As filed with the Securities and Exchange Commission on , 1998
-----------
Registration Statement No. 333-
--------
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
MITSUI VENDOR LEASING ASSET TRUST 1998-1
(Issuer of Securities)
MITSUI VENDOR LEASING FUNDING CORP. II
(Depositor of the above-referenced Trust)
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 6799 APPLIED FOR
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation or Classification Code Number)
Organization) Number)
MITSUI VENDOR LEASING FUNDING CORP. II
6363 GREENWICH DRIVE, SUITE 100
SAN DIEGO, CALIFORNIA 92122
(619) 558-5050
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
JOHN L. PLUNKETT, ESQ.
MITSUI VENDOR LEASING FUNDING CORP. II
6363 GREENWICH DRIVE, SUITE 100
SAN DIEGO, CALIFORNIA 92122
(619) 558-5004
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
----------------
COPIES TO:
Siegfried P. Knopf, Esq. James J. Croke, Jr., Esq.
Brown & Wood LLP Cadwalader, Wickersham & Taft
One World Trade Center 100 Maiden Lane
New York, New York 10048 New York, New York 10038
-------------
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, 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(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box./ /
------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================
Proposed Maximum Proposed Maximum
Amount to Offering Aggregate Amount of
Title of each Class of be Price Per Offering Registration
Securities to be Registered Registered Unit(1) Price(1) Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Receivable Backed-Notes . . . . . . . . $1,000,000 $100% $1,000,000 $303.03
=========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on
the basis of the proposed maximum offering price per unit.
------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted without the delivery of a final prospectus. This
prospectus shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
Preliminary Prospectus dated June 1, 1998; Subject to Completion
PROSPECTUS
Mitsui Vendor Leasing Asset Trust 1998-1
Issuer
$____% Class A-1 Receivable-Backed Notes
$____% Class A-2 Receivable-Backed Notes
$____% Class A-3 Receivable-Backed Notes
$____% Class B Receivable-Backed Notes
$____% Class C Receivable-Backed Notes
Mitsui Vendor Leasing Funding Corp. II
Trust Depositor
Mitsui Vendor Leasing (U.S.A.) Inc.
Seller and Servicer
------------------------------------
Mitsui Vendor Leasing Asset Trust 1998-1 (the "Trust" or the "Issuer") is a
limited purpose business trust formed under the laws of the State of Delaware
pursuant to a Trust Agreement, dated as of _________, 1998 between Mitsui Vendor
Leasing Funding Corp. II ("MVLFC II") as trust depositor (in such capacity, the
Trust Depositor) and _________ as owner trustee (the "Owner Trustee"). MVLFC II
is a wholly owned subsidiary of Mitsui Vendor Leasing (U.S.A.) Inc. ("Mitsui
Vendor Leasing"). The Trust will issue $_______ aggregate principal amount of
___% Class A-1 Receivable-Backed Notes (the "Class A-1 Notes"), $_______
aggregate principal amount of ___% Class A-2 Receivable-Backed Notes (the "Class
A-2 Notes"), and $_______ aggregate principal amount of ___% Class A-3
Receivable-Backed Notes (the "Class A-3 Notes," and together with the Class A-1
Notes and the Class A-2 Notes, the "Class A Notes"), $____________ aggregate
principal amount of ___% Class B Receivable-Backed Notes (the "Class B Notes"),
and $_____________ aggregate principal amount of ___% Class C Receivable-Backed
Notes (the "Class C Notes," and together with the Class A Notes and the Class B
Notes, the "Notes"), pursuant to an indenture dated as of __________________,
1998 (the "Indenture") between the Trust and ______________, as indenture
trustee (in such capacity, the "Indenture Trustee"). To the extent described
herein, payments of interest and principal on the Class B Notes will be
subordinated in priority of payment to interest and principal, respectively, on
the Class A Notes, and payments of interest and principal on the Class C Notes
will be subordinated in priority of payment to interest and principal,
respectively, on the Class A Notes and the Class B Notes. The Notes will have
the benefit of amounts, if any, on deposit in the Reserve Fund. See "Description
of the Notes" herein. (cover continued on next page)
------------------------------------
THERE ARE MATERIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE NOTES.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" ON PAGE 18 OF THIS PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND WILL NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF MITSUI VENDOR LEASING (U.S.A.) INC., MITSUI
VENDOR LEASING FUNDING CORP. II OR ANY OF THEIR AFFILIATES, OTHER THAN THE
TRUST.
------------------------------------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===================================================================================================================================
Underwriting
Price to Public Discounts and Proceeds to Issuer
(1) Commissions(2) (1)(3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class A-1 Note............................................... % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class A-2 Note............................................... % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class A-3 Note............................................... % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class B Note................................................. % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class C Note................................................. % % %
- -----------------------------------------------------------------------------------------------------------------------------------
Total............................................................ $ $ $
===================================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, at the applicable Interest Rate from
___________, 1998.
(2) MVLFC II and Mitsui Vendor Leasing have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933. See "Plan of Distribution."
(3) Before deducting expenses of this offering estimated to be $_______.
The Notes are offered by First Union Capital Markets, a division of Wheat
First Securities, Inc. (the "Underwriter"), subject to prior sale, when, as and
if issued to and accepted by it and subject to its right to reject any order in
whole or in part or to withdraw, cancel or modify any order without notice. It
is expected that delivery of the Notes will be made in book-entry form only
through the Same Day Funds Settlement System of The Depository Trust Company, or
through Cedel Bank, S.A. or the Euroclear System, on or about ___________, 1998.
------------------------------------
First Union Capital Markets
------------------------------------
The date of this Prospectus is ___________, 1998.
