<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1999
REGISTRATION NO. [ ]
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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 1999-2
(Issuer with respect to the Securities)
HELLER FUNDING CORPORATION
(Depositor of the Trust described herein)
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6189 36-4165546
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
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.
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.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
(312) 558-5600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Receivable-Backed Notes............. $1,000,000 100% $1,000,000 $278
Receivable-Backed Notes............. $1,000,000 100% $1,000,000 $278
Receivable-Backed Notes............. $1,000,000 100% $1,000,000 $278
Receivable-Backed Notes............. $1,000,000 100% $1,000,000 $278
Receivable-Backed Notes............. $1,000,000 100% $1,000,000 $278
Receivable-Backed Notes............. $1,000,000 100% $1,000,000 $278
</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>
SUBJECT TO COMPLETION, DATED , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PRELIMINARY PROSPECTUS
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1999-2
RECEIVABLE-BACKED NOTES, SERIES 1999-2
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HELLER FUNDING CORPORATION, HELLER FINANCIAL, INC.,
as trust depositor as servicer
</TABLE>
------------------------
We are offering the following six classes of Receivable-Backed Notes, Series
1999-2:
<TABLE>
<CAPTION>
INITIAL
AGGREGATE FIRST STATED PRICE TO UNDERWRITING
CLASS OF PRINCIPAL PAYMENT MATURITY PUBLIC PER DISCOUNT PER
NOTES AMOUNT COUPON RATE DATE DATE NOTE NOTE
- --------- ---------- ----------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $ % % %
A-2 $ % % %
A-3 $ % % %
A-4 $ % % %
B $ % % %
C $ % % %
</TABLE>
The total price to the public is $ . The total underwriting discount
is $ . The total proceeds to the trust is $ .
YOU SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" ON PAGE 10 OF THIS PROSPECTUS.
THE NOTES ARE NOT OBLIGATIONS OF AND WILL NOT REPRESENT OR INTERESTS IN, AND
ARE NOT GUARANTEED OR INSURED BY, THE TRUST DEPOSITOR, THE OWNER TRUSTEE, HELLER
FINANCIAL, INC. OR ANY OF THEIR RESPECTIVE AFFILIATES, OR ANY GOVERNMENTAL
AGENCY.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999.
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TABLE OF CONTENTS
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Important Notice about Information Presented in
this Prospectus.............................. iii
Summary........................................ 2
Risk Factors................................... 10
The Absence of an Existing Market for the Notes
May Limit Your Ability to Resell the Notes... 10
The Price at Which You Can Resell Your Notes
May Decrease if the Ratings of Your Notes
Change....................................... 10
The Subordination of the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class B Notes,
the Class C Notes and the Class D Notes is a
Limited Form of Credit Enhancement........... 10
Limited Assets Secure the Notes; Noteholders
Will Have No Recourse to the Originators,
Servicer or their Affiliates in the Event
Delinquencies and Losses Deplete the Trust's
Assets....................................... 11
Because Disproportionate Amounts of Contracts
Relate to Four States, Adverse Events in
Those States and Surrounding Regions May
Cause Increased Defaults and Delinquencies... 11
Because Disproportionate Amounts of Contracts
Relate to Particular Industries, Adverse
Economic Conditions in Those Industries May
Cause Increased Defaults and Delinquencies... 12
The Rate at which Equipment or Software Becomes
Obsolete Affects the Prepayment Rate of the
Contracts and the Notes...................... 12
Even if We Repossess and Sell the Equipment
Relating to a Contract After an Obligor
Defaults, Shortfalls in Amounts Available To
Pay the Notes May Occur if the Market Value
of the Equipment Has Declined................ 12
Contracts Relating to Software or Related
Support and Consulting Services are not
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Secured by the Software or Related
Services..................................... 16
Use of Proceeds................................ 17
Calculation of Discounted Contract Balance..... 17
Composition of the Contracts................... 18
Distribution of Contracts by Contract Type..... 19
Distribution of Contracts by State in Which
Obligors Are Located......................... 20
Distribution of Contracts by Equipment Type.... 21
Distribution of Contracts by Obligor
Industry..................................... 22
Distribution of Contracts by Original Gross
Contract Balance............................. 23
Distribution of Contracts by Remaining
Discounted Contract Balance.................. 24
Distribution of Contracts by Original Contract
Term......................................... 25
Distribution of Contracts by Remaining Months
to Stated Maturity........................... 25
Delinquency and Loss Information............... 25
Definition of Delinquency for the Contracts
Transferred to the Trust..................... 27
The Contracts.................................. 27
Prepayment and Yield Considerations............ 35
Heller Financial, Inc. and Heller Financial
Leasing, Inc................................. 38
The Trust...................................... 44
The Trust Depositor............................ 45
Description of the Notes and Indenture......... 45
General...................................... 46
Interest and Principal....................... 46
Amounts Available for Payments on the
Notes...................................... 47
Allocations.................................. 48
Reserve Fund................................. 55
Collection Account and Collection Period..... 56
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i
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PAGE
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Events of Default............................ 58
Events of Default; Remedies.................. 59
The Indenture Trustee........................ 59
Governing Law................................ 60
Amendments................................... 60
Servicing Compensation and Payment of
Expenses................................... 61
Optional Termination......................... 61
Reports...................................... 62
List of Noteholders.......................... 63
Administration Agreement..................... 63
Book-Entry Registration...................... 63
Issuance of Certificated Notes at a Later
Date....................................... 67
The Class D Notes and the Certificate.......... 67
The Sale and Servicing Agreement............... 68
Termination of Trust......................... 68
Conveyance of the Contracts.................. 68
Representations and Warranties; Definition of
Eligible Contract.......................... 69
Remedies for Breaches of Representations and
Warranties; Definition of Ineligible
Contract................................... 72
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Concentration Amounts; Definition of Excess
Contract................................... 73
Material Modifications to Contracts.......... 74
Substitute Contracts......................... 74
Definition of Defaulted Contracts............ 75
Indemnification.............................. 75
Servicing Standard and Servicer Advances..... 76
Servicer Resignation......................... 76
Servicer Default............................. 77
Evidence as to Compliance.................... 78
Amendments................................... 79
The Owner Trustee............................ 79
Federal Income Tax Consequences................ 80
ERISA Considerations........................... 85
Plan of Distribution........................... 87
Rating of the Notes............................ 89
Legal Matters.................................. 89
Experts........................................ 89
Index of Terms................................. 92
</TABLE>
------------------------
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
Within the period during which there is an obligation to deliver a
prospectus, the underwriters will, at your request, promptly deliver to you, or
cause to be delivered to you, without charge, a paper copy of this prospectus.
No dealer, salesman or other person is authorized to give any information or
to make any representation not contained in this prospectus. If anyone makes
such a representation to you, you should not rely on it.
This prospectus does not constitute an offer to sell or a solicitation of
any offer to buy any security other than the notes offered by this prospectus,
nor does it constitute an offer to sell or a solicitation of any offer to buy
any of the notes to any person in any jurisdiction in which the person making
such offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such an offer or solicitation to such person.
ii
<PAGE>
SUMMARY
The following is only a summary of the terms of the notes. It does not
contain all the information that may be important to you. You should read this
entire prospectus. In addition, you may wish to read the documents governing the
sale of the contracts, the formation of the trust and the issuance of notes.
Those documents have been filed as exhibits to the registration statement of
which this prospectus is a part.
There are material risks associated with an investment in the notes. See
"RISK FACTORS" on page 12 for a discussion of factors you should consider before
making an investment in the notes.
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The Trust......................... Heller Equipment Asset Receivables Trust 1999-2. The
trust's principal offices will be in care of Wilmington
Trust Company, as owner trustee, at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890,
telephone number (302) 651-1000.
The Originators................... Heller Financial, Inc. and Heller Financial Leasing,
Inc.
The Trust Depositor............... Heller Funding Corporation. The trust depositor is 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, telephone (312) 441-7246.
The Servicer...................... Heller Financial, Inc., with Heller Financial Leasing,
Inc. acting as a sub-servicer.
The Indenture Trustee............. Norwest Bank Minnesota, National Association
The Trust's Assets
A. The Contracts............... The trust's assets will primarily consist of the
contracts.
The contracts consist of:
- conditional sale agreements
- leases
- secured promissory notes
- installment payment agreements
- financing agreements
Most of the contracts are end-user contracts. End-user
contracts relate to the financing by end-users of
equipment or software and related support and consulting
services. The obligors on the end-user contracts are the
actual end-users. The other contracts are limited
recourse loans to equipment manufacturers, dealers or
distributors or to computer software distributors, all
of which are secured by one or more end-user contracts.
We refer to these other contracts as vendor loans.
The contracts have been originated by Heller Financial,
Inc., Heller Financial Leasing, Inc. or vendors of
equipment or software. If a vendor originated a
contract, the vendor assigned the contract to Heller
Financial, Inc. or Heller Financial Leasing, Inc. Heller
Financial, Inc. and Heller Financial Leasing, Inc. have
sold the contracts to the trust
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2
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depositor. On or about [ ,] 1999, the trust
depositor will transfer the contracts and security
interests in the related equipment to the trust. The
contracts have been selected based on criteria specified
in the sale and servicing agreement.
Frequently, information about the contracts is expressed
in terms of the discounted contract balance. The
discounted contract balance of a contract is the present
value of scheduled payments to be paid on the contract
calculated at a discount rate of [ ]%. For a more
specific description of how the discounted contract
balance is calculated see "DISCOUNTED CONTRACT BALANCE".
Where noted in this prospectus, we used a statistical
discount rate of [ ]% to calculate the discounted
contract balances of the contracts. The statistical
discount rate is based on an average of the estimated
interest rates of the notes weighted by the estimated
initial average life and initial principal amounts of
the notes.
None of the obligors on the contracts are located
outside of the United States and its territories. No
more than [ ]% (calculated using the statistical
discount rate) of the aggregate discounted contract
balance of the contracts relates to obligors located in
the same state. All of the contracts are commercial
contracts and, as of the date of this prospectus, no
contract has any delinquent scheduled payments. We
consider a scheduled payment to be delinquent if:
- it is more than 60 days delinquent; and
- the delinquent amount is more than greater of the
following:
(A) $10 or
(B) 10% of the scheduled payment.
See "THE SALE AND SERVICING AGREEMENT--REPRESENTATIONS
AND WARRANTIES; DEFINITION OF ELIGIBLE CONTRACT" and
"THE CONTRACTS POOL".
As of [ ,] 1999, the contracts had the
following characteristics calculated using the
statistical discount rate:
</TABLE>
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<S> <C>
Number of contracts........................ []
Aggregate discounted contract balance...... $ []
Average discounted contract balance of a
contract................................. $ []
Weighted average original term to
maturity................................. [ ] months
Range...................................... [ ] months
Weighted average remaining term to
maturity................................. [ ] months
Range...................................... [ ] months
</TABLE>
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Changes in characteristics of the contracts between
[ ,] 1999 and the closing date will not affect
more than 5.00% of the aggregate discounted contract
balance of the contracts.
</TABLE>
3
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For further information regarding the contracts, see
"THE CONTRACTS POOL" and "THE CONTRACTS," as well as
"THE SALE AND SECURITY AGREEMENT--REPRESENTATIONS AND
WARRANTIES; DEFINITION OF ELIGIBLE CONTRACT" and
"--CONCENTRATION AMOUNTS; DEFINITION OF EXCESS
CONTRACT".
We may replace a contract that is part of the trust's
assets with a substitute contract:
- if we subsequently determine that a contract was not
eligible to be sold to the trust at the time of its
sale to the trust;
- if we did not remove and replace that contract, the
obligor or equipment concentrations of contracts would
exceed the limits described in "THE SALE AND
SERVICING AGREEMENT-- CONCENTRATION AMOUNTS;
DEFINITION OF EXCESS CONTRACTS;" or
- if such contract is prepaid.
See "THE SALE AND SERVICE AGREEMENT--SUBSTITUTE
CONTRACTS". The substitute contracts will have been
originated under the same credit criteria and policies
as the contracts they replace.
B. Reserve Fund................ On the closing date of the transfer of the contracts to
the trust, the trust depositor will establish a reserve
fund in the name of the indenture trustee. The reserve
fund provides you with limited protection in the event
collections from obligors on the contracts are
insufficient to make payments on the notes. We cannot
assure you, however, that this protection will be
adequate to prevent shortfalls in amounts available to
make payment on the notes. The initial balance of the
reserve fund will be $[ ]. If, on any payment date,
the amounts available for distribution exceed the
amounts needed to pay amounts owed to the servicer and
to pay interest and principal on the notes, the excess
will be deposited into the reserve fund. However, the
amount deposited in the reserve fund shall not exceed
the amount needed to increase the reserve fund balance
to an amount equal to 0.70% of the aggregate discounted
contract balance of the contracts. Investment earnings
on amounts held in the reserve fund will be available
for distribution to you.
If on any payment date, collections on the contracts are
less than the amount needed to pay interest on the
notes, the indenture trustee will withdraw funds from
the reserve fund to pay the interest. Additionally, if
collections on the contracts are sufficient to pay
interest but not principal on the notes, we will
withdraw any amounts in excess of 0.70% of the aggregate
discounted contract balance of the contracts. The
conditions under which we will withdraw amounts from the
reserve fund are more specifically described in the
"DESCRIPTION OF THE NOTES AND INDENTURE--ALLOCATIONS"
and "--RESERVE FUND".
Securities not Offered by this
Prospectus...................... We will also issue $[ ] aggregate principal
amount
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4
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of Class [ ]% Receivable-Backed Notes, Series
1999-2 and a certificate with a $[ ] certificate
balance, neither of which are offered by this
prospectus.
Terms of the Notes................ The basic terms of the notes will be as described below.
See "DESCRIPTION OF THE NOTES AND INDENTURE". We will
pay principal and interest due on the notes using:
- collections of payments due under the contracts held
by the trust;
- earnings on amounts held in the collection account;
- late charges relating to a contract if the late
charges were included in the contract's terms as of the
date the contract was purchased by the trust;
- amounts earned on funds held in the reserve fund;
- amounts received upon the prepayment or purchase of
contracts or liquidation of the contracts and
disposition of the related equipment upon defaults
under the contracts;
- amounts received from vendor recourse, if any; and
- amounts in the reserve fund more specifically
described in "DESCRIPTION OF NOTES AND
INDENTURE--RESERVE FUND".
See "AMOUNTS AVAILABLE FOR PAYMENTS ON THE NOTES".
You may purchase the offered notes in minimum
denominations of $1,000, and in integral multiples of
$1,000 in excess of the minimum denominations. We will
offer the notes only in book-entry form.
A. Events of Default........... Events of default with respect to the notes include:
- failure to pay accrued interest on any payment date,
- failure to pay outstanding principal on the maturity
date,
- breach of representations and warranties with respect
to the contracts which are materially incorrect and
which have a material adverse effect on the
noteholders and
- the occurrence of insolvency events with respect to
the originators, the trust depositor, the trust or the
servicer.
See "DESCRIPTION OF THE NOTES AND INDENTURE--EVENTS OF
DEFAULT".
B. Interest.................... On a payment date, we will first repay any outstanding
servicer advances. Second, we will pay the servicer's
monthly servicing fee, but only if the servicer is not
Heller Financial, Inc. or one of its affiliates. Third,
we will pay interest on the
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5
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notes at the rates specified on the cover of this
prospectus in the following order:
</TABLE>
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<CAPTION>
SECURITIES RECEIVING INTEREST PAYMENT
CLASS OF NOTES PRIOR TO SPECIFIED CLASS
- ----------------- --------------------------------------------------
<S> <C>
A-1, A-2, A-3,
A-4............ None
B................ Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes
C................ Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class B Notes
D................ Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class B Notes, Class C Notes
</TABLE>
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See "DESCRIPTION OF THE NOTES AND
INDENTURE--ALLOCATIONS".
We will calculate interest on the Class A-1 Notes on the
basis of actual days elapsed over a year of 360 days. We
will calculate interest on all other notes on the basis
of a year of 360 days consisting of twelve 30 day
months.
C. Principal..................... On a payment date, after we pay interest on the notes,
we will pay principal on the notes in the following
order:
</TABLE>
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<CAPTION>
SECURITIES RECEIVING PRINCIPAL PAYMENT
CLASS OF NOTES PRIOR TO SPECIFIED CLASS
- ----------------- --------------------------------------------------
<S> <C>
A-1.............. None
A-2.............. Class A-1 Notes
A-3.............. Class A-1 Notes, Class A-2 Notes
Class B Notes, Class C Notes and Class D Notes
will receive principal payments prior to Class A-3
Notes on any payment date on which the outstanding
principal amount of the Class A-2 Notes is greater
than $0
A-4.............. Class A-1 Notes, Class A-2 Notes, Class A-3 Notes
Class B Notes, Class C Notes and Class D Notes
will receive principal payments prior to Class A-4
Notes on any payment date on which the outstanding
principal amount of the Class A-3 Notes is greater
than $0
B................ Class A-1 Notes, Class A-2 Notes
Class A-3 Notes will receive principal payments
prior to the Class B Notes after the outstanding
principal amount of the Class A-1 Notes and Class
A-2 Notes is reduced to $0
Class A-4 Notes will receive principal payments
prior to the Class B Notes only
</TABLE>
6
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<CAPTION>
SECURITIES RECEIVING PRINCIPAL PAYMENT
CLASS OF NOTES PRIOR TO SPECIFIED CLASS
- ----------------- --------------------------------------------------
after the outstanding principal amount of the
Class A-1 Notes, Class A-2 Notes and Class A-3
Notes is reduced to $0
<S> <C>
C................ Class A-1 Notes, Class A-2 Notes, Class B Notes
Class A-3 Notes will receive principal payments
prior to the Class C Notes only after the
outstanding principal amount of the Class A-1
Notes and Class A-2 Notes is reduced to $0
Class A-4 Notes will receive principal payments
prior to the Class C Notes only after the
outstanding principal amount of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes is
reduced to $0
D................ Class A-1 Notes, Class A-2 Notes, Class B Notes,
Class C Notes
Class A-3 Notes will receive principal payments
prior to the Class D Notes only after the
outstanding principal amount of the Class A-1
Notes and Class A-2 Notes is reduced to $0
Class A-4 Notes will receive principal payments
prior to the Class C Notes only after the
outstanding principal amount of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes is
reduced to $0
</TABLE>
<TABLE>
<S> <C>
See "DESCRIPTION OF THE NOTES AND
INDENTURE--ALLOCATIONS".
The amount of principal paid on a Class A-1 Note prior
to its stated maturity date will be based on the amount
that the aggregate discounted contract balance of the
contracts has declined during the most recent full
collection period. Each collection period is
approximately a month.
After the Class A-1 Notes have been paid in full, the
amount of principal paid on any other class of notes
will be the amount necessary to reduce the outstanding
principal of that class of notes to the greater of:
(1) a specified percentage of the aggregate discounted
contract balance of the contracts as of the last
day of the most recent full collection period or
(2) an amount which is intended to maintain a credit
enhancement equal to 31% of the initial credit
enhancement provided by the classes of notes and
certificate subordinate to such class after taking
into account cumulative losses on the contracts.
</TABLE>
7
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The percentage used in clause (1) is the ratio of the
initial principal amount of such class of notes to the
aggregate discounted contract balance of the contracts
minus the initial principal amount of the Class A-1
Notes.
Following an event of default, we will not make
principal payments in the order described above.
Instead, we will pay principal on the notes in the
following order:
- outstanding principal of Class A-1 Notes
- outstanding principal of Class A-2 Notes, Class A-3
Notes and Class A-4 Notes
- outstanding principal of Class B Notes
- outstanding principal of Class C Notes
- outstanding principal of Class D Notes
See "DESCRIPTION OF THE NOTES AND
INDENTURE--ALLOCATIONS" and "--EVENTS OF DEFAULT".
D. Payment Dates............... You will receive distributions of interest and principal
on the [ ] day of each month, or if that day is not a
business day, the next business day.
E. Stated Maturity Date........ The notes will mature on the date shown on the cover of
this prospectus, except that if the day is not a
business day, then the stated maturity date will be the
next business day.
F. Optional Redemption......... If the aggregate discounted contract balance of the
contracts at the time is less than 10% of the initial
aggregate discounted contract balance of the contracts
as of [ ,] 1999, the trust depositor may
redeem any outstanding notes. If the trust depositor
does redeem any outstanding notes, the redemption price
will be equal to the unpaid principal amount of the
notes plus accrued and unpaid interest through the date
of redemption.
Servicing; Servicing Fee.......... The servicer will be responsible for servicing, managing
and administering the contracts and related interests,
and enforcing and making collections on the contracts.
Additionally, the servicer and the sub-servicer have in
some cases delegated servicing and collection functions
on some contracts to the vendor who originated those
contracts. In such instances, the servicer retains the
right to determine or veto some servicing decisions
and/or to replace or take over servicing and collection
functions from the vendor. Although Heller Financial,
Inc. may delegate its servicing duties, it remains
liable for the performance or non-performance of those
duties. See "THE SALE AND SERVICING AGREEMENT--SERVICING
STANDARD AND SERVICER ADVANCES".
The servicer will be entitled to receive a monthly fee
equal to the product of:
(1) one-twelfth of 0.40% and
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8
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<S> <C>
(2) the aggregate discounted contract balance of the
contracts in the trust as of the second day of the
immediately preceding calendar month.
The fee is payable out of amounts we receive on the
contracts. The servicer will pay any servicing fees to
be paid to any sub-servicers (including vendor
sub-servicers) from the servicer's monthly servicing
fee.
The servicing fee is paid after making payments of
interest and principal on the notes as long as Heller
Financial, Inc. or any affiliate is the servicer.
See "DESCRIPTION OF THE NOTES AND INDENTURE--SERVICING
COMPENSATION AND EXPENSES" and "THE SALE AND SERVICING
AGREEMENT".
Federal Income Tax
Considerations.................. In the opinion of Winston & Strawn, federal tax counsel
to the trust depositor, for federal income tax purposes,
the notes offered by this prospectus will be
characterized as debt, and the trust will not be
characterized as an association or a publicly traded
partnership taxable as a corporation. You, by accepting
a note, agree to treat the note as indebtedness. See
"FEDERAL INCOME TAX CONSIDERATIONS".
ERISA Considerations.............. Subject to the considerations discussed under "ERISA
CONSIDERATIONS", the notes will be eligible for purchase
by some employee benefit plans. Any benefit plan
fiduciary considering purchase of the notes should,
however, consult with its counsel regarding the
consequences of its purchase under ERISA and the
Internal Revenue Code. See "ERISA CONSIDERATIONS".
Rating............................ We will not issue the notes unless they receive ratings
from the following rating agencies as set forth below:
</TABLE>
<TABLE>
<CAPTION>
MOODY'S FITCH DUFF & PHELPS
INVESTORS IBCA, CREDIT
CLASS OF NOTE SERVICE INC. RATING CO.
- --------------------------------- ----------- --------- -------------
<S> <C> <C> <C>
A-1..............................
A-2..............................
A-3..............................
A-4..............................
B................................
C................................
</TABLE>
<TABLE>
<S> <C>
A rating is not a recommendation to purchase, hold or
sell notes since a rating does not comment on market
price or suitability for a particular investor. See
"RATING OF THE NOTES".
</TABLE>
9
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors before you invest
in the notes.
THE ABSENCE OF AN EXISTING MARKET FOR THE NOTES MAY LIMIT YOUR ABILITY TO RESELL
THE NOTES
There is currently no public market for the notes and we cannot assure you
that one will develop. Thus, you may not be able to resell your notes at all, or
may be able to do so only at a substantial discount. The underwriters may assist
in resales of the notes but they are not obligated to do so. We do not intend to
apply for listing of the notes on any securities exchange or for the inclusion
of the notes on any automated quotation system. Even if a secondary market does
develop, it may not continue.
PREPAYMENTS ON THE CONTRACTS MAY CAUSE AN EARLIER REPAYMENT OF THE NOTES THAN
YOU EXPECT AND YOU MAY NOT BE ABLE TO FIND INVESTMENTS WITH THE SAME YIELD AS
THE NOTES AT THE TIME OF THE REPAYMENT.
A higher than anticipated level of prepayments may cause us to pay principal
on the notes sooner than you expected. Similarly, upon the occurrence of an
event of default, you may also receive principal of the notes sooner than you
expected. See "DESCRIPTION OF THE NOTES AND INDENTURE--EVENTS OF DEFAULT" and
"PREPAYMENT AND YIELD CONSIDERATION". You may not be able to reinvest those
distributions of principal at yields equivalent to the yield on the notes;
therefore, the ultimate return you receive on your investment in the notes may
by less than the return you expected on the notes. 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.
We cannot assure you that prepayments on the contracts held by the trust
will conform to any historical experience. We cannot predict the actual rate of
prepayments which will be experienced on the contracts.
THE PRICE AT WHICH YOU CAN RESELL YOUR NOTES MAY DECREASE IF THE RATINGS OF YOUR
NOTES CHANGE
Moody's Investors Service, Fitch IBCA, Inc. and Duff & Phelps Credit Rating
Co. are the rating agencies rating the notes. At any time, a rating may be
lowered or withdrawn entirely by a rating agency rating the notes. In the event
that the rating initially assigned to any note is subsequently lowered or
withdrawn for any reason, you may not be able to resell your notes without a
substantial discount. For more detailed information regarding the ratings
assigned to any class of the notes, see "RATING OF THE NOTES."
THE SUBORDINATION OF THE CLASS A-2 NOTES, CLASS A-3 NOTES, CLASS A-4 NOTES,
CLASS B NOTES, THE CLASS C NOTES AND THE CLASS D NOTES IS A LIMITED FORM OF
CREDIT ENHANCEMENT
We will pay interest and principal on some classes of notes prior to paying
interest and principal on other classes of notes. See "DESCRIPTION OF THE NOTES
AND INDENTURE--ALLOCATIONS". The subordination of some classes of notes to
others means that the subordinated classes of notes are more likely to suffer
the consequences of delinquent payments and defaults on the contracts than the
notes which receive payments prior to those subordinated classes.
