversely affects
its business. The Company has not agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its properties,
whether now owned or hereafter acquired, to be subject to a Lien not permitted
by the Indenture.
SECTION 11.09. Legal, Valid and Binding Obligations.
This Indenture, the Sales and Servicing Agreement and any other documents
executed by or on behalf of the Company in connection with the transactions
contemplated hereby or thereby each constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with the respective terms
hereof and thereof, except as the
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same may be limited by bankruptcy, insolvency, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally and
by equitable principles. The Notes, when issued in accordance with the
provisions hereof, will represent the legal, valid and binding obligations of
the Company, enforceable in accordance with the terms thereof, except as the
same may be limited by bankruptcy, insolvency, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally and
by equitable principles.
SECTION 11.10. Perfected Security Interest.
Except for the execution and delivery of the Indenture, the delivery of the
Leases to the Trustee and the filing of required Financing Statements, no
further action, including any filing or recording of any document, is necessary
or advisable in order to establish, protect and perfect the security interest of
the Trustee as of the Closing Date in (a) the Leases (including the right to
receive all payments due or to become due thereunder) and (b) the Equipment and
any proceeds thereof subject to Leases having a Discounted Present Value of not
less than 75% of the Discounted Present Value of the Leases as of the Cut-Off
Date and such equipment relating to not less than 75% of the Booked Residual
Value of such equipment, in each case as against any third party in any
applicable jurisdiction in the United States. In the case of each Lease which
consists of a master lease and one or more exhibits or schedules thereto, the
Company has delivered the schedules relating to the Leases to the Trustee and
has neither assigned such schedules or such master lease in its entirety, nor
delivered physical possession of such schedules or such master lease, to any
Person other than the Trustee (including the trustee under another indenture in
a transaction substantially similar to the transaction contemplated hereby,
which other indenture provides for a lien insofar as it relates to the lease
schedules which are not part of the Trust Estate).
SECTION 11.11. Taxes.
The Company is not in default with respect to the payment of any taxes
levied or assessed against it or any of its assets and has not failed to file
any tax return required to be filed by it.
SECTION 11.12. Nonconsolidation.
The Company is operated in such a manner that it would not be substantively
consolidated in the bankruptcy estate of Copelco, such that the separate
existence of the Company and Copelco would be disregarded in the event of a
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bankruptcy or insolvency of the Company or Copelco, and in such regard:
(a) the Company is not involved in the day-to-day management of Copelco;
(b) the Company maintains separate corporate records and books of account
from Copelco and otherwise observes corporate formalities and has a separate
business office from Copelco;
(c) the financial statements and books and records of the Copelco prepared
after the Issuance Date will reflect the separate existence of the Company;
(d) the Company maintains its assets separately from the assets of Copelco
(including through the maintenance of a separate bank account), the Company's
funds and assets, and records relating thereto, have not been and are not
commingled with those of Copelco and the separate creditors of the Company will
be entitled to be satisfied out of the Company's assets prior to any value in
the Company becoming available to the Company's equityholders or the Copelco's
creditors;
(e) all business correspondence of the Company and other communications are
conducted in the Company's own name and on its own stationery; and
(f) Copelco does not act as an agent of the Company in any capacity and the
Company does not act as agent for Copelco, but instead presents itself to the
public as a corporation separate from Copelco.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by operation of Trust Indenture Act Section 318(a), the duties
imposed by Section 318(a) shall control.
SECTION 12.02. Communication by Noteholders with Other Noteholders.
Noteholders may communicate, pursuant to Trust Indenture Act Section
3.12(b), with other Noteholders with respect to their rights under this
Indenture or the Notes. The Company, the Trustee, the Note Registrar and all
other
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parties shall have the protection of Trust Indenture Act Section 3.12(c).
SECTION 12.03. Officers' Certificate and Opinion of Counsel as to
Conditions Precedent.
Upon any request or application by the Company (or any other obligor upon
the Notes) to the Trustee to take any action under this Indenture, the Company
(or such other Obligor) shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set forth
in Section 12.04) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements set forth in
Section 12.04) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been complied with.
SECTION 12.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been complied with.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
witnessed, all as of the day and year first above written.
COPELCO CAPITAL FUNDING CORP. X
_________________________________________
Name:
Title:
[SEAL]
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
[SEAL] By_______________________________________
Name:
Title:
<PAGE>
SCHEDULE 1
----------
LEASES
<PAGE>
EXHIBIT A
---------
[FORM OF
CLASS A NOTE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
COPELCO CAPITAL FUNDING CORP. X
____% CLASS A LEASE-BACKED NOTE, SERIES 1997-A
CUSIP NO._______________
No. R- $_________________
Copelco Capital Funding Corp. X, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture referred to herein), for value received,
hereby promises to pay to ____ , or registered assigns, the principal sum of
____ Dollars ($___), payable in monthly installments beginning on __________,
1997, in accordance with the Indenture. Interest will accrue on the unpaid
principal hereof from the date of issuance, at the rate of _____% per annum,
until the full amount of principal hereof is otherwise paid or made available
for payment and shall be computed on the basis of twelve 30-day months and a
year of 360 days.
Principal and interest on this Class A Note shall be paid on the [__]th day
of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing __________, 1997, either by check to the registered
address of the Holder of this Class A Note as of the relevant Record Date or by
wire transfer to an account
A-1
<PAGE>
at a bank in the United States as the Holder shall specify, as provided more
fully in the Indenture; provided, that the final payment of principal and
interest in respect of the Notes shall be payable to the Holder of this Note
only upon presentation and surrender of this Note at the Corporate Trust Office
of the Trustee or at the principal office of any Paying Agent appointed pursuant
to the Indenture.
The Stated Maturity of the Class A Notes is __________, ____.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Class A Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class A Note is one of a duly authorized issue of Class A Notes of the
Company designated as its "___% Class A Lease-Backed Notes, Series 1997-A"
(herein called the "Class A Notes") limited in aggregate principal amount of
$__________, issued under the Indenture, dated as of ___________, 1997 (herein
called the "Indenture"), between the Company and _____________________ as
Trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders and of the terms upon which the Class A Notes are authenticated and
delivered. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings set forth in the Indenture.
This Class A Note will be secured by the pledge to the Trustee of the Trust
Estate.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class A Notes (but not less than all the Class
A Notes) may be declared due and payable in the manner and with the effect
provided in the Indenture. Notice of such declaration will be given by mail to
Holders, as their names and addresses appear in the Note Register, as provided
in the Indenture. Upon payment of such principal amount together with all
accrued interest, the obligations of the Company with respect to the payment of
principal and interest on this Class A Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
A-2
<PAGE>
Company and the Trustee with the consent of the Holders of 66 2/3% in aggregate
principal amount of the Class A Notes and the Company's _____% Class B
Lease-Backed Notes, Series 1997-A (the "Class B Notes") at the time Outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Class A Notes and the Class B
Notes at the time Outstanding, on behalf of all the Holders, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Class A Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Class A Note and of any Class A Note
issued upon the registration of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Class A Note or any Class A Note.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Class A Note is registrable in the Note Register,
upon surrender of this Class A Note for registration of transfer at the office
or agency of the Trustee in The City of [__________], and at any other office or
agency maintained by the Company for that purpose, duly endorsed by, or
accompanied by a written instrument of transfer in the form satisfactory to the
Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Class A Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Class A Notes are issuable only in registered form without coupons in
minimum denominations of $1,000. As provided in the Indenture and subject to
certain limitations therein set forth, Class A Notes are exchangeable for a like
aggregate principal amount of Class A Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Class A Note is registered as the owner
hereof for all purposes, whether or not this Class A Note may be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
A-3
<PAGE>
The Indenture and this Class A Note shall be deemed to be contracts made
under the laws of the State of New York and shall for all purposes be governed
by, and construed in accordance with, the laws of the State of New York.
A-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: ________________, 199_
COPELCO CAPITAL FUNDING CORP. X
[SEAL]
By:_______________________________________
Authorized Officer
Attest:
______________________________
Trustee's Certificate of Authentication
This is one of the Class A Notes referred to in the within mentioned
Indenture.
_____________________, as Trustee
By:_______________________________________
Authorized Signatory
A-5
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Class A Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Class A Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint __________________, agent to transfer this Class A Note
on the books of the Company. The agent may substitute another to act for him.
Dated: __________________ Signed: _____________________________
_____________________________
(sign exactly as the name
appears on the other side
of this Class A Note)
Signature Guarantee ____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class A Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class A Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class A Note.
A-6
<PAGE>
[FORM OF
CLASS B NOTE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
COPELCO CAPITAL FUNDING CORP. X
_____% CLASS B LEASE-BACKED NOTE
CUSIP No. _________
No. R- $_______________
Copelco Capital Funding Corp. X, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture referred to herein), for value received,
hereby promises to pay to_____________, or registered assigns, the principal sum
of ________________ Dollars ($____________ ), payable in monthly installments
beginning on __________, 1997, in accordance with the Indenture. Interest will
accrue on the unpaid principal hereof from the date of issuance, at the rate of
_____% per annum, until the full amount of principal hereof is otherwise paid or
made available for payment and shall be computed on the basis of twelve 30-day
months and a year of 360 days.
Principal and interest on this Class B Note shall be paid on the [__]th day
of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing __________, 1997, either by check to the registered
address of the Holder of this Class B Note or by wire transfer to an account at
a bank in the United States as the Holder shall specify, as provided more fully
in the Indenture; provided, that the final payment of principal and interest in
respect of the Class B Notes during the Principal Amortization Period shall be
payable to the Holder
A-7
<PAGE>
of this Class B Note only upon presentation and surrender of this Class B Note
at the Corporate Trust Office of the Trustee or at the principal office of any
Paying Agent appointed pursuant to the Indenture.
The Stated Maturity of the Class B Notes is ___________, ____.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Class B Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class B Note is one of a duly authorized issue of Class B Notes of the
Company designated as its "_____% Class B Lease-Backed Notes, Series 1997-A"
(herein called the "Class B Notes"), limited in aggregate principal amount of
$_____________, issued under the Indenture, dated as of ___________, 1997
(herein called the "Indenture"), between the Company and ____________________ as
Trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders and of the terms upon which the Class B Notes are authenticated and
delivered. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings set forth in the Indenture.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class B Notes (but not less than all the Class
B Notes) may be declared due and payable in the manner and with the effect
provided in the Indenture. Notice of such declaration will be given by mail to
Holders, as their names and addresses appear in the Note Register, as provided
in the Indenture. Upon payment of such principal amount together with all
accrued interest, the obligations of the Company with respect to the payment of
principal and interest on this Class B Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of 66 2/3% in aggregate
principal amount of the Company's _____% Class A Lease-Backed Notes, Series
1996-A (the "Class A Notes"), the Class B Notes and the Class C Notes at the
time Outstanding. The Indenture also contains provisions permitting the Holders
of specified percentages
A-8
<PAGE>
in aggregate principal amount of the Class A Notes and the Class B Notes at the
time outstanding, on behalf of all the Holders, to waive compliance by the
Company with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Holder
of this Class B Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Class B Note and of any Class B Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Class B Note
or any Class B Note.
No sale or transfer of this Class B Note may be made unless such sale or
transfer complies with or is exempt from registration requirements of the
Securities Act and applicable state securities laws. Prospective transferees of
this Class B Note will be required to deliver a certificate pursuant to the
terms of the Indenture relating to compliance with the Securities Act and
applicable state securities law.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Class B Note is registrable in the Note Register,
upon surrender of this Class B Note for registration of transfer at the office
or agency of the Trustee in The City of [__________], and at any other office or
agency maintained by the Company for that purpose, duly endorsed by, or
accompanied by a written instrument of transfer in the form satisfactory to the
Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Class B Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Class B Notes are issuable only in registered form without coupons in
minimum denominations of $1,000. As provided in the Indenture and subject to
certain limitations therein set forth, Class B Notes are exchangeable for a like
aggregate principal amount of Class B Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Class B Note is registered as the owner
hereof for all purposes, whether or not this Class B Note may be overdue,
A-9
<PAGE>
and neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
The Indenture and this Class B Note shall be deemed to be contracts made
under the laws of the State of New York and shall for all purposes be governed
by, and construed in accordance with, the laws of the State of New York.
A-10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: ____________, 199_
COPELCO CAPITAL FUNDING CORP. X
[SEAL]
By:_______________________________________
Authorized Officer
Attest:
______________________
Trustee's Certificate of Authentication
This is one of the Class B Notes referred to in the within mentioned
Indenture.
_____________________, as Trustee
By:_______________________________________
Authorized Signatory
A-11
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Class B Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Class B Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _____________________________ , agent to transfer this
Class B Note on the books of the Company. The agent may substitute another to
act for him.
Dated: __________________ Signed: _____________________________
_____________________________
(sign exactly as the
name appears on the other
side of this Class B
Note)
Signature Guarantee_____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class B Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class B Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class B Note.
A-12
<PAGE>
[FORM OF
CLASS C NOTE]
THIS CLASS C NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR
OTHERWISE DISPOSED OF BY THE OWNER HEREOF UNLESS SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE LAWS, AND WILL NOT BE A
"PROHIBITED TRANSACTION" UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"). BY ACCEPTANCE OF THIS CLASS C NOTE, THE HOLDER
AGREES TO BE BOUND BY ALL THE TERMS OF THE INDENTURE.
COPELCO CAPITAL FUNDING CORP. X
_____% CLASS C LEASE-BACKED NOTE
PP No. _________
No. R- $_______________
Copelco Capital Funding Corp. X, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture referred to herein), for value received,
hereby promises to pay to __________, or registered assigns, the principal sum
of __________Dollars ($__________), payable in monthly installments beginning on
__________, 1997, in accordance with the Indenture. Interest will accrue on the
unpaid principal hereof from the date of issuance, at the rate of _____% per
annum, until the full amount of principal hereof is otherwise paid or made
available for payment and shall be computed on the basis of twelve 30-day months
and a year of 360 days.
Principal and interest on this Class C Note shall be paid on the [__]th day
of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing __________, 1997, either by check to the registered
address of the Holder of this Class C Note or by wire transfer to an account at
a bank in the United States as the Holder shall specify, as provided more fully
in the Indenture; provided, that the final payment of principal and interest in
respect of the Class C Notes during the Principal Amortization Period shall be
payable to the Holder of this Class C Note only upon presentation and surrender
of this Class C Note at the Corporate Trust Office of the
A-13
<PAGE>
Trustee or at the principal office of any Paying Agent appointed pursuant to the
Indenture.
The Stated Maturity of the Class C Notes is ___________, ____.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Class C Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Class C Note is one of a duly authorized issue of Class C Notes of the
Company designated as its "_____% Class C Lease-Backed Notes, Series 1997-A"
(herein called the "Class C Notes"), limited in aggregate principal amount of
$_____________, issued under the Indenture, dated as of ___________, 1997
(herein called the "Indenture"), between the Company and ____________________ as
Trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders and of the terms upon which the Class C Notes are authenticated and
delivered. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings set forth in the Indenture.
If an Event of Default under the Indenture has been declared by the
Trustee, the principal of all the Class C Notes (but not less than all the Class
C Notes) may be declared due and payable in the manner and with the effect
provided in the Indenture. Notice of such declaration will be given by mail to
Holders, as their names and addresses appear in the Note Register, as provided
in the Indenture. Upon payment of such principal amount together with all
accrued interest, the obligations of the Company with respect to the payment of
principal and interest on this Class C Note shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of 66 2/3% in aggregate
principal amount of the Company's _____% Class A Lease-Backed Notes, Series
1996-A (the "Class A Notes"), the Class B Notes and the Class C Notes at the
time Outstanding. The Indenture also contains provisions permitting the Holders
of specified percentages in aggregate principal amount of the Class A Notes and
the Class C Notes at the time outstanding, on behalf of all the
A-14
<PAGE>
Holders, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Class C Note shall be
conclusive and binding upon such Holder and upon all future Holders of this
Class C Note and of any Class C Note issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Class C Note or any Class C Note.
