<PAGE>
As filed with the Securities and Exchange Commission on June 27, 1997
Registration No. 333-[ ]
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington , D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
(Issuer with respect to the Securities)
HELLER FUNDING CORPORATION
(Depositor of the Trust described herein)
(Exact name of Registrant as specified in its charter)
Delaware 6799 36-4165546
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Identification No.)
Code Number)
Heller Funding Corporation
500 West Monroe Street
Chicago, Illinois 60661
(312 ) 441-7246
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Debra H. Snider, Esq.
Executive Vice President,
Chief Administrative Officer
and General Counsel
Heller Funding Corporation
c/o Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
( 312) 441-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
M. David Galainena, Esq. Stephan J. Feder, Esq.
Winston & Strawn Simpson Thacher & Bartlett
35 West Wacker Drive 425 Lexington Avenue
Chicago, Illinois 60601 New York, New York 10017
(312) 558-5600 (212) 455-2000
--------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
Title of Each Class of Amount to Be Proposed Maximum Offering Proposed Maximum Amount of
Securities Registered(1) Price Per Unit (2) Aggregate Offering Price (2) Registration Fee
to Be Registered
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Receivable- $1,000,000 100% $1,000,000 $303.03
Backed Notes
=============================================================================================================================
Class B Receivable- $1,000,000 100% $1,000,000 $303.03
Backed Notes
=============================================================================================================================
Class C Receivable- $1,000,000 100% $1,000,000 $303.03
Backed Notes
=============================================================================================================================
</TABLE>
(1) The amount of Securities being registered represents the maximum aggregate
principal amount of Securities currently expected to be offered for sale.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a).
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 that 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 this 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>
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 HAS
BECOME 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 , 1997
PRELIMINARY PROSPECTUS
- ----------------------
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1997-1
$[ ] [ ]% Class A Receivable-Backed Notes, Series 1997-1
$[ ] [ ]% Class B Receivable-Backed Notes, Series 1997-1
$[ ] [ ]% Class C Receivable-Backed Notes, Series 1997-1
Heller Funding Corporation,
Trust Depositor
Heller Financial, Inc.,
Servicer
---------------------
The Heller Equipment Receivables Trust 1997-1 (the "Trust" or the
"Issuer"), a limited purpose Delaware business trust, has been formed pursuant
to a Trust Agreement, dated as of [ ], 1997, between Heller Funding Corporation
("Heller Funding"), as Trust Depositor (in such capacity, the "Trust
Depositor"), and [ ], as Owner Trustee (the "Owner Trustee"). The Trust
Depositor is a wholly owned, limited purpose bankruptcy remote subsidiary of
Heller Financial, Inc. ("Heller Financial"). The Trust will issue $[ ] aggregate
principal amount of [ ]% Class A Receivable-Backed Notes, Series 1997-1 (the
"Class A Notes"), $[ ] aggregate principal amount of [ ]% Class B Receivable-
Backed Notes, Series 1997-1 (the "Class B Notes") and $[ ] aggregate principal
amount of [ ]% Class C Receivable-Backed Notes, Series 1997-1 (the "Class C
Notes"; and together with the Class A Notes and Class B Notes, the "Notes"). The
Notes will represent debt obligations of the Trust, and will be issued pursuant
to and secured by an Indenture dated as of [ ], 1997 (the "Indenture") to be
entered into between the Trust and [ ], as Indenture Trustee (the "Indenture
Trustee"). The Trust will concurrently issue $[ ] aggregate principal amount of
[ ]% Class
(cover continued on next page)
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS
SET FORTH UNDER "RISK FACTORS" ON PAGE [ ] OF THIS PROSPECTUS.
THE NOTES WILL REPRESENT OBLIGATIONS OF THE TRUST ONLY AND WILL NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY,
THE TRUST DEPOSITOR, THE OWNER TRUSTEE, HELLER FINANCIAL OR ANY OF THEIR
RESPECTIVE AFFILIATES, OR ANY GOVERNMENTAL AGENCY.
---------------------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference.
---------------------
<TABLE>
<CAPTION>
================================================================================
Price to Public Underwriting Discounts Proceeds to Issuer
and (2)
Commissions (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Note $ $ $
- --------------------------------------------------------------------------------
Per Class B Note $ $ $
- --------------------------------------------------------------------------------
Per Class C Note $ $ $
- --------------------------------------------------------------------------------
Total $ $ $
================================================================================
</TABLE>
(1) The Issuer has agreed to indemnify the Underwriter against certain
liabilities, including under the Securities Act of 1933.
(2) Before deducting expenses of this Offering estimated to be $_________
The Notes are offered by the Underwriter, subject to prior sale, when,
as and if issued to and accepted by it and subject to its right to reject any
order in whole or in part or to withdraw, cancel or modify any order without
notice. It is expected that delivery of the Notes will be made in book-entry
form only through the Same Day Funds Settlement System of The Depository Trust
Company, or through Cedel Bank, S.A. or the Euroclear System, on or about [ ],
1997.
First Union Capital Markets Corp. [ ] [ ]
The date of this Prospectus is [ ], 1997.
(cover page continued)
<PAGE>
D-1 Receivable-Backed Certificates, Series 1997-1 (the "Class D-1 Certificates"
or the "Prior Certificates"), as well as $[ ] aggregate principal amount of [ ]%
Class D-2 Receivable-Backed Certificates, Series 1997-1 (the "Class D-2
Certificates" or the "Subordinate Certificates"; and, together with the Prior
Certificates, the "Certificates"). The Certificates will represent fractional
undivided beneficial equity interests in the Trust, and will be issued in each
case pursuant to the Trust Agreement. The Certificates are not being offered and
sold hereunder.
The property of the Trust (the "Trust Assets") will include (a) a pool
of contracts originated or acquired by Heller Financial or its wholly-owned
subsidiary, Heller Financial Leasing, Inc. ("HFLI") as described herein
(inclusive of any Additional Contracts or Substitute Contracts added to the
Trust from time to time as defined and described herein, collectively, the
"Contracts") consisting of (i) conditional sale agreements, promissory notes
with related security agreements, operating and finance leases, installment
payment agreements, and similar types of financing agreements with end-users
(each, an "End-User") of the Equipment, Software and Services described below
(such Contracts, "End-User Contracts") and meeting certain eligibility criteria
specified herein, relating to printing, pre-press, machine tool, plastics,
computer hardware, computer software, restaurant, transportation, energy
related, medical, and industrial equipment (the "Equipment"), certain computer
software (the "Software") and related support and consulting services (the
"Services"; together with Equipment and Software, the "Financed Items"),
together with certain rights of Heller Financial or HFLI under finance program
agreements [and assignments] with Vendors (as defined herein) of the Financed
Items, as well as the Equipment or a security interest in the Equipment, as more
fully described herein, and (ii) limited recourse contractual payment
obligations (which may take the form of promissory notes) payable by Vendors
(such payment obligations, "Vendor Loans") and secured by the Vendor's interest
in End-User Contracts originated by such Vendor (End-User Contracts securing
Vendor Loans being collectively referred to as "Secondary Contracts"), and by
the Equipment related to such End-User Contracts, and (b) collections on such
Contracts due or received on and after [ ], 1997 (the "Cutoff Date") or, in the
case of Additional Contracts or Substitute Contracts, their applicable Cutoff
Dates as defined herein. The Contracts and related interests will be conveyed by
Heller Financial or HFLI (either, in such capacity, a "Seller") to the Trust
Depositor pursuant to a Transfer and Sale Agreement dated as of [ ], 1997 (the
"Transfer and Sale Agreement") by and between Heller Financial, HFLI and the
Trust Depositor. The Trust Depositor will concurrently convey such assets to the
Trust pursuant to the Sale and Servicing Agreement, dated as of [ ], 1997 (the
"Sale and Servicing Agreement"), among the Trust Depositor, the Trust, the
Indenture Trustee (as hereinafter defined) and Heller Financial, in its separate
capacity as Servicer thereunder (Heller Financial being, in such capacity, the
"Servicer").
Interest on the Notes and Certificates will be payable monthly in
arrears on the [ ] day of the month beginning on [ ], 1997 (each, a
"Distribution Date") with respect to the period from and including the
immediately preceding Distribution Date (or with respect to the initial
Distribution Date, the date of issuance of the Notes and Certificates) to the
period to and excluding such Distribution Date. Principal payments with respect
to the Notes and Certificates will be payable to the holders thereof on each
Distribution Date as described herein. The stated maturity date with respect to
the Notes and Certificates is the[ ] Distribution Date. The actual payment in
full, however, of the Notes or Certificates could and is expected to occur
earlier than such stated maturity date. See "Summary of Terms--Terms of the
Notes--B. Principal" and "--Optional Redemption" herein.
The Notes and the Certificates will be payable primarily from
collections of payments due under the Contracts (including payments from Vendors
pursuant to certain recourse arrangements, where applicable, and as further
described below), certain amounts received upon the prepayment or purchase of
Contracts or liquidation of the Contracts and disposition of the related
Equipment upon defaults thereunder, and the proceeds of Servicer Advances (as
defined herein), if any. The likelihood of payment of interest due on each Class
of Notes on any given Distribution Date will be enhanced by the application of
such available amounts (after repayment of any outstanding Servicer Advances,
and payment of the Servicing Fee as defined herein) to the payment of such
interest prior to the payment of principal on any of the Notes or Certificates,
as well as by the preferential right of the holders of each Class of Notes to
receive such interest (i) in the case of the Class A Notes, prior to the payment
of any interest on the Class B Notes, the Class C Notes or the Certificates,
(ii) in the case of the Class B Notes, prior to the payment of any interest on
the Class C Notes or the Certificates, and (iii) in the case of the Class C
Notes, prior to the payment of any interest on the Certificates. Also, following
an Event of Default or during the continuance of a Restricting Event (as defined
herein), the likelihood of payment of principal on each Class of Notes on any
given Distribution Date will be enhanced by the application of remaining
available amounts (after payment of outstanding Servicer Advances, Servicing
Fees and after payment of interest due on the Notes) to the payment of such
principal (i) in the case of the Class A Notes, prior to the payment of
principal on the Class B Notes, the Class C Notes or any Certificates, and prior
to the payment of interest on any Certificates, (ii) in the case of the Class B
Notes, prior to the payment of principal on the Class C Notes, or on any
Certificates, and prior
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<PAGE>
to the payment of interest on any Certificates, and (iii) in the case of the
Class C Notes, prior to the payment of principal or interest on any
Certificates. See "Summary of Terms--Terms of the Notes", as well as
"Description of the Notes--Allocations" herein.
The Notes are being offered pursuant to this Prospectus. Sales of the
Notes may not be consummated unless the purchaser has received this Prospectus.
The Certificates are not being offered hereby.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO NOTEHOLDERS
During such time as the Notes remain in book-entry form, periodic and
annual unaudited reports, containing information concerning the Trust, the
Contracts, the Notes and the Certificates, will be prepared by the Servicer and
sent on behalf of the Trust to Cede & Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC"), [and the Euroclear System ("Euroclear") or Cedel Bank,
S.A. ("")] as registered holders of the Notes. Such reports will be made
available by DTC[, Euroclear or CEDEL] and its participants to holders of
interests in the Notes in accordance with the rules, regulations and procedures
creating and affecting DTC[, Euroclear and CEDEL, respectively]. See
"Description of the Notes--Book Entry Registration" and "--Reports" below. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles or that have been examined and reported
upon by, with an opinion expressed by, an independent or certified public
accountant. Upon the issuance of fully registered, certificated Notes, such
reports will be sent to each registered Noteholder.
AVAILABLE INFORMATION
The Trust Depositor, as originator of the Trust, 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 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 also maintains a public access site on the Internet
through the World Wide Web at which site reports, information statements and
other information, including all electronic filings, regarding the Trust
Depositor and the Trust may be viewed. The Internet address of such World Wide
Web site is http://www.sec.gov. The Servicer, on behalf of the Trust, will also
file or cause to be filed with the Commission such periodic reports as are
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission thereunder. Copies of such
reports can be obtained as described above.
Upon receipt of a request by an investor, or his or her
representative, within the period during which there is an obligation to deliver
a Prospectus, the Underwriter will promptly deliver, or cause to be delivered,
without charge and in addition to any such delivery requirements, a paper copy
of this Prospectus and a Prospectus encoded in an electronic format.
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<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in this summary are defined elsewhere in this Prospectus on the pages
indicated in the "Index of Terms" on page [ ].
Issuer........................ Heller Equipment Asset Receivables Trust 1997-1
(the "Issuer" or the "Trust"), a Delaware
business trust formed by the Trust Depositor
and the Owner Trustee pursuant to the Trust
Agreement dated as of [ ], 1997 (the
"Trust Agreement") between the Trust Depositor
and the Owner Trustee. The principal executive
offices of the Trust are in Wilmington,
Delaware, in care of the Owner Trustee, at the
address of the Owner Trustee specified below.
Trust Depositor............... Heller Funding Corporation (the "Trust
Depositor"), a Delaware corporation and a
wholly owned, limited purpose subsidiary of
Heller Financial, Inc. The Trust Depositor's
principal executive offices are located at 500
West Monroe Street, Chicago, Illinois 60661 and
its telephone number is (312) 441-7246.
Seller/Servicer............... Heller Financial, Inc., a Delaware corporation
("Heller Financial"; or, in its separate
capacities as a Seller under the Transfer and
Sale Agreement described herein, a "Seller", or
as Servicer under the Sale and Servicing
Agreement described herein, the "Servicer").
Heller Financial's offices are located at 500
West Monroe Street, Chicago, Illinois 60661 and
its telephone number is (312) 441-7000.
Additional Seller............. In addition to Heller Financial, Heller
Financial's wholly-owned subsidiary, Heller
Financial Leasing, Inc. ("HFLI") will be an
additional Seller (in such capacity, also a
"Seller") under the Transfer and Sale Agreement
described herein.
Indenture Trustee............. [ ], as indenture
trustee under the Indenture described herein
(the "Indenture Trustee"). The Indenture
Trustee's offices are located at [ ].
Owner Trustee................. [ ], as owner trustee
under the Trust Agreement (the "Owner
Trustee"). The Owner Trustee's offices are
located at [ ].
Cutoff Dates.................. With respect to the Contracts transferred to
the Trust on the Closing Date, [ ], 1997, and
with respect to any Additional Contract or
Substitute Contract (as defined herein)
transferred to the Trust thereafter, the close
of business on the first day of the calendar
month in which such transfer occurs (each of
such dates a "Cutoff Date", an "Additional
Contract Cutoff Date", or a "Substitute
Contract Cutoff Date", respectively). The term
"Cutoff Date" when used herein in the context
of general references to the pool of Contracts
held by the Trust, should be deemed to include
a reference to the Additional Contract Cutoff
Date and Substitute Contract Cutoff Date of any
Additional Contract or Substitute Contract
contained within such pool of Contracts, unless
otherwise specified or unless the context
otherwise clearly requires.
Closing Date.................. On or about [ ], 1997 (the
"Closing Date").
Collection Periods,........... A Collection Period is the period from and
Calculation Dates, including the first day of each calendar month
Distribution Dates to and including the last day of the calendar
and Record Dates month (such first day, the "Calculation Date"
and each such period, a "Collection Period"). A
Distribution Date is the [ ]th day (or if any
such date is not a "Business Day", i.e., a day
other than a Saturday, a Sunday or a day on
which banking institutions in Chicago,
Illinois, Wilmington, Delaware or New York, New
York are authorized or obligated by any law or
regulation to be closed, then on the
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next succeeding Business Day) of each calendar
month (each, a "Distribution Date") commencing
[ ], 199[ ]. The Collection Period
relating to any particular Distribution Date
shall be the Collection Period occurring during
the calendar month preceding the month in which
such Distribution Date occurs.
With respect to any Distribution Date and the
Notes, the "Record Date" is the calendar day
immediately preceding each Distribution Date
(or, with respect to any Definitive Note as
defined herein, the last calendar day of the
month preceding the month in which such
Distribution Date occurs).
The Notes..................... $[ ] aggregate principal amount (the
"Initial Class A Note Principal Balance") of
[ ]% Class A Receivable-Backed Notes, Series
1997-1 (the "Class A Notes"); $[ ] aggregate
principal amount (the "Initial Class B Note
Principal Balance") of [ ]% Class B
Receivable-Backed Notes, Series 1997-1; and
$[ ] aggregate principal amount (the
"Initial Class C Note Principal Balance") of
[ ]% Class C Receivable-Backed Notes, Series
1997-1 (the "Class C Notes"; and together with
the Class A Notes and Class B Notes, the
"Notes"). The Initial Class A Note Principal
Balance is equal to approximately [ ]% of the
initial Aggregate Discounted Contract Balance
(as defined herein) of the Contracts, the
Initial Class B Note Principal Balance is equal
to approximately [ ]% of the initial
Aggregate Discounted Contract Balance of the
Contracts, and the Initial Class C Note
Principal Balance is equal to approximately
[ ]% of the Initial Aggregate Discounted
Contract Balance of the Contracts.
The Notes will be issued by the Trust pursuant
to an Indenture to be dated as of [ ],
1997 (the "Indenture"), between the Trust and
the Indenture Trustee. The Notes will be
secured by the assets of the Trust. The Notes
will be available for purchase in book-entry
form only in minimum denominations of $1,000
and integral multiples thereof (except for one
Note of each Class which, for rounding
purposes, may be less than an integral multiple
thereof). The holders of beneficial interests
in the Notes held in book-entry form ("Note
Owners") will not be entitled to receive
Definitive Notes except in the limited
circumstances described herein. See
"Description of the Notes--General" and
"--Definitive Notes" and "--Book-Entry
Registration" herein. The Class B Notes, the
Class C Notes and the Certificates will be
subordinated to the Class A Notes to the extent
described herein; the Class C Notes and the
Certificates will be subordinated to the Class
B Notes to the extent described herein; and the
Certificates will be subordinated to the Class
C Notes to the extent described herein. See
"Description of the Notes -- Allocations"
herein.
The Certificates.............. On the Closing Date, the Trust will also issue
Class D-1 Certificates (the "Class D-1
Certificates" or the "Prior Certificates") with
an initial certificate balance of [$ ] and
an interest rate of [ ]% (the "Class D-1
Interest Rate"), as well as Class D-2
Certificates (the "Class D-2 Certificates" or
the "Subordinate Certificates"; and, together
with the Prior Certificates, the
"Certificates") with an initial certificate
balance of [$ ] and an interest rate of
[ ]% (the "Class D-2 Interest Rate"). The
Certificates will represent fractional
undivided beneficial equity interests in the
Trust, and will be issued in each case pursuant
to the Trust Agreement. The Certificates are
not being offered and sold hereunder. The Prior
Certificates are expected to be sold
concurrently with the Notes in a private
placement. The Trust Depositor is expected
initially to retain the Subordinate
Certificates, although the Subordinate
Certificates could be subsequently conveyed in
a separate transaction subject to certain
restrictions to ensure the Trust is not treated
as a taxable entity for federal income tax
purposes. The holder or holders of the Class
D-1 Certificates shall be referred to herein as
the "Class D-1 Certificateholders" or the
"Prior Certificateholders" and the holders of
the Subordinate Certificates shall be referred
to herein as the"Class D-2 Certificateholders"
or the "Subordinate
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<PAGE>
Certificateholders" (and, together with the
Prior Certificateholders, the
"Certificateholders").
The rights of the Certificateholders to receive
distributions with respect to the Certificates
will be subordinated to the rights of the
Noteholders to receive distributions with
respect to the Notes to the extent described
herein. See "Description of the Notes -
Allocations" herein.
The Trust..................... The Trust will be a business trust established
under the laws of the State of Delaware
pursuant to the Trust Agreement. The activities
of the Trust will be limited by the terms of
the Trust Agreement to acquiring, owning and
managing the Contracts and related assets,
issuing and making payments on the Notes and
the Certificates and other activities related
thereto.
Trust Assets.................. The property of the Trust (the "Trust Assets")
will include (i) the Contracts transferred to
the Trust on the Closing Date with an aggregate
Discounted Contract Balance of $[ ] as of the
Cutoff Date (together with Additional Contracts
and/or Substitute Contracts that may be
transferred to the Trust from time to time as
described herein), (ii) all monies at any time
paid or payable thereunder or in respect
thereof from and after the Cutoff Date
applicable to such Contracts, in the form of
(A) Scheduled Payments (as defined herein)
inclusive of such payments received through
Vendor recourse or support arrangements, but
excluding the Excluded Amounts, (B) Prepayments
(as defined herein), and (C) Recoveries
(including any derived from the disposition of
related Equipment) received with respect to
Defaulted Contracts (in each case as such terms
are defined herein), (iii) the related
Equipment (or a security interest therein),
(iv) with respect to Contracts which are Vendor
Loans, the Applicable Security related thereto,
(v) such amounts as from time to time may be
held in the Collection Account or any related
Account or Subaccount under the Sale and
Servicing Agreement or the Indenture, together
with earnings on funds therein, (vi) the rights
of the Trust Depositor under the Transfer and
Sale Agreement, (vii) any amounts received with
respect to the Residuals, (viii) any late
charges relating to a Contract which were
included in the Contract's terms as of the
Cutoff Date ("Late Charges") and (ix) proceeds
of any of the foregoing.
A. Contracts................. All of the Contracts to be included in the
Trust (sometimes referred to herein,
collectively, as the "Contracts Pool" or the
"Transferred Contracts") consist of
[conditional sale agreements (each, a "CSA"),]
promissory notes with related security
agreements (each, a "Secured Note"), operating
and finance leases (each, a "Lease"),
installment payment agreements (each, an "IPA")
or other similar types of financing agreements
(each, a "Financing Agreement") covering
Financed Items or, in the case of Vendor Loans,
secured by End-User Contracts which, in turn,
cover Financed Items. With respect to Leases,
the Sellers will jointly and severally
represent in the Transfer and Sale Agreement
either (i) that such Leases are "net leases"
and contain "hell or high water" provisions in
favor of the Seller, which unconditionally
obligate each applicable lessee (each, a
"Lessee") to make all payments scheduled under
its Lease, without setoff , or (ii) with
respect to certain Leases with Lessees that are
governmental entities or municipalities, if
such Lease is cancelled in accordance with its
terms, either (x) the Vendor (as hereinafter
defined) which assigned such Lease to the
Seller is unconditionally obligated to
repurchase such Lease from the Seller for a
purchase price not less than the Discounted
Contract Balance of such Lease (as of the date
of purchase) plus interest thereon at the
weighted average of the Discount Rates through
the Distribution Date following such date of
repurchase or (y) pursuant to the Transfer and
Sale Agreement, the Sellers have jointly and
severally indemnified the Trust Depositor (and
any assignee thereof) against such cancellation
in an amount equal to the Discounted Contract
Balance of such Lease (as of the date of
purchase) plus interest thereon at the Discount
Rate through the Distribution Date following
such cancellation less any amounts paid by the
Vendor pursuant to clause (x). See "The
Contracts Generally" and
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<PAGE>
"The Transfer and Sale Agreement and Sale and
Servicing Agreement Generally--Representations
and Warranties" herein.
The Transferred Contracts have been selected by
the Seller from its portfolio of CSAs, Secured
Notes, Leases, IPAs, Financing Agreements and
Vendor Loans, have the characteristics
specified in the Transfer and Sale Agreement
and Sale and Servicing Agreement and described
herein, and (except for Additional Contracts or
Substitute Contracts as defined herein) will be
purchased by the Trust Depositor from the
applicable Seller on the Closing Date pursuant
to the Transfer and Sale Agreement. See "The
Transfer and Sale Agreement and Sale and
Servicing Agreement Generally--Representations
and Warranties", "Use of Proceeds" and "The
Contracts Pool" herein.
As of the Cutoff Date, the Contract Pool had
the following characteristics (unless otherwise
noted, percentages are calculated by reference
to Discounted Contract Balances of the related
Contracts as a percentage of the Aggregate
Discounted Contract Balance of the Contract
Pool. The Discounted Contract Balances and the
Aggregate Discounted Contract Balance utilized
in clauses (i) through (vii) below were
calculated utilizing the Statistical Discount
Rate (as defined herein):
(i) there were [ ] Contracts in the
Contract Pool;
(ii) the Aggregate Discounted Contract
Balance, or ADCB (as defined herein) of the
Transferred Contracts, calculated at the
Discount Rate (as defined herein), was
$[ ];
(iii) the final scheduled payment date of the
Transferred Contract with the latest maturity
or expiration as of the Cutoff Date was
[ ], 200[ ];
(iv) the average Discounted Contract
Balance was approximately $[ ];
(v) all of the Contracts had (A) original
terms to maturity of not less than [ ] months
and not more than [ ] months, with a weighted
average original term to maturity of
approximately [ ] months, and (B) a remaining
term to maturity of not less than [ ] months
and not more than [ ] months, with a weighted
average remaining term to maturity of
approximately [ ] months;
(vi) of such Contracts, approximately
[ ]% were Vendor Loans; and
(vii) the Obligors (as defined herein) on
approximately [ ]% of the Contracts were
located in the state of [ ]; approximately
[ ]% were located in [ ]; approximately
[ ]% were located in [ ]; approximately
[ ]% were located in [ ]; and no other
state represented more than [ ]% of the
Contracts.
See "The Transfer and Sale Agreement and the
Sale and Servicing Agreement Generally--
Concentration Amounts" herein.
The Statistical Discount Rate is equal to [ ]
(the "Statistical Discount Rate"). The
Discounted Contract Balances and the Aggregate
Discounted Contract Balance calculated at the
Discount Rate will vary somewhat from the
Discounted Contract Balances and Aggregate
Discounted Contract Balance calculated at the
Statistical Discount Rate, such variance will
not be material.
For further information regarding the
Transferred Contracts, see "The Contracts Pool"
and "The Contracts Generally", as well as "The
Transfer and Sale Agreement and Sale and
Security Agreement Generally--Representations
and Warranties" and "--Concentration Amounts"
herein.
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Between the Cutoff Date and the Closing Date
some amortization of the pool is expected to
occur. In addition, certain Contracts included
in the pool as of the Cutoff Date may be
determined not to meet the eligibility
requirements for the final pool, and may not be
included in the final pool. While the
statistical distribution of the characteristics
as of the Closing Date for the initial
Contracts Pool will vary somewhat from the
statistical distribution of such
characteristics as of the Cutoff Date as
presented in this Prospectus, such variance
will not be material.
Generally, the Contracts not constituting
Leases are prepayable by their terms by the
Obligors thereon; in many (but not all)
instances, such terms require a prepayment
penalty. The Contracts constituting Leases
generally will be non-cancellable by the
Obligors. The Sellers have from time to time,
however, and the Servicer may, under the terms
of the Sale and Servicing Agreement, permit or
agree to the early termination or full
prepayment of any such Contract included in the
Contract Pool in certain circumstances, and on
the terms and subject to the conditions more
fully specified in, the Sale and Servicing
Agreement (any prepayment of a Contract,
whether pursuant to its terms or in the
Servicer's discretion being an "Early
Termination", with the Contract related thereto
being an "Early Termination Contract" or
"Prepaid Contract"). Such circumstances may
include, without limitation, a full or partial
buyout of the Equipment which is the subject of
the Contract, or an equipment upgrade.
In the event of an Early Termination which has
been prepaid in full, the Trust Depositor will
have the option to cause the Trust to reinvest
the proceeds of such Early Termination in one
or more Contracts having similar
characteristics to such terminated Contract
(each, an "Additional Contract").
In addition, the Sellers will have the option
under the Transfer and Sale Agreement to cause
the Trust Depositor, pursuant to the terms of
the Sale and Servicing Agreement, to substitute
into the Trust one or more Contracts having
similar characteristics (each, a "Substitute
Contract") for Defaulted Contracts (as defined
herein), and Contracts following a material
modification to or adjustment of the terms of
such Contract which modification or adjustment
would not otherwise be permissible under the
Sale and Servicing Agreement (unless the
Contract was to be prepaid in full to the Trust
and refinanced by the Seller with a new,
modified Contract outside the Trust) (each, an
"Adjusted Contract"). The Aggregate Discounted
Contract Balance (as defined herein) of the
Defaulted Contracts and Adjusted Contracts for
which the Seller may cause the substitution of
Substitute Contracts is limited to an amount
not in excess of 15% of the Aggregate
Discounted Contract Balance of the Contracts as
of the Cutoff Date. The Sellers will also be
permitted to substitute a Substitute Contract
for a Contract which the Seller would otherwise
be required to repurchase due to certain
representations or warranties relating thereto
proving to have been incorrect (a "Warranty
Contract"), without regard to the 15%
limitation described above. See "The Transfer
and Sale Agreement and The Sale and Servicing
Agreement Generally--Representations and
Warranties" herein.
The terms of a Contract may be subjected to
material modifications or adjustments for
administrative reasons or at the request of the
Obligor or related Vendor for such Contract due
to a variety of circumstances. Such material
modifications may result in adjustments to the
Contract commencement date, the stated periodic
payment date for payments due, the amount of
the periodic payment or the equipment subject
to the Contract. There may also occasionally be
non-material adjustments or modifications in
Contract terms which may be effected by the
Servicer on behalf of the Trust without
Noteholder consent and without affecting the
Contract's status as part of the Trust.
Additional Contracts and Substitute Contracts
will be originated and added to the Trust using
the same credit criteria and eligibility
standards as the Contracts in
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<PAGE>
the Contracts Pool on the Closing Date. To the
extent material, information with respect to
such Additional Contracts or Substitute
Contracts will be included in periodic reports
filed by the Servicer on behalf of the Trust as
are required under the Exchange Act.
In no event will the aggregate scheduled
payments of the Contracts, after the inclusion
in the Trust of the Substitute Contracts and
reinvestment in Additional Contracts, be
materially less than the aggregate scheduled
payments of the Contracts prior to such
substitution or reinvestment. In addition,
either the final payment on such Substitute
Contract or Additional Contract will be on or
prior to [ ], or, to the extent the final
payment on such Contract is due after [ ],
only scheduled payments due on or prior to such
date may be included in the Discounted Contract
Balance of such Contract for purpose of making
any calculation under the Indenture or the Sale
and Servicing Agreement.
The Servicer is not authorized to permit an
Early Termination, without the addition to the
Trust of a related Additional Contract, unless
the amount to be prepaid (whether by the
related Obligor, or through a combination of
payments from the related Obligor and from the
Seller/Servicer) on such terminated Contract is
equal at least to the then Discounted Contract
Balance of the Contract, plus any delinquent
payments thereon. See [" "] herein.
B. Equipment and Other....... All of the applicable Seller's right, title and
Financed Items interest (which may be limited to a security
interest) in the Equipment, if any, subject to
each Lease and the security interest of the
applicable Seller in the Equipment, if any,
subject to each CSA, Secured Note, IPA,
Financing Agreement and Vendor Obligation
included in the Contract Pool will be
transferred to the Trust. Equipment will
consist of printing, information technology,
communications, commercial, industrial,
transportation, health care and construction
equipment. See "The Contracts Generally--
Equipment" and "The Contracts Pool" herein. In
the event the party obligated to make payments
under any Contract (as to a Contract, the
"Obligor") defaults in such payments, the
Servicer will follow its customary and usual
collection procedures, which may include the
repossession and sale of any related Equipment
on behalf of the Trust. Any Recoveries (as
defined herein) from such sale shall constitute
Available Amounts (as hereinafter defined). See
"The Contracts Generally--Equipment", ["Credit
and Contract Servicing Procedures--Contract
Collections"] and "Description of the Notes--
Defaulted Contracts" herein.
Certain End-User Contracts cover Financed Items
other than Equipment, including computer
software ("Software") and related support and
consulting services (collectively, "Services").
The Trust will not have title to or a security
interest in such Software, nor will it own such
Services, and would not be able to realize any
value therefrom under a related Contract upon a
default by the Obligor. See "The Contracts
Generally--Software and Services" herein.
C. Collection Account........ A trust account will be established by the
Servicer in the name of and maintained by the
Indenture Trustee (the "Collection Account")
into which all amounts that will be collected
for the Trust will be deposited in accordance
with the Indenture and the Sale and Servicing
Agreement. See "Description of the Notes--
Collection Account" herein.
D. Vendor Agreements......... Each of the Sellers' Vendor finance program
agreements (each, a "Program Agreement") are
agreements with equipment manufacturers,
dealers and distributors or computer software
licensors or distributors or other persons
located in the United States ("Vendors") which,
in each case, provide the Seller with the
opportunity to finance transactions relating to
the acquisition or use by an End-User of a
Vendor's Equipment, Software, Services or other
products. Some of these Program Agreements take
the form of a referral relationship, which may
or may not include credit Terms of the Notes
support from the Vendor. All rights (but not
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obligations) of the Sellers under the Program
Agreements with respect to the Contracts are
generally assignable and will be so assigned by
the Sellers to the Trust Depositor and in turn
conveyed by the Trust Depositor to the Trust.
Such rights may include various forms of
support to the Sellers under such Program
Agreements including representations and
warranties by the Vendor in respect of the End-
User Contracts assigned by the Vendor to the
Seller and related Equipment, Software or
Services, credit support with respect to
defaults by End-Users and equipment repurchase
and remarketing arrangements upon early
termination of End-User Contracts upon a
default by the End-User. See "The Contracts
Generally--Vendor Agreements" herein.
In addition to the foregoing, the Seller may
enter into assignment agreements (each a
"Vendor Assignment"; collectively, with the
Program Agreements, "Vendor Agreements") from
time to time with Vendors pursuant to which
individual End-User Contracts originated by
Vendors are assigned to the Seller, rather than
pursuant to a Program Agreement. Each Vendor
Assignment will be made either with or without
recourse against the Vendor for End-User
defaults and will generally contain many, if
not all, of the representations, warranties and
covenants typically contained in Program
Agreements, as well as a Vendor repurchase
requirement in the event of a breach by the
Vendor of such representations, warranties or
covenants. Vendor Assignments may or may not
provide for any Vendor remarketing support in
the event of an End-User default.
Terms of the Notes............ The principal terms of the Notes will be as
described below:
A. Interest.................. The Class A Notes will bear interest at the
rate of [ ]% per annum (the "Class A Interest
Rate"), the Class B Notes will bear interest at
the rate of [ ]% per annum (the "Class B
Interest Rate") and the Class C Notes will bear
interest at the rate of [ ]% per annum (the
"Class C Interest Rate"), in each case
calculated on the basis of a year of 360 days
consisting of twelve 30 day months.
Interest on the outstanding principal amount of
the Notes will accrue from and including the
most recent Distribution Date on which interest
has been paid (or, in the case of the initial
Distribution Date, from and including the
Closing Date) to but excluding the following
Distribution Date (each period for which
interest accrues on the Notes, an "Accrual
Period"). Interest on the Notes will be payable
on each Distribution Date, commencing [ ],
199[ ], to the holders of record of the Class A
Notes (the "Class A Noteholders"), the holders
of record of the Class B Notes (the "Class B
Noteholders") and the holders of record of the
Class C Notes (the "Class C Noteholders";
together with the Class A Noteholders and Class
B Noteholders, the "Noteholders") as of the
related Record Date. See "Description of the
Notes--General" and "The Indenture--Payments of
Principal and Interest" herein.
Interest on the Class A Notes is payable on a
Distribution Date from Available Amounts (as
defined herein) available on such date (and
after application of such Available Amounts to
repay any outstanding Servicer Advances as
defined herein, and to pay the Servicing Fee as
defined herein). Such Available Amounts
represent primarily collections of payments due
under the Contracts (including realization of
amounts from Vendor recourse, if applicable and
any amounts realized from Residuals), Late
Charges, certain amounts received upon the
prepayment or purchase of Contracts or
liquidation of the Contracts and disposition of
the related Equipment upon defaults thereunder,
and proceeds of Servicer Advances (as defined
herein), if any as well as earnings on amounts
held in the Collection Account. Interest on the
Class B Notes is payable on a Distribution Date
from the Available Amounts on such date, but
after application of such Available Amounts to
repay any outstanding Servicer Advances, to pay
the Servicing Fee, and to pay interest on the
Class A Notes. Interest on the Class C Notes is
payable on a Distribution Date from Available
Amounts on
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<PAGE>
such date, but after application of such
Available Amounts to repay any outstanding
Servicer Advances, to pay the Servicing Fee,
and to pay interest on the Class A Notes and
the Class B Notes. See "Description of the
Notes--Allocations" herein.
B. Principal
General................... Principal of the Class A Notes will be payable
on each Distribution Date in an amount equal to
the lesser of the Class A Principal Payment
Amount (as defined herein) for such
Distribution Date, and the then outstanding
principal amount of the Class A Notes, to the
extent Available Amounts are available
therefor, but after payment of unpaid Servicer
Advances, the Servicing Fee, interest payments
on the Notes, and (except following an Event of
Default or during the continuance of a
Restricting Event as described below) interest
payments on the Prior Certificates. Principal
of the Class B Notes will be payable on each
Distribution Date in an amount equal to the
lesser of the Class B Principal Payment Amount
(as defined herein) for such Distribution Date,
and the then outstanding principal amount of
the Class B Notes, to the extent Available
Amounts are available therefor, but after
payment of unpaid Servicer Advances, the
Servicing Fee, interest payments on the Notes,
interest payments on the Prior Certificates
(except following an Event of Default or
Restricting Event), and the payment of the
Class A Principal Payment Amount. Principal of
the Class C Notes will be payable on each
Distribution Date in an amount equal to the
lesser of the Class C Principal Payment Amount
(as defined herein) for such Distribution Date,
and the then outstanding principal amount of
the Class C Notes, to the extent Available
Amounts are available therefor, but after
payment of unpaid Servicer Advances, the
Servicing Fee, interest payments on the Notes,
interest payments on the Prior Certificates
(except following an Event of Default or
Restricting Event), and the payment of the
Class B Principal Payment Amount. See
"Description of the Notes--Allocations" herein.
The Class A Principal Payment Amount, Class B
Principal Payment Amount and Class C Principal
Payment Amount (as such terms are subsequently
defined herein) represent, in each case, a
calculation of the amount to be payable from
otherwise Available Amounts on a Distribution
Date in respect of principal on the Class A
Notes, Class B Notes or Class C Notes, as
applicable. Such amount generally is
calculated, for each Class of Notes (as will be
the corresponding principal payment amount for
Certificates as well), as a fractional
percentage of the amount that the ADCB (as
defined herein) of the Contract Pool has
declined or been deemed to decline (whether
through payment, prepayment, default and
writeoff, determination of ineligibility or
other mechanism as described further herein)
during the most recent Collection Period (i.e.,
full calendar month), with the fractional
percentage for each Class determined based on
the proportion that the initial principal
amount of such Class bore to the ADCB of the
Contract Pool as of the Cutoff Date (which was
[ ]% for the Class A Notes, [ ]% for the Class
B Notes, [ ]% for the Class C Notes, and [ ]%
for the Certificates). Accordingly, if
sufficient Available Amounts exist, a
proportionate amount of principal would be
repaid on any given Distribution Date on each
of the Class A Notes, the Class B Notes and the
Class C Notes (as well as the Certificates).
Upon the occurrence of an Event of Default, or
upon the occurrence and during the continuance
of a Restricting Event (each as defined
herein), however, the formula for determining
such principal payment amount will change with
the result that, for any Distribution Date
occurring after such adverse event, principal
on the Notes (and also the Certificates) will
be accelerated and paid sequentially, i.e., no
principal will be paid on the Class B Notes or
Class C Notes, and neither principal nor any
interest will be paid on the Certificates,
until the Class A Notes have been repaid in
full; no principal will be paid on the Class C
Notes, and neither principal nor any interest
will be paid on the Certificates, until the
Class B Notes have been repaid in full; and no
principal or
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<PAGE>
any interest will be paid on the Certificates
until the Class C Notes have been repaid in
full. See "Description of the Notes--
Allocations" herein.
Stated Maturity Date........ The stated maturity date (the "Maturity Date")
for the Notes is [ ], 200[ ].
C. Optional Redemption....... Notes remaining outstanding may be redeemed in
whole, but not in part, on any Distribution
Date at the Trust Depositor's option if the
ADCB (as defined herein) of the Contract Pool
at such time is less than 10% of the initial
ADCB of the Contract Pool as of the Cutoff Date
(the "Cleanup Call Condition"). The redemption
price for such outstanding Notes to be redeemed
in such event (the "Redemption Price") will be
equal to the unpaid principal amount of the
Notes plus accrued and unpaid interest thereon
through the date of redemption. The Trust
Depositor will fund such redemption through
concurrent receipt of a payment from the
applicable Seller pursuant to such Seller's
right under the Transfer and Sale Agreement to
repurchase from the Trust Depositor for the
Redemption Price, and concurrently cause the
Trust Depositor to redeem and repurchase from
the Trust, the remaining Contracts held in the
Trust when the Cleanup Call Condition has been
satisfied.
Aggregate Discounted.......... The "Aggregate Discounted Contract Balance" or
Contract Balance "ADCB" with respect to the Contracts means the
sum of the Discounted Contract Balances of each
Contract included in the group of Contracts for
which an ADCB determination is being made.