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<PAGE>
The more senior classes of notes could lose the credit enhancement provided
by the more subordinate classes and the reserve fund if delinquencies and
defaults on the contracts increase and if the collections on the contracts and
amounts in the reserve fund are insufficient to pay even the more senior classes
of notes.
LIMITED ASSETS SECURE THE NOTES; NOTEHOLDERS WILL HAVE NO RECOURSE TO THE
ORIGINATORS, SERVICER OR THEIR AFFILIATES IN THE EVENT DELINQUENCIES AND
LOSSES DEPLETE THE TRUST'S ASSETS
The trust is a limited purpose trust with limited assets. Moreover, you have
no recourse to the general credit of the servicer, originator or their
affiliates. Therefore, you must rely solely upon the contracts for payment of
principal and interest on the notes. If a contract is a vendor loan, you must
rely solely upon the end-user contracts securing the vendor loan. Most vendor
loans are non-recourse to the vendors. You are limited to recovering amounts due
under vendor loans solely from the end-user contracts and related security. If
payments on the contracts are delinquent or are insufficient to make payments on
the notes, no assets other than the reserve fund will be available to make
payments on the notes. Similarly, in the event that contracts become defaulted
contracts, the proceeds from the sale of the equipment securing the contracts
may be insufficient to make payments on the notes and no other assets will be
available for the payment of the deficiency. There can be no assurance that the
delinquency and loss experience of the contracts will be comparable to the
information set forth in "DELINQUENCY AND LOSS INFORMATION".
BECAUSE DISPROPORTIONATE AMOUNTS OF CONTRACTS RELATE TO FOUR STATES, ADVERSE
EVENTS IN THOSE STATES AND SURROUNDING REGIONS MAY CAUSE INCREASED DEFAULTS
AND DELINQUENCIES
If adverse events or economic conditions were particularly severe in the
geographic regions in which there is a substantial concentration of obligors,
the amount of delinquent payments and defaults on the contracts may increase. As
a result, the overall timing and amount of collections on the contracts held by
the trust may differ from what you may have expected, and you may experience
delays or reductions in payments you expected to receive. As of [ ,] 1999,
approximately [ ]% of the aggregate discounted contract balance (calculated
using the statistical discount rate) of the contracts held by the trust related
to obligors located in [ ], [ ]% in [ ], [ ]% in [ ] and
[ ]% in [ ]. No other state accounts for more than [ ]% of the
contracts. The contracts in those states represent [ ]% of the aggregate
discounted contract balance of the contracts held by the trust, calculated using
the statistical discount rate. An example of an adverse event specific to a
geographic region is the occurrence of a catastrophic earthquake in California.
An earthquake in California could have negative regional economic repercussions
and potentially cause obligors in that region to delay or reduce their payments
on contracts. Additionally, a substantial downturn in the financial services
industry which is highly concentrated in the states of New York and New Jersey
could reduce revenues for obligors in those states and ultimately reduce the
associated obligors' ability to make timely payments on their related contracts.
BECAUSE DISPROPORTIONATE AMOUNTS OF CONTRACTS RELATE TO PARTICULAR INDUSTRIES,
ADVERSE ECONOMIC CONDITIONS IN THOSE INDUSTRIES MAY CAUSE INCREASED DEFAULTS
AND DELINQUENCIES
If the industries in which there is a substantial concentration of obligors
experience adverse events or economic conditions, the overall timing and amount
of collections on the contracts held by the trust may differ from what you may
have expected. This could result in delays or reduced payments to you. As of
[ ,]1999, contracts constituting approximately [ ]% of the aggregate
discounted contract balance, calculated using the statistical discount rate, of
the contracts held by the trust relate to equipment used in the printing
industry, [ ]% relate to the business services, [ ]% relate to industrial
machinery, [ ]% relate to nondepository institutions and [ ]% relate to rubber
and miscellaneous plastic products. A reduction in the demand for materials
produced by the industries that
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<PAGE>
utilize print materials, such as advertising and print media, may consequently
cause an increase in delinquencies and defaults on contracts with obligors
associated with the printing industry. A decrease in the demand for consumer
goods could reduce revenues for the plastics industries and this may
consequently increase delinquencies and defaults on the related contracts.
Additionally, an overall economic downturn could reduce demand for credit. No
other industry accounts for more than [ ]% of the aggregate discounted contract
balance calculated using the statistical discount rate, of the contracts held by
the trust.
BECAUSE DISPROPORTIONATE AMOUNTS OF CONTRACTS RELATE TO GROUPS OF OBLIGORS,
INCLUDING OBLIGORS UNDER CONTRACTS ORIGINATED BY THE SAME VENDOR, ADVERSE
ECONOMIC EVENTS FOR THOSE GROUPS OR VENDORS MAY CAUSE INCREASED DEFAULTS AND
DELINQUENCIES
Approximately [ ]% of the aggregate discounted contract balance, calculated
using the statistical discount rate of the contracts, was originated by a single
vendor. That vendor leases printing equipment. If the vendor representing [ ]%
of the aggregate discounted contract balance were to experience financial
difficulties, the obligors' payment performance with respect to the related
contracts may decline as the obligors may be less inclined to make payments on
contracts originated by a vendor who is suffering financial difficulties. In
effect, if any group of obligors, including obligors under contracts originated
by a single vendor, i.e., the printing equipment vendors, were to experience
financial difficulties, the amount of delinquent payments and defaults on the
contracts may increase. As a result, the overall timing and amount of
collections on the contracts held by the trust may differ from what you may have
expected, and you may experience delays or reductions in payments you expected
to receive. No other single vendor originated more than [ ]% of the aggregate
discounted contract balance, calculated using the statistical discount rate, of
the contracts. We are not able to determine and have no basis to predict whether
any events have occurred or may occur, that would cause a material increase in
delinquencies and defaults on contracts originated by an individual vendor or
group of vendors. Similarly, we have no basis to determine whether any economic
conditions, laws or regulations exist or will exist that would cause a material
increase in delinquencies and defaults on contracts originated by an individual
vendor or group of vendors. There can be no assurance that any adverse events or
conditions which materially affect contracts originated by an individual vendor
or a group of vendors will not occur. See also "--INEFFECTIVE SALE IN VENDOR
BANKRUPTCY COULD DELAY OR REDUCE PAYMENTS UNDER THE CONTRACTS".
THE RATE AT WHICH EQUIPMENT OR SOFTWARE BECOMES OBSOLETE AFFECTS THE PREPAYMENT
RATE OF THE CONTRACTS AND THE NOTES
Technological change could affect your investment in the notes. For example,
technological change may cause obligors to prepay their respective contracts in
order to acquire more current technology. Consequently, an increase in
prepayments on the contracts held by the trust would result in an increase in
the rate at which principal on the notes is paid. As a result, you may need to
reinvest your note principal in a market that offers only investments with lower
returns. See "PREPAYMENT AND YIELD CONSIDERATIONS" and "THE CONTRACTS--END-USER
CONTRACTS".
EVEN IF WE REPOSSESS AND SELL THE EQUIPMENT RELATING TO A CONTRACT AFTER AN
OBLIGOR DEFAULTS, SHORTFALLS IN AMOUNTS AVAILABLE TO PAY THE NOTES MAY OCCUR
IF THE MARKET VALUE OF THE EQUIPMENT HAS DECLINED
If a contract held by the trust becomes a defaulted contract, the only
sources of payment for amounts expected to be paid on that contract will be the
income and proceeds from the sale of any related equipment and a deficiency
judgment, if any, against the obligor under the defaulted contract as well as,
to the extent available, vendor recourse. See "THE SALE AND SERVICING
AGREEMENT--DEFINITION OF DEFAULTED CONTRACTS". Since the market value of the
equipment may decline faster than the discounted
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<PAGE>
contract balance, the servicer may not recover the entire amount due on the
contract and might not receive any recoveries on the equipment. The reserve fund
and the subordination of interest and principal payments on the Class D Notes
are intended to make up for deficiencies in the proceeds and recoveries on the
contracts. However, this protection is limited and could be depleted if those
deficiencies are larger than we currently anticipate.
SERVICER'S OR VENDOR'S RETENTION OF CONTRACT FILES MAY HINDER OUR ABILITY TO
REALIZE THE VALUE OF EQUIPMENT SECURING THE CONTRACTS
To facilitate servicing and reduce administrative costs, the servicer will
retain possession of the documents evidencing the contracts held by the trust.
Because the documents evidencing the contracts will remain in the servicer's
possession, if a subsequent purchaser were able to take physical possession of
the documents without knowledge of their assignment, that purchaser could have a
security interest in the contracts senior to our security interest. In the event
that we must rely upon repossession and sale of the related equipment securing
defaulted contracts to recover principal and interest due on the defaulted
contracts, our ability to realize upon the equipment may be limited due to the
existence of a third party's senior security interest in those contracts. In
such event, distributions to you could be delayed or reduced. Similarly, with
respect to contracts securing vendor loans, in some instances the vendor will
retain the original documents associated with those contracts. Uniform
Commercial Code financing statements are filed reflecting the pledge of those
contracts to the applicable originator as security for the vendor loans.
However, the related documents will remain in the vendor's possession. If a
subsequent purchaser were able to take physical possession of the related
documents without knowledge of the pledge to the originator, our priority
security interest in those contracts could be defeated. In such event,
distributions to you could be delayed or reduced.
FAILURE TO RECORD ASSIGNMENT OF PERFECTED SECURITY INTEREST MAY HINDER OUR
ABILITY TO REALIZE THE VALUE OF EQUIPMENT SECURING THE CONTRACTS
In connection with the conveyance of the contracts to the trust, security
interests in the equipment securing the contracts have been assigned by the
originators to the trust depositor and will be assigned by the trust depositor
to the trust. Due to the administrative burden and expense associated with
amending and paying the filing fee for the assignment of approximately [ ]
Uniform Commercial Code financing statements in 50 states where equipment is
located, we will not file any assignments of the Uniform Commercial Code
financing statements evidencing the assignment of the security interests in the
equipment to the trust depositor, the trust or the indenture trustee. Because
neither the trust depositor's, trust's, owner trustee or indenture trustee's
name appears on the UCC financing statements, an originator or the servicer
could inadvertently release the security interest in the equipment securing a
contract. In such event, we would not have a perfected security interest in the
equipment. Without a perfected security interest, we may not be able to fully
realize the value of the equipment if the related contract becomes a defaulted
contract. Failure to file the assignments does not affect either the trust's
perfected security interest in the contracts or the indenture trustee's
perfected security interest in the contracts assigned to it by the trust. It has
been the general policy of the originators to file or cause to be filed Uniform
Commercial Code financing statements with respect to the equipment relating to
the contracts.
REPURCHASE OBLIGATION OF TRUST DEPOSITOR AND ORIGINATORS PROVIDES YOU ONLY
LIMITED PROTECTION AGAINST PRIOR LIENS ON THE CONTRACTS
Federal or state law may grant liens on a contract that have priority over
the trust's interest. To the extent a lien having priority over the trust's lien
exists with respect to a contract and/or the related equipment, the trust's
interest in the asset will be subordinate to such prior lien. In the event the
creditor associated with such prior lien exercises its remedies on its security
interest it is unlikely that,
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<PAGE>
after the senior creditor is repaid, sufficient cash proceeds from the contract
and related equipment will be available to pay the discounted contract balance
to the trust. An example of a lien arising under federal or state law is a tax
or other government lien on property of the originator or the trust depositor
arising prior to the time a contract is conveyed to the trust. The tax lien has
priority over the interest of the trust in the contract.
The vendors have warranted to the originators that the contracts transferred
to the originators are free and clear of the lien of any third party.
Additionally, the vendors have agreed not to sell, pledge, assign, transfer or
grant any lien on any contract transferred to the originators. Under the sale
and servicing agreement, the originators will jointly and severally warrant to
the trust that the contracts transferred thereunder will be transferred free and
clear of the lien of any third party. The originators and the trust depositor
also will jointly and severally warrant to the trust that they will not sell,
pledge, assign, transfer or grant any lien on the contracts. In the event that
such warranties are not true with respect to any contract, the trust depositor
and the originators are required under the sale and servicing agreement to
repurchase the contract. There can be no assurance that the trust depositor or
originators will be able to repurchase a contract at the time we request it.
IF A BANKRUPTCY COURT RULES THAT THE TRANSFER OF CONTRACTS FROM A VENDOR TO THE
ORIGINATOR WAS NOT A TRUE SALE THEN PAYMENTS ON THE CONTRACTS MAY BE REDUCED
OR DELAYED
The originators have originated contracts or acquired contracts from a
vendor, which contracts have in either case been transferred to the trust
depositor. If a bankruptcy court decides that the acquisition of a contract by
an originator is not a sale of the contract from the vendor to the originator,
the contract would be part of the vendor's bankruptcy estate. Accordingly, the
contract would be available to the vendor's creditors. In that case, the trust
would likely receive less than the scheduled payments on the contracts and
distributions to you could be delayed or reduced. In order to treat the transfer
of contracts to the trust as not being a true sale, the bankruptcy court would
recharacterize the transfer as a pledge of the contracts to secure borrowings by
the vendor. Additionally, if the transfer of contracts to an originator from a
vendor is recharacterized as a pledge, a tax or government lien on the property
of the pledging vendor arising before the contracts came into existence, then
the holders of such other interests may have priority over such originator's,
and hence the trust depositor's, the trust's and the indenture trustee's,
interest in the contracts.
IF A BANKRUPTCY COURT RULES THAT THE TRANSFER OF CONTRACTS FROM THE ORIGINATOR
TO THE TRUST DEPOSITOR WAS NOT A TRUE SALE THEN PAYMENTS ON THE CONTRACTS
COULD BE REDUCED OR DELAYED
If an originator became a debtor in a bankruptcy case and creditors of the
originator, or the originator acting as a debtor-in-possession, were to assert
that the transfer of the contracts from an originator to the trust depositor was
ineffective to remove such contracts from the originator's estate, the
distribution of proceeds of the contracts to the trust might be subject to the
automatic stay provisions of the United States Bankruptcy Code. This would delay
the distribution of those proceeds for an uncertain period of time. Furthermore,
if the bankruptcy court rules in favor of the creditor or originator, reductions
in payments under the contracts to the trust could occur. In either case,
distributions to you then could be delayed or reduced. In addition, a bankruptcy
trustee would have the power to sell the contracts if the proceeds of the sale
could satisfy the amount of the debt deemed owed by the originator. The
bankruptcy trustee could also substitute other collateral in lieu of the
contracts to secure the debt. Additionally, the bankruptcy court could adjust
the debt if the originator were to file for reorganization under Chapter 11 of
the Bankruptcy Code. In the sale and servicing agreement, the originators will
jointly and severally warrant to the trust depositor that the conveyance of the
contracts to the trust depositor is a valid sale and transfer of the contracts
to the trust depositor. In addition, the originators and the trust depositor
have agreed that they will each treat the transactions described in this
prospectus as a sale of the contracts to the trust depositor. The
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originators will take all actions that are required under applicable law to
perfect the trust depositor's ownership interest in the contracts sold by the
originators and the trust depositor's security interest in the contracts and the
equipment, if any, securing vendor loans sold by the originators.
INSOLVENCY OF THE TRUST DEPOSITOR OR THE TRUST COULD DELAY OR REDUCE PAYMENTS TO
YOU
If the trust depositor were to become a debtor in a bankruptcy case and
creditors of the trust depositor, or the trust depositor acting as a
debtor-in-possession, were to assert that the sale of the contracts to the trust
was ineffective to remove such contracts from the trust depositor's estate, then
delays in payments under the contracts to the trust could occur or, reductions
in the amount of payments under the contracts to the trust could result.
Distributions to you then could be delayed or reduced. The trust depositor will
warrant in the sale and servicing agreement that the conveyance of the contracts
to the trust is a valid sale of the contracts to the trust. The trust depositor
will also warrant that the security interest in the contracts granted by the
trust to the indenture trustee is a valid and duly perfected security interest.
The trust depositor will also agree to take all actions that are required under
applicable law to perfect the trust's and the indenture trustee's respective
interests in the contracts. In the event the trust depositor becomes subject to
insolvency proceedings, the trust, the trust's interest in the trust's assets
and the trust's obligation to make payments on the notes might also become
subject to the insolvency proceedings. We believe that the trust will be
considered bankruptcy remote from the originators. However, no law firm will
render an opinion to that effect.
INSOLVENCY OF THE VENDORS COULD DELAY OR REDUCE PAYMENTS TO YOU
In the event a vendor under a vendor loan becomes subject to insolvency
proceedings, the end-user contracts and equipment securing the vendor loan as
well as the vendor's obligation to make payments would also become subject to
the insolvency proceedings. Moreover, under bankruptcy and insolvency laws the
servicer may have to write off vendor loans as uncollectible. In that event, we
may be forced to delay of distributions on the notes. We may pay less than the
full amount of payment of principal and interest due on the notes if collections
from the remaining unaffected contracts are insufficient to cover losses to the
trust. Additionally, your remedies under the indenture and the sale and
servicing agreement could be limited.
Some assignments of end-user contracts by vendors provide that the
originator has recourse to the vendor for all or a portion of the losses the
originator may incur as a result of a default under those end-user contracts. 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 an
originator through vendor assignments as loans to the vendor from the originator
secured by the end-user contracts. If such an attempt is successful, such
assignments from vendors would be subject to the risks described in this
prospectus for vendor loans. In such case, the contracts sold under such vendor
assignments would constitute security for loans to the related vendor.
THE RETENTION OF A RESIDUAL INTEREST BY A VENDOR MAY INCREASE THE RISK OF
REJECTION OF THE RELATED CONTRACT IF THAT VENDOR BECOMES BANKRUPT
Any end-user contract which is originated by a vendor for which the vendor
retains a residual interest in the equipment will be subject to rejection by
that vendor, as debtor-in-possession, or by that vendor's bankruptcy trustee.
Upon the vendor's rejection, scheduled payments under the rejected end-user
contract may terminate. You may suffer losses if the remaining unaffected
contracts, and security interests in the related equipment, are insufficient to
cover the losses.
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PROCEEDS FROM REQUIRED SALE OF THE CONTRACTS FOLLOWING TRUST DEPOSITOR
BANKRUPTCY MAY NOT BE SUFFICIENT TO REPAY THE NOTES IN FULL
If the trust depositor is bankrupt or insolvent, then an event of default
would occur with respect to the notes. Under 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 interests
in the contracts. If the sum of the proceeds of the sale of the contracts and
the proceeds of any collections on the contracts is insufficient to pay you in
full, then you may suffer losses on your investment in the notes.
END-USER BANKRUPTCY MAY REDUCE OR DELAY COLLECTIONS ON THE CONTRACTS
Bankruptcy and insolvency laws could affect your interests in contracts with
bankrupt end-user obligors if those laws result in any of the contracts being
written off as uncollectible or result in delay in payments due on any
contracts. As a result, you may be subject to delays in receiving payments, and
you may also suffer losses if collections from the remaining unaffected
contracts are insufficient to cover losses to the trust. State laws impose
requirements and restrictions relating to foreclosure sales and obtaining
deficiency judgments following foreclosure sales. In the event that you must
rely on repossession and disposition of equipment to recover amounts due on
defaulted contracts, the amounts due may not be realized due to these
requirements and restrictions. Factors that may affect whether you receive the
full amount due on a contract include the failure to file financing statements
to perfect the originator's, or trust's security interest in the equipment
securing the contract. The depreciation, obsolescence, damage or loss of any
item of equipment will also affect whether you receive the full amount due on a
contract.
CONTRACTS RELATING TO SOFTWARE OR RELATED SUPPORT AND CONSULTING SERVICES ARE
NOT SECURED BY THE SOFTWARE OR RELATED SERVICES
Some of the contracts held by the trust will relate to software or related
support and consulting services that are not owned by an originator. In these
cases, the vendor or a licensor traditionally owns the software, and the
software and related support and consulting services do not serve as collateral
for the contracts. Thus, we will not have an interest in such software or
related support and consulting services. In other words, we own solely the
associated contracts' cash flow. See "THE CONTRACTS". Accordingly, if any such
contract becomes a defaulted contract, we will not be able to foreclose on the
software or related support and consulting services. Because there will be no
proceeds from the software or related support and consulting services which
could be used to make payments to you, we must look solely to the obligor to
collect amounts due on the contract. There can be no assurance that the obligor
will be able to pay in full amounts due under the contract. The discounted
contract balance of the contracts to be transferred to the trust that relate to
software or relating support and consulting services, does not exceed [ ]%
of the aggregate discounted contract balance (calculated using the statistical
discount rate) of the contracts.
TRANSFER OF SERVICING MAY DELAY PAYMENTS TO NOTEHOLDERS DUE TO CONTRACT
PROCESSING DELAYS
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 you.
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YEAR 2000 ISSUES MAY IMPACT HELLER FINANCIAL'S ABILITY TO SERVICE THE CONTRACTS
If Heller Financial, Inc., as servicer, and Heller Financial Leasing, Inc.
as sub-servicer do not have computerized systems that are Year 2000 compliant by
the Year 2000, their ability to service the contracts may be materially and
adversely affected. Similarly, if the indenture trustee does not have
computerized systems that are Year 2000 compliant by the Year 2000, its ability
to make distributions to you may be materially and adversely affected. The "YEAR
2000" issue concerns the potential exposures related to the automated generation
of business and financial misinformation resulting from the application of
computer programs which have been written using two digits to identify a year in
the date field rather than four. These programs could fail or produce erroneous
results during the transition from the Year 1999 to the Year 2000.
Although Heller Financial, Inc. has taken significant steps to address the
Year 2000 issue, Heller Financial, Inc. continues to bear some risk related to
the Year 2000 issue and could be materially adversely affected if its own
remediation and contingency planning efforts fall behind schedule or if other
entities not affiliated with it do not appropriately address their own Year 2000
compliance issues. These other entities include vendors and those providing
contingency plans or outsourced technology services such as mainframe and
application support, as well as borrowers and power companies. Due to this
uncertainty, Heller Financial, Inc. is unable to represent that there will be no
material adverse consequences related to the Year 2000 issue, however, it
believes that it is doing what is reasonably necessary to provide the expertise,
resources, assessments and corrective procedures for the Year 2000 issues which
could have a material adverse impact on its operations or financial condition.
See "HELLER FINANCIAL, INC. AND HELLER FINANCIAL LEASING, INC.--ASSESSMENT OF
YEAR 2000 ISSUES."
USE OF PROCEEDS
In consideration of the trust depositor's transfer of the contracts to the
trust, the trust will transfer the net proceeds from the sale of the notes to
the trust depositor. The trust depositor purchased the contracts from time to
time from the originators. The trust depositor previously sold undivided
variable percentage ownership interests in the contracts to various purchasers.
The trust depositor will apply the net proceeds from the sale of the notes to
the repurchase of those undivided variable percentage ownership interests.
CALCULATION OF DISCOUNTED CONTRACT BALANCE
As used in this prospectus, the "DISCOUNTED CONTRACT BALANCE" of a contract
is,
(1) 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, unless another rate
is specifically mentioned, and
(2) as of any other date of determination, the sum of:
(A) 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, unless another rate is specifically
mentioned, and
(B) 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 that have not then been received by the servicer.
Excluded from the calculation are scheduled payments related to
defaulted contracts and contracts which have terminated prior to
their scheduled maturity date.
The discounted contract balance for each contract shall be calculated
assuming:
(1) all payments due in any collection period are due on the last day of
such collection period;
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(2) payments are discounted on a monthly basis using a 30 day month and a
360 day year; and
(3) 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 of those payments.
The discount rate is [ ]% and was calculated as the sum of:
(1) the average of the interest rate of the notes weighted by the initial
principal amount of the notes and the initial average life, assuming a
[ ]% conditional prepayment rate and no loss scenario, and assuming that
the trust depositor will exercise its option to redeem the notes when the
aggregate discounted contract balance of the contracts is less than 10%
of the aggregate discounted contract balance as of [ ,] 1999; and
(2) [ ]%.
COMPOSITION OF THE CONTRACTS
On or about [ ,] 1999, the trust depositor will transfer to the
trust the contracts as of [ ,] 1999 and from time to time substitute
contracts as of the applicable cutoff dates under the sale and servicing
agreement. The originators selected the contracts from their portfolio of
contracts based on the criteria described in the sale and servicing agreement.
See "THE SALE AND SERVICING AGREEMENT--REPRESENTATIONS AND WARRANTIES;
DEFINITION OF ELIGIBLE CONTRACT" and "--CONCENTRATION AMOUNTS; DEFINITION OF
EXCESS CONTRACT". The originators will jointly and severally represent that all
of the contracts transferred to the trust are commercial, rather than consumer,
leases or loans/financings, and that no adverse selection process was employed
in the originators' selection of contracts for sale to the trust depositor and
to the trust under the sale and servicing agreement.
The composition and distribution of the contracts by remaining term,
original term, discounted contract balance, original gross 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
[ ,] 1999 using the statistical discount rate. For further information
regarding the contracts, see "THE CONTRACTS".
As the obligors pay amounts owed by them under the contracts, the aggregate
discounted contract balance of all of the contracts held by the trust will
decrease. This decrease in the discounted contract balance of the contracts is
referred to as amortization. The rate at which the discounted contract balance
of each contract is reduced may vary from contract to contract. The variance
will depend in large part on the contract terms and the manner in which the
obligor makes its payments. As a result, the statistical distribution of the
contracts held by the trust, including the concentration of obligors in any one
state or of the contracts with respect to any one equipment type will vary as
the contract balances amortize.
While reading the tables you should note that:
- In the event that the documents evidencing a contract require amounts to
be billed to multiple billing locations, the contract is not treated as a
single contract, but rather multiple contracts corresponding in number to
the number of billing locations.