No sale or transfer of this Class C Note may be made unless such sale or
transfer complies with or is exempt from registration requirements of the
Securities Act and applicable state securities laws. Prospective transferees of
this Class C Note will be required to deliver a certificate pursuant to the
terms of the Indenture relating to compliance with the Securities Act and
applicable state securities law.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Class C Note is registrable in the Note Register,
upon surrender of this Class C Note for registration of transfer at the office
or agency of the Trustee in The City of [__________], and at any other office or
agency maintained by the Company for that purpose, duly endorsed by, or
accompanied by a written instrument of transfer in the form satisfactory to the
Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Class C Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Class C Notes are issuable only in registered form without coupons in
minimum denominations of $250,000. As provided in the Indenture and subject to
certain limitations therein set forth, Class C Notes are exchangeable for a like
aggregate principal amount of Class C Notes of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Class C Note is registered as the owner
hereof for all purposes, whether or not this Class C Note may be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
A-15
<PAGE>
The Indenture and this Class C Note shall be deemed to be contracts made
under the laws of the State of New York and shall for all purposes be governed
by, and construed in accordance with, the laws of the State of New York.
A-16
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: ____________, 199_
COPELCO CAPITAL FUNDING CORP. X
[SEAL]
By:_______________________________________
Authorized Officer
Attest:
______________________
Trustee's Certificate of Authentication
This is one of the Class C Notes referred to in the within mentioned
Indenture.
_____________________, as Trustee
By:_______________________________________
Authorized Signatory
A-17
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Class C Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Class C Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _________________________ , agent to transfer this Class
C Note on the books of the Company. The agent may substitute another to act for
him.
Dated: __________________ Signed: _____________________________
_____________________________
(sign exactly as the
name appears on the other
side of this Class C
Note)
Signature Guarantee ____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Class C Note, it is recommended that you fill in the name of the new
owner in the "Assignee" blank. Alternatively, instead of using this Assignment
Form, you may sign a separate "power of attorney" form and then mail the
unsigned Class C Note and the signed "power of attorney" in separate envelopes.
For added protection, use certified or registered mail for a Class C Note.
A-18
<PAGE>
EXHIBIT B
---------
[FORM OF
INVESTOR'S LETTER]
(Date)
Copelco Capital Funding Corp. X
700 East Gate Center
Mount Laurel, New Jersey 08110
Ladies and Gentlemen:
We propose to purchase $__________ in original aggregate principal amount
of Copelco Capital Funding Corp. X _____% Class C Lease-Backed Notes, Series
1997-A, (the "Class C Notes"). The Class C Notes were issued pursuant to an
Indenture (the "Indenture"), dated as of [May] 1, 1997, among Copelco Capital
Funding Corp. X and [Manufacturers and Traders Trust Company]. Capitalized terms
used herein but not otherwise defined shall have the same meaning as in the
Indenture.
In connection with our proposed purchase of Class C Notes, we agree to the
following terms and conditions and make the representations and warranties
stated herein with the express understanding that they will be relied upon by
Copelco Capital Funding Corp. X and ____________________.
1. We understand that the Class C Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") or registered or
qualified under any state securities or "Blue Sky" laws and are being sold to us
in a transaction that is exempt from the registration requirements of the
Securities Act and the registration or qualification requirements of such state
laws.
2. We are (Check one):
___ (a) a "Qualified Institutional Buyer" (as defined in Rule 144A under
the Securities Act), in the case of a transfer of Certificates to
be made in reliance on Rule 144A.
___ (b) an institutional investor that has such knowledge and experience
in financial and business matters as to be capable of evaluating
the merits and risks of an investment in the Class C Notes and is
able to bear the economic risk of investment in the Class C
Notes.
B-1
<PAGE>
___ (c) an "accredited investor" as defined in Rule 501 promulgated under
the Securities Act that has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of investment in the Class C Notes and is able
to bear the economic risk of investment in the Class C Notes.
3. We agree that, to the extent that Section 2(a) of this letter is
applicable, that the Class C Notes will not be transferred unless such transfer
is made in reliance on Rule 144A or unless some other exemption from the
registration requirements of the Securities Act, or any applicable state
securities law, is available.
4. To the extent that Section 2(b) or (c) of this letter is applicable,
that we are acquiring the Class C Notes (i) solely for investment purposes for
our own account or for accounts as to which we exercise sole investment
discretion and not with a view to any resale or distribution of the Class C
Notes in whole or in part, or (ii) otherwise for purposes which will not
constitute a distribution of securities under the Securities Act, or under any
state securities or "Blue Sky" laws subject, nevertheless, to the understanding
that disposition of our property shall at all times be and remain within our
control, and under no circumstances will we attempt to sell, pledge, hypothecate
or otherwise transfer all or any portion of our interest in the Class C Notes
except in accordance with the terms of the Class C Notes and the Indenture.
5. We agree not to sell the Class C Notes in whole or in part, unless the
subsequent purchaser agrees to be subject to the same representations and
warranties as were applicable to us in acquiring the Class C Notes.
6. We understand that each of the Class C Notes shall bear a legend to
substantially the following effect:
THIS CLASS C NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR
OTHERWISE DISPOSED OF BY THE OWNER HEREOF UNLESS SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE LAWS, AND WILL NOT BE A
"PROHIBITED TRANSACTION" UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"). BY ACCEPTANCE OF THIS CLASS C NOTE, THE HOLDER
AGREES TO BE BOUND BY ALL THE TERMS OF THE INDENTURE.
B-2
<PAGE>
7. We understand that there is no public market for the Class C Notes and
it is unlikely that such market will develop.
8. We are authorized to invest in the Class C Notes.
9. We certify that, in acquiring the Class C Notes, we have complied with
any applicable guidelines or regulations for or limitations on investments
established by each regulatory agency or body, if any, which has jurisdiction
over investments made by us and that our acquisition and retention of the Class
C Notes will not violate the limitations on possession contained in any such
guidelines, regulations or limitations.
10. We further agree to be bound by all of the terms and conditions of
ownership of the Class C Notes contained in the Indenture, as the same may be
amended from time to time.
Very truly yours,
[TRANSFEREE]
B-3
<PAGE>
June 10, 1997
Copelco Capital Funding Corp. X
East Gate Drive
Mount Laurel, New Jersey 08054-5400
Re: Copelco Capital Funding Corp. X
(File No. 333-23679)
Ladies and Gentlemen:
We have acted as special counsel for Copelco Capital Funding Corp. X, a
Delaware corporation (the "Issuer"), in connection with the preparation of the
Registration Statement on Form S-1 (the "Registration Statement"), filed with
the Securities and Exchange Commission contemporaneously herewith under the
Securities Act of 1933, as amended (the "Act"), which Registration Statement
includes a Prospectus (the "Prospectus") for the registration under the Act of
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 and Class B Lease-Backed Notes, Series 1997-A
(the "Offered Notes") to be issued pursuant the Indenture dated on or about May
1, 1997 ("Indenture") between the Issuer and Manufacturers and Traders Trust
Company, as Indenture Trustee (substantially in the form filed as an Exhibit to
the Registration Statement).
In that regard, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion.
The opinions expressed below are subject to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
We are admitted to the Bar of the State of New York and we express no
opinion as to the laws of any other jurisdiction except as to matters that are
governed by Federal law or the laws of the State of New York or the Delaware
General Corporate Law. All opinions expressed herein are based on laws,
regulations and policy guidelines currently in force and may be affected by
future regulations.
<PAGE>
Based upon the foregoing, we are of the opinion that when the Indenture has
been duly authorized by the Indenture Trustee and duly executed and delivered by
the Indenture Trustee and when the Offered Notes have been duly executed and
authenticated in accordance with the provisions of the Indenture, and issued
and sold as contemplated in the Registration Statement and the Prospectus, as
amended or supplemented, delivered pursuant to Section 5 of the Act in
connection therewith, such Offered Notes will be legally and validly
issued and the holders of such Offered Notes will be entitled to the benefits of
such Indenture.
This opinion is furnished by us as counsel to the Issuer and is solely for
the benefit of the addressee hereof. It may not be relied upon by any other
person or for any other purpose without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this opinion, we do not concede that we are
experts within the meaning of the Act or the rules and regulations therewith, or
that this consent is required by Section 7 of the Act.
Very truly yours,
/s/ Dewey Ballantine
--------------------
Dewey Ballantine
2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COPELCO CAPITAL, INC.,
SELLER AND SERVICER
AND
COPELCO CAPITAL FUNDING CORP. X,
PURCHASER
-------------------------
FORM OF SALES AND SERVICING AGREEMENT
Dated as of [May 1], 1997
-------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ALL RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT OF COPELCO CAPITAL
FUNDING CORP. X HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN
FAVOR OF [MANUFACTURERS AND TRADERS TRUST COMPANY], AS TRUSTEE, UNDER THE
INDENTURE DATED AS OF [MAY 1], 1997, FOR THE BENEFIT OF THE PERSONS REFERRED TO
THEREIN.
<PAGE>
TABLE OF CONTENTS
Page
----
R E C I T A L S...................................................... 1
A G R E E M E N T S.................................................. 2
SECTION 1. PURCHASE AND SALE........................................ 2
1.01 Purchase of Leases....................................... 2
1.02 Consideration and Payment................................ 2
1.03 Capital Contribution..................................... 2
1.04 Grant of Security Interest............................... 2
1.05 Servicer to Act as Custodian............................. 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE
SELLER......................................................... 4
2.01 Corporate Organization and Authority..................... 4
2.02 Business and Property.................................... 5
2.03 Financial Statements..................................... 5
2.04 Equipment and Leases..................................... 5
2.05 Payments................................................. 9
2.06 Full Disclosure.......................................... 9
2.07 Pending Litigation....................................... 10
2.08 Title to Properties...................................... 10
2.09 Transactions Legal and Authorized........................ 10
2.10 Governmental Consent..................................... 11
2.11 Taxes.................................................... 11
2.12 Compliance with Law...................................... 11
2.13 ERISA.................................................... 12
2.14 Ability to Perform....................................... 12
2.15 Ordinary Course; No Insolvency........................... 12
2.16 Assets and Liabilities................................... 13
2.17 Fair Consideration....................................... 13
2.18 Ability to Pay Debts..................................... 13
2.19 Bulk Transfer Provisions................................. 13
2.20 Transfer Taxes........................................... 13
2.21 Principal Executive Office............................... 14
2.22 Servicing Provisions Customary........................... 14
2.23 Nonconsolidation......................................... 14
2.24 Sale Treatment........................................... 15
2.25 Leases are Chattel Paper................................. 15
SECTION 3. ADMINISTRATION OF LEASES................................. 15
3.01 Servicer to Act.......................................... 15
3.02 Lease Amendments and Modifications....................... 18
Non-Performing Leases.................................... 19
3.04 Costs of Servicing; Servicing Fee;
Administrative Expenses.................................. 20
3.05 Other Transactions....................................... 21
i
<PAGE>
Page
----
SECTION 4. SERVICER ADVANCES AND SELLER'S SUPPORT................... 21
4.01 Late Lease Payments...................................... 21
4.02 Early Termination Leases................................. 21
4.03 Indemnification.......................................... 22
4.04 Repurchases; Other Payments.............................. 22
4.05 Payment Advices.......................................... 24
SECTION 5. INFORMATION TO BE PROVIDED............................... 24
5.01 Monthly Status Reports; Servicing Reports................ 24
5.02 Certain Reports and Calculations......................... 25
5.03 Annual Independent Public Accountant's
Report................................................... 26
SECTION 6. THE SERVICER............................................. 27
6.01 Merger or Consolidation of the Servicer.................. 27
6.02 Limitation on Liability of the Servicer and
Others................................................... 27
6.03 Servicer Not to Resign or Be Removed..................... 27
6.04 Financial and Business Information....................... 28
6.05 Officers' Certificates................................... 30
6.06 Inspection............................................... 30
6.07 Servicer Records......................................... 31
SECTION 7. THE SELLER............................................... 31
7.01 Merger or Consolidation of the Seller.................... 31
7.02 Control of Company....................................... 31
7.03 Financial and Business Information....................... 31
7.04 Officers' Certificates................................... 33
7.05 Inspection............................................... 33
7.06 Books and Records........................................ 34
7.07 Communications........................................... 34
SECTION 8. DEFAULT.................................................. 34
8.01 Servicer Events of Default............................... 34
8.02 Termination.............................................. 36
8.03 Trustee to Act; Appointment of Successor................. 37
8.04 Servicer to Cooperate.................................... 38
8.05 Notification to Noteholders.............................. 38
8.06 Remedies Not Exclusive................................... 38
SECTION 9. SUBSTITUTION AND ADDITION OF LEASES...................... 39
9.01 Substitution and Addition................................ 39
9.02 Procedure................................................ 41
9.03 Objection and Repurchase................................. 42
9.04 Seller's and Servicer's Subsequent
Obligations.............................................. 42
SECTION 10. ASSIGNMENT.............................................. 42
10.01 Assignment to Trustee................................ 43
10.02 Assignment by Seller or Servicer..................... 43
ii
<PAGE>
SECTION 11. NATURE OF SELLER'S OBLIGATIONS
AND SECURITY THEREFOR...................... 43
11.01 Seller's Obligations Absolute...................... 43
11.02 Security for Obligations........................... 44
11.03 Further Assurances; Financing
Statements............................................... 44
SECTION 12. DEFINITIONS............................................. 45
SECTION 13. INTER-COMPANY LOANS..................................... 51
13.01 Inter-Company Loans................................ 51
SECTION 14. MISCELLANEOUS........................................... 51
14.01 Continuing Obligations............................. 51
14.02 GOVERNING LAW...................................... 51
14.03 Successors and Assigns............................. 51
14.04 Modification....................................... 52
14.05 No Proceedings..................................... 52
14.06 Notices............................................ 52
14.07 Counterparts....................................... 52
Schedule 1 - Subsidiaries of the Seller
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Inter-Company Loan Note
Exhibit C - Form of Servicing Report
iii
<PAGE>
SALES AND SERVICING AGREEMENT
This SALES AND SERVICING AGREEMENT is made and dated as of [May 1,] 1997,
by and between COPELCO CAPITAL FUNDING CORP. X, a Delaware corporation, as
purchaser hereunder (the "Company"), and COPELCO CAPITAL, INC., a Delaware
corporation, as seller (in such capacity, the "Seller") and servicer (in such
capacity, the "Servicer") hereunder.
R E C I T A L S
A. The Seller wishes to sell and assign to the Company, and the Company
wishes to purchase from the Seller, all right, title and interest of the Seller
in, to and under the Leases (such term and all other capitalized terms used
herein having the meanings ascribed thereto in Section 12 hereof unless
otherwise indicated).
B. Contemporaneously with such sale and assignment, the Seller wishes to
contribute to the Company all right, title and interest of the Seller in and to
each item of Equipment subject to each Lease.
C. Pursuant to the Indenture, the Company is issuing one class of ______%
Class A-1 Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-1 Notes"), one class of ______% Class A-2
Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-2 Notes"), one class of ______% Class A-3
Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-3 Notes"), one class of ______% Class A-4
Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-4 Notes"), one class of _____% Class B
Leased-Backed Notes, Series 1997-A (the "Class B Notes"), in the aggregate
principal amount of $__________ and one class of ______% Class C
Lease-Backed Notes, Series 1997-A, in the aggregate principal amount of
$__________ (the "Class C Notes") (the Class A Notes, the Class B Notes
and the Class C Notes are referred to collectively as the "Notes"), the proceeds
of which are being used by the Company to make payment to the Seller for the
Leases.
D. Pursuant to the Indenture, the Company is granting, inter alia, to the
Trustee, for the benefit of the holders from time to time of the Notes, a
security interest in all right, title and interest of the Company in, to and
under the Leases, the interests in the Equipment and this Sales and Servicing
Agreement.
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A G R E E M E N T S
SECTION 1. PURCHASE AND SALE
1.01 Purchase of Leases. By their execution and delivery of this Sales and
Servicing Agreement, the Seller hereby sells and assigns to the Company, and the
Company hereby purchases from the Seller without recourse (except to the extent
of the Seller's repurchase obligations as set forth herein), all of the Seller's
right, title and interest in and to each of the Leases (including the right to
receive all payments due or to become due thereunder since the Cut-Off Date).
1.02 Consideration and Payment. The purchase price of the Leases (including
the right to receive all payments due or to become due thereunder since the
Cut-Off Date) is $________________.