"Discounted Contract Balance" means with
respect to any Contract, (A) as of the related
Cutoff Date, the present value of all of the
remaining Scheduled Payments becoming due under
such Contract after the applicable Cutoff Date
discounted monthly at the Discount Rate, and
(B) as of any other date of determination, the
sum of (1) the present value of all of the
remaining Scheduled Payments becoming due under
such Contract after such date of determination
discounted monthly at the Discount Rate, and
(2) the aggregate amount of all Scheduled
Payments due and payable under such Contract
after the applicable Cutoff Date and prior to
such date of determination (other than
Scheduled Payments related to Defaulted
Contracts and Early Termination Contracts) that
have not then been received by the Servicer.
The Discounted Contract Balance for each
Contract shall be calculated assuming:
(a) All payments due in any Collection Period
are due on the last day of the Collection
Period;
(b) Payments are discounted on a monthly
basis using a 30 day month and a 360 day
year; and
(c) All security deposits and drawings under
letters of credit, if any, issued in
support of a Contract are applied to
reduce Scheduled Payments in inverse
order of the due date thereof.
"Discount Rate" means, at any date of
determination, ___% which is equal to the sum
of (i) the weighted average of the Class A
Interest Rate, Class B Interest Rate, Class C
Interest Rate, Class D-1 Interest Rate and
Class D-2 Interest Rate, and (ii) the Servicing
Fee Percentage. The Statistical Discount Rate
is equal to [ %]. See "The Contracts Pool".
"Scheduled Payments" means, with respect to any
Contract, the monthly or quarterly or semi-
annual or annual rent or financing (whether
principal or principal and interest) payment
scheduled to be made by the related Obligor
under the terms of such Contract after the
related Cutoff Date (it being
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<PAGE>
understood that Scheduled Payments do not
include any Excluded Amounts as defined
herein).
Subordination................. The Class A Notes will be senior in
right of payment to the Class B Notes, Class C
Notes and the Certificates; the Class B Notes
will be senior in right of payment to the Class
C Notes and the Certificates; and the Class C
Notes will be senior in right of payment to the
Certificates; in each case to the extent
described herein. See "Description of the
Notes--Allocations" and "The Indenture--
Payments of Principal and Interest" herein.
Servicing; Servicing Fee;..... The Servicer will be responsible for servicing,
Servicer Advances managing and administering the Transferred
Contracts and related interests, and enforcing
and making collections on the Contracts. The
Servicer will be required to exercise the
degree of skill and care in performing these
functions that it customarily exercises with
respect to similar property owned or serviced
by the Servicer in its individual capacity. The
Sellers have in some cases delegated servicing
and collection functions to an applicable
Vendor (or, in certain limited instances, to a
subservicer acceptable to the Seller) with
respect to End-User Contracts originated
through such Vendor, but in such instances the
Servicer (on behalf of the Trust, in the
Trust's capacity as assignee of the Seller
through the Trust Depositor) retains ultimate
contractual control over the servicing and
collection functions through provisions in the
applicable Vendor Agreements (or agreement with
such subservicer) giving the Seller (and hence
the Servicer, on behalf of the Trust as
assignee) the right to determine or veto
certain servicing decisions and/or to replace
or take over servicing and collection functions
from the Vendor in the event of the Vendor's
default or non-compliance with its servicing or
other obligations.
The Servicer will be entitled to receive (a) a
monthly fee (the "Servicing Fee") equal to the
product of (i) one-twelfth of [ ]% (the
"Servicing Fee Rate") and (ii) the Aggregate
Discounted Contract Balance of all Contracts as
of the beginning of the previous Collection
Period, payable out of (a) the Collection
Account and (b) certain other fees paid by the
Contract Obligors ("Servicing Charges"), as
compensation for acting as Servicer.
Under certain limited circumstances, the
Servicer may resign or be removed, in which
event either the Indenture Trustee or a third
party meeting the requirements set forth in the
Sale and Servicing Agreement will be appointed
as successor Servicer. See "The Transfer and
Sale Agreement and the Sale and Servicing
Agreement Generally--Certain Other Matters
Regarding the Servicer" and "--Servicer
Default" herein.
The Servicer will be required to cause amounts
collected on the Contracts on behalf of the
Trust to be deposited to the Collection Account
maintained by the Indenture Trustee no later
than two Business Days following the Servicer's
determination that such amounts relate to the
Contracts or the Financed Items. The Servicer
may also, at its option, make advances (each, a
"Servicer Advance") for delinquent Scheduled
Payments, to the extent it determines in its
sole discretion that such advances will be
recoverable in future periods. Such Servicer
Advances are reimbursable from Available
Amounts as described herein. See "The Transfer
and Sale Agreement and The Sale and Servicing
Agreement Generally--Collection and Other
Servicing Procedures" herein.
Repurchase for Certain........ The Trust Depositor under the Sale and
Breaches of Representations Servicing Agreement and the Sellers under the
and Warranties Transfer and Sale Agreement will be obligated
to accept the reconveyance of a Contract and
the interest in the related Equipment from the
Indenture Trustee and the Trust, and to deposit
the corresponding Transfer Deposit Amount (as
defined herein), if the interest of the Trust
in any of the related Equipment, the related
Contract, or the related Contract File (as
defined herein) is materially adversely
affected by a breach of a representation or
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<PAGE>
warranty made by such party with respect to
such Contract and if such breach has not been
cured within thirty (30) days of discovery of
such breach. See also "Summary of Terms--
Prepayment Considerations" below. In the
alternative, and at the Trust Depositor's and
applicable Seller's option, the affected
Contract may be replaced with a Substitute
Contract of similar characteristics under the
standards applicable generally to Substitute
Contracts as described herein.
Maturity and Prepayment....... As noted above, non-Lease Contracts are
Conditions generally prepayable by their terms, and the
Servicer will be authorized to accept
prepayments on Leases in certain circumstances.
Each prepayment on a Contract, if such Contract
is not replaced by the Trust's reinvestment in
a comparable Additional Contract as described
herein, will shorten the weighted average
remaining term of the Contracts and the
weighted average life of the Notes. Such
prepayments of principal will be included in
the Available Amounts and will be payable to
Noteholders on the Distribution Date following
the Collection Period in which such prepayment
was received, as set forth herein. The rate of
prepayments on the Contracts may also be
affected under certain circumstances relating
to breaches of representations, warranties or
covenants with respect to the Contracts, since
the Trust Depositor will be obligated to
repurchase adversely affected Contracts from
the Trust (to be funded through a corresponding
obligation of the Seller to repurchase such
Contracts from the Trust Depositor). A higher
than anticipated rate of prepayments will
reduce the ADCB of the Contracts more quickly
than expected and thereby reduce anticipated
aggregate interest payments on the Notes. Any
reinvestment risks resulting from a faster or
slower incidence of prepayment of Contracts
will be borne entirely by the Noteholders and
the Certificateholders. Such reinvestment risks
include the risk that interest rates may be
lower at the time such holders received
payments from the Trust than interest rates
would otherwise have been had such prepayments
not been made or had such prepayments been made
at a different time.
Federal Income Tax............ In the opinion of Winston & Strawn, federal tax
Considerations counsel to the Trust Depositor, for federal
income tax purposes, the Notes will be
characterized as debt, and the Trust will not
be characterized as an association (or a
publicly traded partnership) taxable as a
corporation. Each Noteholder, by the acceptance
of a Note, will agree to treat the Notes as
indebtedness. See "Certain Federal Income Tax
Considerations" herein.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein, the Notes will
be eligible for purchase by employee benefit
plans. Any benefit plan fiduciary considering
purchase of the Notes should, however, consult
with its counsel regarding the consequences of
such purchase under ERISA and the Code. See
"ERISA Considerations" herein.
Rating........................ It is a condition to the issuance of the Notes
offered hereunder that the Class A Notes be
rated at least "[ ]" and "[ ]", that the Class
B Notes be rated at least "[ ]" and "[ ]", and
that the Class C Notes be rated at least "[ ]"
and "[ ]" by [a nationally recognized rating
agency] and [a nationally recognized rating
agency], respectively (collectively, the
"Rating Agencies"). A rating is not a
recommendation to purchase, hold or sell Notes
inasmuch as such rating does not comment as to
market price or suitability for a particular
investor. Ratings address the likelihood of
timely payment of interest and the ultimate
payment of principal on the Notes pursuant to
their terms. Ratings will not address the
likelihood of an early return of invested
principal. There can be no assurance that any
rating will remain for a given period of time
or that a rating will not be lowered or
withdrawn entirely if, in the judgment of any
Rating Agency, circumstances in the future so
warrant. See "Rating of the Notes" herein.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors
before investing in the Notes.
Limited Liquidity
There is currently no public market for the Notes and there is no assurance
that one will develop. The Underwriter expects, but is not obligated, to make a
market in the Notes. There is no assurance that any such market will be created
or, if so created, will continue. If no public market develops, the Noteholders
may not be able to liquidate their investment in the Notes prior to maturity.
Maturity and Prepayment Considerations
Because the rate of payment of principal on the Notes will depend, among
other things, on the rate of payment on the Contracts, the rate of payment of
principal on the Notes cannot be assured. Payments on the Contracts will include
Scheduled Payments as well as partial and full prepayments (including any
Scheduled Payment (or portion thereof) which the Servicer has received, and
expressly permitted the related Obligor to make, in advance of its scheduled due
date and which will be applied on such due date) (any such prepayment of a
Scheduled Payment, an "Optional Prepayment"), and any and all cash proceeds or
rents realized from the sale, lease, re-lease or re-financing of Equipment under
a Prepaid Contract (net of liquidation expenses), payments upon the liquidation
of Defaulted Contracts, payments upon repurchases by the applicable Seller
through the Trust Depositor as a result of the breach of certain representations
and warranties or covenants in the Transfer and Sale Agreement and the Sale and
Servicing Agreement, and payments upon an optional termination of the Trust (any
such voluntary or involuntary prepayment, purchase or termination, a
"Prepayment"). The occurrence of an Event of Default or a Restricting Event (as
defined herein) may also result in the receipt by Noteholders of principal
payments on the Notes in excess of the expected principal payment amount and
result in earlier than anticipated repayment of the Notes. Noteholders may not
be able to reinvest distributions of principal at yields equivalent to the yield
on the Notes. See "Description of the Notes--Principal", "--Additions of Trust
Assets" and "--Restricting Events" herein. Further, the Servicer may permit the
Obligor under a Contract to make an Optional Prepayment in an amount which is
less than the amount sufficient to repay the portion of such Contract financed
by the Noteholders (together with accrued interest thereon) so long as the Trust
is indemnified for any such insufficiency by the Vendor or the Seller. See
"Description of the Notes--Prepaid Contracts".
The rate of early terminations of Contracts due to Prepayments, including
defaults, is influenced by various factors, including technological change,
changes in customer requirements, the level of interest rates, the level of
casualty losses, and the overall economic environment. Many prepayments occur at
the request of customers, whose motivations may not be known to the Seller. No
assurance can be given that Prepayments (including Optional Prepayments) on the
Contracts will conform to any historical experience, and no prediction can be
made as to the actual rate of Prepayments which will be experienced on the
Contracts. Noteholders will bear all reinvestment risk resulting from the rate
of Prepayments on the Contracts. See "Prepayment and Yield Considerations."
No Assurances Given as to Changes in the Ratings of the Notes
A rating is not a recommendation to purchase, hold or sell Notes inasmuch as
such rating does not comment as to market price or suitability for a particular
investor. Ratings of Notes will address the likelihood of the payment of
principal and interest thereon pursuant to their terms. The ratings of Notes
will not address the likelihood of an early return of invested principal. In
addition, any such rating will not address the possibility of the occurrence of
an Event of Default or Restricting Event. There can be no assurance that a
rating will remain for a given period of time or that a rating will not be
lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant. In the event that the rating initially
assigned to any Note is subsequently lowered for any reason, no person or entity
is obligated to provide any additional credit support therefor. For more
detailed information regarding the ratings assigned to any Class of the Notes,
see "Rating of the Notes."
Subordination of the Class B Notes, the Class C Notes and the Certificates
To the extent described herein under "Description of the Notes--Allocations",
(i) payments of interest and (following an Event of Default or Restricting
Event) principal on the Class B Notes, Class C Notes and the Certificates will
be subordinated in priority of payment to interest and principal, respectively,
on the Class A Notes, (ii) payments of interest and (following an Event of
Default or Restricting Event) principal on the Class C Notes, and of interest
(following
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an Event of Default or Restricting Event) and principal (following an Event of
Default or Restricting Event) on the Prior Certificates, and of interest and
principal at all times on the Subordinate Certificates, will be subordinated in
priority of payment to interest and principal, respectively, on the Class B
Notes, and (iii) payments of interest (following an Event of Default or
Restricting Event) and principal (following an Event of Default or Restricting
Event) on the Prior Certificates, and of interest and principal at all times on
the Subordinate Certificates, will be subordinated in priority of payment to
interest and principal, respectively, on the Class C Notes. The Certificates
initially will represent the right to receive principal in an amount equal to
[ ]% of the initial ADCB, but such amount will be reduced as a result of
principal payments made on the Certificates prior to an Event of Default or
Restricting Event (see "Description of the Notes--Principal"), which will reduce
the benefit to the Notes of the subordination of the Certificates.
Delinquencies and defaults on the Contracts could eliminate the protection
afforded the Noteholders by the subordination of the Certificates, and the Class
C Noteholders could incur losses on their investment as a result. Further
delinquencies and defaults on the Contracts could eliminate the protection
offered to the Class B Noteholders by the subordination of the Class C Notes,
and such Noteholders could also incur losses on their investment as a result.
Additionally, delinquencies and defaults on the Contracts could eliminate the
protection offered the Class A Noteholders by the subordination of the Class B
Notes, and such Noteholders could also incur losses on their interest as a
result.
Certain Risks Associated with Geographic or Industry Concentrations of Contracts
The Contracts constituting the initial Contract Pool reflect concentrations
of [Obligors] [End-Users] thereon located in the States of [ ] and [ ]
in excess of [ ]% of the ADCB of the Contract Pool as of the Cutoff Date, and
reflect concentrations in excess of [ ]% for Contracts financing or related to
Equipment used in the printing industry. No other State or industry accounts for
more than [ ]% of the Contract Pool. To the extent adverse events or economic
conditions were particularly severe in such geographic region or industry or in
the event an [Obligor][End-User] under a large amount of Contracts within such
region or industry were to experience financial difficulties, the delinquency
and default experience of the Contract Pool could be adversely impacted with
corresponding negative implications for the timing and amount of collections on
the Contracts and possible delays or insufficiencies in payments due to
Certificateholders or Noteholders. The Trust Depositor, however, is unable to
determine and has no basis to predict, with respect to any state or region or
industry, whether any such events have occurred or may occur, or to what extent
any such events may affect the Contracts or the payment of the Notes.
Equipment Obsolescence
Technological change could affect the Noteholders. For example, to the extent
that technological change results in increased prepayment activity, it may
increase Prepayments of the Contracts. See "--Maturity and Prepayment
Considerations" and "The Contracts Generally--Equipment", "--Leases" and "--
Installment Payment Agreements and Financing Agreements".
In the event a Contract becomes a Defaulted Contract, the only source of
payment for amounts expected to be paid on such Contract will be the income and
proceeds from the disposition of any related Equipment and a deficiency
judgment, if any, against the Obligor under the Defaulted Contract. Since the
market value of the Equipment may decline faster than the Discounted Contract
Balance, the Servicer may not recover the entire amount due on the Contract and
might not receive any Recoveries on the Equipment. Certain types of Equipment
also may be subject to sudden, significant declines in value because of
technological advances. See "The Contracts Generally--Equipment" herein.
Certain Legal Risks
Legal Risks Associated With Servicer's or Vendor's Retention of Contract
Files. To facilitate servicing and reduce administrative costs, the Contract
Files (as defined herein) will be retained in the possession of the Servicer and
not be deposited with the Indenture Trustee or any other agent or custodian for
the benefit of the Noteholders. The Servicer will, however, physically segregate
the Contract Files from other similar documents that are in the Servicer's
possession, and will stamp or mark the Contract Files to reflect the transfer of
the Contracts to the related Trust. Also, UCC financing statements will be filed
reflecting the sale and assignment of the Contracts and related interests (the
"Transferred Property") by Heller Financial or HFLI, as applicable, to the Trust
Depositor, and by the Trust Depositor to the Trust, and the Servicer's
accounting records and computer files will be marked to reflect such sales and
assignments. Because the Contract Files will remain in the Servicer's
possession, if a subsequent purchaser were able to take physical possession of
the Contract Files without knowledge of such assignment, the Indenture Trustee's
priority interest in the Contracts (as assignee of the Seller's, Trust
Depositor's and the Trust's interest) could be defeated. In such event,
distributions to Noteholders could be adversely affected. The segregation and
stamping of Contract Files should, however, mitigate this risk.
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Similarly, with respect to Secondary Contracts securing Vendor Loans, in some
instances the Vendor will retain the original contract files associated with the
related End-User Contracts which are Secondary Contracts securing such Vendor
Obligation. Although UCC financing statements are filed reflecting the pledge of
such Contracts to the applicable Seller as security for the Vendor Loans,
because these contract files will remain in the Vendor's possession, if a
subsequent purchaser were able to take physical possession of such contract
files without knowledge of the pledge to the Seller, the Indenture Trustee's
priority security interest in the such Secondary Contracts (as assignee of the
Seller's, Trust Depositor's and the Trust's interest) could be defeated. In such
event, distributions to Noteholders could be adversely affected. Each Vendor
represents, warrants and covenants in the applicable agreement evidencing a
Vendor Obligation, however, that it has not and will not sell, pledge or
otherwise assign or convey to any other party (other than the applicable Seller)
any interest in the Secondary Contracts securing such Vendor Obligation, and
agrees that it will maintain possession of the related contract files as
custodian for the benefit of the Seller as secured party with respect to such
Secondary Contracts.
Legal Risks Associated With Transfers of Interests in Financed Equipment. In
connection with the conveyance of the Contracts to the Trust, security interests
in the related financed Equipment securing such Contracts (or, in connection
with Leases, the Seller's ownership interest in or title to such Equipment) will
be assigned by the applicable Seller to the Trust Depositor and by the Trust
Depositor to the Trust. It has been the general policy of the Sellers to file or
cause to be filed UCC financing statements with respect to the Equipment
relating to the Contracts. Due to the administrative burden and expense
associated with amending many filings in numerous states where Equipment is
located, no assignments of the UCC financing statements evidencing the security
interest of the Sellers in the Equipment will be filed to reflect the Trust
Depositor's, the Trust's or the Indenture Trustee's interests therein; provided,
however, inventory filings will be made centrally in states representing ___% of
the ADCB of the Contract Pool. While failure to file such assignments does not
affect the Trust's interest in the Contracts (including the related Seller's
security interest in the related Equipment) or perfection of the Indenture
Trustee's interest in such Contracts and related Equipment, it does expose the
Trust (and thus Noteholders) to the risk that the Servicer could inadvertently
release its security interest in the Equipment of record, and it could
complicate the Trust's enforcement, as assignee, of the Seller's security
interest in the Equipment. While these risks should not affect the perfection or
priority of the interest of the Indenture Trustee in the Contracts or rights to
payment thereunder, they may adversely affect the right of the Indenture Trustee
to receive proceeds of a disposition of the Equipment related to a Defaulted
Contract. Additionally, statutory liens for repairs or unpaid taxes and other
liens arising by operation of law may have priority even over prior perfected
security interests in the Equipment assigned to the Indenture Trustee.
Also, the transfer to the Trust Depositor of the applicable Seller's security
interest in motor vehicles, aircraft, barges or similar maritime assets [, or
railroad rolling stock] ("Title Registry Equipment") securing certain Contracts,
or its ownership interest in Title Registry Equipment subject to Leases, and the
transfer of such interests by the Trust Depositor to the Trust, is subject to
state vehicle registration laws (in the case of motor vehicles) or certain
federal title registration statutes, regulations and procedures (in the case of
other Title Registry Equipment). Due to the significant administrative burden
and expense associated with re-registering transfers of titles and of security
interests with respect to such Title Registry Equipment, the certificates of
title or similar instruments or registrations of title with respect to Title
Registry Equipment securing Contracts, and to Title Registry Equipment subject
to Leases, will not identify the Trust as secured party or owner, as the case
may be, of such Equipment. There exists a risk in not so identifying the Trust
as the new secured party or owner that, through fraud or negligence, a third
party could acquire an interest in the Title Registry Equipment superior to that
of the Trust. In addition, statutory liens for repairs or unpaid taxes may have
priority even over a perfected security interest in the Title Registry
Equipment. The Sellers will jointly and severally represent that as of the
Cutoff Date, in the Sellers' reasonable judgment, the Discounted Contract
Balance of End-User Contracts in the Contract Pool that are secured by Title
Registry Equipment, does not exceed [ ]% of the ADCB of the Contract Pool.
In addition, some of the Equipment related to the Contracts may constitute
"fixtures" under the real estate or UCC provisions of the jurisdiction in which
such Equipment is located. In order to perfect a security interest in such
Equipment, the holder of the security interest must file either a "fixture
filing" under the provisions of the UCC or a real estate mortgage under the real
estate laws of the state where the Equipment is located. These filings must be
made in the real estate records office of the county in which such Equipment is
located. So long as the Obligor does not permanently attach the Equipment to the
real estate, a security interest in the Equipment will be governed by the UCC,
and the filing of a UCC-1 financing statement will be effective to maintain the
priority of the applicable Seller's security interest in such Equipment. Except
for a small portion of such Equipment, the Trust Depositor does not believe that
any of the Equipment will be permanently affixed to the related real estate. If,
however, any Equipment is permanently attached to the real estate in which it is
located, other parties could obtain an interest in the Equipment which is prior
to the security interest originally obtained by the applicable Seller and
transferred to the Trust Depositor. Based on the representation of the Sellers,
the Trust Depositor, however, believes that with respect to Equipment which
constitutes a "fixture", it has obtained a perfected first priority security
interest, through assignment of such security interest by the Seller, by virtue
of the Seller's proper filing of UCC-1 financing statements naming the Seller as
secured party in the real
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estate records office of the county in which the Equipment is located. Also, the
Sellers will jointly and severally represent that as of the Cutoff Date, in the
Sellers' reasonable judgment, the Discounted Contract Balance of End-User
Contracts in the Contract Pool that are secured by fixtures, does not exceed
[ ]% of the ADCB of the Contract Pool.
The Trust Depositor will be obligated to reacquire any Contract transferred
to the Trust (subject to the Seller's reacquisition thereof) in the event it is
determined that a first priority perfected security interest, or ownership
interest in the case of Leases, in the name of the Trustee in the Equipment
related to such Contract did not exist as of the date such Contract was conveyed
to the Trust, if (i) such breach shall materially adversely affect such Contract
and (ii) such failure or breach shall not have been cured by the last day of the
second (or, if the Trust Depositor elects, the first) month following the
discovery by or notice to the Trust Depositor of such breach, and the Sellers
will be jointly and severally obligated to reacquire such Contract from the
Trust Depositor contemporaneously with the Trust Depositor's reacquisition from
the Trust. If there is any Equipment as to which the applicable Seller failed to
perfect its security interest, such Seller's security interest, and the security
interests of the Trust Depositor and the related Trust (and the Indenture
Trustee as assignee), would be subordinated to, among others, subsequent
purchasers of the Equipment and holders of perfected security interests with
respect thereto. To the extent the security interest of the Seller in the
related Equipment is perfected, subject to the exceptions set forth in the
following sentence, the Trust will have a prior claim over subsequent purchasers
from the Obligor of such Equipment and holders of subsequently perfected
security interests granted by Obligors. However, as against Mechanics' Liens or
liens for taxes and other non-consensual liens unpaid by an Obligor under a
Contract, or in the event of fraud or negligence of the Seller or Servicer, the
Trust could lose the priority of its interest or its interest in such Equipment
following the conveyance of such Contract to the Trust. See "Certain Legal
Aspects of the Contracts" herein. Neither the Trust Depositor nor the Servicer
not any Seller will have any obligation to reacquire a Contract if any of the
occurrences described in the foregoing sentence (other than fraud or negligence
of the Seller) result in the Trust's losing the priority of its security
interest or its security interest in such Equipment after the date such Contract
is conveyed to the Trust.
Legal Risks Associated With Transfer of Contracts. There are certain limited
circumstances under the Uniform Commercial Code (the "UCC") and applicable
federal law in which prior or subsequent transferees of Contracts or Secondary
Contracts could have an interest in such contracts with priority over the
Trust's interest. See "Certain Legal Aspects of the Contracts--Transfer of
Contracts." Under each Vendor Agreement, the Vendor (i) has or will warrant to
the applicable Seller that the Contracts transferred to the Seller thereunder
will be transferred free and clear of the lien of any third party and that the
interests in Secondary Contracts transferred thereunder will be transferred free
and clear of the lien of any third party and (ii) has or will also covenant that
it will not sell, pledge, assign, transfer or grant any lien on any Contract (or
Secondary Contract) transferred thereunder to the Seller. Under the Transfer and
Sale Agreement, the Sellers will jointly and severally warrant to the Trust
Depositor and, under the Sale and Servicing Agreement, the Trust Depositor will
warrant to the Trust, that the Contracts and security interests in Secondary
Contracts transferred thereunder will be transferred free and clear of the lien
of any third party. Also, under the Transfer and Sale Agreement, the Sellers
will jointly and severally covenant to the Trust Depositor and, under the Sale
and Servicing Agreement, the Trust Depositor will also covenant to the Trust,
that it will not sell, pledge, assign, transfer or grant any lien on any
Contract or Secondary Contract transferred to the Trust Depositor or the Trust.
Risk of Ineffective Sale in Vendor Bankruptcy. The Sellers will either (i)
originate Contracts or (ii) acquire End-User Contracts from a Vendor, which
Contracts will be transferred to the Trust Depositor. If the acquisition of an
End-User Contract by a Seller is treated as a sale of such Contract from the
applicable Vendor to such Seller, except in certain limited circumstances, such
Contract would not be part of such Vendor's bankruptcy estate and would not be
available to such Vendor's creditors. If a Vendor became a debtor in a
bankruptcy case and, in the case of End-User Contracts acquired as described in
clause (ii) above, if an unpaid creditor of such Vendor or a representative of
creditors of such Vendor, such as a trustee in bankruptcy, or such Vendor acting
as a debtor-in-possession, were to take the position that the sale of such
Contracts to a Seller was ineffective to remove such Contracts from such
Vendor's estate (for instance, that such sale should be recharacterized as a
pledge of Contracts to secure borrowings of such Vendor), then delays in
payments under the Contracts to the Trust could occur or, should the court rule
in favor of such creditor, representative or Vendor, reductions in the amount of
such payments could result. If the transfer of End-User Contracts to a Seller as
described in clause (ii) above is recharacterized as a pledge, a tax or
government lien on the property of the pledging Vendor arising before the
Contracts came into existence may have priority over such Seller's (and hence
the Trust Depositor's, the Trust's and the Indenture Trustee's) interest in the
Contracts. No law firm will, in connection with the offering of the Notes,
express any opinion as to the issues discussed in this paragraph. See "Certain
Legal Aspects of the Contracts--Certain Matters Relating to Bankruptcy".
Risk of Ineffective Sale in Seller Bankruptcy. In the Transfer and Sale
Agreement, the Sellers will jointly and severally warrant to the Trust Depositor
that the conveyance of the Contracts to the Trust Depositor thereunder is a
valid sale and transfer of such Contracts to the Trust Depositor. In addition,
the Sellers and the Trust Depositor have covenanted that they will each treat
the transactions described herein as a sale of the Contracts to the Trust
Depositor, and the Sellers will take all actions that are required under
applicable law to perfect the Trust Depositor's ownership
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interest in the Contracts sold by the Sellers and the Trust Depositor's security
interest (as assignee of the Seller's security interest) in the Secondary
Contracts securing Vendor Loans sold by the Sellers. See "Certain Legal Aspects
of the Contracts--Transfer of Contracts". Moreover, Winston & Strawn, special
counsel to the Sellers and the Trust Depositor, will render a reasoned opinion
to the effect that in the event a Seller became a debtor under the United States
Bankruptcy Code, the transfer of the Contracts from the Seller to the Trust
Depositor in accordance with the Transfer and Sale Agreement would be treated as
a sale and not as a pledge to secure borrowings.
If, however, the transfer of the Contracts from a Seller to the Trust
Depositor were treated as a pledge to secure borrowings by the Seller, the
distribution of proceeds of the Contracts to the Trust might be subject to the
automatic stay provisions of the United States Bankruptcy Code, which would
delay the distribution of such proceeds for an uncertain period of time. In
addition, a bankruptcy trustee would have the power to sell the Contracts if the
proceeds of such sale could satisfy the amount of the debt deemed owed by the
Seller, or the bankruptcy trustee could substitute other collateral in lieu of
the Contracts to secure such debt, or such debt could be subject to adjustment
by the bankruptcy court if the Seller were to file for reorganization under
Chapter 11 of the United States Bankruptcy Code. A case decided by the United
States Court of Appeals for the Tenth Circuit contains language to the effect
that accounts sold by a debtor under Article 9 of the Uniform Commercial Code
("UCC") would remain property of the debtor's bankruptcy estate. If, following a
bankruptcy of the Seller, a court were to follow the reasoning of the Tenth
Circuit and apply such reasoning to chattel paper, then similar reductions or
delays in payments of collections on or in respect of the Contracts could occur.
Additionally, because the Sellers have purchased Contracts from Vendors located
in the Tenth Circuit which could become debtors in a bankruptcy proceeding, the
rationale of such case could be applicable to such Vendors' sales of Contracts
to the Sellers and the corresponding negative implications for receipt of
payments with respect to such Contracts may occur.
Risk of Rejection of "True Leases". A bankruptcy trustee or debtor in
possession under the United States Bankruptcy Code (Title 11 U.S.C. 101 et seq.)
(the "Bankruptcy Code") has the right to elect to assume or reject any executory
contract or unexpired lease which is considered to be a "true lease" (and not a
financing) under applicable law. Any rejection of such a contract or lease would
constitute a breach of such contract or lease, as applicable, as of the day
preceding the commencement of the applicable bankruptcy case, entitling the
nonbreaching party to a pre-petition claim for damages.
Certain End-User Contracts will be "true leases" and thus subject to
rejection by the lessor under the Bankruptcy Code. Any such End-User Contract
originated by the Seller or acquired by the Seller in a transaction whereby the
Seller is the "lessor" thereunder, will be subject to rejection by the Seller,
as debtor in possession, or by the Seller's bankruptcy trustee. Upon any such
rejection, Scheduled Payments under such rejected End-User Contract may
terminate and the Noteholders may be subject to losses if proceeds realizable
from security interests in the related Equipment are insufficient to cover the
losses. In addition, any End-User Contract which is a "true lease" originated by
a Vendor and transferred to the Seller in a transaction whereby such Vendor
continues to be the "lessor" thereunder (such as a transfer by a Vendor to the
Seller of a security interest in such End-User Contract or a transfer by a
Vendor to the Seller of an interest in the right to payments only under any such
End-User Contract), will be subject to rejection by such Vendor, as debtor in
possession, or by such Vendor's bankruptcy trustee. Upon any such rejection
Scheduled Payments under such rejected End-User Contract may terminate and the
Noteholders may be subject to losses if the proceeds realizable from security
interests in the related Equipment are insufficient to cover the losses.
There can be no assurance as to the exact amount of the Discounted Contract
Balance of End-User Contracts in the Contract Pool at any date that are or might
be "true leases". The Sellers will, however, jointly and severally represent as
of the Cutoff Date that, in the Sellers' reasonable judgment, the Discounted
Contract Balance of End-User Contracts in the Contract Pool that are "true
leases" does not exceed [ ]% of the ADCB of the Contract Pool as of such date.
Insolvency of the Trust Depositor or the Trust. Certain restrictions have
been imposed on the Trust Depositor and the Trust and certain other parties to
the transactions described herein which are intended to reduce the risk of an
insolvency proceeding involving the Trust Depositor or the Trust. These
restrictions include incorporating the Trust Depositor as a separate, special
purpose corporation pursuant to a certificate of incorporation containing
certain restrictions on the nature and scope of its business. Additionally, the
Trust Depositor may commence a voluntary case or proceeding under any bankruptcy
or insolvency law, or cause the Trust to commence a voluntary case or proceeding
under any bankruptcy or insolvency law, only upon the affirmative vote of all
its directors, including its independent directors, as long as the Trust
Depositor is solvent and does not reasonably foresee becoming insolvent. The
Trust Depositor's certificate of incorporation requires that the Trust Depositor
have at all times at least two independent director. In addition, the Trust
Depositor has no intent to file, and the Seller has represented that it has no
intent to cause the filing of, a voluntary application under the insolvency laws
with respect to the Trust Depositor, as long as the Trust Depositor is solvent
and does not reasonably foresee becoming insolvent. However, no assurance can be
given that insolvency proceedings involving either the Trust Depositor or the
Trust will not occur. In the event the Trust
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Depositor becomes subject to insolvency proceedings, the Trust, the Trust's
interest in the Trust Assets and the Trust's obligation to make payments on the
Notes might also become subject to such insolvency proceedings. In the event of
insolvency proceedings involving the Trust, the Trust's interest in the Trust
Assets and the Trust's obligation to make payments on the Notes would become
subject to such insolvency proceedings. No assurance can be given that
insolvency proceedings involving the Seller would not lead to insolvency
proceedings of either, or both, of the Trust Depositor or the Trust. In either
such event, or if an attempt were made to litigate any of the foregoing issues,
delays of distributions on the Notes, possible reductions in the amount of
payment of principal of and interest on the Notes and limitations (including a
stay) on the exercise of remedies under the Indenture and the Sale and Servicing
Agreement could occur, although the Noteholders would continue to have the
benefit of the Indenture Trustee's security interest in the Trust Assets under
the Indenture.
The right of the Indenture Trustee, as a secured party under the Indenture
for the benefit of the Noteholders, to foreclose upon and sell the Trust Assets
is likely to be significantly impaired by applicable bankruptcy laws, including
the automatic stay pursuant to Section 362 of the Bankruptcy Code, if a
bankruptcy proceeding were to be commenced by or against the Trust, and possibly
the Trust Depositor, before or possibly even after the Indenture Trustee has
foreclosed upon and sold the Trust Assets. Under the bankruptcy laws, payments
on debts are not made and secured creditors are prohibited from repossessing
their security from a debtor in a bankruptcy case or from disposing of security
repossessed from such a debtor, without bankruptcy court approval. Moreover, the
bankruptcy laws generally permit the debtor to continue to retain and to use
collateral even though the debtor is in default under the applicable debt
instruments, provided generally that the secured creditor has the right to seek
"adequate protection". The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the security from any diminution in the value of the collateral as a result
of the use of the collateral by the debtor during the pendency of the bankruptcy
case. In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict whether or to what extent the holders of the Notes would
be compensated for any diminution in value of the Trust Assets. Furthermore, in
the event a bankruptcy court determines that the value of the Trust Assets is
not sufficient to repay all amounts due on the Notes, the Noteholders would hold
secured claims only to the extent of the value of the Trust Assets to which the
holders are entitled, and unsecured claims with respect to such shortfall. The
bankruptcy laws do not permit the payment or accrual of post-petition interest,
costs and attorneys' fees during a debtor's bankruptcy case unless, and then
only to the extent, the claims are oversecured.
Insolvency of the Vendors. In the event a Vendor under a Vendor Obligation
becomes subject to insolvency proceedings, the Secondary Contracts and other
Applicable Security for such Vendor Obligation as well as such Vendor's
obligation to make payments thereon would also become subject to such insolvency
proceedings. In such event, delays of distributions on the Notes, possible
reductions in the amount of payment of principal of and interest on the Notes
and limitations (including a stay) on the exercise of remedies under the
Indenture and the Sale and Servicing Agreement could occur, although the
Noteholders would continue to have the benefit of the Indenture Trustee's
security interest in the Vendor Loans and Applicable Security therefor under the
Indenture.
The right of the Indenture Trustee, as secured party under the Indenture for
the benefit of the Noteholders, to foreclose upon and sell any Secondary
Contracts or Applicable Security is likely to be significantly impaired by
applicable bankruptcy laws, including the automatic stay pursuant to Section 362
of the Bankruptcy Code, if a bankruptcy proceeding were to be commenced by or
against a Vendor obligated on a Vendor Obligation, before or possibly even after
the Indenture Trustee has foreclosed upon and sold such Secondary Contracts or
Applicable Security. Under the bankruptcy laws, payments on debts are not made
and secured creditors are prohibited from repossessing their security from a
debtor in a bankruptcy case or from disposing of security repossessed from such
a debtor, without bankruptcy court approval. Moreover, the bankruptcy laws
generally permit the debtor to continue to retain and to use collateral even
though the debtor is in default under the applicable debt instruments, provided
generally that the secured creditor has the right to seek "adequate protection".
The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the
security from any diminution in the value of the collateral as a result of the
use of the collateral by the debtor during the pendency of the bankruptcy case.
In view of the lack of a precise definition of the term "adequate protection"
and the broad discretionary powers of a bankruptcy court, it is impossible to
predict whether or to what extent the holders of the Notes would be compensated
for any diminution in value of the Secondary Contracts. Furthermore, in the
event a bankruptcy court determines that the value of the Secondary Contracts is
not sufficient to repay all amounts due on the related Vendor Loans, the
Noteholders would hold secured claims in a Vendor bankruptcy only to the extent
of the value of the Secondary Contracts to which the holders are entitled, and
unsecured claims with respect to such shortfall. The bankruptcy laws do not
permit the payment or accrual of post-petition interest, costs and attorneys'
fees during a debtor's bankruptcy case unless, and then only to the extent, the
claims are oversecured.
Loss in Event of Sale of Contracts Upon Trust Depositor Bankruptcy. If a
conservator, receiver or liquidator of the Trust Depositor was appointed or if
certain other events relating to the bankruptcy, insolvency or receivership of
the
-20-
<PAGE>
Trust Depositor were to occur (an "Insolvency Event"), then an Event of Default
would occur with respect to the Notes and, pursuant to the terms of the
Indenture and the Sale and Servicing Agreement, and assuming the Trust was not
then a debtor in a bankruptcy case, the Indenture Trustee would be required to
sell the Contracts, thereby causing early termination of the Trust and a
possible loss to the Noteholders if the sum of (i) the proceeds of the sale
allocable to the Noteholders and (ii) the proceeds of any collections on the
Contracts in the Collection Account allocable to the Noteholders, is
insufficient to pay the Noteholders in full. See "Certain Legal Aspects of the
Contracts--Transfer of Contracts" and "--Certain Matters Relating to
Bankruptcy".
Risk of Realization of Contract Amount Upon Bankruptcy or Sale. Application
of federal and state bankruptcy and insolvency laws in the event of bankruptcy
of End-Users could affect the interests of the Noteholders in the Contracts and
Secondary Contracts if such laws result in any such contracts being written off
as uncollectible or result in delay in payments due on any Contracts. See
"Description of the Notes--Defaulted Contracts" and "Certain Legal Aspects of
the Contracts--Certain Matters Relating to Bankruptcy". In addition, application
of federal and state bankruptcy and insolvency laws in the event of bankruptcy
of Vendors could affect the interests of the Noteholders in the Vendor Loans and
Secondary Contracts if such laws result in any such Vendor Loans or Secondary
Contracts being written off as uncollectible or result in delay in payments due
on any such Vendor Loans or Secondary Contracts. See "--Insolvency of the
Vendors". State laws impose requirements and restrictions relating to
foreclosure sales and obtaining deficiency judgments following such sales. In
the event that the Noteholders must rely on repossession and disposition of
Equipment to recover amounts due on Defaulted Contracts, such amounts may not be
realized because of the application of these requirements and restrictions.
Other factors that may affect the ability of the Noteholders to realize the full
amount due on a Contract or a Secondary Contract include the failure to file
financing statements to perfect the Seller's, Trust Depositor's, Trust's or the
Indenture Trustee's security interest, as applicable, in the Equipment or other
Applicable Security and the depreciation, obsolescence, damage or loss of any
item of Equipment. As a result, the Noteholders may be subject to delays in
receiving payments and losses if the over collateralization represented by the
subordinated Certificates is insufficient to absorb such losses.
Certain Other UCC Considerations. Certain states have adopted a version of
Article 2A of the UCC ("Article 2A"), which purports to codify many provisions
of existing common law. Although there is little precedent regarding how Article
2A will be interpreted, it may, among other things, limit enforceability of any
"unconscionable" lease or "unconscionable" provision in a lease, provide a
lessee with remedies, including the right to cancel the lease contract, for
certain lessor breaches or defaults, and may add to or modify the terms of
"consumer leases" and leases in which the lessee is a "merchant lessee".
However, in the Transfer and Sale Agreement, the Sellers will jointly and
severally represent that (I) no End-User Contract is a "consumer lease" as
defined in Section 2A-103(1)(e) of the UCC; and (ii) to the best of the Sellers'
knowledge, each End-User has accepted the Equipment leased to it and, after
reasonable opportunity to inspect and test, has not notified the Seller of any
defects therein. Article 2A, moreover, recognizes typical commercial lease "hell
or high water" rental payment clauses and validates reasonable liquidated
damages provisions in the event of lessor or lessee defaults. Article 2A also
recognizes the concept of freedom of contract and permits the parties in a
commercial context a wide degree of latitude to vary from the provisions of the
law.