- Classification by industry is based on Heller Financial, Inc.'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 and end-user contracts securing vendor loans, which represents
an aggregate discounted contract balance of approximately [ ]% as of
[ ,] 1999 (calculated at the statistical discount rate), relates to
printing and publishing.
18
<PAGE>
- The final scheduled payment on the contract with the latest maturity or
expiration is on or prior to [ ].
- Approximately [ ]% of the aggregate discounted contract balance
(calculated at the statistical discount rate) of the contracts provide for
payments by the obligor thereunder on a basis other than monthly payments.
Some of the contracts intended, as of [ ,] 1999, to be transferred to
the trust may be determined not to meet the eligibility requirements and those
contracts may not be transferred to the trust on the closing date for the sale
of the contracts to the trust. While the statistical distribution of the
characteristics as of the closing date for the final pool of contracts and
calculated at the discount rate will vary somewhat from the statistical
distribution of the characteristics as of [ ,]1999 and calculated at the
statistical discount rate as presented in this prospectus, the variance will not
be material. Changes in the characteristics of the contracts between [ ,]
1999 and the closing date will not affect more than 5.00% of the aggregate
discounted contract balance of the contracts.
With respect to notes issued in a separate offering by the Heller Equipment
Asset Receivables Trust 1997-1, the variance between the aggregate discounted
contract balance calculated at the statistical discount rate and the discount
rate was 0.36%. There can be no assurance that the variance between the
statistical discount rate and the discount rate with respect to the notes issued
by the trust will be substantially similar.
The statistical information presented in the following tables is as of
[ ,] 1999 and is calculated using the statistical discount rate of
[ ]%. The statistical discount rate is based on an average of the estimated
interest rates of the notes, weighted by estimated initial average life and
initial principal amounts. The percentages and balances set forth in each of the
following tables may not total due to rounding.
<TABLE>
<S> <C>
Aggregate Discounted Contract Balance............................... $
Number of Contracts.................................................
Weighted Average Original Term (Range) (in months)..................
Weighted Average Remaining Term (Range) (in months).................
Average Discounted Contract Balance................................. $
</TABLE>
DISTRIBUTION OF CONTRACTS BY CONTRACT TYPE
DATA AS OF [ ,] 1999
<TABLE>
<CAPTION>
PERCENTAGE OF DISCOUNTED PERCENTAGE OF
NUMBER OF NUMBER OF CONTRACT AGGREGATE DISCOUNTED
TYPE CONTRACTS CONTRACTS BALANCE CONTRACT BALANCE
- ------------- ------------- --------------- ------------- -----------------------
<S> <C> <C> <C> <C>
Leases.......
Loans........
Total:.......
</TABLE>
19
<PAGE>
DISTRIBUTION OF CONTRACTS BY STATE IN WHICH OBLIGORS ARE LOCATED
AS OF [ ,] 1999
(ORDERED BY PERCENTAGE OF AGGREGATE DISCOUNTED CONTRACT BALANCE)
<TABLE>
<CAPTION>
PERCENTAGE OF DISCOUNTED PERCENTAGE OF
NUMBER OF NUMBER OF CONTRACT AGGREGATE DISCOUNTED
STATE CONTRACTS CONTRACTS BALANCE CONTRACT BALANCE
- ------------- ----------- --------------- ------------- ---------------------
<S> <C> <C> <C> <C>
Total:.......
</TABLE>
20
<PAGE>
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
AS OF [ ,] 1999
<TABLE>
<CAPTION>
PERCENTAGE OF DISCOUNTED PERCENTAGE OF AGGREGATE
NUMBER OF NUMBER OF CONTRACT DISCOUNTED CONTRACT
EQUIPMENT TYPE CONTRACTS CONTRACTS BALANCE BALANCE
- --------------- --------------- ----------------- --------------- -------------------------
<S> <C> <C> <C> <C>
Total:.........
</TABLE>
21
<PAGE>
DISTRIBUTION OF CONTRACTS BY OBLIGOR INDUSTRY
DATA AS OF [ ,] 1999
<TABLE>
<CAPTION>
PERCENTAGE OF DISCOUNTED PERCENTAGE OF AGGREGATE
NUMBER OF NUMBER OF CONTRACT DISCOUNTED CONTRACT
INDUSTRY CONTRACTS CONTRACTS BALANCE BALANCE
- ---------------- --------------- ----------------- --------------- -------------------------
<S> <C> <C> <C> <C>
Subtotal........
All others......
Total:..........
</TABLE>
22
<PAGE>
DISTRIBUTION OF CONTRACTS BY ORIGINAL GROSS CONTRACT BALANCE
DATA AS OF [ ,] 1999
<TABLE>
<CAPTION>
PERCENTAGE OF DISCOUNTED PERCENTAGE OF AGGREGATE
ORIGINAL GROSS NUMBER OF NUMBER OF CONTRACT DISCOUNTED CONTRACT
CONTRACT BALANCE CONTRACTS CONTRACTS BALANCE BALANCE
- ------------------------- --------------- ----------------- --------------- -------------------------
<S> <C> <C> <C> <C>
25,001-50,000............
50,001-100,000...........
100,001-150,000..........
150,001-200,000..........
200,001-250,000..........
250,001-300,000..........
300,001-400,000..........
400,001-500,000..........
500,001-600,000..........
600,001-700,000..........
700,001-800,000..........
800,001-900,000..........
900,001-1,000,000........
1,000,001-1,250,000......
1,250,001-1,500,000......
1,500,001-1,750,000......
1,750,001-2,000,000......
2,000,001-2,250,000......
2,250,001-2,500,000......
2,500,001-2,750,000......
2,750,001-3,000,000......
3,000,001-3,500,000......
3,500,001-4,000,000......
4,000,001-4,500,000......
4,500,001-5,000,000......
5,000,001-6,000,000......
7,000,001-8,000,000......
8,000,001-9,000,000......
10,000,001-11,000,000....
18,000,001-19,000,000....
Total:...............
</TABLE>
23
<PAGE>
DISTRIBUTION OF CONTRACTS BY REMAINING DISCOUNTED CONTRACT BALANCE
DATA AS OF [ ,] 1999
<TABLE>
<CAPTION>
REMAINING PERCENTAGE OF DISCOUNTED PERCENTAGE OF AGGREGATE
DISCOUNTED NUMBER OF NUMBER OF CONTRACT DISCOUNTED CONTRACT
CONTRACT BALANCE CONTRACTS CONTRACTS BALANCE BALANCE
- ----------------------- --------------- ----------------- --------------- -------------------------
<S> <C> <C> <C> <C>
1-25,000...............
25,001-50,000..........
50,001-100,000.........
100,001-150,000........
150,001-200,000........
200,001-250,000........
250,001-300,000........
300,001-400,000........
400,001-500,000........
500,001-600,000........
600,001-700,000........
700,001-800,000........
800,001-900,000........
900,001-1,000,000......
1,000,001-1,250,000....
1,250,001-1,500,000....
1,500,001-1,750,000....
1,750,001-2,000,000....
2,000,001-2,250,000....
2,250,001-2,500,000....
2,500,001-2,750,000....
2,750,001-3,000,000....
3,000,001-3,500,000....
3,500,001-4,000,000....
4,000,001-4,500,000....
4,500,001-5,000,000....
5,000,001-6,000,000....
Total:.............
</TABLE>
24
<PAGE>
DISTRIBUTION OF CONTRACTS BY ORIGINAL CONTRACT TERM
DATA AS OF [ ,] 1999
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE DISCOUNTED AGGREGATE
ORIGINAL TERM NUMBER OF OF NUMBERS CONTRACT DISCOUNTED CONTRACT
(MONTHS) CONTRACTS OF CONTRACTS BALANCE BALANCE
- ------------- ----------- ------------ ----------- -------------------
<S> <C> <C> <C> <C>
13-24........
25-36........
37-48........
49-60........
61-72........
73-84........
85-114.......
Total:.......
</TABLE>
DISTRIBUTION OF CONTRACTS BY REMAINING MONTHS TO STATED MATURITY
DATA AS OF [ ,] 1999
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
PERCENTAGE DISCOUNTED AGGREGATE
REMAINING NUMBER OF OF NUMBERS CONTRACT DISCOUNTED CONTRACT
TERM (MONTHS) CONTRACTS OF CONTRACTS BALANCE BALANCE
- ------------- ----------- ------------ ----------- -------------------
<S> <C> <C> <C> <C>
1-12.........
13-24........
25-36........
37-48........
49-60........
61-72........
73-81........
Total:.......
</TABLE>
DELINQUENCY AND LOSS INFORMATION
The originators treat a contract as delinquent if the obligor does not make
a scheduled payment at the time or in the amount required by the contract terms.
Contract terms require payment by the obligor within 30 days from the "DUE DATE"
provided in the associated invoice.
The following tables set forth the originators' delinquency and loss
experience on their aggregate domestic portfolio of equipment lease and loan
portfolio. Not all of the contracts in the originators' aggregate portfolio will
be transferred to the trust. Therefore, the data in the following tables
includes delinquency and loss experience for the contracts and other financial
assets owned by Heller Financial. The delinquency and loss experience set forth
in the following tables is described in terms of receivables and repossessed
assets on Heller Financial's financial statements. The receivables are
calculated net of unearned income.
The data presented in the following tables and the period to period
discussion below reflect historical results and there is no assurance that the
delinquency or loss experience of the contracts will be similar to that set
forth below.
25
<PAGE>
CONTRACT PORTFOLIO
DELINQUENCY EXPERIENCE
(DOLLARS IN MILLIONS)
AT
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ending Receivables
and Repossesed
Assets........... $1,647.00 100.00% $1,758.00 100.00% $1,525.00 100.00% $1,175.00 100.00%
Number of
Delinquent Days
($ of Ending
Receivables and
Repossessed
Assets)
31-60 days......... $ 9.44 0.57% $ 17.33 0.99% $ 16.55 1.09% $ 18.38 1.56%
61-90 days......... $ 6.04 0.37% $ 6.86 0.39% $ 4.68 0.31% $ 11.23 0.96%
Over 90 days....... $ 14.55 0.88% $ 18.91 1.08% $ 17.15 1.12% $ 11.84 1.01%
Total.............. $ 30.03 1.82% $ 43.10 2.45% $ 38.38 2.52% $ 41.45 3.53%
</TABLE>
Delinquent receivables in the above table include accrued interest.
CONTRACT PORTFOLIO
CONTRACT LOSS EXPERIENCE
(DOLLARS IN MILLIONS)
AT
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Receivables
and Repossessed
Assets........... $1,845.00 100% $1,609.00 100% $1,293.00 100% $ 1,014.0 100%
Gross Losses (as %
of Receivables
and Repossessed
Assets).......... $ 1.35 0.07% $ 1.92 0.12% $ 0.65 0.05% $ 0.89 0.09%
Gross Recoveries
(as % of
Receivables and
Repossessed
Assets).......... $ 0.60 0.03% $ 0.42 0.03% $ 0.36 0.03% $ 0.32 0.03%
Net Losses (as % of
Receivables and
Repossessed
Assets).......... $ 0.75 0.04% $ 1.50 0.09% $ 0.29 0.02% $ 0.58 0.06%
</TABLE>
Gross losses, as a percentage of receivables and repossessed assets, are
shown in the above table net of vendor recourse.
With respect to contracts representing over 50% of the average receivables
and repossessed assets for contracts secured by printing equipment, defaults
would have been approximately $4.1 million in the twelve months ended December
31, 1998 and $8.4 million for the twelve months ended December 31, 1997; after
vendor recourse, actual losses aggregated $58,000 over the period.
26
<PAGE>
TWELVE MONTHS ENDED DECEMBER 31, 1998 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1997
The amounts classified as delinquent as a percentage of receivables and
repossessed assets declined between December 31, 1997 and December 31, 1998. Net
losses as a percentage of average receivables and repossessed assets decreased
slightly in 1998 as compared to 1997. The slight increase is not attributable to
any one factor and we have no basis to predict, and offer no assurances as to,
whether net losses as a percentage of receivables and repossessed assets will
continue to decrease in subsequent periods. Average receivables and repossessed
assets increased approximately 14.7% from December 31, 1997 to December 31, 1998
due to normal fluctuations in the amount of contracts originated. We believe
that stability in delinquency and loss experience is a result of continued
favorable economic conditions and consistent application of credit standards on
the part of the originators of such assets.
TWELVE MONTHS ENDED DECEMBER 31, 1997 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1996
The amounts classified as delinquent as a percentage of receivables and
repossessed assets decreased slightly between December 31, 1996 and December 31,
1997. Net losses as a percentage of average receivables and repossessed assets
increased slightly in 1997 as compared to 1996. The increase is not attributable
to any one factor and we believe that it is partially attributable to the
increase in average receivables and repossessed assets. Average receivables and
repossessed assets increased approximately 24% from December 31, 1996 to
December 31, 1997 due to an increase in financing activity. As noted above, we
believe that stability in delinquency and loss experience is a result of
continued favorable economic conditions and consistent application of credit
standards on the part of the originators of such assets.
TWELVE MONTHS ENDED DECEMBER 31, 1996 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1995
The amounts classified as delinquent as a percentage of receivables and
repossessed assets decreased between December 31, 1995 and December 31, 1996.
Net losses as a percentage of average receivables and repossessed assets
decreased slightly during the same period while average receivables and
repossessed assets increased approximately 27.5%. As noted above, we believe
that stability in delinquency and loss experience is a result of continued
favorable economic conditions and consistent application of credit standards on
the part of the originators of such assets.
DEFINITION OF DELINQUENCY FOR THE CONTRACTS TRANSFERRED TO THE TRUST
As of [ ,] 1999 no contract sold to the trust has any delinquent
scheduled payments. We consider a scheduled payment to be delinquent if:
- it is more than 60 days delinquent; and
- the delinquent amount is more than the greater of the following:
(A) $10 or
(B) 10% of the scheduled payment.
There are no non-performing or non-prime contracts included in the contracts
sold to the trust. For a definition of defaulted contracts, see "THE SALE AND
SERVICING AGREEMENT--DEFINITION OF DEFAULTED CONTRACTS".
THE CONTRACTS
The trust will be entitled to all collections on account of the contracts
and related equipment, including collections on end user contracts securing
vendor loans. However, the trust will not be
27
<PAGE>
entitled to the Excluded Amounts. See "DESCRIPTION OF THE NOTES AND
INDENTURE--AMOUNTS AVAILABLE FOR PAYMENT ON THE NOTES". All of the contracts are
commercial contracts.
END-USER CONTRACTS
The following discussion describes the end-user contracts, including
end-user contracts securing vendor loans. All of the end-user contracts in
respect of equipment, software and related support and consulting services to be
included from time to time in the trust are of one of the following types:
- conditional sale agreements;
- leases;
- secured promissory notes;
- installment payment agreements; and
- financing agreements.
There is no limit on the number of contracts which may consist of any of the
foregoing types. Each contract must be an eligible contract as of the applicable
cutoff date. In order for a contract to be eligible to be transferred to the
trust and to be a trust asset it must have the characteristics which are more
fully described in "THE SALE AND SERVICING AGREEMENT--REPRESENTATIONS AND
WARRANTIES; DEFINITION OF ELIGIBLE CONTRACT".
CONDITIONAL SALE AGREEMENTS.
The originators offer financing for equipment under conditional sale
agreements assigned to the originators by vendors. Most of the conditional sale
agreements transferred to the trust will consist of either the originators'
standard, pre-printed form, or of the vendors' standard, pre-printed forms.
These forms have been reviewed and approved for use by the applicable
originator. The conditional sale agreement sets forth the description of each
item financed thereunder and the schedule of installment payments. Most of the
loans under conditional sale agreements are fixed rate and are for a one to
seven year term. Most of the payments under conditional sale agreements are due
monthly. Conditional sale agreement terms include the following:
- a grant by the end-user of a security interest in any related equipment
which is then assigned by the vendor to the originator;
- may allow prepayment of the obligation upon payment, where allowed by
applicable state law, of an additional prepayment fee;
- the end-user is required to maintain the equipment, keep it free and clear
of liens and encumbrances and pay all taxes related to the equipment;
- no modification or disposal of the equipment without the originator's or
its assignee's consent;
- a disclaimer of warranties;
- the end-user's indemnity against liabilities arising from the use,
possession or ownership of the equipment; and
- the end-user's absolute and unconditional obligation to pay the
installment payments required under the terms of the agreement.
The conditional sale agreement also requires each end-user to maintain
insurance, the terms of which may vary. The terms of a conditional sale
agreement may be modified at its inception at the end-user's request. These
modifications must either be approved by the originator's legal department and
several levels of management before the originator will agree to accept an
assignment of the
28
<PAGE>
conditional sale agreement from a vendor, or the vendor must indemnify the
originator against any losses or damages it may suffer as a result of the
modifications.
LEASES.
The originators, either directly or by assignment from vendors, offer
financing of equipment under leases. Leases may consist of individual lease
agreements each relating to a single, separate transaction or may consist of
individual transactions written under and governed by a master lease agreement
which contains the general terms and conditions of the transaction. Specific
terms and conditions, such as descriptions of the specific equipment being
leased or financed and the schedule of related rental payments, are contained in
a supplement or schedule to the master lease agreement, which is signed by the
end-user, as lessee, and either the vendor or the originator, as lessor. The
supplement or schedule incorporates the master lease agreement by reference and
is treated by the originator as a separate lease. Each lease is originated in
the ordinary course of business by either the originator or a vendor. The
vendors assign leases to the originator through a vendor finance agreement or
vendor assignment.
The initial terms of most of the leases transferred to the trust range from
one to seven years. Each lease provides for the periodic payment by the end-user
of rent in advance or arrears, usually monthly or quarterly. The periodic
payments represent the amortization, usually 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 transferred to the trust are "NET LEASES" under which the
end-user assumes responsibility for the items financed thereunder, including
operation, maintenance, repair, 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 such financed item during the lease term. The
originator or vendor is named as loss payee on insurance policies covering the
equipment. The end-user further agrees to indemnify the lessor for any
liabilities arising out of the use or operation of the item financed by the
end-user. 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 failed to perform. In addition, the leases often 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 originator is the lessor, the lease contains no express or
implied warranties with respect to the items financed thereunder other than a
warranty of quiet enjoyment. If a vendor is the lessor, the lease or a related
agreement may contain representations and warranties relating to the items
financed thereunder 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, including the originator, 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 those risks, if approved in advance by the originator.
The leases include both "true leases" and leases intended for security as
defined in Section 1-201(37) of the Uniform Commercial Code. Under a "true
lease," the lessor bears the risk of ownership, although the risk of loss of the
related equipment is passed to the end-user under the leases, and no title is
conferred upon the lessee. Under a "true lease" the lessor also takes any tax
benefits associated with the ownership of depreciable property under applicable
law. 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
29
<PAGE>
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 master lease agreement supplement or schedule. Those terms
usually provide for the purchase of the equipment at a specified price, which
may be nominal.
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 some master lease agreements, the end-user may assign its
rights and obligations under the lease, but only upon receiving the prior
written consent of the lessor. Under some master lease agreements, the end-user
may relocate the equipment upon giving the lessor prompt written notice of the
relocation. The right to grant or deny the consent or to receive the written
notice will be exercised by the servicer. Some 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 usually permit
cancellation by the end-user, some 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 originator, or by a vendor with the consent
of the originator. Modifications are often permitted in conjunction with
additional financing opportunities from the same end-user. 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 originator and an amount approximately 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 originator. 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 the equipment, the
originator may reprice and extend the related base lease term. Leases whose
terms have been extended under those circumstances may remain in the pool of
contracts held by the trust. Heller Financial, Inc., as servicer, expects to
continue to permit these modifications and terminations with respect to leases
included in the contracts. However the servicer's ability to make material
modifications is limited as described under "THE SALE AND SERVICING
AGREEMENT--MATERIAL MODIFICATIONS TO CONTRACTS".
The standard terms and conditions of a master lease agreement may be
modified at the inception of a lease at the request of the end-user. The
modifications must either be approved by the originator's legal department and
several levels of management before the originator will agree to enter into the
lease or accept an assignment of the lease from a vendor. Alternatively, the
vendor must indemnify the originator against any losses or damages it may suffer
as a result of the modifications. Common permitted modifications include, but
are not limited to, the following:
- a one dollar purchase option at the end of the lease term;
- prearranged mid-lease purchase options, early termination options and
lease extension options as described above;
- modifications to the lessor's equipment inspection rights;
- modifications to the end-user's insurance requirements permitting the
end-user to self-insure against casualty to the equipment;
- 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
- extended grace periods for late payments of rent.
30
<PAGE>
SECURED PROMISSORY NOTES.
The originators also provide direct initial financing or refinancing of
equipment under secured promissory notes, which consist of an installment note
and a separate security agreement. In an initial financing transaction, the
applicable originator pays to the vendor the purchase price for the equipment
and in a refinancing transaction, the originator pays off an end-user's existing
financing source. In the case of a refinancing transaction, upon payment to the
existing financing source, the originator obtains a release of the other party's
lien on the financed equipment. In either case, the originator records its own
lien against the financed equipment and takes possession of the secured
promissory note, which constitutes chattel paper under the Uniform Commercial
Code. In either case, the transaction is documented as a direct loan by the
originator to the end-user of the equipment using a secured promissory note.
Except for the lack of references to "SALE" or "PURCHASE" of equipment, the
terms and conditions contained in a secured promissory note are substantially
similar to those contained in a conditional sale agreement.
INSTALLMENT PAYMENT AGREEMENTS AND FINANCING AGREEMENTS.
The originators provide financing for software license fees and related
support and consulting services under installment payment supplements to
software license agreements, separate installment payment agreements or other
forms of financing agreements assigned to the applicable originator by vendors
of software. Each financing agreement is an unsecured obligation of the
end-user. Most of the financing agreements provide:
- a fixed schedule of payments with no end-user right of prepayment;
- that the agreement is noncancellable for its term;
- 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 in such agreement;
- for the vendor to assign the payment agreement to a third party, including
the originator
- an agreement by the end-user, upon such assignment, not to assert against
such assignee any claims or defenses the end-user may have against the
vendor; and
- default and remedy provisions that often include acceleration of amounts
due.
In some cases, the financing agreements also give the vendor the right to
terminate the underlying software license and all related support and consulting
activities. The originator may obtain this right by assignment from the vendor.
EQUIPMENT
The end-user contracts cover a wide variety of new and used equipment. Some
examples of the types of equipment are: printing, pre-press, machine tool,
plastics, computer hardware, computer software, restaurant, transportation,
energy related, medical, industrial equipment and aircraft. All of the interests
of the originator in the equipment subject to an end-user contract will be
transferred to the trust. Those interests consist or will consist of either
title to the equipment or a security interest in the equipment.
SOFTWARE AND RELATED SERVICES
Some of the end-user contracts, which are usually in the form of financing
agreements, 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. Those
end-user contracts may also cover related support and consulting services
31
<PAGE>
which are provided by the vendor, an affiliate of the vendor or a third party
contract party and which facilitate the obligors use of the software. No
interest in the software, the software license agreement or the related
services, other than the right to collect the payment of software license fees
and, in some cases, to exercise rights and remedies under the software license
agreement, has been or will be conveyed to the originators or the trust
depositor. Consequently, the trust will not have title to or a security interest
in the software, nor will it own the related services, and would not be able to
realize any value from the software upon a default by the end-user.
VENDOR LOANS
The contracts may include limited recourse or non-recourse loan or repayment
obligations. These loan or repayment obligations are referred to in this
prospectus as vendor loans. A vendor loan is payable by a vendor and secured by
all of the vendor's interest in an individual end-user contract originated by
the vendor and by the equipment related to that end-user contract. A vendor can
be a equipment manufacturer, dealer or distributor or a computer software
distributor or any other person located in the United States.
Vendor loans may be originated under a vendor finance program. Under some
vendor financial programs end-user contracts may be originated by the originator
directly, or purchased by the originator from the vendor, in separate
transactions not giving rise to vendor loans. See "--VENDOR FINANCE PROGRAMS".
Vendor loans often are non-recourse to the vendor, meaning the applicable
originator may obtain repayment solely from the proceeds of the end-user
contracts and related equipment securing the vendor loan. In a few instances,
however, recourse to a vendor for nonpayment of a vendor loan may be available
through a limited recourse arrangement included in the related vendor finance
program. The repayment terms under a vendor loan, 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 the vendor
loan.
VENDOR FINANCE PROGRAMS
We expect that a substantial portion of the end-user contracts included in
the trust will have been originated by vendors and assigned or pledged to the
originator under the vendor finance programs. Also, as described above, vendor
loans may be originated through vendor finance programs with the related vendor.
All rights, but not obligations, of the originators with respect to the
contracts under the agreements governing vendor finance programs are usually
assignable and will be so assigned by the originators to the trust depositor and
in turn conveyed by the trust depositor to the trust. The vendor finance
programs with vendors provide the originators with the opportunity to finance
transactions relating to the acquisition or use by an end-user of a vendor's
equipment, software and related services or other products. Vendor finance
programs provide the originators with a steady, sustainable flow of new
business. Often these vendors have costs of origination that are lower than the
originators' asset-based financings which are marketed directly to end-users.
Many of the vendor finance programs provide various forms of support to the
applicable originator, including representations and warranties by the vendor in
respect of the end-user contracts assigned by the vendor to the originator and
related equipment or software and related 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 related
end-users. Some of the vendor finance programs take the form of a referral
relationship which is less formal, and may or may not include credit or
remarketing support to the originator from the vendor.