1.03 Capital Contribution. The Seller and the Company each acknowledge and
confirm that contemporaneously with the sale and purchase of the Leases as
hereinabove provided, the Seller, as the sole stockholder of the Company, is
contributing and transferring to the Company, and in connection with each sale,
transfer and assignment of Additional Leases and Substitute Leases the Seller
will contribute and transfer to the Company, without recourse, all right, title
and interest of the Seller in and to each item of Equipment subject to each
Lease, Additional Lease and Substitute Lease. After such contribution and
transfer by the Seller to the Company, all right, title and interest of the
Seller in and to each item of Equipment subject to each Lease shall be vested in
the Company.
1.04 Transfer of Leases; Grant of Security Interest. It is the intention
of the parties hereto that the transfer of Leases, Additional Leases, Substitute
Leases, Lease Payments and all other amounts due or becoming due with respect
thereto and Equipment (or interests therein) being made hereunder shall
constitute a purchase and sale or capital contribution and not a loan. The
Seller shall take no action inconsistent with the Company's ownership of the
Leases, the Lease Receivables and all other amounts due or becoming due with
respect thereto and the interests in the Equipment, the Seller shall indicate in
its records that ownership of each of the Leases, the Lease Receivables and the
interests in the Equipment is held by the Company, and the Seller shall respond
to any inquiries from third parties by indicating that its ownership in the
Leases, Additional Leases, Substitute Leases, the Lease Receivables and all
other amounts due or becoming due with respect thereto and the interests in the
Equipment is held by the Company and pledged to the Trustee. In the event,
however, that a court
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of competent jurisdiction were to hold that any transaction evidenced hereby
constitutes a loan and not a purchase and sale or capital contribution, it is
the intention of the parties hereto that this Agreement shall constitute a
security agreement under applicable law and that the Seller shall be deemed to
have granted to the Company and the Trustee a first priority security interest
in the Leases and all Lease Payments, Casualty Payments, Termination Payments
and other amounts now due or becoming due with respect thereto since the Cut-Off
Date (other than any prepayments of rent required pursuant to the terms of any
Lease at or before the commencement of the Lease and payments due before the
Cut-Off Date) and all Additional Leases and Substitute Leases and all Lease
Payments, Casualty Payments, Termination Payments and other amounts due or
becoming due with respect thereto since the effective date of their respective
addition or substitution (other than any prepayments of rent required by the
terms of any Lease at or before the commencement of the Lease and any payments
due before the effective date of such addition or substitution), (b) all rights
of the Debtor to or under any guarantees of or collateral (including all rights
of the Debtor in any security deposits) for the Lessee's obligations under any
Lease, (c) all interests of the Debtor in the Equipment at any time subject to
any Lease and (d) all proceeds of the conversion, whether voluntary or
involuntary, of any of the foregoing into cash or other property.
1.05 Servicer to Act as Custodian. (a) The Servicer shall hold and
acknowledges that it is holding the Leases and all other Granted Assets that it
may from time to time receive hereunder as custodian for the Trustee.
(b) The Servicer shall perform its duties under this Section 1.05 in
accordance with the standard set forth in Section 3.01 as such standard applies
to servicers acting as custodial agents. The Servicer shall promptly report to
the Trustee any failure by it to hold the complete Leases as herein provided and
shall promptly take appropriate action to remedy any such failure but only to
the extent (i) any such failure is caused by the acts or omissions of the
Servicer and (ii) such remedial action is otherwise within its capabilities or
control. As custodian, the Servicer shall have and perform the following powers
and duties:
(A) hold the Leases on behalf of the Trustee for the benefit of the
Noteholders, maintain accurate records pertaining to each Lease to enable
it to comply with the terms and conditions of this Sales and Servicing
Agreement, and maintain a current inventory thereof;
(B) implement policies and procedures in accordance with the
Servicer's normal business practices with respect to the handling and
custody of the Leases so that the integrity and physical possession of the
Leases will be maintained; and
(C) attend to all details in connection with maintaining custody of
the Leases on behalf of the Trustee on behalf of the Noteholders.
(c) In acting as custodian of the Leases, the Servicer agrees further that
it does not and will not have or assert any beneficial ownership interest in
such Leases. The Servicer on behalf of the Noteholders shall mark conspicuously
each original contractual document with a Lessee, and its master data processing
records evidencing each Lease with a legend, acceptable to the Trustee,
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evidencing that all right, title and interest in the Leases has been granted to
the Trustee as provided in the Indenture.
(d) The Servicer agrees to maintain the Leases at either its office in Mt.
Laurel, New Jersey or Mahwah, New Jersey or at such other offices of the
Servicer as shall from time to time be identified by prior written notice to the
Trustee. Subject to the foregoing, the Servicer may temporarily move individual
Leases or any portion thereof without notice as necessary to conduct collection
and other servicing activities.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants as follows:
2.01 Corporate Organization and Authority.
The Seller:
(a) is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation,
(b) has all requisite power and authority and all necessary licenses and
permits to own and operate its properties and to carry on its business
as now conducted (except where the failure to have such licenses and
permits would not have a material adverse effect on the business or
condition (financial or otherwise) of the Seller or impair the
enforceability of any Lease) and to enter into and perform its
obligations under this Sales and Servicing Agreement, and the
transactions contemplated hereby, including performance of the duties
of the Servicer and the Seller's support obligations hereunder, and
(c) has duly qualified and is authorized to do business and is in good
standing as a foreign corporation in each jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary (except where the failure to be so qualified
or in good standing
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would not have a material adverse effect on the Trust Estate or the
business or condition (financial or otherwise) of the Seller or impair
the enforceability of any Lease).
2.02 Business and Property. The Prospectus and the Private Placement
Memorandum, accurately describe in all material respects the general nature of
the business of the Seller. The Seller has no subsidiaries other than those
listed on Schedule 1 hereto.
2.03 Financial Statements. (a) The consolidated balance sheet of the Seller
and its consolidated subsidiaries for the fiscal periods ended December 31,
1996 and December 31, 1995 and the related consolidated statements of income,
retained earnings and cash flow for the respective period and fiscal years ended
on such dates, all accompanied by reports thereon containing opinions without
qualification, except as therein noted, by KPMG Peat Marwick, independent
certified public accountants, and the unaudited interim consolidated balance
sheet of the Seller and its consolidated subsidiaries as of March 31, 1997 and
the related consolidated statements of income, retained earnings and cash flow
for the three months ended on such date have been prepared in accordance with
generally accepted accounting principles consistently applied, and present
fairly the financial position of the Seller and its subsidiaries as of such
dates and the results of their operations for such periods.
(b) Except as disclosed in the Prospectus, the Private Placement Memorandum
and the financial statements referred to in the preceding Section 2.03(a), since
December 31, 1996 there has been no change in the business, condition or
prospects (financial or otherwise) of the Seller except changes in the ordinary
course of business, none of which individually or in the aggregate has been
materially adverse. Neither the Seller nor any of its subsidiaries has any
material liabilities or obligations not incurred in the ordinary course of
business other than those disclosed in the financial statements referred to in
Section 2.03(a) or for which adequate reserves are reflected in such financial
statements and certain contingent obligations of the Seller relating to other
asset securitization transactions involving the Seller.
2.04 Equipment and Leases. (a) Prior to the date of each transfer of any
Leases and contribution of Equipment in accordance with Sections 1.01 and 1.03,
respectively, the Seller purchased each item of Equipment from either (i) the
manufacturer or other supplier following
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receipt of an invoice from such manufacturer or supplier or (ii) a Lessee
following confirmation that such item of Equipment was on such Lessee's
premises. The Seller has paid in full, to the manufacturer or supplier or
Lessee, as the case may be, the purchase price and any related charges in
connection with the acquisition of the Equipment. The sale to the Company of the
Leases and all of the Seller's right, title and interest in each item of
Equipment does not violate the terms or provisions of any Lease or any other
agreement to which the Seller is a party or by which it is bound.
(b) Upon payment of the consideration described in Section 1.02 hereof,
issuance of its common stock as described in Section 1.03 hereof, and transfer
of the Seller's interest in the Equipment, the Company will (i) be the legal
owner of the Leases (including the right to receive all payments due or to
become due thereunder), (ii) have good title to each item of the Equipment
subject to any Lease other than a Nominal Buy-Out Lease, and (iii) have a valid
security interest in each item of Equipment with a purchase price in excess of
$25,000 subject to a Nominal Buy-Out Lease. At such time, the Leases (including
the right to receive all payments due or to become due thereunder) and the
Seller's interest in the Equipment will be free and clear of all Liens other
than the rights of each Lessee under the Lease to which such Lessee is a party
and the Lien created by the Indenture; and there will be no delinquent taxes or
other outstanding charges affecting the Equipment which are or may be Liens
prior to, or equal or coordinate with, the Lien of the Trustee under the
Indenture.
(c) At the time of each transfer of a Lease hereunder, each such Lease (i)
is or will be a triple-net lease and (ii) is or will be a legal, valid and
binding full recourse obligation of the Lessee thereunder, enforceable by the
Company (and by the Trustee as assignee of the Company) against such Lessee in
accordance with the terms thereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights and by general equity principles,
is noncancellable by the Lessee and is in full force and effect, and any and all
requirements of any federal, state or local law, including, without limitation,
usury, truth-in-lending and equal credit opportunity laws applicable to each
Lease have been complied with; and the Seller has no knowledge (after due
inquiry) of any challenge, dispute or claim by or against the Lessee under or
affecting any Lease or of the bankruptcy or insolvency of any such Lessee. As of
the initial Determination Date, or the effective date of the transfer of any
Additional Lease
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or Substitute Lease, each Lessee has paid at least one installment of rent under
its respective Lease.
(d) At the time that any item of Equipment (including the Seller's security
interest in any item not owned by it) is contributed hereunder, the Seller will
have no knowledge that any item of the Equipment has suffered any loss or damage
which has not been repaired.
(e) Each Lease requires the Lessee thereunder to maintain insurance on the
Equipment subject thereto in an amount at least equal to the fair market value
thereof.
(f) In addition to the insurance maintained by the Lessees with respect to
the Equipment, the Seller (or an Affiliate of the Seller) maintains (i) one or
more casualty insurance policies which, in the aggregate, are in an amount not
less than the aggregate Outstanding Principal Amount of the Notes, (ii) a
general liability insurance policy in the aggregate amount of $1,000,000 and
(iii) an excess liability insurance policy in umbrella form in the aggregate
amount of $10,000,000. Each of such policies is in full force and effect and
covers all equipment owned by the Seller and the Company. All premiums in
respect of such policies have been paid. Each of the Trustee and the Company are
named as loss payees and additional insureds, as their interests may appear, on
such casualty and liability policies maintained by the Seller.
(g) At the time of each transfer of a Lease hereunder, no Lease had
outstanding rent which was [63] or more days past due as of the Cut-Off Date.
(h) Each Lease was entered into or acquired by the Seller in accordance
with the Seller's regular credit approval process described in the Prospectus,
and no selection procedures adverse to the credit quality of the Leases were
employed in selecting the Leases for sale under this Sales and Servicing
Agreement.
(i) The obligation of each Lessee to pay rent under each of the Leases
throughout the term thereof is and will be unconditional, without any right of
setoff by such Lessee and without regard to any event affecting the Equipment,
the obsolescence of any Equipment, any claim of such Lessee against the Company,
the Seller or the Servicer or any change in circumstance of such Lessee or any
other circumstance whatsoever except to the extent that in the event of a
casualty of any item of Equipment, the Lessee is obligated to pay, in lieu of
the future Lease Payments with respect to such item, an amount which equals or
exceeds the Discounted Present Value of the Lease as of the Payment Date next
succeeding the making of such payment.
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(j) In the case of each Lease which consists of a master lease and one or
more exhibits or schedules thereto, the Seller has neither assigned such master
lease in its entirety, nor delivered physical possession of such master lease,
to any Person other than the Company or the Trustee (including the trustee under
another indenture in a transaction substantially similar to the transaction
contemplated hereby, which other indenture provides that the lien thereof on
such master lease extends only to such master lease insofar as it relates to
lease schedules which are not part of the Trust Estate).
(k) As of the time of each transfer of Leases and Equipment hereunder,
there are no facts or circumstances which give rise, or would give rise at any
time in the future, to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, to obligations of any Lessee, including the
obligation of such Lessee to pay all amounts due with respect to any Lease to
which such Lessee is a party, and neither the operation of any of the terms of
any Lease or the exercise of any right thereunder will render such Lease
unenforceable in whole or in part or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, and no such right of
rescission, setoff, counterclaim or defense has been asserted with respect
thereto.
(l) As of the time of each transfer of Leases and Equipment hereunder, no
Lease has been amended, altered or modified in any respect, except in writing
and copies of all such writings are attached to the Lease delivered to the
Trustee.
(m) As of the time of each transfer of Leases and Equipment hereunder, no
Lessee will have been released, in whole or in part, from any of its obligations
in respect of any Lease; no Lease will have been satisfied, cancelled or
subordinated, in whole, or in part, or rescinded, and no Equipment covered by
any Lease will have been released from such Lease, in whole or in part, nor has
any instrument been executed that would effect any such satisfaction, release,
cancellation, subordination or rescission.
(n) As of the time of each transfer of Leases and Equipment hereunder, each
Lease was either (a) originated by the Seller in the ordinary course of its
business or (b) purchased by the Seller for value and taken into possession
prior to the Cut-Off Date in the ordinary course of its business.
(o) No Lease was originated in or is subject to the laws of any
jurisdiction whose laws would make the
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transfer and sale thereof under this Sales and Servicing Agreement unlawful.
(p) All parties to each Lease had authority and capacity to execute such
Lease.
(q) None of the Leases is a consumer lease and each Lessee has accepted the
Equipment leased to it.
(r) The Booked Residual Value of the Equipment as of the Cut-Off Date
equals $70,790,509.72.
(s) All parties to each Lease had all requisite authority and capacity to
execute such Lease.
(t) As of the Cut-Off Date, the Final Lease Payment on each Lease was due
and payable on or prior to _________.
[(u) There is only one original of each Lease for purposes of the UCC as in
effect in New Jersey and in New York and such counterpart will be delivered to
the Servicer on or before the Closing Date.]
2.05 Payments. (a) The aggregate amount of Lease Payments payable by the
Lessees under the Leases during each lease payment period, including amounts on
deposit in the Reserve Account, is sufficient to cover the Servicing Fee and pay
the principal and interest on the Notes, as such payments become due and
payable.
(b) The portfolio detail delivered or to be delivered to the Trustee on or
prior to the Closing Date (i) accurately sets forth, as of the Cut-Off Date, the
amount of each Lease Payment due under each of the Leases and the month in which
such Lease Payment is to be paid in accordance with the terms of the Lease under
which the same is to be paid, (ii) accurately sets forth, as of the Cut-Off
Date, the information with respect to certain other characteristics of the
Leases and the Equipment described in such portfolio detail and (iii) is
otherwise true and correct in all respects.
2.06 Full Disclosure. The Prospectus and the Private Placement Memorandum
(including, without limitation, the statistical and descriptive information with
respect to the initial Leases, Lessees and Equipment), as of their respective
dates, do not contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. There is no fact
peculiar to the Seller or any Affiliate of the Seller or, to the knowledge of
the Seller, any Lease, Lessee or item of Equipment, which the Seller has not or
will not disclose in the Prospectus or the Private Placement Memorandum which
materially affects adversely nor, so far as the Seller can now reasonably
foresee, will materially
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affect adversely the ability of the Seller to perform the transactions
contemplated by this Sales and Servicing Agreement.
2.07 Pending Litigation. There are no proceedings or investigations
pending, or to the knowledge (after due inquiry) of the Seller threatened,
against or affecting the Seller or any subsidiary in or before any court,
governmental authority or agency or arbitration board or tribunal, including,
but not limited to, any such proceeding or investigation with respect to any
environmental or other liability resulting from the ownership or use of any of
the Equipment, which, individually or in the aggregate, involve the possibility
of materially and adversely affecting the properties, business, prospects,
profits or condition (financial or otherwise) of the Seller and its
subsidiaries, or the ability of the Seller to perform its obligations under this
Sales and Servicing Agreement. The Seller is not in default with respect to any
order of any court, governmental authority or agency or arbitration board or
tribunal.
2.08 Title to Properties. Immediately following the transfer by the Seller
to the Company of the Leases and the Seller's interest in the Equipment, the
Leases (including the right to receive all payments due or to become due
thereunder) and the interest in the Equipment will be free and clear of all
Liens, except the Lien on the Trust Estate in favor of the Trustee granted
pursuant to the Indenture (or the Lien in favor of the Company which is assigned
to the Trustee pursuant to the Indenture).