Recharacterization of Certain Vendor Assignments. Certain Vendor Assignments
and certain assignments executed under various Program Agreements (each, a
"Program Assignment") provide that the Seller has recourse to the related Vendor
for all or a portion of the losses the Seller may incur as a result of a default
under the End-User Contracts sold under such Vendor Assignment or Program
Assignment. In the event of a Vendor's bankruptcy, a bankruptcy trustee, a
creditor or the Vendor as debtor in possession might attempt to characterize
sales to the Seller pursuant to such Vendor Assignments or Program Assignments
as loans to the Vendor from the Seller secured by the Contracts sold thereunder.
If such an attempt is successful, such Vendor Assignment or Program Assignment
would be subject to the risks described herein for Vendor Loans. In such case
the Contracts sold under such Vendor Assignment or Program Assignment would
constitute Secondary Contracts under the recharacterized Vendor Assignment or
Program Assignment.
Risk of State Taxes. Because of the inclusion of "true" leases in the Trust,
a risk exists that certain states may attempt to impose certain property or
transfer taxes on the Trust. The Trust Depositor has agreed to indemnify the
Trust for such taxes if any are imposed, however, because of the limited nature
of the Trust Depositor's business there is no assurance the Trust Depositor
would have sufficient funds to make such indemnity payment.
No Interest in Software or Services
Certain Contracts will relate not to Equipment but rather to Software or
Services that are not owned by the Seller and in which no related interest will
be transferred to the Trust. See "The Contracts Generally". Accordingly, if any
such Contract becomes a Defaulted Contract, the Trust will not realize any
proceeds from the related Software or Services from which to satisfy any related
outstanding Scheduled Payments.
-21-
<PAGE>
Risks Associated with Non-Recourse Nature of the Offered Notes - No Recourse to
the Seller, Servicer or its Affiliates
Neither the Sellers, the Servicer nor any of their affiliates is generally
obligated to make any payments in respect of the Notes or the Contracts.
However, in connection with the sale of Contracts by a Seller to the Trust
Depositor, and the concurrent conveyance of such Contracts by the Trust
Depositor to the Trust, the Sellers will jointly and severally make
representations and warranties with respect to the characteristics of such
Contracts and, in certain circumstances, the Sellers may be required to
repurchase Contracts from the Trust Depositor (and the Trust Depositor
concurrently from the Trust) with respect to which such representations and
warranties have been breached. See "The Transfer and Sale Agreement and The Sale
and Servicing Agreement Generally--Representations and Warranties" herein.
Moreover, if Heller Financial were to cease acting as Servicer, delays in
processing payments on the Contracts and information in respect thereof could
occur and result in delays in payments to the Noteholders. Because the Trust is
a limited purpose trust with limited assets, the Noteholders must rely solely
upon the Contracts, the Equipment and related security described herein for
payment of principal of and interest on the Notes. Moreover, in respect of
Vendor Loans, the Noteholders must generally rely solely upon the Secondary
Contracts securing such Vendor Loans (together with the Equipment and related
security securing such Secondary Contracts, should the End-User default in its
obligation to pay such Secondary Contracts), since Vendor Loans are generally
non-recourse to the Vendors (i.e., the holder of such Vendor Obligation is
limited to recovering amounts solely from the Secondary Contracts and related
security therefor) [except for certain Vendor Loans which are covered by a UNL
Pool]. If payments made or realized from the Contracts (including Secondary
Contracts securing Vendor Loans) 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 Indenture Trustee as Noteholders, as that term is used in the
Indenture. Hence, until such time, beneficial owners will only be able to
exercise the rights of Noteholders indirectly, through DTC, 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."
-22-
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes and the Certificates will be paid
to the Trust Depositor in consideration of the transfer to the Trust of the
Contracts. Such proceeds will be applied by the Trust Depositor to the purchase
price of the Contracts to be sold to the Trust Depositor by the applicable
Seller pursuant to the Transfer and Sale Agreement. The Sellers will use the
proceeds received to pay down preexisting debt and for other general corporate
purposes.
THE TRUST
The Notes offered hereby will be issued by the Trust which has been
established by the Trust Depositor pursuant to the Trust Agreement. The Contract
Pool will be formed and transferred to the Trust pursuant to the Sale and
Servicing Agreement and pledged to the Indenture Trustee pursuant to the
Indenture.
The Trust will be organized as a business trust to be formed in accordance
with the laws of the State of Delaware, pursuant to the Trust Agreement, solely
for the purpose of effectuating the transactions described herein. Prior to
formation, the Trust will have had no assets or obligations and no operating
history. Upon formation, the Trust will not engage in any business activity
other than (a) acquiring, managing and holding the Contracts and related
interests described herein, (b) issuing the Notes and Certificates, (c) making
distributions and payments thereon and (d) engaging in those activities,
including entering into agreements, that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or connected therewith. As
a consequence, the Trust is not expected to have any source of capital resources
other than the Trust Assets.
THE CONTRACTS POOL
The Transferred Contracts. The Transferred Contracts will consist of
Contracts purchased from the Seller by the Trust Depositor on the Closing Date
(and as of the Cutoff Date) under the Transfer and Sale Agreement dated as of
[ ], 1997 (the "Transfer and Sale Agreement"), as well as any Additional
Contracts or Substitute Contracts conveyed thereunder as described herein as of
their applicable Cutoff Dates. The Transferred Contracts have been and will be
selected by the Sellers from their portfolio of Contracts based on the criteria
specified in the Transfer and Sale Agreement and the Sale and Servicing
Agreement. See "The Sale and Servicing Agreement Generally--Representations and
Warranties" and "--Concentration Amounts" herein. The Sellers will jointly and
severally represent that all of the Contracts are commercial, rather than
consumer, leases or loans/financings, and that no adverse selection process was
employed in the Sellers' selection of Contracts for sale under the Transfer and
Sale Agreement. As of the Cutoff Date, the ADCB of the Transferred Contracts was
$[ ], the weighted average remaining term to maturity for the Transferred
Contracts was approximately [ ] months, the final scheduled payment date of the
Transferred Contract with the latest maturity or expiration was [ ], 200[ ]
and the average Discounted Contract Balance was approximately $[ ]. The
Discount Rate for the Transferred Contracts is [ ]% per annum.
For further information regarding the Transferred Contracts, see "The
Contracts Generally" herein and "The Contracts Pool--Other Pool Data" below.
Other Pool Data. As of the Cutoff Date, there are [ ] Transferred Contracts,
with an ADCB (calculated at the Discount Rate) of $[ ]. Approximately [ ]% of
the ADCB of the Transferred Contracts provide for payments by the Obligor
thereunder on a basis other than monthly payments. The composition and
distribution of the Transferred Contracts by remaining term, original term,
Discounted Contract Balance, End-User industry, geographic distribution, type of
equipment and type of End-User Contract are set forth in the following tables
and are reported as of the Cutoff Date. Subschedules to Transferred Contracts
reflecting amounts billed to separate billing locations are treated as separate
Transferred Contracts. Classification by industry is based on Heller Financial's
customary procedures for determining obligor industry. Percentages and amounts
set forth in the following tables may not total due to rounding. The largest
End-User industry concentration (including End-User Obligors on Contracts
originated by the Sellers directly, as well as Contracts originated through
Vendors with or without Vendor recourse, and Secondary Contracts securing Vendor
Loans), which represents an ADCB of $[ ] as of the Cutoff Date, relates to
printing equipment. See "Risk Factors--Certain Risks Associated with Geographic
or Industry Concentrations of Contracts" herein, and "The Contracts Pool -
Contract Loss Experience" below.
The statistical information concerning the Contracts set forth below is based
upon information as of the opening of business on the Cutoff Date and the
Statistical Discount Rate. Certain Contracts included in the pool as of the
Cutoff Date may be determined not to meet the eligibility requirements for the
final pool, and may not be included in the final Contract Pool. While the
statistical distribution of the characteristics as
-23-
<PAGE>
of the Cutoff Date for the final Contract Pool and calculated at the Statistical
Discount Rate will vary somewhat from the statistical distribution of such
characteristics as of the Cutoff Date and calculated at the Statistical Discount
Rate as presented in this Prospectus, such variance will not be material.
-24-
<PAGE>
COMPOSITION OF THE CONTRACT POOL
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Aggregate Discounted Original Term (Range) Remaining Term (Range) Average Discounted
Contract Balance Number of Contracts (in months) (in months) Contract Balance
<S> <C> <C> <C> <C>
</TABLE>
-25-
<PAGE>
DISTRIBUTION OF CONTRACTS BY CONTRACT TYPE
<TABLE>
<CAPTION>
Percentage of Number Aggregate Discounted Percentage of Aggregate
Number of Contracts of Contracts Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
Finance Leases
Operating Leases
End-User Loans
Vendor Loans
Total
</TABLE>
-26-
<PAGE>
DISTRIBUTION OF CONTRACTS BY STATE IN WHICH OBLIGORS ARE LOCATED
<TABLE>
<CAPTION>
Percentage of Percentage of Percentage of
Number of Number of Number of Number of Discounted Contract Aggregate Discounted
State Contracts Contracts Obligors(1) Obligors Balance Contract Balance
<S> <C> <C> <C> <C> <C> <C>
Alabama
Alaska
Arizona
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
Percentage of Percentage of Percentage of
Number of Number of Number of Number of Discounted Contract Aggregate Discounted
State Contracts Contracts Obligors(1) Obligors Balance Contract Balance
<S> <C> <C> <C> <C> <C> <C>
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
</TABLE>
-28-
<PAGE>
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Percentage of Number Percentage of Aggregate
Equipment Type Number of Contracts of Contracts Discounted Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
Printing
[Plastics]
Computer Hardware
Computer Software
Telephones
Telex Machines
Facsimile
Office Furniture
Mailing Equipment
Manufacturing Equipment
Construction Equipment
Other/Miscellaneous
Total
</TABLE>
DISTRIBUTION OF CONTRACTS BY OBLIGOR INDUSTRY
<TABLE>
<CAPTION>
Percentage of Number Percentage of Aggregate
Industry Number of Contracts of Contracts Discounted Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
Financial Services
Manufacturing
Printing
Health Care
Transportation
Construction
Distribution
Government
Other/Miscellaneous
Total
</TABLE>
-29-
<PAGE>
DISTRIBUTION OF CONTRACTS BY PAYMENT FREQUENCY
<TABLE>
<CAPTION>
Percentage of Number Percentage of Aggregate
Payment Frequency Number of Contracts of Contracts Discounted Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
Monthly
Quarterly
Semiannual
Annual
Other
</TABLE>
DISTRIBUTION OF CONTRACTS BY CONTRACT BALANCE
<TABLE>
<CAPTION>
Percentage of Aggregate
Discounted Contract Balance Number of Contracts Percentage of Number of Contracts Discounted Contract Balance
<S> <C> <C> <C>
$ 0 - 250,000
250,001 - 500,000
500,001 - 750,000
750,001 - 1,000,000
1,000,001 - 1,250,000
1,250,001 - 1,500,000
1,500,001 - 1,750,000
1,750,001 - 2,000,000
greater than $2,000,000
Total
</TABLE>
-30-
<PAGE>
DISTRIBUTION OF CONTRACTS BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
Remaining Term Percentage of Number Aggregate Discounted Percentage of Aggregate
(Months) Number of Contracts of Contracts Contract Balance Discounted Contract Balance
<S> <C> <C> <C> <C>
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
Total
</TABLE>
DISTRIBUTIONS OF CONTRACTS BY
ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
Percentage of
Original Term Number of Percentage of Number Discounted Aggregate Discounted
(Months) Contracts of Contracts Contract Balance Contract Balance
<S> <C> <C> <C> <C>
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
85 - 96
Total
</TABLE>
-31-
<PAGE>
Delinquency and Loan Loss Information
The following tables set forth the Sellers' delinquency and loss experience
on their aggregate portfolio of owned Contracts for the below described periods.
For purposes of this table such experience is described in terms of the Sellers'
funds deployed for the acquisition of the related Contracts less associated
unearned finance charges (hereinafter "Adjusted Deployed Funds").
Contract Portfolio
Delinquency Experience
(Dollars in Thousands)
At
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Six Months Twelve Months Twelve Months Twelve Months
---------- ---------- -------------- -------------- --------------
Ended Ended Ended Ended Ended
----- ----- ----- ----- -----
June 30, June 30, December 31, December 31, December 31,
-------- ------- ----------- ----------- -----------
1997(2) 1996(2) 1996 1995 1994
------- ------- ---- ---- ----
Ending
Adjusted
Deployed
Funds....
No. of
Delinquent
Days (% of
Ending
Adjusted
Deployed
Funds....
31-60 days..
61-90 days..
Over 90 days
Total
</TABLE>
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming [--] day months). Consequently, a Contract
due on the first day of a month is not __ days delinquent until the first
day of the next month. A Contract is considered delinquent consistent with
the definition provided above notwithstanding the existence of Vendor
recourse; see the "Contract Portfolio - Contract Loss Experience" for the
impact of Vendor recourse on the Contracts' loss experience.
(2) Annualized.
-32-
<PAGE>
Contract Portfolio
Contract Loss Experience
(Dollars in Thousands)
At
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Six Months Twelve Months Twelve Months Twelve Months
---------- ---------- -------------- -------------- --------------
Ended Ended Ended Ended Ended
----- ----- ----- ----- -----
June 30, June 30, December 31, December 31, December 31,
-------- ------- ----------- ----------- -----------
1997(1) 1996(1) 1996 1995 1994
------- ------- ---- ---- ----
Average
Adjusted
Deployed
Funds
(of all
Contracts
Serviced)...
Gross Losses
(as % of
Average
Adjusted
Deployed
Funds)......
Net Losses
(as % of
Average
Adjusted
Deployed
Funds)......
Net Losses
(as % of
Liquidations)
(2)(3).....
</TABLE>
(1) Annualized.
(2) With respect to Contracts secured by printing equipment before Vendor
recourse, losses would have been, in the absence of Vendor recourse, $[___]
in the twelve months ended December 31, 1994, $[__] in the twelve months
ended December 31, 1995 and $[__] in the twelve months ended December 31,
1996; after Vendor recourse actual losses aggregated $[__] for such
periods. The above figures relating to "losses . . . in the absence of
Vendor recourse", assume that there would have been no Recoveries (e.g.,
from disposition of related Equipment) on such Contracts if such Contracts
had not otherwise been paid through Vendor support. The Seller/Servicer
believes, however, based on its prior experience with Defaulted Contracts
not supported by Vendor recourse such losses, net of recoveries, would have
been [__].
(3) The calculation of net loss includes actual charge-offs, deficiency
balances remaining after liquidation of repossessed Equipment and expenses
of repossession and liquidation, net of recoveries inclusive of Vendor
recourse.
The data presented in the foregoing tables are for illustrative purposes only
and there is no assurance that the delinquency or loss experience of the
Contracts will be similar to that set forth above.
-33-
<PAGE>
THE CONTRACTS GENERALLY
The Trust will be entitled to all collections on account of the Contracts
in the Contract Pool and related Equipment and Applicable Security, except for
(i) collections on deposit in the Collection Account or otherwise received by
the Servicer on or with respect to the Contract Pool or related Equipment, which
collections are attributable to any taxes, fees or other charges imposed by any
governmental authority, and (ii) collections representing reimbursements of
insurance premiums or payments for certain services that were not financed by
the Seller, and (iii) any proceeds from the sale or other disposition of
Equipment in excess of the difference between (x) the Discounted Contract
Balance of the related Contract as of the applicable Cutoff Date, over (y) the
present value as of the applicable Cutoff Date of all amounts (other than
Excluded Amounts) actually received by the Trust in respect of such Contract,
discounted monthly at the Discount Rate (amounts described in clauses (i), (ii)
and (iii), "Excluded Amounts") due on or after the applicable Cutoff Date for
such Contracts.
End-User Contracts
The following discussion describes the End-User Contracts (including End-
User Contracts which are Secondary Contracts). All of the End-User Contracts to
be included from time to time in the Trust are CSAs, Leases, Secured Notes, IPAs
and Financing Agreements in respect of Equipment, Software and Services. There
is no limit on the number of Contracts in the Contract Pool which may consist of
any of the foregoing types. Each Contract is required, however, to be an
Eligible Contract (as defined herein) as of the Cutoff Date.
Conditional Sale Agreements. The Sellers offer financing for Equipment
under CSAs assigned to the Seller by Vendors. It is expected that most of the
CSAs in the Contract Pool will consist of either the Sellers' standard pre-
printed form, or of the Vendors' standard, pre-printed forms (which in each case
have been reviewed and approved for use by the applicable Seller). The CSA sets
forth the description of each Financed Item and the schedule of installment
payments. Generally, loans under CSAs are fixed rate and are for a one to five
year term. Payments under CSAs generally are due monthly. CSA terms (i) provide
for a grant by the End-User thereunder of a security interest in any related
Equipment (which security interest is assigned by the Vendor to the Seller),
(ii) may allow prepayment of the obligation upon payment, where allowed by
applicable state law, of an additional prepayment fee, (iii) require the End-
User to maintain the Equipment, keep it free and clear of liens and encumbrances
and pay all taxes related to the Equipment, (iv) restrict the modification or
disposal of the Equipment without the seller's, or its assignee's, consent, (v)
include a disclaimer of warranties, (vi) include the End-User's indemnity
against liabilities arising from the use, possession or ownership of the
Equipment, (vii) include the End-User's absolute (except as provided in clause
(ii)) and unconditional obligation to pay the installment payments thereunder
and (viii) include specifically identifiable events of default and remedies
therefor. The CSA also requires each End-User to maintain insurance, the terms
of which may vary. The terms of a CSA may be modified at its inception at the
End-User's request. Such modifications must either be approved by the Seller's
legal department and certain levels of management before the Seller will agree
to accept an assignment of the CSA from a Vendor, or the Vendor must indemnify
the Seller against any losses or damages it may suffer as a result of such
modifications.
Leases. The Sellers, either directly or by assignment from Vendors, offer
financing of Equipment, Software and Services under Leases. Leases may consist
of individual lease agreements relating to a single, separate transaction and
Financed Item, or may consist of individual transactions written under and
governed by a master lease agreement (each, an "MLA") which contains the general
terms and conditions of the transaction. Specific terms and conditions, such as
descriptions of the specific Equipment, Software and Services being leased or
financed and the schedule of related rental payments, are contained in a
supplement or schedule to the MLA (each an "MLA Supplement"), which is signed by
the End-User as lessee, and either the Vendor or the Seller, as lessor. The MLA
Supplement incorporates the MLA by reference, and is treated by the Seller as a
separate Lease. Each Lease is originated in the ordinary course of business by
either the Seller or a Vendor (and assigned to the Seller pursuant to a Vendor
Agreement).
The initial terms of the Leases in the Contract Pool generally range from
one to five years. Each Lease provides for the periodic payment by the End-User
of rent in advance or arrears, generally monthly or quarterly. Such periodic
payments represent the amortization, generally on a level basis, of the total
amount that an End-User is required to pay throughout the term of a Lease.
The Leases to be included in the Contract Pool are "net leases" under which
the End-User assumes responsibility for the Financed Items, including operation,
maintenance, repair, insurance or self-insurance, return of any Equipment at the
expiration or termination of the Lease and the payment of all sales and use and
property taxes relating to the Financed Items during the Lease term. The End-
User further agrees to indemnify the lessor for any liabilities arising out of
the use or operation of the Financed Items. In most cases, the lessor is also
authorized to perform the End-User's obligations under the Lease at the End-
User's expense, if it so elects, in cases where the End-User has
-34-
<PAGE>
failed to perform. In addition, the Leases generally contain "hell or high
water" clauses unconditionally obligating the End-User to make periodic
payments, without setoff, at the times and in the amounts specified in the
Lease. If the Seller is the lessor, the Lease contains no express or implied
warranties with respect to the Financed Items other than a warranty of quiet
enjoyment. If a Vendor is the lessor, the Lease or a related agreement may
contain certain representations and warranties with respect to the Financed
Items in addition to a warranty of quiet enjoyment; however, the End-User agrees
not to assert any warranty claims against any assignee of the Vendor (which
would include the Seller) by way of setoff, counterclaim or otherwise, and
further agrees that it may only bring such claims against the Vendor. All Leases
of Equipment require the End-User to maintain, at its expense, casualty
insurance covering damage to or loss of the Equipment during the Lease term or
to self-insure against such risks, if approved in advance by the Seller.
The Leases include both "true leases" and leases intended for security as
defined in Section 1-201(37) of the UCC. Under a "true lease," the lessor bears
the risk of ownership (although the risk of loss of the Equipment is passed to
the End-User under the Leases), takes any tax benefits associated with the
ownership of depreciable property under applicable law and no title is conferred
upon the lessee. The lessee under a "true lease" has the right to the temporary
use of property for a term shorter than the economic life of such property in
exchange for payments at scheduled intervals during the lease term and the
lessor retains a significant "residual" economic interest in the leased
property. End of lease options for "true leases" include purchase or renewal at
fair market value. Under leases intended for security, the lessor in effect
finances the "purchase" of the leased property by the lessee and retains a
security interest in the leased property. The lessee retains the leased property
for substantially all its economic life and the lessor retains no significant
residual interest. Such leases are considered conditional sales type leases for
federal income tax purposes and, accordingly, the lessor does not take any
federal tax benefits associated with the ownership of depreciable property. End
of lease options for such Leases depend on the terms of the related individual
lease agreement or MLA Supplement, but generally such terms provide for the
purchase of the Equipment at a prestated price, which may be nominal. The
inclusion of "true leases" in the Contract Pool will have no federal income tax
impact on Noteholders since the Notes are treated as debt for federal income tax
purposes. See "Certain Federal Income Tax Matters." However, "true leases" are
treated differently under the Bankruptcy Code from leases intended for security.
See "Certain Legal Aspects of the Contracts--Certain Matters Relating to
Bankruptcy."
End-Users under a Lease are either prohibited from altering or modifying
the Equipment or may alter or modify the Equipment only to the extent the
alterations or modifications are readily removable without damage to the
Equipment. Under certain MLAs, the End-User may assign its rights and
obligations under the Lease, but only upon receiving the prior written consent
of the lessor, or may relocate the Equipment upon giving the lessor prompt
written notice of such relocation. The right to grant or deny such consent or to
receive such written notice will be exercised by the Servicer pursuant to the
authority delegated to it in the Sale and Servicing Agreement. Certain Leases
permit the End-User to substitute substantially identical leased Equipment for
leased Equipment scheduled to be returned to the lessor under the Lease.
While the terms and conditions of the Leases do not generally permit
cancellation by the End-User, certain Leases may be modified or terminated
before the end of the Lease term. Modifications to a Lease term or early Lease
terminations may be permitted by the Seller, or by a Vendor, with the consent of
the Seller, and are generally associated with additional financing opportunities
from the same End-User. End-Users may also negotiate with the Seller, at the
Seller's discretion, an early termination arrangement allowing the End-User to
purchase the Equipment during the term of a Lease for an amount generally equal
to or in excess of the present value of the remaining rental payments under the
Lease plus the anticipated market value of the related Equipment as of the end
of the Lease term. In some circumstances, early termination of a Lease may be
permitted in connection with the acquisition of new technology requiring
replacement of the Equipment. In such cases, the related Equipment is returned
to the Vendor or Seller and an amount generally equal to the present value of
the remaining rental payments under the Lease plus an early termination fee is
paid by the End-User to the Seller. Modifications usually involve repricing a
Lease or modification of the Lease term. Occasionally a Lease may be modified in
connection with an increase in the capacity or performance of Equipment by
adding additional Equipment that includes new technology. Coincident with the
financing of an upgrade to such Equipment, the Seller may reprice and extend the
related base Lease term to be coterminous with the desired term of the Lease
relating to the upgrade. In certain cases, subject to certain conditions
described under "Description of the Notes--Prepaid Contracts," such base lease
extensions may remain in the Contract Pool. Heller Financial expects, as
Servicer, to continue to permit these modifications and terminations with
respect to Leases included in the Contract Pool pursuant to the authority
delegated to it in the Sale and Servicing Agreement, subject to certain
conditions and covenants of the Servicer described under "Description of the
Notes--Prepaid Contracts."
In certain circumstances, the standard terms and conditions of the MLA are
modified at the inception of a Lease at the request of the End-User. Such
modifications must either be approved by the Seller's legal department and
certain levels of management before the Seller will agree to enter into the
Lease or accept an assignment of the Lease from a Vendor, or the Vendor must
indemnify the Seller against any losses or damages it may suffer as a result of
such
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modifications. Common permitted modifications include, but are not limited to,
(i) a one dollar purchase option at the end of the Lease term, (ii) prearranged
mid-Lease purchase options, early termination options and lease extension
options as described above, (iii) modifications to the lessor's equipment
inspection rights, (iv) modifications to the End-User's insurance requirements
permitting the End-User to self-insure against casualty to the Equipment, (v)
the End-User's right to assign the Lease or sub-lease the Financed Items to an
affiliated entity, so long as the End-User remains liable under the Lease and
promptly notifies the lessor or its assignee of such assignment or sublease and
(vi) extended grace periods for late payments of rent.
Secured Notes. The Sellers also provides direct initial financing or
refinancing of Equipment under secured promissory notes (each a "Secured Note"),
which consist of an installment note and a separate security agreement. In an
initial financing transaction, the applicable Seller pays to the Vendor the
purchase price for the Equipment and in a refinancing transaction, the Seller
pays off an End-User's existing financing source, and the initial financing or
refinancing is documented as a direct loan by the Seller to the End-User of the
Equipment using a Secured Note. In the case of a refinancing transaction, upon
payment to the existing financing source, the Seller obtains a release of such
party's lien on the financed Equipment. In either case, the Seller records its
own lien against the financed Equipment and takes possession of the Secured
Note, which constitutes chattel paper under the UCC. Except for the lack of
references to "sale" or "purchase" of Equipment, the terms and conditions
contained in a Secured Note are substantially similar to those contained in a
CSA.
Installment Payment Agreements. The Sellers provide financing for certain
Software license fees and related support and consulting services under
installment payment supplements to software license agreements, separate IPAs
other forms of Financing Agreements assigned to the applicable Seller by Vendors
of Software. Each such Financing Agreement is an unsecured obligation of the
End-User; generally provides for a fixed schedule of payments with no End-User
right of prepayment; is noncancellable for its term and generally contains a
"hell or high water" clause unconditionally obligating the End-User to make
periodic payments, without setoff, at the times and in the amounts specified
therein; permits the Vendor to assign the payment agreement to a third party
(including the Seller) and include the End-User's agreement, upon such
assignment, not to assert against such assignee any claims or defenses the End-
User may have against the Vendor; and contains default and remedy provisions
that generally include acceleration of amounts due and to become due and, in
certain cases, the right of the Vendor, or the Seller by assignment, to
terminate the underlying Software license and all related support and consulting
activities.
Equipment
The End-User Contracts and Secondary Contracts cover a wide variety of new
and used equipment, including, but not limited to, the following: printing, pre-
press, machine tool, plastics, computer hardware, computer software, restaurant,
transportation, energy related, medical, and industrial equipment (collectively,
"Equipment"). All of the interests of the applicable Seller in the Equipment
subject to each related End-User Contract (which consists or will consist of
either title to the Equipment or a security interest in the Equipment) will be
transferred to the Trust.
Software and Services
Certain of the End-User Contracts cover license fees and other fees owed by
the End-Users under either perpetual or term software license agreements and
other related agreements in connection with the use by such End-Users of
computer software programs ("Software"), and such End-User Contracts may also
cover related support and consulting services ("Services"). No interest in the
Software, the Software license agreement (other than the right to collect the
payment of Software license fees and, in certain cases, to exercise certain
rights and remedies under the Software license agreement or other agreements
related thereto) or the related Services has been or will be conveyed to the
Sellers by either the Vendors or licensors of the Software or by the End-Users
under the related End-User Contracts. Consequently, the Trust will not have
title to or a security interest in such Software, nor will it own such Services,
and would not be able to realize any value therefrom under a related End-User
Contract upon a default by the End-User. Equipment, Software and Services are
collectively referred to as "Financed Items". It is a condition to the issuance
of the Notes that as of the Closing Date, no more than [__]% of the ADCB of the
Contract Pool will consist of Software transactions.
Vendor Loans
The Contracts may include limited recourse loan or repayment obligations
(which may take the form of promissory notes with related security agreements)
("Vendor Loans") each of which is payable by a Vendor and secured by all of the
Vendor's interest in an individual End-User Contract originated by such Vendor
and by the Equipment related to such End-User Contract.
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Vendor Loans may be originated through, and incorporate terms and
conditions of, a Program Agreement (including a Program Agreement under which
End-User Contracts also are or may be originated by the Seller directly, or
purchased by the Seller from the Vendor, in separate transactions not giving
rise to Vendor Loans). Vendor Loans generally are non-recourse to the Vendor,
i.e., the applicable Seller may obtain repayment solely from the proceeds of the
End-User Contracts and related Equipment securing the Vendor Obligation. In a
few instances, however, recourse to a Vendor for nonpayment of a Vendor
Obligation may be available through a limited recourse arrangement included in
the related Program Agreement. The repayment terms under a Vendor Obligation,
including periodic amounts payable and schedule of payments, correspond to the
payment terms of the End-User under the End-User Contract collaterally assigned
under such Vendor Obligation. Each Vendor Obligation either includes most, if
not all, of the representations and warranties regarding the End-User Contract
and related Equipment typically included in a Vendor Agreement, or incorporates
such representations and warranties included in any related Program Agreement by
reference.
Program Agreements With Vendors
It is expected that a substantial portion of the End-User Contracts to be
included from time to time in the Trust will consist of End-User Contracts
originated by Vendors and assigned or pledged to the Seller pursuant to Program
Agreements. Also, as described above, Vendor Loans may be originated through
Program Agreements with the related Vendor. The Sellers' Program Agreements are
agreements with Equipment manufacturers, dealers and distributors, or Software
licensors or distributors, located in the United States ("Vendors") which
provide the Sellers with the opportunity to finance transactions relating to the
acquisition or use by an End-User of a Vendor's Equipment, Software, Services or
other products. Vendor finance arrangements provide the Sellers with a steady,
sustainable flow of new business, generally with lower costs of origination than
asset-based financings marketed directly to end-users. Many of the Program
Agreements provide various forms of support to the applicable Seller, including
representations and warranties by the Vendor in respect of the End-User
Contracts assigned by the Vendor to the Seller and related Equipment, Software
or Services, credit support with respect to defaults by End-Users and equipment
repurchase and remarketing arrangements upon early termination of End-User
Contracts upon a default by the End-User. Some of the Program Agreements take
the form of a referral relationship which is less formal, and may or may not
include credit or remarketing support to the Seller from the Vendor.
Each Program Agreement (other than Program Agreements that only establish a
referral relationship) generally includes the following provisions, among
others:
1. Vendor representations, warranties and covenants regarding each
End-User Contract assigned to the Seller, including among other things
that: the obligations of the End-User under the assigned End-User Contract
are absolute, unconditional, noncancellable, enforceable in accordance with
its terms and free from any rights of offset, counterclaim or defense; the
Seller holds the sole original of the End-User Contract and has either
title to or a first priority perfected security interest in the Equipment;
the Equipment and the End-User Contract are free and clear of all liens,
claims or encumbrances; the Equipment or the Software has been irrevocably
accepted by the End-User and will perform as warranted to the End-User; and
the assigned End-User Contract was duly authorized and signed by the End-
User.
2. Remedies in the event of a misrepresentation or breach of a
warranty or covenant by the Vendor regarding an assigned End-User Contract,
which usually require the Vendor to repurchase the affected End-User
Contract for the Seller's investment balance in the End-User Contract plus
costs incurred by the Seller in breaking any underlying funding arrangement
(which may or may not be calculated in accordance with a specified
formula).
3. In the case of End-User Contracts covering Equipment, remarketing
support from the Vendor in the event of an End-User default and subsequent
repossession or return of the Equipment under the End-User Contract (to
assist the Seller in realizing proceeds from the Equipment assigned as
collateral security to support the obligations of the End-User under the
End-User Contract).
4. The right of the Seller to further assign its interests in
assigned End-User Contracts, all payments thereunder and any related
interest in Equipment.
5. With respect to End-User Contracts for which the Vendor (or, in
certain limited instances a subservicer acceptable to the Seller) will
perform ongoing administrative duties on behalf of and for the benefit of
the applicable Seller relating to servicing, processing of collections and
actual substantive collection remedies, as such duties are delegated by the
Seller to the Vendor (or, in certain limited instances a subservicer
acceptable to the Seller) pursuant to the Program Agreement,
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provisions governing the Vendor's (or subservicer's) performance of such
duties, and providing the Seller with the right to assume such duties in
the event of breach or inadequate performance by the Vendor (or
subservicer, if applicable).
In addition to the foregoing, a Program Agreement may include recourse
against the Vendor with respect to End-User defaults under certain identified
End-User Contracts, either by specifying that the assignment of the End-User
Contract from the Vendor to the Seller is with full recourse against the Vendor,
by specifying that the Vendor will absorb a limited fixed dollar or percentage
amount of "first losses" on the Contract, or by inclusion of the End-User
Contract in an "ultimate net loss pool" ("UNL Pool") created under the Program
Agreement. In the event of an End-User default under an End-User Contract which
was assigned by the Vendor to the Seller subject to the UNL Pool, the Seller may
draw against the UNL Pool up to the amount of the Seller's remaining unpaid
investment balance in the defaulted End-User Contract, but not in excess of the
UNL Pool balance then available. Drawings may also be made against the UNL Pool
with respect to End-User Contracts that are not included in the Contract Pool
and, accordingly, there can be no assurance that any amounts contributed by a
Vendor to the UNL Pool will be available in the event of an End-User default
under a End-User Contract included in the Contract Pool.
The manner in which End-User Contracts are assigned to the Seller by the
Vendors differs under each Program Agreement, depending upon the nature of the
Financed Items, the form of the End-User Contract, the accounting treatment
sought by the Vendor and the End-User, and certain tax considerations.
For example, the Seller might either accept a Vendor Obligation and
collateral assignment of the End-User Contract and related Equipment (or
security interest therein) from the Vendor, or accept a full assignment of such
End-User Contract and either (i) a collateral assignment of the related
Equipment (or security interest therein) from the Vendor, which collateral
assignment secures the End-User's obligations under the End-User Contract or
(ii) in the case of Leases, title to the Equipment. The Seller also may receive,
from a Vendor with respect to Software, a full assignment of leases, installment
payment agreements, installment payment supplements to license agreements, and
other types of financing agreements used in financing Software license payments
and related support and consulting services. Such assignments may include an
assignment of the Software Vendor's or licensor's right, or the agreement of the
Vendor or licensor (at the Seller's instructions), to terminate the software
license covered by the End-User Contract and suspend related support in the
event of an End-User default under the End-User Contract. In some cases, the
Software Vendor also agrees not to relicense the same or similar software to a
defaulted End-User for some period of time (e.g., one year) unless the End-User
cures its default.
It is also expected that some portion of the End-User Contracts included in
the Contract Pool, especially in the case of CSAs, will consist of End-User
Contracts originated by Vendors and assigned to the Seller pursuant to Vendor
Assignments, each of which relates to an individual End-User Contract, rather
than pursuant to a Program Agreement. Each Vendor Assignment will either be made
with or without recourse against the Vendor for End-User defaults and will
generally contain many, if not all, of the representations, warranties and
covenants typically contained in Program Agreements, as well as a Vendor
repurchase requirement in the event of a breach by the Vendor of such
representations, warranties or covenants. Vendor Assignments may or may not
provide for any Vendor remarketing support in the event of an End-User default.
Residual Investments
With respect to certain of the Contracts, the Seller may have taken a
residual interest in the Equipment financed. A residual interest arises when the
Seller leases equipment to an Obligor and the Seller is dependent upon the sale
of the Equipment at the expiration of the lease term in order to achieve its
anticipated rate of return or yield. The Contracts providing for residual
interests include both guaranteed residuals ("Guaranteed Residuals") and non-
guaranteed residuals ("Non-Guaranteed Residuals" together with Guaranteed
Residuals, the "Residuals"). A Guaranteed Residual assumes a residual interest
in the Equipment for the Seller with the associated investment return or yield
with respect to the Contract mitigated by requiring the Obligor to repurchase
the Equipment at a pre-established purchase price or requiring a lease renewal
which requires the Obligor to continue rent payments for such period sufficient
to fully amortize the residual; with respect to Guaranteed Residuals the option
to return the Equipment in lieu of a purchase or lease renewal is not available
to the Obligor. A Non-Guaranteed Residual is one in which the Seller assumes an
"at-risk" residual position. The Seller must sell the Equipment at lease
termination to achieve its anticipated rate of return or yield and the Obligor
may or may not purchase the Equipment at lease termination. If the Obligor does
not exercise the purchase or renewal option, the Equipment may be returned at
the termination of the Contract. The Seller must then sell the Equipment for at
least the priced residual in order to achieve the originally intended rate of
return or yield. As of the Cutoff Date, Guaranteed Residuals and Non-Guaranteed
Residuals shall not represent more than ____% and ______%, respectively of the
ADCB of the Contract Pool. The Residuals represent enhancement for the Notes;
proceeds of the Notes will not be used to purchase any Residuals.
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Contract Files
The applicable Seller will indicate in its books and records, including the
appropriate computer files relating to the Transferred Contracts, that such
Contracts have been transferred to the Trust for the benefit of the Noteholders,
and will stamp, or permit the Servicer to stamp, the related Contract Files or
otherwise mark such Contracts with a legend to the effect that such Contracts
have been transferred to the Trust for the benefit of the Noteholders. The
Sellers will also deliver to the Indenture Trustee a computer file or microfiche
or written list containing a true and complete list of all Contracts which have
been transferred to the Trust, identified by account number and by the
Discounted Contract Balance as of the Cutoff Date.
Collections on Contracts
All collections received with respect to the Contracts will be allocated as
described herein. See "Description of the Notes--Allocations". Prepayments will
be given effect as of the last day of the Collection Period in which they are
received and Scheduled Payments of principal made in advance of their due date
will be given effect on their due date.
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PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of each
interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Contracts. The
payments on such Contracts 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 Contracts. 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 by the Trust Depositor pursuant to the Sale and Servicing
Agreement (and contemporaneously therewith by the applicable Seller from the
Trust Depositor pursuant to the Transfer and Sale Agreement), whether as a
result of a breach of representation or warranty as to such Contract
constituting a Warranty Contract as defined herein, or at the Trust Depositor's
and Seller's option upon satisfaction of the Cleanup Call Condition (and, in the
case of Warranty Contracts, such rate of prepayment would also be influenced by
the Trust Depositor's decision not to repurchase such Warranty Contract and
instead, to accept a Substitute Contract therefor as described below). In the
event of a repurchase, the repurchase price will decrease the Discounted
Contract Balance of the Contracts, leading to a principal repayment and causing
the corresponding weighted average life of the Notes to decrease. See "Risk
Factors -- Maturity and Prepayment Considerations."
In the event a Contract becomes a Defaulted Contract, an Adjusted Contract
or a Warranty Contract (each as defined herein), the Seller will have the option
to substitute for the affected Contract another of similar characteristics (a
"Substitute Contract"), subject to an overall limitation, in respect of
Defaulted Contracts or Adjusted Contracts only, of an aggregate amount not to
exceed 15% of the ADCB of the Contracts as of the Cutoff Date. In addition, in
the event of an Early Termination Contract (as defined herein) which has been
prepaid in full, the Seller will have the option to transfer to the Trust
through the Trust Depositor, and the Trust Depositor may cause the Trust to
reinvest such prepayment proceeds in, an additional Contract of similar
characteristics (an "Additional Contract"). The Substitute Contracts and
Additional Contracts will have a Discounted Contract Balance equal to or greater
than that of the Contracts being modified and/or replaced and the monthly
payments on the Substitute Contracts or Additional Contracts will be at least
equal to those of the replaced Contracts through the term of such replaced
Contracts. In the event that an Early Termination is allowed by the Servicer and
an Additional Contract is not provided, the amount prepaid (whether by the
related Obligor, or through a combination of payments from the related Obligor
and the Seller/Servicer) will be equal to at least the Discounted Contract
Balance of the terminated Contract, plus any delinquent payments.
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.
The following chart sets forth the percentage of the Initial Principal
Amount of the Class A Notes, Class B Notes and Class C Notes which would be
outstanding on the Distribution Dates set forth below assuming a conditional
payment rate (a "Conditional Payment Rate" or "CPR") of [__]% and [___]%,
respectively. Such information is hypothetical and is set forth for illustrative
purposes only. The CPR assumes that a fraction of the outstanding Contract Pool
is prepaid on each Distribution Date, which implies that each Contract in the
Contract 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
Contract Balances of the Contracts, after the payment of all Scheduled Payments
on the Contracts during such Collection Period. The CPR further assumes that all
Contracts are the same size and amortize at the same rate and that each Contract
will be either paid as scheduled or prepaid in full. The amounts set forth below
are based upon the timely receipt of scheduled monthly Contract payments as of
the Cutoff Date, assumes that the Trust Depositor does not exercise its option
to cause a redemption of the Notes in connection with the Cleanup Call
Condition, and assumes the Closing Date is July __, 1997.