(cover page continued)
The Notes will represent asset-backed debt obligations of the Trust and
will be secured pursuant to the Indenture primarily by (i) a pool of contracts
(the "Contracts") consisting of leases ("Leases") and conditional sale
agreements ("CSAs"), financing the lease or purchase of a variety of new and
used machine tools (such as machining centers, lathes, milling machines and
cutting machinery), medical equipment (such as diagnostic and therapeutic
examination equipment for radiology, nuclear medicine and ultrasound and
laboratory analysis equipment), photo-finishing equipment, plastic injection
molding equipment, textile equipment (such as knitting machines and textile
manufacturing machines), computer equipment (such as inventory control and
tracking computer equipment, computer work stations, personal computers, data
storage devices and other computer related peripheral equipment) and other types
of equipment (collectively, the "Equipment") and (ii) amounts available, if any,
in the Reserve Fund. The Contracts and related interests will be conveyed by
Mitsui Vendor Leasing (in such capacity, the "Seller") to the Trust Depositor
pursuant to a transfer and sale agreement dated as of __________________, 1998
(the "Transfer and Sale Agreement") by and between the Seller the Trust
Depositor. The Trust Depositor will concurrently convey such assets to the Trust
pursuant to a sale and servicing agreement dated as of __________, 1998 (the
"Sale and Servicing Agreement") among the Trust, the Trust Depositor, Mitsui
Vendor Leasing, as servicer (in its capacity as servicer, the "Servicer"),
_____________, as back-up servicer (in such capacity, the "Back-up Servicer"),
and the Indenture Trustee.
Interest on the Notes will be payable monthly in arrears on the ___________
(____) day of the month (or, if such day is not a Business Day, the next
succeeding Business Day) beginning on ___________, 1998 (each, a "Payment Date")
with respect to the period from and including the immediately preceding Payment
Date (or, with respect to the initial Payment Date, the date of issuance of the
Notes) to and excluding such Payment Date. Principal payments with respect to
the Notes will be payable on each Payment Date to the extent described herein.
The stated maturity date with respect to the Class A-1 Notes is the ________
____ Payment Date, with respect to the Class A-2 Notes is the ________ ____
Payment Date, with respect to the Class A-3 Notes is the ________ ____ Payment
Date, with respect to the Class B Notes is the ____________ ____ Payment Date,
and with respect to the Class C Notes is the __________ ____ Payment Date. The
actual payment in full, however, of the Notes could and is expected to occur
earlier than such stated maturity dates. See "Summary of Terms--Terms of the
Notes--B. Principal" and "--C. Optional Redemption" herein.
The Notes are being offered pursuant to this Prospectus. Sales of the Notes
may not be consummated unless the purchaser has received this Prospectus.
The Trust Depositor does 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.
There currently is no secondary market for the Notes and there is no
assurance that one will develop, or if one does develop, that it will continue
or provide sufficient liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO NOTEHOLDERS
During such time as the Notes remain in book-entry form, periodic and
annual unaudited reports, containing information concerning the Trust, the
Contracts and the Notes, will be prepared by the Servicer and sent on behalf of
the Issuer to Cede & Co. ("Cede"), as nominee of The Depository Trust Company
("DTC"), and the Euroclear System ("Euroclear") or Cedel Bank, S.A. ("CEDEL") as
registered holders of the Notes. Such reports will be made available by DTC,
Euroclear or CEDEL and its participants to holders of interests in the Notes in
accordance with the rules, regulations and procedures creating and affecting
DTC, Euroclear and CEDEL, respectively. See "Description of the Notes--Book-
Entry Registration" and "--Reports" herein. Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles or that have been examined and reported upon by, with an opinion
expressed by, an independent or certified public accountant.
AVAILABLE INFORMATION
The Trust Depositor, as originator of the Trust, has filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes offered pursuant to this Prospectus and described
herein. For further information, reference is made to the Registration Statement
which may be inspected and copied at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549;
Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of the
Registration Statement may be obtained from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a public access site on the Internet
through the World Wide Web at which site reports, information statements and
other information, including all electronic filings, regarding the Trust
Depositor and the Trust may be viewed. The Internet address of such World Wide
Web site is http://www.sec.gov. The Servicer, on behalf of the Trust, will also
file or cause to be filed with the Commission such periodic reports as are
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission thereunder. Copies of such
reports can be obtained as described above. However, in accordance with the
Exchange Act and the rules and regulations of the Commission thereunder, the
Servicer expects that the Trust's obligation to file such reports will be
terminated following the end of 1998.
Upon receipt of a request by an investor, or his or her representative,
within the period during which there is an obligation to deliver a Prospectus,
the Underwriter will promptly deliver, or cause to be delivered, without charge
and in addition to any such delivery requirements, a paper copy of this
Prospectus and a Prospectus encoded in an electronic format.
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms used in this summary are defined elsewhere in this Prospectus on the pages
indicated under the heading "Index of Terms" commencing on page 85.
There are material risks associated with an investment in the Notes. See
"Risk Factors" on page 18 for a discussion of certain factors that investors
should consider before making an investment in the Notes.
Issuer.....................Mitsui Vendor Leasing Asset Trust 1998-1, (the
"Issuer" or the "Trust"), a Delaware business trust
formed by the Trust Depositor and the Owner Trustee
pursuant to the Trust Agreement dated as of
__________ , 1998 (the "Trust Agreement") between the
Trust Depositor and the Owner Trustee. The principal
executive offices of the Trust are in Wilmington,
Delaware, in care of the Owner Trustee, at the
address of the Owner Trustee specified below.
Trust Depositor............Mitsui Vendor Leasing Funding Corp. II, a Delaware
corporation (the "Trust Depositor") and a
wholly-owned, limited purpose subsidiary of Mitsui
Vendor Leasing (U.S.A.) Inc. The Trust Depositor's
principal executive offices are located at 6363
Greenwich Drive, Suite 100, San Diego, California
92122 and its telephone number is (619) 558-____. See
"The Trust" herein.
Seller/Servicer............Mitsui Vendor Leasing (U.S.A.) Inc., a Delaware
corporation ("Mitsui Vendor Leasing," or, in its
separate capacities as a Seller under the Transfer
and Sale Agreement, or as Servicer under the Sale and
Servicing Agreement described herein, the "Seller"
and the "Servicer", respectively). Mitsui Vendor
Leasing's offices are located at 6363 Greenwich
Drive, Suite 100, San Diego, California 92122 and its
telephone number is (619) 558-5050. See "Mitsui
Vendor Leasing (U.S.A.) Inc." herein.