2.09 Transactions Legal and Authorized. The transfer by the Seller of all
of its right, title and interest in and to each item of Equipment and each Lease
(including the right to receive all payments due or to become due thereunder)
and compliance by the Seller with all of the provisions of this Sales and
Servicing Agreement:
(a) have been duly authorized by all necessary corporate action on the
part of the Seller, and do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of the Seller except such as have been duly obtained;
(b) are within the corporate powers of the Seller; and
(c) are legal and will not conflict with, result in any breach in any of
the provisions of, constitute a default under,
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or result in the creation of any Lien upon any property of the Seller
under the provisions of, any agreement, charter instrument, by-law or
other instrument to which the Seller is a party or by which it or its
property may be bound or result in the violation of any law,
regulation, rule, order or judgment applicable to the Seller or its
properties, or any order to which the Seller or its properties is
subject, of or by any government or governmental agency or authority.
2.10 Governmental Consent. No consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority is
necessary or required on the part of the Seller in connection with the execution
and delivery of this Sales and Servicing Agreement or the sale of the Leases and
contribution of the Equipment.
2.11 Taxes. (a) All tax returns required to be filed by the Seller or any
subsidiary in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Seller or any
subsidiary, or upon any of their respective properties, income or franchises,
shown to be due and payable on such returns have been paid. To the best of the
Seller's knowledge all such tax returns were true and correct and neither the
Seller nor any subsidiary knows of any proposed additional tax assessment
against it in any material amount nor of any basis therefor.
(b) The provisions for taxes on the books of the Seller and each of its
subsidiaries are in accordance with generally accepted accounting principles.
2.12 Compliance with Law.
The Seller:
(a) is not in violation of any laws, ordinances, governmental rules
or regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of
its property or to the conduct of its business; and
(c) is not in violation in any material respect of any term of any
agreement, charter instrument, by-law or other
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instrument to which it is a party or by which it may be bound,
which violation or failure to obtain might materially adversely affect the
business or condition (financial or otherwise) of the Seller and its
subsidiaries.
2.13 ERISA. (a) The present value of all benefits vested under all
"employee pension benefit plans," as such term is defined in Section 3 of ERISA,
maintained by or contributed to by the Seller and its Related Persons (other
than multi-employer plans as such term is defined in Section 3 of ERISA), as
from time to time in effect (herein called the "Pension Plans"), does not exceed
the value of the assets of the Pension Plans allocable to such vested benefits
(based on the value of such assets as of [December 31, 1994,] [need
confirmation] the last annual valuation date);
(b) No Prohibited Transactions, Accumulated Funding Deficiencies,
Withdrawals or Reportable Events have occurred with respect to any Pension Plans
that, in the aggregate, could subject the Seller to any material tax, penalty or
other liability; and
(c) No notice of intent to terminate a Pension Plan under a distress
termination has been filed, nor has the PBGC instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has
occurred or condition exists which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan.
2.14 Ability to Perform. At the date hereof, the Seller does not believe,
nor does it have any reasonable cause to believe, that it cannot perform each
and every covenant contained in this Sales and Servicing Agreement.
2.15 Ordinary Course; No Insolvency. The transactions contemplated by the
Notes, the Indenture and this Sales and Servicing Agreement are being
consummated by the Seller in furtherance of the Seller's ordinary business
purposes and constitute a practical and reasonable course of action by the
Seller designed to improve the financial position of the Seller, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. The Seller will not, either as a result of
the transaction contemplated by this Sales and Servicing Agreement, or
immediately before or after such transaction, be insolvent or have an
unreasonably small capital for the conduct of its business and the payment of
anticipated obligations.
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2.16 Assets and Liabilities. (a) Both immediately before and after any
transfer of Leases (including the right to receive all payments due or to become
due thereunder) and the transfer of the interests in the Equipment contemplated
by this Sales and Servicing Agreement, the present fair salable value of the
Seller's assets was or will be in excess of the amount that will be required to
pay the Seller's probable liabilities as they then exist and as they become
absolute and matured; and
(b) Both immediately before and after any transfer of Leases (including the
right to receive all payments due or to become due thereunder) and the transfer
of the interests in the Equipment contemplated by this Sales and Servicing
Agreement, the sum of the Seller's assets was or will be greater than the sum of
the Seller's debts, valuing the Seller's assets at a fair salable value.
2.17 Fair Consideration. The consideration received by the Seller, in
exchange for the Leases (including the right to receive all payments due or to
become due thereunder) and the transfer of its interests in the Equipment, is
fair consideration having value equivalent to or in excess of the value of the
assets being transferred by the Seller.
2.18 Ability to Pay Debts. Neither as a result of the transaction
contemplated by this Sales and Servicing Agreement nor otherwise does the Seller
believe that it will incur debts beyond its ability to pay or which would be
prohibited by its charter documents or by-laws. The Seller's assets and cash
flow enable it to meet its present obligations in the ordinary course of
business as they become due.
2.19 Bulk Transfer Provisions. The sale, transfer, assignment and
conveyance of the Leases and its interests in the Equipment by the Seller
pursuant to this Sales and Servicing Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any applicable
jurisdiction.
2.20 Transfer Taxes. The sale, transfer, assignment and conveyance of the
Leases (including all payments due or to become due thereunder) and its
interests in the Equipment by the Seller pursuant to this Sales and Servicing
Agreement is not subject to and will not result in any tax, fee or governmental
charge payable by the Seller to any federal, state or local government
("Transfer Taxes"). In the event that the Company receives actual notice of any
Transfer Taxes arising out of the transfer, assignment and conveyance of the
Leases and/or its interests in the Equipment, on written demand by the Company,
or upon the
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Seller otherwise being given notice thereof, the Seller shall pay, and otherwise
indemnify and hold the Company, the Trustee and the holders of the Notes
harmless, on an after-tax basis, from and against any and all such Transfer
Taxes (it being understood that the holders of the Notes and the Trustee shall
have no obligation to pay such Transfer Taxes).
2.21 Principal Executive Office. The principal executive office of each of
the Seller and the Servicer is located at One International Boulevard, Mahwah,
New Jersey 07430-0631.
2.22 Servicing Provisions Customary. The servicing arrangements hereunder,
including without limitation the terms and conditions pursuant to which the
Seller will act as Servicer and the Servicing Fee to be paid to the Seller, are
consistent with the arrangements and customary practices of the Seller when
providing comparable services to non-affiliated entities and of other servicers
in the equipment leasing industry.
2.23 Nonconsolidation. The Seller is and at all times since its
incorporation has been operated in such a manner that it would not be
substantively consolidated with the Company, such that the separate existence of
the Seller and the Company would be disregarded in the event of a bankruptcy or
insolvency of the Seller or the Company, and in such regard:
(a) the Seller is not involved in the day-to- day management of the
Company;
(b) the Seller maintains separate corporate records and books of account
from the Company and otherwise observes corporate formalities and has a separate
business office from the Company;
(c) the financial statements and books and records of the Seller prepared
after the Closing Date will reflect the separate existence of the Company;
(d) the Seller maintains its assets separately from the assets of the
Company (including through the maintenance of a separate bank account), the
Seller's funds and assets, and records relating thereto, have not been and are
not commingled with those of the Company and the separate creditors of the
Company will be entitled to be satisfied out of the Company's assets prior to
any value in the Company becoming available to the Company's equityholders or
the Seller's creditors;
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(e) all business correspondence of the Seller and other communications are
conducted in the Seller's own name and on its own stationery; and
(f) the Company does not act as an agent of the Seller in any capacity and
the Seller does not act as agent for the Company, but instead presents itself to
the public as a corporation separate from the Company; provided that the Seller
is the Servicer hereunder and under agreements substantially the same as this
Agreement.
2.24 Sale Treatment. The Seller will treat the transfer to the Company of
the Leases and the Lease Receivables as a sale for reporting and accounting
purposes and the Seller will treat the transfer to the Company of its interest
in the Equipment as a contribution for reporting and accounting purposes.
2.25 Leases are Chattel Paper. Each Lease agreement is "chattel paper"
within the meaning of the Uniform Commercial Code in the states of New York and
New Jersey.
SECTION 3. ADMINISTRATION OF LEASES
3.01 Servicer to Act. (a) Notwithstanding the transfers and assignments of
the Leases (including the right to receive all payments due or to become due
thereunder) and the related interests in the Equipment contemplated hereby, the
Servicer, for the benefit of the Company, will service and administer each Lease
in accordance with the terms thereof and of this Sales and Servicing Agreement.
The Servicer shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect each Lease from time
to time, all in accordance with (i) customary and prudent servicing procedures
for leases of a similar type, (ii) all applicable laws, rules and regulations,
and (iii) without limitation as to its obligations under the preceding clauses
(i) and (ii), no less a standard of care than that which it applies to Leases it
services for its own account. The Servicer shall provide the Lessees with
appropriate invoices and such other notices as may be required to ensure that
all Lease Payments, Casualty Payments and Termination Payments on or in respect
of each Lease are remitted by the Lessees to the address specified by the
Servicer. The Servicer shall deposit such payments to the Collection Account
within two Business Days of the receipt thereof. Any other amount received by
the Servicer from time to time from the Seller, the Company or any Lessee which
is or is intended to be subject to the Lien of the Indenture shall be held in
trust by the Servicer, as agent for the Trustee and promptly turned over to the
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Trustee or deposited into the Collection Account for application in accordance
with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and authority to do,
subject only to the specific requirements and prohibitions of this Sales and
Servicing Agreement, any and all things in connection with the servicing and
administration of the Leases and the interests in the Equipment which are
consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Company, the Trustee and the holders of the Notes, subject at all times to the
provisions of the Indenture, without regard to any relationship which the
Servicer or any Affiliate of the Servicer may otherwise have with a Lessee. The
Servicer shall at all times act in accordance with the provisions of each Lease,
and shall observe and comply with all requirements of law applicable to it.
Except as permitted by the terms of any Lease following a default thereunder,
the Servicer shall not take any action which would result in the interference
with the Lessee's right to quiet enjoyment of the Equipment subject to the Lease
during the term thereof. The Servicer shall exercise with respect to each item
of Equipment all rights and remedies it, the Company or the Trustee shall have
against any vendor of the Equipment, subject to the provisions of any Lease, and
shall promptly pay all amounts realized from such actions to the Trustee for
deposit in the Collection Account.
(c) Without limiting the generality of the foregoing, the Servicer agrees
to (i) invoice each Lessee monthly (except quarterly, semi-annually or annually
in the case of Leases which provide for quarterly, semi-annual or annual Lease
Payments, respectively) for all Lease Payments required to be paid by such
Lessee in such manner and to the same extent as the Servicer does with respect
to leases held for its own account, (ii) maintain with respect to each Lease and
each item of Equipment, and with respect to each payment by each Lessee and
compliance by each Lessee with the provisions of each Lease, complete and
accurate records in the same form and to the same extent as the Servicer does
with respect to leases and equipment held for its own account (which records
shall be at least as complete and accurate as those maintained by the Servicer
as of the date of this Sales and Servicing Agreement), and (iii) from time to
time execute, deliver and file (or cause the same to be done), and the Servicer
is hereby authorized and empowered to execute, deliver, and file on behalf of
the Company and the Trustee, any and all tax returns with respect to sales,
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use, personal property and other taxes (other than corporate income tax returns)
and any and all reports or licensing applications required to be filed in any
jurisdiction with respect to any Lease or any item of Equipment and any and all
required Financing Statements and assignments of Financing Statements and such
additional Financing Statements and continuation statements with respect thereto
as may from time to time be necessary because of Lease substitutions, equipment
replacements in accordance with the provisions of any Lease or otherwise so that
the security interest contemplated by the Indenture in favor of the Trustee in
each of the Leases, at all times will be perfected by such filings with the
appropriate Uniform Commercial Code filing offices. The Seller and the Servicer
agree to file Financing Statements on Form UCC-1 to perfect the security
interest of the Trustee in the Leases and the Lease Payments, and to the extent
provided herein, the Equipment.
(d) The Servicer will maintain, or cause to be maintained, with respect to
the Leases and the Equipment casualty and liability insurance in amounts at
least as great as those described in Section 2.04(f). Each such casualty and
liability policy (i) if maintained by the Servicer, shall name the Company and
Trustee as loss payees or additional insureds and (ii) if maintained by the
Lessee, shall name the Servicer or the Trustee as loss payee and additional
insured; provided that the Servicer shall cause all such policies to name the
Trustee and the Company as loss payees and additional insureds if (A) the Seller
is no longer the Servicer, (B) an Event of Default shall have occurred and be
continuing or (C) a Servicer Event of Default shall have occurred and be
continuing.
(e) On or prior to the Closing Date, the Servicer will file the Financing
Statements and assignments of Financing Statements in accordance with the Filing
Requirements and thereafter will file such additional Financing Statements and
continuation statements and assignments with respect to the Leases as may be
necessary because of equipment replacements in accordance with the provisions of
any
Lease, purchases of Additional Leases in accordance with Section 9 and Lease
substitutions pursuant to Section 9 hereof or otherwise so that (i) the
ownership interest contemplated by this Agreement in favor of the Company and
the security interest contemplated by the Indenture in favor of the Trustee in
each of the Leases will be perfected by such filings with the appropriate
Uniform Commercial Code filing offices.
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(f) The Servicer shall pay the Excess Copy Charges and Fee Per Scan
Charges, if any, owing the related vendor in a timely fashion.
3.02 Lease Amendments and Modifications. In performing its obligations
hereunder, the Servicer may, acting in the name of the Company and without the
necessity of obtaining the prior consent of the Company or the Trustee, enter
into and grant modifications, waivers and amendments to the terms of any Lease
except for modifications, waivers or amendments that (a) are inconsistent with
the servicing standards set forth in Section 3.01 above, (b) would reduce the
amount or extend the time for payment of any Lease Payment, Casualty Payment or
Termination Payment to be made under a Lease (other than to permit termination
of a Lease which does not otherwise provide for termination by requiring the
payment, in lieu of all future Lease Payments with respect to the Lease or
Equipment subject thereto, an amount which equals or exceeds the Lease
Repurchase Amount for such Lease as of such date) or the Lessee's absolute and
unconditional obligation to make payment of the same, (c) would reduce or
adversely affect the Lessee's obligation to maintain, service, insure and care
for the Equipment or would permit the alteration of any item of Equipment in any
way which could adversely affect its present or future value or (d) otherwise
could adversely affect the interests of any of the Company, the Trustee or the
holders of the Notes.
In addition, following the transfer of any Lease to the Company in
accordance herewith, the Servicer may make 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 and the
assignment of a new Lease number, but will not be considered to be a
substitution or prepayment of such Lease. Except to the extent the Seller
substitutes a Substitute Lease therefor in accordance with Section 9 hereof, the
Servicer may permit such adjustments so long as the following conditions
precedent have been satisfied:
(i) after giving effect to such adjustments and any additions and
substitutions pursuant to Section 9, the aggregate Booked Residual Value of
such Leases will not be less than [90%] of the aggregate Booked Residual
Value of the Leases adjusted, replaced or substituted since the Issuance
Date.
(ii) after giving effect to such adjustment, either the final payment
on such Lease must be on or prior to _________ or, to the extent the final
payment on such Lease is due
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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.
(iii) after giving effect to such adjustments and any additions and
substitutions pursuant to Section 9 the aggregate amount of Lease Payments
through the term of the Leases (including the Substitute Leases and the
Additional Leases) will not be materially less than the aggregate scheduled
Lease Payments of the Leases prior to such adjustment, substitution or
addition.
(iv) after giving effect to such adjustments, additions and
substitutions, the Discounted Present Value of the Performing Leases must
not be less than the Discounted Present Value of the Performing Leases
prior to such adjustment, addition and substitution.