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PERCENTAGE OF THE INITIAL CLASS A PRINCIPAL AMOUNT,
INITIAL CLASS B PRINCIPAL AMOUNT,
AND INITIAL CLASS C PRINCIPAL AMOUNT
AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
[_]% CPR [_]% CPR
-------- --------
<S> <C> <C> <C> <C> <C> <C>
Issuance Date Class A Class B Class C Class A Class B Class C
</TABLE>
WEIGHTED AVERAGE LIFE (YEARS)
If the Trust Depositor exercises its option to cause a redemption of the Notes
in connection with the Cleanup Call Condition, the average life of the Class A
Notes would be ____ years and ____ years, the average life of the Class B
Notes would be ____ years and ____ years, and the average life of the Class C
Notes would be ____ years and ____ years for the [_]% CPR and [_]% CPR
scenarios, respectively.
The weighted average life of a Class A Note, a Class B Note or a Class C Note
is determined by (a) multiplying the amount of cash distributions in reduction
of the outstanding Class A Principal Amount, outstanding Class B Principal
Amount or outstanding Class C Principal Amount, as the case may be, by the
number of years from the Closing Date to the respective Distribution Date on
which each such Class of Notes is repaid in full, (b) adding the results, and
(c) dividing the sum by the Initial Class A Principal Amount, Initial Class B
Principal Amount or Initial Class C Principal Amount, as the case may be.
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HELLER FINANCIAL, INC.
AND
HELLER FINANCIAL LEASING, INC.
General
The Seller/Servicer was incorporated in 1919 under the laws of the State of
Delaware and is engaged in various aspects of the commercial finance business.
The Seller/Servicer and its consolidated subsidiaries employ approximately 1,500
people; its executive offices are located at 500 West Monroe Street, Chicago,
Illinois 60661 (telephone: (312) 441-7000). All of the outstanding Common Stock
of the Seller/Servicer is owned by Heller International Corporation, a wholly-
owned subsidiary of The Fuji Bank, Limited, headquartered in Tokyo, Japan. All
of the outstanding Common Stock of the Additional Seller is owned by the
Seller/Servicer. The Seller/Servicer is a diversified financial services company
which provides a broad array of commercial financial products and services
primarily to middle-market companies in the United States and internationally
and provides its products and services through five product categories: (1)
asset based finance, (2) cash flow lending, (3) real estate finance, (4)
international asset based finance and factoring and (5) specialized finance. The
middle-market segment served includes entities primarily in the manufacturing
and service sectors with annual sales in the range of $15 million to $200
million and in the real estate sector with property values generally in the
range of $5 million to $40 million. The Additional Seller is a non-operating
subsidiary which through the Commercial Equipment Finance and the Vendor Finance
(both as described below) originates Contracts.
As of June 30, 1996, the Seller/Servicer had total assets of $[______]
compared with $[______] as of June 30, 1995, total liabilities of $[______]
compared with $[________] as of June 30, 1995, shareholder's equity of $[______]
compared with $[_______] as of June 30, 1995 and total revenues and net income
of $[________] and $[________], respectively, for the period ended June 30,
1996, compared with $[_______] and $[________], respectively, for the period
ended June 30, 1995. For the fiscal year ended December 31, 1996, the
Seller/Servicer had total assets of $9,926,000,000 compared with $9,638,000,000
as of December 31, 1995, total liabilities of $8,402,000,000 compared with
$8,208,000,000 as of December 31, 1995, shareholder's equity of $1,467,000,000
compared with $1,384,000,000 as of December 31, 1995 and total revenues and net
income of $533,000,000 and $133,000,000, respectively, for the fiscal year ended
December 31, 1996 compared with $620,000,000 and $125,000,000, respectively, for
the fiscal year ended December 31, 1995.
The Seller/Servicer and the Additional Seller originated the Contracts
under two separate operating divisions: Commercial Equipment Finance and Vendor
Finance. Originations from either Commercial Equipment Finance or Vendor Finance
must meet Heller Financial's Credit Risk Management System as hereinafter
described.
Credit Risk Management System
Heller's Financial's Credit Risk Management System provides credit
functions within the Sellers' origination groups (including Commercial Equipment
Finance and Vendor Finance) as well as credit oversight at the
Seller's/Servicer's corporate level. The system provides established, consistent
and documented credit policies at both the corporate and group level. The first
line of credit risk management is the origination groups where substantially all
originations, due diligence and primary credit analysis are performed. Credit
determinations are separate from origination and are staffed with experienced
credit and portfolio officers in the origination groups.
Headed by the Seller's Chief Credit Officer, oversight over the credit
process is maintained at the Seller's/Servicer's corporate level. Corporate
Credit is responsible for ensuring that the credit risk management system is
appropriately implemented. The Seller's/Servicer's Chief Executive Officer
approves all new transactions and modifications that exceed origination group
authority. Additionally, the Seller/Servicer Credit Committee approves new
lending programs and performs ongoing reviews of existing lending programs and
strategies as well as identifies strategic credit issues (including review of
the portfolio mix) and the credit policies and procedures throughout the
Seller/Servicer.
The Credit Risk Management System emphasizes active portfolio management in
an effort to to ensure: (1) individual accounts are appropriately managed; (2)
portfolio reporting to management is accurate and timely; (3) problem accounts
are identified and reported on a timely basis to ensure prompt corrective
action. Each origination group has portfolio practices which enhance in early
identification of account issues through account performance analysis, risk
rating systems and regular group portfolio reviews. Management of risk accounts
is transferred to corporate workout specialists where appropriate. Quarterly or
semi-annual portfolio reviews are held with the Chairman and Chief Credit
Officer. The Seller's Internal Audit Department performs extensive loan reviews
on an independent basis to ensure (1) compliance with group and corporate credit
policies and procedures, (2) the integrity of the risk ratings, (3) the
effectiveness of problem loan identification, and (4) the adequacy of loan loss
reserves.
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Vendor Finance
General Description. Vendor Finance ("VF") provides customized equipment
finance programs to manufacturers and distributors of a wide variety of
commercial, industrial and technology-based products. These programs are
generally made with partial, or in some cases, full recourse to the Vendor. The
Vendor Finance portfolio is well diversified with an average transaction size of
$150,000. With respect to originations, transactions generally range in size
from $50,000 to approximately $3 Million. Vendor Finance's annual originations
increased 30% in 1996 to over $400 Million.
VF's Credit Analysis. The primary factors involved in credit extensions by
VF are developed by determining the appropriate balance between the following
facts (in order of importance): (1) Vendor support and the Seller's reliance on
such support, (2) the credit strength of the underlying End-User, and (3) the
value of the Equipment.
Notwithstanding the type of program (i.e. Vendor credit extension or Vendor
End-User transactions) and their respective credit analysis, the following
discipline is applied to all VF originations: (1) a complete underwriting is
required for each new Vendor program evaluating financial information, equipment
value, quality of Obligor customer base, review of relevant industry data and
the value of recourse, (2) tiered credit approval authorities have been
implemented for each Vendor Program and the transactions originated under such
programs, (3) a comprehensive credit policies and procedures manual is
maintained to ensure consistent compliance with the Seller's credit standards,
(4) an independent internal audit function exists within VF to conduct due
diligence on new client relationships and which conducts ongoing audits of the
client relationship, (5) financial performance of each Vendor is periodically
reviewed, (6) VF's portfolio is reviewed semiannually with the Seller's Chairman
and Chief Credit Officer, and (7) there is an independent internal audit
function.
Collection Process/Vendor Recourse. Vendor recourse ranges from limited
remarketing assistance to full recourse programs. Vendor credit support includes
direct recourse, holdbacks, funded reserves, remarketing agreements as well as
representations and warranties provided in the Contract documentation. Direct
Vendor recourse may be provided with respect to a "pool" of numerous underlying
transactions or on an individual, transaction-by-transaction basis. In certain
circumstances the Vendor and/or another leasing company originates, documents
and performs servicing while in other circumstances the Seller/Servicer
originates, documents and performs servicing with respect to the Contracts. From
a servicing perspective a Vendor Program may be structured with the Vendor
generating documents and the bills as well as collecting payments from the End-
User and remitting payment to the Servicer. In such instances and the Servicer's
involvement is transparent to the End-User and is motivated by a variety of
Vendor marketing considerations. In other situations, the Vendor simply sources
the origination and the Servicer performs the servicing with respect to the
Vendor. In general, the servicing function of the Vendor is an important factor
in the pricing characteristics for the respective Vendor program.
In those situations in which the Vendor is providing a substantial portion
of the servicing functions, the Servicer undertakes extensive due diligence with
respect to the Vendor's internal operating procedures with additional emphasis
on billing, collection, reporting and remittance. The due diligence analysis
will take on various levels of scrutiny depending on the degree of servicing
handled by the Vendor, the Vendor's credit strength, the volume generated by the
Program, and the history and relationship with the Vendor.
Commercial Equipment Finance
General Description. Commercial Equipment Finance ("CEF") offers expansion,
replacement and modernization equipment financing directly to a broad range of
industries where the financing is primarily collateralized by the financed
equipment. The portfolio is well diversified with financings that generally
range from $500,000 to $15 Million. As of December 31, 1996 the average
transaction size was approximately $4 Million. New business volume in 1996 was
approximately $500 Million representing a 37% increase over 1995.
CEF's Credit Analysis. CEF's approach to lending concentrates on three
critical factors: (1) cash flow of the Obligor (i.e. evaluate the quality of the
underlying obligor's cash flow by analyzing the related industry dynamics, the
Obligor's competitive strengths and weaknesses, the role of external factors in
the obligor's business as well as the financial profile of the Obligor), (2) the
importance/value of the Equipment to the obligor's overall operations (i.e. in a
downside/workout scenario, the more important/valuable the Equipment, the more
likely it is that the Seller will be paid), and (3) the Seller's position in the
overall capital structure of the company (i.e. the smaller the role that CEF
plays in a company's overall capital structure, the more likely it is that the
Seller will be paid) in a negative economic environment).
Notwithstanding the type of program or related credit analysis, the
following discipline is applied to all CEF originations: (1) the CEF credit
approval process requires complete financial due diligence, collateral review,
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management/strategy evaluation, review of all industry relevant data as well as
review of all legal aspects of the credit, (2) reliance on the CEF Policy
Manual, (3) approval authority tiered to provide prompt responses to the
customer at lower exposure levels and ensure divisional involvement at higher
exposure levels; (i.e. for all regional office origination, required), (4)
quarterly/annual financial reviews of each account are prepared by CEF credit
staff, (5) quarterly reviews of the portfolio are conducted with the Chairman
and Chief Credit Officer of the Seller, (6) monthly distribution of key reports
(delinquency, flash reports, risk ratings changes, etc.) to the Seller's senior
management (this helps ensure prompt communication of material credit issues),
and (6) industry and geographic diversity is maintained with respect to CEF's
originations.
Collection/Servicing. A delinquency report for each region must be prepared
by the Region Credit Manager on a monthly basis. The Seller's/Servicer's key to
successful resolution of a problem contract is early recognition. Each region is
responsible for detecting signs of potential problem contracts through proactive
portfolio management, including review of delinquency reports, the Financial
Statement and Covenant Compliance Checklist for each account, Account Risk
Rating Memos, Flash Reports, Annual Reviews, and the quarterly portfolio reviews
held in Chicago. Within ten business days of the point in time at which an
account is both 60 days past due or delinquent and is put on a "watch list", an
in-person collateral inspection must be performed. If an in-person inspection is
impractical, an updated UCC search must be performed within the same ten day
period.
CEF transactions are required to contain a provision for assessing late
charges in the event that an Obligor fails to make a payment on the Contract on
the related due date. The charge is generally between 1% and 5% of the amount
due and is incurred within one to fifteen days after the due date depending upon
the documentation (at times calculated on a per diem basis). An account is
delinquent if as of the 1st day of any given month, the borrower had failed to
make 2 consecutive monthly payments. An account is classified as non-earning if
no payment is received within ninety days of the scheduled payment due date.
All obligors are required by the terms of the Contracts to maintain the
Equipment and install the Equipment at a place of business approved by CEF
personnel. Delivery, transportation, repairs and maintenance are obligations of
obligors, and obligors are required to carry, at their own expense, liability
and replacement cost insurance under terms acceptable to CEF. Any lease payment
defaults permit CEF to declare immediately due and payable all remaining lease
payments. At the end of a lease term, Lessees must return the leased equipment
to the Seller in good working order unless the lease is renewed or the leased
equipment is purchased by the Obligor.
THE TRUST DEPOSITOR
The Trust Depositor is a wholly-owned bankruptcy-remote subsidiary of
Heller Financial, formed solely for the purpose of acquiring from the Sellers
Contracts and Equipment as well as certain other financial assets from time to
time and either issuing debt securities secured by identifiable fixed or
revolving pools of such assets, or conveying or depositing the same into trusts
or other securitization vehicles. As a bankruptcy-remote entity, the Trust
Depositor'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
Indenture Trustee on behalf of the Noteholders and the trustees or collateral
agents on behalf of other securityholders under indentures, security agreements,
pooling agreements or similar agreements or undertakings which provide for
essentially nonrecourse, asset-backed financings) which may bring bankruptcy
proceedings against the Trust Depositor and (b) the risk that it will be
consolidated into the bankruptcy proceedings of any other entity is diminished.
The Trust Depositor will have no other assets available to pay amounts owing
under the Indenture except the Trust Assets, including the Contracts and the
interests in the Equipment, the proceeds thereof and the amounts on deposit in
the Collection Account. The Trust Depositor's address is 500 West Monroe Street,
Chicago, Illinois 60661, and its phone number is (312) 441-7246.
DESCRIPTION OF THE NOTES
The statements under this caption are summaries, do not purport to be
complete and are subject to and qualified in their entirety by reference to the
Sale and Servicing Agreement and the Indenture (the "Operative Documents").
Copies of the Sale and Servicing Agreement and the Indenture have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
General
The Notes will consist of three Classes, the Class A Notes, the Class B
Notes and the Class C Notes. The Notes will be issued pursuant to the Indenture
between the Trust and the Indenture Trustee. The following summary describes the
material terms of the Notes and is qualified in its entirety by reference to the
Sale and Servicing Agreement and the Indenture.
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The Class A Notes, Class B Notes and Class C Notes will initially be
represented by one or more certificates registered in the name of the nominee of
DTC (together with any successor depository selected by the Trust Depositor, the
"Depository"), except as set forth below. The Notes will be available for
purchase in minimum denominations of $1,000 and in integral multiples thereof in
book-entry form. The Trust Depositor has been informed by DTC that DTC's nominee
will be Cede. See "--Book-Entry Registration" and "--Definitive Notes" below.
Only the Notes will be offered hereby.
The Indenture Trustee will be granted a lien of the first priority on the
Trust Assets to secure the Notes; provided, that distributions on the Notes (and
each Class thereof) will be allocated as provided herein. The Notes are
nonrecourse obligations of the Trust only and do not represent interests in or
obligations of either the Sellers, the Servicer or the Trust Depositor, or any
affiliate thereof.
Interest
Interest on the Notes will be payable on each of the Distribution Dates
occurring on or prior to the earlier of (i) the date of payment in full of such
Notes and (ii) the Maturity Date for the Notes. Interest will accrue at the
applicable Class A Interest Rate, Class B Interest Rate or Class C Interest
Rate, for the period from and including the most recent Distribution Date on
which interest has been paid (or, in the case of the initial Distribution Date,
from and including the Closing Date) to but excluding the following Distribution
Date (each period for which interest accrues on the Notes, an "Accrual Period")
on the outstanding principal amount of such Notes as of the first day of such
Accrual Period.
Interest on the Class A Notes is payable on a Distribution Date from
Available Amounts (as defined herein) on such date (and after application of
such Available Amounts to repay any outstanding Servicer Advances as defined
herein, and to pay the Servicing Fee as defined herein). Such Available Amounts
represent primarily collections of payments due under the Contracts, certain
amounts received upon the prepayment or purchase of Contracts or liquidation of
the Contracts and disposition of the related Equipment upon defaults thereunder,
and proceeds of Servicer Advances (as defined herein), if any.
Interest on the Class B Notes is payable on a Distribution Date from
Available Amounts on such date, but after application of such Available Amounts
to repay any outstanding Servicer Advances, to pay the Servicing Fee, and to pay
interest on the Class A Notes.
Interest on the Class C Notes is payable on a Distribution Date from
Available Amounts on such date, but after application of such Available Amounts
to repay any outstanding Servicer Advances, to pay the Servicing Fee, and to pay
interest on the Class A Notes and the Class B Notes.
Principal
Each Note will have a stated maturity of [ ], 200[ ] (the
"Maturity Date"). However, if all payments on the Contracts are made as
scheduled, final payment with respect to the Notes would occur prior to stated
maturity.
Principal of the Class A Notes will be payable on each Distribution Date in
an amount equal to the lesser of the Class A Principal Payment Amount (as
defined herein) for such Distribution Date, and the then outstanding principal
amount of the Class A Notes, to the extent Available Amounts are available
therefor, but after payment from such Available Amounts of unpaid Servicer
Advances, the Servicing Fee, interest payments on the Notes, and (except
following an Event of Default or during a Restricting Event as defined herein)
interest payments on the Prior Certificates. See "Description of the Notes--
Allocations" herein.
Principal of the Class B Notes will be payable on each Distribution Date
in an amount equal to the lesser of the Class B Principal Payment Amount (as
defined herein) for such Distribution Date, and the then outstanding principal
amount of the Class B Notes, to the extent Available Amounts are available
therefor, but after payment from such Available Amounts of unpaid Servicer
Advances, the Servicing Fee, interest payments on the Notes, interest payments
on the Prior Certificates (except following an Event of Default or Restricting
Event as defined herein), and the payment of the Class A Principal Payment
Amount. See "Description of the Notes--Allocations" herein.
Principal of the Class C Notes will be payable on each Distribution Date in
an amount equal to the lesser of the Class C Principal Payment Amount (as
defined herein) for such Distribution Date, and the then outstanding principal
amount of the Class C Notes, to the extent Available Amounts are available
therefor, but after payment from such Available Amounts of unpaid Servicer
Advances, the Servicing Fee, interest payments on the Notes, interest payments
on the Prior Certificates (except following an Event of Default or Restricting
Event as defined herein), and the payment of the Class B Principal Payment
Amount. See "Description of the Notes--Allocations" herein.
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The Notes will mature and be due and payable on their respective Maturity
Dates. Prior thereto, amounts to be applied in reduction of the outstanding
Principal Amount of any Note, including the payment of the Class A Principal
Payment Amount, Class B Principal Payment Amount or Class C Principal Payment
Amount payable on any Distribution Date, will not be due and payable, although
the failure of the Trust Depositor or Servicer to remit any Available Amounts
(including Available Amounts to be used to make a Class A Principal Payment
Amount, a Class B Principal Payment Amount or a Class C Principal Payment
Amount) will, after the applicable grace period, constitute an Event of Default
under the Indenture. See "Description of the Notes--Events of Default".
As used herein, the following terms shall have the following meanings:
The "ADCB" or "Aggregate Discounted Contract Balance" with respect to
the Contracts means the sum of the Discounted Contract Balances of each
Contract included in the group of Contracts for which an ADCB determination
is being made.
"Aggregate Principal Amount" means, for any group of Notes at any date
of determination, the sum of the Principal Amounts of such Notes at such
date.
"Applicable Class Percentage" means, for any Contract and for any
outstanding Class of Notes or Certificates, the ratio that the Initial
Principal Amount of such Class of Notes or Certificates bears to the sum of
the Initial Principal Amount of the outstanding Notes and Certificates of
all Classes; provided, however, that following the occurrence of and during
the continuance of any Restricting Event or Event of Default, the
Applicable Class Percentage (i) for the Class A Notes shall be 100% until
all outstanding principal of the Class A Notes has been paid in full, and
thereafter shall be 0%; (ii) for the Class B Notes shall be 0% until all
outstanding principal of the Class A Notes has been paid in full, shall
then be 100% until all outstanding principal of the Class B Notes has been
paid in full, and thereafter shall be 0%; (iii) for the Class C Notes shall
be 0% until all outstanding principal of the Class A Notes and Class B
Notes has been paid in full, shall then be 100% until all outstanding
principal of the Class C Notes has been paid in full, and thereafter shall
be 0%; (iv) for the Prior Certificates shall be 0% until all outstanding
principal of the Class A Notes, Class B Notes and Class C Notes has been
paid in full, shall then be 100% until all outstanding principal of the
Prior Certificates has been paid in full, and thereafter shall be 0%; and
(v) for the Subordinate Certificates shall be 0% until all outstanding
principal of the Class A Notes, Class B Notes, Class C Notes and Prior
Certificates has been paid in full, shall then be 100% until all
outstanding principal of the Subordinate Certificates has been paid in
full, and thereafter shall be 0%.
"Class A Principal Payment Amount" for the Class A Notes means, for
any Distribution Date, the sum of (i) the product of (A) the Applicable
Class Percentage for such Notes, multiplied by (B) the excess of (1) the
ADCB as of the last day of the second Collection Period preceding such
Distribution Date (or, in the case of Contracts that were first added to
the Contract Pool during the Collection Period immediately preceding such
Distribution Date, as of the Cutoff Date for such Contracts) over (2) the
ADCB as of the last day of the Collection Period immediately preceding
such Distribution Date (the product described in clause (i) being the
"Expected Class A Payment"), and (ii) the aggregate amount of Expected
Class A Payments which were not paid on each preceding Distribution Date.
"Class B Principal Payment Amount" for the Class B Notes means, for
any Distribution Date, the sum of (i) the product of (A) the Applicable
Class Percentage for such Notes, multiplied by (B) the excess of (1) the
ADCB as of the last day of the second Collection Period preceding such
Distribution Date (or, in the case of Contracts that were first added to
the Contract Pool during the Collection Period immediately preceding such
Distribution Date, as of the Cutoff Date for such Contracts) over (2) the
ADCB as of the last day of the Collection Period immediately preceding
such Distribution Date (the product described in clause (i) being the
"Expected Class B Payment"), and (ii) the aggregate amount of Expected
Class B Payments which were not paid on each preceding Distribution Date.
"Class C Principal Payment Amount" for the Class C Notes means, for
any Distribution Date, the sum of (i) the product of (A) the Applicable
Class Percentage for such Notes, multiplied by (B) the excess of (1) the
ADCB as of the last day of the second Collection Period preceding such
Distribution Date (or, in the case of Contracts that were first added to
the Contract Pool during the Collection Period immediately preceding such
Distribution Date, as of the Cutoff Date for such Contracts) over (2) the
ADCB as of the last day of the Collection Period immediately preceding
such Distribution Date (the product described in clause (i) being the
"Expected Class C Payment"), and (ii) the aggregate amount of Expected
Class C Payments which were not paid on each preceding Distribution Date.
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"Class D-1 Principal Payment Amount" for the Class D-1 Certificates
(i.e., the Prior Certificates) means, for any Distribution Date, the sum of
(i) the product of (A) the Applicable Class Percentage for such
Certificates, multiplied by (B) the excess of (1) the ADCB as of the last
day of the second Collection Period preceding such Distribution Date (or,
in the case of Contracts that were first added to the Contract Pool during
the Collection Period immediately preceding such Distribution Date, as of
the Cutoff Date for such Contracts) over (2) the ADCB as of the last day of
the Collection Period immediately preceding such Distribution Date (the
product described in clause (i) being the "Expected Class D-1 Payment"),
and (ii) the aggregate amount of Expected Class D-1 Payments which were not
paid on each preceding Distribution Date.
"Class D-2 Principal Payment Amount" for the Class D-2 Certificates
(i.e., the Subordinate Certificates) means, for any Distribution Date, the
sum of (i) the product of (A) the Applicable Class Percentage for such
Certificates, multiplied by (B) the excess of (1) the ADCB as of the last
day of the second Collection Period preceding such Distribution Date (or,
in the case of Contracts that were first added to the Contract Pool during
the Collection Period immediately preceding such Distribution Date, as of
the Cutoff Date for such Contracts) over (2) the ADCB as of the last day of
the Collection Period immediately preceding such Distribution Date (the
product described in clause (i) being the "Expected Class D-2 Payment"),
and (ii) the aggregate amount of Expected Class D-2 Payments which were not
paid on each preceding Distribution Date.
"Discounted Contract Balance" means with respect to any Contract, (A)
as of the related Cutoff Date, the present value of all of the remaining
Scheduled Payments becoming due under such Contract after the applicable
Cutoff Date discounted monthly at the Discount Rate and (B) as of any other
date of determination, the sum of (1) the present value of all of the
remaining Scheduled Payments becoming due under such Contract after such
date of determination discounted monthly at the Discount Rate, and (2) the
aggregate amount of all Scheduled Payments due and payable under such
Contract after the applicable Cutoff Date and prior to such date of
determination (other than Scheduled Payments related to Contracts that have
become Defaulted Contracts or Prepaid Contracts, as defined herein, and
which have not been replaced with an Additional Contract or Substitute
Contract) that have not then been received by the Servicer.
The Discounted Contract Balance for each Contract shall be calculated
assuming:
(a) All payments due in any Collection Period are due on the last day
of the Collection Period;
(b) Payments are discounted on a monthly basis using a 30 day month
and a 360 day year; and
(c) All security deposits and drawings under letters of credit, if
any, issued in support of a Contract are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
"Discount Rate" means, [_]% (which is equal to the sum of (i) the
weighted average of the Class A Interest Rate, Class B Interest Rate, Class
C Interest Rate, Class D-1 Interest Rate and Class D-2 Interest Rate, and
(ii) the Servicing Fee Percentage).
"Principal Amount" of a Class of Notes or Certificates means the
aggregate initial principal amount thereof reduced by (i) the aggregate
amount of any Distributions applied in reduction of such principal amount
and (ii) the aggregate amount of any Distributions then on deposit in the
note or certificate payment account, if any, for such Class of Notes or
Certificates established in accordance with the Indenture or the Sale and
Servicing Agreement and to be applied in reduction of such principal amount
in accordance therewith.
"Scheduled Payments" means, with respect to any Contract, the monthly
or quarterly or semi-annual or annual rent or financing (whether principal
or principal and interest) payment scheduled to be made by the related
Obligor under the terms of such Contract after the related Cutoff Date (it
being understood that Scheduled Payments do not include any Excluded
Amounts).
Allocations
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Prior to an Event of Default or Restricting Event. On the third Business
Day prior to each Distribution Date (each, a "Determination Date"), prior to the
occurrence of an Event of Default or the occurrence and continuance of a
Restricting Event, the Servicer shall instruct the Indenture Trustee to
withdraw, and on the succeeding Distribution Date the Indenture Trustee acting
in accordance with such instructions shall withdraw, the amounts required to be
withdrawn from the Collection Account in order to make the following payments or
allocations from the Available Amounts for the related Distribution Date (in
each case, such payment or transfer to be made only to the extent funds remain
available therefor after all prior payments and transfers for such Distribution
Date have been made), in the following order of priority:
(A) pay to the Servicer, the amount of any unreimbursed Servicer
Advances;
(B) pay to the Servicer, the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the
Servicing Fee that were due in respect of prior monthly periods
that remain unpaid;
(C) pay to the Indenture Trustee, on behalf of the Class A Notes, an
amount equal to interest accrued in respect of such Class A Notes
for the Accrual Period immediately preceding such Distribution
Date, together with any such amounts that accrued in respect of
prior Accrual Periods for which no allocation was previously
made;
(D) pay to the Indenture Trustee, on behalf of the Class B Notes, an
amount equal to the interest accrued thereon for the Accrual
Period immediately preceding such Distribution Date, together
with any such amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made;
(E) pay to the Indenture Trustee, on behalf of the Class C Notes, an
amount equal to interest accrued thereon for the Accrual Period
immediately preceding such Distribution Date, together with any
such amounts that accrued in respect of prior Accrual Periods for
which no allocation was previously made;
(F) pay to the holders of the Prior Certificates an amount equal to
interest accrued in respect of the Prior Certificates for the
Accrual Period immediately preceding such Distribution Date,
together with any such amounts that accrued in respect of prior
Accrual Periods for which no allocation was previously made;
provided, that if the Available Amounts remaining to be allocated
pursuant to this clause is less than the full amount required to
be so paid, such remaining Available Amounts shall be allocated
to each Prior Certificate pro rata based on the outstanding
principal amount thereof;
(G) pay to the Indenture Trustee, on behalf of the Class A Notes, the
lesser of (i) the Class A Principal Payment Amount for such
Distribution Date, and (ii) the remaining outstanding Principal
Amount of the Class A Notes; provided (i) that if the Available
Amounts remaining to be allocated pursuant to this clause is less
than the full amount required to be so paid, such remaining
Available Amounts shall be allocated to each Class A Note pro
rata based on the outstanding principal amount thereof, and (ii)
if the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Class A Note principal in
full, then such excess shall be applied in repayment of principal
on the Class B Notes;
(H) pay to the Indenture Trustee, on behalf of the holders of the
Class B Notes, the lesser of (i) the Class B Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class B Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class B Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class B
Note principal in full, then such excess shall be applied in
repayment of principal on the Class C Notes;
(I) pay to the Indenture Trustee, on behalf of the holders of the
Class C Notes, the lesser of (i) the Class C Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class C Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full
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amount required to be so paid, such remaining Available Amounts
shall be allocated to each Class C Note pro rata based on the
outstanding principal amount thereof, and (ii) if the amount to
be allocated pursuant to this clause exceeds the amount needed to
repay outstanding Class C Note principal in full, then such
excess shall be applied in repayment of principal on the Prior
Certificates;
(J) pay to the holders of the Subordinate Certificates an amount
equal to interest accrued in respect of the Subordinate
Certificates for the Accrual Period immediately preceding such
Distribution Date, together with any such amounts that accrued in
respect of prior Accrual Periods for which no allocation was
previously made; provided, that if the Available Amounts
remaining to be allocated pursuant to this clause is less than
the full amount required to be so paid, such remaining Available
Amounts shall be allocated to each Subordinate Certificate pro
rata based on the outstanding principal amount thereof;
(K) pay to the holders of the Prior Certificates the lesser of (i)
the Class D-1 Principal Payment Amount for such Distribution Date
and (ii) the remaining outstanding Principal Amount of the Class
D-1 Certificates; provided (i) that if the Available Amounts
remaining to be allocated pursuant to this clause is less than
the full amount required to be so paid, such remaining Available
Amounts shall be allocated to each Prior Certificate pro rata
based on the outstanding principal amount thereof, and (ii) if
the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Prior Certificate principal in
full, then such excess shall be applied in repayment of principal
on the Subordinate Certificates; and
(L) pay the remaining Available Amounts to the holder of the
Subordinate Certificates.
As used herein,"Available Amounts" means as of any Distribution Date, the
sum of (i) all amounts on deposit in the Collection Account as of the
immediately preceding Determination Date on account of Scheduled Payments
inclusive of such payments received through Vendor recourse or support and
agreements, but excluding the Excluded Amounts due on or before and Prepayments
received on or before the last day of the Collection Period immediately
preceding such Distribution Date (other than Excluded Amounts); (ii) Recoveries
on account of previously Defaulted Contracts received as of the immediately
preceding Determination Date; (iii) such amounts as from time to time may be
held in the Collection Account, together with earnings on funds therein, (iv)
the rights of the Trust Depositor under the Transfer and Sale Agreement, (v) any
amounts received with respect to the Residuals, (vi) any late charges relating
to a Contract provided such late charges were included in the Contract's terms
as of the Cutoff Date ("Late Charges") and (vii) proceeds of any of the
foregoing.
Pursuant to the Indenture, the Indenture Trustee will distribute amounts
received from the Indenture Trustee in accordance with the foregoing to the
Class A Noteholders, Class B Noteholders and Class C Noteholders represented
thereby pro rata in accordance with the respective amounts owed thereto.
Following an Event of Default or Restricting Event. On each Determination
Date after the occurrence of an Event of Default, or after the occurrence of,
and during the continuance of, a Restricting Event, the Servicer shall instruct
the Indenture Trustee to withdraw, and on the succeeding Distribution Date the
Indenture Trustee acting in accordance with such instructions shall withdraw,
the amounts required to be withdrawn from the Collection Account in order to
make the following payments or allocations from the Available Amounts for the
related Distribution Date (in each case, such payment or transfer to be made
only to the extent funds remain available therefor after all prior payments and
transfers for such Distribution Date have been made), in the following order of
priority:
(A) pay to the Indenture Trustee, the amount of any unpaid fees and
expenses;
(B) pay to the Servicer, the amount of any unreimbursed Servicer
Advance;
(C) pay to the Servicer, the monthly Servicing Fee for the preceding
monthly period together with any amounts in respect of the
Servicing Fee that were due in respect of prior monthly periods
that remain unpaid;
(D) pay to the Indenture Trustee, on behalf of the Class A Notes, an
amount equal to interest accrued in respect of such Class A Notes
for the Accrual Period immediately preceding such Distribution
Date, together with any such amounts that accrued in respect of
prior Accrual Periods for which no allocation was previously
made; provided,
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that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class A Note pro rata based on the outstanding principal amount
thereof;
(E) pay to the Indenture Trustee, on behalf of the Class B Notes, an
amount equal to the interest accrued thereon for the Accrual
Period immediately preceding such Distribution Date, together
with any such amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made; provided,
that if the Available Amount s remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class B Note pro rata based on the outstanding principal amount
thereof;
(F) pay to the Indenture Trustee, on behalf of the Class C Notes, an
amount equal to interest accrued in respect of the Class C Notes
for the Accrual Period immediately preceding such Distribution
Date, together with any such amounts that accrued in respect of
prior Accrual Periods for which no allocation was previously
made; provided, that if the Available Amounts remaining to be
allocated pursuant to this clause is less than the full amount
required to be so paid, such remaining Available Amounts shall be
allocated to each Class C Note pro rata based on the outstanding
principal amount thereof;
(G) pay to the Indenture Trustee, on behalf of the Class A Notes, the
lesser of (i) the Class A Principal Payment Amount for such
Distribution Date, and (ii) the remaining outstanding Principal
Amount of the Class A Notes; provided (i) that if the Available
Amounts remaining to be allocated pursuant to this clause is less
than the full amount required to be so allocated, such remaining
Available Amounts shall be allocated to each Class A Note pro
rata based on the outstanding principal amount thereof, and (ii)
if the amount to be allocated pursuant to this clause exceeds the
amount needed to repay outstanding Class A Note principal in
full, then such excess shall be applied in repayment of principal
on the Class B Notes;
(H) pay to the Indenture Trustee, on behalf of the holders of the
Class B Notes, the lesser of (i) the Class B Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class B Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class B Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class B
Note principal in full, then such excess shall be applied in
repayment of principal on the Class C Notes;
(I) pay to the Indenture Trustee, on behalf of the holders of the
Class C Notes, the lesser of (i) the Class C Principal Payment
Amount for such Distribution Date, and (ii) the remaining
outstanding Principal Amount of the Class C Notes; provided (i)
that if the Available Amounts remaining to be allocated pursuant
to this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated to each
Class C Note pro rata based on the outstanding principal amount
thereof, and (ii) if the amount to be allocated pursuant to this
clause exceeds the amount needed to repay outstanding Class C
Note principal in full, then such excess shall be applied in
repayment of principal on the Prior Certificates;
(J) pay to the holders of the Prior Certificates an amount equal to
interest accrued in respect of the Prior Certificates for the
Accrual Period immediately preceding such Distribution Date,
together with any such amounts that accrued in respect of prior
Accrual Periods for which no allocation was previously made;
provided, that if the Available Amounts remaining to be allocated
pursuant to this clause is less than the full amount required to
be so paid, such remaining Available Amounts shall be allocated
to each Prior Certificate pro rata based on the outstanding
principal amount thereof;
(K) pay to the holders of the Subordinate Certificates an amount
equal to interest accrued in respect of the Subordinate
Certificates for the Accrual Period immediately preceding
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such Distribution Date, together with any such amounts that
accrued in respect of prior Accrual Periods for which no
allocation was previously made; provided, that if the
Available Amounts remaining to be allocated pursuant to
this clause is less than the full amount required to be so
paid, such remaining Available Amounts shall be allocated
to each Subordinate Certificate pro rata based on the
outstanding principal amount thereof;
(L) pay to the holders of the Prior Certificates the lesser of
(i) the Class D-1 Principal Payment Amount for such
Distribution Date and (ii) the remaining outstanding
Principal Amount of the Prior Certificates; provided (i)
that if the Available Amounts remaining to be allocated
pursuant to this clause is less than the full amount
required to be so paid, such remaining Available Amounts
shall be allocated to each Prior Certificate pro rata based
on the outstanding principal amount thereof, and (ii) if
the amount to be allocated pursuant to this clause exceeds
the amount needed to repay outstanding Prior Certificate
principal in full, then such excess shall be applied in
repayment of principal on the Subordinate Certificates; and
(M) pay the remaining Available Amounts to the holder of the
Subordinate Certificates.
Pursuant to the Indenture, the Indenture Trustee will distribute amounts
received from the Indenture Trustee in accordance with the foregoing to the
Noteholders represented thereby pro rata in accordance with the respective
amounts owed thereto.
Defaulted Contracts
A Contract will automatically be deemed to be in default (a "Defaulted
Contract") if (i) it is more than 120 days past due (or, with respect to
Contracts for which there exists sufficient available payment recourse to a
Vendor to cover the amounts in default, and which recourse was not available or
had not yet been paid by the Vendor prior to the end of such 120 day period, at
such time thereafter as the Vendor shall have failed to pay such defaulted
amount in accordance with the provisions of the applicable Program Agreement
providing such recourse); or (ii) if at any time the Servicer determines, in
accordance with its customary and usual practices, that such Contract is not
collectible (and taking into account any available Vendor recourse). The current
policy of the Servicer with respect to writing off Contracts is described in
[" "] above.
Upon classification as a Defaulted Contract, the Servicer shall accelerate
all payments due thereunder or take such other action as the Servicer reasonably
believes will maximize the amount of Recoveries in respect thereof and shall
otherwise follow its customary and usual collection procedures, which may
include the repossession and sale of any related Equipment or other Applicable
Security on behalf of the Trust. Any recoveries on account of a previously
Defaulted Contract (including proceeds of repossessed Equipment or other
Applicable Security or other property, Insurance Proceeds, amounts representing
late fees and penalties and amounts subsequently received pursuant to a Program
Agreement with a Vendor, but net of amounts representing costs and expenses of
liquidation incurred by the Servicer; such recoveries net of such amounts,
"Recoveries") shall be deemed to be Available Amounts.
Collection Account
The Servicer, for the benefit of the Noteholders, shall cause to be
established and maintained in the name of the Indenture Trustee, with an office
or branch of a depository institution or trust company (which may include the
Indenture Trustee) organized under the laws of the United States of America or
any one of the states thereof and located in the state designated by the
Servicer, a non-interest bearing segregated corporate trust account (the
"Collection Account") bearing a designation clearly indicating that the funds
deposited therein are held in trust for the benefit of the Noteholders;
provided, however, that at all times such depository institution or trust
company shall be (a) the corporate trust department of the Indenture Trustee or,
(b) a depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), (i)(A) which has either (1) a long-term
unsecured debt rating acceptable to the Rating Agencies or (2) a short-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies, (B) the parent corporation of which has either (1) a long-term
unsecured debt rating acceptable to the Rating Agencies or (2) a short-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies or (C) is otherwise acceptable to the Rating Agencies and (ii) whose
deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC";
any such depository institution or trust company, a "Qualified Institution").
Funds in the Collection Account generally will be invested in (i) obligations
fully guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies having commercial paper with the highest rating from each Rating
Agency, (iii) commercial paper (or other short term obligations) having, at the
time of the Trust's investment therein, the highest
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rating from each Rating Agency, (iv) demand deposits, time deposits and
certificates of deposit which are fully insured by the FDIC, (v) notes or
bankers' acceptances issued by any depository institution or trust company
described in (ii) above, (vi) money market funds which have the highest rating
from, or have otherwise been approved in writing by, each Rating Agency, (vii)
time deposits with an entity, the commercial paper of which has the highest
rating from the Rating Agency, (viii) eligible repurchase agreements, and (ix)
any other investments approved in writing by the Rating Agency (collectively,
"Eligible Investments"). Such funds may be invested in debt obligations of
Heller Financial or its affiliates so long as such obligations qualify as
Eligible Investments. Any earnings (net of losses and investment expenses) on
funds in the Collection Account will be held therein and be treated as Available
Amounts. The Servicer will have the revocable power to instruct the Indenture
Trustee to make withdrawals and payments from the Collection Account for the
purpose of carrying out its duties under the Sale and Servicing Agreement.
Replacement Accounts
If any institution with which any of the accounts established pursuant to
the Sale and Servicing Agreement or the Indenture are established ceases to be a
Qualified Institution, the Servicer or the Owner Trustee (as the case may be)
shall within ten Business Days establish a replacement account at a Qualified
Institution after notice thereof.