Indenture Trustee..........._________________________, as trustee under the
Indenture described herein (in such capacity, the
"Indenture Trustee"). The Indenture Trustee's
corporate trust office is located at __________
____________________________________________________.
See "The Indenture--The Indenture Trustee" herein.
Owner Trustee.............._______________________, as owner trustee under the
Trust Agreement (the "Owner Trustee"). The Owner
Trustee's offices are located at ____________________
___, Wilmington, Delaware, ________.
Back-up Servicer..........._________________________, as back-up servicer under
the Sale and Servicing Agreement described herein (in
such capacity, the "Back-up Servicer"). Pursuant to
the Sale and Servicing Agreement, the Back-up
Servicer will become the successor Servicer upon any
resignation or termination of the Servicer. See "The
Transfer and Sale Agreement and Sale and Servicing
Agreement Generally--Back-up Servicer" herein.
Cutoff Date................With respect to the Contracts transferred to the
Trust on the Closing Date, ____________, 1998, and
with respect to any Additional Contract or Substitute
Contract transferred to the Trust thereafter, the
close of business on the first day of the calendar
month in which such transfer occurs (each of such
dates, the "Cutoff Date," an "Additional Contract
Cutoff Date" or a "Substitute Contract Cutoff Date,"
respectively). The term "Cutoff Date," when used
herein in the context of general references to the
Contracts, should be deemed to include a reference to
the Additional Contract Cutoff Date and Substitute
Contract Cutoff Date of any Additional Contract or
Substitute Contract included in the Contracts, unless
otherwise specified or unless the context otherwise
clearly requires.
Closing Date...............On or about ________ __, 1998 (the "Closing Date").
Collection Periods,
Calculation Dates,
Payment Dates and
Record Dates...............The period from and including the first day of each
calendar month to and including the last day of the
calendar month (such last day, the "Calculation Date"
and each such period, a "Collection Period").
A "Payment Date" is the _________ (___) day (or if
any such date is not a "Business Day," i.e., a day
other than a Saturday, a Sunday or a day on which
banking institutions in San Diego, California or New
York, New York are authorized or obligated by any law
or regulation to be closed, then on the next
succeeding Business Day) of each calendar month
commencing ________ __, 1998. The Collection Period
relating to any particular Payment Date shall be the
calendar month preceding the month in which such
Payment Date occurs.
With respect to any Payment Date and the Notes, the
"Record Date" is the day immediately preceding each
Payment Date (or, with respect to any Definitive
Note, the last day of the calendar month preceding
the month in which such Payment Date occurs).
The Notes..................$___________ aggregate principal amount (the "Initial
Class A-1 Note Principal Balance") of _____% Class
A-1 Receivable-Backed Notes (the "Class A-1 Notes"),
$___________ aggregate principal amount (the "Initial
Class A-2 Note Principal Balance") of _____% Class
A-2 Receivable-Backed Notes (the "Class A-2 Notes"),
and $___________ aggregate principal amount (the
"Initial Class A-3 Note Principal Balance" and
together with the Initial Class A-1 Note Principal
Balance and the Class A-2 Principal Balance, the
"Initial Class A Note Principal Balance") of _____%
Class A-3 Receivable-Backed Notes (the "Class A- 3
Notes" and together with the Class A-1 Notes and the
Class A-2 Notes, the "Class A Notes"); $__________
aggregate principal amount (the "Initial Class B Note
Principal Balance") of _____% Class B
Receivable-Backed Notes (the "Class B Notes"); and
$__________ aggregate principal amount (the "Initial
Class C Note Principal Balance") of _____% Class C
Receivable-Backed Notes (the "Class C Notes"; and
together with the Class A Notes and the Class B
Notes, the "Notes"). The Initial Class A Note
Principal Balance is equal to approximately ____% of
the initial ADCB of the Contract Pool (with the
Initial Class A-1 Note Principal Balance, the Initial
Class A-2 Note Principal Balance and the Initial
Class A-3 Principal Balance equal to approximately
__%, __% and __%, respectively, of the initial ADCB
of the Contract Pool), the Initial Class B Note
Principal Balance is equal to approximately _____% of
the initial ADCB of the Contract Pool, and the
Initial Class C Note Principal Balance is equal to
approximately _____% of the initial ADCB of the
Contract Pool.
The Notes will be issued by the Trust pursuant to an
indenture dated as of ________ __, 1998 (the
"Indenture") between the Issuer and the Indenture
Trustee. The Notes will be secured by the Contracts
and the other Trust Assets pledged by the Issuer to
the Indenture Trustee under the Indenture. The Notes
will be available for purchase in book-entry form
only in minimum denominations of $1,000 and integral
multiples thereof (except for one Note of each Class
which, for rounding purposes, may be less than an
integral multiple thereof). The holders of beneficial
interests in the Notes held in book-entry form ("Note
Owners") will not be entitled to receive Definitive
Notes except in the limited circumstances described
herein. See "Description of the Notes--General" and
"--Definitive Notes" and "--Book-Entry Registration"
herein.
The Class B Notes and the Class C Notes will be
subordinated to the Class A Notes to the extent
described herein and the Class C Notes will be
subordinated to the Class B Notes to the extent
described herein. See "Description of the
Notes--Allocations" herein.
Trust Assets...............The assets pledged to the Indenture Trustee to secure
the Notes will include the following (the "Trust
Assets"): (i) the Contracts (including all Additional
Contracts and Substitute Contracts, if any), (ii) all
monies due or to become due thereunder or in respect
thereof from and after the Cutoff Date applicable to
such Contracts, in the form of (A) Scheduled Payments
inclusive of such payments received through Vendor
recourse or support arrangements, but excluding the
Excluded Amounts, (B) Prepayments and (C) Recoveries
(including any derived from the disposition of
related Equipment) received with respect to Defaulted
Contracts, (iii) the related Equipment (or a security
interest therein), (iv) such amounts as from time to
time may be held in the Collection Account or any
related account or subaccount under the Sale and
Servicing Agreement or the Indenture, together with
earnings on funds therein, (v) the rights of the
Trust under the Sale and Servicing Agreement, (vi)
amounts available, if any, in the Reserve Fund,
together with earnings on the funds therein and (vii)
proceeds of any of the foregoing.