32
<PAGE>
Other than agreements that only establish a referral relationship, each
agreement governing a vendor finance program includes the following provisions:
- Vendor representations, warranties and covenants regarding each end-user
contract assigned to the originator, including the following:
(1) the obligations of the end-user under the assigned end-user contract
are absolute, unconditional, noncancellable and enforceable;
(2) the obligations of the end-user under assigned end-user contract are
free from any rights of offset, counterclaim or defense;
(3) the originator holds the sole original of the end-user contract and
has either title to or a first priority perfected security interest
in the equipment;
(4) the equipment and the end-user contract are free and clear of all
liens, claims or encumbrances;
(5) the equipment or the software has been irrevocably accepted by the
end-user and will perform as warranted to the end-user; and
(6) the assigned end-user contract was duly authorized and signed by the
end-user;
- Remedies in the event of a misrepresentation or breach of a warranty or
covenant by the vendor regarding an assigned end-user contract. These
remedies usually require the vendor to repurchase the affected end-user
contract for the originator's investment balance in the end-user contract
plus costs incurred by the originator in breaking any underlying funding
arrangement;
- 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. The
remarking support is intended to assist the originator in realizing
proceeds from the equipment assigned as collateral security to support the
obligations of the end-user under the end-user contract; and
- The right of the originator to further assign its interests in assigned
end-user contracts, all payments thereunder and any related interest in
equipment.
The originator may delegate to the vendor ongoing administrative duties
relating to servicing, processing of collections and actual substantive
collection remedies. The vendor may be able to delegate those administrative
duties to a sub-servicer acceptable to the originator.
In addition to the foregoing, a vendor finance program agreement may include
recourse against the vendor with respect to end-user defaults under specific
end-user contracts. The recourse may be structured in the following ways:
- by specifying that the assignment of the end-user contract from the vendor
to the originator 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"
created under the vendor finance program. In the event of an end-user
default under an end-user contract which was assigned by the vendor to the
originator subject to the ultimate net loss pool, the originator may draw
against the ultimate net loss pool up to the amount of the originator's
remaining unpaid investment balance in the defaulted end-user contract,
but not in excess of the ultimate net loss pool balance then available.
Drawings may also be made against the ultimate net loss pool with respect
to end-user contracts that are not included in the pool of contracts and,
accordingly,
33
<PAGE>
there can be no assurance that any amounts contributed by a vendor to the
ultimate net loss pool will be available in the event of an end-user
default under a end-user contract included in the pool of contracts.
The manner in which end-user contracts are assigned to the originator by the
vendors differs under each vendor finance program, depending upon the nature of
the financed equipment by the contracts, the form of the end-user contract, the
accounting treatment sought by the vendor and the end-user and tax
considerations.
For example, the originator might either accept a vendor loan and collateral
assignment of the end-user contract and the security interest in the related
equipment from the vendor. Alternatively, the originator may accept a full
assignment of the end-user contract and collateral assignment of related
equipment from the vendor, which collateral assignment secures the end-user's
obligations under the end-user contract. The originator also may receive, from a
vendor with respect to software, a full assignment of leases, installment
payment programs, installment payment supplements to license programs, and other
types of financing programs used in financing software license payments and
related support and consulting services.
We expect that some portion of the end-user contracts included in the pool
of contracts, especially in the case of conditional sale programs, will consist
of end-user contracts originated by vendors and assigned to the originator under
individual assignments to vendors. Each vendor assignment of a contract or
contracts will either be made with or without recourse against the vendor for
end-user defaults. Additionally, each vendor assignment of a contract will
contain many, if not all, of the representations, warranties and covenants
typically contained in vendor finance program agreements, as well as a vendor
repurchase requirement in the event of a breach by the vendor of such
representations, warranties or covenants. The vendor assignments may or may not
provide for any vendor remarketing support in the event of an end-user default.
CONTRACT FILES
The applicable originator will indicate in its books and records, including
the appropriate computer files relating to the contracts, that the contracts
have been transferred to the trust for the benefit of the holders of the notes
and certificate. Furthermore, the servicer will stamp the documents relating to
the contracts or otherwise mark the contracts with a legend to the effect that
the contracts have been transferred to the trust for the benefit of the holders
of the notes and certificate. The originators 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
applicable cutoff date.
HOW COLLECTIONS ON THE CONTRACTS ARE TREATED
All collections received with respect to the contracts will be allocated as
described in "DESCRIPTION OF THE NOTES AND INDENTURE--ALLOCATIONS". Prepayments
will be treated as though they were received on the last day of the collection
period in which they are actually received for purposes of calculating amounts
available for distribution to you. Payments of principal on the contracts made
in advance of their due date will be treated as though they were received on the
last day of the collection period in which such principal payments were actually
received. Each collection period begins on the second day of a calendar month
and ends on and includes the first day of the immediately following calendar
month.
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<PAGE>
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 the contracts may be in the form of payments scheduled to be made
under the terms of the contracts, prepayments or liquidations due to default,
casualty and other events which cannot be specified at present. Any payments
other than scheduled payments may result in distributions to you of amounts
which would otherwise have been distributed over the remaining term of the
contracts. Each prepayment on a contract, if the contract is not replaced by the
trust with a comparable substitute contract as described under "THE SALE AND
SERVICING AGREEMENT--SUBSTITUTE CONTRACTS", will shorten the weighted average
remaining term of the contracts and the weighted average life of the notes.
In general, the rate of payments on the contracts may be influenced by a
number of other factors, including general economic conditions. The rate of
principal payments with respect to any class of notes may also be affected by
any repurchase by the trust depositor of contracts under the sale and servicing
agreement. Under the sale and servicing agreement, the trust depositor and the
originators must repurchase contracts if there is:
- a breach of representation or warranty as to the contracts which causes
such contract to be ineligible to be at trust asset; or
- the exercise by the trust depositor of its repurchase option when the
aggregate discounted contract balance of the contracts is less than 10% of
the aggregate discounted contract balance of the contracts as of [ ,]
1999, the initial cutoff date.
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, together with accrued interest, so long as
the trust is indemnified for any such insufficiency by the vendor or the
originator. In the case of contracts which must be removed from the trust assets
due to their failure to have the characteristics set forth in the sale and
servicing agreement or which are Excess Contracts, the rate of prepayment would
also be influenced by the trust depositor's decision not to repurchase those
contracts and instead, to accept substitute contracts. See "THE SALE AND
SERVICING AGREEMENT--SUBSTITUTE CONTRACTS". In the event of a repurchase, the
repurchase price will decrease the aggregate 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."
A higher than anticipated rate of prepayment will reduce the aggregate
discounted contract balance of the contracts more quickly than expected and
thereby result in an increase in the rate at which principal is paid to you and
reduce the aggregate interest payments you may have expected to receive on the
notes.
The effective yield will depend upon, among other things, the amount of and
rate at which principal is paid to you. You will bear any reinvestment risks
resulting from a faster or slower incidence of prepayment of contracts. The
reinvestment risks include the risk that interest rates may be lower at the time
you receive payments from the trust than interest rates would otherwise have
been had the prepayments not been made or had the prepayments been made at a
different time. Your after-tax yield may be affected by lags between the time
interest income accrues to you and the time the related interest income is
received by you.
The following chart sets forth the percentage of the initial principal
amount of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class B Notes, Class C Notes and Class D Notes which would be outstanding
on the distribution dates set forth below assuming a conditional prepayment rate
of [ ]%, [ ]%, [ ]%, [ ]%, [ ]% and [ ]%, respectively. Such information
is
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<PAGE>
hypothetical and is set forth for illustrative purposes only. The conditional
prepayment rate assumes that a fraction of the outstanding contracts is prepaid
on each distribution date, which implies that each contract in the pool of
contracts is equally likely to prepay. This fraction, expressed as a percentage,
is annualized to arrive at the conditional prepayment rate for the contracts.
The conditional prepayment rate measures prepayments based on the outstanding
discounted contract balances of the contracts, after the payment of all payments
scheduled to be made under the terms of the contracts during each collection
period. The conditional prepayment rate 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
[ ,] 1999, assumes that the trust depositor exercises its option to cause a
redemption of the notes when the aggregate discounted contract balance of the
contracts is less than 10% of the aggregate discounted contract balance of the
contracts as of [ ,] 1999, and assumes the closing date for the sale of the
contracts to the trust is [ ,] 1999. These tables are based upon the
statistical discount rate of [ ]%. In addition, it is assumed for the purposes
of these tables only, that the trust issues the notes in the following amounts
and at the following interest rates:
<TABLE>
<CAPTION>
CLASS INITIAL PRINCIPAL AMOUNT INTEREST RATE
- ---------------------------------------- ------------------------ -------------
<S> <C> <C>
A-1..................................... $
A-2.....................................
A-3.....................................
A-4.....................................
B.......................................
C.......................................
D.......................................
</TABLE>
<TABLE>
<S> <C>
PERCENTAGE OF THE INITIAL CLASS A-1 NOTES PRINCIPAL AMOUNT
AT THE CONDITIONAL PREPAYMENT RATES SET FORTH BELOW
PERCENTAGE OF THE INITIAL CLASS A-2 NOTES PRINCIPAL AMOUNT
AT THE CONDITIONAL PREPAYMENT RATES SET FORTH BELOW
PERCENTAGE OF THE INITIAL CLASS A-3 NOTES PRINCIPAL AMOUNT
AT THE CONDITIONAL PREPAYMENT RATES SET FORTH BELOW
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
PERCENTAGE OF THE INITIAL CLASS A-4 NOTES PRINCIPAL AMOUNT
AT THE CONDITIONAL PREPAYMENT RATES SET FORTH BELOW
PERCENTAGE OF THE INITIAL CLASS B NOTES PRINCIPAL AMOUNT
AT THE CONDITIONAL PREPAYMENT RATES SET FORTH BELOW
PERCENTAGE OF THE INITIAL CLASS C NOTES PRINCIPAL AMOUNT
AT THE CONDITIONAL PREPAYMENT RATES SET FORTH BELOW
PERCENTAGE OF THE INITIAL CLASS D NOTES PRINCIPAL AMOUNT
AT THE CONDITIONAL PREPAYMENT RATES SET FORTH BELOW
</TABLE>
37
<PAGE>
WEIGHTED AVERAGE LIFE
If the trust depositor does not exercise its option to cause a redemption of
the notes when the aggregate discounted contract balance of the contracts is
less than 10% of the aggregate discounted contract balance of the contracts as
of [ ,] 1999, the average life of the each class of notes would be as
follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE
ASSUMING ASSUMING ASSUMING ASSUMING ASSUMING ASSUMING
[ ]% [ ]% [ ]% [ ]% [ ]% [ ]%
CONDITIONAL CONDITIONAL CONDITIONAL CONDITIONAL CONDITIONAL CONDITIONAL
PREPAYMENT PREPAYMENT PREPAYMENT PREPAYMENT PREPAYMENT PREPAYMENT
CLASS RATE RATE RATE RATE RATE RATE
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
A-1...........
A-2...........
A-3...........
A-4...........
B.............
C.............
D.............
</TABLE>
The weighted average life of a note is determined by:
- multiplying the amount of cash distributions in reduction of the
outstanding principal amount of such class of notes, by the number of
years from the closing date of the sale of the contracts to the trust to
the respective note payment date on which such class of notes is repaid in
full;
- adding the results; and
- dividing the sum by the initial principal amount of such class of notes.
The following shows the scheduled cashflows from the contracts:
<TABLE>
<CAPTION>
COLLECTION PERIOD SCHEDULED CASHFLOW
- --------------------------------------- ------------------
<S> <C>
</TABLE>
HELLER FINANCIAL, INC. AND HELLER FINANCIAL LEASING, INC.
GENERAL
Heller Financial, Inc. is a Delaware corporation formed in 1919 and is
engaged in various aspects of the commercial finance business. Heller Financial,
Inc. and its consolidated subsidiaries employ approximately 2,500 people; its
executive offices are located at 500 West Monroe Street, Chicago, Illinois 60661
(telephone: (312) 441-7000). In May 1998, Heller Financial, Inc. issued
38,525,000 shares of Class A Common Stock in an initial public offering. Fuji
American Holdings, a wholly owned subsidiary of The Fuji Bank, Limited, owns 79%
of the voting interest and 56% of the economic interest in Heller Financial,
Inc.'s issued and outstanding common stock. All of the outstanding common stock
of the Heller Financial Leasing, Inc. is owned by Heller Financial, Inc. Heller
Financial Leasing, Inc. is a non-operating subsidiary which through the
Commercial Equipment Finance and the Global Vendor Finance business units
originate contracts.
Heller Financial, Inc. is a leading diversified commercial financial
services company which provides a broad array of financial products and services
to mid-sized and small businesses in the United States and selected
international markets. Heller Financial, Inc. provides its products and services
principally
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<PAGE>
through two business segments namely, Domestic Commercial Finance and
International Corporate Finance. The Domestic Commercial Finance segment is made
up of five business units:
- Heller Corporate Finance, which provides collateralized cash flow and
asset based lending;
- Heller Real Estate Financial Services, which provides secured real estate
financing;
- Heller Leasing Services, which provides debt and lease financing of small
and large ticket equipment and commercial aircraft;
- Heller Small Business Finance, which provides financing to small
businesses, primarily under U.S. Small Business Administration loan
programs; and
- Heller Commercial Services, which provides factoring and receivables
management services.
Heller Financial, Inc.'s International Factoring and Asset Based Finance segment
provides factoring services and loans secured primarily by receivables,
inventory and equipment through its wholly-owned subsidiaries and joint
ventures. Heller Financial Leasing, Inc. is made up of three distinct units:
Global Vendor Finance, Commercial Equipment Finance and Capital Finance.
Heller Financial, Inc. primarily serves middle-market businesses. 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 typically in the
range of $5 million to $40 million.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(IN BILLIONS)
<S> <C> <C> <C>
Total Assets............................................ $ 14.4 $ 12.9 $ 9.9
Total Liabilities....................................... $ 12.4 $ 11.1 $ 8.4
Total Stockholders' Equity.............................. $ 2.0 $ 1.7 $ 1.5
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Total Revenues.......................................... $ 783 $ 754 $ 533
Net Income.............................................. $ 193 $ 158 $ 133
</TABLE>
Heller Financial, Inc. and Heller Financial Leasing, Inc. originated the
contracts under two separate operating units: Commercial Equipment Finance and
Global Vendor Finance. Originations from either Commercial Equipment Finance or
Global Vendor Finance must meet Heller Financial, Inc.'s Credit Risk Management
System as described below.
CREDIT RISK MANAGEMENT SYSTEM
Heller Financial, Inc.'s Credit Risk Management System provides credit
functions within the originators' origination groups, including Commercial
Equipment Finance and Global Vendor Finance, as well as credit oversight at
Heller Financial, Inc.'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.
Oversight over the credit process at Heller Financial, Inc.'s corporate
level is headed by Heller Financial, Inc.'s Chief Credit Officer. The Chief
Credit Officer is responsible for ensuring that the
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<PAGE>
credit risk management system is appropriately implemented. Heller Financial,
Inc.'s Chief Credit Officer approves all new transactions and modifications that
exceed origination group authority. Additionally, Heller Financial's 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 Heller Financial, Inc.
The Credit Risk Management System emphasizes active portfolio management in
an effort to ensure:
- individual accounts are appropriately managed;
- portfolio reporting to management is accurate and timely; and
- problem accounts are identified and reported on a timely basis to ensure
prompt corrective action.
Each origination group has portfolio practices which enhance 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 Chief Executive Officer and
Chief Credit Officer. Heller Financial, Inc.'s Internal Audit Department
performs extensive loan reviews on an independent basis to ensure:
- compliance with group and corporate credit policies and procedures;
- the integrity of the risk ratings;
- the effectiveness of problem loan identification; and
- the adequacy of loan loss reserves.
As servicer, Heller Financial, Inc. will continue to apply its Credit Risk
Management System to the management of the contracts that have been sold to the
trust.
GLOBAL VENDOR FINANCE
GENERAL DESCRIPTION.
Global Vendor Finance was formed in 1998 by the combination of the existing
Vendor Finance unit and U.S. assets of the Dealer Products Group of Dana
Commercial Credit Corporation and the stock of Dealer Products Group's
international subsidiaries which were acquired by Heller Financial, Inc. on
November 30, 1998. Global Vendor Finance provides customized sales financing
programs that enable vendors and manufacturers in commercial, industrial,
medical, information and technology markets to offer financing and leasing
options to their customers. These programs are often made with partial, or in
some cases, full recourse from the vendor. This unit also provides a wide range
of financing options to independent leasing companies, including term financing,
residual financing and private securitization structures. The Global Vendor
Finance portfolio is well diversified with an average transaction size of
$350,000 excluding newly acquired Dealer Products Group which has an average
transaction size of $10,000. In 1998, Global Vendor Finance generated
approximately $792 million in new business volume.
GLOBAL VENDOR FINANCE'S CREDIT ANALYSIS.
The primary factors used by Global Vendor Finance in its credit analysis are
the following, listed in order of importance:
(1) vendor support and the originator's reliance on such support;
40
<PAGE>
(2) the credit strength of the underlying end-user of the equipment or
software; and
(3) the value of the equipment.
The credit analysis involves finding an appropriate balance between these
factors.
The following discipline is applied to all Global Vendor Finance
originations:
- a complete underwriting is required for each new vendor finance program
evaluating financial information, equipment value, quality of obligor
customer base, review of relevant industry data and the value of recourse,
- tiered credit approval authorities have been implemented for each vendor
program and the transactions originated under such programs,
- a comprehensive credit policies and procedures manual is maintained to
ensure consistent compliance with the originator's credit standards,
- an independent internal audit function exists within Global Vendor Finance
to conduct due diligence on new client relationships and which conducts
ongoing audits of the client relationship,
- financial performance of each vendor is periodically reviewed,
- Global Vendor Finance's portfolio is reviewed semiannually with the
originator's Chief Executive Officer and Chief Credit Officer, and
- there is an independent internal audit function.
COLLECTION PROCESS/VENDOR RECOURSE.
The vendor finance programs usually provide for some form of credit support
or recourse to the vendor. 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 some
circumstances the vendor and/or another leasing company originates, documents
and performs servicing while in other circumstances the originators originate,
document and perform servicing with respect to the contracts. The vendor may
generate documents and the bills as well as collect payments from the end-user
and remit payment to the servicer. In such instances 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 originates the contract
and the servicer performs the servicing with respect to such contract. In
general, the servicing function of the vendor is an important factor in the
pricing characteristics for the respective vendor finance program. A write-down
or write-off of a loan or lease receivable is governed by Heller Financial, Inc.
policy, with the amount of the write-off or write-down based on the principal
amount outstanding; plus unpaid service charges which have not been suspended;
less the fair market value of collateral or the amount of dealer/vendor
recourse. Accounts are reviewed and appropriate write-offs made when an obligor
is past due or when an obligor is in bankruptcy.
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
vendor, and the history and relationship with the vendor.
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<PAGE>
COMMERCIAL EQUIPMENT FINANCE
GENERAL DESCRIPTION.
Commercial Equipment Finance offers expansion, replacement and modernization
equipment financing directly to a broad range of industries where the financing
is primarily collateralized by the financed equipment. In addition to direct
origination, Commercial Equipment Finance generates business through traditional
broker and intermediary channels. The portfolio is well diversified with
financings that typically range from $500,000 to $15 million. As of December 31,
1997 the average transaction size was approximately $4 million. New business
volume in 1998 was approximately $600 million representing a 11% increase over
1997.
COMMERCIAL EQUIPMENT FINANCE CREDIT ANALYSIS.
Commercial Equipment Finance's approach to lending concentrates on three
critical factors:
- cash flow of the obligor--meaning Commercial Equipment Finance evaluates
the quality of the underlying obligor's cash flow by analyzing the related
industry dynamics, such obligor's competitive strengths and weaknesses,
the role of external factors in such obligor's business as well as the
financial profile of the obligor,
- the importance/value of the equipment to the obligor's overall
operations--in a downside/ workout scenario, the more important/valuable
the equipment, the more likely it is that the originator will be paid, and
- the originator's position in the overall capital structure of the
obligor--the smaller the role that Commercial Equipment Finance plays in a
company's overall capital structure, the more likely it is that the
originator will be paid in a negative economic environment.
Notwithstanding the type of program or related credit analysis, the
following discipline is applied to all Commercial Equipment Finance
originations:
- the Commercial Equipment Finance credit approval process requires complete
financial due diligence, collateral review, management/strategy
evaluation, review of all industry relevant data as well as review of all
legal aspects of the credit,
- reliance on the Commercial Equipment Finance Policy Manual,
- approval authority tiered to provide prompt responses to the customer at
lower exposure levels and ensure divisional involvement at higher exposure
levels; All regional office origination is approved by both the region
manager and the area region credit manager,
- quarterly/annual financial reviews of each account are prepared by
Commercial Equipment Finance credit staff,
- quarterly reviews of the portfolio are conducted with the Chief Executive
Officer and Chief Credit Officer of the originator,
- monthly distribution of key reports relating to delinquency and risk
ratings changes to the originator's senior management to ensure prompt
communication of material credit issues, and
- industry and geographic diversity is maintained with respect to Commercial
Equipment Finance's originations.
COLLECTION/SERVICING.
A delinquency report for each region must be prepared by a region credit
manager on a monthly basis. Heller Financial's key to successful resolution of a
problem contract is early recognition. Each
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<PAGE>
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 Uniform Commercial Code search must be performed
within the same ten day period.
Commercial Equipment Finance 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 usually between
1% and 5% of the amount due and is incurred within one to fifteen days after the
due date depending upon the documentation. An account is delinquent when a
payment is not made according to contract terms. A write-down or write-off of a
loan or lease receivable is governed by Heller Financial, Inc. policy, with the
amount of the write-off or write-down based on the principal amount outstanding;
plus unpaid service charges which have not been suspended; less the fair market
value of collateral or the amount of dealer/vendor recourse. Accounts are
reviewed and appropriate write-offs made when an obligor is past due or when an
obligor is in bankruptcy.
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
Commercial Equipment Finance 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 Commercial Equipment Finance. Any lease payment defaults permit
Commercial Equipment Finance 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 originator in good working order unless the lease is
renewed or the leased equipment is purchased by the obligor.
LEGAL PROCEEDINGS
Heller Financial, Inc. is not subject to any legal proceedings that could
have a material adverse impact on its operations or its consolidated financial
condition.
ASSESSMENT OF YEAR 2000 ISSUES
Heller Financial, Inc., as servicer, and as the parent of the trust
depositor and Heller Financial Leasing, Inc. as sub-servicer, has adopted a
phased approach to assessing and, where necessary, remediating or otherwise
addressing Year 2000 issues. Phases include:
- awareness, which, while ongoing, is substantially complete;
- assessment, which was substantially completed in 1998 with respect to
information technology systems and potential issues relating to borrowers,
vendors, international affiliates and environmental factors;
- remediation or implementation of contingency solutions, which is
substantially complete for all but one of the information technology
systems deemed mission-critical; and
- validation, which is scheduled for completion on the final
mission-critical information technology system and key information
technology infrastructure in the second quarter of 1999 and will continue
throughout 1999 for all other matters.
As part of the validation process, Heller Financial, Inc. is also assessing
the need for any re-verification of client server hardware and software
represented as compliant by the vendor. In late 1998, Heller Financial, Inc.
acquired leasing assets from another company and, in connection with the
acquisition, completed an assessment of related Year 2000 risk. Heller Financial
has engaged a third
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<PAGE>
party to complete remediation and validation activities, which are underway and
scheduled for completion in 1999.
Heller Financial, Inc. has made, and will continue to make, investments in
its software applications and systems to ensure that its systems function
properly through and beyond the Year 2000. Heller Financial, Inc. has three loan
processing systems, a lease processing system, a factoring system and systems
for general ledger processing, payroll, accounts payable, fixed assets, treasury
and other smaller applications. Heller Financial, Inc. has established plans to
modify, upgrade or replace each of these systems for compliance and has
established an overall plan to bring all of these systems into compliance by the
end of 1999. Heller Financial, Inc. continues to address the impact of Year 2000
issues on its consolidated international subsidiaries and its international
joint venture companies. As a result of the risk assessment substantially
completed with respect to these international companies in 1998, significant
remediation activity and additional readiness validation are underway for
completion in 1999.
In addition to information technology systems, Heller Financial, Inc. is
assessing potential Year 2000 impacts on its material vendors and borrowers, as
well as Year 2000 issues relating to environmental factors such as facilities
and general utilities. With respect to vendors, Heller Financial, Inc. has
categorized vendors with reference to materiality and availability of other
sources for the provided services and supplies, and is making inquiry of those
vendors deemed material. Responses are reviewed to assess the need for any
follow-up action. This assessment and any resulting remediation or contingency
solutions are scheduled for completion during 1999. With respect to borrowers,
Heller Financial, Inc. has incorporated a Year 2000 risk assessment into its
underwriting and portfolio management activities in order to evaluate exposure
due to any lack of compliance on the part of borrowers. Heller Financial, Inc.
categorizes prospective and existing borrowers by level of Year 2000 risk, and
is underwriting new transactions and managing portfolio accounts accordingly.
Finally, Heller Financial, Inc. is incorporating Year 2000 contingency planning
into its overall business resumption program in consideration of facilities and
other environmental factors. The planning component of this effort is scheduled
for completion in the first quarter of 1999, with implementation to occur
throughout the year.
To date, Heller Financial, Inc. has incurred approximately $[ ] million of
expenses related to the Year 2000 issue and estimates that an additional amount,
of approximately $[ ]million, will be incurred through the end of 1999.
Remediation, compliance, maintenance and modification costs will be expensed as
incurred.
THE TRUST
The trust has been organized as a business trust under the laws of the State
of Delaware under the Trust Agreement. The Trust was formed solely for the
purpose of effectuating the transactions described in this prospectus. Prior to
formation, we had no assets or obligations and no operating history. Upon
formation, we will not engage in any business activity other than:
(1) acquiring, managing and holding the contracts and related interests
described in this prospectus,
(2) issuing the notes and certificate,
(3) making distributions and payments on the notes and certificate, and
(4) engaging in those activities, including entering into agreements, that
are necessary, suitable or convenient to accomplish the above listed
activities or are incidental to those activities.
As a consequence, we do not expect to have any source of capital resources other
than the assets transferred to the trust as described in this prospectus. As of
the date of this prospectus, neither the trust depositor nor the trust is
subject to any legal proceedings.