Events of Default
Allocations of Available Amounts will be made as described above under
"--Allocations; Prior to an Event of Default or Restricting Event" unless and
until an Event of Default or Restricting Event has occurred, in which case
allocations of Available Amounts will be made as described above under "--
Allocations; Following an Event of Default or Restricting Event". An "Event of
Default" refers to any of the following events:
(a) failure to pay on each Distribution Date the full
amount of accrued interest on any Note;
(b) failure to pay the then outstanding principal amount of
any Note, if any, on its related Maturity Date;
(c) (i) failure on the part of any Seller to make any payment
or deposit required under the Sale and Servicing Agreement
or Transfer and Sale Agreement within three Business Days
after the date the payment or deposit is required to be
made, or (ii) failure on the part of any Seller, the Trust
Depositor, the Trust or the Owner Trustee to observe or
perform any other covenants or agreements of such entity
set forth in the Transfer and Sale Agreement, Sale and
Servicing Agreement or the Indenture, which failure has a
material adverse effect on the Noteholders and which
continues unremedied for a period of 60 days after written
notice; provided, that no such 60-day cure period shall
apply in the case of a failure by the Sellers to perform
their joint and several agreement to accept reassignment
of Ineligible Contracts, and further provided, that only a
five day cure period shall apply in the case of a failure
by any Seller, the Trustee or the Owner Trustee to observe
their respective covenants not to grant a security
interest in or otherwise intentionally create a lien on
the Contracts;
(d) any representation or warranty made by any Seller, the
Trust Depositor, the Trustee or the Owner Trustee in the
Sale and Servicing Agreement or the Indenture or any
information required to be given by any Seller or the
Trust Depositor to the Indenture Trustee to identify the
Contracts proves to have been incorrect in any material
respect when made and continues to be incorrect in any
material respect for a period of 60 days after written
notice and as a result of which the interests of the
Noteholders are materially and adversely affected;
provided, however, that an Event of Default shall not be
deemed to occur thereunder if the Seller has repurchased
the related Contracts through the Trust Depositor during
such period in accordance with the provisions of the Sale
and Servicing Agreement and the Transfer and Sale
Agreement;
(e) the occurrence of an Insolvency Event relating to any
Seller, the Trust Depositor, the Trust or the Servicer;
or
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(f) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as
amended.
In the case of any event described in clause (a), (b), (c), (d), (e) or (f)
above, an Event of Default with respect to the Notes will be deemed to have
occurred provided such Event of Default may be waived if the Required Holders
provide written notice to the Trust Depositor and the Servicer of such waiver.
In the event the Indenture Trustee has actual knowledge of an Event of Default,
it will be required to notify, among others, the Trust Depositor, each Seller,
the Servicer and the Owner Trustee.
If an Insolvency Event relating to the Trust Depositor occurs, pursuant to
the Sale and Servicing Agreement, on the day of such Insolvency Event, the Trust
Depositor will promptly give notice to the Indenture Trustee of the Insolvency
Event, and the Indenture Trustee will, unless notified to the contrary by the
Controlling Party, promptly act to sell, dispose of or otherwise liquidate the
Contracts in a commercially reasonable manner and on commercially reasonable
terms. The proceeds from any such sale, disposition or liquidation of Contracts
will be deposited in the Collection Account and allocated as described in the
Sale and Servicing Agreement and herein. If the proceeds of any collections on
Contracts in the Collection Account allocated to Noteholders of any Class is not
sufficient to pay the Principal Amount of the Notes of such Class in full, such
Noteholders will incur a loss.
As used herein, "Required Holders" means (i) prior to the payment in full
of the Class A Notes outstanding, Class A Noteholders holding Class A Notes
evidencing more than 66 2/3% of the Aggregate Principal Amount of the Class A
Notes, or the Indenture Trustee on behalf of such Noteholders, and (ii) from and
after the payment in full of the Class A Notes outstanding, Class B Noteholders
holding Class B Notes evidencing more than 66 2/3% of the Aggregate Principal
Amount of the Class B Notes outstanding, and (iii) from and after the payment in
full of the Class B Notes outstanding, Class C Noteholders holding Class C Notes
evidencing more than 66 2/3% of the Aggregate Principal Amount of the Class C
Notes outstanding.
Restricting Events
Prior to the occurrence of a Restricting Event, allocations of Available
Amounts will be made as described above under "--Allocations; Prior to an Event
of Default or Restricting Event" unless a Restricting Event has occurred and is
continuing in which case allocations will be made as described above under
"--Allocations; Following an Event of Default or Restricting Event". A
"Restricting Event" refers to any of the following events:
(a) As of any Calculation Date, the Cumulative Net Loss
Ratio (as defined below) exceeds [ ]%; or
(b) A Servicer Default (as defined herein) or an Event
of Default has occurred and is continuing.
"Cumulative Net Loss Ratio" means, for any date of determination, the
percentage equivalent of a fraction, the numerator of which is the excess, if
any, of (i) the cumulative ADCB of all Contracts which became Defaulted
Contracts during each full Collection Period occurring since the Closing Date,
over (ii) the cumulative aggregate Recoveries received during each full
Collection Period occurring since the Closing Date; and the denominator of which
is the ADCB of the Transferred Contracts as of the Cutoff Date.
Servicing Compensation and Payment of Expenses
The Servicer's compensation with respect to its servicing activities and
reimbursement for its expenses for any Collection Period will be a servicing fee
(the "Servicing Fee") calculated monthly, and payable on each Distribution Date,
in an amount equal to the product of (i) one-twelfth, (ii) [ ]% (such
percentage, the "Servicing Fee Percentage") and (iii) the ADCB of the Contract
Pool as of the beginning of the related Collection Period. The Servicing Fee
will be funded from Available Amounts and will be paid on the Distribution Date
with respect to each Collection Period from the Collection Account.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Contracts including, without
limitation, expenses related to the enforcement of the Contracts, payment of the
fees and disbursements of the Indenture Trustee and Owner Trustee and
independent accountants, casualty insurance on Equipment (to the extent the
Contracts provide for the Seller to pay such insurance) and other fees which are
not expressly stated in the Sale and Servicing Agreement to be payable by the
Trust, the Noteholders or the Trust Depositor (other than federal, state, local
and foreign income, franchise or other taxes based on income, if any, or any
interest or penalties with respect thereto, imposed upon the Trust). In the
event that Heller Financial is acting as Servicer and fails to pay the fees and
disbursements of the Indenture Trustee or Owner Trustee (the "Trustees"), such
Trustee will be
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entitled to receive the portion of the Servicing Fee that is equal to such
unpaid amounts. In no event will the Noteholders be liable to the Trustees for
the Servicer's failure to pay such amounts, and any such amounts so paid to the
Trustees will be treated as paid to the Servicer for all other purposes of the
Sale and Servicing Agreement.
Record Date
Payments on the Notes will be made as described herein to the Noteholders
in whose names the Notes were registered (expected to be Cede, as nominee of
DTC) at the close of business on the Record Date. However, the final payment on
the Notes offered hereby will be made only upon presentation and surrender of
such Notes. All payments with respect to the principal of and interest on the
Notes (each, a "Distribution") will be made to DTC in immediately available
funds. See "Description of the Notes--Book-Entry Registration".
Optional Termination
On any Distribution Date occurring on or after the date on which the ADCB
of the Contract Pool is less than 10% of the initial ADCB of the Contract Pool
as of the Cutoff Date (the "Cleanup Call Condition"), the Trust Depositor will
have the option to cause the Trust to purchase (without penalty) all, but not
less than all, of the remaining outstanding Notes and Certificates. The
redemption price will be equal to the sum of the outstanding principal amount of
the Notes and Certificates, together with accrued interest thereon through the
date of redemption, and shall be payable to the holders of the Notes and
Certificates on such Distribution Date from the proceeds of the Trust's sale to
the Trust Depositor (and the Trust Depositor's concurrent resale to the
applicable Sellers), for a repurchase price equal to such redemption price, of
the remaining Contracts Pool and other Trust Assets held by the Trust. Following
any redemption, the Noteholders will have no further rights with respect to the
Trust Assets.
Reports
No later than the third Business Day prior to each Distribution Date, the
Servicer will forward to the Indenture Trustee and each Rating Agency a
statement (the "Monthly Report") prepared by the Servicer setting forth certain
information with respect to the Trust and the Notes and Certificates, including:
(i) the ADCB (A) as of the end of the related Collection Period and (B) as of
the end of the second Collection Period preceding such Distribution Date (or, in
the case of Contracts that were first added to the Contract Pool during the
related Collection Period, as of the Cutoff Date for such Contracts); (ii) the
Class A Principal Payment Amount, Class B Principal Payment Amount, Class C
Principal Payment Amount, Class D-1 Principal Payment Amount, and Class D-2
Principal Payment Amount (including the calculations utilized in the
determination thereof); (iii) the ADCB of Contracts held by the Trust which were
30, 60 and 90 days or more delinquent as of the end of such Collection Period;
(iv) the Discounted Contract Balance of each Contract in the Contract Pool that
became a Defaulted Contract during such Collection Period and cumulatively for
each preceding Collection Periods; (v) the monthly Servicing Fee for such
Collection Period; and (vi) the Available Amounts with respect to the related
Collection Period (including the calculation utilized in the determination
thereof).
With respect to each Distribution Date, the Monthly Report also will
include the following information with respect to the Notes: (i) the total
amount distributed; (ii) the amount allocable to principal on the Notes and each
Class thereof; (iii) the amount allocable to interest on the Notes and each
Class thereof; and (iv) the amount, if any, by which the unpaid principal amount
of the Notes of each Class exceeds the Principal Amount of such Class as of the
Record Date with respect to such Distribution Date. On each Distribution Date,
the Indenture Trustee (or an agent on its behalf), will forward to each
Noteholder of record a copy of the Monthly Report.
On or before January 31 of each calendar year, commencing January 31, 1998,
the Indenture Trustee (or an agent on its behalf) will furnish (or cause to be
furnished) to each person who at any time during the preceding calendar year was
a Noteholder of record, a statement containing the information required to be
provided by an issuer of indebtedness under the Code for such preceding calendar
year or the applicable portion thereof during which such person was a
Noteholder, together with such other customary information as is necessary to
enable the Noteholders to prepare their tax returns. See "Certain Federal Income
Tax Matters".
List of Noteholders
At such time, if any, as Definitive Notes have been issued, upon written
request of any Noteholder or group of Noteholders of record holding Notes
evidencing not less than 10% of the aggregate unpaid principal amount of the
Notes, the Indenture Trustee will afford such Noteholders access during normal
business hours to the current list of Noteholders for purpose of communicating
with other Noteholders with respect to their rights under the Indenture, the
Sale and Servicing Agreement or the Notes. While the Notes are held in book-
entry form, holders of beneficial interests in the Notes will not have access to
a list of other holders of beneficial interests in the Notes, which may impede
the ability of such holders of beneficial interests to communicate with each
other. See "--Book-Entry Registration" below.
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Book-Entry Registration
Noteholders may only 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, the
global Class B Note or Notes, and the global Class C 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 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
Underwriter, 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 directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected 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 Notes, see "Certain Federal
Income Tax Considerations."
Noteholders that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
on the Notes from the Indenture Trustee through DTC and its Participants. Under
a book-entry format, 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 Notes.
It is anticipated that the only "Class A Noteholder" , "Class B Noteholder" and
"Class C Noteholder" will be Cede, as nominee of DTC, and that holders of
beneficial interests in the Class A Notes, Class B Notes or Class C Notes,
respectively, under the Indenture will only be permitted to exercise the rights
of Class A Noteholders, Class B Noteholders or Class C 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 Notes and is required to receive and
transmit distributions of principal of and interest on the Notes. Participants
and Indirect Participants with
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which holders of beneficial interests in the 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 Notes to pledge Notes to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
Notes, may be limited due to the lack of a Definitive Note for such Notes.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Class A Noteholder, Class B Noteholder or Class C Noteholder under
the Indenture only at the direction of one or more Participants to whose account
with DTC the Class A Notes, Class B Notes or Class C Notes are credited.
Additionally, DTC has advised the Issuer that it may take actions with respect
to percentage interests in any particular Class of the Notes represented by
holders of beneficial interests evidencing that percentage, which actions may
conflict with other of its actions with respect to other percentage interests
therein.
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 Underwriter. 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 Underwriter.
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 Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See "Certain
Federal Income Tax Considerations." Cedel or the Euroclear Operator, as the case
may be, will take any other action permitted to be taken by an 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.
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Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of 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.
Except as required by law, none of the Servicer, any Seller, the Owner
Trustee, the Trust Depositor or the Indenture Trustee will have any liability
for any aspect of the records relating to, actions taken or implemented by, or
payments made on account of, beneficial ownership interests in the Notes held
through DTC, or for maintaining, supervising or reviewing any records or actions
relating to such beneficial ownership interests.
Definitive Notes
The 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 Trust advises the Indenture Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Depository with respect to such Notes, and the Indenture 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.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee is required to notify all beneficial
owners for each Class of Notes held 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 Indenture
Trustee will issue such Definitive Notes, and thereafter the Indenture Trustee
will recognize the holders of such Definitive Notes as Noteholders under the
Indenture (the "Holders"). The Indenture Trustee will also notify the Holders of
any adjustment to the Record Date with respect to the Notes necessary to enable
the Indenture Trustee to make distributions to Holders of the Definitive Notes
for such Class of record as of each Distribution Date.
Additionally, upon the occurrence of any such event described above,
distribution of principal of and interest on the Notes will be made by the
Indenture 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 Indenture Trustee or its agent in New York, New York, which the
Indenture 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 Indenture Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
THE CERTIFICATES
On the Closing Date, the Trust will also issue Class D-1 Certificates with
an initial certificate balance of [$ ] (the "Class D-1 Certificates" or the
"Prior Certificates") and an interest rate of [ ]% (the "Class D-1 Interest
Rate"), as well as Class D-2 Certificates ("Class D-2 Certificates" or the
"Subordinate Certificates"; and, together with the Prior Certificates, the
"Certificates") with an initial certificate balance of [$ ] and an interest rate
of [ ]% (the "Class D-2 Interest Rate"). The Certificates will represent
fractional undivided beneficial equity interests in the Trust, and will be
issued in each case pursuant to the Trust Agreement.
The Certificates are not being offered and sold hereunder. The Prior
Certificates are expected to be sold concurrently with the Notes in a private
placement. The Trust Depositor is expected initially to retain the Subordinate
Certificate, although the Subordinate Certificate could be transferred at some
later date in a transaction separate from this offering provided the Owner
Trustee and Indenture Trustee receive an opinion of Independent Counsel that
such transfer will not cause the Trust to become a taxable entity or otherwise
adversely affect the Noteholders or Certificateholders. Distributions with
respect to the Certificates will be subordinated to the rights of the
Noteholders to receive distributions with respect to the Notes to the extent
described herein. See "Description of the Notes--Allocations" herein.
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THE TRANSFER AND SALE AGREEMENT AND
SALE AND SERVICING AGREEMENT GENERALLY
The following is a summary of the material terms of the Transfer and Sale
Agreement and the Sale and Servicing Agreement, the forms of which were filed as
exhibits to the Registration Statement of which this Prospectus is a part, and
this summary is qualified in its entirety by reference to the Transfer and Sale
Agreement and Sale and Servicing Agreement, respectively.
Termination of Trust
Unless the Trust Depositor instructs the Owner Trustee otherwise, the Trust
will terminate only on the earliest to occur of (i) the day following the day on
which the Aggregate Principal Amount of all Notes and Certificates is zero
(provided, that the Trust Depositor shall have delivered a written notice to the
Owner Trustee electing to terminate the Trust), (ii) December 31, 2015, or (iii)
if the Contracts are sold, disposed of or liquidated following the occurrence of
an Insolvency Event as described under "Description of the Notes--Events of
Default", immediately following such sale, disposition or liquidation (the
"Trust Termination Date"). Upon termination of the Trust, all right, title and
interest in the Trust Assets (other than amounts in accounts maintained by the
Trust for the final payment of principal and interest to Noteholders or
Certificateholders) will be conveyed and transferred to the holder of the
Subordinate Certificate and any permitted assignee.
Conveyance of Contracts
The Contracts, and interests in the Equipment and other Applicable
Security, to be sold or contributed to the Trust by the Trust Depositor will be
acquired by the Trust Depositor from the Sellers pursuant to the Transfer and
Sale Agreement dated as of [ ], 1997 among the Trust Depositor, Heller
Financial and HFLI (each as a Seller thereunder) (the "Transfer and Sale
Agreement"). A form of Transfer and Sale Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part.
Under the Transfer and Sale Agreement, each Seller will sell to the Trust
Depositor, to the extent of the Seller's interest therein, (i) the Contracts and
its interest in any related Equipment and Applicable Security as of the Cutoff
Date, and (ii) the proceeds thereof (except Excluded Amounts). Pursuant to the
Sale and Servicing Agreement, such interests in the related Contracts, the
Equipment, the Applicable Security and the proceeds thereof will then be sold by
the Trust Depositor to the Trust, and pursuant to the Indenture a lien thereon
will be granted by the Trust in favor of the Indenture Trustee, and the Trust
Depositor will also assign its rights in, to and under the Transfer and Sale
Agreement with respect to the Contracts and Equipment and Applicable Security to
the Trust and the Trust will assign such rights to the Indenture Trustee.
Pursuant to the Transfer and Sale Agreement, each Seller will sell,
transfer, assign, set over and otherwise convey to the Trust Depositor, without
recourse (except as expressly set forth in such Transfer and Sale Agreement) all
of such Seller's right, title and interest in and to (i) specified Contracts and
all monies due or to become due in payment of such Contracts on or after the
related Cutoff Date, including all Scheduled Payments thereunder due on or after
such Cutoff Date, any Prepayment Amounts, any payments in respect of a casualty
or early termination, and any Recoveries received with respect thereto but
excluding any Scheduled Payments due prior to the Cutoff Date or any Excluded
Amounts, (ii) the related Equipment and, in the case of any Vendor Obligation,
Applicable Security, including all proceeds from any sale or other disposition
of such Equipment or Applicable Security, (iii) any documents delivered to the
Trust Depositor or held by the Servicer on its behalf with respect to each such
Contract (the "Contract Files"), (iv) all payments made or to be made in the
future with respect to each such Contract and the Vendor thereunder under any
Vendor Agreements with the applicable Seller and under any other guarantee or
similar credit enhancement with respect to such Contracts, (v) all payments made
with respect to each such Contract under any insurance policy covering physical
damage to the related Equipment (the "Insurance Proceeds") and (vi) all income
and proceeds of the foregoing (the foregoing are referred to collectively as the
"Transferred Assets"). As of the Cutoff Date the Trust Depositor will transfer
and assign, among other things, the Transferred Assets to the Trust for the
benefit of the Noteholders and Certificateholders and the Trust will grant a
lien on such Transferred Assets in favor of the Indenture Trustee, pursuant to
the Sale and Servicing Agreement and the Indenture.
Heller Financial, as Servicer under the Sale and Servicing Agreement, will
retain custody of (but not title to) the Contracts, the Contract Files and any
related evidence of insurance payments, Scheduled Payments and any other similar
payments under the Contracts. Prior to the conveyance of any Contracts to the
Trust Depositor, Heller Financial caused (in the case of the Contracts sold
under the Transfer and Sale Agreement on the Closing Date) or will cause (in the
case of Additional Contracts or Substitute Contracts conveyed after the Closing
Date) its and/or HFLI's computer accounting systems to be marked to show that
the Contracts transferred thereunder have been conveyed to the Trust Depositor,
and prior to each transfer of any Trust Assets to the Trust pursuant to the Sale
and Servicing Agreement,
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Heller Financial or the Trust Depositor, as appropriate, will file UCC financing
statements reflecting (A) the conveyance of the Transferred Assets to the Trust
Depositor, (B) each sale of Trust Assets to the Trust pursuant to the Sale and
Servicing Agreement and (C) the grant of a lien thereon in favor of the
Indenture Trustee (except that financing statements will be filed with respect
to each conveyance of an interest in Equipment to the Trust Depositor by Heller
Financial and each sale of an interest in Equipment to the Trust by the Trust
Depositor, and each transfer of an interest in Equipment to the Indenture
Trustee by the Trust, in each case, only to the extent the same may be viewed as
inventory of Heller Financial (or HFLI, as applicable), the Trust Depositor and
the Trust, respectively). Each Seller and the Trust Depositor will mark its
books and records, including the appropriate computer files relating to the
Contracts, to indicate that all interests in the Contracts have been conveyed
(i) to the Trust Depositor, (ii) by the Trust Depositor to the Trust, and (iii)
by the Trust to the Indenture Trustee. See "Certain Legal Aspects of the
Contracts".
Representations and Warranties
The Seller/Servicer and HFLI have, jointly and severally, made certain
representations and warranties in the Transfer and Sale Agreement with respect
to the Contracts transferred thereunder as of the Cutoff Date, and the Sellers
will similarly make or be deemed to have made certain representations and
warranties with respect to each Additional Contract or Substitute Contract
transferred by either of them as of its related Cutoff Date, including that: (i)
the information with respect to the Contract, any Secondary Contract securing
the obligations under such Contract, and the Equipment, if any, subject to the
Contract delivered under the Transfer and Sale Agreement is true and correct in
all material respects; (ii) immediately prior to the transfer of a Contract and
any related Equipment (or security interest therein) or Applicable Security (or
security interest therein) to the Trust Depositor, such Contract was owned by
the applicable Seller free and clear of any adverse claim; (iii) the Contract
did not have a Scheduled Payment that was a delinquent payment for more than
[60] days, and the Contract is not otherwise a Defaulted Contract; (iv) no
provision of the Contract has been waived, altered or modified in any respect,
except by instruments or documents contained in the Contract File (other than
payment delinquencies permitted under clause (iii) above); (v) the Contract is a
valid and binding payment obligation of the Obligor and is enforceable in
accordance with its terms (except as may be limited by applicable insolvency,
bankruptcy, moratorium, reorganization, or other similar laws affecting
enforceability of creditors' rights generally and the availability of equitable
remedies); (vi) the Contract is not and will not be subject to rights of
rescission, setoff, counterclaim or defense and, to the Sellers' knowledge, no
such rights have been asserted or threatened with respect to the Contract; (vii)
the Contract, at the time it was made, did not violate the laws of the United
States or any state, except for any such violations which do not materially and
adversely affect the collectibility of the Contracts in the Contract Pool taken
as a whole; (viii) (x) the Contract and any related Equipment have not been
sold, transferred, assigned or pledged by the applicable Seller to any other
person (other than the sale of the Equipment to the End-User in connection with
CSAs, Secured Notes and "non-true leases" and, with respect to a Contract which
is a "true lease", any Equipment related to such true lease is free and clear of
any liens or encumbrances of any third parties (except for Permitted Liens) and
(y) [either (A)] such Contract is secured by a fully perfected Lien of the first
priority on the related Equipment or, in the case of any Vendor Obligation,
related Applicable Security [or (B) in the case of a Contract secured by Title
Registry Equipment, either (1) within 30 calendar days of the origination or
acquisition of such Contract by the Seller an application was filed (in the case
of motor vehicles) in the appropriate state office to note Heller Financial's
interest on the certificate of title for such vehicle, or (in the case of other
Title Registry Equipment) [all applicable federal registration or recording
procedures were initiated], and in any case such interest will be so noted or
recorded within 180 days of such acquisition or origination or (2) a certificate
of title or similar evidence or recordation on which the Seller's interest has
been noted has been obtained]; (ix) if the Contract constitutes either an
"instrument" or "chattel paper" for purposes of the UCC, there is not more than
one "secured party's original" counterpart of the Contract; (x) all filings
necessary to evidence the conveyance or transfer of the Contract to the Trust
Depositor have been made in all appropriate jurisdictions; (xi) the Obligor is
not to the Sellers' knowledge, subject to bankruptcy or other insolvency
proceedings; (xii) the Obligor's billing address is in the United States and the
Contract is a U.S. dollar-denominated obligation; (xiii) the Contract does not
require the prior written consent of an Obligor or contain any other restriction
on the transfer or assignment of the Contract (other than a consent or waiver of
such restriction that has been obtained prior to the date of such Contract's
conveyance to the Trust); (xiv) [either (A)] the obligations of the related
Obligor under such Contract are irrevocable and unconditional and non-cancelable
(or, if prepayable by its terms, such Contract meets the criteria described in
clause (xxiv) below) or (B) with respect to certain Leases with Lessees that are
governmental entities or municipalities, if such Lease is cancelled in
accordance with its terms, either (1) the Vendor which assigned such Lease to
the Seller is unconditionally obligated to repurchase such Lease from the Seller
for a purchase price not less than the Discounted Contract Balance of such Lease
(as of the date of purchase) plus interest thereon at the Discount Rate through
the Distribution Date following such date of repurchase or (2) pursuant to the
Transfer and Sale Agreement, the Sellers have indemnified the Trust Depositor
against such cancellation in an amount equal to the Discounted Contract Balance
of such Lease (as of the date of purchase) plus interest thereon at the Discount
Rate through the Distribution Date following such cancellation less any amounts
paid by the Vendor pursuant to clause (1); (xv) the Contract has an original
maturity of not greater than the term specified in the Sale and Servicing
Agreement; (xvi) no adverse selection procedure was used in selecting the
Contract for transfer; (xvii) the Obligor under the Contract is required to
maintain casualty insurance with respect to the related Equipment or to
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self-insure against casualty with respect to the related Equipment in accordance
with the Servicer's normal requirements; (xviii) the Contract constitutes
chattel paper, an account, an instrument or a general intangible as defined
under the UCC; (xix) no Lease is a "consumer lease" as defined in Section
2A-103(1)(e) of the UCC; (xx) each Lessee has represented to the Seller or the
Vendor that it has accepted the related Equipment and that it has had a
reasonable opportunity to inspect and test such Equipment and the Seller has not
been notified of any defects therein; (xxi) the Contract is not subject to any
guarantee by any Seller nor has the Seller established any specific credit
reserve with respect to the related Obligor; (xxii) each Lease is a "triple net
lease" under which the Obligor is responsible for the maintenance of the related
Equipment in accordance with general industry standards applicable to such item
of Equipment; (xxiii) each Vendor Obligation is secured by an Eligible Secondary
Contract having an aggregate Discounted Contract Balance for such Eligible
Secondary Contract equal to the outstanding principal amount of such Vendor
Obligation (and assuming the interest rate specified in such Vendor Obligation
is the "Discount Rate" for purposes of calculating such Discounted Contract
Balance); and (xxiv) no provision of such Contract provides for a Prepayment
Amount less than the amount calculated in accordance with the definition thereof
(unless otherwise indemnified by the Vendor or the Sellers in an amount equal to
the excess of the "Prepayment Amount" as calculated in accordance with the
definition thereof over the amount otherwise payable upon a prepayment under
such Contract).
The foregoing representations and warranties, as appropriate, will be
reaffirmed by the Sellers with respect to any Additional Contract or Substitute
Contract transferred by any Seller to the Trust Depositor. A Contract which
satisfies all of the above representations and warranties shall be termed an
"Eligible Contract" [and Contracts with respect to which the representations in
clauses (iii), (xv) and (xxiv) are not true shall also be Eligible Contracts if
the Trust Depositor shall have received confirmation from each Rating Agency
that the discrepancy will not result in a Ratings Effect]. In addition, the
Sellers will jointly and severally represent and warrant to the Trust Depositor
that the conveyance pursuant to the Transfer and Sale Agreement constitutes a
valid sale and assignment to the Trust Depositor of all right, title and
interest of the applicable Seller in the related Contracts, whether then
existing or thereafter created, and the proceeds thereof, which is effective as
of the date of conveyance of such Contract.
As used above, "Permitted Liens" shall mean (a) with respect to Contracts
in the Contract Pool: (i) liens for state, municipal or other local taxes if
such taxes shall not at the time be due and payable or if the Trust Depositor
shall currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto, (ii) liens in favor of the Trust Depositor created pursuant to the
Transfer and Sale Agreement and transferred to the Trust pursuant to the Sale
and Servicing Agreement, (iii) liens in favor of the Trust created pursuant to
the Sale and Servicing Agreement, and (iv) liens in favor of the Indenture
Trustee created pursuant to the Sale and Servicing Agreement and the Indenture;
and (b) with respect to the related Equipment: (i) materialmen's,
warehousemen's, mechanics' and other liens arising by operation of law in the
ordinary course of business for sums not due, (ii) liens for state, municipal or
other local taxes if such taxes shall not at the time be due and payable or if
the Trust Depositor shall currently be contesting the validity thereof in good
faith by appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto, (iii) liens in favor of the Trust Depositor
created pursuant to the Transfer and Sale Agreement and transferred to the Trust
pursuant to the Sale and Servicing Agreement, (iv) liens in favor of the Trust
created pursuant to the Sale and Servicing Agreement; (v) liens in favor of the
Indenture Trustee created pursuant to the Sale and Servicing Agreement and the
Indenture, (vi) other subordinated liens which are subordinated to the prior
payment of the Notes and Prior Certificates on terms described in the Sale and
Servicing Agreement and (vii) liens granted by the End-Users or Vendors which
are subordinated to the interest of the Trust in such Equipment.
In addition to the foregoing, the Sellers will jointly and severally
represent and warrant in the Transfer and Sale Agreement with respect to each
Secondary Contract securing a Vendor Obligation transferred by either Seller
under the Transfer and Sale Agreement as of the related Cutoff Date (unless
otherwise indicated), among other things, (i) that each such Secondary Contract
satisfies the representations set forth in the second preceding paragraph (other
than the representations set forth in clauses (ii), (viii) (with respect to
ownership by the Seller of the Contract) and (xxiii), and except that the term
"Obligor" shall be deemed to be "End-User" in all such representations), (ii)
that the Seller holds a duly perfected lien of the first priority on such
Secondary Contract and (iii) that the transfer of the Seller's security interest
in such Secondary Contract and the proceeds thereof to the Trust Depositor is
effective to create in favor of the Trust Depositor a lien thereon and that such
lien has been duly perfected (Secondary Contracts which satisfy all of the
foregoing representations shall be termed "Eligible Secondary Contracts").
The Trust Depositor will represent and warrant in the Sale and Servicing
Agreement, among other things, (i) that the transfer of the related Contracts,
whether then existing or thereafter created, and the proceeds thereof is a valid
sale, transfer and assignment to the Trust of all right, title and interest of
the Trust Depositor therein and that all filings necessary to evidence the
conveyance or transfer of the Contracts to the Trust have been made in all
appropriate jurisdictions; (ii) that each Contract transferred by it to the
Trust is an "Eligible Contract"; (iii) that each Secondary Contract (or interest
therein) transferred by it to the Trust is an "Eligible Secondary Contract";
(iv) that the security interest granted on the related Contracts, whether then
existing or thereafter created, and the proceeds thereof by the
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Trust to the Indenture Trustee is effective to create in favor of the Indenture
Trustee a lien thereon and that such lien has been duly perfected; (v) that the
Trust Depositor holds a duly perfected lien of the first priority on each
Secondary Contract and (vi) that the transfer of the Trust Depositor's security
interest in each Secondary Contract and the proceeds thereof by the Trust to the
Indenture Trustee is effective to create in favor of the Indenture Trustee a
lien thereon and that such lien has been duly perfected.
None of the Indenture Trustee, the Trust, the Owner Trustee or any of them
in their individual capacities (in such capacity, the "Trust Company"), shall
make or be deemed to have made any representations or warranties, express or
implied, regarding the Trust Assets or the transfers thereof by the Sellers, the
Trust Depositor or the Trust.
Under the terms of the Transfer and Sale Agreement and the Sale and
Servicing Agreement, each Contract must be an Eligible Contract as of its date
of transfer to the Trust. The Indenture Trustee shall reassign to the Trust
Depositor, and the Sellers will be concurrently obligated, jointly and
severally, to purchase from the Trust Depositor, any Contract transferred by a
Seller and any interest in Equipment transferred that is subject to such
Contract no later than 90 days after any Seller becomes aware, or receives
written notice from the Servicer or the Trust Depositor, of the breach of any
representation or warranty made by the Seller in the Transfer and Sale Agreement
that materially adversely affects the interests of the Trust Depositor or the
Trust or their successors or assigns in any Contract or the related Contract
File, which breach has not been cured or waived in all material respects (an
"Ineligible Contract"). This purchase obligation will constitute the sole remedy
against the Sellers available to the Trust Depositor, the Indenture Trustee and
the Noteholders or Certificateholders for a breach of a representation or
warranty under the Transfer and Sale Agreement made by the Sellers with respect
to such a Contract. This purchase obligation also will constitute the sole
remedy against the Trust Depositor available to the Indenture Trustee and the
Noteholders or Certificateholders for a breach of a representation or warranty
under the Sale and Servicing Agreement made by the Trust Depositor with respect
to such a Contract.
Pursuant to the Sale and Servicing Agreement, an Ineligible Contract shall
be reassigned to the Trust Depositor and the Trust Depositor shall make a
deposit in the Collection Account in immediately available funds in an amount
equal to the sum of the Discounted Contract Balance of the Ineligible Contract
(utilizing, for purposes of calculating the Discounted Contract Balance, the
Discount Rate at the time such Ineligible Contract was transferred to the Trust)
and any outstanding Servicer Advances thereon. Any amount deposited into the
Collection Account in connection with the reassignment of an Ineligible Contract
(the amount of such deposit being referred to herein as a "Transfer Deposit
Amount") shall be considered payment in full of the Ineligible Contract. Any
such Transfer Deposit Amount shall be treated as an Available Amount. In the
alternative, the Trust Depositor may instead cause the Sellers, or either of
them, to convey to the Trust Depositor, for concurrent conveyance to the Trust
and concurrent pledge to the Indenture Trustee, a Substitute Contract (otherwise
satisfying the terms and conditions generally applicable to Substitute Contracts
in other situations described herein) in replacement for the affected Ineligible
Contract, which shall thereupon be deemed released by the Trust (and Indenture
Trustee) and reconveyed through the Trust Depositor to the Seller thereof.
Concentration Amounts
In addition to the representations and warranties made by the Sellers and
the Trust Depositor with respect to the Contracts as described above under "--
Representations and Warranties", the Trust Depositor will represent and warrant
as of the initial Cutoff Date as follows:
(i) the ADCB of all End-User Contracts with Obligors that are
governmental entities or municipalities does not exceed [ ]% of
the ADCB of the Contract Pool;
(ii) the ADCB of all End-User Contracts which finance, lease or are
related to Software will not exceed [ ]% of the ADCB of the
Contract Pool;
(iii) the ADCB of all End-User Contracts with Obligors who comprise the
three (3) largest Obligors (measured by ADCB as of the date of
determination) does not exceed [ ]% of the ADCB of the Contract
Pool;
(iv) the ADCB of all End-User Contracts with Obligors who comprise the
twenty (20) largest Obligors (measured by ADCB as of the date of
determination) does not exceed [ ]% of the ADCB of the Contract
Pool;
(v) the ADCB of all End-User Contracts related to a single Vendor, or
representing a Vendor Obligation of such Vendor [or affiliate
thereof] does not exceed [ ]% of the ADCB of the Contract Pool;
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(vi) the ADCB of all End-User Contracts with Obligors [or affiliates
thereof] located in a single State of the United States does not
exceed [ ]% of the ADCB of the Contract Pool;
(vii) in the Trust Depositor's reasonable judgment, the Discounted
Contract Balance of End-User Contracts in the Contract Pool that are
"true leases" does not exceed [ ]% of the ADCB of the Contract
Pool.
With respect to any date of transfer of either an Additional Contract or a
Substitute Contract to the Trust, the Sellers and the Trust Depositor will make
the above described representations and warranties; provided, however, in the
event a specific category described above is in excess of a respective
concentration limit because of the amortization of the Contract Pool, the
Sellers and Trust Depositor will not be in breach of such representation or
warranty, to the extent such Additional Contract or Warranty Contract replaces
the ADCB of a Contract which is over such concentration due to the Contract
Pool's amortization.
The Indenture Trustee shall reassign to the Trust Depositor, and the
Sellers will be jointly and severally obligated to purchase from the Trust
Depositor, any Contract transferred by a Seller (and any related Equipment or
Applicable Security) (an "Excess Contract"; any such Contract, together with any
Ineligible Contract as described and defined above, being sometimes referred to
herein, collectively, as a "Warranty Contract") selected by the Servicer at such
time as there is a breach of any of the foregoing representations or warranties,
which breach has not been cured or waived in all material respects, the removal
of which shall remedy such breach. Such purchase shall occur no later than 90
days after the Trust Depositor or any Seller becomes aware, or receives written
notice from the Servicer or the Trust Depositor, of such breach. This purchase
obligation will constitute the sole remedy against the Sellers available to the
Trust Depositor, the Indenture Trustee and the Noteholders or Certificateholders
for a breach of one of the foregoing representations or warranties.
Pursuant to the Sale and Servicing Agreement, an Excess Contract shall be
reassigned to the Trust Depositor and the Trust Depositor shall make a deposit
in the Collection Account in immediately available funds in an amount (an
"Excess Concentration Amount") equal to the sum of the Discounted Contract
Balance of the Excess Contract (together with accrued interest thereon at the
Discount Rate) and any outstanding Servicer Advances thereon. Any amount
deposited into the Collection Account in connection with the reassignment of an
Excess Contract shall be considered payment in full of the Ineligible Contract.
Any such amount shall be considered a Transfer Deposit Amount and shall be
treated as an Available Amount. In the alternative, the Trust Depositor may
instead cause the Sellers, or either of them, to convey to the Trust Depositor,
for concurrent conveyance to the Trust and concurrent pledge to the Indenture
Trustee, a Substitute Contract (otherwise satisfying the terms and conditions
generally applicable to Substitute Contracts in other situations described
herein) in replacement for the affected Excess Contract, which shall thereupon
be deemed released by the Trust (and Indenture Trustee) and reconveyed through
the Trust Depositor to the Seller thereof.
Indemnification
The Sale and Servicing Agreement provides that the Servicer will indemnify
the Trust Depositor, the Trust, the Owner Trustee, and the Indenture Trustee
from and against any loss, liability, expense, damage or injury suffered or
sustained arising out of the Servicer's actions or omissions with respect to the
Trust pursuant to the Sale and Servicing Agreement. Pursuant to the Sale and
Servicing Agreement, the Servicer, irrevocably and unconditionally, (i) submits
for itself and its property in any legal action arising out of the Sale and
Servicing Agreement and the other Operative Documents, to the nonexclusive
general jurisdiction of the courts of the United States of America for the
Northern District of Illinois, and appellate courts therefrom and (ii) waives
any objection it may have that any action therein was brought in an inconvenient
court. Notwithstanding the foregoing, a court may determine, on its own motion,
that an action brought against the Servicer in any such court was brought in an
inconvenient forum.
Under the Sale and Servicing Agreement, the Trust Depositor has agreed to
be liable directly to an injured party for the entire amount of any losses,
claims, damages or liabilities (other than those incurred by a Noteholder or
Certificateholder in the capacity of an investor in the Notes or Certificates)
arising out of or based on the arrangement created by the Sale and Servicing
Agreement as though such agreement created a partnership under the [Illinois
Uniform Limited Partnership Act] in which the Trust Depositor was a general
partner. In the event of a Service Transfer, the successor Servicer will
indemnify and hold harmless the Trust Depositor for any losses, claims, damages
and liabilities of the Trust Depositor as described in this paragraph arising
from the actions or omissions of such successor Servicer. The Trust Depositor
has agreed to indemnify the Trust for any state or local taxes imposed on the
Trust as a result of the inclusion of true leases or the location of the
servicing activities (including the Illinois personal property replacement tax).
Except as provided in the two preceding paragraphs, the Sale and Servicing
Agreement provides that none of the Trust Depositor, the Servicer or any of
their directors, officers, employees or agents will be under any other liability
to
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the Trust, the Owner Trustee, the Indenture Trustee, the holders of Notes or
Certificates or any other person for any action taken, or for refraining from
taking any action, in good faith pursuant to the Sale and Servicing Agreement.
However, none of the Trust Depositor, the Servicer or any of their directors,
officers, employees or agents will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties thereunder.
In addition, the Sale and Servicing Agreement provides that the Servicer is
not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the Sale and
Servicing Agreement. The Servicer may, in its sole discretion, undertake any
such legal action which it may deem necessary or desirable for the benefit of
holders of Notes or Certificates with respect to the Sale and Servicing
Agreement and the rights and duties of the parties thereto and the interest of
Noteholders or Certificateholders thereunder.
Collection and Other Servicing Procedures
Pursuant to the Sale and Servicing Agreement, the Servicer is responsible
for servicing, collecting, enforcing and administering the Contracts in
accordance with its customary and usual procedures for servicing contracts
comparable to the Contracts. See [" "] above.
The Servicer pursuant to the Sale and Servicing Agreement also may advance
Scheduled Payments with respect to any Contract (a "Servicer Advance") which
were due in a Collection Period and were not received and identified to a
Contract by the close of business on the Determination Date, to the extent that
the Servicer, in its sole discretion, expects to recover the Servicer Advance
from subsequent payments on or with respect to the Contract. The Servicer shall
be entitled to reimbursement of Servicer Advances from subsequent payments on or
with respect to the Contract, including collections of any Prepayment Amount,
Transfer Deposit Amount or Recoveries with respect to such Contract, and, if the
Servicer determines that Servicer Advances will not be recovered from the
Contracts to which the Servicer Advances were related, from other Contracts
included in the Trust.