3.03 Non-Performing Leases. (a) Upon receipt of notice from the Company,
the Trustee or any other Person, or if the Servicer otherwise learns that any
Lease is a Non-Performing Lease, the Servicer will take such action as is
appropriate, consistent with the Servicer's administration of leases in its own
portfolio and consistent with the customary practices of servicers in the
equipment leasing industry, including such action as may be necessary to cause,
or attempt to cause, the Lessee thereunder to cure such non-performance (if the
same may be cured) or to terminate or attempt to terminate such Lease and to
recover, or attempt to recover, all damages resulting from such default. The
Servicer shall demand, on behalf of the Company, that the Seller immediately
repay any Inter-Company Loan representing the advance pursuant to Section 12.01
hereof of any security deposit with respect to any Lease which becomes a
Non-Performing Lease, and the Servicer shall apply such security deposit in
accordance with Section 3.03(d) hereof.
(b) The Servicer will use its best efforts to sell or lease any Equipment
upon the expiration or early termination of a Lease or that is subject to a
Non-Performing Lease in a timely manner and upon the most favorable terms and
conditions available at the time. In the event of an early lease termination,
any substitute Lease must have a Discounted Present Value equal to or greater
than that of the terminated Lease and monthly payments at least equal to those
of the terminated Lease through the remaining term of such terminated Lease.
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(c) In the event that the Servicer is required to sell or lease any item of
Equipment pursuant to the provisions of this Section 3.03 at a time when the
Servicer has other similar items of equipment available to it, the Servicer will
not favor any such other item in its remarketing efforts.
(d) All amounts realized by the Servicer in the performance of its duties
hereunder with respect to any Lease or Equipment remaining subject to the Lien
of the Indenture (net of the Servicer's actual out-of-pocket expenses reasonably
incurred in such realization) shall be held in trust by the Servicer, as agent
for the Trustee and deposited into the Collection Account for application in
accordance with the provisions of the Indenture; provided that, to the extent
that (i) the Servicer has made any advances pursuant to Section 4.01 hereof with
respect to any Lease which thereafter became a Non-Performing Lease, and (ii)
the Servicer has not otherwise been fully reimbursed for such advances or
payments, the Servicer shall reimburse itself for such advances or payments from
any amounts recovered with respect to such Non-Performing Lease before
depositing any such amounts pursuant to this Section 3.03(d).
3.04 Costs of Servicing; Servicing Fee; Administrative Expenses. (a) All
costs of servicing each Lease in the manner required by this Section 3 shall be
borne by the Servicer, but the Servicer shall be entitled to retain, out of any
amounts actually recovered by the Servicer in the performance of its obligations
under Section 3.03 hereof with respect to any Lease or the interests in the
Equipment subject thereto, the Servicer's actual out-of-pocket expenses
reasonably incurred in the course of such performance with respect to such Lease
or the interests in the Equipment. (For all purposes of this Section 3 the
Servicer's "out-of-pocket expenses" means only those expenses incurred to third
parties (e.g., reasonable fees of outside counsel in a collection suit) and not
salaries, operating costs, overtime wages and other such "overhead" costs or
expenses of the Servicer.) In addition, the Servicer shall be entitled to
receive from the Company on each Payment Date following the Closing Date a
servicing fee (the "Servicing Fee") in the amount described in paragraph (b)
below.
(b) The amount of the Servicing Fee which the Servicer shall be entitled to
receive on each Payment Date following the original issuance of the Notes shall
be determined by multiplying the Outstanding Principal Amount of the Notes at
the Determination Date for such Payment Date times one-twelfth of 0.75%.
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(c) The Servicer agrees to pay, out of the Servicing Fee, all Trustee's
Fees and expenses in connection with the Notes (including the expenses relating
to the preparation and delivery of reports to Noteholders) and all fees of
accountants in connection with the Notes.
3.05 Other Transactions. Nothing in this Sales and Servicing Agreement
shall preclude the Seller or the Servicer from entering into other leases or
other financial transactions with any Lessee or selling or discounting any such
lease with any Person.
SECTION 4. SERVICER ADVANCES AND SELLER'S SUPPORT
4.01 Late Lease Payments. On each Determination Date, the Servicer may, but
will not be required to, advance and remit to the Trustee, in such manner as
will ensure that the Trustee will have immediately available funds on account
thereof by 11:00 a.m. New York City time on the second Business Day prior to the
next succeeding Payment Date, an amount (a "Servicer Advance") equal to any
Lease Payment due during the prior Lease Payment Period but unpaid prior to such
Determination Date with respect to any Lease. In consideration of each Servicer
Advance the Servicer will be entitled to retain any late payment fees recovered
from the Lessee with respect to any Lease Payment covered by a Servicer Advance.
In addition, the Servicer will be reimbursed for Servicer Advances from funds in
the Collection Account in accordance with the Indenture on the second following
Payment Date.
4.02 Early Termination Leases. Following the Determination Date as of which
any Lease first becomes an Early Termination Lease the Seller may, but shall
have no obligation to, either (a) substitute one or more Eligible Leases and the
Equipment subject thereto for such Lease and the Equipment subject thereto
pursuant to Section 9 hereof (if the Seller is then entitled to substitute
Leases and Equipment in accordance with the provisions of Section 9.01 hereof)
on or before the second Business Day prior to the next succeeding Payment Date,
(b) repurchase from the Company such Lease and the related Equipment by
remitting to the Trustee an amount equal to the Lease Repurchase Amount in such
manner as will ensure that the Trustee will have immediately available funds
therefor by 11 a.m. New York City time on the second Business Day prior to the
next succeeding Payment Date or (c) offer for sale to the Company one or more
Additional Leases in consideration of the proceeds thereof in accordance with
Section 9 hereof. Any Early Termination Lease and the Equipment subject thereto
which is repurchased, or for which Additional Leases have been purchased or
Substitute Leases transferred, pursuant to
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this Section 4.02 shall nevertheless remain subject to the Lien of the Indenture
until such time as an Additional Lease or Additional Leases have been purchased
or Substitute Lease or Substitute Leases have been transferred in accordance
with the provisions of Section 9 hereof or the Lease Purchaser Amount has been
deposited into the Collection Account. A Lease will be considered to be an
"Eligible Lease" if on the date such Lease is substituted for or added in
replacement of an Early Termination Lease, such Lease satisfies the
representations and warranties set forth in Section 2.04(a) through (r) and the
requirements of Section 9 hereof.
4.03 Indemnification. The Seller agrees to indemnify and hold harmless the
Company, the Servicer, the Trustee and each holder of the Notes (each an
"Indemnified Party") against any and all liabilities, losses, damages,
penalties, costs and expenses (including costs of defense and legal fees and
expenses) which may be incurred or suffered by such Indemnified Party (except to
the extent arising out of the gross negligence or willful misconduct on the part
of the Indemnified Party) as a result of claims, actions, suits or judgments
asserted or imposed against it and arising out of the transactions contemplated
hereby or by the Indenture, including, without limitation, any claims resulting
from any use, operation, maintenance, repair, storage or transportation of any
item of Equipment, whether or not in the Servicer's possession or under its
control pursuant to this Sales and Servicing Agreement, and any tort claims and
any fines or penalties arising from any violation of the laws or regulations of
the United States or any state or local government or governmental authority;
provided that the foregoing indemnity shall in no way be deemed to impose on the
Seller any obligation, other than to the extent specifically set forth in this
Section 4, to make any payment with respect to principal or interest on the
Notes or to reimburse the Company for any payments on account of the Notes.
4.04 Repurchases; Other Payments. (a) In the event that (i) any of the
representations or warranties made by the Seller in Sections 2.04 and 2.05
hereof with respect to any of the Leases or the Equipment subject thereto proves
at any time to have been inaccurate in any material respect as of the Closing
Date or related transfer date, as the case may be or (ii) 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
the Seller (other than any such action or inaction of the Seller, when acting as
Servicer, in connection with the enforcement of any Lease in a manner consistent
with the provisions of this Sales and Servicing Agreement) or any claim by any
Lessee against the Seller
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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 the Seller is
given notice thereof by the Company or the Trustee or the date on which the
Seller otherwise first has notice thereof, the Seller will repurchase such Lease
and the Equipment subject thereto by paying to the Trustee, not later than the
third Business Day after the Determination Date next following the expiration of
such 30-day period with respect to the events referenced in Section 4.04(a)(i)
and (ii), an amount equal to the Lease Repurchase Amount, and simultaneously
with such repurchase, the Seller shall reimburse the Servicer for all amounts,
if any, theretofore advanced by the Servicer pursuant to Section 4.01 with
respect to such Lease. Without limiting the generality of the foregoing, it is
agreed and understood that for purposes of this Section 4.04, 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 Payment
under any Lease shall be deemed to be material.
(b) By the Closing Date, the Seller agrees to obtain and provide to the
Trustee UCC searches against it and the Company from the central filing offices
in New Jersey confirming the absence of any UCC filings against either the
Seller or the Company with respect to the Leases (including the right to receive
all payments due or to become due thereunder) and the Equipment, other than
those naming the Company as the purchaser of the Leases or the Trustee as
secured party. If any searches delivered pursuant to this Section 4.05(b)
disclose UCC filings (which are not in the process of being released pursuant to
releases delivered on the Closing Date) against the Company or the Seller with
respect to Leases of Equipment the Discounted Present Value of which (i) is
greater than 2% but less than 5% of all the Leases, then the Seller shall cause
searches to be made in additional states within 30 days following such
disclosure so that the Discounted Present Value of Leases of Equipment in states
where searches have been performed exceeds 75% of the aggregate Discounted
Present Value of all Leases and 75% of the Booked Residual Value of Equipment or
(ii) is greater than 5% of all the Leases then the Seller shall cause searches
to be made in additional states within 30 days following such disclosure so that
the Discounted Present Value of Leases of Equipment in states where such
searches have been performed equals 100% of the aggregate Discounted Present
Value of all Leases. Without limiting the provisions of Section 4.04(a) or this
Section 4.04(b), in the event the Seller fails to provide any such searches
required by the preceding sentences of this Section 4.05(b) within the required
time period or any search reveals the
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existence of any conflicting Liens (which are not removed within 30 days of
receipt of such search), the Seller shall be required to repurchase not later
than the third Business Day after the Determination Date following the
expiration of the time period during which such search was to be obtained or
such Lien released, as the case may be, any Lease of Equipment in any such state
for which such searches are not provided or with respect to which conflicting
Liens are found to exist at the Lease Repurchase Amount for such Lease.
(c) The Seller's obligations under this Section 4.04 are the full recourse
obligations of the Seller and shall in no way be limited or discharged by the
application of any funds constituting part of the Trust Estate.
4.05 Payment Advices. Each payment by the Seller or the Servicer to the
Trustee pursuant to any of the provisions of this Sales and Servicing Agreement
shall be accompanied by written advice containing sufficient information to
identify the Lease and/or Equipment to which such payment relates, the Section
of this Sales and Servicing Agreement pursuant to which such payment is made,
and the proper application pursuant to the provisions of the Indenture of the
amounts being paid.
SECTION 5. INFORMATION TO BE PROVIDED
5.01 Monthly Status Reports; Servicing Reports. (a) Within five Business
Days following each Payment Date, the Servicer will send to the Trustee (copies
of which the Trustee shall send to each Rating Agency and to each holder of the
Notes as provided in the Indenture) a written report, signed by one of the
Servicer's financial officers, (i) identifying each Lease with respect to which
any Lease Payment was 30 or more days overdue as of the end of the immediately
preceding Lease Payment Period, the Discounted Present Value of such Lease as of
such Payment Date, the amount advanced by the Servicer with respect to such
Lease pursuant to Section 4.01 hereof since the Servicer's previous monthly
report (or, in the case of the first such report, since the Cut-Off Date), (ii)
identifying each Lease with respect to which any Lease Payment was 60 or more
days overdue as of the end of the immediately preceding Lease Payment Period,
the Discounted Present Value of such Lease as of such Payment Date, the amount
advanced by the Servicer with respect to such Lease pursuant to Section 4.01
hereof since the Servicer's previous monthly report (or, in the case of the
first such report, since the Closing Date), (iii) identifying each Lease with
respect to which any Lease Payment was [93] or more days overdue as of the end
of the immediately preceding Lease Payment Period, the Discounted
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Present Value of such Lease as of such Payment Date, the amount advanced by the
Servicer with respect to such Lease pursuant to Section 4.01 hereof since the
Servicer's previous monthly report (or, in the case of the first such report,
since the Closing Date), (iv) identifying each Lease which became a
Non-Performing Lease as of the preceding Determination Date and specifying the
Discounted Present Value of such Lease as of such Determination Date (or, in the
case of the first such report, subsequent to the Cut-Off Date) and the aggregate
Discounted Present Value of all such Non-Performing Leases, (v) indicating the
aggregate amount recovered by the Servicer subsequent to the preceding Payment
Date (or, in the case of the first Payment Date, subsequent to the Cut-Off Date)
and on or prior to such Payment Date with respect to Lease Delinquency Payments
and Non-Performing Lease Payments previously made by the Seller and the Servicer
(and the specific amounts so recovered with respect to any Non-Performing Lease)
and (vi) indicating the Residual Realizations, the Available Residual Amount and
the Utilized Residual Amount as of the related Determination Date. Each such
report shall also describe generally what action or actions the Servicer is then
taking or proposes to take to recover from the appropriate Lessees any amounts
previously paid by the Servicer to the Trustee pursuant to Section 4.01 hereof.
(b) On the Business Day following the Determination Date, the Servicer
shall deliver to the Trustee a certificate signed by an officer of the Servicer
(a "Servicing Report") stating the date and in the form of Exhibit C hereto.
The Trustee shall forward such report to the Noteholders and the Rating
Agencies within five days of the respective Payment Date.
(c) The Servicing Report shall include, among other items, the total amount
of all Lease Payments, Casualty Payments, Termination Payments, Non-Performing
Lease Payments, Similar Transaction Payments and Other Lease Payments received
by the Servicer and deposited in the Collection Account prior to such
Determination Date and on or subsequent to the Determination Date preceding such
Determination Date (or, in the case of the first Determination Date, on or
subsequent to the Cut-Off Date). Such report shall indicate the amount of all
Lease Payments received by the Servicer and deposited in the Collection Account
which are for any Lease Payment Period other than the Lease Payment Period for
such Determination Date and shall identify each Lease with respect to which a
Casualty Payment, Termination Payment or Non-Performing Lease Payment was made
during such time period. Such report shall also indicate (i) the aggregate
amount paid by the Servicer on or
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subsequent to the most recent Determination Date with respect to Non-Performing
Leases pursuant to Section 4.01 hereof, and (ii) the aggregate amount reimbursed
to the Servicer prior to the most recent Determination Date and on or subsequent
to the Determination Date preceding such Determination Date (or, in the case of
the first Determination Date, on or subsequent to the Cut-Off Date) for actual
cash payments made by the Servicer with respect to Non-Performing Leases
pursuant to Section 4.01 hereof. The Servicer hereby represents and warrants
that such calculations will be correct and accurate, and the Servicer shall be
fully responsible for, and shall reimburse and indemnify each Indemnified Party
for, any loss resulting from such Indemnified Party's reliance on any such
calculations which are not correct.]
(d) If the Servicer intends to withdraw any funds from the Collection
Account in accordance with Section 3.02(b) of the Indenture after the Payment
Date relating to the Determination Date for which a Servicing Report is
submitted, the Servicer shall submit with such report a certificate (i) setting
forth the amounts to be withdrawn (on an item-by-item basis), (ii) stating that
none of such amounts are all or part of any Lease Payment, Lease Delinquency
Payment, Non-Performing Lease Payment, Casualty Payment or Termination Payment,
and (iii) identifying the lease or leases to which such amounts relate.
5.02 Annual Independent Public Accountant's Report. The Servicer shall
cause a firm of independent public accountants (who may also render other
services to the Servicer or to the Seller) to deliver to the Trustee, with a
copy to each Rating Agency, within 135 days following the end of each fiscal
year of the Servicer, beginning with the Servicer's fiscal year ending December
31, 1997, a written statement to the effect that such firm has (a) obtained from
the Servicer a copy of the monthly status report pursuant to Section 5.01 for a
single month during the previous calendar year; (b) compared the information
contained in such monthly status report and in the monthly summaries prepared by
the Servicer in support of such monthly status report to the computer printouts
and accounts prepared by the Servicer and supporting such reports; and (c)
selected, at random, at least twenty-five Leases included in the Trust Estate
and compared the activity in the files maintained by the Servicer for such
Leases to the activity as reported for those Leases to the monthly summaries
prepared by the Servicer and supporting the monthly status report, and that, on
the basis of such examination and comparison, such firm is of the opinion that
the Servicer has prepared such monthly status report and summaries in agreement
with the computer printouts, accounts and individual Lease files, except in each
case for (x) such
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exceptions as such firm shall believe to be immaterial and (y) such other
exceptions as shall be set forth in such statement.