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<PAGE>
If the issuance and sale of the notes had taken place on [ ,] 1999 the
capitalization of the trust would consist solely of the notes with an aggregate
principal amount of $[ ] and a certificate with a
$[ ]balance.
The trust depositor has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended, with
respect to the notes offered by this prospectus. For further information, you
should read the registration statement. The registration statement may be
inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at the following locations:
<TABLE>
<S> <C> <C>
450 Fifth Street,
N.W. Citicorp Center
Room 1024 500 West Madison, Suite Seven World Trade Center
Washington, D.C. 1400 Suite 1300
20549 Chicago, Illinois 60661 New York, New York 10048
</TABLE>
You may obtain copies of the registration statement for a fee from the
Public Reference Branch of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Securities and Exchange Commission
also maintains a public access site on the Internet through the World Wide Web
at which you may view reports, information statements and other information,
including all electronic filings, regarding the trust depositor and the trust.
The Internet address of the 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
Securities and Exchange Commission the periodic reports required under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder. Copies of those reports can
be obtained as described above.
THE TRUST DEPOSITOR
The trust depositor is a wholly-owned bankruptcy-remote subsidiary of Heller
Financial, Inc. The trust depositor was formed solely for the purpose of
acquiring from the originators contracts as well as other financial assets and
either issuing debt securities secured by identifiable fixed or revolving pools
of financial 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 it does not engage in business with, or
incur liabilities to, any other entity other than the indenture trustee and
other trustees and agents on behalf of other investors in nonrecourse,
asset-backed financings. The restrictions are intended to prevent the trust
depositor from engaging in business with other entities which may bring
bankruptcy proceedings against the trust depositor. The restrictions are also
intended to reduce the risk that the trust depositor will be consolidated into
the bankruptcy proceedings of any other entity.
The trust depositor will have no other assets available to pay amounts owing
under the indenture except the trust's assets, including the contracts and the
security interests in the equipment, the proceeds of the contracts and earnings
on 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 AND INDENTURE
The statements under this caption describe all of the material terms of the
notes and an indenture, dated as of [ ,] 1999, between the trust and the
indenture trustee. However, these statements are summaries. For a more detailed
description of the terms of the notes, you should read the sale and servicing
agreement and the indenture, the forms of which have been filed as exhibits to
the registration statement of which this prospectus is a part.
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<PAGE>
GENERAL
The offered notes will consist of six classes, the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, Class B Notes and the
Class C Notes. The Class D Notes are not being offered and sold pursuant to this
prospectus. The notes will be issued under the indenture.
The notes will be available for purchase in minimum denominations of $1,000
and in integral multiples of $1,000 in book-entry form. The Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 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 The Depository Trust Company, except as set forth
below. Payments on the notes will be made as described below to the noteholders
in whose names the notes were registered at the close of business on the day
immediately preceding the day in which such payments will be made. However, the
final payment on the notes offered hereby will be made only upon presentation
and surrender of the notes. All payments with respect to the principal of and
interest on the notes will be made in immediately available funds. See
"DESCRIPTION OF THE NOTES AND INDENTURE--BOOK-ENTRY REGISTRATION".
The indenture trustee will be granted a first priority lien on the trust's
assets to secure the notes; PROVIDED, that distributions on the notes will be
allocated as provided in "--ALLOCATIONS". The notes are nonrecourse obligations
of the trust only and do not represent interests in or obligations of the
originators, the servicer or the trust depositor, or any affiliate of such
persons.
INTEREST AND PRINCIPAL
Interest on the notes will be payable on the [ ] day of each calendar
month, or if that day is not a business day, the next business day, beginning on
[ ,] 1999 until the notes have been paid in full or have matured. Interest
on the offered notes will be paid at the respective rates specified on the cover
of this prospectus. Interest on each class of notes will accrue at the interest
rate specified for the class, for the period from and including the most recent
date on which interest has been paid. However, in the case of the initial
interest payment date, interest will accrued from the closing date for the
initial transfer of the Contracts to the trust to but excluding the following
payment date. The interest will accrue on the outstanding principal amount of
the notes as of the first day of the interest accrual period.
The stated maturity dates of the offered notes are specified on the cover of
this prospectus. However, if all payments on the contracts are made as
scheduled, final payment with respect to the notes would occur prior to stated
maturity. Prior to the respective stated maturity dates, 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, Class C Principal Payment Amount or Class D Principal Payment Amount
payable on any payment date, will not be due and payable, although the failure
of the trust depositor or servicer to remit any amounts available for payment on
the notes will, after the applicable grace period, constitute an event of
default under the indenture. See "--EVENTS OF DEFAULT".
We will pay interest and principal on the notes using amounts representing
primarily collections of payments due under the contracts and amounts received
upon prepayment or purchase of the contracts or liquidation of the contracts and
disposition of the related equipment upon defaults thereunder, but only after we
use those amounts to repay servicer advances. See "--AMOUNTS AVAILABLE FOR
PAYMENTS ON THE NOTES" and "THE SALE AND SERVICING AGREEMENT--SERVICING STANDARD
AND SERVICER ADVANCES".
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<PAGE>
AMOUNTS AVAILABLE FOR PAYMENTS ON THE NOTES
As of any payment date which shall be the [ ] day of each calendar month,
the amounts available for payment of interest and principal consist of:
- except for Excluded Amounts, all amounts on deposit in the collection
account as of the third business day immediately preceding the payment
date on account of scheduled payments due on or before, and prepayments
received on or before, the last day of the immediately preceding
collection period;
- recoveries on account of previously defaulted contracts received during
the preceding collection period, including proceeds of repossessed
equipment or other security or other property, insurance proceeds, amounts
representing late fees and penalties and amounts subsequently received
from the related vendor, net of collection and liquidation expenses;
- amounts held from time to time in the collection account, together with
investment earnings credited to the collection account and the reserve
fund;
- late charges relating to a contract received during the preceding
collection period, provided that the late charges were included in the
contract's terms as of the applicable cutoff date;
- funds on deposit in the reserve fund in the amount specified in "RESERVE
FUND"; and
- proceeds of any of the above items.
Each collection period for purposes of determining the amounts available for
distribution on the notes is a monthly period that begins on the second day of
each calendar month and ends on and includes the first day of the next following
calendar month.
Amounts available for distribution to you will not include any amounts
payable on an account of the equipment which exceeds the sum of the scheduled
payments and late charges described above payable under the related contract.
Furthermore, the available amounts will not include amounts relating to the
residual value of equipment leased under true leases.
Prepayments on the contracts which are treated as available amounts are:
- optional prepayments which are partial and full prepayments, including any
payment which the servicer has received, and expressly permitted the
related obligor to make, in advance of its scheduled due date;
- payments upon repurchases by the applicable originator through the trust
depositor as a result of the breach of representations and warranties or
covenants in the sale and servicing agreement; and
- payments upon an optional termination of the trust.
If the servicer permits an obligor to prepay a contract in an amount less
than its discounted contract balance plus accrued, unpaid interest at the
discount rate, the originator of the contract will make up the difference.
"EXCLUDED AMOUNTS" means:
- collections on deposit in the collection account or otherwise received by
the servicer on or with respect to the contracts or related equipment,
which collections are attributable to any taxes, fees or other charges
imposed by any governmental authority;
- collections representing reimbursements of insurance premiums or payments
for services that were not financed by the originator; and
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<PAGE>
- any proceeds from prepayments in excess of the sum of
(1) the discounted contract balance of the prepaid contracts on the date of
the prepayments plus any accrued and unpaid interest and
(2) any outstanding servicer advances on those prepaid contracts.
ALLOCATIONS
PRIOR TO AN EVENT OF DEFAULT.
On the third business day prior to each payment date prior to the occurrence
of an event of default under the indenture, the servicer shall instruct the
indenture trustee to withdraw, and on the payment date the indenture trustee
shall withdraw, from the collection account the amounts needed to make the
following payments. See "--AMOUNTS AVAILABLE FOR PAYMENT ON THE NOTES" and
"--EVENTS OF DEFAULT". The payments listed below will be made only to the extent
there are sufficient amounts available on the payment date. We will make
payments on the [ ] day of each calendar month, or if such day is not a
business day, the next business day, in the following order of priority:
FIRST, to the servicer, reimbursement for the amount of any scheduled
payments on the contracts which were not received when due and which the
servicer advanced for deposit in the collection account;
SECOND, if the servicer is no longer Heller Financial, Inc. or an affiliate
of Heller Financial, Inc., to the servicer, its monthly servicing fee for the
preceding monthly period together with any amounts in respect of the servicer's
fee that were due in respect of prior monthly periods that remain unpaid;
THIRD, to the holders of the notes, the amounts specified in the following
table and in the order set forth in the following table:
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
- ---------------------------- ------------------------------------------------------------------------------------
<S> <C>
A-1, A-2, A-3 and A-4....... Interest accrued on the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class
A-4 Notes at their respective interest rates for the period from and including the
most recent date on which interest has been paid to, but excluding, the current
interest payment date.
B........................... Interest accrued on the Class B Notes at the Class B Note interest rate for the
period from and including the most recent date on which interest has been paid to,
but excluding, the current interest payment date.
C........................... Interest accrued on the Class C Notes at the Class C Note interest rate for the
period from and including the most recent date on which interest has been paid to,
but excluding, the current interest payment date.
D........................... Interest accrued on the Class D Notes at the Class D Note interest rate for the
period from and including the most recent date on which interest has been paid to,
but excluding, the current interest payment date.
A-1......................... The Class A Principal Payment Amount, until the outstanding principal of the Class
A-1 Notes is reduced to $0.
A-2......................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes is reduced to $0.
- Class A Principal Payment Amount less the amount needed to reduce the outstanding
principal of the Class A-1 Notes to $0, on subsequent payment dates until the
outstanding principal of the Class A-2 Notes is reduced to $0.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
- ---------------------------- ------------------------------------------------------------------------------------
<S> <C>
A-3......................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes and Class A-2 Notes is reduced to $0.
- Class A Principal Payment Amount less the amount needed to reduce the outstanding
principal of the Class A-1 Notes and Class A-2 Notes to $0, on subsequent payment
dates until the outstanding principal of the Class A-3 Notes is reduced to $0.
A-4......................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes is reduced to $0.
- Class A Principal Payment Amount less the amount needed to reduce the outstanding
principal amount of the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes to
$0, on subsequent payment dates until the outstanding principal of the Class A-4
Notes is reduced to $0.
B........................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes is reduced to $0.
- Class B Principal Payment Amount, on subsequent payment dates until the
outstanding principal of the Class B Notes is reduced to $0.
C........................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes is reduced to $0.
- Class C Principal Payment Amount, on subsequent payment dates until the
outstanding principal of the Class C Notes is reduced to $0.
D........................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes is reduced to $0.
- Class D Principal Payment Amount, on subsequent payment dates until the
outstanding principal of the Class D Notes is reduced to $0.
A-2......................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes is reduced to $0.
- Additional Principal, on subsequent payment dates until the outstanding principal
of the Class A-2 Notes is reduced to $0.
A-3......................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes and Class A-2 Notes is reduced to $0.
- The excess of Additional Principal over the amount needed to reduce the
outstanding principal of the Class A-2 Notes to $0, on subsequent payment dates
until the outstanding principal of the Class A-3 Notes is reduced to $0.
A-4......................... - $0, prior to the payment date on which the outstanding principal of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes is reduced to $0.
- The excess of Additional Principal over the amount needed to reduce the
outstanding principal of the Class A-2 Notes and Class A-3 Notes to $0, on
subsequent payment dates until the outstanding principal of the Class A-4 Notes
is reduced to $0.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
- ---------------------------- ------------------------------------------------------------------------------------
<S> <C>
B........................... - $0, prior to the payment date on which the outstanding principal of the Class A-4
Notes is reduced to $0.
- The excess of Additional Principal over the amount needed to reduce the
outstanding principal of the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes
to $0, on subsequent payment dates until the outstanding principal of the Class B
Notes is reduced to $0.
C........................... - $0, prior to the payment date on which the outstanding principal of the Class B
Notes is reduced to $0.
- The excess of Additional Principal over the amount needed to reduce the
outstanding principal of the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes
and Class B Notes to $0, on subsequent payment dates until the outstanding
principal of the Class C Notes is reduced to $0.
D........................... - $0, prior to the payment date on which the outstanding principal of the Class C
Notes is reduced to $0.
- The excess of Additional Principal over the amount needed to reduce the
outstanding principal of the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class B Notes and Class C Notes to $0, on subsequent payment dates until the
outstanding principal of the Class D Notes is reduced to $0.
</TABLE>
FOURTH, if the servicer is Heller Financial, Inc. or an affiliate of Heller
Financial, Inc., to the servicer, its monthly servicing fee for the preceding
monthly period together with any amounts in respect of the servicer's fee that
were due in respect of prior monthly periods that remain unpaid;
FIFTH, to the extent that any amounts remain after allocating the amounts
available for distribution on the notes, the indenture trustee will deposit into
the reserve fund an amount, if any, which, when so deposited, causes the balance
in the reserve fund to equal the Required Reserve Amount; and
SIXTH, any excess shall be paid to the holder of the certificate.
The indenture trustee will distribute available amounts on each note within
each class of notes based on the outstanding principal amount of the note
relative to the aggregate outstanding principal amount of that class of notes.
FOLLOWING AN EVENT OF DEFAULT.
On the third business day prior to each payment after the occurrence of an
event of default under the indenture, the servicer shall instruct the indenture
trustee to withdraw, and on the payment date the indenture trustee will follow
the instructions to withdraw, from the collection account the amounts needed to
make the following payments. See "--AMOUNTS AVAILABLE FOR PAYMENT ON THE NOTES"
and see "--EVENTS OF DEFAULT". The payments listed below will be made only to
the extent there are sufficient amounts available on such payment date. We will
make payments on the [ ] day of each calendar month, or if such day is not a
business day, the next business day, in the following order of priority:
FIRST, pay to the indenture trustee or the owner trustee, the amount of any
unpaid fees, expenses, late charges or other losses;
SECOND, pay to the noteholders, reimbursement for any indemnity payments
made by them to the indenture trustee;
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<PAGE>
THIRD, if the servicer is no longer Heller Financial or an affiliate of
Heller Financial, to the servicer, its monthly servicing fee for the preceding
monthly period together with any amounts in respect of the servicer's fee that
were due in respect of prior monthly periods that remain unpaid;
FOURTH, to the holders of the notes the amounts specified in the following
table and in the order set forth in the following table:
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
- ---------------------------- ------------------------------------------------------------------------------------
<S> <C>
A-1, A-2, A-3 and A-4....... Interest accrued on the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class
A-4 Notes at their respective interest rates for the period from and including the
most recent date on which interest has been paid to, but excluding, the current
interest payment date.
B........................... Interest accrued on the Class B Notes at the Class B Note interest rate for the
period from and including the most recent date on which interest has been paid to,
but excluding, the current interest payment date.
C........................... Interest accrued on the Class C Notes at the Class C Note interest rate for the
period from and including the most recent date on which interest has been paid to,
but excluding, the current interest payment date.
D........................... Interest accrued on the Class D Notes at the Class D Note interest rate for the
period from and including the most recent date on which interest has been paid to,
but excluding, the current interest payment date.
A-1......................... Outstanding principal of the Class A-1 Notes.
A-2, A-3 and A-4............ Outstanding principal of the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes,
pro rata according to the outstanding principal for each class of notes.
B........................... Outstanding principal of the Class B Notes.
C........................... Outstanding principal of the Class C Notes.
D........................... Outstanding principal of the Class D Notes.
</TABLE>
FIFTH, any excess shall be paid to the holder of the certificate.
The terms used in describing the calculation of interest and principal
payments and allocations on the notes are defined as follows:
"ADDITIONAL PRINCIPAL" means, with respect to a date on which principal is
to be paid,
(1) if the Class B Target Investor Principal Amount, Class C Target Investor
Principal Amount and Class D Target Investor Principal Amount exceed the
Class B Floor, Class C Floor and Class D Floor, respectively, an amount
of $0; or
(2) if any of the conditions in clause (1) are not satisfied, an amount
equal to the excess, if any, of
(A) the difference between
(i) the sum of the outstanding principal amount of all of the notes
and the Overcollateralization Balance as of the immediately
preceding principal payment date (after making any principal
payments on such date) and
(ii) the aggregate discounted contract balance of the contracts as
of the last day of the most recently completed collection
period, over
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<PAGE>
(B) the sum of the Class A Principal Payment Amount, Class B Principal
Payment Amount, Class C Principal Payment Amount and Class D
Principal Payment Amount for such payment date.
"CLASS A PERCENTAGE" means approximately [ ]%, which is the ratio of:
(1) the sum of the initial principal amount of the Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes to
(2) the aggregate discounted contract balance of the contracts as of [ ,]
1999 minus the initial principal amount of the Class A-1 Notes.
"CLASS A PRINCIPAL PAYMENT AMOUNT" means, with respect to a date on which
principal is to be paid,
(1) while there is outstanding principal on the Class A-1 Notes, the lesser
of:
(A) the amount necessary to reduce such outstanding principal to $0 and
(B) the difference between
(1) the sum of the outstanding principal amount of all of the notes
and the Overcollateralization Balance as of the immediately
preceding principal payment date (after making any principal
payments on such date) and
(2) the aggregate discounted contract balance of the contracts as of
the last day of the most recently completed collection period;
(2) on the payment date on which the outstanding principal of the Class A-1
Notes is reduced to $0, the sum of:
(A) the amount necessary to reduce the outstanding principal of the Class
A-1 Notes to $0; and
(B) the amount necessary to reduce the sum of the outstanding principal
amount of the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes to
the Class A Target Investor Principal Amount; or
(3) on any subsequent payment dates, the amount necessary to reduce the sum
of outstanding principal amount of the Class A-2 Notes, Class A-3 Notes
and Class A-4 Notes to the Class A Target Investor Principal Amount.
"CLASS A TARGET INVESTOR PRINCIPAL AMOUNT" means, with respect to a date on
which principal is to be paid, an amount equal to the product of:
(1) the Class A Percentage and
(2) the aggregate discounted contract balance of the contracts as of the
last day of immediately preceding completed collection period.
"CLASS B FLOOR" means, with respect to a date on which principal is to be
paid,
(1) [ ]% of the initial aggregate discounted contract balance of the
contracts plus
(2) the Cumulative Loss Amount as of such payment date minus
(3) the sum of
(A) the outstanding principal amount of the Class C Notes and Class D
Notes as of the immediately preceding payment date after giving
effect to all principal payments made on such prior payment date and
(B) the Overcollateralization Balance as of the immediately preceding
payment date.
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"CLASS B PERCENTAGE" means approximately [ ]%, which is the ratio of:
(1) the initial principal amount of the Class B Notes to
(2) the aggregate discounted contract balance of the contracts as of [ ,]
1999 minus the initial principal amount of the Class A-1 Notes.
"CLASS B PRINCIPAL PAYMENT AMOUNT" means, with respect to a date on which
principal is to be paid,
(1) while there is outstanding principal on the Class A-1 Notes, $0; and
(2) after the outstanding principal amount of the Class A-1 Notes is reduced
to $0, the amount necessary to reduce the outstanding principal amount of
the Class B Notes to the greater of:
(A) the Class B Target Investor Principal Amount; or
(B) the Class B Floor.
"CLASS B TARGET INVESTOR PRINCIPAL AMOUNT" means, with respect to a date on
which principal is to be paid, an amount equal to the product of:
(1) the Class B Percentage and
(2) the aggregate discounted contract balance of the contracts as of the
last day of immediately preceding completed collection period.
"CLASS C FLOOR" means, with respect to a date on which principal is to be
paid,
(1) [ ]% of the initial aggregate discounted contract balance of the
contracts plus
(2) the Cumulative Loss Amount as of such payment date minus
(3) the sum of
(A) the outstanding principal amount of the Class D Notes as of the
immediately preceding payment date after giving effect to all
principal payments made on such prior payment date and
(B) the Overcollaterization Balance as of the immediately preceding
payment date; PROVIDED, HOWEVER, that if the outstanding principal
amount of the Class B Notes is less than or equal to the Class B
Floor on such payment date, the Class C Floor will equal the
outstanding principal amount of the Class C Notes as of the
immediately preceding payment date after giving effect to all
principal payments made on such prior payment date.
"CLASS C PERCENTAGE" means approximately [ ]%, which is the ratio of:
(1) the initial principal amount of the Class C Notes to
(2) the aggregate discounted contract balance of the contracts as of
[ ,] 1999 minus the initial principal amount of the Class A-1 Notes.
"CLASS C PRINCIPAL PAYMENT AMOUNT" means, with respect to a date on which
principal is to be paid,
(1) while there is outstanding principal on the Class A-1 Notes, $0; and
(2) after the outstanding principal amount of the Class A-1 Notes is reduced
to $0, the amount necessary to reduce the outstanding principal amount of
the Class C Notes to the greater of:
(A) the Class C Target Investor Principal Amount; or
(B) the Class C Floor.
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"CLASS C TARGET INVESTOR PRINCIPAL AMOUNT" means, with respect to a date on
which principal is to be paid, an amount equal to the product of:
(1) the Class C Percentage and
(2) the aggregate discounted contract balance of the contracts as of the
last day of immediately preceding completed collection period.
"CLASS D FLOOR" means, with respect to a date on which principal is to be
paid,
(1) [ ]% of the initial aggregate discounted contract balance plus
(2) the Cumulative Loss Amount as of such payment date minus
(3) the Overcollateralization Balance as of the immediately preceding
payment date; PROVIDED, HOWEVER, that if the outstanding principal amount
of the Class C Notes is less than or equal to the Class C Floor on such
payment date, the Class D Floor will equal the outstanding principal
amount of the Class D Notes as of the immediately preceding payment date
after giving effect to all principal payments made on such prior payment
date.
"CLASS D PERCENTAGE" means approximately [ ]%, which is the ratio of:
(1) the initial principal amount of the Class D Notes to
(2) the aggregate discounted contract balance of the contracts as of
[ ,] 1999 minus the initial principal amount of the Class A-1 Notes.
"CLASS D PRINCIPAL PAYMENT AMOUNT" means, with respect to a date on which
principal is to be paid,
(1) while there is outstanding principal on the Class A-1 Notes, $0; and
(2) after the outstanding principal amount of the Class A-1 Notes is reduced
to $0, the amount necessary to reduce the outstanding principal amount of
the Class D Notes to the greater of:
(A) the Class D Target Investor Principal Amount; or
(B) the Class D Floor.
"CLASS D TARGET INVESTOR PRINCIPAL AMOUNT" means, with respect to a date on
which principal is to be paid, an amount equal to the product of:
(1) the Class D Percentage and
(2) the aggregate discounted contract balance of the contracts as of the
last day of immediately preceding completed collection period.
"CUMULATIVE LOSS AMOUNT" means, with respect to a date on which principal is
to be paid, an amount equal to the excess, if any, of
(1) the total of:
(A) the outstanding principal amounts of all of the notes as of the
immediately preceding payment date after giving effect to all
principal payments made on such date plus
(B) the Overcollateralization Balance as of the immediately preceding
payment date minus
(C) the lesser of
(1) the difference between
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(x) the sum of the outstanding principal amount of all of
the notes and the Overcollateralization Balance as of the
immediately preceding principal payment date (after making any
principal payments on such date) and
(y) the aggregate discounted contract balance of the
contracts as of the last day of the most recently completed
collection period; and
(2) the amounts available for distribution on the notes after paying
all amounts owing to the servicer, excluding servicing fees owed
to Heller Financial, Inc. or an affiliate of Heller Financial,
Inc., and all interest due on the notes on such payment date over
(2) the aggregate discounted contract balance as of the last day of the
immediately preceding completed collection period.
"OVERCOLLATERALIZATION BALANCE" means with respect to a principal payment
date, an amount equal to the excess, if any, of:
(1) the aggregated discounted contract balance as of the last day of the
collection period completed immediately prior to such date over
(2) the sum of the outstanding principal amount of all of the notes as of
such date after giving effect to all principal payments made on such
date.
RESERVE FUND
The reserve fund will be an account held in the name of the indenture
trustee on behalf of you. On the closing date for the transfer of the contracts
to the trust, the reserve fund balance will be $[ ]. On any payment date,
after distributing the available amounts to the servicer and noteholders as
described in "--ALLOCATIONS", we will deposit the remaining available amounts
into the reserve fund until the amounts in the reserve fund equal the Required
Reserve Amount.
"REQUIRED RESERVE AMOUNT" means with respect to a payment date, an amount
equal to 0.70% of the aggregate outstanding principal amount of the notes as of
the last day of the immediately preceding completed collection period.
Amounts in the reserve fund will be invested in investments deemed to be
eligible investments for funds held in the collection account. See "--COLLECTION
ACCOUNT". Earnings on the eligible investments will be treated as amounts
available for distribution to the noteholders and the holder of the certificate.
If on any payment date, the available amounts remaining after we pay the
servicer and noteholders as described in "--ALLOCATIONS" exceed the amount
needed to increase the reserve fund balance to the Required Reserve Amount, we
will distribute such excess to the holder of the certificate. Upon any such
distributions to the holder of the certificate, you will have no further rights
in, or claims to, such amounts.
On any payment date, if the amounts available for making the following two
payments are insufficient, the indenture trustee will withdraw the deficiency
from the reserve fund to make the following two payments:
- servicing fee, if the servicer is no longer Heller Financial, Inc. or an
affiliate of Heller Financial, Inc.; or
- interest on the notes.
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Furthermore, if the amounts available for making the following four payments are
insufficient, the indenture trustee will withdraw the lesser of the deficiency
and the excess in the reserve fund over the Required Reserve Amount to make the
following four payments:
- unreimbursed servicer advances;
- principal on the notes;
- additional principal, if any, to most senior outstanding class of notes;
or
- servicing fee, if the servicer is Heller Financial, Inc. or an affiliate
of Heller Financial, Inc.