Certain Other Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the Sale
and Servicing Agreement, except upon determination that such duties are no
longer permissible under applicable law. No such resignation will become
effective until the Indenture Trustee or a successor to the Servicer has assumed
the Servicer's responsibilities and obligations under the Sale and Servicing
Agreement.
Any person into which, in accordance with the Sale and Servicing Agreement,
Heller Financial or the Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which Heller Financial or the
Servicer is a party, or any person succeeding to the business of Heller
Financial or the Servicer, will be the successor to Heller Financial, as the
Servicer, under the Sale and Servicing Agreement.
Servicer Default
In the event of any Servicer Default, either the Indenture Trustee or the
Required Holders, by written notice to the Servicer and the Owner Trustee (and
to the Indenture Trustee, if given by the Noteholders) (a "Termination Notice"),
may terminate all of the rights and obligations of the Servicer, as servicer,
under the Sale and Servicing Agreement. If the Indenture Trustee within 60 days
of receipt of a Termination Notice is unable to obtain any bids from eligible
Servicers and the Servicer delivers an officer's certificate to the effect that
the Servicer cannot in good faith cure the Servicer Default which gave rise to
the Termination Notice, then the Indenture Trustee shall offer the Trust
Depositor the right at its option to accept retransfer of the Trust Assets. The
purchase price for such a retransfer shall be equal to the sum of the Aggregate
Principal Amount of all Notes and Certificates on such Distribution Date plus
accrued and unpaid interest thereon at the applicable interest rate (together
with, if applicable, interest on interest amounts that were due and not paid on
a prior date), through the date of such retransfer.
The Indenture Trustee shall, as promptly as possible after giving a
Termination Notice, appoint a successor Servicer (a "Service Transfer"), and if
no successor Servicer has been appointed by the Indenture Trustee and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all rights, authority, power and obligations of the Servicer under the Sale and
Servicing Agreement shall pass to and be vested in the Indenture Trustee. Prior
to any Service Transfer, the Indenture Trustee will seek to obtain bids from
potential Servicers meeting certain eligibility requirements set forth in the
Sale and Servicing Agreement to serve as a successor Servicer for servicing
compensation not in excess of the Servicing Fee. The rights and interest of the
Trust Depositor under the Sale and Servicing Agreement as holder of the
Subordinate Certificate will not be affected by any Termination Notice or
Service Transfer.
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A "Servicer Default" refers to any of the following events:
(a) any failure by the Servicer to make any payment, transfer or deposit
or to give instructions or notice to the Owner Trustee or the
Indenture Trustee pursuant to the Sale and Servicing Agreement on or
before the date occurring three Business Days after the date such
payment, transfer, deposit, or such instruction or notice or report is
required to be made or given, as the case may be, under the terms of
the Sale and Servicing Agreement; or
(b) failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer set
forth in the Sale and Servicing Agreement which has a material adverse
effect on the Noteholders or Certificateholders, which continues
unremedied for a period of 30 days after the first to occur of (i) the
date on which written notice of such failure requiring the same to be
remedied shall have been given to the Servicer by the Indenture
Trustee or to the Servicer and the Indenture Trustee by the
Noteholders or Certificateholders or the Indenture Trustee on behalf
of such Noteholders of Notes aggregating not less than 25% of the
Principal Amount of any Class adversely affected thereby and (ii) the
date on which the Servicer becomes aware thereof and such failure
continues to materially adversely affect such Noteholders or
Certificateholders for such period; or
(c) any representation, warranty or certification made by the Servicer in
the Sale and Servicing Agreement or in any certificate delivered
pursuant to the Sale and Servicing Agreement shall prove to have been
incorrect when made, which has a material adverse effect on the
Noteholders or Prior Certificateholders and which continues to be
incorrect in any material respect for a period of 30 days after the
first to occur of (i) the date on which written notice of such
incorrectness requiring the same to be remedied shall have been given
to the Servicer and the Owner Trustee by the Indenture Trustee, or to
the Servicer, the Owner Trustee and the Indenture Trustee by
Noteholders or Prior Certificateholders or by the Indenture Trustee on
behalf of Noteholders of Notes aggregating not less than 25% of the
Principal Amount of any Class adversely affected thereby and (ii) the
date on which the Servicer becomes aware thereof, and such
incorrectness continues to materially adversely affect such Holders
for such period; or
(d) an Insolvency Event shall occur with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of five Business Days or
referred to under clause (b) or (c) for a period of 60 days (in addition to any
period provided in (a), (b) or (c)) shall not constitute a Servicer Default
until the expiration of such additional five Business Days or 60 days,
respectively, if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or other similar occurrences. Upon the occurrence of any such event
the Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Sale and
Servicing Agreement and the Servicer shall provide the Owner Trustee, the
Indenture Trustee and the Trust Depositor prompt notice of such failure or delay
by it, together with a description of its efforts to so perform its obligations.
The Servicer shall immediately notify the Indenture Trustee in writing of any
Servicer Default.
Evidence as to Compliance
The Sale and Servicing Agreement provides that on or before March 31 of
each calendar year the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Trust Depositor) to furnish a report to the effect that such
firm has applied certain procedures agreed upon with the Servicer and examined
certain documents and records relating to the servicing of the related Contracts
and that, on the basis of such procedures, nothing came to the attention of such
firm that caused them to believe that such servicing was not conducted in
compliance with the Sale and Servicing Agreement except for such exceptions or
errors as such firm shall believe to be immaterial and such other exceptions as
shall be set forth in such statement.
The Sale and Servicing Agreement provides for delivery to the Indenture
Trustee and each Rating Agency on or before March 31 of each calendar year of a
statement signed by an officer of the Servicer to the effect that, to the best
of such officer's knowledge, the Servicer has performed its obligations in all
material respects under the Sale and Servicing Agreement throughout the
preceding year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the
Indenture Trustee may be obtained by a request in writing delivered to the
Indenture Trustee.
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Amendments
The Sale and Servicing Agreement may be amended from time to time by
agreement of the Owner Trustee, the Indenture Trustee and the Trust Depositor
without the consent of the Noteholders or Certificateholders (or the Indenture
Trustee) (i) to cure any ambiguity or (ii) to add any consistent provisions;
provided, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
The Sale and Servicing Agreement may also be amended from time to time by
the Trust Depositor, the Servicer, the Indenture Trustee and the Owner Trustee
with the consent of the Noteholders holding Notes evidencing not less than 66
2/3% of the Principal Amount of the Notes for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Sale and Servicing Agreement or of modifying in any manner the rights of
Noteholders. No such amendment, however, may
(i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Note without the
consent of each Noteholder affected thereby;
(ii) change the definition of (or that of any definition included within
the definition of) or the manner of calculating the "Applicable
Class Percentage", the "Controlling Party", the "Class A Principal
Payment Amount", the "Class B Principal Payment Amount", the "Class
C Principal Payment Amount", the "Class D-2 Principal Payment
Amount", the "Class D-2 Principal Payment Amount", the "Discounted
Contract Balance", the "Principal Amount", or the "Available Amount"
without the consent of each Noteholder and Prior Certificateholder;
or
(iii) reduce the aforesaid percentage required to consent to any such
amendment without the consent of each Noteholder or
Certificateholder affected thereby; or
(iv) modify, amend or supplement the provisions of the Sale and Servicing
Agreement relating to the allocation of Available Amounts (see
"Description of the Notes--Allocations") without the consent of each
Noteholder and Prior Certificateholder; or
(v) make any Note or Certificate payable in money other than Dollars
without the consent of each Noteholder or Certificateholder affected
thereby.
Promptly following the execution of any such amendment (other than an
amendment described in the preceding paragraph), the Owner Trustee will furnish
written notice of the substance of such amendment to each affected Noteholder
and Certificateholder.
The Owner Trustee
[ ] will be the Owner Trustee under the Sale and
Servicing Agreement. Heller Financial and its affiliates may from time to time
enter into banking and trustee relationships with the Owner Trustee and its
affiliates. Heller Financial and its affiliates may hold Notes in their own
names; however, any Notes so held shall not be entitled to participate in any
decisions made or instructions given to the Owner Trustee by the Noteholders as
a group. The Owner Trustee's address is [ ], Wilmington, Delaware
[ ], Attention: Trust Department.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Owner Trustee
will have the power to appoint a co-trustee or separate trustee of all or any
part of the Trust Assets. To the extent permitted by law, all rights, powers,
duties and obligations conferred or imposed upon the Owner Trustee will be
conferred or imposed upon and exercised or performed by the Owner Trustee and
such separate trustee or co-trustee jointly, or, in any jurisdiction in which
the Owner Trustee will 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 Owner
Trustee.
The Owner Trustee may resign at any time, in which event a successor Owner
Trustee will be appointed as provided in the Sale and Servicing Agreement. The
Servicer may also remove the Owner Trustee if such Owner Trustee ceases to be
eligible to continue as such under the Sale and Servicing Agreement. In such
circumstances, a successor Owner Trustee will be appointed as provided in the
Sale and Servicing Agreement. Any resignation or removal of the Owner Trustee
and appointment of a successor Owner Trustee does not become effective until
acceptance of the appointment by the successor Owner Trustee.
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THE INDENTURE
General
The Notes will be issued pursuant to an Indenture between the Trust and the
Indenture Trustee. Pursuant to the Sale and Servicing Agreement the Indenture
Trustee will obtain the benefits of the Sale and Servicing Agreement for itself
and the Noteholders represented thereby.
Payments of Principal and Interest
Pursuant to the Indenture, each payment received by the Indenture Trustee
as described above under "Description of the Notes--Allocations; Prior to an
Event of Default or Restricting Event" shall be promptly distributed in the
following order of priority:
first, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Class A Notes shall be distributed to the Class A Noteholders
ratably, without priority of any one Class A Note over any other Class
A Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class A Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class A Notes;
second, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Class B Notes shall be distributed to the Class B Noteholders
ratably, without priority of any one Class B Note over any other Class
B Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class B Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class B Notes;
third, so much of such installment or payment as shall be required to
pay in full the aggregate amount of interest then due on or in respect
of the Class C Notes shall be distributed to the Class C Noteholders
ratably, without priority of any one Class C Note over any other Class
C Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class C Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class C Notes;
fourth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class A Noteholders to
pay in full the aggregate amount of the Class A Principal Payment then
due pursuant to or in respect of the Class A Notes, without priority
of any one Class A Note over any other Class A Note, in the proportion
that the aggregate unpaid principal amount of each Class A Note bears
to the aggregate unpaid principal amount of all Class A Notes;
fifth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class B Noteholders to
pay in full the aggregate amount of the Class B Principal Payment then
due pursuant to or in respect of the Class B Notes, without priority
of any one Class B Note over any other Class B Note, in the proportion
that the aggregate unpaid principal amount of each Class B Note bears
to the aggregate unpaid principal amount of all Class B Notes; and
sixth, the balance, if any, of such installment or payment remaining
thereafter shall be distributed ratably to the Class C Noteholders to
pay in full the aggregate amount of the Class C Principal Payment then
due pursuant to or in respect of the Class C Notes, without priority
of any one Class C Note over any other Class C Note, in the proportion
that the aggregate unpaid principal amount of each Class C Note bears
to the aggregate unpaid principal amount of all Class C Notes.
Pursuant to the Indenture, each payment received by the Indenture Trustee
as described above under "Description of the Notes--Allocations; Following an
Event of Default or Restricting Event" shall be promptly distributed in the
following order of priority:
first, so much of such payment as shall be required to reimburse the
Indenture Trustee for any tax, expense, charge or other loss incurred
by the Indenture Trustee (to the extent not previously
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reimbursed), (including, without limitation, the expense of sale,
taking or other proceeding, attorneys' fees and expenses, court costs,
and any other expenditures incurred or expenditures or advances made
by the Indenture Trustee in the protection, exercise or enforcement of
any right, power or remedy or any damages sustained by the Indenture
Trustee, liquidated or otherwise, upon the Indenture Event of Default
giving rise to such expenditures or advances) shall be applied by the
Indenture Trustee in reimbursement of such expenses;
second, so much of such payment remaining as shall be required to
reimburse the Noteholders in full for certain indemnity payments, if
any, made by such Noteholders to the Indenture Trustee (to the extent
not previously reimbursed) shall be distributed to the Noteholders,
and, if the aggregate amount remaining shall be insufficient to
reimburse all such payments in full, it shall be distributed ratably,
without priority of any Noteholder over any other, in the proportion
that the aggregate amount of such unreimbursed indemnity payments made
by each such Noteholder bears to the aggregate amount of such
unreimbursed indemnity payments made by all Noteholders;
third, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the
date of distribution on the Class A Notes shall be distributed to the
Class A Noteholders, and, if the aggregate amount remaining shall be
insufficient to pay all such amounts in full, it shall be distributed
ratably, without priority of any one Class A Note over any other Class
A Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class A Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class A Notes;
fourth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the
date of distribution on the Class B Notes shall be distributed to the
Class B Noteholders, and, if the aggregate amount remaining shall be
insufficient to pay all such amounts in full, it shall be distributed
ratably, without priority of any one Class B Note over any other Class
B Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class B Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class B Notes;
fifth, so much of such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest to the
date of distribution on the Class C Notes shall be distributed to the
Class C Noteholders, and, if the aggregate amount remaining shall be
insufficient to pay all such amounts in full, it shall be distributed
ratably, without priority of any one Class C Note over any other Class
C Note, in the proportion that the aggregate amount of all accrued but
unpaid interest to the date of distribution on each Class C Note bears
to the aggregate amount of all accrued but unpaid interest to the date
of distribution on all Class C Notes;
sixth, the balance, if any, of such payment remaining thereafter shall
be distributed to the Class A Noteholders in order to pay in full the
outstanding aggregate amount of principal of the Class A Notes, and if
the aggregate amount remaining shall be insufficient to pay all such
amounts in full, it shall be distributed ratably, without priority of
any one Class A Note over any other Class A Note, in the proportion
that the aggregate unpaid principal amount of each Class A Note bears
to the aggregate unpaid principal amount of all Class A Notes;
seventh, the balance, if any, of such payment remaining thereafter
shall be distributed ratably to the Class B Noteholders to pay in full
the aggregate amount of principal of the Class B Notes, then due
pursuant to or in respect of the Class B Notes, and if the aggregate
amount remaining shall be insufficient to pay all such amounts in
full, it shall be distributed ratably, without priority of any one
Class B Note over any other Class B Note, in the proportion that the
aggregate unpaid principal amount of each Class B Note bears to the
aggregate unpaid principal amount of all Class B Notes; and
eight, the balance, if any, of such payment remaining thereafter shall
be distributed ratably to the Class C Noteholders to pay in full the
aggregate amount of principal of the Class C Notes, then due pursuant
to or in respect of the Class C Notes, and if the aggregate amount
remaining shall be insufficient to pay all such amounts in full, it
shall be distributed ratably, without priority of any
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one Class C Note over any other Class C Note, in the proportion that
the aggregate unpaid principal amount of each Class C Note bears to
the aggregate unpaid principal amount of all Class C Notes.
Events of Default and Restricting Events; Remedies
If an Event of Default referred to in subparagraphs (d) or (e) (see
"Description of the Notes--Events of Default") has occurred, then and in every
such case the unpaid principal of the Notes, together with interest accrued but
unpaid thereon, and all other amounts due to the Noteholders under the
Indenture, shall immediately and without further act become due and payable.
If any other Event of Default shall have occurred and be continuing, then
and in every such case, the Notes shall be accelerated with accrued but unpaid
interest thereon; provided, however, such Event of Default may be waived if the
Required Holders may provide the Trustee and the Trust Depositor written notice
of such waiver.
The Indenture Trustee
The Indenture Trustee with respect to the Notes is [ ]. Heller Financial
and its affiliates may from time to time enter into banking and trustee
relationships with the Indenture Trustee and its affiliates. Heller Financial
and its affiliates may hold Notes in their own names; however, any Notes so held
shall not be entitled to participate in any decisions made or instructions given
to the Indenture Trustee by the Noteholders as a group.
The Indenture Trustee's responsibilities will be generally ministerial in
nature, consisting principally of the distribution of monies received pursuant
to the Sale and Servicing Agreement, the authentication and registration of
transfer of Notes under the Indenture, and the delivery of certain information
received from the Trust Depositor.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Indenture
Trustee will have the power to appoint a co-trustee or separate trustee of all
or any part of the Trust Assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the Indenture Trustee
will be conferred or imposed upon and exercised or performed by the Indenture
Trustee and such separate trustee or co-trustee jointly, or, in any jurisdiction
in which the Indenture Trustee will 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 Indenture Trustee.
The Indenture Trustee may resign at any time, in which event a successor
Indenture Trustee will be appointed as provided in the Indenture. The Servicer
may also remove the Indenture Trustee if the Indenture Trustee ceases to be
eligible to continue as such under the Indenture. In such circumstances, a
successor Indenture Trustee will be appointed as provided in the Indenture. Any
resignation or removal of the Indenture Trustee and appointment of a successor
Indenture Trustee does not become effective until acceptance of the appointment
by the successor Indenture Trustee.
Governing Law
The Indenture will be governed by the laws of the State of New York.
Amendments
At any time and from time to time, (i) the Owner Trustee, the Trust
Depositor, and the Indenture Trustee, with the written consent of a Majority in
Interest of the Noteholders represented thereby, may execute a supplement to the
Indenture for the purpose of adding provisions to, or changing or eliminating
provisions of, the Indenture (including any appendix or schedule hereto) and
(ii) the Indenture Trustee, with the written consent of a Majority in Interest
of the Noteholders represented thereby, may consent to or execute a written
amendment of or supplement to, or waiver or consent under, the Sale and
Servicing Agreement; provided, however, that, without the consent of each
Noteholder under the Indenture, no such amendment, supplement, waiver or consent
shall
(i) reduce the amount or extend the time of payment of any amount
owing or payable under any Note or (except as provided in the
Indenture) increase or reduce the interest payable on any Note (except
that only the consent of the affected Noteholder shall be required for
any decrease in an amount of or the rate of interest payable on such
Note or any extension for the time of payment of any amount payable
under such Note), or alter or modify the provisions of the Sale and
Servicing Agreement with respect to the order of priorities in which
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distributions thereunder shall be made or with respect to the amount
or time of payment of any such distribution,
(ii) reduce, modify or amend any indemnities in favor of any
Noteholder or in favor of or to be paid by the Trust Depositor, or
alter the definition of "Indemnitees" to exclude any Noteholder
(except as consented to by each Person adversely affected thereby),
(iii) make any Note payable in money other than U.S. dollars,
(iv) modify, amend or supplement the provisions of the Sale and
Servicing Agreement relating to amendments, waivers and supplements to
the Indenture, the Sale and Servicing Agreement or any other document,
or
(v) modify the definition of "Majority in Interest" (as defined
in the Indenture) or the percentage of Noteholders required to effect
any modification of the Indenture.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
Transfer of Contracts. As of the Cutoff Date, Heller Financial or HFLI, as
Sellers, will sell the Contracts to the Trust Depositor, which Contracts will be
immediately conveyed to the Trust pursuant to the Sale and Servicing Agreement.
Under commercial law, the transfer of the Contracts to the Trust is either a
sale of the Contracts to the Trust or a grant of a security interest in such
property to the Trust. The Trust Depositor has taken and will take all actions
that are required under applicable law to perfect the Trust's interest in the
Contracts in the event the transfer by the Trust Depositor to the Trust is
deemed to be a loan for commercial law purposes, and it is the intent of the
Trust Depositor that the Trust will at all times have a first priority perfected
security interest in the Contracts and in the proceeds thereof, with certain
exceptions. The Trust Depositor will represent and warrant upon the execution of
the Sale and Servicing Agreement and as of the Closing Date and, with respect to
Additional Contracts or Substitute Contracts, as of each date of conveyance
thereof, that such sale to the Trust constitutes a valid sale to the Trust of
all right, title and interest of the Trust Depositor in and to such Contracts.
The Trust Depositor will also represent and warrant to the Trust that, in the
event the sale of such Contracts by the Trust Depositor to the Trust is deemed
to create a security interest under the UCC, there will exist a valid,
subsisting and enforceable first priority perfected security interest in the
Contracts, in existence at the time of the formation of the Trust with respect
to Contracts conveyed on the Closing Date or at the date of conveyance of any
Additional Contracts or Substitute Contracts, in favor of the Trust. For a
discussion of the Trust's rights arising from these representations and
warranties not being satisfied, see "The Transfer and Sale Agreement and The
Sale and Servicing Agreement Generally--Representations and Warranties".
Financing statements covering the Contracts will be filed under the UCC by
the Trust Depositor, the Trust and the Indenture Trustee to perfect their
respective interests in the Contracts and continuation statements will be filed
as required to continue the perfection of such interests. In addition, each
Seller will indicate in its books and records, including the appropriate
computer files relating to the Contracts, that such Contracts have been
transferred by such Seller to the Trust Depositor, by the Trust Depositor to the
Trust and by the Trust to the Indenture Trustee, and each Seller will physically
separate from its general files relating to similar Contracts, and stamp the
related Contract Files or otherwise mark such Contracts with a legend to the
effect that such Contracts have been transferred to the Trust and assigned to
the Indenture Trustee, and deliver to the Indenture Trustee a computer file or
microfiche or written list containing a true and complete list of all Contracts
then being transferred to the Trust and all Secondary Contracts in which a
security interest is then being transferred to the Trust, identified by account
number and by the Discounted Contract Balance as of the related Cutoff Date. To
facilitate servicing and reduce administrative costs, however, the Contract
Files (as defined herein) will be retained in the possession of the Servicer and
not deposited with the Indenture Trustee or any other agent or custodian for the
benefit of the Noteholders. Because the Contract Files will remain in the
Servicer's possession, if a subsequent purchaser were able to take physical
possession of the Contract Files without knowledge of such assignment, the
Indenture Trustee's priority interest in the Contracts (as assignee of the
Seller's, Trust Depositor's and the Trust's interest) could be defeated. In such
event, distributions to Noteholders could be adversely affected. The segregation
and stamping of Contract Files should, however, mitigate this risk.
Similarly, with respect to Secondary Contracts securing Vendor Loans, in
some instances the Vendor will retain the original contract files associated
with the related End-User Contracts which are Secondary Contracts securing such
Vendor Obligation. Although UCC financing statements are filed reflecting the
pledge of such Contracts to the applicable Seller as security for the Vendor
Loans, because these contract files will remain in the Vendor's possession, if a
subsequent purchaser were able to take physical possession of such contract
files without knowledge of the pledge to the Seller, the Indenture Trustee's
priority security interest (as assignee of the Seller's, Trust Depositor's and
the Trust's interest) in the such Secondary Contracts, as security for the
related Vendor Obligation, could be defeated. In
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such event, distributions to Noteholders could be adversely affected. Each
Vendor represents, warrants and covenants in the applicable agreement evidencing
a Vendor Obligation, however, that it has not and will not sell, pledge or
otherwise assign or convey to any other party (other than the applicable Seller)
any interest in the Secondary Contracts securing such Vendor Obligation, and
agrees that it will maintain possession of the related contract files as
custodian for the benefit of the Seller as secured party with respect to such
Secondary Contracts.
There are also certain limited circumstances under applicable federal or
state law in which prior transferees of Contracts or Secondary Contracts could
have an interest in such contracts with priority over the Indenture Trustee's
interest. A tax or other government lien on property of the Seller or the Trust
Depositor arising prior to the time a Contract or interest in a Secondary
Contract is conveyed to the Trust may also have priority over the interest of
the Trust and the Indenture Trustee in such contract. Under the Transfer and
Sale Agreement, the Sellers will jointly and severally warrant to the Trust
Depositor, and, under the Sale and Servicing Agreement, the Trust Depositor will
warrant to the Indenture Trustee, that the Contracts have been transferred free
and clear of the lien of any third party [(other than the Subordinated Residual
Interest, if any, assigned to any Residual Assignee)] and that the interests in
Secondary Contracts transferred thereunder have been transferred free and clear
of the lien of any third party. Each Seller, the Trust Depositor, the Owner
Trustee and the Trust will also covenant that it will not sell, pledge, assign,
transfer or grant any lien on any Contract or Secondary Contract included in the
Trust, other than transfers to the Trust and by the Trust to the Indenture
Trustee. In addition, as described above under "The Trust Depositor", the Trust
Depositor has been organized as a "bankruptcy-remote" entity which is not
engaged in any business or activities unrelated to the transactions described
herein.
Transfers of Interests in Financed Equipment. In connection with the
conveyance of the Contracts to the Trust, security interests in the related
financed Equipment securing such Contracts (or, in connection with Leases, the
Seller's ownership interest in or title to such Equipment) will be assigned by
the applicable Seller to the Trust Depositor and by the Trust Depositor to the
Trust. It has been the general policy of the Sellers to file or cause to be
filed UCC financing statements with respect to the Equipment relating to the
Contracts. See "[ ]". Due to the administrative burden and expense
associated with amending many filings in numerous states where Equipment is
located, no assignments of the UCC financing statements evidencing the security
interest of the Sellers in the Equipment will be filed to reflect the Trust
Depositor's, the Trust's or the Indenture Trustee's interests therein. While
failure to file such assignments does not affect the Trust's interest in the
Contracts or perfection of the Indenture Trustee's interest in such Contracts
(including the related Seller's security interest in the related Equipment), it
does expose the Trust (and thus Noteholders) to the risk that the Servicer could
inadvertently release its security interest in the Equipment of record, and it
could complicate the Trust's enforcement, as assignee, of the Seller's security
interest in the Equipment. While these risks should not affect the perfection or
priority of the interest of the Indenture Trustee in the Contracts or rights to
payment thereunder, they may adversely affect the right of the Indenture Trustee
to receive proceeds of a disposition of the Equipment related to a Defaulted
Contract. Additionally, statutory liens for repairs or unpaid taxes and other
liens arising by operation of law may have priority even over prior perfected
security interests in the Equipment assigned to the Indenture Trustee.
Also, the transfer to the Trust Depositor of the applicable Seller's
security interest in motor vehicles, aircraft, barges or similar maritime assets
, or railroad rolling stock ("Title Registry Equipment") securing certain
Contracts, or its ownership interest in Title Registry Equipment subject to
Leases, and the transfer of such interests by the Trust Depositor to the Trust,
is subject to state vehicle registration laws (in the case of motor vehicles) or
certain federal title registration statutes, regulations and procedures (in the
case of other Title Registry Equipment). Due to the significant administrative
burden and expense associated with reregistering transfers of titles and of
security interests with respect to such Title Registry Equipment, the
certificates of title or similar instruments or registrations of title with
respect to Title Registry Equipment securing Contracts, and to Title Registry
Equipment subject to Leases, will not identify the Trust as secured party or
owner, as the case may be, of such Equipment. There exists a risk in not so
identifying the Trust as the new secured party or owner that, through fraud or
negligence, a third party could acquire an interest in the Title Registry
Equipment superior to that of the Trust. In addition, statutory liens for
repairs or unpaid taxes may have priority even over a perfected security
interest in the Title Registry Equipment. The Sellers will jointly and severally
represent that as of the Cutoff Date, in the Sellers' reasonable judgment, the
Discounted Contract Balance of End-User Contracts in the Contract Pool that are
secured by Title Registry Equipment, does not exceed [ ]% of the ADCB of the
Contract Pool. Also, the Sellers will execute a power of attorney to the
Indenture Trustee authorizing the Indenture Trustee to designate the Indenture
Trust as the first and sole lien holder on the certificate of title with respect
to Title Registry Equipment consisting of motor vehicles.
In addition, some of the Equipment related to the Contracts may constitute
"fixtures" under the real estate or UCC provisions of the jurisdiction in which
such Equipment is located. In order to perfect a security interest in such
Equipment, the holder of the security interest must file either a "fixture
filing" under the provisions of the UCC or a real estate mortgage under the real
estate laws of the state where the Equipment is located. These filings must be
made in the real estate records office of the county in which such Equipment is
located. So long as the Obligor does not permanently attach the Equipment to the
real estate, a security interest in the Equipment will be governed by the UCC,
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and the filing of a UCC-1 financing statement will be effective to maintain the
priority of the applicable Seller's security interest in such Equipment. Except
for a small portion of such Equipment, the Trust Depositor does not believe that
any of the Equipment will be permanently affixed to the related real estate. If,
however, any Equipment is permanently attached to the real estate in which it is
located, other parties could obtain an interest in the Equipment which is prior
to the security interest originally obtained by the applicable Seller and
transferred to the Trust Depositor. Based on the representation of the Sellers,
the Trust Depositor, however, believes that with respect to Equipment which
constitutes a "fixture", it has obtained a perfected first priority security
interest, through assignment of such security interest by the Seller, by virtue
of the Seller's proper filing of UCC-1 financing statements naming the Seller as
secured party in the real estate records office of the county in which the
Equipment is located. Also, the Sellers will jointly and severally represent
that as of the Cutoff Date, in the Sellers' reasonable judgment, the Discounted
Contract Balance of End-User Contracts in the Contract Pool that are secured by
fixtures, does not exceed [__]% of the ADCB of the Contract Pool.
The Trust Depositor will be obligated to reacquire any Contract transferred
to the Trust (subject to the Seller's reacquisition thereof) in the event it is
determined that a first priority perfected security interest, or ownership
interest in the case of Leases, in the name of the Seller in the Equipment
related to such Contract did not exist as of the date such Contract was conveyed
to the Trust, if (i) such breach shall materially adversely affect such Contract
and (ii) such failure or breach shall not have been cured by the last day of the
second (or, if the Trust Depositor elects, the first) month following the
discovery by or notice to the Trust Depositor of such breach, and the Sellers
will be jointly and severally obligated to reacquire such Contract from the
Trust Depositor contemporaneously with the Trust Depositor's reacquisition from
the Trust. If there is any Equipment as to which the applicable Seller failed to
perfect its security interest, such Seller's security interest, and the security
interests of the Trust Depositor and the related Trust (and the Indenture
Trustee as assignee), would be subordinated to, among others, subsequent
purchasers of the Equipment and holders of perfected security interests with
respect thereto. To the extent the security interest of the Seller in the
related Equipment is perfected, subject to the exceptions set forth in the
following sentence, the Trust will have a prior claim over subsequent purchasers
from the Obligor of such Equipment and holders of subsequently perfected
security interests granted by Obligors. However, as against Mechanics' Liens or
liens for taxes and other non-consensual liens unpaid by an Obligor under a
Contract, or in the event of fraud or negligence of the Seller or Servicer, the
Trust could lose the priority of its interest or its interest in such Equipment
following the conveyance of such Contract to the Trust. Neither the Trust
Depositor nor the Servicer not any Seller will have any obligation to reacquire
a Contract if any of the occurrences described in the foregoing sentence (other
than fraud or negligence of the Seller) result in the Trust's losing the
priority of its security interest or its security interest in such Equipment
after the date such Contract is conveyed to the Trust.
With respect to motor vehicles, in the event that the owner of a vehicle
moves to a state other than the state in which such vehicle is registered, under
the laws of most states the perfected security interest in the vehicle would
continue for four months after such relocation and thereafter until the owner
titles the vehicle in such state. A majority of states generally require
surrender of a certificate of title to re-register a vehicle. Accordingly,
Heller Financial as Servicer must surrender possession if it holds the
certificates of title to such vehicle or, in the case of vehicles originally
registered in a state which provides for notation of lien but does not require
possession of the certificate of title by the holder of the security interest in
the related motor vehicle, Heller Financial as Servicer would receive notice of
surrender if the security interest in the vehicle is noted on the certificate of
title. Accordingly, the Servicer would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In states which do
not require a certificate of title for registration of a motor vehicle, re-
registration could defeat perfection. In the ordinary course of servicing its
portfolio of motor vehicle financing agreements, Heller Financial takes steps to
effect such reperfection upon receipt of notice of re-registration of
information from the Obligor as to relocation. Similarly, when an Obligor sells
a vehicle, Heller Financial must surrender possession of the certificates of
title or will receive notice as a result of its lien noted thereon and
accordingly will have an opportunity to require satisfaction of the related
Contract before release of the lien. Under the Sale and Servicing Agreement, the
Servicer is obligated to take such steps, at the Servicer's expense, as are
necessary to maintain perfection of security interests in the vehicles.
Under the laws of many states, certain possessory liens for repairs
performed on a motor vehicle and storage, as well as certain rights in favor of
federal and state governmental authorities arising from the use of a motor
vehicle in connection with illegal activities, may take priority even over a
perfected security interest. Certain federal tax liens may have priority over
the lien of a secured party. In the Transfer and Sale Agreement, the Sellers
will represent, and the Trust Depositor will represent in the Sale and Servicing
Agreement, that they have no knowledge of any such liens with respect to any
vehicle. However, such liens could arise at any time during the term of a
Contract. No notice will be given to the Indenture Trustee in the event such a
lien arises.
The Servicer on behalf of the Trust may take action to enforce the Trust's
security interest by repossession and resale of the vehicles securing the
related Contracts. The actual repossession may be contracted out to third party
contractors. Under the UCC and laws applicable in most states, a creditor can
repossess a motor vehicle securing a loan by voluntary surrender, "self-help"
repossession that is "peaceful" (i.e., without breach of the peace) and, in the
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absence of voluntary surrender and the ability to repossess without breach of
the peace, by judicial process. The UCC and consumer protection laws in most
states place restrictions on repossession sales, including requiring prior
notice to the debtor and commercial reasonableness in effecting such a sale. In
the event of such repossession and resale of a vehicle, the Trust would be
entitled to be paid out of the sale proceeds before such proceeds could be
applied to the payment of the claims of unsecured creditors or the holders of
subsequently perfected security interests or, thereafter, to the debtor.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the motor vehicle securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments. In general, a
defaulting Obligor may not have sufficient assets to make the pursuit of a
deficiency judgment worthwhile.
Certain other federal and state statutory provisions, including bankruptcy
law, insolvency laws, and other laws affecting the rights of creditors and
debtors generally as well as general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Certain Matters Relating to Bankruptcy. The Sellers will either (i)
originate Contracts or (ii) acquire End-User Contracts from a Vendor, which
Contracts will be transferred to the Trust Depositor. If the acquisition of an
End-User Contract by a Seller is treated as a sale of such Contract from the
applicable Vendor to such Seller, such Contract generally would not be part of
such Vendor's bankruptcy estate and would not be available to such Vendor's
creditors. If a Vendor became a debtor in a bankruptcy case then, in the case of
End-User Contracts acquired as described in clause (ii) above, if an unpaid
creditor of such Vendor or a representative of creditors of such Vendor, such as
a trustee in bankruptcy, or such Vendor acting as a debtor-in-possession, were
to take the position that the sale of such Contracts to the Seller was
ineffective to remove such Contracts from such Vendor's estate (for instance,
that such sale should be recharacterized as a pledge of Contracts to secure
borrowings of such Vendor), then delays in payments under the Contracts to the
Trust could occur or, should the court rule in favor of such creditor,
representative or Vendor, reductions in the amount of such payments could
result. Further, if the transfer of End-User Contracts to the Seller as
described in clause (ii) above is recharacterized as a pledge, a tax or
government lien on the property of the pledging Vendor arising before the
Contracts came into existence may have priority over the Seller's (and its
assignee's) interest in the Contracts. No law firm will, in connection with any
offering of the Notes, express any opinion as to the issues discussed above.
In the Transfer and Sale Agreement, the Sellers will jointly and severally
warrant to the Trust Depositor that the conveyance of the Contracts by a Seller
to the Trust Depositor is a valid sale and transfer of such Contracts to the
Trust Depositor. In addition, each Seller and the Trust Depositor will treat the
transactions described herein as a sale of the Contracts to the Trust Depositor
and the Seller will take all actions that are required under applicable law to
perfect the Trust Depositor's ownership interest in the Contracts sold by it and
the Trust Depositor's security interest in the Secondary Contracts securing
Vendor Loans sold by it. Notwithstanding the foregoing, if the Seller became a
debtor in a bankruptcy case and an unpaid creditor of the Seller or a
representative of creditors of the Seller, such as a trustee in bankruptcy, or
the Seller acting as a debtor-in-possession, were to take the position that the
sale of Contracts to the Trust Depositor was ineffective to remove such
Contracts from the Seller's estate (for instance, that such sale should be
recharacterized as a pledge of Contracts to secure borrowings of the Seller),
then delays in payments under the Contracts to the Trust could occur or, should
the court rule in favor of such creditor, representative or Seller, reductions
in the amount of such payments could result. If the transfer of Contracts to the
Trust Depositor is recharacterized as a pledge, a tax or government lien on the
property of the Seller arising before the Contracts came into existence may have
priority over the Trust Depositor's interest in the Contracts. If the
transactions contemplated herein are treated as a sale of Contracts to the Trust
Depositor, generally the Contracts would not be part of the Seller's bankruptcy
estate and would not be available to the Seller's creditors.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), the
United States Court of Appeals for the Tenth Circuit held that, under the UCC,
accounts sold by a debtor remain property of the debtor's estate under Section
541 of the Bankruptcy Code. In the event of a bankruptcy of a Seller, or, in the
case of Contracts originated by a Vendor and purchased by a Seller, a bankruptcy
of a Vendor, and a determination by a court that the sale of the Contracts to
the Trust Depositor or to the Seller, respectively, should be recharacterized as
a pledge of such Contracts to secure a borrowing, not as a "true sale,"
including as a result of the application by a court of the Octagon court's
reasoning to the Seller's sale of Contracts to the Trust Depositor or to a
Vendor's sale of Contracts to the Seller, delays in distributions on Notes, and
possible reductions in the amount of distributions, could occur.
The Trust Depositor will warrant in the Sale and Servicing Agreement (i)
that the conveyance of the Contracts to the Trust is a valid sale of the
Contracts to the Trust and (ii) that the security interest thereon granted by
the Trust in favor of the Indenture Trustee is a valid and duly perfected
security interest, and will take all actions that are required under applicable
law to perfect the Trust's and the Indenture Trustee's respective interests in
the Contracts and the
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Secondary Contracts securing Vendor Loans sold by it. Nevertheless, if the Trust
Depositor were to become a debtor in a bankruptcy case and an unpaid creditor of
the Trust Depositor or a representative of creditors of the Trust Depositor,
such as a trustee in bankruptcy, or the Trust Depositor acting as a debtor-in-
possession, were to take the position that the sale of Contracts to the Trust
was ineffective to remove such Contract's from the Trust Depositor's estate (for
instance, that such sale should be recharacterized as a pledge of Contracts to
secure borrowings of the Trust Depositor), then delays in payments under the
Contracts to the Trust could occur or, should the court rule in favor of such
creditor, representative or Trust Depositor, reductions in the amount of such
payments could result. If the transfer of Contracts to the Trust is
recharacterized as a pledge, a tax or government lien on the property of the
Trust Depositor arising before the Contracts came into existence may have
priority over the Noteholder's interest in the Contracts. If the transactions
are treated as a sale of Contracts, generally, the Contracts would not be part
of the Trust Depositor's estate and would not be available to the Trust
Depositor's creditors.
A bankruptcy trustee or debtor in possession under the United States
Bankruptcy Code (Title 11 U.S.C. Section 101 et seq.) (the "Bankruptcy Code")
has the right to elect to assume or reject any executory contract or unexpired
lease which is considered to be a "true lease" (and not a financing) under
applicable law. Any rejection of such a contract or lease would constitute a
breach of such contract or lease, as applicable, as of the day preceding the
commencement of the applicable bankruptcy case, entitling the nonbreaching party
to a pre-petition claim for damages.
Certain End-User Contracts will be "true leases" and thus subject to
rejection by the lessor under the Bankruptcy Code. Any such End-User Contract
originated by a Seller or acquired by a Seller in a transaction whereby the
Seller is the "lessor" thereunder, will be subject to rejection by such Seller,
as debtor in possession, or by such Seller's bankruptcy trustee. Upon any such
rejection, Scheduled Payments under such rejected End-User Contract may
terminate and the Noteholders may be subject to losses if the remaining
unaffected Contracts and security interests in the related Equipment are
insufficient to cover the losses. In addition, any End-User Contract which is a
"true lease" originated by a Vendor and transferred to a Seller in a transaction
whereby such Vendor continues to be the "lessor" thereunder (such as a transfer
by a Vendor to the Seller of a security interest in such End-User Contract or a
transfer by a Vendor to the Seller of an interest in the right to payments only
under any such End-User Contract), will be subject to rejection by such Vendor,
as debtor in possession, or by such Vendor's bankruptcy trustee. Upon any such
rejection Scheduled Payments under such rejected End-User Contract may terminate
and the Noteholders may be subject to losses if the remaining unaffected
Contracts, and security interests in the Equipment related thereto, are
insufficient to cover the losses.
Certain restrictions have been imposed on the Trust Depositor and the Trust
and certain other parties to the transactions described herein which are
intended to reduce the risk of an insolvency proceeding involving the Trust
Depositor or the Trust. These restrictions include incorporating the Trust
Depositor as a separate, special purpose company pursuant to a certificate of
incorporation containing certain restrictions on the nature of its business.
Additionally, the Trust Depositor may commence a voluntary case or proceeding
under any bankruptcy or insolvency law, or cause the Trust to commence a
voluntary case or proceeding under any bankruptcy or insolvency law, only upon
the affirmative vote of all its directors, including its independent directors,
as long as the Trust Depositor is solvent and does not reasonably foresee
becoming insolvent. The Trust Depositor's certificate of incorporation requires
that the Trust Depositor have at all times at least two independent directors.