SECTION 6. THE SERVICER
6.01 Merger or Consolidation of the Servicer. The Servicer will keep in
full force and effect its existence, rights and franchise as a corporation under
the laws of its jurisdiction of incorporation and will preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is necessary to protect the validity and enforceability
of any of the Leases or to permit performance of the Servicer's duties under
this Sales and Servicing Agreement.
The Servicer shall not merge or consolidate with any other Person unless
(i) the entity surviving such merger or consolidation is a corporation organized
under the laws of the United States or any jurisdiction thereof and (ii) the
surviving entity, if not the Servicer, shall execute and deliver to the Company,
the Servicer and the Trustee, in form and substance satisfactory to each of
them, (a) an instrument expressly assuming all of the obligations of the
Servicer hereunder and (b) an opinion of counsel to the effect that such Person
is a corporation of the type described in the preceding clause (i) and has
effectively assumed the obligations of the Servicer hereunder.
6.02 Limitation on Liability of the Servicer and Others. Neither the
Servicer nor any of the directors, officers, employees or agents of the Servicer
shall incur any liability to the Company, the Trustee or the holders of the
Notes for any action taken or not taken in good faith pursuant to the terms of
this Sales and Servicing Agreement with respect to any Lease (including any
Non-Performing Lease) or the Equipment subject thereto; provided, however, that
this provision shall not protect the Servicer or any such person against any
breach of warranties, representations or covenants made by it herein or in any
certificate delivered in conjunction with the purchase of the Notes or for any
liability which would otherwise be imposed for any action or inaction resulting
from willful misconduct or bad faith or for negligence in the performance or
nonperformance of its duties hereunder.
6.03 Servicer Not to Resign or Be Removed. The Servicer shall not resign
from the servicing obligations and duties hereby imposed on it except upon
determination that such duties hereunder are no longer permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced by an opinion
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of independent counsel to the Servicer, in form and substance satisfactory to
the holders of the Notes, to such effect delivered to the Trustee.
Except as provided in Section 8.02 hereof, the Servicer shall not be
removed or be replaced as Servicer with respect to any Lease or any of the
Equipment.
No resignation or removal of the Servicer shall in any event (i) become
effective until the Trustee or a successor servicer shall have assumed the
Servicer's servicing responsibilities and obligations in accordance with Section
8.02 hereof, or (ii) affect the Seller's obligations pursuant to Section 4
hereof.
6.04 Financial and Business Information. The Servicer will deliver to the
Company and the Trustee upon receipt thereof shall deliver to each Rating Agency
and upon request, to any holder of outstanding Notes evidencing not less than
25% of the Outstanding Principal Amount of the Notes (and, upon the request of
any holder of outstanding Notes, to any prospective transferee of any Notes)
and, in the case of subsection (c) below:
(a) Quarterly Statements - within 45 days after the end of each of the
first three quarterly fiscal periods in each fiscal year of the Servicer, a copy
of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries at the end of such quarter, and
(2) consolidated statements of income, retained earnings and cash flow
of the Servicer (or its parent) and its consolidated subsidiaries for that
quarter and for the portion of the fiscal year ending with such quarter,
accompanied by a certificate signed by a principal financial officer of the
Servicer stating that such financial statements present fairly the financial
condition of the Servicer and its consolidated subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Annual Statements - within 135 days after the end of each fiscal year
of the Servicer, a copy of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries, at the end of that year, and
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(2) consolidated statements of income, retained earnings and cash flow
of the Servicer (or its parent) and its consolidated subsidiaries for that
year, setting forth in each case in comparative form the figures for the
previous fiscal year,
all in reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants of recognized national standing stating that such
financial statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and footnote), and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(c) Notice of Servicer Event of Default immediately upon becoming aware of
the existence of any condition or event which constitutes a Servicer Event of
Default, a written notice, by certified mail return receipt requested, hand
delivery or overnight courier, describing its nature and period of existence and
what action the Servicer is taking or proposes to take with respect thereto;
(d) SEC and Other Reports - promptly upon their becoming available, one
copy of each report (including the Servicer's annual report to shareholders and
reports on Form 8-K, 10-K, and 10-Q), proxy statement, registration statement,
prospectus and notice filed with or delivered to any securities exchange, the
Securities and Exchange Commission or any successor agencies; and
(e) Report on Proceedings - promptly upon the Servicer's becoming aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or conditions (financial
or otherwise) of the Servicer, a written notice specifying the nature of such
investigation or proceeding and what action the Servicer is taking or proposes
to take with respect thereto and evaluating its merits; and
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(f) Requested Information - with reasonable promptness, any other data and
information which may be reasonably requested from time to time, including,
without limitation, any information required to be made available at any time to
any prospective transferee of any Notes in order to satisfy the requirements of
Rule 144A under the Securities Act of 1933, as amended.
6.05 Officers' Certificates. With each set of financial statements
delivered pursuant to Section 6.04, the Servicer will deliver an Officers'
Certificate stating (i) that the officers signing such Officers' Certificate
have reviewed the relevant terms of this Sales and Servicing Agreement and have
made, or caused to be made under such officers' supervision, a review of the
activities of the Servicer during the period covered by the statements then
being furnished, (ii) that the review has not disclosed the existence of any
Servicer Event of Default or, if a Servicer Event of Default exists, describing
its nature and what action the Servicer has taken and is taking with respect
thereto, and (iii) that on the basis of such review the officers signing such
certificate are of the opinion that during such period the Servicer has serviced
the Leases in compliance with the procedures hereof except as described in such
certificate.
6.06 Inspection. The Servicer will permit, on reasonable prior notice, the
representatives of the Company and the Trustee and the holder of any Notes
evidencing not less than 25% of the Outstanding Principal Amount of any class of
Notes to examine all of the books of account, records, reports and other papers
of the Servicer, to make copies and extracts therefrom, and to discuss the
Servicer's affairs, finances and accounts with its officers, employees and
independent public accountants (and by this provision the Servicer authorizes
said accountants to discuss the finances and affairs of the Servicer) all at
such reasonable times and as often as may be reasonably requested for the
purpose of reviewing or evaluating the financial condition or affairs of the
Servicer or the Servicer's performance of its duties and obligations hereunder.
Any expense incident to the exercise by the Company, the Trustee, or any holder
of the Notes during the continuance of any Servicer Event of Default, or any
event or condition which with the giving of notice or the lapse of time or both
would become a Servicer Event of Default, of any right under this Section 6.06
shall be borne by the Servicer.
6.07 Servicer Records. The Servicer will indicate in its records that it is
servicing and administering each Lease in its capacity as Servicer hereunder,
and to the extent it is in possession of any original Lease agreement, will hold
such Lease, subject to
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the provisions of the Indenture as Custodian for the Trustee.
SECTION 7. THE SELLER
7.01 Merger or Consolidation of the Seller. The Seller will keep in full
force and effect its existence, rights and franchise as a corporation under the
laws of its jurisdiction of incorporation and will preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is necessary to protect the validity and enforceability of any of
the Leases or to permit performance of the Seller's duties under this Sales and
Servicing Agreement.
The Seller shall not merge or consolidate with any other Person unless (i)
the entity surviving such merger or consolidation is a corporation organized
under the laws of the United States or any jurisdiction thereof and (ii) the
surviving entity, if not the Seller, shall execute and deliver to the Company,
the Servicer and the Trustee, in form and substance satisfactory to each of
them, (a) an instrument expressly assuming all of the obligations of the Seller
hereunder and (b) an opinion of counsel to the effect that such Person is a
corporation of the type described in the preceding clause (i) and has
effectively assumed the obligations of the Seller hereunder.
7.02 Control of Company. So long as any of the Notes or the other
obligations secured by the Indenture remain outstanding, the Seller will not (i)
sell, pledge or otherwise transfer any of the capital stock in the Company held
by the Seller or (ii) vote such stock in favor of any amendment to or alteration
of the certificate of incorporation of the Company. In furtherance of the
Seller's negative covenant pursuant to clause (i) of the preceding sentence, the
Seller will deliver to the Trustee on the Closing Date each certificate
representing any share of the capital stock of the Company held by the Seller,
and the Seller will promptly deliver to the Trustee upon receipt by the Seller
each certificate representing any additional shares of the capital stock of the
Company at anytime thereafter received by the Seller.
7.03 Financial and Business Information. The Seller will deliver to the
Company and the Trustee and upon receipt thereof the Trustee shall deliver to
each Rating Agency and upon request, to any holder of outstanding Notes
evidencing not less than 25% of the Outstanding Principal Amount Notes (and,
upon the request of any holder of outstanding Notes, to any prospective
transferee of any Notes):
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(a) Notice of Servicer Event of Default - immediately upon becoming
aware of the existence of any condition or event which constitutes a
Servicer Event of Default, a written notice (with a copy to each Rating
Agency) describing its nature and period of existence and what action the
Seller is taking or proposes to take with respect thereto;
(b) SEC and Other Reports - promptly upon their becoming available,
one copy of each report (including the Seller's annual report to
shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy statement,
registration statement, prospectus and notice filed with or delivered to
any securities exchange, the Securities and Exchange Commission or any
successor agencies;
(c) Report on Proceedings - promptly upon the Seller's becoming aware
of
(1) any proposed or pending investigation of it by any
governmental authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Seller, a written notice specifying the nature of such
investigation or proceeding and what action the Seller is taking or proposes to
take with respect thereto and evaluating its merits;
(d) ERISA - (i) promptly and in any event within ten days after the
Seller knows or has reason, to know of the occurrence of a Reportable Event
with respect to a Pension Plan with regard to which notice must be provided
to the PBGC, a copy of such materials required to be filed with the PBGC
with respect to such Reportable Event and in each such case a statement of
the chief financial officer of the Seller setting forth details as to such
Reportable Event and the action which the Seller proposes to take with
respect thereto; (ii) at least ten days prior to the filing by any plan
administrator of a Pension Plan of a notice of intent to terminate such
Pension Plan, a copy of such notice; (iii) upon request of the Company and
the Trustee, and in no event more than ten days after such request, copies
of each annual report which is filed on Form 5500, together with certified
financial statements for the Pension Plan (if any) as of the end of such
year and actuarial statements on Schedule B to such Form
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5500; (iv) promptly and in any event within ten days after it knows or has
reason to know of any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Pension Plan, a statement of the chief
financial officer of the Seller describing such event or condition; (v)
promptly and in no event more than ten days after receipt thereof by the
Seller or any Related Person, each notice received by the Seller or any
Related Person concerning the imposition of any withdrawal liability under
Section 4202 of ERISA; and (vi) promptly after receipt thereof a copy of
any notice the Seller or any Related Person may receive from the PBGC or
the Internal Revenue Service with respect to any Pension Plan; provided,
however, that this subsection (vi) shall not apply to notices of general
application promulgated by the PBGC or the Internal Revenue Service or
notices which would not require any material payment by the Seller or any
Related Person; and
(e) Requested Information - with reasonable promptness, any other
data and information which may be reasonably requested from time to time.
7.04 Officers' Certificates. With each set of financial statements
delivered pursuant to Section 7.03, the Seller will deliver an Officers'
Certificate stating that the officers signing such Certificate have reviewed the
relevant terms of this Sales and Servicing Agreement and have made, or caused to
be made under such officers' supervision, a review of the activities of the
Seller during the period covered by the income statements then being furnished
and, so long as the Seller is Servicer hereunder, that the review has not
disclosed the existence of any Servicer Event of Default or, if a Servicer Event
of Default exists, describing its nature and what action the Seller has taken
and is taking with respect thereto.
7.05 Inspection. The Seller will permit, on reasonable prior notice, the
representatives of the Company, the Servicer, the Trustee, or any holder of the
Notes evidencing not less than 25% of the Outstanding Principal Amount of any
class of Notes to examine all of the books of account, records, reports and
other papers of the Seller, to make copies and extracts therefrom, and to
discuss the Seller's affairs, finances and accounts with its officers, employees
and independent public accountants (and by this provision the Seller authorizes
said accountants to discuss the finances and affairs of the Seller) all at such
reasonable times and as often as may be reasonably requested for the purpose of
reviewing or evaluating the financial condition or affairs of the Seller or the
Seller's
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performance of its duties and obligations hereunder. Any expense incident to the
exercise by the Company, the Trustee or any holder of the Notes during the
continuance of any default by the Seller in any of its obligations hereunder of
any right under this Section 7.05 shall be borne by the Seller.
7.06 Books and Records. The Seller will clearly mark its books and records
to reflect each sale of a Lease and contribution of the Equipment subject
thereto to the Company.
7.07 Communications. The Seller will reply to all inquiries by third
parties with respect to the transactions contemplated by this Agreement by
indicating that it has sold to the Company the Leases and contributed to the
Company its right, title and interest in the related Equipment.
SECTION 8. DEFAULT
8.01 Servicer Events of Default. The following events and conditions shall
constitute Servicer Events of Default hereunder:
(i) failure on the part of the Servicer to deposit to the Collection
Account or other applicable account within three Business Days following
the receipt thereof any monies received by the Servicer (including, without
limitation, any Lease Payments and any Non-Performing Lease Payments) and
required to be deposited hereunder;
(ii) so long as the Seller is the Servicer hereunder, failure on the
part of the Seller to pay to the Trustee on the date when due in accordance
with the terms hereof, any payment required to be made by the Seller
pursuant to Section 4 hereof;
(iii) failure on the part of either the Servicer or (so long as the
Seller is the Servicer) the Seller to observe or perform in any material
respect any other of their respective covenants or agreements in this Sales
and Servicing Agreement which failure continues unremedied for a period of
30 days after the earlier of (A) the date it first becomes known to any
officer of the Seller or the Servicer, as the case may be, and (B) the date
on which written notice thereof requiring the same to be remedied
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shall have been given to the Seller or the Servicer, as the case may be, by
the Trustee, or to the Seller or the Servicer, as the case may be, and the
Trustee by any holder of the Notes;
(iv) if any representation or warranty made by the Seller in this
Sales and Servicing Agreement or in any certificate or other writing
delivered pursuant hereto or made by any successor Servicer in connection
with such successor Servicer's assumption of the duties of the Servicer
shall prove to be incorrect in any material respect as of the time when the
same shall have been made; provided, however, that the breach of any
representation or warranty made by the Seller or Servicer in this 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 a material breach of any representation or warranty
made by the Servicer in this 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 the Seller repurchases such Lease and
Equipment in accordance with this Sales and Servicing Agreement.
(v) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Servicer in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law or (B) a decree or order
adjudging the Servicer bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment, or
composition of or in respect of the Servicer under any applicable federal
or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator, or other similar official of the Servicer or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days;
(vi) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any
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other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of
the Servicer in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization, or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any applicable federal or
state law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator, or similar official of the Servicer or of
any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the failure by the Servicer to pay its
debts generally as they become due, or the taking of corporate action by
the Servicer in furtherance of any such action;
(vii) 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; or
(viii) 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.
8.02 Termination. So long as a Servicer Event of Default shall be
continuing, the Trustee shall, upon the instructions of the holders of 66-2/3%
in Outstanding Principal Amount of the Notes, by notice in writing to the
Servicer terminate all of the rights and obligations of the Servicer (but not
the Seller's obligations which shall survive any such termination) under this
Sales and Servicing Agreement. On the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this
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Sales and Servicing Agreement to take any action with respect to any Lease or
Equipment shall cease and the same shall pass to and be vested in the Trustee
pursuant to and under this Section and the Indenture; and, without limitation,
the Trustee is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, any and all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and assignment of any Lease and
the related Equipment, or otherwise.
8.03 Trustee to Act; Appointment of Successor. (a) On and after the time
the Servicer receives a notice of termination pursuant to Section 8.02 hereof,
the Trustee, subject to the terms of Section 5.02 of the Indenture, shall be the
successor in all respects to the Servicer in its capacity as servicer of the
Leases under this Sales and Servicing Agreement and, to such extent, shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof (but not the
obligations of the Seller contained in Section 4 hereof which shall survive any
such termination as above provided) and shall be entitled to receive from the
Company the Servicing Fee provided for in Section 3.04 hereof; provided that the
Trustee shall in no way be responsible or liable for any action or actions of
the Servicer before the time the Servicer receives such a notice of termination.