We will allocate amounts withdrawn from the reserve fund as described in
"--ALLOCATIONS". Upon making these payments in full, the funds on deposit in the
reserve fund in excess of the Required Reserve Amount shall be paid to the
holder of the certificate.
If amounts on deposit in the reserve fund have been depleted as a result of
losses in respect of the contracts, the credit enhancement afforded by the
reserve fund will be exhausted and will not be restored.
The servicer may, from time to time after the date of this prospectus
request each rating agency that rated the notes to, at the request of the trust
depositor, approve a formula for determining the Required Reserve Amount that is
different from the formula described above and would result in a decrease in the
amount of the Required Reserve Amount or the manner by which the reserve fund is
funded. If each rating agency delivers a letter to the indenture trustee and the
owner trustee to the effect that the use of the new formulation will not result
in a qualification, reduction or withdrawal of its then-current rating of any
class of notes then the Required Reserve Amount will be determined using the new
formula. The sale and servicing agreement will accordingly be amended to reflect
the new calculation without your consent.
COLLECTION ACCOUNT AND COLLECTION PERIOD
The servicer, for your benefit, shall cause to be established an account
referred to as the "COLLECTION ACCOUNT" maintained in the name of the indenture
trustee, with an office or branch of a depository institution or trust company,
which may be the indenture trustee, organized under the any state laws or laws
of the United States of America and located in the state designated by the
servicer. This account will be a non-interest bearing segregated corporate trust
account bearing a designation clearly indicating that the funds deposited in the
account are held in trust for the benefit of the noteholders.
At all times such depository institution or trust company shall have the
following characteristics and the amounts in the collection account will be
invested in the following eligible investments:
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ELIGIBLE DEPOSITORY INSTITUTION OR TRUST COMPANY
- - the corporate trust department of the indenture trustee or
- - a depository institution organized under any state laws the laws of the United
States of America or the District of Columbia or any domestic branch of a
foreign bank,
(1) (A) which has either
(i) a long-term unsecured debt rating acceptable to the rating agencies
rating the notes or
(ii) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the rating agencies,
(B) the parent corporation of which has either
(i) a long-term unsecured debt rating acceptable to the rating agencies
rating the notes or
(ii) 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 rating the notes and
(2) whose deposits are insured by the Federal Deposit time deposits with an
entity, the commercial paper of which Insurance Corporation.
ELIGIBLE INVESTMENTS
- - obligations fully guaranteed by the United States of America;
- - demand deposits, time deposits or certificates of deposit of depository
institutions or trust companies having commercial paper and short-term
unsecured debt obligations, other than such obligation whose rating is based
on the credit of another person, with the highest rating from each rating
agency rating the notes;
- - commercial paper or other short-term obligations having the highest rating
from each rating agency rating the notes at the time the trust purchased it;
- - demand deposits, time deposits and certificates of deposit which are fully
insured by the FDIC.
- - notes or banker's' acceptance issued by any depository institution or trust
company having commercial paper and short-term unsecured debt obligations,
other than such obligation whose rating is based on the credit of another
person, with the highest money market funds which have the highest rating
from, or have otherwise been approved in writing by, each rating agency rating
the notes;
Funds in the collection account may be invested in debt obligations of
Heller Financial or its affiliates so long as the obligations qualify as the
above described eligible investments.
Any earnings, net of losses and investment expenses, on funds in the
collection account will be held in that account and be treated as amounts
available for distribution to you. 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.
If any institution at which any of the collection account is established
ceases to be an eligible institution as described above, the servicer shall,
within ten business days after receiving notice of that fact, establish a
replacement account at another institution meeting the above eligibility
requirements.
Each collection period begins on the second day of a calendar month and ends
on and includes the first day of the immediately following calendar month.
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EVENTS OF DEFAULT
Allocations of amounts to payments to you will be made as described above
under "--ALLOCATIONS; PRIOR TO AN EVENT OF DEFAULT" unless and until an event of
default has occurred, in which case allocations of amounts will be made as
described above under "--ALLOCATIONS; FOLLOWING AN EVENT OF DEFAULT".
An "EVENT OF DEFAULT" refers to any of the following events:
- failure to pay the full amount of accrued interest on any note on a
payment date;
- failure to pay the then outstanding principal amount of any note, if any,
on its related maturity date of the note;
- (1) failure on the part of any originator to make any payment or deposit
required under the sale and servicing agreement within three business
days after the date the payment or deposit is required to be made, or
(2) failure on the part of any originator, the trust depositor, the trust
or the owner trustee to observe or perform any other covenants or
agreements in the 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, there is no 60-day cure period if the originators do not
accept reassignment of ineligible contracts as required by the sale
and servicing agreement, and FURTHER PROVIDED, that only a five day
cure period shall apply in the case of a failure by any originator,
the indenture trustee or the owner trustee to comply with their
respective covenants not to grant a security interest in or otherwise
intentionally create a lien on the contracts;
- any representation or warranty made by any originator, the trust
depositor, the indenture trustee or the owner trustee in the sale and
servicing agreement or any information required to be given by any
originator or the trust depositor to the indenture trustee to identify the
contracts was 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 noteholders' interests are materially
and adversely affected; PROVIDED, HOWEVER, that an event of default shall
not be deemed to occur under the sale and servicing agreement if the
originator has repurchased the related contracts through the trust
depositor during such period under the terms of the sale and servicing
agreement;
- the occurrence of any of the following events with respect to the
originator, the trust depositor, the trust or the servicer:
(1) a court files a decree or order for relief against the party in an
involuntary case under the Bankruptcy Code of the United States or
any other liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debtor relief laws affecting the rights of
creditors,
(2) the party commences a voluntary case under any insolvency law,
(3) the party consents to a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official taking possession of any
substantial part of its property,
(4) the party makes a general assignment for the benefit of creditors, or
(5) the party fails to pay its debts as those debts become due;
- the trust becomes an "INVESTMENT COMPANY" within the meaning of the
Investment Company Act of 1940, as amended.
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In the case of any event described above, an event of default with respect
to the notes will be deemed to have occurred; PROVIDED the event of default may
be waived if the Required Holders provide written notice to the trust depositor
and the servicer of the 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 originator, the servicer and the owner trustee.
"REQUIRED HOLDERS" means:
(1) prior to the payment in full of the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes outstanding, holders Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes, respectively, evidencing
more than 66 2/3% of the aggregate of principal amount of the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes voting as a
single class, and
(2) from and after the payment in full of the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes outstanding, holders of Class B Notes
evidencing more than 66 2/3% of the aggregate principal amount of the Class
B Notes outstanding, and
(3) from and after the payment in full of the Class B Notes outstanding, holders
of Class C Notes evidencing more than 66 2/3% of the aggregate principal
amount of the Class C Notes outstanding.
If events relating to the bankruptcy or insolvency of the trust depositor
occur on the day of such event, the trust depositor will promptly give notice to
the indenture trustee of the event, and the indenture trustee will, unless
notified to the contrary by the Required Holders, 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 sale, disposition or
liquidation of contracts will be deposited in the collection account and
allocated as described in the sale and servicing agreement and in
"--ALLOCATIONS". 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 the class in full, those noteholders
will incur a loss.
EVENTS OF DEFAULT; REMEDIES
If an event of default relating to bankruptcy or insolvency as described
under the heading "--EVENTS OF DEFAULT" has occurred, then the unpaid principal
of the notes, together with interest accrued but unpaid and all other amounts
due to you under the indenture, shall immediately become due and payable.
If an event of default other than the event of default relating to
bankruptcy or insolvency as described under the heading "--EVENTS OF DEFAULT"
occurs, the Required Holders may waive the event of default by sending a written
notice of the waiver to the indenture trustee, the servicer and the trust
depositor. If the Required Holders do not waive the event of default then the
unpaid principal of the notes, together with interest accrued but unpaid and all
other amounts due to you under the indenture, shall immediately and without
further act become due and payable.
THE INDENTURE TRUSTEE
The indenture trustee with respect to the notes is Norwest Bank Minnesota,
National Association. Heller Financial, Inc. and its affiliates may from time to
time enter into banking and trustee relationships with the indenture trustee and
its affiliates. Heller Financial, Inc. 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 ministerial in nature,
consisting principally of:
- the distribution of monies as required by the sale and servicing
agreement;
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- the authentication and registration of transfer of notes under the
indenture, and
- the delivery of information received from the trust depositor.
The indenture trustee also, as pledgee of the trust under the indenture, will
take and maintain possession of any contracts constituting "INSTRUMENTS" for
purposes of the Uniform Commercial Code that are not otherwise part of chattel
paper.
For purposes of meeting the legal requirements of any jurisdictions in which
any part of the trust's 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's 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 the separate trustee or co-trustee jointly. In any jurisdiction in which the
indenture trustee will be incompetent or unqualified to perform as required by
the indenture, all rights, powers, duties and obligations conferred or imposed
upon the indenture trustee will be conferred or imposed 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 which meets the requirements of Section 310(a) of the Trust
Indenture Act of 1939, as amended, will be appointed by the servicer. The
servicer may also remove the indenture trustee if the indenture trustee ceases
to be eligible to continue as the trustee under the indenture. In such
circumstances, a successor indenture trustee which meets the requirements of
Section 310(a) of the Trust Indenture Act will be appointed by the servicer. 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
The owner trustee, the trust depositor, and the indenture trustee, with the
written consent of the Required Holders represented thereby, may execute a
supplement to the indenture for the purpose of adding provisions to, or changing
or eliminating provisions of, the indenture. Additionally, the indenture
trustee, with the written consent of the Required Holders represented thereby,
may consent to or execute a written amendment of or supplement to, or waiver or
consent under, the sale and servicing agreement. But, in each case the consent
of each noteholder is required to:
(1) reduce the amount or extend the time of payment of any amount owing or
payable under any note,
(2) increase or reduce the interest payable on any note,
(3) alter or modify the provisions of the sale and servicing agreement with
respect to the order of priorities in which collections on the contracts
shall be paid to noteholders or with respect to the amount or timing of
payments on the notes,
(4) 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 by the change,
(5) make any interest or principal payable in a currency other than U.S.
dollars,
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(6) 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
(7) modify the definition of Required Holders or the percentage of
noteholders required to make any modification of the indenture.
However, only the consent of the affected holder shall be required for any
decrease in an amount of or the rate of interest payable on the note or any
extension for the time of payment of any amount payable under the note.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicer's compensation with respect to its servicing activities and
reimbursement for its expenses will be a servicing fee calculated monthly in
conjunction with the collection periods for the notes. The servicer's monthly
fee will be an amount equal to the product of
(1) one-twelfth,
(2) 0.40% and
(3) the aggregate discounted contract balance of all of the contracts as of
the second day of the immediately preceding calendar month.
The servicer's fee will be funded from payments due under the contracts and
amounts received upon the prepayment or purchase of contracts or liquidation of
the contracts and disposition of the related equipment upon defaults thereunder.
See "--AMOUNTS AVAILABLE FOR PAYMENTS ON THE NOTES". The servicer's monthly fee
will be paid on the 13th day of each calendar month from the collection account.
See "DESCRIPTION OF THE NOTES AND INDENTURE--ALLOCATIONS" above.
The servicer will pay from its servicing compensation some of the 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;
- expenses of maintaining casualty insurance on equipment to the extent the
contracts provide for the originator to pay such insurance; and
- any fees which are not expressly stated in the sale and servicing
agreement to be payable by the trust, you or the trust depositor.
However, the servicer will not pay federal, state, local and foreign income,
franchise or other taxes based on income, if any, or any interest or penalties
on such income, imposed upon the trust. The servicing fees of any sub-servicers,
including vendor sub-servicers, will be paid by the servicer out of its monthly
servicing fee.
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
trustee will be entitled to receive the portion of the servicer's monthly
servicing fee that is equal to those unpaid amounts. In no event will you be
liable to the indenture trustee or owner trustee for the servicer's failure to
pay those amounts.
OPTIONAL TERMINATION
If the aggregate discounted contract balance of the contracts is less than
10% of the initial aggregate discounted contract balance of the contracts as of
[ ,] 1999, the trust depositor will
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have the option to cause the trust to purchase without penalty all, but not less
than all, of the remaining outstanding notes and certificate. The trust
depositor will exercise this option only on a payment date for the notes. The
redemption price will be equal to the sum of the outstanding principal amount of
the notes and certificate, together with accrued interest through the date of
redemption. The source of funds for the redemption price will be the proceeds of
the trust's sale to the trust depositor of the contracts and the trust
depositor's concurrent resale of the contracts to the applicable originators.
Following any redemption, you will have no further rights with respect to the
trust's assets.
REPORTS
No later than the third business day prior to each payment date, the
servicer will forward to the indenture trustee and each rating agency rating the
notes a monthly report prepared by the servicer setting forth information with
respect to the trust and the notes and certificate, including:
(1) the aggregate discounted contract balance
(A) as of the end of the related collection period and
(B) as of the end of the second collection period preceding such interest
and principal payment date;
(2) the Class A Principal Payment Amount, Class B Principal Payment Amount,
Class C Principal Payment Amount Class D Principal Payment Amount, and
Additional Principal including the calculations utilized in the
determination of those principal payment amounts;
(3) the aggregate discounted contract balance of contracts held by the trust
which were 31, 61 and 91 days or more delinquent as of the end of such
collection period;
(4) the discounted contract balance of contracts that became defaulted
contracts during such collection period and cumulatively for each
preceding collection period;
(5) the monthly servicing fee for the related collection period;
(6) the amounts available for distribution to the holders of the notes with
respect to the related collection period, including the calculation of
those amounts;
(7) the total amount distributed on the notes;
(8) the amount allocable to principal on each class of the notes;
(9) the amount allocable to interest on each class of the notes;
(10) any servicer advances; and
(11) the balance in the reserve fund.
On each payment 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, 2000,
the indenture trustee 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 Internal Revenue Code of 1986, as amended for such
preceding calendar year or the applicable portion of the year during which you
were a noteholder, together with such other customary information as is
necessary to enable you to prepare your tax returns. See "FEDERAL INCOME TAX
CONSEQUENCES".
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As long as the notes remain in book-entry form, periodic and annual
unaudited reports, containing information concerning the trust, the contracts,
the offered notes and the certificate, will be prepared by the servicer and sent
on behalf of the trust to Cede & Co., as nominee of The Depository Trust
Company, and the Euroclear System or Cedel Bank, S.A. as registered holders of
the offered notes. These reports will be made available by DTC, Euroclear or
CEDEL and its participants to holders of interests in the offered notes as
required by the rules, regulations and procedures creating and affecting DTC,
Euroclear and CEDEL, respectively. See "DESCRIPTION OF THE NOTES AND
INDENTURE--BOOK ENTRY REGISTRATION" and "--REPORTS". These 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, these reports will be sent to
each registered noteholder.
LIST OF NOTEHOLDERS
If the notes are subsequently issued in fully registered, certificated form,
the indenture trustee will afford you 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. The indenture trustee will provide this list 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. 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.
ADMINISTRATION AGREEMENT
Heller Financial, Inc., in its capacity as administrator, will enter into an
Administration Agreement. Heller Financial, Inc. will agree, to the extent
provided in the Administration Agreement, to provide the notices and to perform
other administrative obligations required to be provided or performed by the
trust or the owner trustee under the indenture.
Heller Financial, Inc., as the administrator agrees to perform the
accounting functions of the trust which the owner trustee is required to perform
under the Trust Agreement, including but not limited to:
- maintaining the books of the trust;
- filing tax returns for the trust; and
- delivering tax related reports to you.
However, the owner trustee shall retain responsibility for distributing the
Schedule K-1s. As compensation for the performance of the administrator's
obligations under the Administration Agreement and as reimbursement for its
expenses, Heller Financial, Inc., as the administrator will be entitled to a
monthly administration fee, which fee will be paid by the servicer.
BOOK-ENTRY REGISTRATION
You may hold your notes through The Depository Trust Company in the United
States or Cedel Bank, society anonyme or Euroclear System in Europe if you are a
participant of those systems, or indirectly through organizations that are
participants in those systems.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered under to Section 17A of the Exchange
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Act. DTC was created to hold securities for its direct participants and to
facilitate the clearance and settlement of securities transactions between its
direct participants through electronic book-entries, thereby eliminating the
need for physical movement of certificates. DTC's direct participants include
the underwriters offering the notes to you, securities brokers and dealers,
banks, trust companies and clearing corporations, and may include other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly.
To facilitate subsequent transfers, all notes deposited with DTC will be
registered in the name of DTC's nominee, Cede & Co. You will maintain beneficial
ownership of the notes despite the deposit of notes with DTC and their
registration in the name of Cede. DTC has no knowledge of the actual
noteholders; DTC's records reflect only the identity of its direct participants
to whose accounts such notes are credited, which may or may not be the
noteholders. DTC's direct and indirect participants will remain responsible for
keeping account of their holdings on behalf of their customers.
You will not be entitled to receive a certificate representing such person's
interest in a class of notes. As long as the notes are registered in the name of
Cede & Co., any action to be taken by you or any other noteholders will be taken
by DTC upon instructions from DTC's participants, and all distributions,
notices, reports and statements to noteholders will be delivered to Cede, as the
registered holder of the notes, for distribution to noteholders in compliance
with DTC procedures.
You will receive all payments of principal and interest on the notes through
direct participants or indirect participants. DTC will forward such payments to
its direct participants which will forward them to indirect participants or
noteholders. Under a book-entry format, you may experience some delay in their
receipt of payments, since such payments will be forwarded to Cede as nominee of
DTC. You will not be recognized by the indenture trustee as a noteholder, as
such term is used in the indenture. You will be permitted to exercise the rights
of noteholders only indirectly through DTC and its direct participants and
indirect participants. Because DTC can act only on behalf of direct
participants, who in turn act on behalf of indirect participants, and on behalf
of banks, trust companies and other persons approved by it, your ability to
pledge the notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such notes, may be limited due to
the absence of physical notes for such notes.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct
participants and indirect participants to noteholders will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payments by DTC participants to noteholders
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name" and will be the responsibility of such DTC
participant and not of DTC, the indenture trustee, the owner trustee, the
originators or the originator, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the indenture trustee, disbursement of
such payments to direct participants shall be the responsibility of DTC and
disbursement of such payments to noteholders shall be the responsibility of
direct participants and indirect participants.
Purchases of notes under the DTC system must be made by or through direct
participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual noteholder is in turn to be recorded on the
direct participants' and indirect participants' records. Noteholder will not
receive written confirmation from DTC of their purchase, but noteholders are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holders, from the direct participant or
indirect participant through which the noteholder entered into the transaction.
Transfers of ownership interests in the notes are to be accomplished by entries
made on the books of DTC's participants acting on behalf of noteholders.
Noteholders will not receive
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physical notes representing their ownership interest in notes, except in the
event that use of the book-entry system for the notes is discontinued.
DTC will not comment or vote with respect to the notes. DTC has advised us
that it will take any action permitted to be taken by a noteholder under the
indenture only at the direction of one or more direct participants to whose
accounts with DTC the notes are credited. Additionally, DTC has advised us that
to the extent that the indenture requires that any action may be taken only by
noteholders representing a specified percentage of the aggregate outstanding
principal amount of the notes, DTC will take such action only at the direction
of and on behalf of direct participants whose holdings include undivided
interests that satisfy such specified percentage.
DTC may discontinue providing its services as securities depositary with
respect to the notes at any time by giving reasonable notice to the indenture
trustee. Under such circumstances, in the event that a successor securities
depositary is not obtained, fully registered, certificated notes are required to
be printed and delivered. The originator may decide to discontinue use of the
system of book-entry transfers through DTC or a successor securities depositary.
In that event, fully registered, certificated notes will be delivered to
noteholders. See "--ISSUANCE OF DEFINITIVE NOTES AT A LATER DATE".
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but neither we
nor the trust depositor take any responsibility for the accuracy of this
information.
Cedel and Euroclear will hold omnibus positions on behalf of the
participants in the Cedel and Euroclear systems, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the books of
their respective depositaries which in turn will hold such positions in
customers' securities accounts in the depositaries' names on the books of DTC.
Cedel is incorporated under the laws of Luxembourg as a professional
depositary. Cedel holds securities for its participants and facilitates the
clearance and settlement of securities transactions between its participants
through electronic book-entry changes in accounts of its 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 its 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 depositary, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel's participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and other
organizations and may include the underwriters. Indirect access to Cedel is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedel participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear's 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, under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation. All operations are conducted by Euroclear's operator
and all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with Euroclear's operator. Euroclear Clearance Systems S.C. establishes
policy for Euroclear on behalf of Euroclear's participants. Euroclear
participants include banks, securities brokers and dealers and other
professional financial intermediaries and may include the underwriters.
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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.
Morgan Guaranty Trust Company of New York 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 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. Those
Euroclear 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
Euroclear Terms and Conditions only on behalf of Euroclear's participants, and
has no record of or relationship with persons holding through Euroclear's
participants.
Transfers between direct participants will comply with DTC rules. Transfers
between Cedel's participants and Euroclear's participants will comply with their
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel or Euroclear, on the other, will be effected in DTC under DTC
rules through the relevant European international clearing system through its
Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system as required by 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 using its normal procedures for same-day funds settlement
applicable to DTC. Cedel participants and Euroclear participants may not deliver
instructions directly to the depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing day, dated the business
day following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing day will be reported to the
relevant Cedel participant or Euroclear participant 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 DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
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 originator, any originator, 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.
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ISSUANCE OF CERTIFICATED NOTES AT A LATER DATE
The notes will be issued in fully registered, certificated form to
beneficial owners or their nominees rather than to The Depository Trust Company
or its nominee, only if:
(1) we advise the indenture trustee in writing that The Depository Trust
Company is no longer willing or able to discharge properly its
responsibilities as Depository with respect to such notes, and we or the
indenture trustee are unable to locate a qualified successor or
(2) we elect to terminate the book-entry system.
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 The Depository Trust Company of the
availability of notes in fully registered, certificated form. Upon surrender by
The Depository Trust Company of the global note representing the notes and
instructions for reregistration, the indenture trustee will issue such fully
registered, certificated notes, and the indenture trustee will recognize the
holders of such fully registered, certificated notes as noteholders under the
indenture.
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 you as required by the indenture. Distributions
will be made by check, mailed to your address 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 will be made only upon presentation and surrender
of such Note at the office or agency specified in the notice of final
distribution to noteholders. The final payment will be made in this manner
whether the notes are fully registered, certificated notes or the note for such
class registered in the name of Cede & Co. representing the notes of such class.
Fully registered, certificated 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 fully registered, certificated 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 with the transfer or
exchange.
THE CLASS D NOTES AND THE CERTIFICATE
On the closing date for the sale of the offered notes; we will also issue
$[ ] aggregate principal amount of Class D [ ]% Receivable-Backed Notes,
Series 1999-2. The initial principal balance of the Class D Notes is equal to
[ ]% of the initial aggregate discounted contract balance of the contracts. The
Class D Notes will mature on [ ]. We will also issue the certificate
with an initial certificate balance of $[ ]; the certificate will not bear
interest and shall have the right to monies in the reserve fund and to funds
remaining after the payment of all principal and interest on the notes. The
certificate will represent a fractional undivided beneficial equity interest in
the trust and will be issued under the Trust Agreement.
Neither the Class D Notes nor the certificate is being offered and sold by
this prospectus. We expect to sell the Class D Notes concurrently in a private
placement. The trust depositor is expected initially to retain the certificate,
although we may transfer the certificate 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.
Distributions with respect to the certificate will be subordinated to the rights
of the noteholders to the extent described in "DESCRIPTION OF THE NOTES AND
INDENTURE--ALLOCATIONS".
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THE SALE AND SERVICING AGREEMENT
The following is a summary of all of the material terms of the sale and
servicing agreement dated as of [ ,] 1999 among the trust depositor, the
originators, the trust and the indenture trustee. You should read the sale and
servicing agreement, the form of which was filed as an exhibit to the
Registration Statement of which this prospectus is a part.
TERMINATION OF TRUST
Unless the trust depositor instructs the owner trustee otherwise, the trust
will terminate only on the earliest to occur of
(1) the day following the day on which the aggregate principal amount of all
notes is zero; provided, that the trust depositor shall have delivered a
written notice to the owner trustee electing to terminate the trust, or
(2) if the contracts are sold, disposed of or liquidated following the
occurrence of events relating to bankruptcy or insolvency, immediately
following such sale, disposition or liquidation. Upon termination of the
trust, all right, title and interest in the trust's assets (other than
amounts in accounts maintained by the trust for the final payment of
principal and interest to the holders of the notes and certificate) will
be conveyed and transferred to the holder of the certificate and any
permitted assignee.
CONVEYANCE OF THE CONTRACTS
The contracts, and security interests in the equipment and in end-user
contracts and equipment securing vendor loans for the contracts, will be sold or
contributed to the trust by the trust depositor as required by the sale and
servicing agreement. The originators have sold, transferred, assigned, set over
and otherwise conveyed to the trust depositor, without recourse all of the
originators' right, title and interest in and to:
- the contracts, including any substitute contracts, and all monies due or
to become due in payment of the contracts on or after the related cutoff
date, including all scheduled payments thereunder due on or after the
cutoff date;
- any prepayment amounts, any payments in respect of a casualty or early
termination, and any recoveries on the contracts but excluding any
scheduled payments due prior to the related cutoff date, any scheduled
payments due after the cutoff date but received on or prior to the cutoff
date and any Excluded Amounts;
- the related equipment (and, in the case of any vendor loan, any end-user
contracts or equipment securing the vendor loan), including all proceeds
from any sale or other disposition of the equipment;
- any documents delivered to the trust depositor or held by the servicer on
its behalf with respect to each contract;
- all payments made or to be made in the future with respect to each
contract and the obligor thereunder and under any other guarantee or
similar credit enhancement with respect to the contracts;
- all payments made with respect to each contract under any insurance policy
covering physical damage to the related equipment; and
- all income and proceeds of the foregoing.