In addition, the Trust Depositor has no intent to file, and Heller Financial has
represented that it has no intent to cause the filing of, a voluntary
application under the insolvency laws with respect to the Trust Depositor, as
long as the Trust Depositor is solvent and does not reasonably foresee becoming
insolvent. However, no assurance can be given that insolvency proceedings
involving either the Trust Depositor or the Trust will not occur. In the event
the Trust Depositor becomes subject to insolvency proceedings, the Trust, the
Trust's interest in the Trust Assets, and the Trust's obligation to make
payments on the Notes might also become subject to such insolvency proceedings.
In the event of insolvency proceedings involving the Trust, the Trust's interest
in the Trust Assets and the Trust's obligation to make payments on the Notes
would become subject to such insolvency proceedings. No assurance can be given
that insolvency proceedings involving Heller Financial would not lead to
insolvency proceedings of either, or both, of the Trust Depositor or the Trust.
In either such event, or if an attempt were made to litigate any of the
foregoing issues, delays of distributions on the Notes, possible reductions in
the amount of payment of principal of and interest on the Notes and limitations
(including a stay) on the exercise of remedies under the Indenture and the Sale
and Servicing Agreement could occur, although the Noteholders would continue to
have the benefit of the Indenture Trustee's security interest in the Trust
Assets under the Sale and Servicing Agreement.
The right of the Indenture Trustee, as secured party under the Sale and
Servicing Agreement for the benefit of the Noteholders, to foreclose upon and
sell the Trust Assets is likely to be significantly impaired by applicable
bankruptcy laws, including the automatic stay pursuant to Section 362 of the
Bankruptcy Code, if a bankruptcy proceeding were to be commenced by or against
the Trust, and possibly the Trust Depositor, before or possibly even after the
Indenture Trustee has foreclosed upon and sold the Trust Assets. Under the
bankruptcy laws, payments on debts are not made and secured creditors are
prohibited from repossessing their security from a debtor in a bankruptcy case
or from
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disposing of security repossessed from such a debtor, without bankruptcy court
approval. Moreover, the bankruptcy laws generally permit the debtor to continue
to retain and to use collateral even though the debtor is in default under the
applicable debt instruments, provided generally that the secured creditor has
the right to seek "adequate protection". The meaning of the term "adequate
protection" may vary according to circumstances, but it is intended in general
to protect the value of the security from any diminution in the value of the
collateral as a result of the use of the collateral by the debtor during the
pendency of the bankruptcy case. In view of the lack of a precise definition of
the term "adequate protection" and the broad discretionary powers of a
bankruptcy court, it is impossible to predict whether or to what extent the
holders of the Notes would be compensated for any diminution in value of the
Trust Assets. Furthermore, in the event a bankruptcy court determines that the
value of the Trust Assets is not sufficient to repay all amounts due on the
Notes, the Noteholders would hold secured claims only to the extent of the value
of the Trust Assets to which the holders are entitled, and unsecured claims with
respect to such shortfall. The bankruptcy laws do not permit the payment or
accrual of post-petition interest, costs and attorneys' fees during a debtor's
bankruptcy case unless, and then only to the extent, the claims are oversecured.
If an Insolvency Event with respect to the Trust Depositor were to occur,
then an Event of Default would occur with respect to the Notes and, pursuant to
the terms of the Sale and Servicing Agreement, and assuming the Trust Assets
were not then subject to being involved in a bankruptcy case, the Indenture
Trustee would sell the Contracts, thereby causing early termination of the Trust
and would use the proceeds of such sale to pay the outstanding principal of and
accrued interest on the Notes to the extent and in the order of priority
described under "Description of the Notes--Allocations; Following an Event of
Default or Restricting Event". The Noteholders would suffer a loss if the sum of
(i) the proceeds of the sale allocable to the Noteholders and (ii) the proceeds
of any collections on the Contracts in the Collection Account allocable to the
Noteholders is insufficient to pay the Noteholders in full.
The occurrence of certain events of bankruptcy, insolvency or receivership
with respect to the Servicer will result in a Servicer Default. If no other
Servicer Default other than the occurrence of an Insolvency Event with respect
to the Servicer exists, an unpaid creditor of the Servicer or a representative
of creditors of the Servicer, such as a trustee in bankruptcy, or the Servicer
acting as a debtor-in-possession, would have the power to prevent either the
Indenture Trustee or the Noteholders from appointing a successor Servicer.
State laws impose requirements and restrictions relating to foreclosure
sales and obtaining deficiency judgments following such sales. In the event that
the Noteholders must rely on repossession and disposition of any Equipment to
recover amounts due on Defaulted Contracts, such amounts may not be realized
because of the application of these requirements and restrictions. Other factors
that may affect the ability of the Noteholders to realize the full amount due on
a Contract or Secondary Contract include the failure to file financing
statements to perfect the applicable Seller's, the Trust Depositor's, the
Trust's or Indenture Trustee's security interest, as applicable, in the
Equipment or other Applicable Security, 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 if the remaining unaffected Contracts
are insufficient to cover such losses.
If a court, in a lawsuit by an unpaid creditor of a Seller or by a
representative of creditors of such Seller, such as a trustee in bankruptcy, or
by the Seller acting as a debtor-in-possession, were to find that, at the time
of or as a result of any transfer by such Seller of Contracts to the Trust
Depositor, (i) (A) the Seller entered into such transaction with the intent of
hindering, delaying or defrauding creditors or (B) the Seller received less than
a reasonably equivalent value or fair consideration as a result of such transfer
and (ii) the Seller (A) was insolvent or would be rendered insolvent by such
transfer, (B) was engaged in a business or transaction for which its assets
constituted unreasonably small capital after such transfer or (C) intended to
incur, or believed that it would incur, indebtedness beyond its ability to pay
as the obligations under such indebtedness matured (as the foregoing terms are
defined in or interpreted under the relevant fraudulent conveyance statutes),
such court could invalidate such transfer to the Trust Depositor or to the
Trust, or substantively consolidate the Trust Depositor, the Trust and the
Seller, or subordinate the rights of the Noteholders to the rights of unsecured
creditors of the Seller, or take other actions that would be adverse to the
Noteholders.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction that is being applied. Generally, however, an
entity would be considered insolvent if the fair saleable value of its assets is
less than the amount of its liabilities (including contingent liabilities) or
the amount that will be required to pay its probable liabilities on its existing
debts as they become absolute and matured. The Sellers believe that they are
entering into these transactions (including the transfers of Contracts pursuant
to the Transfer and Sale Agreement) for proper purposes and in good faith and
that the purchase price for the Contracts identified in the Transfer and Sale
Agreement will represent reasonably equivalent value or fair consideration for
the transfers of such Contracts by the Sellers to the Trust Depositor.
The Trust Depositor will receive, on the Closing Date, a certificate from
each Seller to the effect that (i) the Seller did not intend, in entering into
the Transfer and Sale Agreement and consummating the transactions contemplated
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thereby, to hinder, delay or defraud either then present or future creditors or
any other person to which such Seller was or would thereafter become, as of or
after the consummation of such transactions, indebted and (ii) the purchase
price for the Contracts sold under the Transfer and Sale Agreement represented
reasonably equivalent value or fair consideration as a result of the transfers
of such Contracts to the Trust Depositor. There can be no assurance, however,
that a court would reach the same conclusion.
No law firm will, in connection with any offering of the Notes, express any
opinion as to federal or state laws relating to fraudulent transfers.
Certain states have adopted a version of Article 2A of the UCC ("Article
2A"), which purports to codify many provisions of existing common law. Although
there is little precedent regarding how Article 2A will be interpreted, it may,
among other things, limit enforceability of any "unconscionable" lease or
"unconscionable" provision in a lease, provide a lessee with remedies, including
the right to cancel the lease contract, for certain lessor breaches or defaults,
and may add to or modify the terms of "consumer leases" and leases where the
lessee is a "merchant lessee". However, in the Transfer and Sale Agreement, the
Sellers will jointly and severally represent that (i) no Contract is a "consumer
lease" and (ii) each Obligor has accepted the equipment leased to it and, after
reasonable opportunity to inspect and test, has not notified Heller Financial of
any defects therein. Article 2A, moreover, recognizes typical commercial lease
"hell or high water" rental payment clauses and validates reasonable liquidated
damages provisions in the event of lessor or lessee defaults. Article 2A also
recognizes the concept of freedom of contract and permits the parties in a
commercial context wide degree of latitude to vary provisions of the law.
Vendor Loans and Vendor Recourse Contracts. The Vendor Loans are, by their
terms, payable solely from the proceeds of the Secondary Contracts securing such
Vendor Loans, and do not generally represent obligations of the Vendor [(except
that Secondary Contracts may be covered by such Vendor's UNL Pool or other forms
of Vendor recourse)]. Consequently, Noteholders must rely solely upon the
Secondary Contracts and any other Applicable Security, if any, for the payment
of principal of, and interest on, the related Vendor Loans. As noted above, any
Secondary Contract which is a "true lease" originated by a Vendor will be
subject to rejection by such Vendor, as debtor in possession, or by such
Vendor's bankruptcy trustee. Upon any such rejection Scheduled Payments under
such rejected Secondary Contract may terminate and the Noteholders may be
subject to losses if the remaining unaffected Contract, and security interests
in the related Equipment, are insufficient to cover the losses. Further, as
noted under above, a tax or government lien on the property of the pledging
Vendor arising before a Secondary Contract came into existence may have priority
over the applicable Seller's (and hence its assignee's) interest in such
Secondary Contract.
Certain Vendor Assignments and certain Program Agreements provide that the
applicable Seller has recourse to the related Vendor for all or a portion of the
losses the Seller may incur as a result of a default under the End-User
Contracts sold under such Vendor Assignment or Program Agreement. In the event
of a Vendor's bankruptcy, a bankruptcy trustee, a creditor or the Vendor as
debtor in possession might attempt to characterize sales to the Seller pursuant
to such Vendor Assignments or Program Agreements as loans to the Vendor from the
Seller secured by the Contracts sold thereunder. If such an attempt is
successful, such Vendor Assignment or Program Agreement would be subject to the
risks described herein for Vendor Loans. In such case the Contracts sold under
such Vendor Assignment or Program Agreement would constitute Secondary Contracts
under the recharacterized Vendor Assignment or Program Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general discussion of certain United States federal
income tax consequences of the purchase, ownership and disposition of the Notes.
The discussion that follows, and the opinion set forth below of Winston &
Strawn, special tax counsel to the Trust Depositor ("Tax Counsel"), are based
upon current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations promulgated thereunder, current administrative
rulings, judicial decisions and other applicable authorities in effect as of the
date hereof, all of which are subject to change, possibly with retroactive
effect. There are no cases, regulations, or Internal Revenue Service ("IRS")
rulings on comparable transactions or instruments to those described herein. As
a result, there can be no assurance that the IRS will not challenge the
conclusions reached herein, and no ruling from the IRS has been or will be
sought on any of the issues discussed below. Furthermore, legislative, judicial
or administrative changes may occur, perhaps with retroactive effect, which
could affect the accuracy of the statements and conclusions set forth herein as
well as the tax consequences to Noteholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to Noteholders in light of their personal
investment or tax circumstances nor to certain types of holders who may be
subject
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to special treatment under the federal income tax laws (including, without
limitation, financial institutions, broker-dealers, insurance companies, foreign
persons, tax-exempt organizations, and persons who hold the Notes as part of a
straddle, hedging, or conversion transaction). The discussion is generally
directed to prospective purchasers who purchase Notes at the time of original
issue, who are citizens or residents of the United States, and who hold the
Notes as "capital assets" within the meaning of Section 1221 of the Code.
Taxpayers and preparers of tax returns (including those filed by any partnership
or other issuer) should be aware that under applicable Treasury Regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should consult
their own tax advisors and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax treatment has been
discussed herein. PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES
TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES.
Opinion
In the opinion of Tax Counsel, for federal income tax purposes, 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, (i) the Trust will not be treated as an association (or publicly
traded partnership) taxable as a corporation and (ii) the Notes will be treated
as indebtedness. Such opinion assumes that the Servicer, the Trust Depositor,
the Certificateholders and all the Noteholders will consistently treat the Notes
for all tax purposes as indebtedness of the Trust and the Trust as a partnership
with the Certificates representing partnership interests in such partnership. An
opinion of counsel does not foreclose the possibility of a contrary
determination by the IRS or by a court of competent jurisdiction, or of a
contrary position by the IRS or Treasury Department in regulations or rulings
issued in the future.
Although it is the opinion of Tax Counsel that the Trust will not be
treated as an association (or publicly traded partnership) taxable as a
corporation and the Notes will be characterized as indebtedness for federal
income tax purposes, no assurance can be given that such characterization of the
Trust and the Notes will prevail. If the Trust were taxable as a corporation for
federal income tax purposes, it would be subject to corporate income tax on its
taxable income. The Trust's taxable income would include all its income on the
related Contracts and other assets, which may be reduced by its interest expense
on the Notes if the Notes are respected as debt of such corporation. Any such
corporate income tax could materially reduce cash available to make payments on
the Notes. If, contrary to the opinion of Tax Counsel, the IRS also successfully
asserted that one or more of the Notes did not represent debt for federal income
tax purposes, the Notes might be treated as equity interests in the Trust. If so
treated, the Trust might be taxable as corporation with the adverse tax
consequences described above (and the resulting taxable corporation would not be
able to reduce its taxable income by deductions for interest expense on the
Notes recharacterized as equity). Alternatively, if the IRS treated the Notes as
equity, it is also possible that the Trust might by treated as a publicly traded
partnership that would not be taxable as a corporation because the Trust would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) may constitute "unrelated business taxable
income," income to foreign holders generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses, and income from the Trust's assets would be taxable to Noteholders
without regard to whether cash distributions are made from the Trust or the
Noteholders' method of tax accounting.
The discussion that follows assumes that the Notes will be treated as
indebtedness for federal income tax purposes. The following discussion is also
based in part upon Treasury Regulations interpreting the original issue discount
("OID") provisions of the Code. The OID regulations, however, are subject to
varying interpretations and do not address all issues that would affect
Noteholders.
Taxation of Interest Income to Noteholders
Based upon Tax Counsel's interpretation of (i) the definition of "qualified
stated interest" and (ii) other provisions of the OID Code sections and
regulations, it is not expected that the Notes will be issued with OID (i.e.,
any excess of the stated redemption price at maturity over their issue price),
other than perhaps with a de minimis amount (i.e., 1/4 of the Notes stated
redemption price at maturity multiplied by the number of full years to
maturity). In such case, the stated interest on each class of Notes should be
treated as qualified stated interest and will be taxable as ordinary income for
federal income tax purposes when received or accrued in accordance with the
Noteholder's general method of tax accounting.
OID
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If Notes were issued at a discount from their principal amounts or if the
stated interest were not treated as "qualified stated interest," the Notes would
be treated as having OID. Under the OID regulations currently in effect, in
order to have qualified stated interest, the stated interest must be
"unconditionally payable" in cash or property at least once annually. Interest
is unconditionally payable only if reasonable legal remedies exist to compel
timely payment or the debt instrument otherwise provides terms and conditions
that make the likelihood of late payment (other than a late payment that occurs
within a reasonable grace period) or nonpayment a remote contingency. Tax
Counsel believes that the likelihood of late payment or nonpayment of the stated
interest on the Notes should constitute a remote contingency; the IRS, however,
may disagree. In such case, the stated interest on the Notes would not be
qualified stated interest and the Notes would be considered to have been issued
with OID.
If the Notes are in fact issued with a greater than de minimis amount of
OID or are otherwise treated as having been issued with OID, the following rules
should apply. The excess of the "stated redemption price at maturity" of a Note
(generally equal to its principal amount as of the date of issuance plus all
interest other than "qualified stated interest" payable prior to or at maturity)
over the original issue price (in this case, the initial offering price at which
a substantial amount of the Notes are sold to the public) will constitute OID. A
Noteholder must include OID in income as interest over the term of the Note
under a constant yield method. OID must be included in income in advance of the
receipt of cash representing that income. In general, the amount of OID included
in income is the sum of the "daily portions" of the OID with respect to the Note
for each day during the taxable year the Noteholder held the Note. The daily
portion generally is determined by allocating to each day in an accrual period a
ratable portion of the OID allocable to such accrual period. The amount of OID
allocable to an accrual period is generally equal to the difference between (i)
the product of the Note's adjusted issue price and its yield to maturity and
(ii) the amount of qualified stated interest payments allocable to such accrual
period. The "adjusted issue price" of an OID Note at the beginning of any
accrual period is the sum of its issue price plus the amount of OID allocable to
prior accrual periods minus the amount of prior payments that were not qualified
stated interest.
Alternatively, because the payments on the Notes may be accelerated by
reason of prepayments on the Contracts, OID, other than de minimis OID, on the
Notes, if any, may have to be accrued under Code section 1272(a)(6), which
allocates OID to each day in an accrual period by taking the ratable portion of
the excess of (i) the sum of the present value of the remaining payments on a
Note as of the close of the accrual period and the payments made during the
accrual period that were included in stated redemption price at maturity, over
(ii) the adjusted issue price of the Note at the beginning of the accrual
period. No regulations have been issued under Code section 1272(a)(6) so it is
not clear if such section would apply to the Notes if they are treated as having
OID. Legislation has been proposed which if enacted, would require any OID (or
interest) on the Notes to be computed in accordance with the rules of Section
1272(a)(6) and certain prepayment assumptions.
A holder of a Note issued with de minimis OID must include such OID in
income proportionately as principal payments are made on such Note.
Acquisition Premium
A holder that purchases a Note for an amount less than or equal to the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest but in excess of its adjusted issue price (any such
excess being "acquisition premium") and that does not make the election
described below under "Election to Treat All Interest as Original Issue
Discount" is permitted to reduce the daily portions of OID, if any, by a
fraction, the numerator of which is the excess of the holder's adjusted basis in
the Note immediately after its purchase over the adjusted issue price of the
Note, and the denominator of which is the excess of the sum of all amounts
payable on the Note after the purchase date, other than payments of qualified
stated interest, over the Note's adjusted issue price.
Market Discount
Whether or not the Notes are issued with OID, a subsequent purchaser (i.e.,
a purchaser who acquires a Note not at the time of original issue) of a Note at
a discount will be subject to the "market discount rules" of Sections 1276
through 1278 of the Code. In general, these rules provide that if the holder of
a Note purchases the Note at a market discount (i.e., a discount from its
original issue price plus any accrued OID that exceeds a de minimis amount
specified in the Code) and thereafter recognizes gain upon a disposition (or
receives a principal payment), the lesser of (i) such gain (or the principal
payment) or (ii) the accrued market discount will be taxed as ordinary income.
Generally, the accrued market discount will be the total market discount on the
Note multiplied by a fraction, the numerator of which is the number of days the
holder held the Note and the denominator of which is the number of days from the
date the holder acquired the Note until its maturity date. The holder may elect,
however, to determine accrued market discount under the constant yield method.
The adjusted basis of a Note subject to such election will be increased to
reflect market discount included in gross income, thereby reducing any gain or
increasing any loss on a subsequent sale or taxable disposition. Holders should
consult with their own tax advisors as to the effect of making this election.
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Limitations imposed by the Code, which are intended to match deductions
with the taxation of income, may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder who elects to include market
discount in gross income as it accrues, however, is exempt from this rule.
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 .25% of
the remaining principal balance of the Note multiplied by its expected weighted
average remaining life. If market discount is de minimis, the actual amount of
discount must be allocated to the remaining principal distributions on the Note,
and when such distribution is received, capital gain will be recognized equal to
discount allocated to such distribution.
Amortizable Bond Premium
In general, if a subsequent purchaser acquires a Note at a premium (i.e.,
an amount in excess of the amount payable upon the maturity thereof), such
Noteholder will be considered to have purchased the Note with "amortizable bond
premium" equal to the amount of such excess. A Noteholder may elect to deduct
the amortizable bond premium as it accrues under a constant yield method over
the remaining term of the Note. Under proposed regulations, if finalized,
accrued amortized bond premium may only be used as an offset against qualified
stated interest income when such income is included in the holder's gross income
under the holder's normal accounting system.
Election to Treat All Interest as Original Issue Discount
A holder may elect to include in gross income all interest that accrues on
a Note using the constant yield method described above under the heading "OID,"
with modifications described below. For purposes of this election, interest
includes stated interest, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. In applying the constant yield method to a Note
with respect to which this election has been made, the issue price of the Note
will equal the electing holder's adjusted basis in the Note immediately after
its acquisition, the issue date of the Note will be the date of its acquisition
by the electing holder, and no payments on the Note will be treated as payments
of qualified stated interest. This election, if made, may not be revoked without
the consent of the IRS. Holders should consult with their own tax advisors as to
the effect of making this election in light of their individual circumstances.
Disposition of Notes
Generally, capital gain or loss will be recognized on a sale or other
taxable disposition of the Notes in an amount equal to the difference between
the amount realized (other than amounts attributable to, and taxable as, accrued
interest) and the seller's tax basis in the Notes. A Noteholder's tax basis in a
Note will generally equal his or her cost increased by any OID, market discount,
and gain previously included by such Noteholder in income with respect to the
Note and decreased by any bond premium previously amortized and any principal
payments previously received by such Noteholder with respect to the Note.
Subject to the market discount rules of the Code, any such gain or loss will be
capital gain or loss if the Note was held as a capital asset. Capital gain or
loss will be long-term if the Note was held by the holder for more than one year
and otherwise will be short-term. Any capital losses realized generally may be
used by a corporate taxpayer only to offset capital gains, and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
Information Reporting and Backup Withholding
The Indenture Trustee will be required to report annually to the IRS, and
to each Noteholder, the amount of interest paid on the Notes (and the amount
withheld for federal income taxes, if any) for each calendar year, except as to
exempt recipients (generally, corporations, tax-exempt organizations, qualified
pension and profit-sharing trusts, individual retirement accounts, or
nonresident aliens who provide certification as to their status). Each holder
(other than holders who are not subject to the reporting requirements) will be
required to provide, under penalties of perjury, a certificate (Form W-9)
containing the holder's name, address, correct federal taxpayer identification
number and a statement that the holder is not subject to backup withholding.
Should a non-exempt Noteholder fail to provide the required certification, the
Trustee will be required to withhold (or cause to be withheld) 31% of the
interest otherwise payable to the holder, and remit the withheld amounts to the
IRS as a credit against the holder's federal income tax liability.
Tax Consequences to Foreign Investors
Based upon Tax Counsel's opinion that the Notes will be treated as
indebtedness for federal income tax purposes, the following information
describes the general U.S. federal income tax treatment of investors that are
not U.S. persons (each a "Foreign Person"). The term "Foreign Person" means any
person other than (i) a citizen or resident of the
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United States, (ii) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof or
(iii) an estate or trust which is under the jurisdiction or governance of a U.S.
court or fiduciary or the income of which is includible in gross income for U.S.
federal income tax purposes, regardless of its source.
(a) Interest paid or accrued to a Foreign Person that is not effectively
connected with the conduct of a trade or business within the United
States by the Foreign Person, will generally be considered "portfolio
interest" and generally will not be subject to United States federal
income tax and withholding tax, as long as the Foreign Person (i) is
not actually or constructively a "10 percent shareholder" of the
Trust, Trust Depositor or HFI or a "controlled foreign corporation"
with respect to which the Trust Depositor is a "related person" within
the meaning of the Code, and (ii) provides an appropriate statement
(Form W-8) to the Trustee or paying agent (generally the clearing
agency, financial intermediary, or broker) that is signed under
penalties of perjury, certifying that the beneficial owner of the Note
is a Foreign Person and providing that Foreign Person's name and
address. If the information provided in this statement changes, the
Foreign Person must provide a new Form W-8 within 30 days. The Form W-
8 is generally effective for three years. If such interest were not
portfolio interest, then it would be subject to United States federal
income and withholding tax at a rate of 30 percent unless reduced or
eliminated pursuant to an applicable income tax treaty. To qualify for
any reduction as the result of an income tax treaty, the Foreign
Person must provide the paying agent with Form 1001. This form is also
effective for three years.
(b) Any capital gain realized on the sale or other taxable disposition of
a Note by a Foreign Person will be exempt from United States federal
income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the
United States by the Foreign Person, and (ii) in the case of an
individual Foreign Person, the Foreign Person is not present in the
United States for 183 days or more in the taxable year. If an
individual Foreign Person is present in the U.S. for 183 days or more
during the taxable year, the gain on the disposition of the Notes
could be subject to a 30% withholding tax unless reduced by treaty.
(c) If the interest, gain or income on a Note held by a Foreign Person is
effectively connected with the conduct of a trade or business in the
United States by the Foreign Person, the holder (although exempt from
the withholding tax previously discussed if an appropriate statement
(Form 4224) is furnished to the paying agent) generally will be
subject to United States federal income tax on the interest, gain or
income at regular federal income tax rates. Form 4224 is effective for
only one calendar year. In addition, if the Foreign Person is a
foreign corporation, it may be subject to a branch profits tax equal
to 30 percent of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
CERTAIN STATE TAX CONSEQUENCES
Because of the differences in state tax laws and their applicability to
different investors, it is not possible to summarize the potential state tax
consequences of holding the Notes. ACCORDINGLY, PURCHASERS OF NOTES SHOULD
CONSULT THEIR OWN TAX ADVISERS REGARDING THE STATE TAX CONSEQUENCES OF
PURCHASING ANY NOTES.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA ("ERISA
Plans") and prohibits certain transactions between ERISA Plans and persons who
are "parties in interest" (as defined under ERISA) with respect to assets of
such Plans. Section 4975 of the Code prohibits a similar set of transactions
between certain plans or individual retirement accounts ("Code Plans," and
together with ERISA Plans, "Plans") and persons who are "disqualified persons"
(as defined in the Code) with respect to Code Plans. Certain employee benefit
plans, such as governmental plans and church plans (if no election has been made
under Section 410(d) of the Code), are not subject to the requirements of ERISA
or Section 4975 of the Code, and assets of such plans may be invested in the
Notes, subject to the provisions of other applicable federal and state law. Any
such plan which is qualified under Section 401(a) of the Code and exempt from
taxation under Section 501(a) of the Code is, however, subject to the prohibited
transaction rules set forth in Section 503 of the Code.
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Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that investments be made in accordance with
the documents governing the ERISA Plan. Before investing in the Notes, an ERISA
Plan fiduciary should consider, among other factors, whether to do so is
appropriate in view of the overall investment policy and liquidity needs of the
ERISA Plan.
Prohibited Transactions
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit
parties in interest and disqualified persons with respect to ERISA Plans and
Code Plans from engaging in certain transactions involving such Plans or "plan
assets" of such Plans, unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code and Sections 502(i) and 502(1) of
ERISA provide for the imposition of certain excise taxes and civil penalties on
certain persons that engage or participate in such prohibited transactions. The
Trust Depositor, the Underwriter, the Servicer, the Indenture Trustee or the
Owner Trustee or certain affiliates thereof may be considered or may become
parties in interest or disqualified persons with respect to a Plan. If so, the
acquisition or holding of the Notes by, on behalf of or with "plan assets" of
such Plan may be considered to give rise to a "prohibited transaction" within
the meaning of ERISA and/or Section 4975 of the Code, unless an administrative
exemption described below or some other exemption is available.
The Notes may not be purchased with the assets of a Plan if the Trust
Depositor, the Underwriter, the Servicer, the Indenture Trustee, or the Owner
Trustee or an affiliate thereof either (a) has discretionary authority or
control with respect to the investment or management of such assets or (b) has
authority or responsibility to give, or regularly gives, investment advice with
respect to such assets pursuant to an agreement or understanding that such
advice will serve as a primary basis for investment decisions with respect to
such assets and that such advice will be based on the particular needs of the
Plan or (c) is an employer of employees covered under the Plan unless such
investment is made through an insurance company general or pooled separate
account or a bank collective investment fund and an exemption is available.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the Notes - for
example, Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager;" PTCE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest; PTCE 91-38, which exempts
certain transactions between bank collective investment funds and parties in
interest; PTCE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest; or PTCE 84-14, which
exempts certain transactions effected on behalf of a Plan by a "qualified
professional asset manager." There can be no assurance that any of these
exemptions will apply with respect to any Plan's investment in the Notes or,
even if an exemption were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment.
Due to the complexity of these rules and the penalties imposed, any
fiduciary or other Plan investor who proposes to invest assets of a Plan in the
Notes should consult with its counsel with respect to the potential consequences
under ERISA and Section 4975 of the Code of doing so.
PLAN OF DISTRIBUTION
General
Subject to the terms and conditions set forth in an underwriting agreement
dated [ ] (the "Underwriting Agreement") for the sale of the Notes, the
Trust Depositor has agreed to sell to First Union Capital Markets Corp,
[ ], and [ ]. (the "Underwriters") and each of the Underwriters has
separately agreed to purchase from the Trust Depositor, the principal amount of
the Notes set forth opposite its name below:
Aggregate Principal Amount
to be Purchased
--------------------------
Class A Receivable-Backed Notes, Series 1997-1
----------------------------------------------
First Union Capital Markets Corp. $______________
[ ] $______________
[ ] $______________
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Aggregate Principal Amount
to be Purchased
--------------------------
Class B Receivable-Backed Notes, Series 1997-1
----------------------------------------------
First Union Capital Markets Corp. $______________
[ ] $______________
[ ] $______________
Aggregate Principal Amount
to be Purchased
--------------------------
Class C Receivable-Backed Notes, Series 1997-1
----------------------------------------------
First Union Capital Markets Corp. $______________
[ ] $______________
[ ] $______________
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Notes offered hereby
if any of such Notes are purchased.
The Underwriter has advised the Issuer that the Underwriter proposes
initially to offer the Notes to the public at the price set forth on the cover
page hereof and to certain dealers at such price less a selling concession not
in excess of [ ]% of the initial principal amount of the Notes. The Underwriter
may allow and such dealers may reallow a concession not in excess of [ ]% of
the initial principal amount of the Notes. After the initial public offering,
the public offering price and such concessions may be changed.
The Underwriting Agreement provides that Heller Financial and the Trust
Depositor, jointly and severally, will indemnify the Underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or contribute to payments the Underwriter may be required to
make in respect thereof.
In addition, First Union Capital Markets Corp. ("First Union") will act as
the private placement agent for the Trust Depositor in connection with the sale
of the Prior Certificates and will receive compensation therefor.
In the ordinary course of its business, the Underwriters and their
affiliates have engaged and may engage in commercial banking and investment
banking transactions with Heller Financial and its affiliates, including the
Trust Depositor and HFLI.
RATING OF THE NOTES
It is a condition to the issuance of the Notes that the Class A Notes be
rated at least "[ ]" and "[ ]" , that the Class B Notes be rated at least
"[ ]" and "[ ]" , and that the Class C Notes be rated at least "[ ]" and
"[ ]", by S&P and [a nationally recognized rating agency] and [a nationally
recognized rating agency], respectively.
Such rating will reflect only the views of the Rating Agency and will be
based primarily on the subordination of the Class B Notes, Class C Notes and the
Certificates (in the case of the Class A Notes), the subordination of the Class
C Notes and the Certificates (in the case of the Class B Notes) and the
subordination of the Certificates (in the case of the Class C Notes), as well as
the value and creditworthiness of the Contracts and Equipment. The ratings are
not a recommendation to purchase, hold or sell the Notes, inasmuch as such
ratings do not comment as to market price or suitability for a particular
investor. Each rating may be subject to revision or withdrawal at any time by
the assigning Rating Agency. 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 Notes. The rating of the Notes addresses the likelihood of the
timely payment of interest and the ultimate payment of principal on the Notes
pursuant to their terms. The rating does not address the rate of Prepayments
that may be experienced on the Contracts and, therefore, does not address the
effect of the rate of Prepayments on the return of principal to the Noteholders.
-81-
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the Notes, including certain federal
income tax matters, as well as other matters, will be passed upon for the Trust,
the Trust Depositor, the Seller/Servicer ad the Administrator by Winston &
Strawn, Chicago, Illinois. Certain legal matters for the Underwriter will be
passed upon by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York.
-82-
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Term(s) Page(s)
<S> <C>
ADCB ............................................................... 11, 47
Accrual Period ..................................................... 10, 46
Acquisition Premium .................................................... 79
Act .................................................................. II-4
Additional Contract ................................................. 8, 41
Additional Contract Cutoff Date ......................................... 4
Adjusted Contract ....................................................... 8
Aggregate Discounted Contract Balance .................................. 12
Aggregate Principal Amount ............................................. 47
Applicable Class Percentage ........................................ 47, 66
Article 2A ......................................................... 22, 76
Available Amounts ................................................... 9, 50
Bankruptcy Code .................................................... 20, 74
Business Day ............................................................ 4
Calculation Date ........................................................ 4
Cede .................................................................... 3
Cedel Participants ..................................................... 57
Certificateholders ...................................................... 6
Certificates ..................................................... 2, 5, 59
Class A Interest Rate .................................................. 10
Class A Noteholders .................................................... 10
Class A Notes ........................................................... 1
Class A Principal Payment Amount ....................................... 47
Class B Interest Rate .................................................. 10
Class B Noteholders ................................................ 10, 68
Class B Notes ........................................................... 1
Class B Principal Payment Amount ....................................... 47
Class C Interest Rate .................................................. 10
Class C Noteholders .................................................... 10
Class C Notes ........................................................... 1
Class C Principal Payment Amount ....................................... 47
Class D-1 Certificateholders ............................................ 5
Class D-1 Certificates ........................................... 2, 5, 58
Class D-1 Principal Payment Amount...................................... 48
Class D-2 Certificateholders ............................................ 5
Class D-2 Certificates ........................................... 2, 5, 58
Class D-2 Interest Rate ............................................. 5, 59
Class D-2 Principal Payment Amount ..................................... 48
Cleanup Call Condition ............................................. 12, 55
Closing Date ............................................................ 4
Code ................................................................... 77
Code Plans ............................................................. 81
Collection Account .................................................. 9, 52
Collection Period ....................................................... 4
Commission .............................................................. 3
Conditional Payment Rate ............................................... 41
Contract Files ......................................................... 59
Contracts ............................................................... 2
Contracts Pool .......................................................... 6
Cooperative ............................................................ 57
CPR .................................................................... 41
CSA ..................................................................... 6
Cutoff Date .......................................................... 2, 4
Defaulted Contract ..................................................... 52
Definitive Notes ....................................................... 58
Depositaries............................................................ 56
Depository.............................................................. 46
Determination Date...................................................... 49
Discount Rate ...................................................... 13, 48
Discounted Contract Balance ........................................ 12, 48
Distribution ........................................................... 55
Distribution Date .................................................... 2, 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DTC................................................................. 3
Early Termination Contract.......................................... 8
Eligible Contract................................................... 61
Eligible Investments................................................ 53
Eligible Secondary Contracts........................................ 62
End-User............................................................ 2
End-User Contracts.................................................. 2
Equipment........................................................... 2,37
ERISA............................................................... 81
ERISA Plans......................................................... 81
Euroclear........................................................... 3
Euroclear Operator.................................................. 57
Euroclear Participants.............................................. 57
Excess Concentration Amount......................................... 63
Excess Contract..................................................... 63
Exchange Act........................................................ 3
Excluded Amounts.................................................... 35
Expected Class A Payment............................................ 47
Expected Class B Payment............................................ 47
Expected Class C Payment............................................ 47
Expected Class D-1 Payment.......................................... 48
Expected Class D-2 Payment.......................................... 48
FDIC................................................................ 53
Financed Items...................................................... 2,37
Financing Agreement................................................. 6
First Union......................................................... 83
Foreign Person...................................................... 80
Heller Financial.................................................... 1,4
Heller Funding...................................................... 1
HFLI................................................................ 2,4
Holders............................................................. 58
Indenture........................................................... 1,5
Indenture Trustee................................................... 1,4
Indirect Participants............................................... 56
Ineligible Contract................................................. 62
Initial Class A Note Principal Balance.............................. 5
Initial Class B Note Principal Balance.............................. 5
Initial Class C Note Principal Balance.............................. 5
Insolvency Event.................................................... 22
Insurance Proceeds.................................................. 60
IPA................................................................. 6
IRS................................................................. 77
Issuer.............................................................. 1,4
Lease............................................................... 6
Lessee.............................................................. 6
Maturity Date....................................................... 12,46
MLA................................................................. 35
MLA Supplement...................................................... 35
Monthly Report...................................................... 55
Note Owners......................................................... 5
Noteholders......................................................... 10
Notes............................................................... 1,5
Obligor............................................................. 9
OID................................................................. 78
Operative Documents................................................. 45
Optional Prepayment................................................. 16
Owner Trustee....................................................... 1,4
Participants........................................................ 56
Permitted Liens..................................................... 61
Plans............................................................... 81
Prepaid Contract.................................................... 8
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Prepayment............................................. 16
Principal Amount....................................... 48
Prior Certificateholders............................... 5
Prior Certificates..................................... 2, 5, 58
Program Agreement...................................... 10
Program Assignment..................................... 22
PTCE................................................... 81
Qualified Institution.................................. 53
Rating Agencies........................................ 14
Record Date............................................ 5
Recoveries............................................. 52
Redemption Price....................................... 12
Registration Statement................................. 3
Required Holders....................................... 54
Restricting Event...................................... 54
S&P.................................................... 14
Sale and Servicing Agreement........................... 2
Scheduled Payments..................................... 13, 48
Secondary Contracts.................................... 2
Secured Note........................................... 6, 37
Securities Act......................................... 3
Seller................................................. 2, 4
Service Transfer....................................... 65
Servicer............................................... 2, 4
Servicer Advance....................................... 13, 64
Servicer Default....................................... 65
Services............................................... 2, 9, 37
Servicing Charges...................................... 13
Servicing Fee.......................................... 13, 54
Servicing Fee Percentage............................... 54
Servicing Fee Rate..................................... 13
Software............................................... 2, 9, 37
Subordinate Certificateholders......................... 5
Subordinate Certificates............................... 2, 5, 58
Substitute Contract.................................... 8, 41
Substitute Contract Cutoff Date........................ 4
Tax Counsel............................................ 77
Termination Notice..................................... 65
Terms and Conditions................................... 57
Title Registry Equipment............................... 18, 72
Transfer and Sale Agreement............................ 2, 24, 59
Transfer Deposit Amount................................ 62
Transferred Assets..................................... 60
Transferred Contracts.................................. 6
Transferred Property................................... 17
Trust.................................................. 1, 4
Trust Agreement........................................ 4
Trust Assets........................................... 2, 6
Trust Company.......................................... 62
Trust Depositor........................................ 1, 4
Trust Termination Date................................. 59
UCC.................................................... 19, 20
Underwriter............................................ 82
Underwriting Agreement................................. 82
UNL Pool............................................... 39
Vendor Agreements...................................... 10
Vendor Assignment...................................... 10
Vendor Obligations..................................... 2, 37
Vendors................................................ 10, 38
VFD.................................................... 44
Warranty Contract...................................... 8, 63
</TABLE>
-3-
<PAGE>
===============================================================================
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Trust Depositor or the Underwriter. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any security
other than the Securities offered hereby, nor does it constitute an offer to
sell or a solicitation of an offer to buy any of the Securities to any person in
any jurisdiction in which the person making such offer or solicitation is not
qualified to do so or to anyone whom it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstance create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
_________________
TABLE OF CONTENTS
Page
----
____________________
Until ___________, 199__, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligations of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotment or subscriptions.
================================================================================
================================================================================
HELLER FUNDING CORPORATION
___________
_____________________
_________________________
PROSPECTUS
_________________________
_____________, 199__
================================================================================
<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>
<CAPTION>
<S> <C>
SEC Registration Fee $ 909.09
Printing and Engraving Expenses 45,000.00
Trustee's Fees and Expenses 8,000.00
Legal Fees and Expenses 200,000.00
Blue Sky Fees and Expenses 8,000.00
Accountants' Fees and Expenses 25,000.00
Rating Agency Fees 30,000.00
Miscellaneous Fees 30,000.00
Total $346,909.09
</TABLE>
___________________________
* All amounts except the SEC Registration Fee are estimates of expenses
incurred or to be incurred in connection with the issuance and distribution
of the Notes in an aggregate principal amount assumed for these purposes to
be equal to $3,000,000 of Notes registered hereby.
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. 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.
Heller Financial 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.
Item 15. Recent Sales of Unregistered Securities
None
II-1
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits and Financial Statements
<S> <C>
Exhibits
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Form of Trust Agreement (including form of Certificates)*
4.2 Form of Indenture (including form of Notes)*
5.1 Opinion of Winston & Strawn with respect to legality*
8.1 Opinion of Winston & Strawn with respect to tax matters*
10.1 Form of Sale and Servicing Agreement*
10.2 Form of Administration Agreement*
10.3 Form of Transfer and Sale Agreement*
23.1 Consent of Winston & Strawn (included in Exhibit 5.1)*
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Indenture Trustee*
</TABLE>
__________________________________
*To be filed by amendment
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 Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 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, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on June 27, 1997.