(b) Notwithstanding the above, the Trustee may, if it shall be unwilling to
so act, or shall, if it is unable to so act, give notice of such fact to each
holder of the Notes and (i) appoint an established institution satisfactory to
the holders of 66-2/3% in Outstanding Principal Amount of the Notes as the
successor to the Servicer hereunder to assume all of the rights and obligations
of the Servicer hereunder, including, without limitation, the Servicer's right
hereunder to receive the Servicing Fee (but not the obligations of the Seller
contained in Section 4 hereof) or, (ii) if no such institution satisfactory to
the holders of 66-2/3% in Outstanding Principal Amount of the Notes is so
appointed within 60 days following the giving of such notice, appoint a bank or
other established institution, which has experience in servicing lease contracts
and equipment similar to the Leases and Equipment and as to which each of S&P
and DCR has indicated in writing that the appointment of such Person, as the
successor to the Servicer hereunder will not result in the reduction or
withdrawal of such Rating Agency's then-current rating of the Notes or, (iii) if
no such institution is so appointed, petition a court of competent jurisdiction
to appoint an institution meeting
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such criteria as the Servicer hereunder. Pending appointment of a successor to
the Servicer hereunder, the Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Trustee shall
cause such successor to the Servicer to enter into a servicing agreement
substantially in the form of this Sales and Servicing Agreement except that such
agreement shall not include any of the Seller's representations, warranties or
obligations and the Trustee may make arrangements for the compensation of such
successor out of payments on Leases as it and such successor shall agree;
provided, however, that no such compensation shall be in excess of that provided
for a successor to the Servicer in Section 3.04 hereof. The Trustee shall
provide Moody's with prior written notice of the appointment of any successor to
the Servicer.
8.04 Servicer to Cooperate. The Servicer hereby agrees to cooperate with
the Trustee or any successor to the Servicer appointed in accordance with
Section 8.03 hereof, as applicable, in effecting the termination and transfer of
the responsibilities and rights of the Servicer hereunder to the Trustee or any
successor to the Servicer, including, without limitation, the execution and
delivery of assignments of Financing Statements, and the transfer to the Trustee
or the successor to the Servicer for administration by it of all cash amounts
which shall at the time be held by the Servicer or thereafter received with
respect to the Leases. The Servicer hereby agrees to transfer to any successor
to the Servicer its electronic records and all other records, correspondence and
documents relating to the Leases and Equipment in the manner and at such times
as the successor to the Servicer shall reasonably request. The Servicer hereby
designates the Trustee and any successor to the Servicer its agent and
attorney-in-fact to execute transfers of Financing Statements (including any and
all Financing Statements naming an individual Lessee as debtor and the Servicer
as secured party) and any other filings or instruments which may be necessary or
advisable to effect such transfer of the Servicer's responsibilities and rights
hereunder.
8.05 Notification to Noteholders. Upon any such termination or appointment
of a successor to the Servicer, the Company shall cause the Trustee to give
prompt written notice thereof to each Rating Agency and to each holder of the
Notes in the manner provided in the Indenture.
8.06 Remedies Not Exclusive. Nothing in the preceding provisions of this
Section 8 shall be interpreted as limiting or restricting any rights or remedies
which the Company, the Trustee or any other Person would otherwise have at law
or in equity on account of the breach or
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violation of any provision of this Sales and Servicing Agreement by the
Servicer, including, without limitation, the right to recover full and complete
damages on account thereof to the extent not inconsistent with Section 6.02
hereof.
SECTION 9. SUBSTITUTION AND ADDITION OF LEASES
9.01 Substitution and Addition. (a) Subject to the satisfaction of the
requirements set forth in Section 9.01(b) hereof, the Seller will have the right
(but not the obligation) at any time to substitute one or more Eligible Leases
and the Equipment subject thereto (each, a "Substitute Lease") for a Lease (for
purposes of this Section 9 referred to as a "Predecessor Lease") and the
Equipment subject thereto if:
(i) the Predecessor Lease became (A) a Non-Performing Lease, (B) a
Warranty Lease or (C) an Adjusted Lease during the immediately preceding
Due Period;
(ii) the aggregate Discounted Present Value of the Non-Performing
Leases that are Predecessor Leases shall not in the aggregate exceed 10%
of the Discounted Present Value of the Leases on the Cut-Off Date; and
(iii) the aggregate Discounted Present Value of the Adjusted Leases
and Warranty Leases that are Predecessor Leases shall not exceed 10% of
the Discounted Present Value of the Leases on the Cut-off Date.
Subject to the satisfaction of the requirements set forth in Section 4 and
Section 9.01(b) hereof, in the event of an Early Lease Termination which has
been prepaid in full, the Company will have the option to reinvest the proceeds
of such Early Termination Lease in one or more Additional Leases. The purchase
price of such Additional Lease or Leases will be an amount equal to the proceeds
of such Early Termination Lease.
(b) Each transfer of Substitute Leases and addition of Additional Leases
will be subject to the satisfaction of the following conditions precedent:
(i) after giving effect to such additions and substitutions and any
adjustments pursuant to Section 3.02 thereof, the aggregate Booked Residual
Value of such Leases must be not less than [90%] of the Booked Residual
Value of the
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Leases added, substituted or adjusted since the Issuance Date.
(ii) either the final payment on such Substitute Lease or Additional
Lease must be on or prior to April 2004 or, to the extent the final payment on
such Lease is due subsequent to April 2004, 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.
(iii) after giving effect to such additions and substitutions and any
adjustments pursuant to Section 3.02 thereof the aggregate amount of Lease
Payments through the term of the Leases (including the Substitute Leases
and the Additional Leases) and the Discounted Present Value of the
Performing Leases will not be materially less than the aggregate scheduled
Lease Payments of the Leases and the Discounted Present Value of the
Leases, respectively prior to such substitution or addition or adjustment;
and
(iv) after giving effect to such adjustments, additions and
substitutions, the Discounted Present Value of the Performing Leases must
not be less than the Discounted Present Value of the Performing Leases
prior to such adjustment, substitution or addition.
(v) such Additional Lease or Substitute Lease was originated in the
Healthcare Division, the Manufacturing Technology Division and the Business
Technology Division or its predecessors or successors.
(c) Each addition and substitution pursuant to this Section 9.01 shall
include the right to receive all amounts due or to become due under each
Substitute Lease being substituted or Additional Leases being purchased and any
security deposits paid by the related Lessee to the Seller in connection
therewith (other than any prepayments of rent required pursuant to the terms
thereof at or before the commencement of such Lease and any payments due before
the Lease Payment Period during which such substitution or addition is made). At
the time of each such substitution and addition, the Seller shall transfer to
the Trustee all Lease Payments actually received by the Seller which became due
during the current Lease Payment Period.
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9.02 Procedure. (a) By 11:00 a.m. on the third Business Day following each
Determination Date, the Seller shall give written notice to the Servicer of any
substitution of Substitute Leases for Predecessor Leases or addition of
Additional Leases for Early Termination Leases which have been prepaid in full
pursuant to Section 9.01 during the preceding Lease Payment Period. By 11:00
a.m. on the fourth Business Day following each Payment Date, the Seller shall
deliver to the Servicer and the Trustee and, to the extent not included in the
Monthly Servicer Report, the Trustee shall promptly deliver to each Rating
Agency (i) a supplement to Exhibit A hereto setting forth the information shown
thereon for each such Substitute Lease and Additional Lease, (ii) an Officer's
Certificate (A) certifying that each such Substitute Lease and Additional Lease
is an "Eligible Lease", (B) specifying each Predecessor Lease for which a
substitution has been made and each Early Termination Lease which is being
replaced by an Additional Lease and the amount of each periodic Lease Payment
and the Booked Residual Value under each such Predecessor Lease and the amount
of each periodic Lease Payment and the Booked Residual Value under each
Additional Lease and Substitute Lease being transferred thereby and (C) that all
conditions precedent to such addition or substitution have been satisfied and
(iii) such additional information concerning such Additional Leases, Substitute
Leases, Early Termination Leases or Predecessor Leases as may be needed for the
Servicer to prepare its monthly reports pursuant to Section 5.01 hereof and to
otherwise carry out its duties as servicer hereunder.
(b) Subject to the provisions of Section 9.03, the delivery of any
Officer's Certificate and supplement to Exhibit A pursuant to Section 9.02(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Lease Payment Period (i) the Seller assigned to the
Company pursuant to Section 9.01 hereof all of the Seller's right, title and
interest in and to the Substitute Leases and Additional Leases identified in
such supplement and the related rights described in Section 9.01 hereof, (ii)
the Seller transferred to the Company, as a contribution to capital, all of the
Seller's right, title and interest in and to the Equipment subject to such
Substitute Leases (to the extent of the Seller's interest in such Equipment,
including the Seller's security interest in any Equipment which is not owned by
the Seller), and (iii) the Company assigned and transferred to the Seller,
without representation or warranty, all of the Company's right, title and
interest in and to the Predecessor Leases and Early Termination Leases
identified in such Officer's Certificate and the Equipment subject thereto (to
the extent of the Company's interest in such Equipment, including the Company's
security interest in any Equipment which is not
41
<PAGE>
owned by the Company). The Seller shall promptly deliver to the Trustee the
original executed counterpart of each Substitute Lease and Early Termination
Lease assigned to the Company pursuant to Section 9.01 hereof and the Company
shall promptly request the Trustee to deliver to the Seller the original
executed counterpart of each Predecessor Lease for which substitution has been
made pursuant to Section 9.01 hereof.
9.03 Objection and Repurchase. If any holder of the Notes objects to any
substitution of Leases within ten days of receipt of the Servicer's monthly
report providing notice thereof pursuant to Section 5.01 above, on the grounds
either that any Substitute Lease or Additional Lease is not an Eligible Lease
within the meaning of the definition thereof or that such substitution or
addition is otherwise not permitted under the provisions of Section 9.01 hereof,
the Seller shall be entitled to present such additional information as it deems
appropriate in an effort to demonstrate that such Lease is an Eligible Lease and
that such substitution is permitted under the provisions of Section 6.01 hereof.
Following such presentation, the substitution shall remain effective if each
person originally objecting to the substitution withdraws his objection. If the
conditions specified in the preceding sentence are not satisfied, or if at any
time it is established that any lease was not, at the time of substitution, an
Eligible Lease, then the Seller shall be required to repurchase such Lease in
accordance with the provisions of Section 4.05 hereof.
9.04 Seller's and Servicer's Subsequent Obligations. Upon any substitution
of Leases in accordance with the provisions of this Section 9, the Seller's and
the Servicer's obligations hereunder with respect to the Predecessor Lease shall
cease but the Seller and the Servicer shall each thereafter have the same
obligations with respect to the Substitute Lease substituted as it has with
respect to all other Leases subject to the terms hereof.
SECTION 10. ASSIGNMENT
10.01 Assignment to Trustee. It is understood that this Sales and Servicing
Agreement and all rights of the Company hereunder will be assigned by the
Company to the Trustee pursuant to the Indenture, for the benefit of the
Trustee, the holders from time to time of the Notes as provided in the
Indenture, and may be subsequently assigned by the Trustee to any successor
Trustee or as otherwise provided in the Indenture. Each of the Seller and the
Servicer hereby expressly agrees to each such assignment and agrees that all of
its duties, obligations, representations
42
<PAGE>
and warranties hereunder shall be for the benefit of, and may be enforced by,
the Trustee, the holders from time to time of the Notes, and any successor to or
assignee of any thereof.
10.02 Assignment by Seller or Servicer. None of the respective rights or
obligations of the Seller and the Servicer hereunder may be assigned without the
prior written consent of the Company, the Trustee (acting upon the instructions
of the holders of 66-2/3% of the then aggregate unpaid Outstanding Principal
Amount of the Notes); provided, that nothing herein shall preclude the Servicer
from performing its duties hereunder through the use of agents to the extent
that such use is consistent with the Servicer's business practices in dealing
with leases and equipment for its own account.
SECTION 11. NATURE OF SELLER'S OBLIGATIONS
AND SECURITY THEREFOR
11.01 Seller's Obligations Absolute. The obligations of the Seller
hereunder, and the rights of the Trustee, as assignee of the Company, in and to
all amounts payable by the Seller hereunder, shall be absolute and unconditional
and shall not be subject to any abatement, reduction, setoff, defense,
counterclaim or recoupment whatsoever, including, without limitation,
abatements, reductions, setoffs, defenses, counterclaims or recoupments due or
alleged to be due to, or by reason of, any past, present or future claims which
the Seller may have against the Servicer, the Company, the Trustee, and any
holder of the Notes or any other Person for any reason whatsoever; nor, except
as otherwise expressly provided herein, shall this Sales and Servicing Agreement
terminate, or the respective obligations of the Company, the Seller or the
Servicer be otherwise affected, by reason of any defect in any Lease or in any
unit of Equipment or in the respective rights and interests of the Company, the
Seller and the Trustee therein, or by reason of any Liens, encumbrances,
security interests or rights of others with respect to any Lease or any unit of
Equipment, or any failure by the Company or the Servicer to perform any of its
obligations herein contained, or by reason of any other indebtedness or
liability, howsoever and whenever arising, of the Company, the Servicer, the
Trustee, or any holder of the Notes to the Seller or any other Person or by
reason of any insolvency, bankruptcy, or similar proceedings by or against the
Seller, the Servicer, the Company, the Trustee or any other Person or for any
other cause whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding, it being the intention of the
parties hereto that all obligations of the Seller hereunder and all
43
<PAGE>
amounts payable by the Seller hereunder shall continue to be due and payable in
all events and in the manner and at the times herein provided unless and until
the obligation to perform or pay the same shall be terminated or limited
pursuant to the express provisions of this Sales and Servicing Agreement.
11.02 Security for Obligations. As security for the full and timely
performance by the Seller and the Servicer of each of its obligations hereunder,
and by the Company of each of its obligations hereunder and under the Notes and
the Indenture, the Seller hereby pledges and grants to the Trustee (as a
precaution in the event that, contrary to the intent of the parties to the
transactions contemplated hereby, it is contended that the Seller has any
continuing interest in any Lease or item of Equipment subject to the Indenture)
a first priority Lien on and security interest in all right, title and interest
of the Seller now or hereafter acquired in and to each Lease (including the
right to receive all payments due or to become due thereunder) and each item of
Equipment at any time subject to the Indenture. The foregoing security interest
is granted upon and is subject to the same terms and provisions as are set forth
in the Indenture and shall continue in full force and effect until the same is
discharged in accordance with the terms therein, notwithstanding any waiver or
modification of any of the terms hereof or thereof or of any of the Notes,
whether with or without the consent of the Seller.
11.03 Further Assurances; Financing Statements. Each of the Seller and the
Servicer severally agrees that at any time and from time to time, at its
expense, it shall promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable or
that the Company or the Trustee may request to perfect and protect the
assignments and security interests granted or purported to be granted herein
with respect to the Leases and the Lease Payments or to enable the Company or
the Trustee to exercise and enforce its rights and remedies under this Agreement
with respect to any Leases and the Lease Payments. Without limiting the
generality of the foregoing, the Seller shall execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices as may be necessary or desirable or that the Company or the Trustee may
request to protect and preserve the assignments and security interests granted
by this Agreement with respect to the Leases.
44
<PAGE>
SECTION 12. DEFINITIONS
As used in this Sales and Servicing Agreement, the following terms have the
respective meanings set forth below or set forth in the Section hereof or in any
other agreement indicated:
Accumulated Funding Deficiency - a funding deficiency described in Section
302 of ERISA.
Additional Lease - each separate lease agreement and each lease schedule or
supplement (and each master lease agreement insofar as the same relates to any
such schedule or supplement) acquired by the Company from the Seller with all or
a portion of the proceeds of an Early Termination Lease that has been prepaid in
full pursuant to Section 9 hereof.
Adjusted Lease - a Lease which has had one or more non-credit related
terms adjusted or modified by the Servicer.
Available Residual Amount - Section 1.01 of the Indenture.
Affiliate - Section 1.01 of the Indenture.
Booked Residual Value - the estimated residual value of the Equipment
recorded on the books of the Seller.