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As of the initial cutoff date or any subsequent cutoff date for substitute
contracts, the trust depositor will transfer and assign the assets described in
the previous seven bullet points to the trust for the benefit of the noteholders
and the trust will grant a lien on the same in favor of the indenture trustee.
To facilitate servicing and reduce administrative costs, Heller Financial
Leasing, Inc., as a sub-servicer, will retain custody of, but not title to, the
contracts, the documents relating to the contracts 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, each
originator indicated in its books and records, including the computer files
relating to the contracts, that the contracts have been transferred to the trust
depositor. Prior to each transfer of any assets to the trust, the trust
depositor will file UCC financing statements reflecting the conveyance of the
assets described in the previous seven bullet points to the trust and the grant
of a lien on those assets to the indenture trustee. The trust depositor will
mark its books and records, including the appropriate computer files relating to
the contracts, to indicate that the contracts have been conveyed to the trust.
The trust will give the indenture trustee a list of the contracts transferred to
trust, identified by account number and by the discounted contract balance as of
the related cutoff date. With respect to end-user contracts securing vendor
loans, in some instances the vendor will retain the original contract files
associated with those end-user contracts. UCC financing statements have been
filed to reflect the pledge of contracts to the applicable originator as
security for the vendor loans.
REPRESENTATIONS AND WARRANTIES; DEFINITION OF ELIGIBLE CONTRACT
The originators will, jointly and severally, make the following
representations and warranties in the sale and servicing agreement with respect
to each contract as of [ ,] 1999. Similarly, the originators will
make or be deemed to have made those representations and warranties with respect
to each substitute contract which may be transferred by either of them as of its
related cutoff date, including that:
(1) the information with respect to the contract is true and correct in all
material respects;
(2) immediately prior to the transfer of a contract, the contract was owned
by the originator free and clear of any adverse claim;
(3) the contract is not a defaulted contract;
(4) no provision of the contract has been waived, altered or modified in any
way, except by instruments or documents contained in the files relating
to the contract;
(5) the contract is a valid and binding payment obligation of the obligor
and its terms are enforceable, except the enforcement may be limited by
insolvency, bankruptcy, moratorium, reorganization, or other similar
laws affecting enforceability of creditors' rights and the availability
of equitable remedies;
(6) the contract is not and will not be subject to rights of rescission,
setoff, counterclaim or defense;
(7) the contract, at the time it was made, did not violate the laws of the
United States or any state, except for any violations which do not
materially and adversely affect the collectibility of the contracts
taken as a whole;
(8)(a) the contract and any related equipment have not been sold,
transferred, assigned or pledged by the originator to any person
other than the end-user;
(b) any equipment related to the contract is free and clear of any liens
and encumbrances of any third parties other than liens in favor of
the originator and permitted liens; and
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(c) either
(i) the contract is secured by a fully perfected lien of the first
priority on the related equipment or, in the case of any vendor
loan, related end-user contract or equipment or
(ii) in the case of a contract secured by aircraft, within 30
calendar days of the origination or acquisition of the contract
by the originator all required federal registration or
recording procedures were initiated, and such interest will be
so noted or recorded within 180 days of such acquisition or
origination;
(9) if the contract constitutes either an "INSTRUMENT" or "CHATTEL PAPER"
for purposes of the Uniform Commercial Code, there is not more than one
"SECURED PARTY'S ORIGINAL" counterpart of the contract;
(10) all filings necessary to evidence the conveyance or transfer of the
contract to the trust depositor have been made in all appropriate
jurisdictions;
(11) the obligor is not, to the originators' knowledge, subject to bankruptcy
or other insolvency proceedings;
(12) the contract is a U.S. dollar-denominated obligation and the associated
equipment is located in the United States;
(13) 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 the contract was sold to the trust;
(14) the obligations of the related obligor under the contract are
irrevocable and unconditional and non-cancelable or, if prepayable by
its terms, such contract meets the criteria described in clause (24)
below;
(15) the contract has an original maturity of not greater than [ ] months;
(16) no adverse selection procedure was used in selecting the contract for
transfer;
(17) the obligor under the contract is required to maintain casualty
insurance with respect to the related equipment or to self-insure
against casualty with respect to the related equipment in an amount that
is consistent with the servicer's normal servicing requirements;
(18) the contract constitutes chattel paper, an account, an instrument or a
general intangible as defined under the Uniform Commercial Code;
(19) no lease is a "CONSUMER LEASE" as defined in Section 2A-103(1)(e) of the
Uniform Commercial Code and each lease is a lease intended for security
as defined in Section 1-201(39) of the Uniform Commercial Code;
(20) each lessee has represented to the originator or the vendor that it has
accepted the related equipment and that it has had a reasonable
opportunity to inspect and test the equipment and the originator has not
been notified of any defects in the equipment;
(21) the contract is not guaranteed by any originator nor has the originator
established any specific credit reserve with respect to the related
obligor;
(22) each lease is a "TRIPLE NET LEASE" under which the obligor is
responsible for the maintenance of the related equipment in a manner
that conforms with general industry standards;
(23) each vendor loan is secured by an end-user contract(s) having an
aggregate discounted contract balance equal to the outstanding principal
amount of the vendor loan;
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(24) no provision of the contract provides for a prepayment amount less than
(a) the amount the discounted contract balance on the date of the
prepayment plus
(b) any accrued, unpaid interest at the discount rate plus
(c) any outstanding servicer's advances for the contract;
unless the vendor or the originators pay to the trust the difference
between the prepayment amount actually paid and the required prepayment
amount; and
(25) the obligor is not the United States of America or any state or local
government or any agency, department, subdivision or instrumentality of
those governments.
These representations and warranties will be reaffirmed by the originators
when they transfer a substitute contract to the trust depositor. A contract
which satisfies all of the above representations and warranties shall be deemed
an "ELIGIBLE CONTRACT". Contracts with respect to which the representations in
clauses (3), (15) and (24) are not true shall also be eligible contracts if the
trust depositor shall have received confirmation from each rating agency rating
the notes that the discrepancy will not result in a downgrading of the existing
ratings on the notes. In addition, the originators will jointly and severally
represent and warrant to the trust depositor that they have validly sold and
assigned to the trust depositor all right, title and interest of the applicable
originator in the related contracts and the proceeds of the contracts.
The originators will also jointly and severally represent and warrant in the
sale and servicing agreement with respect to each end-user contract securing a
vendor loan transferred by either originator that as of the related cutoff date,
among other things,
(1) that the end-user contract is an eligible contract,
(2) that the originator holds a duly perfected lien of the first priority on
the end-user contract, and
(3) that the transfer of the originator's security interest in the end-user
contract and the proceeds of those contracts to the trust depositor is
effective to create in favor of the trust depositor a lien on those
contracts and that such lien has been duly perfected.
Permitted liens on the contracts consist of:
(1) liens for state, municipal or other local taxes but only if
(a) such taxes shall not at the time be due and payable or
(b) the trust depositor shall currently be contesting the validity of
those liens in good faith by appropriate proceedings and shall have
reserved for those liens on its books;
(2) liens in favor of the trust depositor created under the sale and
servicing agreement and transferred to the trust under the sale and
servicing agreement;
(3) liens in favor of the trust created under the sale and servicing
agreement; and
(4) liens in favor of the indenture trustee created under the sale and
servicing agreement and the indenture; and
Permitted liens on the equipment securing the contracts consist of:
(1) materialmen's, warehousemen's, mechanics' and other liens arising by
operation of law in the ordinary course of business for sums not due;
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(2) liens for state, municipal or other local taxes if:
(A) such taxes shall not at the time be due and payable or
(B) the trust depositor shall currently be contesting the validity of
those liens in good faith by appropriate proceedings and shall have
set aside on its books adequate related reserves;
(3) liens in favor of the trust depositor and transferred to the trust under
the sale and servicing agreement;
(4) liens in favor of the trust created under the sale and servicing
agreement;
(5) liens in favor of the indenture trustee created under the sale and
servicing agreement and the indenture;
(6) other subordinated liens which are subordinated to the prior payment of
the notes on terms described in the sale and servicing agreement; and
(7) liens granted by the end-users or vendors which are subordinated to the
interest of the trust in the equipment.
The trust depositor will represent and warrant in the sale and servicing
agreement that:
(1) the transfer of the contracts is a valid sale, transfer and assignment
to the trust of all right, title and interest of the trust depositor in
the contracts;
(2) all filings necessary to evidence the conveyance or transfer of the
contracts to the trust have been made in all appropriate jurisdictions;
(3) that each contract is an eligible contract;
(4) that each end-user contract or interest in the contract securing a
vendor loan is an eligible contract;
(5) that the security interest granted on the related contracts by the trust
to the indenture trustee is effective to create in favor of the indenture
trustee a lien on the contracts and that the lien has been duly
perfected; and
(6) that the trust depositor holds a duly perfected lien of the first
priority on each end-user contract securing a vendor loan.
None of the indenture trustee, the trust, the owner trustee or any of them
in their individual capacities, shall make or be deemed to have made any
representations or warranties, express or implied, regarding the trust's assets
or the transfers of those assets by the originators, the trust depositor or the
trust.
REMEDIES FOR BREACHES OF REPRESENTATIONS AND WARRANTIES; DEFINITION OF
INELIGIBLE CONTRACT
Under the terms of 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 any contract to the trust depositor, and the originators
will be concurrently obligated, jointly and severally, to purchase from the
trust depositor, such contract transferred by an originator no later than 90
days after any originator becomes aware, or receives written notice from the
servicer or the trust depositor, of the breach of any representation or warranty
made by the originator in the sale and servicing agreement. That transfer and
repurchase of the contract is required only if the breach of the representation
or warranty by the originator materially adversely affects the interests of the
trust depositor or the trust or their successors or assigns in such contract or
the documents relating to such contract, which breach has not been cured or
waived in all material respects. This purchase obligation will constitute the
sole remedy against the
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originators and the trust depositor available to you for a breach of a
representation or warranty under the sale and servicing agreement made by the
originators with respect to that contract.
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 discounted contract balance of the
ineligible contract together with accrued interest and any outstanding servicer
advances on the contract. Any amount deposited into the collection account in
connection with the reassignment of an ineligible contract shall be considered
payment in full of the ineligible contract, and that amount shall be treated as
an amount available for distribution to you. In the alternative, the trust
depositor may instead obtain a substitute contract and convey the substitute
contract to the trust in replacement for the affected ineligible contract. We
will release by the ineligible contract and the trust depositor will reconvey it
to the originator. See "SUBSTITUTE CONTRACTS".
CONCENTRATION AMOUNTS; DEFINITION OF EXCESS CONTRACT
In addition to the representations and warranties made by the originators
and the trust depositor with respect to the contracts as described above under
"--REPRESENTATIONS AND WARRANTIES; DEFINITION OF ELIGIBLE CONTRACT", the trust
depositor will represent and warrant (using the statistical discount rate) as of
[ ,] 1999 as follows:
(1) the aggregate discounted contract balance of all end-user contracts
which finance, lease or are related to software will not exceed [ ]%
of the aggregate discounted contract balance of the contracts;
(2) the aggregate discounted contract balance of all end-user contracts with
obligors who comprise the five largest obligors (measured by aggregate
discounted contract balance) does not exceed [ ]% of the aggregate
discounted contract balance of the contracts; and
(3) the aggregate discounted contract balance of all end-user contracts with
obligors located in a single State of the United States does not exceed
[ ]% of the aggregate discounted contract balance of the contracts.
On the date a substitute contract is added to the trust's assets the trust
depositor will make the foregoing representations and warranties as of the
initial closing date of the transfer of the contracts to the trust. We will
treat the Substitute Contract as though it, and not the replaced contract, was
included in the contracts on the initial closing date; however, the discounted
contract balance of such substitute contract shall be equal to its discounted
contract balance as of the actual cutoff date.
If there is a breach of any of the foregoing representations or warranties
(an "EXCESS CONTRACT"), which breach has not been cured or waived in all
material respects, the removal of which shall remedy such breach, the servicer
will select a contract, and the indenture trustee shall reassign such contract
to the trust depositor, and the originators will be jointly and severally
obligated to purchase such contract from the trust depositor. Such purchase
shall occur no later than 90 days after the trust depositor or any originator
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 originators and trust depositor available to you for a breach
of one of the foregoing representations or warranties.
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 equal to the discounted contract balance of the
Excess Contract together with accrued interest and any outstanding servicer
advances on the contract. Any amount deposited into the collection account in
connection with the reassignment of an Excess Contract shall be considered
payment in full of the Excess Contract and shall be treated as an amount
available for distribution to you. In the alternative, the trust depositor may
instead cause the originators, or either of them, to convey to the trust
depositor, a substitute
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contract in replacement for the Excess Contract, which shall thereupon be deemed
released by the trust and reconveyed through the trust depositor to the
applicable originator. See "--SUBSTITUTE CONTRACTS".
MATERIAL MODIFICATIONS TO CONTRACTS
Under the terms of the sale and servicing agreement, the servicer may vary
the provisions of a contract, some of which constitute material modifications.
Under the sale and servicing agreement, only the following modifications are
permitted:
- waivers and other modifications that:
(1) conform with the servicer's customary and usual practices and
(2) do not have the effect of accelerating, delaying, reducing or
extending the dates for scheduled payments for the contract; however,
the rating agencies may waive this requirement;
- to the extent consistent with the servicer's past practices, the servicer
may reduce one to three scheduled payments for a contract if additional
payments are added to the scheduled payments subsequently due and the
discounted contract balance of the contract as modified equals or exceeds
the discounted contract balance prior to the modification; provided, that
the discounted contract balances of all contracts which have similarly
reduced scheduled payments does not exceed 5% of the aggregate discounted
contract balance of the contracts as of the initial cutoff date and no
payments are deferred beyond [ ];
- waiver of any late payment charge and other service fees that may be
collected in the ordinary course of servicing the contract; or
- permit prepayment of a contract that is not otherwise prepayable by its
terms. The prepayment may include, without limitation, a full or partial
buy out of the equipment which is the subject of the contract, or an
equipment upgrade. In the event of an early termination of a contract
which has been prepaid in full, the trust depositor will have the option
to cause the trust to reinvest the proceeds of the contract in one or more
contracts having similar characteristics to the terminated contract. See
"--SUBSTITUTE CONTRACTS". The servicer is not authorized to permit an
early termination of a contract, without the addition to the trust of a
substitute 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 originator or servicer, on such terminated contract
is equal at least to the then discounted contract balance of the contract,
plus accrued and unpaid interest.
Non-material adjustments or modifications in contract terms may be effected by
the servicer on behalf of the trust without your consent and without affecting
the status of the contract as part of the trust.
SUBSTITUTE CONTRACTS
In the event we subsequently determine that a contract is not an eligible
contract or a contract becomes a prepaid contract, a materially modified
contract or an Excess Contract, the originator will have the option to
substitute for that contract another contract having similar characteristics.
See "--REMEDIES FOR BREACHES OF REPRESENTATIONS AND WARRANTIES; DEFINITION OF
INELIGIBLE CONTRACT," "--CONCENTRATION AMOUNTS; DEFINITION OF EXCESS CONTRACT"
and "--MATERIAL MODIFICATIONS TO CONTRACTS". The ability to substitute contracts
is subject to an overall limit, in respect of the materially modified contracts,
of an aggregate amount not to exceed 10% of the aggregate discounted contract
balance of the contracts as of [ ,] 1999, the initial cutoff date.
The substitute contracts will have a discounted contract balance equal to or
greater than that of the contracts being substituted and shall have a similar
weighted average life. In addition, either the
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final payment on the substitute 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 the contract for the purpose of
making any calculation under the indenture or the sale and servicing agreement.
DEFINITION OF DEFAULTED CONTRACTS
A contract will automatically be deemed to be a defaulted contract on the
earlier occurrence of either (1) or (2) below:
(1) a full contractual payment has not been received from the obligor or the
vendor, if there is vendor recourse, for 120 days or a shorter period as
the originators may determine consistent with their respective collection
policy; or
(2) if at any time the servicer determines, under its customary and usual
practices, that the contract is not collectible after taking into account
any available vendor recourse.
The current policy of the servicer with respect to writing off contracts is
described in "HELLER FINANCIAL, INC. AND HELLER FINANCIAL LEASING, INC.--GLOBAL
VENDOR FINANCE--COLLECTION PROCESS/VENDOR RECOURSE" and "HELLER FINANCIAL, INC.
AND HELLER FINANCIAL LEASING, INC.--COMMERCIAL EQUIPMENT
FINANCE--COLLECTION/SERVICING" above.
Upon classification as a defaulted contract, the servicer shall accelerate
all payments due thereunder or take any other action as the servicer reasonably
believes will maximize the amount of recoveries and shall otherwise follow its
customary and usual collection procedures, which may include the repossession
and sale of any related equipment or other security on behalf of the trust.
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.
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 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. However, the trust depositor is not liable to you for any
losses, claims, damages or liabilities incurred by you in your capacity as an
investor in the notes. In the event a successor servicer is appointed, 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 the successor servicer.
Except as provided in the preceding paragraph, 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
the trust, the owner trustee, the indenture trustee, the noteholders or any
other person for any action taken, or for refraining from taking any action, in
good faith under 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
legal
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action which it may deem necessary or desirable for the benefit of the
noteholders with respect to the sale and servicing agreement and the rights and
duties of the parties thereunder.
SERVICING STANDARD AND SERVICER ADVANCES
The servicer is responsible for servicing, collecting, enforcing and
administering the contracts in a manner consistent with its customary and usual
procedures for servicing contracts comparable to the contracts. Although Heller
Financial, Inc. may delegate its servicing duties to a sub-servicer, it remains
liable for the performance or non-performance of those duties.
If the servicer determines that any scheduled payment with respect to any
contract which was due during the collection period was not received in full
prior to the end of that collection period, the servicer is required to advance
the unpaid scheduled payment if the servicer, in its sole discretion, determines
that it can recover its advance from subsequent payments on or with respect to
the contract. The servicer shall be entitled to reimbursement of the servicer
advances from subsequent payments on or with respect to the contract, including
collections of any prepayment amount, amounts deposited in the collection
account for the repurchase of ineligible contracts or recoveries with respect to
the contract, and, if the servicer determines that its advances will not be
recovered from the contracts to which its advances were related, from other
contracts included in the trust. If any entity, other than an affiliate of
Heller Financial, Inc., becomes a successor servicer, that entity shall have no
obligation to make the advances described in this paragraph.
SERVICER RESIGNATION
The servicer may not resign from its obligations and duties under the sale
and servicing agreement, except upon determination that its duties are no longer
permissible under applicable law. No such resignation will become effective
until a successor to the servicer has assumed the servicer's responsibilities
and obligations under the sale and servicing agreement.
Assuming that the action complies with the sale and servicing agreement
(1) any person into which Heller Financial, Inc. or the servicer may be
merged or consolidated;
(2) any person resulting from any merger or consolidation to which Heller
Financial, Inc. or the servicer is a party; or
(3) any person succeeding to the business of Heller Financial, Inc. or the
servicer
will be the successor to Heller Financial, Inc., as the servicer, under the sale
and servicing agreement.
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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, 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 the
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's assets on the
following note interest and principal payment date. The purchase price for the
retransfer of the trust's assets shall be equal to the sum of the aggregate
principal amount of all notes and certificate on such payment date plus accrued
and unpaid interest at the applicable interest rate through the date of the
retransfer. The purchase price may also include interest on interest payments
that were due but not paid when due.
The indenture trustee shall, as promptly as possible after giving a
termination notice, appoint a successor servicer and if no successor servicer
has been appointed by the indenture trustee and has accepted the 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 appointment of the
successor, the indenture trustee will seek to obtain bids from potential
servicers meeting the 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 "DESCRIPTION OF THE NOTES AND
INDENTURE--SERVICING COMPENSATION AND PAYMENT OF EXPENSES". The rights and
interest of the trust depositor under the sale and servicing agreement as holder
of the certificate will not be affected by the termination or appointment of a
successor to the servicer.
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 as required by the sale and servicing agreement on or before the
date occurring three business days after the date the payment, transfer,
deposit, or the 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, which continues unremedied for a period of 30
days after the first to occur of:
(1) 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 the indenture trustee on behalf of the holders of
notes aggregating not less than 25% of the principal amount of any
class of notes adversely affected thereby and
(2) the date on which the servicer becomes aware of the failure and such
failure continues to materially adversely affect the noteholders 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 under
the sale and servicing agreement shall prove to have been incorrect when
made, which has a material adverse effect on the noteholders and
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which continues to be incorrect in any material respect for a period of
30 days after the first to occur of:
(1) 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 by the indenture
trustee on behalf of holders of notes aggregating not less than 25%
of the principal amount of any class adversely affected thereby and
(2) the date on which the servicer becomes aware of the incorrectness,
and such incorrectness continues to materially adversely affect such
holders for such period; or
(d) any event relating to bankruptcy, insolvency or receivership 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. Regardless of whether the events described in
(a)-(d) have occurred, the servicer is required to use its best efforts to
perform its obligations in a timely manner in as required by the sale and
servicing agreement. 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 perform its obligations. The
servicer shall immediately notify the indenture trustee in writing of any
servicer default.
If an event relating to bankruptcy, insolvency or receivership occurs with
respect to the servicer and no other event which would result in a servicer
default has occurred, 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.
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 to furnish a report to the effect that such firm
has applied the procedures agreed upon with the servicer and examined 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 the servicing was not conducted in compliance with the sale
and servicing agreement except for those exceptions or errors as such firm shall
believe to be immaterial and other exceptions set forth in its statement. Those
accountants may also render other services to the servicer or the trust
depositor.
The sale and servicing agreement provides for delivery to the indenture
trustee and each rating agency rating the notes 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 the 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 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 your consent or the indenture trustee's consent, to cure any ambiguity
or to add any consistent provisions; PROVIDED, we obtain an opinion of counsel
stating that the amendment does not adversely affect in any material respect the
interests of any noteholder or holder of the certificate.
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 your rights. No
amendment, however, may
(1) 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;
(2) change the definition of or the manner of calculating the "CLASS A-1
PRINCIPAL PAYMENT AMOUNT", the "CLASS A-2 PRINCIPAL PAYMENT AMOUNT", the
"CLASS A-3 PRINCIPAL PAYMENT AMOUNT", the "CLASS A-4 PRINCIPAL PAYMENT
AMOUNT", the "CLASS B PRINCIPAL PAYMENT AMOUNT", the "CLASS C PRINCIPAL
PAYMENT AMOUNT", the "CLASS D PRINCIPAL PAYMENT AMOUNT", the ADDITIONAL
PRINCIPAL", the "DISCOUNTED CONTRACT BALANCE", the "REQUIRED HOLDERS",
the amounts available for distribution to noteholders or the principal
amount of the notes without the consent of each noteholder and holder of
the certificate; or
(3) reduce the aforesaid percentage required to consent to any amendment
without the consent of each holder of the security affected thereby; or
(4) modify, amend or supplement the provisions of the sale and servicing
agreement relating to the allocation of collections on the contracts
without the consent of each noteholder; or
(5) make any security issued by the trust payable in money other than U.S.
dollars without the consent of each holder of the security affected
thereby.
Promptly following the execution of an amendment that requires the consent
of any noteholder, the owner trustee will furnish written notice of the
substance of such amendment to each affected noteholder.
THE OWNER TRUSTEE
Wilmington Trust Company will be the owner trustee under the sale and
servicing agreement. Heller Financial, Inc. and its affiliates may from time to
time enter into banking and trustee relationships with the owner trustee and its
affiliates. Heller Financial, Inc. 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.
For purposes of meeting the legal requirements of any jurisdictions in which
any part of the trust's 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's 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
the separate trustee or co-trustee jointly. In any jurisdiction in which the
owner trustee will be incompetent or unqualified to perform specific acts, all
rights, powers, duties and obligations conferred or imposed upon owner trustee
will be conferred or imposed upon the separate trustee or co-trustee who shall
exercise and perform those rights, powers, duties and obligations solely at the
direction of the owner trustee.
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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 the owner trustee ceases to be
eligible to continue as the owner trustee 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.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of the material United
States federal income tax consequences of the purchase, ownership and
disposition of the notes offered by this prospectus. The discussion that
follows, and the opinion described below of Winston & Strawn, special tax
counsel to the trust depositor, are based upon current provisions of the
Internal Revenue Code of 1986, as amended, existing and proposed Treasury
Regulations, 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 rulings on comparable transactions or instruments to
those described in this prospectus. As a results, there can be no assurance that
the IRS will not challenge the conclusions reached in this description of
Federal Income Tax Consequences, 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 set forth below.
The following is a summary of material federal income tax consequences and
therefore it does not attempt to explain fully every relevant technical aspect
of the applicable tax provisions. Additionally, some of the complex technical
rules which would not be applicable to most investors but may apply to some
specific types of investors, such as dealers in securities, have not been
included. Also, the descriptions of the relevant tax rules are intended to
explain the general application of the rules. BECAUSE THIS SUMMARY OF MATERIAL
FEDERAL INCOME TAX CONSEQUENCES IS INTENDED TO BE GENERAL IN NATURE, IT IS
RECOMMENDED THAT PROSPECTIVE INVESTORS 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 THE NOTES.
This summary material federal income tax matters is divided into two parts.
The first part describes the classification of the notes as debt and the
treatment of the trust as a pass-thru entity rather than as a corporation or
other entity subject to tax at the entity level. The second part describes the
taxation of an investor in the notes. Under the caption "General Tax Treatment
of Noteholders" is a description of the tax consequences for what is expected to
be the typical investment situation. The description of General Tax Treatment of
Noteholders provides a summary of federal income tax consequences for investors
who are citizens or residents of the United States who purchase U.S. dollar
denominated notes for investment at a purchase price equal to the principal
amount of the notes plus accrued interest, if any. There are a variety of
technical tax rules which can be expected to apply only to some investors or in
special circumstances. Those rules are separately described under the caption
"Special Tax Rules". Those special rules apply, for example, to investors who
are foreign persons or who purchase a note at a price which is higher or lower
than a note's principal amount. IT IS RECOMMENDED THAT EACH PROSPECTIVE INVESTOR
CONSULT A TAX ADVISOR TO DETERMINE WHETHER ANY OF THE SPECIAL TAX RULES ARE
APPLICABLE.