A. Contracts...............The Contracts to be included in the pool of
Contracts pledged by the Issuer to the Indenture
Trustee pursuant to the Indenture (the "Contract
Pool") consist of leases (each, a "Lease") or
conditional sale agreements (each, a "CSA") relating
to the lease or sale of Equipment.
The Contracts included in the Contract Pool have the
characteristics specified in the Transfer and
Servicing Agreement and described herein, and will be
purchased by the Trust Depositor from the Seller on
the Closing Date pursuant to the Transfer and Sale
Agreement and concurrently conveyed to the Trust by
the Trust Depositor pursuant to the Sale and
Servicing Agreement. The Seller, will make certain
representations and warranties concerning the
Contracts, including that all of the Contracts are
commercial, rather than consumer, leases or financing
arrangements, and that no adverse selection process
was employed in the selection of Contracts for sale
under the Transfer and Sale Agreement. See "The
Transfer and Sale Agreement and Sale and Servicing
Agreement Generally--Representations and Warranties,"
"Use of Proceeds" and "The Contract Pool" herein.
As of the initial Cutoff Date, the Contract Pool had
the following characteristics (unless otherwise
noted, percentages are calculated by reference to
Discounted Contract Balances of the related Contracts
as a percentage of the ADCB of the Contract Pool).
The Discounted Contract Balances and the ADCB
utilized in clauses (ii), (iv) and (vi) below were
calculated utilizing the Statistical Discount Rate:
(i) there were ______ Contracts in the Contract
Pool;
(ii) the ADCB of the Contracts in the Contract
Pool was $______________;
(iii) the final scheduled payment date of the
Contract with the latest maturity or expiration was
____________, 200_;
(iv) the average Discounted Contract Balance was
approximately $___________;
(v) all of the Contracts had (A) original terms
to maturity of not less than ____ months and not more
than ____ months, with a weighted average original
term to maturity of approximately months and (B) a
remaining term to maturity of not less than 1 month
and not more than _____ months, with a weighted
average remaining term to maturity of approximately
_____ months; and
(vi) the End-Users in respect of approximately
_____% of the Contracts were located in the State of
California; approximately ___% were located in the
State of _______________; approximately ___% were
located _________ in the State of _______________;
and in no other state represented more 5.00% of the
Contracts.
See "The Transfer and Sale Agreement and Sale and
Servicing Agreement Generally--Concentration Amounts"
herein.
The Statistical Discount Rate is equal to _____% (the
"Statistical Discount Rate"). Although the Discounted
Contract Balances and the ADCB calculated at the
Discount Rate will vary somewhat from the Discounted
Contract Balances and ADCB calculated at the
Statistical Discount Rate, such variance will not be
material.
For further information regarding the Contracts
included in the Contract Pool, see "The Contract
Pool" and "The Contracts Generally," as well as "The
Sale and Servicing Agreement Generally--
Representations and Warranties" and "--Concentration
Amounts" herein.
Between the initial Cutoff Date and the Closing Date
some amortization of the Contracts included in the
Contract Pool is expected to occur. In addition,
certain Contracts included in the Contract Pool as of
the initial Cutoff Date may be determined not to meet
the eligibility requirements for the final Contract
Pool, and may not be included in the final Contract
Pool. To the extent a Contract is determined not to
meet the eligibility requirements for the Contract
Pool, the Seller will pursue one of two options: (i)
repurchase the ineligible Contract or (ii) substitute
for the ineligible Contract a new Contract having
similar characteristics and meeting the requirements
described herein (a "Substitute Contract"). While the
statistical distribution of the characteristics as of
the Closing Date for the Contract Pool will vary
somewhat from the statistical distribution of such
characteristics as of the initial Cutoff Date as
presented in this Prospectus, such variance will not
be material.
In addition, in connection with any Contract for
which a full contractual payment has not been
received from the End-User for more than 120 days or
which the Servicer determines, in accordance with its
customary and usual practices, is not collectible
(each a "Defaulted Contract"), the Servicer will have
the option under the Sale and Servicing Agreement to
substitute for such Defaulted Contract one or more
Substitute Contracts. See "Mitsui Vendor Leasing
(U.S.A.) Inc.--Write-Off Policy" herein.
Also, the Servicer may, at its option, make a
material modification to or adjustment of the terms
of a Contract that would not otherwise be permissible
under the Sale and Servicing Agreement (unless the
Contract was to be prepaid in full) (each, an
"Adjusted Contract"), if the Servicer
contemporaneously substitutes one or more Substitute
Contracts for such Adjusted Contract. In addition,
from time to time there may also be non-material
adjustments or modifications in Contract terms that
may be effected by the Servicer on behalf of the
Issuer without Noteholder consent and without
affecting the Contract's status as part of the
Contract Pool.
The ADCB of the Defaulted Contracts and Adjusted
Contracts for which the Seller or Servicer may cause
the substitution of Substitute Contracts is limited
to an amount not in excess of 10% of the ADCB of the
Contract Pool as of the initial Cutoff Date.
In addition, the Servicer may at its option, under
the terms of the Sale and Servicing Agreement, permit
or agree to the early termination or full prepayment
of any Contract in certain circumstances, and on the
terms and subject to the conditions more fully
specified in the Sale and Servicing Agreement (any
such Contract for which there is an early termination
or full prepayment, a "Prepaid Contract"). Such
circumstances may include, without limitation, a full
or partial buyout of the Equipment which is the
subject of the Contract, or an equipment upgrade.
With respect to any Prepaid Contract the Servicer may
at its option either (x) include such prepayment in
full in the Available Amount for the related Payment
Date or (y) reinvest the prepayment proceeds of such
Prepaid Contract in one or more new Contracts having
similar characteristics to such Prepaid Contract
(each, an "Additional Contract").