Business Day - any day that is not a Saturday, Sunday or other day on which
commercial banking institutions in the city in which the Corporate Trust Office
or the Servicer is located are authorized or obligated by law or executive order
to remain closed.
Casualty Payment - any payment pursuant to a Lease on account of the loss,
theft, condemnation, governmental taking, destruction, or damage beyond repair
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.
Class A Notes - the Company's Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes.
Class A-1 Notes - the Company's _______% Class A-1 Lease-Backed Notes,
Series 1997-A.
Class A-2 Notes - the Company's _______% Class A-2 Lease-Backed Notes,
Series 1997-A.
45
<PAGE>
Class A-3 Notes - the Company's _______% Class A-3 Lease-Backed Notes,
Series 1997-A.
Class A-4 Notes - the Company's _______% Class A-4 Lease-Backed Notes,
Series 1997-A.
Class B Notes - the Company's _______% Class B Lease-Backed Notes, Series
1997-A.
Class C Notes - the Company's _______% Class C Lease-Backed Notes, Series
1997-A.
Closing Date - May ____, 1997, the date on which the Notes are originally
issued pursuant to the Prospectus and the Private Placement Memorandum.
Code - the Internal Revenue Code of 1986, as amended.
Collection Account - Section 1.01 of the Indenture.
Company - the corporation so identified in the first paragraph of
this Sales and Servicing Agreement and any successor corporation.
Corporate Trust - Section 1.01 of the Indenture.
Cut-Off Date - close of business on [May 1], 1997.
Delinquent Lease - Section 1.01 of the Indenture.
Determination Date - Section 1.01 of the Indenture.
Discounted Present Value of the Leases - Section 1.01 of the Indenture.
Early Termination Lease - a lease which has been terminated.
Eligible Lease - Section 4.02 hereof.
Equipment - all units or items of equipment from time to time subject to
any Lease and all such units or items of equipment (to the extent of the
Company's interest therein) remaining subject to the Lien of the Indenture
following the expiration or termination of the Lease to which the same was
previously subject.
ERISA - the Employee Retirement Income Security Act of 1974, as amended.
46
<PAGE>
Event of Default - Section 1.01 of the Indenture.
Excess Copy Charges - Section 1.01 of the Indenture.
Fee Per Scan Charges - Section 1.01 of the Indenture.
Filing Requirements - Financing Statements necessary to perfect the
ownership interest of the Company and the perfected security interest of the
Trustee in the Leases and as of the Closing Date, in Equipment (i) subject to
Leases having a Discounted Present Value of at least 75% of the aggregate
Discounted Present Value of the Leases, which are not finance leases and (ii)
relating to not less than 75% of the Booked Residual Value of such Equipment.
Financing Statement - a statement filed pursuant to the UCC which evidences
a perfected security interest in an asset.
Granted Assets - The Granting Clause of the Indenture.
Indemnified Party - Section 4.03 hereof.
Indenture - the Indenture dated as of the date hereof, between the Company
and the Trustee, as the same may be supplemented, modified or amended from time
to time in accordance with the terms thereof.
Inter-Company Loans - Section 13.01 hereof.
Issuance Date - [May ______], 1997.
Lease - each separate lease agreement and each lease schedule or supplement
(and each master lease agreement insofar as the same relates to any such
schedule or supplement) described on Exhibit A hereto, as the same may be
amended or modified from time to time in accordance with the provisions hereof
and thereof.
Lease Delinquency Payment - Section 1.01 of the Indenture.
Lease Payment - Section 1.01 of the Indenture.
Lease Payment Period - with respect to any Payment Date and the
Determination Date with respect thereto, the calendar month prior to the month
in which such Payment Date and Determination Date occur.
Lease Receivables - with respect to any Lease, all amounts owing by the
Lessee thereunder.
Lease Repurchase Amount - at any date with respect to any Lease, an amount
equal to the Discounted Present Value of the Lease as of the next following
Payment Date plus any amounts previously due and unpaid.
47
<PAGE>
Lessee - each lessee under a Lease.
Lien - means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics liens, and any liens
that attach to a Lease by operation of law.
Nominal Buy-Out Lease - each Lease identified on Exhibit A hereto as having
an estimated residual value of $0 or $1 in the column under the-heading
"RESIDUAL".
Non-Performing Lease - Section 1.01 of the Indenture.
Nonrecoverable Advance - any advance made or to be made by the Servicer
pursuant to Section 4.01 hereof which, in the good faith judgment of the
Servicer, will ultimately not be recoverable by the Servicer under the terms of
this Sales and Servicing Agreement and the Indenture.
Notes - the Class A Notes, Class B Notes and Class C Notes issued pursuant
to the Indenture and all notes issued in exchange therefor pursuant to the
Indenture.
Officers' Certificate - with respect to the Seller or Servicer, a
certificate delivered to the Trustee and signed by the Chairman, the President,
or a Vice President, and by another Vice President, the Treasurer, an Assistant
Treasurer, the Secretary, or an Assistant Secretary of the Seller or Servicer,
as the case may be, who is not the same person as the other officer signing such
certificate.
Original Principal Amount of the Notes - the principal amount of the Notes
originally issued on the Closing Date.
Other Lease Payments - Section 1.01 of the Indenture.
Outstanding Principal Amount - Section 1.01 of the Indenture.
PBGC - the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
Payment Date - the 20th day of each calendar month.
Predecessor Lease - Section 9.01 hereof.
Pension Plan - Section 2.13 hereof.
48
<PAGE>
Person - an individual, partnership, corporation, joint venture,
association, limited liability company, trust (including any beneficiary
thereof) or unincorporated organization, or a government or agency or political
subdivision thereof.
Prime Rate - the [Manufacturers and Traders Trust Company] prime lending
rate.
Private Placement Memorandum - the final Private Placement Memorandum used
in connection with the private offering of the Class C Notes.
Prohibited Transaction - any transaction described in Section 406 of ERISA
which is not exempt by reason of Section 408 of ERISA or the transitional rules
set forth in Section 414(c) of ERISA and any transaction described in Section
4975(c) of the Code which is not exempt by reason of Section 4975(c)(2) or
Section 4975(d) of the Code, or the transitional rules of Section 2003(c) of
ERISA.
Prospectus - the form of final prospectus to be used in connection with the
public offering of the Class A Notes and the Class B Notes as filed with the
Securities and Exchange Commission pursuant to Rule 424(b).
Rating Agency - Standard & Poor's Ratings Services, a Division of the
McGraw-Hill Companies, Moody's Investors Services, Inc., Fitch Investors
Service, L.P. or Duff & Phelps Credit Rating Co.
Registration Statement - the registration statement (File No. 333-23679)
filed with the Securities and Exchange Commission for the registration of the
Class A Notes and the Class B Notes.
Related Person - any Person (whether or not incorporated) which is under
common control with the Seller within the meaning of Section 414(c) of the
Internal Revenue Code of 1986, as amended, or of Section 4001(b) of ERISA.
Reportable Event - any of the events set forth in Section 4043(c) of ERISA
or the regulations thereunder, a withdrawal from a Pension Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4062(e)
of ERISA.
Reserve Account - Section 1.01 of the Indenture.
Residual Account - Section 1.01 of the Indenture.
Residual Realization - Section 1.01 of the Indenture.
49
<PAGE>
Seller - Copelco Capital, Inc., a Delaware corporation, and any successor.
Servicer - the corporation so identified in the first paragraph of this
Sales and Servicing Agreement and any successor thereto in accordance with the
provisions hereof.
Servicer Event of Default - Section 8.01 hereof.
Servicing Fee - Section 3.04(a) hereof.
Servicing Report - Section 5.01(b) hereof.
Similar Transaction Amount - Section 1.01 of the Indenture.
Similar Transaction Payments - Section 1.01 of the Indenture.
Substitute Lease - Section 9.01(a) hereof.
Stated Maturity of the Notes - The ______, ______
Payment Date for the Class A-1 Notes; the ______,______
Payment Date for the Class A-2 Notes; the ______,______
Payment Date for the Class A-3 Notes; the ______, ______
Payment Date for the Class A-4 Notes; and the ______, ______
Payment Date for the Class B Notes.
Termination Payment - Section 1.01 of the Indenture.
Transaction Payment Amount - Section 1.01 of the Indenture.
Trust Estate - Section 1.01 of the Indenture.
Trustee - Manufacturers and Traders Trust Company, and any successor
thereto, as trustee under the Indenture.
Underwriting Agreement - the Underwriting Agreement dated May ____, 1997
among the Company, Lehman Brothers Inc. and First Union Capital Markets Corp.
and, with respect to the Class A Notes, Morgan Stanley & Co. Incorporated for
the purchase and sale of the Class A Notes and the Class B Notes.
Uniform Commercial Code or UCC - with respect to a particular jurisdiction,
the Uniform Commercial Code, as in effect from time to time in such
jurisdiction, or any successor statute thereto.
50
<PAGE>
Utilized Residual Amount - Section 1.01 of the Indenture.
Warranty Lease - Section 1.01 of the Indenture.
SECTION 13. INTER-COMPANY LOANS
13.01 Inter-Company Loans. With the purchase of the Leases, the Company has
acquired the right to hold and apply in accordance with the provisions of
certain of the Leases, security deposits in the amounts [indicated on Schedule
II of Exhibit A to this Agreement]. The Company may from time to time, to the
extent permitted by law, lend such security deposits and any amounts disbursed
to the Company pursuant to Sections 3.03(b) or 6.06 of the Indenture to the
Seller (each such advance, an "Inter-Company Loan"). Each Inter-Company Loan
shall be on a demand basis, shall bear interest at an annual rate equal to the
Prime Rate plus one percent, shall be in the form attached hereto as Exhibit B
and shall otherwise be on such arm's-length terms and conditions as the Company
and the Seller may agree.
SECTION 14. MISCELLANEOUS
14.01 Continuing Obligations. This Sales and Servicing Agreement shall
continue in full force and effect until each of the Notes and any other amounts
due to any holder of the Notes have been paid in full and all other obligations,
if any, secured by the Lien of the Indenture have been fully satisfied.
14.02 GOVERNING LAW. THIS SALES AND SERVICING AGREEMENT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF NEW YORK. IF ANY PROVISION OF THIS SALES AND
SERVICING AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS
SALES AND SERVICING AGREEMENT.
14.03 Successors and Assigns. This Sales and Servicing Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company, the Seller, the Servicer and the Trustee and shall inure to the benefit
of the successors and assigns of the holders, from time to time, of the Notes.
14.04 Modification. The terms of this Sales and Servicing Agreement shall
not be waived, modified or amended without the written consent of the party
against whom such waiver, modification or amendment is claimed and, in any
51
<PAGE>
case, the Trustee (acting upon the instructions of the holders of 66-2/3% of the
then aggregate unpaid Outstanding Principal Amount of the Notes).
14.05 No Proceedings. The Seller and the Servicer, each hereby agree that
it will not, directly or indirectly, institute, or cause to be instituted,
against the Company any proceeding of the type referred to in Section 6.01(e) or
(f) of the Indenture so long as there shall not have elapsed one year plus one
day since the latest maturing Notes have been paid in full in cash.
14.06 Notices. All notices and other communications given in connection
with this Sales and Servicing Agreement shall be sufficient for every Person
hereunder (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid or certified mail return receipt requested, or sent
by private courier or confirmed telecopy, in case of the Seller, to East Gate
Center, 700 East Gate Drive, Mount Laurel, New Jersey 08054-5404, Attention:
Michael Ritter (telecopy: 609-273-9288) and in the case of the Company, the
Servicer and the Trustee and the holders of the Notes, to such addresses as are
provided pursuant to Sections 1.05 and 1.06 of the Indenture or to such other
address as either party may specify to the other from time to time in accordance
with this Section 14.06.
14.07 Counterparts. This Sales and Servicing Agreement may be executed in
any number of counterparts, each counterpart constituting an original, but all
together constituting only one Agreement.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Sales and
Servicing Agreement as of the date and year first written above.
COPELCO CAPITAL, INC., as
Seller and Servicer
By:_____________________________________
Name:
Title:
COPELCO CAPITAL FUNDING CORP. X
By:_____________________________________
Name:
Title:
Address:
The undersigned hereby acknowledges receipt of a copy of the foregoing Sales and
Servicing Agreement and agrees to, and to be bound by, each of the provisions
thereof applicable to the undersigned.
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee
By: ________________________________________
Name:
Title:
<PAGE>
Schedule 1
SUBSIDIARIES OF COPELCO CAPITAL, INC.
1. Copelco Lease Funding Corp. IV, a New Jersey corporation.
2. Copelco Lease Funding Corp. V, a New Jersey corporation.
3. Copelco Lease Funding Corp. VI, a New Jersey corporation.
4. Copelco Capital Funding Corp. I, a Delaware corporation.
5. Copelco Capital Funding Corp. II, a Delaware corporation.
6. Copelco Capital Funding Corp. III, a Delaware corporation.
7. Copelco Capital Funding Corp. IV, a Delaware corporation.
8. Copelco Capital Funding Corp. V, a Delaware corporation.
9. Copelco Capital Funding Corp. VI, a Delaware corporation.
10. Copelco Capital Funding Corp. VIII, a Delaware corporation.
11. Copelco Capital Funding Corp. IX, a Delaware corporation.
12. Copelco Capital Funding Corp. X, a Delaware corporation.
13. Copelco Credit Funding Corp. VII, a New Jersey corporation.
14. Copelco Credit Funding Corp. VIII, a New Jersey corporation.
15. Copelco Credit Funding Corp. IX, a New Jersey corporation.
16. National Equipment Rental Program, Inc., a Delaware corporation.
17. CDRI, Inc., a Delaware corporation.
18. Copelco Equipment Leasing Co., a Delaware corporation.
19. Copelco Specialized Finance Corp., a Delaware corporation.
<PAGE>
EXHIBIT A
SCHEDULE OF LEASES AND EQUIPMENT
A-1
<PAGE>
EXHIBIT B
[FORM OF INTER-COMPANY LOAN NOTE]
ALL RIGHT, TITLE AND INTEREST IN AND TO THIS PROMISSORY NOTE ON THE PART OF
COPELCO CAPITAL FUNDING CORP. X HAS BEEN ASSIGNED TO AND IS SUBJECT TO A
SECURITY INTEREST IN FAVOR OF _______________, AS TRUSTEE, UNDER AN INDENTURE
DATED AS OF ___________, 1997, FOR THE BENEFIT OF THE PERSONS REFERRED TO
THEREIN.
$__________ [Date]
COPELCO CAPITAL, INC., a Delaware corporation (the "Maker"), with its
principal office at _________________________ , FOR VALUE RECEIVED, hereby
promises to pay to the order of Copelco Capital Funding Corp. X, a corporation
with its offices located at _______________ or its assignee (the "Payee"), for
its account, at __________________, the principal sum of _______________ Dollars
($____________) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Payee to the Maker under the Sale
Agreement (as defined below)), together with interest per annum on the unpaid
principal amount hereof at the Prime Rate plus one per cent, in lawful money of
the United States of America and in immediately available funds immediately on
the demand of the Payee.
The date, amount and interest rate, of each Loan made by the Payee to the
Maker, and each payment made on account of the principal thereof, shall be
recorded by the Payee on its books and, prior to any transfer of this Note,
endorsed by the Payee on the schedule attached hereto or any continuation
thereof.
This Note evidences certain Inter-Company Loans from Payee to Maker
pursuant to Section 13.01 of that certain Sales and Servicing Agreement dated as
of [May 1, 1997], between the Maker and the Payee (the "Sale Agreement").
Capitalized terms used in this Note have the respective meanings assigned to
them in the Sale Agreement.
B-1
<PAGE>
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
COPELCO CAPITAL, INC.
By_________________________
<PAGE>
SCHEDULE OF LOANS
This Note evidences demand Loans made under the within-described Sale
Agreement to the Maker, on the date, at the interest rate, and in the principal
amounts set forth below, subject to the payments and prepayments of principal
set forth below:
<TABLE>
<CAPTION>
=====================================================================================================
Principal Amount Unpaid
Amount of Interest Paid or Principal Notation
Date Loan Rate Prepaid Amount Made By
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
=====================================================================================================
</TABLE>
B-3
<PAGE>
The Board of Directors
Copelco Capital Funding Corp. X:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
New York, New York
June 9, 1997