CLASSIFICATION OF THE NOTES AND THE TRUST
In connection with the issuance of the notes, Winston & Strawn has delivered
its opinion that, for federal income tax purposes, under existing law the trust
will not be treated as an association (or
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publicly traded partnership) taxable as a corporation and the notes will be
treated as indebtedness. In rendering these opinions, Winston & Strawn has
assumed that the terms of the various documents relating to the issuance of the
notes will be complied with by all of the parties to the transaction. Those
terms include a requirement, which each investor agrees to by virtue of
acquiring ownership of any beneficial interest in a note, that the trust and the
investors in the notes treat the notes as indebtedness for federal income tax
purposes. The opinion of Winston & Strawn 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 Winston & Strawn 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 this characterization of the
trust or the notes will prevail. If, contrary to the opinion of Winston &
Strawn, the IRS successfully asserted that one or more of the notes did not
represent debt for federal income tax purposes, such notes might be treated as
equity interests in the trust. As a result, the trust might be classified as a
publicly traded partnership taxable as a corporation. If the trust were
classified as a publicly traded partnership taxable as a corporation, the trust
would be subject to United States federal income tax on its net income. An
imposition of the corporate-level income tax could materially reduce the amount
of cash that would be available to make payments of principal and interest on
the notes. Alternatively, if the trust were classified as a partnership other
than a publicly traded partnership taxable as a corporation, the trust itself
would not be subject to United States federal income tax. Instead, holders of
notes that were determined to be equity interests in the partnership would be
required to take into account their allocable share of the trust's income and
deductions. Such treatment may have adverse federal income tax consequences for
some noteholders. For example:
(1) income to some tax-exempt entities, including pension funds, may
constitute "UNRELATED BUSINESS TAXABLE INCOME,"
(2) income to foreign holders is often subject to U.S. tax and U.S. tax
return filing and withholding requirements,
(3) individual holders might be subject to limits on their ability to deduct
their share of trust expenses, and
(4) income from the trust's assets would be taxable to noteholders without
regard to whether cash distributions are actually made by the trust or
any particular noteholder's method of tax accounting.
The discussion that follows assumes that the notes will be treated as
indebtedness for federal income tax purposes.
GENERAL TAX TREATMENT OF NOTEHOLDERS
PAYMENTS OF INTEREST. An investor will be taxed on the amount of payments
of interest on a note as ordinary interest income at the time it accrues or is
received in a manner that is consistent with the investor's regular method of
accounting for United States federal income tax purposes.
SALE OR OTHER DISPOSITION OF A NOTE. An investor who disposes of a note,
whether by sale, exchange for other property, or payment by the trust, will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale or other disposition, not including any amount attributable
to accrued but unpaid interest, and the investor's adjusted tax basis in the
note. In general, an investor's adjusted tax basis in a note will be equal to
the initial purchase price. Any gain or loss recognized upon the sale or other
disposition of a note will be capital gain or loss. For non-corporate investors,
capital gain recognized on the sale or other disposition of a note held by the
investor for more than one year will be taxed at a maximum rate of 20%. Capital
gain for a note held for one year
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or less is taxed at the rates applicable to ordinary income, I.E., up to 39.6%.
Taxpayers must aggregate capital gains and losses for each taxable year. In the
event a taxpayer realizes a net capital loss for any year there are limits on
the amount of capital losses which can be deducted.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The trust will be required to
report annually to the IRS, and to each non-corporate noteholder, the amount of
interest paid on the notes for each calendar year. Each non-corporate
noteholder, other than noteholders who are not subject to the reporting
requirements, will be required to provide, under penalties of perjury, a
certificate (Form W-9) containing the noteholder's name, address, correct
federal taxpayer identification number and a statement that the noteholder is
not subject to backup withholding. Should a non-exempt noteholder fail to
provide the required certification, the trust will be required to withhold or
cause to be withheld 31% of the interest otherwise payable to the noteholder and
remit the withheld amounts to the IRS as a redact against the noteholder's
federal income tax liability.
SPECIAL TAX RULES
SPECIAL TYPES OF INVESTORS. The reference to United States citizens or
residents in the description of General Tax Treatment of Noteholders set forth
above applies not only to individuals but also to any investor who is:
- a corporation or partnership created or organized in or under the laws of
the United States or of any political subdivision thereof,
- an estate the income of which is subject to the United States federal
income taxation regardless of its sources, or
- a trust if a court within the United States is able to exercise primary
jurisdiction over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust.
Any investor which is not a United States citizen or resident should review the
summary below for investment in notes by foreign persons. Also, neither the
description of General Tax Treatment of Noteholders above nor this discussion of
Special Tax Rules describes tax consequences to special classes of investors,
including investors who are dealers in securities or currencies, persons holding
notes as a part of a hedging transaction, some financial institutions or
insurance companies. Those particular types of investors are subject to specific
federal income tax treatment which is not generally applicable to other
investors. This summary of Material Federal Income Tax Consequences does not
describe tax consequences for those types of investors.
PURCHASE AT A DISCOUNT. An investor who purchases a note as part of the
initial offering by the trust for an issue price that is less than its "stated
redemption price at maturity" will be considered to have purchased the note at
an original issue discount for United States federal income tax purposes,
referred to as "OID". In general, the stated redemption price at maturity for a
note is equal to the principal amount. If a note is acquired with OID the
investor will be required to include in income each year, taxable as ordinary
income in the same manner as cash interest payments, a portion of the OID. For
cash basis investors, such as individuals, the requirement that OID be accrued
as income each year means the investor recognizes taxable income even though the
investor does not receive cash corresponding to that income. The amount of OID
accrued as income each year is based upon a formula which looks at the constant
yield on the notes and the term to maturity so as to annually allocate a
proportionate share of OID. Under these rules, investors will be required to
include in income increasingly greater amounts of OID in successive accrual
periods.
In determining whether a note has OID, the issue price of the note may not
necessarily equal the investor's purchase price, although they should be
approximately the same. The issue price of a note will equal the initial
offering price to the public at which price a substantial amount of the notes is
sold
82
<PAGE>
not including bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters or wholesalers.
If an investor acquires a note in a secondary market transaction for a
purchase price which is less than the principal amount or other amount payable
at maturity of the note, the difference is referred to for tax purposes as
market discount. Similarly to OID, an investor must accrue a portion of the
market discount each year. The amount of market discount which accrues annually
will be calculated on a straight-line basis over the remaining term to maturity
of the note unless the investor elects to accrue market discount using the
constant yield method, I.E., the OID method. Unlike OID, however, an investor
does not include accrued market discount in ordinary income each year. Rather,
the aggregate amount of accrued market discount is included in income when an
investor sells or otherwise disposes of the note or principal amounts are
received. At that time, the portion of the amount realized by the investor on
the sale or other disposition of the note equal to accrued market discount is
taxed as ordinary income (maximum tax rate of 39.6%) rather than long term
capital gain (maximum tax rate of 20%).
If an investor would prefer to be taxed on the annual accrual of market
discount each year rather than being taxed on the aggregate amount of all
accrued market discount when the note is sold or otherwise disposed of, the
investor can file an election to do so. The adjusted basis of a note subject to
the election will be increased to reflect market discount included in gross
income, thereby reducing gain or increasing any loss on a sale or other taxable
disposition of the note. Such an election would apply to all of the investor's
debt investments acquired in or after the taxable year in which the notes are
acquired and not just to the notes.
Limitations imposed by the federal tax law which are intended to match
deductions with the taxation of income may defer deductions for interest paid by
an investor on indebtedness incurred or continued, or short-sale expenses
incurred, to purchase or carry a note with market discount. A noteholder who
elects to include market discount in gross income as it accrues is exempt from
this rule.
Whenever an investor accrues and includes in income an amount of OID or
market discount, the investor's adjusted basis in the corresponding note is
increased by that same amount. As a result, the investor would recognize a lower
capital gain or greater capital loss on the sale or other disposition of the
note.
In general, if the amount of OID or market discount would be less than 1/4th
of one percent of the note's principal or other stated redemption price at
maturity, the investor can disregard the OID or market discount rules.
PURCHASE AT A PREMIUM. If an investor purchases a note as part of the
initial offering for a price that exceeds the principal amount or other amount
payable at maturity, the investor will be considered to have an amortizable bond
premium. An investor can elect to accrue a portion of the premium each year as a
deduction to offset interest income on the corresponding note. The amount of
premium which can be amortized and deducted each year is calculated using a
constant yield method over the remaining term to maturity of the note. The
deduction is available only to offset interest income on the corresponding note;
it cannot be used as a deduction to the extent it exceeds taxable note interest.
The adjusted tax basis which an investor has in a note must be reduced by the
amount of premium for which a deduction is claimed. Because the basis is
reduced, the investor would recognize a larger taxable capital gain or a smaller
capital loss on the sale or other disposition of the note. If an investor elects
to amortize and deduct premium, the election will apply to all of the investor's
debt investments and not just to the notes.
83
<PAGE>
If an investor purchases in a secondary market transaction a note which was
originally issued with OID for an amount which is less than 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 (I.E., the
original issue price plus any accrued OID as those terms are described above),
the excess is referred to for tax purposes as "acquisition premium." The
investor would be permitted to reduce the daily portions of OID the investor
would otherwise include in income by an amount corresponding to the ratio of (1)
the excess of the investor's purchase price for the note over the adjusted issue
price of the note as of the purchase date to (2) the excess 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.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. An investor may
elect to include in gross income all interest that accrues on a note using the
constant-yield method described above under the heading "PURCHASE AT A
DISCOUNT," with modifications described below. For purposes of this election,
interest includes qualified stated interest, OID, DE MINIMIS original issue
discount, market discount, DE MINIMUS 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
investor'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
investor, 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 Internal Revenue Service. Investors should consult with their own tax
advisors as to the effect in their circumstances of making this election.
FOREIGN INVESTORS. Special tax rules apply to the purchase of notes by
foreign persons. For U.S. tax purposes, foreign investors include any person who
is not:
- a citizen or resident of the United States,
- a corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof,
- an estate the income of which is includible in gross income for U.S.
federal income tax purposes, regardless of its sources, or
- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust.
Interest paid or accrued to a foreign investor that is not effectively
connected with the conduct of a trade or business within the United States by
the investor will be considered "PORTFOLIO INTEREST" and usually will not be
subject to United States federal income tax or withholding tax as long as the
foreign investor is not actually or constructively a 10 percent shareholder of
the trust or a controlled foreign corporation related to the trust through stock
ownership and provides an appropriate statement (Form W-8) to the trust or
paying agent 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 investor must provide a new Form W-8 within 30 days. The
Form W-8 is effective for three years. If the foreign investor fails to satisfy
these requirements so that interest on the investor's notes was not portfolio
interest, interest payments would be subject to United States federal income and
withholding tax treaty, the foreign investor must provide the paying agent with
Form 1001. This form is also effective for three years.
84
<PAGE>
Any capital gain realized on the sale or other taxable disposition of a note
by a foreign investor will be exempt from United States federal income and
withholding tax, provided that:
(1) the gain is not effectively connected with the conduct of a trade or
business in the Unites States by the investor and
(2) in the case of an individual foreign investor, the investor is not
present in the United States for 183 days or more during the taxable
year. If an individual foreign investor is present in the U.S. for 183
days or more during the taxable year, the gain on the sale or other
disposition of the notes could be subject to a 30% withholding tax unless
reduced by treaty.
If the interest, gain or income on a note held by a foreign investor is
effectively connected with the conduct of a trade or business in the United
States by the investor, the noteholder will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax rates.
At the same time, the noteholder may be exempt from withholding tax if a Form
4224 is furnished to the paying agent. Form 4224 is effective for only one
calendar year. In addition, if the foreign investor is a foreign corporation, it
may be subject to a branch profits tax equal to 30% of its "effectively
connected earnings and profits" for the taxable year, as adjusted, unless it
qualifies for a lower rate under an applicable tax treaty.
Regardless of when a foreign investor acquired the note, Treasury
Regulations which will become effective for note payments made after December
31, 1999 may change reporting requirements for some withholding agents.
If a foreign investor fails to provide necessary documentation to the trust
or its paying agent regarding the investor's taxpayer identification number or
certification of exempt status, a 31% backup withholding tax may be applied to
note payments to that investor. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against the foreign
investor's U.S. federal income tax liability provided the required information
is furnished to the Internal Revenue Service.
STATE AND LOCAL TAX CONSEQUENCES
Because of the differences in state and local tax laws and their
applicability to different investors, it is not possible to summarize the
potential, state and local tax consequences of purchasing, holding or disposing
of the notes and no opinions of counsel have been obtained regarding state tax
matters. ACCORDINGLY, IT IS RECOMMENDED THAT EACH PROSPECTIVE INVESTOR CONSULT A
TAX ADVISOR REGARDING THE STATE AND LOCAL TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, imposes
specific requirements on employee benefit plans subject to ERISA and prohibits
some transactions between ERISA-regulated plans and persons who are "PARTIES IN
INTEREST" (as defined under ERISA) with respect to assets of such plans. Section
4975 of the Internal Revenue Code prohibits a similar set of transactions
between specified plans or individual retirement accounts and persons who are
"DISQUALIFIED PERSONS" (as defined in the Internal Revenue Code) with respect to
Internal Revenue Code-regulated plans. Some employee benefit plans, such as
governmental plans and church plans, if no election has been made under Section
410(d) of the Internal Revenue Code, are not subject to the requirements of
ERISA or Section 4975 of the Internal Revenue 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
Internal Revenue Code and exempt from taxation under Section 501(a) of the
Internal Revenue Code is, however, subject to the prohibited transaction rules
set forth in Section 503 of the Internal Revenue Code.
85
<PAGE>
Investments by ERISA-regulated plans are subject to ERISA's general
fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that investments comply with the terms of
the documents governing the ERISA-regulated plan. Before investing in the notes,
an ERISA-regulated 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 Internal Revenue
Code prohibit parties in interest and disqualified persons with respect to ERISA
Plans and Code Plans from engaging in some transactions involving such Plans or
"PLAN ASSETS" of such Plans, unless a statutory or administrative exemption
applies to the transaction. Section 4975 of the Internal Revenue Code of 1986,
as amended and Sections 502(i) and 502(1) of ERISA provide for the imposition of
excise taxes and civil penalties on persons that engage or participate in such
prohibited transactions. The trust depositor, the underwriters, the servicer,
the indenture trustee or the owner trustee or their affiliates 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 Internal
Revenue 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 underwriters, the servicer, the indenture trustee, or the owner
trustee or any of their affiliates 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, some prohibited
transaction exemptions may apply to the purchase or holding of the notes--for
example, Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
transactions effected on behalf of a Plan by an "IN-HOUSE ASSET MANAGER;" PTCE
95-60, which exempts transactions between insurance company general accounts and
parties in interest; PTCE 91-38, which exempts transactions between bank
collective investment funds and parties in interest; PTCE 90-1, which exempts
transactions between insurance company pooled separate accounts and parties in
interest; or PTCE 84-14, which exempts 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 Internal Revenue Code of doing so.
86
<PAGE>
PLAN OF DISTRIBUTION
GENERAL
Under the terms of an underwriting agreement dated [ ,] 1999 for the
sale of the notes offered by this prospectus, the trust depositor has agreed to
sell to 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.
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS A-1 RECEIVABLE-BACKED NOTES, SERIES 1999-2
---------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS A-2 RECEIVABLE-BACKED NOTES, SERIES 1999-2
---------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS A-3 RECEIVABLE-BACKED NOTES, SERIES 1999-2
---------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS A-4 RECEIVABLE-BACKED NOTES, SERIES 1999-2
---------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS B RECEIVABLE-BACKED NOTES, SERIES 1999-2
-------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AMOUNT TO BE PURCHASED
CLASS C RECEIVABLE-BACKED NOTES, SERIES 1999-2
-------------------------------------------------
<S> <C>
</TABLE>
In the respective underwriting agreements, the underwriters respectively
have agreed, subject to the terms and conditions set forth the agreements, to
purchase all the notes offered by this prospectus if any of the notes are
purchased.
The underwriters of each of the following classes of notes have advised the
trust and the trust depositor that the underwriters propose initially to offer
the notes to the public at the prices set forth on the cover page hereof and to
dealers at those prices less a selling concession not in excess of the following
percentages of the principal amounts of the notes:
<TABLE>
<CAPTION>
SELLING CONCESSION (AS A PERCENTAGE OF THE
CLASS OF NOTES PRINCIPAL AMOUNT OF THE CLASS OF NOTES)
- ------------------------------------------------------ ---------------------------------------------
<S> <C>
A-1................................................... %
A-2................................................... %
A-3................................................... %
A-4................................................... %
B..................................................... %
C..................................................... %
</TABLE>
87
<PAGE>
Additionally, the underwriters may allow and the dealers may reallow a
concession not in excess of the following percentages of the principal amounts
of the notes:
<TABLE>
<CAPTION>
REALLOWANCE CONCESSION (AS A PERCENTAGE OF THE
CLASS OF NOTES PRINCIPAL AMOUNT OF THE CLASS OF NOTES)
- ------------------------------------------------- ---------------------------------------------------
<S> <C>
A-1.............................................. %
A-2.............................................. %
A-3.............................................. %
A-4.............................................. %
B................................................ %
C................................................ %
</TABLE>
The respective underwriting agreements provide that Heller Financial and the
trust depositor, jointly and severally, will indemnify the underwriters of the
offered notes against some civil liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the respective
underwriters may be required to make.
There is currently no secondary market for the notes and you should not
assume that one will develop. The underwriters currently expect, but are not
obligated to make a market in the offered notes. You should not assume that any
such market will develop, or if one does develop, that it will continue or
provide sufficient liquidity.
Until the distribution of the offered notes is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
some selling group members to bid for and purchase the offered notes. As an
exception to these rules, the underwriters are permitted to engage in some
transactions that stabilize the price of the offered notes. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the offered notes.
Some of the persons participating in this offering may engage in
transactions that affect the price of the offered notes. These transactions may
include the purchase of the offered notes to cover syndicate short positions. If
the underwriters create a short position in the offered notes in connection with
the offering, I.E., if it sells more notes than are set forth on the cover page
of this prospectus, the underwriters may reduce that short position by
purchasing such classes of notes in the open market. In general, purchases of a
security to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases.
Neither the originators nor the underwriters make any representations or
prediction as to the direction or magnitude of any effect that the transactions
described above, if engaged in, may have on the prices of the offered notes. In
addition, neither the originators nor the underwriters make any representation
that the underwriters will engage in those transactions or that those
transactions, once commenced, will not be discontinued without notice.
88
<PAGE>
In addition, [ ] will act as the private placement agent
for the trust depositor in connection with the sale of the Class D Notes 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 Heller Financial Leasing, Inc.
RATING OF THE NOTES
It is a condition to the issuance of the notes that they receive the
following ratings from the following rating agencies:
<TABLE>
<CAPTION>
MOODY'S INVESTORS FITCH IBCA, DUFF & PHELPS CREDIT RATING
CLASS SERVICE INC. CO.
- --------------------------------------- ----------------------- --------------- -----------------------------
<S> <C> <C> <C>
Class A-1 Notes........................
Class A-2 Notes........................
Class A-3 Notes........................
Class A-4 Notes........................
Class B Notes..........................
Class C Notes..........................
</TABLE>
The rating will reflect only the views of the rating agencies and will be
based primarily on the subordination of some classes of notes to other classes
of notes as described in this prospectus, 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, since the 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 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 the
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 as required by 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 you.
LEGAL MATTERS
Winston & Strawn, Chicago, Illinois will provide a legal opinion relating to
the notes in its capacity as special counsel to the trust, the trust depositor,
the originators, the servicer and the administrator. Other legal matters for the
underwriters will be passed upon by [ ].
EXPERTS
The balance sheet and footnote of Heller Equipment Asset Receivables Trust
1999-2 as of [ ,] 1999 included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report on page 121 and are included in
this prospectus in reliance upon the authority of Arthur Andersen LLP as experts
in giving said reports.
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Heller Equipment Asset Receivables Trust 1999-2:
We have audited the accompanying balance sheet of Heller Equipment Asset
Receivables Trust 1999-2 (a Delaware corporation) as of inception, [ ,]
1999. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Heller Equipment Asset Receivables
Trust 1999-2 as of inception, [ ,] 1999, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Chicago, Illinois
[ ,] 1999
90
<PAGE>
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1999-2
BALANCE SHEET AS OF [ ,] 1999
<TABLE>
<S> <C>
Assets--Cash........................................................... $ 0
Beneficial Equity...................................................... $ 0
Liabilities............................................................ $ 0
</TABLE>
NOTES TO THE BALANCE SHEET
Heller Equipment Asset Receivables Trust 1999-2 (the "Trust") is limited
purpose business trust established under the laws of the State of Delaware and
was formed on [ ,] 1999 by Heller Funding Corporation (the "Trust
Depositor"), and Wilmington Trust Company (the "Owner Trustee") pursuant to the
Trust Agreement dated as of [ ,]1999 between the Trust Depositor and
the Owner Trustee. The activities of the Trust are limited by the terms of the
Trust Agreement to acquiring, owning and managing lease and loan contracts and
related assets, issuing and making payments on notes and subordinate securities
and other activities related thereto. Prior to and including [ ,] 1999, the
Trust did not conduct any activities.
The Trust Depositor will pay all fees and expenses related to the
organization and operations of the Trust (including any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Trust). The Trust Depositor has also agreed to indemnify the Trustees and
certain other persons.
91
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
<S> <C>
Additional Principal....................................................................................... 79
Class A Percentage......................................................................................... 79
Class A Principal Payment Amount........................................................................... 79
Class A Target Investor Principal Amount................................................................... 80
Class B Floor.............................................................................................. 80
Class B Percentage......................................................................................... 80
Class B Principal Payment Amount........................................................................... 80
Class B Target Investor Principal Amount................................................................... 80
Class C Floor.............................................................................................. 80
Class C Percentage......................................................................................... 81
Class C Principal Payment Amount........................................................................... 81
Class D Percentage......................................................................................... 81
Class D Principal Payment Amount........................................................................... 81
Class D Target Investor Principal Amount................................................................... 82
Cumulative Loss Amount..................................................................................... 82
Excess Contract............................................................................................ 102
Excluded Amounts........................................................................................... 74
Overcollaterization Balance................................................................................ 82
Required Holders........................................................................................... 86
Required Reserve Amount.................................................................................... 82
</TABLE>
92
<PAGE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE SECURITIES OFFERED BY THIS PROSPECTUS, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$
HELLER EQUIPMENT ASSET RECEIVABLES TRUST 1999-2
$[ ]% Class A-1 Receivable-Backed Notes, Series 1999-2
$[ ]% Class A-2 Receivable-Backed Notes, Series 1999-2
$[ ]% Class A-3 Receivable-Backed Notes, Series 1999-2
$[ ]% Class A-4 Receivable-Backed Notes, Series 1999-2
$[ ]% Class B Receivable-Backed Notes, Series 1999-2
$[ ]% Class C Receivable-Backed Notes, Series 1999-2
HELLER FUNDING CORPORATION,
trust depositor
HELLER FINANCIAL, INC.,
servicer
---------------------
PROSPECTUS
---------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee............................................................... $
Printing and Engraving Expenses....................................................
Trustee's Fees and Expenses........................................................
Legal Fees and Expenses............................................................
Blue Sky Fees and Expenses.........................................................
Accountants' Fees and Expenses.....................................................
Rating Agency Fees.................................................................
Miscellaneous Fees.................................................................
Total.............................................................................. $
</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 offered notes in an aggregate principal amount assumed for these
purposes to be equal to $[ ] of Securities 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, as
amended, 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>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the trust depositor*
3.2 Bylaws of the trust depositor*
4.1 Form of Trust Agreement (including form of certificate)*
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*
23.1 Consent of Winston & Strawn*
23. Consent of Arthur Andersen LLP*
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 at a later date.
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 July 16, 1999.
<TABLE>
<S> <C> <C>
HELLER EQUIPMENT ASSET RECEIVABLES TRUST
1999-2
By: HELLER FUNDING CORPORATION, AS TRUST
DEPOSITOR
By: /s/ DAVID R. SCHMUCK
-----------------------------------------
Title: VICE PRESIDENT
HELLER FUNDING CORPORATION, AS THE TRUST
DEPOSITOR
By: /s/ DAVID R. SCHMUCK
-----------------------------------------
Title: VICE PRESIDENT
</TABLE>
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David R. Schmuck and Julia S. Landes and each of
them his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to sign any Registration Statement for the
same offering covered by this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, and all post-effective amendments thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Act, this registration statement has
been signed by the following persons in the capacities indicated on July 16,
1999:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
/s/ LAURALEE E. MARTIN Chief Executive Officer
- ------------------------------ and Director (Principal
Lauralee E. Martin Executive Officer)
/s/ LAWRENCE G. HUND Chief Financial Officer
- ------------------------------ (Principal Financial and
Lawrence G. Hund Accounting Officer)
/s/ JEFFREY A. HILZINGER
- ------------------------------ Director
Jeffrey A. Hilzinger
/s/ RICHARD L. TAIANO
- ------------------------------ Director
Richard L. Taiano
/s/ DWIGHT JENKINS
- ------------------------------ Director
Dwight Jenkins
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the trust depositor*
3.2 Bylaws of the Company*
4.1 Form of Trust Agreement (including form of certificate)*
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*
23.1 Consent of Winston & Strawn*
23.2 Consent of Arthur Andersen LLP*
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 at a later date.