Additional Contracts and Substitute Contracts
included in the Contract Pool (i) will be conveyed to
the Trust Depositor pursuant to the Transfer and Sale
Agreement, by the Trust Depositor to the Issuer
pursuant to the Sale and Servicing Agreement and in
turn pledged by the Issuer to the Indenture Trustee
pursuant to the Indenture and (ii) must meet the
Contract Pool concentration limitations and the other
substitution requirements described herein. See "The
Transfer and Sale and Sale and Servicing Agreement
Generally--Representations and Warranties" herein. In
addition, either the final scheduled payment on such
Substitute Contract or Additional Contract will be on
or prior to the _______ ______ Payment Date or, to
the extent the final payment on such Contract is due
after the ______ ______ Payment Date, only Scheduled
Payments due on or prior to such date may be included
in the Discounted Contract Balance of such Contract
for the purpose of making any calculation under the
Indenture or the Sale and Servicing Agreement.
B. Equipment...............All of the Seller's right, title and interest (which
may be limited to a security interest) in the
Equipment, if any, subject to each Lease and the
security interest of the Seller in the Equipment, if
any, subject to each CSA included in the Contract
Pool will be transferred to the Trust Depositor
pursuant to the Transfer and Sale Agreement and to
the Issuer pursuant to the Sale and Servicing
Agreement and will be pledged by the Issuer to the
Indenture Trustee pursuant to the Indenture.
Equipment will include a variety of machine tools
(such as machining centers, lathes, milling machines
and cutting machinery), medical equipment (such as
diagnostic and therapeutic examination equipment for
radiology, nuclear medicine and ultrasound and
laboratory analysis equipment), photo-finishing
equipment, plastic injection molding equipment,
textile equipment (such as knitting machines and
textile manufacturing machines), computer equipment
(such as inventory control and tracking computer
equipment, computer work stations, personal
computers, data storage devices and other computer
related peripheral equipment) and other types of
equipment. See "The Contracts Generally--Equipment"
and "The Contract Pool" herein. In the event the
End-User defaults in its obligation to make payments
under any Contract, the Servicer will follow its
customary and usual collection procedures, which may
include the repossession and sale of any related
Equipment on behalf of the Trust. Any Recoveries from
such sale shall constitute Available Amounts. See
"The Contracts Generally--Equipment," and
"Description of the Notes--Defaulted Contracts"
herein.
C. Collection
Account................A trust account will be established by the Servicer
in the name of and aintained by the Indenture Trustee
(the "Collection Account") into which all amounts
that will be collected in respect of the Contracts
will be deposited in accordance with the Sale and
Servicing Agreement and the Indenture. See
"Description of the Notes--Collection Account"
herein.
D. Vendor
Agreements.............The Seller acquired the Contracts included in the
Contract Pool by an assignment (each a "Vendor
Assignment") from equipment manufacturers, dealers
and distributors (each a "Vendor") who originated
such Contracts in connection with the acquisition or
use by an End-User of a Vendor's Equipment.
A substantial portion of the Vendor Assignments
(representing approximately ___% of the ADCB of the
Contract Pool as of the initial Cutoff Date) will be
made pursuant to finance program agreements (each, a
"Vendor Program Agreement") with the Vendors pursuant
to which the Seller finances transactions relating to
the acquisition or use by an End-User of the Vendor's
Equipment. The Vendor Assignments, the Vendor Program
Agreements or a combination thereof generally provide
for various forms of support from Vendors with
respect to the Contracts. Such support generally
includes representations and warranties by Vendors
with respect to the Contracts (and repurchase
obligations in case of a breach of such
representations and warranties) and remarketing
support by the Vendor with respect to the Equipment
in the event of an End-User default. The Vendor
Assignments and Vendor Program Agreements generally
do not provide direct recourse against the Vendor for
End-User defaults. See "The Contracts
Generally--Vendor Program Agreements" and "--Other
Vendor Arrangements" herein.
All of the Seller's right, title and interest in the
Vendor Assignments and the Vendor Program Agreements
(to the extent related to the Contracts included in
the Contract Pool) will be conveyed to the Issuer on
the Closing Date and in turn will be pledged by the
Issuer to the Indenture Trustee under the Indenture.
E. Reserve Fund............A trust account has been established by the Trust
Depositor in the name of, and maintained by, the
Indenture Trustee (the "Reserve Fund"). On the
Closing Date the Trust Depositor will deposit (or
cause to be deposited) $___________ in the Reserve
Fund (which is equal to ___% of the ADCB of the
Contract Pool as of the initial Cutoff Date) (the
"Initial Reserve Fund Deposit"). Pursuant to the Sale
and Servicing Agreement, the amount on deposit at any
time in the Reserve Fund (the "Reserve Fund Amount")
will be required to equal the greater of (a) (i) from
the Closing Date until such date as the Initial
Reserve Fund Deposit equals or exceeds _____% of the
then current ADCB of the Contract Pool, the Initial
Reserve Fund Deposit and (ii) from and after such
date as the Initial Reserve Fund equals of exceeds
___% of the then current ADCB of the Contract Pool,
___% of the then current ADCB of the Contract Pool
and (b) ___% of the ADCB of the Contract Pool as of
the initial Cutoff Date. The amount at any time
required to be held in the Reserve Fund is referred
to herein as the "Required Reserve Fund Amount."
Amounts held from time to time in the Reserve Fund
will continue to be held for the benefit of the
Noteholders through the date on which the Notes are
paid in full. On each Payment Date, the Reserve Fund
Amount will be applied as described under
"Description of the Notes--Allocations" and
"--Reserve Fund" herein to the extent that Available
Amounts with respect to any Payment Date are less
than the amount necessary to pay interest on the
Notes, provided that upon the occurrence of an Event
of Default or a Restricting Event, any amounts
remaining in the Reserve Fund shall be applied to pay
the principal on the Notes. On any Payment Date if,
after giving effect to all allocations and
distributions on such Payment Date, the Reserve Fund
Amount exceeds the Required Reserve Fund Amount, such
excess will be distributed to the Seller. Upon any
such distributions to the Seller, the Noteholders
will have no further rights in, or claims to, such
amounts.