Heller Funding Corporation
By: /s/ Lauralee E. Martin
--------------------------------
Name: Lauralee E. Martin
------------------------------
Title: Principal Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of Heller Funding Corporation do
hereby constitute and appoint Deepak Rai and David Schmuck, and each of them,
with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all instruments for
us and in our names in the capacities indicated below which such person may deem
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933 (the "Act"), as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but not limited to, power and authority to
sign for us, or any of us, in the capacities indicated below and any and all
amendments (including pre-effective and post-effective amendments or any other
registration statement filed pursuant to the provisions of Rule 462(b) under the
Act) hereto; and we do hereby ratify and confirm all that such person or persons
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<C> <S> <C>
/s/ Lauralee E. Martin Chief Executive Officer and Director June 27, 1997
- ------------------------ (Principal Executive Officer)
Lauralee E. Martin
/s/ Lawrence G. Hund Chief Financial Officer (Principal June 27, 1997
- ------------------------ Financial and Accounting Officer)
Lawrence G. Hund
/s/ David J. Friedman Director June 27, 1997
- ------------------------
David J. Friedman
/s/ Deepak Rai Director June 27, 1997
- ------------------------
Deepak Rai
/s/ Jeffrey A. Hilzinger Director June 27, 1997
- ------------------------
Jeffrey A. Hilzinger
</TABLE>
II-3
<PAGE>
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
HELLER FUNDING CORPORATION
(Exact name of Registrant as specified in its charter)
_____________________
EXHIBIT VOLUME
================================================================================
<PAGE>
EXHIBIT INDEX
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 Form of Trust Agreement (including form of Certificates)
4.2 Form of Indenture (including form of Notes)
5.1 Opinion of Winston & Strawn with respect to legality
8.1 Opinion of Winston & Strawn with respect to tax matters
10.1 Form of Sale and Servicing Agreement
10.2 Form of Administration Agreement
10.3 Form of Transfer and Sale Agreement
23.1 Consent of Winston & Strawn (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of Indenture Trustee
-i-
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HELLER FUNDING CORPORATION
ARTICLE I
NAME
The name of the corporation (hereinafter called the "Corporation") is
Heller Funding Corporation.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
ARTICLE III
CORPORATE PURPOSES
The nature of the business to be conducted or promoted by the Corporation
is to engage in the following activities:
(a) to purchase or otherwise acquire, own, hold, transfer or sell
interests in, or interests in pools of, accounts, drafts, notes receivable,
installment sale agreements, conditional sale agreements, promissory notes
with or without related security agreements, operating and finance leases,
installment payment agreements and similar types of financing agreements or
obligations or rights to payment thereunder or arising in connection
therewith, including monies paid, due or to become due thereunder or in
connection therewith, and together with any related collateral security or
contract rights, whether constituting real or personal property, securing
such agreements or obligations or supporting the payment thereof (including
the acquisition of ownership interests in real or personal property the
subject of leases) (collectively, any of the foregoing the "Assets");
(b) To enter into, and perform its obligations under, any agreements
with affiliates relating to or effecting the transfers and conveyances of
Assets as described above (including issuing promissory notes or incurring
other indebtedness to such affiliates pursuant to such agreements, which
notes or indebtedness are subordinated to the rights of holders of
Securities as defined below);
<PAGE>
(c) To transfer Assets or interests therein (including for the purpose
of establishing, forming or funding one or more trusts ("Trusts")),
pursuant to one or more indentures, pooling agreements, pooling and
servicing agreements, sale agreements, sale and servicing agreements or
other agreements ("Agreements") entered into by and among, among others,
the Corporation, any trustee or trustees or collateral agent named therein
(a "Trustee"), and any entity acting as servicer for the Assets, and to
perform its obligations under any such Agreements;
(d) To issue, sell, authorize and deliver one or more series and/or
classes or certificates, bonds, notes or other evidences of indebtedness
secured or collateralized by, or otherwise representing interests in, one
or more pools of Assets (or by notes or certificates of any series or class
issued by one or more Trusts established or funded by the Corporation)
(collectively, any of the foregoing being "Securities");
(e) to acquire, hold and enjoy any and all rights and privileges of
any class of any series of Securities, including any class which may be
subordinate to any other class, and, except to the extent otherwise
provided in any Securities, or related Agreement, to sell, assign, pledge
or otherwise transfer any such Securities or any interest therein; and
(f) To enter into any additional agreements or undertakings, engage in
any further activities, and to exercise any other powers permitted to
corporations organized under the laws of the State of Delaware, that are
related or incidental to the foregoing and necessary, convenient or
advisable to accomplish the foregoing.
ARTICLE IV
COMMON STOCK
The total number of shares of capital stock which the Corporation has
authority to issue is one thousand (1,000) shares, designated as Common Stock,
and all of such shares shall be without par value.
ARTICLE V
DENIAL OF PREEMPTIVE RIGHTS
No holder of any class of capital stock of the Corporation, whether now or
hereafter authorized, shall be entitled, as such, as a matter of right, to
subscribe for or purchase any part of any new or additional issue of capital
stock of the Corporation of any class whatsoever, or of securities convertible
into or exchangeable for capital stock of the Corporation of any class
whatsoever, whether now or hereafter authorized, or whether issued for cash,
property or services.
-2-
<PAGE>
ARTICLE VI
POWERS OF BOARD OF DIRECTORS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized:
(a) To make, alter, amend or repeal the By-Laws, except as otherwise
expressly provided in any By-Law made by the holders of the capital stock
of the Corporation entitled to vote thereon. Any By-law may be altered,
amended or repealed by the holders of the capital stock of the Corporation
entitled to vote thereon at any annual meeting or at any special meeting
called for that purpose; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the Board of
Directors which would have been valid if such By-Laws had not been adopted.
(b) Subject to the provisions of Article III, to take, lease, purchase
or otherwise acquire, and to own, use, hold, sell, convey, exchange, lease,
mortgage or otherwise encumber, work, improve, develop, divide and
otherwise handle, deal in, or dispose of real estate, real and personal
property and any interest or right therein.
(c) To determine the use and disposition of any surplus and net
profits of the Corporation, including the determination of the amount of
working capital required, to set apart out of any of the funds of the
Corporation, whether or not available for dividends, a reserve or reserves
for any proper purpose and to abolish any such reserve in the manner in
which it was created.
(d) To designate, by resolution passed by a majority of the whole
Board of Directors, one or more committees, each committee to consist of
one or more directors of the Corporation, which, to the extent provided in
the resolution designating the committee or in the By-Laws of the
Corporation, shall, subject to the limitations prescribed by law, have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by a majority of
the whole Board of Directors.
(e) To exercise, in addition to the powers and authorities
hereinbefore or by law conferred upon it, any such powers and authorities
and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the laws of the
State of Delaware and of the Certificate of Incorporation and of the By-
Laws of this Corporation.
-3-
<PAGE>
ARTICLE VII
CORPORATE RESTRICTIONS
(a) At all times that the Corporation has issued and has outstanding, or
any Trust established or funded by the Corporation has issued and has
outstanding, any series or class of Securities which has been rated by a
nationally recognized rating agency, the Board of Directors shall include at
least two individuals who are Independent Directors. As used herein, an
"Independent Director" shall be an individual who: (i) is not and has not been
employed by Heller Financial, Inc. ("Heller Financial") or any of its
subsidiaries or affiliates, as a director, officer or employee within the five
years immediately prior to such individual's appointment as an Independent
Director; (ii) is not (and is not affiliated with a company or a firm that is) a
significant advisor or consultant to Heller Financial or any of its subsidiaries
and affiliates; (iii) is not affiliated with a significant customer or supplier
of Heller Financial or any of its subsidiaries or affiliates; (iv) is not
affiliated with a company of which Heller Financial or any of its subsidiaries
and affiliates is a significant customer or supplier, (v) does not have
significant personal services contract(s) with Heller Financial or any of its
subsidiaries or affiliates; (vi) is not affiliated with a tax-exempt entity that
receives significant contributions from Heller Financial or any of its
subsidiaries or affiliates; (vii) is not the beneficial owner at the time of
such individual's appointment as an Independent Director, or at any time
thereafter while serving as an Independent Director, of such number of shares of
any classes of common stock of Heller Financial the value of which constitutes
more than 5% of the outstanding common stock of Heller Financial; (viii) does
not at any time hold any beneficial or economic interest in the Corporation; and
(ix) is not a spouse, parent, sibling or child of any person described in
clauses (i) through (viii).
(b) As used in paragraph (a) of this Article VII, the following terms shall
have the meanings:
(i) an "affiliate" of a person, or a person "affiliated with," a
specified person, shall mean a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, the specified person.
(ii) The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") shall mean the possession,
direct or indirect, 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; provided, however, that a
person shall not be deemed to control another person solely because he or
she is a director of such other person.
(iii) The term "person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group deemed to be a person pursuant to
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, as in
effect on the date of incorporation of the Corporation.
-4-
<PAGE>
(iv) A "subsidiary" of Heller Financial shall mean any corporation a
majority of the voting stock of which is owned, directly or indirectly
through one or more other subsidiaries by Heller Financial.
(v) A person shall be deemed to be, or to be affiliated with, a
company or firm that is a "significant advisor or consultant to Heller
Financial or any of its subsidiaries or affiliates" if he, she, or it, as
the case may be, received or would receive fees or similar compensation
from Heller Financial or any of its subsidiaries or affiliates in excess of
the lesser of (A) 3% of the consolidated gross revenues which Heller
Financial and its subsidiaries received for the sale of their products and
services during the last fiscal year of Heller Financial; (B) 5% of the
gross revenues of the person during the last calendar year if such person
is a self-employed individual; and (C) 5% of the consolidated gross
revenues received by such company or firm for the sale of its products and
services during its last fiscal year, if the person is a company or firm;
provided, however, that director's fees and expense reimbursements shall
not be included in the gross revenues of an individual for purposes of this
determination.
(vi) A "significant customer of Heller Financial or any of its
subsidiaries or affiliates" shall mean a customer from which Heller
Financial and any of its subsidiaries or affiliates collectively in the
last fiscal year of Heller Financial received payments in consideration for
the products and services of Heller Financial and its subsidiaries or
affiliates which are in excess of 3% of the consolidated gross revenues of
Heller Financial and its subsidiaries during such fiscal year.
(vii) A "significant supplier of Heller Financial or any of its
subsidiaries or affiliates" shall mean a supplier to which Heller Financial
and any of its subsidiaries or affiliates collectively in the last fiscal
year of Heller Financial made payments in consideration for the supplier's
products and services in excess of 3% of the consolidated gross revenues of
Heller Financial and its subsidiaries during such fiscal year.
(viii) Heller Financial or any of its subsidiaries and affiliated
shall be deemed a "significant customer" of a company if Heller Financial
and any of its subsidiaries and affiliates collectively were the direct
source during such company's last fiscal year of in excess of 5% of the
gross revenues which such company received for the sale of its products and
services during such fiscal year.
(ix) Heller Financial or any of its subsidiaries and affiliates shall
be deemed a "significant supplier" of a company if Heller Financial and any
of its subsidiaries and affiliates collectively received in such company's
last fiscal year payments from such company in excess of 5% of the gross
revenues which such company received during such fiscal year for the sale
of its products and services.
(x) A person shall be deemed to have "significant personal services
contract(s) which Heller Financial or any of its subsidiaries or
affiliates" if the fees and other compensation received by the person
pursuant to personal services contract(s) with Heller
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<PAGE>
Financial and any of its subsidiaries or affiliates exceed or would exceed
5% of his or her gross revenues during the last calendar year.
(xi) A tax-exempt entity shall be deemed to receive significant
contributions from Heller Financial or any of its subsidiaries or
affiliates if such tax-exempt entity received during its last fiscal year
contributions from Heller Financial or its subsidiaries or affiliates in
excess of the lesser of (A) 3% of the consolidated gross revenues of Heller
Financial and its subsidiaries during such fiscal year and (B) 5% of the
contributions received by the tax-exempt entity during such fiscal year.
(c) Notwithstanding any other provision of the Certificate of Incorporation
or any provision of law that otherwise so empowers the Corporation, the
Corporation shall not, without (i) the affirmative vote of 100% of the members
of the Board of Directors of the Corporation, (ii) the affirmative vote of
shareholders holding at least two-thirds (2/3) of the total number of
outstanding shares of Common Stock of the Corporation, and (iii) written
confirmation, from each nationally recognized rating agency which has rated
Securities issued by the Corporation or by any Trust established or funded by
the Corporation, that the then current ratings on such Securities will not be
reduced or withdrawn as a result thereof, do any of the following:
(A) engage in any business or activity other than those set forth in
Article III;
(B) incur any indebtedness for borrowed money, or assume or guaranty any
indebtedness of any other entity, other than (x) indebtedness evidenced by, or
incurred in connection with, any issue of Securities, (y) indebtedness not
exceeding 1% of the Corporation's total assets at such time on account of
incidentals or services supplied or furnished to the Corporation, and (z)
indebtedness to Heller Financial or any affiliate thereof incurred in connection
with the acquisition of Assets, which indebtedness shall be subordinated to all
obligations evidenced by Securities;
(C) dissolve or liquidate, in whole or in part; or consolidate or merge
with or into any other entity or convey, transfer or lease its properties and
assets substantially as an entirety to any entity, or permit any entity to merge
into it or convey, transfer or lease its properties and assets substantially as
an entirety to it, unless;
(y) the entity (if other than the Corporation) formed or surviving the
consolidation or merger or which acquires the properties and assets of the
Corporation is organized and existing under the laws of any State of the
United States or the District of Columbia; expressly assumes the due and
punctual payment of, and all obligations of the Corporation, including
those obligations of the Corporation under any Agreement; and has a
Certificate of Incorporation containing provisions substantially identical
to the provisions of Article III, this Article VII, Article XIV, and
Article XV; and
(z) immediately after giving effect to the transaction, no default or
event of default has occurred and is continuing under any indebtedness of
the Corporation or any agreement relating to such indebtedness.
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<PAGE>
(d) Notwithstanding any other provision of the Certificate of Incorporation
or any provision of law that otherwise so empowers the Corporation, the
Corporation shall not, for so long as the Corporation is able to pay its debts
generally as they become due, and without the affirmative vote of 100% of the
members of the Board of Directors of the Corporation, (i) institute proceedings
to be adjudicated bankrupt or insolvent, (ii) consent to the institution of
bankruptcy or insolvency proceedings against it, (iii) file a petition seeking
or consent to reorganization or relief under any applicable federal or state law
relating to bankruptcy, (iv) consent to the appointment of a receiver,
liquidator, assignee, trustee, or sequestrator (or other similar official) of
the Corporation or a substantial part of its property, (v) make any assignment
for the benefit of creditors or admit its inability to pay its debts generally
as they become due, or (vi) authorize or take corporate action in furtherance of
any such action. If there shall not be, as and to the extent required by this
Article VII, Independent Directors then in office and acting as required by this
Article VII,, a vote on any matter set forth in this paragraph (d) shall not be
taken unless and until Independent Directors meeting the requirements of this
Article VII shall have been appointed and qualified.
ARTICLE VIII
DIRECTORS PROTECTED
A member of the Board of Directors of the Corporation, or a member of any
committee designated by the Board of Directors, shall, in the performance of
his/her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
report or statements as are presented to the Corporation by any of the
Corporation's officers or employees or committees of the Board of Directors, or
by any other person as to matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation. Neither the amendment nor
repeal of this Article VIII, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article VIII, shall
eliminate or reduce the effect of this Article VIII in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article
VIII, would accrue or arise prior to such amendment, repeal or adoption of an
inconsistent provision.
ARTICLE IX
CORPORATE EXISTENCE
The Corporation is to have perpetual existence.
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<PAGE>
ARTICLE X
NO LIABILITY OF HOLDERS OF CAPITAL STOCK
FOR CORPORATE DEBTS
The holder or holders of the capital stock of the Corporation shall not be
personally or directly liable for the payment of the Corporation's debts and the
private property of the holders of the capital stock of the Corporation shall
not be subjected to the payment of debts of the Corporation to any extent
whatsoever.
ARTICLE XI
TRANSACTIONS WITH DIRECTORS AND OFFICERS
No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction, or
solely because his/her or their votes are counted for such purpose, if: (1) the
material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative vote of a majority of disinterested
directors, even though the disinterested directors be less than a quorum; or (2)
the material facts as to the relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by the vote of the stockholders; or (3) the contract or transaction is fair as
to the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee thereof which authorizes the
contract or transaction.
ARTICLE XII
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHERS
(a) Any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation), by reason of the fact that he/she is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent (for
purposes of this Article, such person shall include a trustee) of another
corporation, partnership, joint venture, trust or other
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<PAGE>
enterprise, shall be indemnified and held harmless by the Corporation to the
fullest extent legally permissible under the General Corporation Law of the
State of Delaware, as amended from time to time, against all expenses,
liabilities and losses (including attorneys' fees and disbursements), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if he/she acted in
good faith and in a manner he/she reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful;
provided, that any amounts payable by the Corporation in accordance with this
subsection (a) of Article XII hereof, shall be payable solely to the extent of
funds actually received by the Corporation in excess of funds necessary to pay
in full all outstanding Securities rated by a nationally recognized rating
agency. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he/she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his/her conduct was unlawful. Entry of a
judgment by consent as part of a settlement shall not be deemed a final
adjudication of liability for negligence or misconduct in the performance of
duty, nor of any other issue or matter.
(b) To the extent that a director, officer, employee or agent of, or
serving at the request of, the Corporation (as described in clause (a) of this
Article) has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in clause (a), or in defense of any
claim, issue or matter therein, he/she shall be indemnified by the Corporation
against expenses (including attorneys' fees and disbursements) actually and
reasonably incurred by him/her in connection therewith without the necessity of
any action being taken by the Corporation other than the determination, in good
faith, that such defense has been successful. In all other cases wherein
indemnification is provided by this Article, unless ordered by a court,
indemnification shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he/she has met
the applicable standard of conduct specified in this Article. Such determination
shall be made (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less that a quorum, or (2) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the holders of a majority of the shares
of capital stock of the Corporation entitled to vote thereon.
(c) Expenses (including attorneys' fees and disbursements) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon receipt of any
undertaking by or on behalf of such director or officer to repay such amount
unless it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation. Expenses (including attorneys' fees and
disbursements) incurred by other employees or agents in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
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<PAGE>
(d) No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this clause (d) of this
Article shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment or repeal.
(e) The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement may be entitled under any By-Law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, and shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
(f) By action of the Board of Directors, notwithstanding any interest of
the directors in such action, the Corporation may purchase and maintain
insurance, in such amounts as the Board of Directors deems appropriate, on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against
him/her and incurred by him/her in any such capacity, or arising out of his/her
status as such, whether or not the Corporation shall have the power to indemnify
him against such liability under the provisions of this Article.
ARTICLE XIII
COMPROMISE OR ARRANGEMENT BETWEEN CORPORATION
AND ITS CREDITORS OR STOCKHOLDERS
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
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<PAGE>
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
ARTICLE XIV
RESERVATION OF RIGHT TO AMEND
CERTIFICATE OF INCORPORATION
The Corporation shall not amend, alter, change or repeal Article III,
Article VII, this Article XIV or Article XV unless it has received (i) prior
written confirmation from each nationally recognized rating agency which has
rated any Securities that the current ratings on such Securities will not be
reduced or withdrawn as a result of such amendment, alteration, change or
repeal, (ii) the affirmative vote of 100% of the members of the Board of
Directors of the Corporation, and (iii) the affirmative vote of shareholders
holding at least two-thirds (2/3) of the total number of outstanding shares of
capital stock of the Corporation entitled to vote thereon. Subject to the
foregoing limitation, the Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the law of the State of Delaware, and all
the provisions of this Certificate of Incorporation and all rights and powers
conferred in this Certificate of Incorporation on stockholders, directors and
officers are subject to this reserved power.
ARTICLE XV
CORPORATE PROCEDURES
(a) The Corporation's assets will not be commingled with those of any
direct or ultimate parent of the Corporation; and
(b) The Corporation will maintain separate corporate records and books of
account from those of any subsidiaries, affiliates, or the direct or ultimate
parent of the Corporation.
ARTICLE XVI
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the By-Laws of
the Corporation shall so provide.
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<PAGE>
ARTICLE XVII
RECORDS OUTSIDE STATE
The books and records of the Corporation may, subject to any statutory
requirements, be kept at a location or locations outside the State of Delaware
as may be designated by the Board of Directors or in the By-Laws of the
Corporation.
ARTICLE XVIII
SECTION 203 ELECTION
The Corporation expressly elects not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
ARTICLE XIX
INCORPORATOR
The name and the mailing address of the Incorporator are as follows:
NAME MAILING ADDRESS
M. David Galainena Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
* * * * * * * * * * * * * * * * *
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT: The Corporation
Trust Company of Delaware hereby accepts appointment as Resident Agent for
Heller Funding Corporation.
The Corporation Trust Company of Delaware by:
____________________________________ _______________________
(Signature of Resident Agent) (Date)
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<PAGE>
The undersigned, being the Incorporator named above, in order to form a
corporation pursuant to the General Corporation Law of the State of Delaware,
does hereby certify that this is my act and deed and that the facts herein
stated are true, and accordingly have hereunto set my hand this 25th day of
June, 1997.
/s/ M. David Galainena
--------------------------------------
M. David Galainena
Sole Incorporator
STATE OF ILLINOIS)
) SS.
COUNTY OF COOK )
On this 25th day of June, 1997 personally appeared before me, a Notary
Public in and for the State of and County aforesaid, M. David Galainena, known
to me to be the person who executed the foregoing Certificate of Incorporation,
and who acknowledged to me that he executed the same freely and voluntarily and
for the uses and purposes therein described.
WITNESS my hand and official seal, this 25th day of June, 1997.
/s/ Paige Denton
--------------------------------------
Notary Public
My commission expires: 9/26/97
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BY-LAWS
-------
OF
HELLER FUNDING CORPORATION
--------------------------
ARTICLE I
---------
OFFICES
-------
Section 1.1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
----------
STOCKHOLDERS' MEETING
---------------------
Section 2.1. Place of Meetings. All meetings of the stockholders, whether
annual or special, shall be held in the City of Chicago, State of Illinois, at
such place as may be fixed from time to time by the Board of Directors, or at
such other place either within or without the State of Delaware as may be
designated from time to time by the Board of Directors and stated in the notice
of meeting.
Section 2.2. Annual Meetings. An annual meeting of the stockholders, commen
cing with the year 1998, shall be held on the second Monday in June in each
year, if not a legal holiday, and if a legal holiday then on the next secular
day following, at 10:00 a.m., or at such other date and time as shall be
designated by the Board of Directors and stated in the notice of meeting, at
which they shall elect a Board of Directors, and transact such other business as
may properly be brought before the meeting.
Section 2.3. Notice of Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting, shall be given not less than
ten or more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, notice is given when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address as it appears on the records of the Corporation.
Section 2.4. Stockholders' List. At least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at said
meeting, arranged in
<PAGE>
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be prepared by the
Secretary. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting at the place within the city where the
meeting is to be held which place shall be specified in the notice of meeting,
or if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 2.5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of InCorporation, may be called by the President and shall be called
by the Secretary at the request of a majority of the Board of Directors, or at
the request in writing of stockholders owning at least a majority of the number
of shares of the Corporation issued and outstanding and entitled to vote. Such
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting shall be limited to the purposes stated in the
notice of special meeting.
Section 2.6. Notice of Special Meeting. Written notice of a special
meeting, stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder entitled
to vote at such meeting. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation.
Section 2.7. Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute, by the Certificate of Incorporation or by these By-Laws. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholder entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, of the place, date
and hour of the adjourned meeting, until a quorum shall again be present or
represented by proxy. At the adjourned meeting at which a quorum shall be
present or represented by proxy, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment, a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.8. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares having voting power, present in person
or represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes or
of the Certificate of Incorporation or of these By-Laws, a different vote is
required in which case such express provision shall govern and control the
decision of such question. Each stockholder shall have one vote for each share
of stock having voting power
2
<PAGE>
registered in his name on the books of the Corporation, except as otherwise
provided in the Certificate of Incorporation.
Section 2.9. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
Section 2.10. Unanimous Consent. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action by any provisions of the statutes or of the Certificate of
Incorporation or these By-Laws, the meeting, notice of the meeting, and vote of
stockholders may be dispensed with if all the stockholders who would have been
entitled to vote upon the action, if such meeting were held, shall consent in
writing to such corporate action being taken.
ARTICLE III
-----------
DIRECTORS
---------
Section 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such acts and things as
are not by the Delaware General Corporation Law nor by the Certificate of
Incorporation nor by these By-Laws directed or required to be exercised or done
by the stockholders.
Section 3.2. Number of Directors. The number of directors which shall
constitute the whole Board shall be four (4). Each director shall be elected at
the annual meeting of the stockholders, and shall hold office until his
successor is elected and qualified or until his earlier resignation or removal.
Section 3.3. Vacancies. If the office of a director becomes vacant by
reason of death, resignation, retirement disqualification, removal from office,
or otherwise, or a new directorship is created, the holders of a plurality of
shares issued and outstanding and entitled to vote in elections of directors,
shall choose a successor or successors, or a director to fill the newly created
directorship, who shall hold office for the unexpired term or until the next
election of directors.
Section 3.4. Place of Meetings. The Board of Directors may hold its
meetings outside of the State of Delaware, at the office of the Corporation or
at such other places as they may from time to time determine, or as shall be
fixed in the respective notices or waivers of notice of such meetings.
Section 3.5. Committees of Directors. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board, designate one
or more committees, each
3
<PAGE>
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power of
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amendment to the By-Laws, of the Corporation;
and, unless the resolution, By-Laws, or Certificate of Incorporation expressly
so provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. The committees shall keep regular
minutes of their proceedings and report the same to the Board of Directors when
required.
Section 3.6. Compensation of Directors. Directors, as such, may receive
such stated salary for their services and/or such fixed sums and expenses of
attendance for attendance at each regular or special meeting of the Board of
Directors as may be established by resolution of the Board; provided that
nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 3.7. Annual Meeting. The annual meeting of the Board of Directors
shall be held within ten days after the annual meeting of the stockholders in
each year. Notice of such meeting, unless waived, shall be given by mail or
telegram to each director elected at such annual meeting, at his address as the
same may appear on the records of the Corporation, or in the absence of such
address, at his residence or usual place of business, at least three days before
the day on which such meeting is to be held. Said meeting may be held at such
place as the Board may fix from time to time or as may be specified or fixed in
such notice or waiver thereof.
Section 3.8. Special Meetings. Special meetings of the Board of Directors
may be held at any time on the call of the President or at the request in
writing of at least 40% of the directors. Notice of any such meeting, unless
waived, shall be given by mail or telegram to each director at his address as
the same appears on the records of the Corporation not less than one day prior
to the day on which such meeting is to be held if such notice is by telegram,
and not less than two days prior to the day on which the meeting is to be held
if such notice is by mail. If the Secretary shall fail or refuse to give such
notice, then the notice may be given by the officer or any one of the directors
making the call. Any such meeting may be held at such place as the Board may fix
from time to time or as may be specified or fixed in such notice or waiver
thereof. Any meeting of the Board of Directors shall be a legal meeting without
any notice thereof having been given, if all the directors shall be present
thereat, and no notice of a meeting shall be required to be given to any
directors who shall attend such meeting.
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Section 3.9. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting, if a written consent to such action is signed by all
members of the Board or such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board of Directors.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
Section 3.10. Quorum and Manner of Acting. Except as otherwise provided in
these By-Laws, a majority of the total number of directors as at the time
specified by the By-Laws shall constitute a quorum at any regular or special
meeting of the Board of Directors. Except as otherwise provided by statute, by
the Certificate of Incorporation or by these By-Laws, the vote of a majority of
the directors present at any meeting at which a quorum is present shall be the
act of the Board of Directors. In the absence of a quorum, a majority of the
directors present may adjourn the meeting from time to time until a quorum shall
be present. Notice of any adjourned meeting need not be given, except that
notice shall be given to all directors if the adjournment is for more than
thirty days.
ARTICLE IV
----------
OFFICERS
--------
Section 4.1. Executive Officers. The executive officers of the Corporation
shall be a President, such number of Vice Presidents, if any, as the Board of
Directors may determine, a Secretary and a Treasurer. One person may hold any
number of said offices.
Section 4.2. Election, Term of Office and Eligibility. The executive
officers of the Corporation shall be elected annually by the Board of Directors
at its annual meeting or at a special meeting held in lieu thereof. Each
officer, except such officers as may be appointed in accordance with the
provisions of Section 4.3, shall hold office until his successor shall have been
duly chosen and qualified or until his death, resignation or removal. None of
the officers need be members of the Board.
Section 4.3. Subordinate Officers. The Board of Directors may appoint such
Assistant Secretaries, Assistant Treasurers, Controller and other officers, and
such agents as the Board may determine, to hold office for such period and with
such authority and to perform such duties as the Board may from time to time
determine. The Board may, by specific resolution, empower the chief executive
officer of the Corporation or the Executive Committee to appoint any such
subordinate officers or agents.
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Section 4.4. Removal. The President, any Vice President, the Secretary
and/or the Treasurer may be removed at any time, either with or without cause,
but only by the affirmative vote of the majority of the total number of
directors as at the time specified by the By-Laws. Any subordinate officer
appointed pursuant to Section 4.3 may be removed at any time, either with or
without cause, by the majority vote of the directors present at any meeting of
the Board or by any committee or officer empowered to appoint such subordinate
officers.
Section 4.5. The President. The President shall be the chief executive
officer of the Corporation. He shall have executive authority to see that all
orders and resolutions of the Board of Directors are carried into effect and,
subject to the control vested in the Board of Directors by statute, by the
Certificate of Incorporation, or by these By-Laws, shall administer and be
responsible for the management of the business and affairs of the Corporation.
He shall preside at all meetings of the stockholders and the Board of Directors;
and in general shall perform all duties incident to the office of the President
and such other duties incident to the office of the President and such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 4.6. The Vice Presidents. In the event of the absence or disability
of the President, each Vice President, in the order designated, or in the
absence of any designation, then in the order of their election, shall perform
the duties of the President. The Vice Presidents shall also perform such other
duties as from time to time may be assigned to the them by the Board of
Directors or by the chief executive officer of the Corporation.
Section 4.7. The Secretary. The Secretary shall:
(a) Keep the minutes of the meetings of the stockholders and of the Board
of Directors;
(b) See that all notices are duly given in accordance with the provisions
of these By-Laws or as required by law;
(c) Be custodian of the records and of the seal of the Corporation and see
that the seal or a facsimile or equivalent thereof is affixed to or reproduced
on all documents, the execution of which on behalf of the Corporation under
its seal is duly authorized;
(d) Have charge of the stock record books of the Corporation;
(e) In general, perform all duties incident to the office of Secretary, and
such other duties as are provided by these By-Laws and as from time to time
are assigned to him by the Board of Directors or by the chief executive
officer of the Corporation.
Section 4.7 The Assistant Secretaries. If one or more Assistant Secretaries
shall be appointed pursuant to the provisions of Section 4.3 respecting
subordinate officers, then, at the
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request of the Secretary, or in his absence or disability, the Assistant
Secretary designated by the Secretary (or in the absence of such designations,
then any one of such Assistant Secretaries) shall perform the duties of the
Secretary and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the Secretary.
Section 4.8. The Treasurer. The Treasurer shall:
(a) Receive and be responsible for all funds of and securities owned or
held by the Corporation and, in connection therewith, among other things: keep
or cause to be kept full and accurate records and accounts for the
Corporation; deposit or cause to be deposited to the credit of the Corporation
all moneys, funds and securities so received in such bank or other depositary
as the Board of Directors or an officer designated by the Board may from time
to time establish; and disburse or supervise the disbursement of the funds of
the Corporation as may be properly authorized.
(b) Render to the Board of Directors at any meeting thereof, or from time
to time when ever the Board of Directors or the chief executive officer of the
Corporation may require, financial and other appropriate reports on the
condition of the Corporation;
(c) In general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board
of Directors or by the chief executive officer of the Corporation.
Section 4.9. The Assistant Treasurers. If one or more Assistant Treasurers
shall be appointed pursuant to the provisions of Section 4.3 respecting
subordinate officers, then, at the request of the Treasurer, or in his absence
or disability, the Assistant Treasurer designated by the Treasurer (or in the
absence of such designation, then any one of such Assistant Treasurers) shall
perform all the duties of the Treasurer and when so acting shall have all the
powers of and be subject to all the restrictions upon, the Treasurer.
Section 4.10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
Section 4.11. Bonds. If the Board of Directors or the chief executive
officer shall so require, any officer or agent of the Corporation shall give
bond to the Corporation in such amount and with such surety as the Board of
Directors or the chief executive officer, as the case may be, may deem
sufficient, conditioned upon the faithful performance of their respective duties
and offices.
Section 4.12. Delegation of Duties. In case of the absence of any officer
of the Corporation or for any other reason which may seem sufficient to the
Board of Directors, the Board
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of Directors may, for the time being, delegate his powers and duties, or any of
them, to any other officer or to any director.
ARTICLE V
---------
SHARES OF STOCK
---------------
Section 5.1. Regulation. Subject to the terms of any contract of the
Corporation, the Board of Directors may make such rules and regulations as it
may deem expedient concerning the issue, transfer, and registration of
certificates for shares of the stock of the Corporation, including the issue of
new certificates for lost, stolen or destroyed certificates, and including the
appointment of transfer agents and registrars.
Section 5.2. Stock Certificates. Certificates for shares of the stock of
the Corporation shall be respectively numbered serially for each class of stock,
or series thereof, as they are issued, shall be impressed with the corporate
seal or a facsimile thereof, and shall be signed by the President or a Vice
President, and by the Secretary or Treasurer, or an Assistant Secretary or an
Assistant Treasurer, provided that such signatures may be facsimiles on any
certificate countersigned by a transfer agent other than the Corporation or its
employee. Each certificate shall exhibit the name of the Corporation, the class
(or series of any class) and number of shares represented thereby, and the name
of the holder. Each certificate shall be otherwise in such form as may be
prescribed by the Board of Directors.
Section 5.3. Restriction on Transfer of Securities. A restriction on the
transfer or registration of transfer of securities of the Corporation may be
imposed either by the Certificate of Incorporation or by these By-Laws or by an
agreement among any number of security holders or among such holders and the
Corporation. No restriction so imposed shall be binding with respect to
securities issued prior to the adoption of the restriction unless the holders of
the securities are parties to an agreement or voted in favor of the restriction.
A restriction on the transfer of securities of the Corporation is permitted
by this Section if it:
(a) Obligates the holder of the restricted securities to offer to the
Corporation or to any other holders of securities of the Corporation or to any
other person or to any combination of the foregoing a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted securities; or
(b) Obligates the Corporation or any holder of securities of the
Corporation or any other person or any combination of the foregoing to
purchase the securities which are the subject of an agreement respecting the
purchase and sale of the restricted securities; or
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(c) Requires the Corporation or the holders of any class of securities of
the Corporation to consent to any proposed transfer of the restricted
securities or to approve the proposed transferee of the restricted securities;
or
(d) Prohibits the transfer of the restricted securities to designated
persons or classes of persons; and such designation is not manifestly
unreasonable; or
(e) Restricts transfer or registration of transfer in any other lawful
manner.
Unless noted conspicuously on the security, a restriction, even though
permitted by this Section, is ineffective except against a person with actual
knowledge of the restriction.
Section 5.4. Transfer of Shares. Subject to the restrictions permitted by
Section 5.3, shares of the capital stock of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by his duly authorized attorney, upon the surrender or cancellation of a
certificate or certificates for a like number of shares. As against the
Corporation, a transfer of shares can be made only on the books of the
Corporation and in the manner hereinabove provided, and the Corporation shall be
entitled to treat the registered holder of any share as the owner thereof and
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person, whether or not it shall have express
or other notice thereof, save as expressly provided by the statutes of the State
of Delaware.
Section 5.5. Fixing Date for Determination of Stockholders of Record. (a)
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty nor less
than ten days before the date of such meeting. If no record is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; providing, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by the Delaware Corporation Law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody
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of the book in which proceedings of meetings by stockholders are recorded.
Delivery made to a Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by the Delaware General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect to any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 5.6. Lost Certificate. Any stockholder claiming that a certificate
representing shares of stock has been lost, stolen or destroyed may make an
affidavit or affirmation of the fact and, if the Board of Directors so requires,
advertise the same in a manner designated by the Board, and give the Corporation
a bond of indemnity in form and with security for an amount satisfactory to the
Board (or an officer or officers designated by the Board), whereupon a new
certificate may be issued of the same tenor and representing the same number,
class and/or series of shares as were represented by the certificate alleged to
have been lost, stolen or destroyed.
ARTICLE VI
----------
BOOKS AND RECORDS
-----------------
Section 6.1. Location. The books, accounts and records of the Corporation
may be kept at such place or places within or without the State of Delaware as
the Board of Directors may from time to time determine.
Section 6.2. Inspection. The books, accounts, and records of the
Corporation shall be open to inspection by any member of the Board of Directors
at all times; and open to inspection by the stockholders at such times, and
subject to such regulations as the Board of Directors may prescribe, except as
otherwise provided by statute.
ARTICLE VII
-----------
DIVIDENDS AND RESERVES
----------------------
Section 7.1. Dividends. The Board of Directors of the Corporation, subject
to any restrictions contained in the Certificate of Incorporation and other
lawful commitments of the
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Corporation, may declare and pay dividends upon the shares of its capital stock
either out of the surplus of the Corporation, as defined in and computed in
accordance with the Delaware General Corporation Law, or in case there shall be
no such surplus, out of the net profits of the Corporation for the fiscal year
in which the dividend is declared and/or the preceding fiscal year. If the
capital of the Corporation, computed in accordance with the Delaware General
Corporation Law, shall have been diminished by depreciation in the value of its
property, or by losses, or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets, the Board of
Directors of the Corporation shall not declare and pay out of such net profits
any dividends upon any shares of any classes of its capital stock until the
deficiency in the amount of capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of assets shall
have been repaired. Dividends may be paid in cash, in property, or in shares of
the Corporation's capital stock.
Section 7.2. Reserves. The Board of Directors of the Corporation may set
apart, out of any of the funds of the Corporation available for dividends, a
reserve or reserves for any proper purpose and may abolish any such reserve.
ARTICLE VIII
------------
MISCELLANEOUS PROVISIONS
------------------------
Section 8.1. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 8.2. Depositories. The Board of Directors or an officer designated
by the Board shall appoint banks, trust companies, or other depositories in
which shall be deposited from time to time the money or securities of the
Corporation.
Section 8.3. Checks, Drafts and Notes. All checks, drafts, or other orders
for the payment of money and all notes or other evidence or indebtedness issued
in the name of the Corporation shall be signed by such officer or officers or
agent or agents as shall from time to time be designated by resolution of the
Board of Directors or by an officer appointed by the Board.
Section 8.4. Contracts and Other Instruments. The Board of Directors may
authorize any officer, agent or agents to enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation and such
authority may be general or confined to specific instances.
Section 8.5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the
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Corporation would have the power to indemnify him against such liability under
the Delaware General Corporation Law.
Section 8.6. Notices. Whenever under the provisions of the statutes or of
the Certificate of Incorporation or of these By-Laws notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, by depositing the same
in post office or letter box, in a postpaid sealed wrapper, or by delivery to a
telegraph company, addressed to such director or stockholder at such address as
appears on the records of the Corporation, and such notice shall be deemed to be
given at the time when the same shall be thus mailed or delivered to a telegraph
company. Notice may also be given by facsimile transmission provided that such
notice shall be immediately confirmed by a telephone call to the recipient at
the number specified in the records of the Corporation and such notice shall be
deemed to be given at the time when the same shall be transmitted by facsimile
machine.
Section 8.7. Waivers of Notice. Whenever any notice is required to be given
under the provisions of the statutes or of the Certificate of Incorporation or
of these By-Laws, a waiver thereof in writing signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
Section 8.8. Stock in Other Corporations. Any shares of stock in any other
Corporation which may be from time to time be held by this Corporation may be
represented and voted at any meeting of shareholders of such Corporation by the
President or a Vice President, or by any other person or persons thereunto
authorized by the Board of Directors, or by any proxy designated by written
instrument of appointment executed in the name of this Corporation by its
President or a Vice President. Shares of stock belonging to the Corporation need
not stand in the name of the Corporation, but may be held for the benefit of the
Corporation in the individual name of the Treasurer of any other nominee
designated for the purpose by the Board of Directors. Certificates for shares so
held for the benefit of the Corporation shall be endorsed in blank or have
proper stock powers attached so that said certificates are at all times in due
form for transfer, and shall be held for safekeeping in such manner as shall be
determined from time to time by the Board of Directors.
Section 8.9. Amendment of By-Laws. The stockholders, by the affirmative
vote of the holders of a majority of the stock issued and outstanding and having
voting power may, at any annual or special meeting if notice of such alteration
or amendment of the By-Laws is contained in the notice of such meeting, adopt,
amend, or repeal these By-Laws, and alterations or amendments of By-Laws made by
the stockholders shall not be altered or amended by the Board of Directors.
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The Board of Directors, by the affirmative vote of a majority of the whole
Board, may adopt, amend, or repeal these By-Laws at any meeting, except as
provided in the above paragraph. By-Laws made by the Board of Directors may be
altered or repealed by the stockholders.
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