The Seller may, from time to time after the date of
this Prospectus, request each Rating Agency that
rated the Notes to approve a formula for determining
the Reserve Fund Amount that is different from the
formula described above and would result in a
decrease in the amount of the Required Reserve Fund
Amount or the manner by which the Reserve Fund is
funded. If each Rating Agency delivers a letter to
the Seller and the Indenture Trustee to the effect
that the use of any such new formulation will not in
and of itself result in a qualification, reduction or
withdrawal of its then current rating of any Class of
Notes, then the Reserve Fund Amount will be
determined in accordance with such new formula. The
Sale and Servicing Agreement and the Indenture, as
applicable, will be amended to reflect such new
calculation without the consent of any Noteholder.
Terms of the Notes.........The principal terms of the Notes will be as
described below:
A. Interest...............Interest on the outstanding principal amount of the
Notes will accrue on the basis of a year of 360 days
consisting of twelve 30 day months from and including
the most recent Payment Date on which interest has
been paid (or, in the case of the initial Payment
Date, from and including the Closing Date) to but
excluding the following Payment Date (each period for
which interest accrues on the Notes, an "Accrual
Period"). Interest on the Notes will be payable on
each Payment Date to the holders of record of the
Class A Notes (the "Class A Noteholders"), the
holders of record of the Class B Notes (the "Class B
Noteholders") and the holders of record of the Class
C Notes (the "Class C Noteholders;" together with the
Class A Noteholders and the Class B Noteholders, the
"Noteholders") as of the related Record Date. See
"Description of the Notes--General" and "--Interest"
herein.
Interest on the Notes is payable on a Payment Date
from Available Amounts available on such date (after
application of such Available Amounts to repay any
outstanding Servicer Advances, and to pay the
Servicing Fee and after application of such amounts,
in the case of the Class B Notes, to pay interest on
the Class A Notes and, in the case of the Class C
Notes, to pay interest on the Class A and Class B
Notes). Such Available Amounts represent primarily
collections of payments due under the Contracts,
certain amounts received upon the prepayment or
repurchase of Contracts or liquidation of the
Contracts and disposition of the related Equipment
upon defaults thereunder, and proceeds of Servicer
Advances, if any, amounts available in the Reserve
Fund, if any, as well as earnings on amounts held in
the Collection Account and the Reserve Fund. See
"Description of the Notes--Allocations" herein.
B. Principal..............Principal of the Class A Notes will be payable on
each Payment Date in an amount equal to the Class A
Principal Payment Amount for such Payment Date, to
the extent Available Amounts are available therefor,
after payment of unpaid Servicer Advances, the
Servicing Fee and interest payments on the Notes. The
Class A Principal Payment Amount will be allocated
sequentially among the Class A-1, Class A-2 and Class
A-3 Notes so that the entire Class A Principal
Payment Amount will be allocated, first, to the Class
A-1 Notes until the Class A-1 Notes are paid in full,
second, to the Class A-2 Notes until the Class A-2
Notes are paid in full and, third, to the Class A-3
Notes until the Class A-3 Notes are paid in full;
provided that, should any Event of Default or
Restricting Event have occurred and be continuing,
the Class A Principal Payment Amount will be
allocated among the Class A-1, Class A-2 and Class
A-3 Notes on a pro rata basis. See "Description of
the Notes--Allocations" herein.
Principal of the Class B Notes will be payable on
each Payment Date in an amount equal to the Class B
Principal Payment Amount for such Payment Date, to
the extent Available Amounts are available therefor,
after payment of unpaid Servicer Advances, the
Servicing Fee, interest payments on the Notes, and
the payment of the Class A Principal Payment Amount.
See "Description of the Notes--Allocations" herein.
Principal of the Class C Notes will be payable on
each Payment Date in an amount equal to the Class C
Principal Payment Amount for such Payment Date, to
the extent Available Amounts are available therefor,
after payment of unpaid Servicer Advances, the
Servicing Fee, interest payments on the Notes, and
the payment of the Class A Principal Payment Amount
and the Class B Principal Payment Amount. See
"Description of the Notes--Allocations" herein.
The Class A Principal Payment Amount, the Class B
Principal Payment Amount and the Class C Principal
Payment Amount for any Payment Date represent the
Applicable Percentage for each such Class for such
Payment Date times the Aggregate Principal Paydown
Amount for such Payment Date. Such principal payment
amounts, however, are payable on any Payment Date
only to the extent of Available Amounts available
therefor. As a result, any deficiency in the payment
of such principal payment amounts on any Payment Date
that is due to the limited Available Amounts
remaining after payment of all amounts payable
therefrom having a higher priority will not
constitute an Event of Default under the Indenture.
To the extent the Notes of any Class remain
outstanding on the stated maturity of such Class,
failure to pay the Notes of such Class in full on
such date will constitute an Event of Default. See
"Description of the Notes--Events of Default."
The "Aggregate Principal Paydown Amount" means, for
any Payment Date, an amount (not less than zero)
equal to (a) the ADCB of the Contract Pool as of the
beginning of business on the first day of the
immediately preceding Collection Period, minus (b)
the ADCB of the Contract Pool as of the close of
business on the last day of the immediately preceding
Collection Period. Such decline in the ADCB of the
Contract Pool for such immediately preceding
Collection Period may be through payment, prepayment,
default and writeoff, determination of ineligibility,
substitution or addition of the Contracts or as may
otherwise be described herein.
The "Applicable Percentage" means, (a) prior to the
Cross Over Date, (i) for the Class A Notes, ______%,
(ii) for the Class B Notes, ______% and (iii) for the
Class C Notes, ______% and (b) after the Cross Over
Date, (i) for the Class A Notes, ______%, (ii) for
the Class B Notes, ______% and (iii) for the Class C
Notes, ______%. The "Cross Over Date" is the Payment
Date on which aggregate principal amount of the Notes
is equal to ___% or less of the ADCB of the Contract
Pool as of the last day of the related Collection
Period. As of the Closing Date, the aggregate initial
principal amount of the Notes will be equal to
approximately ___% of the initial ADCB of the
Contract Pool.
After the occurrence of an Event of Default, or upon
the occurrence and during the continuance of a
Restricting Event, principal on the Notes will be
allocated among the Class A, Class B and Class C
Notes sequentially (i.e., no principal will be paid
on the Class B Notes or the Class C Notes until the
Class A Notes have been paid in full, and no
principal will be paid on the Class C Notes until the
Class B Notes have been paid in full); provided that
principal allocated in such manner to the Class A
Notes will be distributed among the Class A-1, Class
A-2 and Class A-3 Notes pro rata. See "Description of
the Notes--Allocations" herein.
Stated Maturity Date.......The stated maturity of
the Class A-1 Notes is the _______ Payment Date; the
stated maturity of the Class A-2 Notes is the
__________ Payment Date; the stated maturity of the
Class A-3 Notes is the __________ Payment Date; the
stated maturity of the Class B Notes is the
_________Payment Date; and the stated maturity of the
Class C Notes is the ______________ Payment Date.
However, if all payments on the Contracts are made as
scheduled, final payment with respect to the Notes
would occur earlier than stated maturity.
C. Optional
Redemption.............The Trust Depositor may repurchase all remaining
Contracts and related assets, and thus effect the
early redemption of the Notes on any Payment Date on
or after which the ADCB of the Contract Pool is less
than 10% of the ADCB of the Contract Pool as of the
initial Cutoff Date. The price at which the Trust
Depositor will be required to purchase the Contracts
in order to exercise such option will be equal to the
greater of (i) the ADCB of the Contract Pool and (ii)
the amount that when applied pursuant to the
Indenture together with all other amounts available
thereunder will be sufficient to redeem the Notes at
a price equal to the unpaid principal amount of the
Notes plus accrued and unpaid interest thereon
through the date of redemption.
ADCB.......................The "ADCB" means, at any time, the sum of the
Discounted Contract Balances of all Contracts
included in the Contract Pool at such time.
"Discounted Contract Balance" means with respect to
any Contract, (a) as of the related Cutoff Date, the
present value of all of the remaining Scheduled
Payments becoming due under such Contract after the
applicable Cutoff Date but not later than the
_________ ________ Payment Date, discounted monthly
at the Discount Rate and (b) as of any other date of
determination, the sum of (i) the present value of
all of the remaining Scheduled Payments becoming due
under such Contract on or after such date of
determination but not later than the _________
________ Payment Date, discounted monthly at the
Discount Rate and (ii) 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; provided that the
Discounted Contract Balance of any Defaulted Contract
will be equal to zero. The Discounted Contract
Balance for each Contract shall be calculated
assuming:
(a) all payments due in any Collection
Period are due on the last day of the
Collection Period;
(b) payments are discounted on a monthly
basis using a 30 day month and a 360
day year; and
(c) all security deposits and drawings
under letters of credit, if any,
issued in support of a Contract are
applied to reduce Scheduled Payments
in inverse order of the due date
thereof.
"Discount Rate" means, at any date of determination,
a per annum rate equal to the sum of (i) the weighted
average of the Class A Interest Rate, Class B
Interest Rate and Class C Interest Rate, each
weighted by (x) the Initial Class A Note Principal
Balance, Initial Class B Note Principal Balance or
Initial Class C Note Principal Balance, as applicable
and (y) the expected weighted average life of each
Class of Notes, as applicable, assuming a CPR of ___%
and (ii) the Servicing Fee Percentage.
"Scheduled Payments" means, with respect to any
Contract, the rent or financing payment (whether
principal or principal and interest) scheduled to be
made by the related End-User under the terms of such
Contract after the related Cutoff Date (provided that
Scheduled Payments do not include any Excluded
Amounts). Substantially all of the Contracts included
in the Contract Pool provide for Scheduled Payments
to be made monthly.
Subordination..............The Class A Notes will be senior in right of payment
to the Class B Notes and Class C Notes, and the Class
B Notes will be senior in right of payment of the
Class C Notes; in each case to the extent described
herein. See "Description of the Notes--Allocations."
Servicing; Servicing
Fee; Servicer
Advances...................The Servicer will be responsible for servicing,
managing and administering the Contracts and related
interests, and enforcing and receiving collections on
the Contracts. The Servicer will be required to
exercise the degree of skill and care in performing
these functions that it customarily exercises with
respect to similar property owned or serviced by the
Servicer in its individual capacity.
The Servicer will be entitled on each Payment Date to
receive (a) a monthly fee (the "Servicing Fee") equal
to the product of (i) one-twelfth of ___% (the
"Servicing Fee Percentage") and (ii) the ADCB of the
Contract Pool as of the beginning of the immediately
preceding Collection Period, payable out of Available
Amounts. In addition as compensation for acting as
Servicer, the Servicer will be entitled to all late
charges and certain other fees paid by the End-Users.
Under certain limited circumstances, the Servicer may
resign or be removed, in which event the Back-up
Servicer will be appointed as successor Servicer. See
"The Sale and Servicing Agreement Generally
--Resignation and Certain Other Matters Regarding the
Servicer" and "--Servicer Default" herein.
The Servicer will be required to cause amounts
collected on the Contracts to be deposited to the
Collection Account maintained by the Indenture
Trustee no later than two Business Days following the
Servicer's determination that such amounts relate to
the Contracts or the Equipment. The Servicer will
also make advances (each, a "Servicer Advance") for
delinquent Scheduled Payments, but only to the extent
it determines in its sole discretion that such
advances will be recoverable in future periods from
Recoveries on the related Contract. Such Servicer
Advances are reimbursable from Available Amounts as
described herein. See "The Transfer and Sale
Agreement and Sale and Servicing Agreement
Generally--Collection and Other Servicing Procedures"
herein.
Repurchase or
Substitution for
Certain Breaches
Of Representations And
Warranties.................Pursuant to the Transfer and Sale Agreement, the
Seller will be obligated to accept the reconveyance
of a Contract and the interest in the related
Equipment from the Indenture Trustee and to deposit
the corresponding Transfer Deposit Amount, if the
interest of the Issuer or the Noteholders in any of
the related Equipment, the related Contract, or the
related Contract File is materially adversely
affected by a breach of a representation or warranty
made by the Seller with respect to such Contract and
if such breach has not been cured within ___ days of
discovery of such breach. In the alternative, and at
the Seller's option, the affected Contract may be
replaced with a Substitute Contract of similar
characteristics under the standards applicable
generally to Substitute Contracts as described
herein.
Maturity and
Prepayment
Conditions.................CSAs are generally prepayable by their terms, and the
Servicer will be authorized to accept prepayments on
Leases in certain circumstances. Each prepayment on a
Contract, if such Contract is not replaced by the
Issuer's reinvestment in a comparable Additional
Contract as described herein, will shorten the
weighted average remaining term of the Contracts and
the weighted average life of the Notes. Such
prepayments of principal will be included in the
Available Amounts and will be payable in whole or in
part to Noteholders on the Payment Date following the
Collection Period in which such prepayment was
received, as set forth herein. The rate of
prepayments on the Contracts will also be affected
under certain circumstances relating to breaches of
representations, warranties or covenants with respect
to the Contracts, since the Seller will be obligated
to repurchase materially adversely affected Contracts
from the Contract Pool unless it provides a
Substitute Contract for the Contract related to the
breached representation or warranty. Additionally,
the rate of payments on the Contracts will also be
affected by the timing of Recoveries on Defaulted
Contracts unless the Servicer provides a Substitute
Contract for the Defaulted Contract, which
substitution is in the sole and absolute discretion
of the Servicer. A higher than anticipated rate of
prepayments will reduce the ADCB of the Contracts
more quickly than expected and thereby reduce
anticipated aggregate interest payments on the Notes.
Any reinvestment risks resulting from a faster or
slower incidence of prepayment of Contracts will be
borne entirely by the Noteholders. Such reinvestment
risks include the risk that interest rates may be
lower at the time such holders received payments from
the Issuer than interest rates would otherwise have
been had such prepayments not been made or had such
prepayments been made at a different time.
Risk Factors...............See "Risk Factors" for a discussion of certain
material risks that should be considered in
connection with an investment in the Notes offered
hereby, including certain legal risks.
Federal Income Tax
Considerations.............In the opinion of Brown & Wood llp, federal tax
counsel to the Issuer, for federal income tax
purposes, the Notes will be characterized as debt,
and the Issuer will not be characterized as an
association (or a publicly traded partnership)
taxable as a corporation. Each Noteholder, by the
acceptance of a Note, will agree to treat the Notes
as indebtedness. See "Federal Income Tax
Consequences" herein.
ERISA Considerations.......Subject to the considerations discussed under "ERISA
Considerations" herein, the Notes will be eligible
for purchase by employee benefit plans. Any benefit
plan fiduciary considering purchase of the Notes
should, however, consult with its counsel regarding
the consequences of such purchase under ERISA and the
Code. See "ERISA Considerations" herein.
Rating.....................It is a condition to the issuance of the Notes
offered hereunder that the Class A Notes, be rated at
least _______, that the Class B Notes be rated at
least _____ and that the Class C Notes be rated at
least _______ by _____________ and ___________,
respectively (collectively, the "Rating Agencies"). A
rating is not a recommendation to purchase, hold or
sell Notes inasmuch as such rating does not comment
as to market price or suitability for a particular
investor. Ratings address the likelihood of timely
payment of interest and the ultimate payment of
principal on the Notes pursuant to their terms.
Ratings will not address the likelihood of an early
return of invested principal. There can be no
assurance that any rating will remain for a given
period of time or that a rating will not be lowered
or withdrawn entirely if, in the judgment of any
Rating Agency, circumstances in the future so
warrant. See "Rating of the Notes" herein.
RISK FACTORS
Prospective investors should carefully consider the following risk factors
before investing in the Notes.
Absence of Public Market; Limited Liquidity
There is currently no public market for the Notes and there is no assurance
that one will develop. The Underwriter expects, but is not obligated, to make a
market in the Notes. There is no assurance that any such market will be created
or, if so created, will continue. If no public market develops, the Noteholders
may not be able to liquidate their investment in the Notes prior to maturity.
Prepayments on the Contracts Affect the Yield of the Notes
Because the rate of payment of principal on the Notes will depend, among
other things, on the rate of payment on the Contracts, the rate of payment of
principal on the Notes cannot be assured. Payments on the Contracts will include
Scheduled Payments as well as partial and full prepayments (including any
Scheduled Payment (or portion thereof) which the Servicer has received in
advance of its scheduled due date and which will be applied on such due date),
and any and all cash proceeds or rents realized from the sale, lease, re-lease
or re-financing of Equipment under any Prepaid Contract, payments upon the
liquidation of Defaulted Contracts (net of liquidation expenses), and payments
upon repurchases by the Seller through the Trust Depositor as a result of the
breach of certain representations and warranties or covenants in the Transfer
and Sale Agreement and the Sale and Servicing Agreement (any such voluntary or
involuntary prepayment, purchase or termination, a "Prepayment"). The Servicer
may permit the End-User under a Contract that is not prepayable by its terms to
make an optional prepayment so long as such Prepayment is in an amount which is
not less than the Prepayment Amount of the related Contract.
The rate of early terminations of Contracts due to Prepayments (including
Prepayments caused by defaults on Contracts) is influenced by various factors,
including technological change, changes in customer requirements, the level of
interest rates, the level of casualty losses, and the overall economic
environment. Many Prepayments occur at the option or request of customers, whose
motivations may not be known to the Servicer. No assurance can be given that
Prepayments on the Contracts will conform to any historical experience, and no
prediction can be made as to the actual rate of Prepayments which will be
experienced on the Contracts. Noteholders will bear all reinvestment risk
resulting from the rate of Prepayments on the Contracts.
No Assurances Given as to Changes in the Ratings of the Notes
A rating is not a recommendation to purchase, hold or sell Notes inasmuch
as such rating does not comment as to market price or suitability for a
particular investor. Ratings of Notes will address the likelihood of timely
payment of interest and the ultimate payment of principal on the Notes pursuant
to their terms. The ratings of Notes will not address the likelihood of an early
return of invested principal. In addition, any such rating will not address the
possibility of the occurrence of an Event of Default or Restricting Event. There
can be no assurance that a rating will remain for a given period of time or that
a rating will not be lowered or withdrawn entirely by a Rating Agency if in its
judgment circumstances (i.e., such as the performance of the Contracts or the
Servicer) in the future so warrant. In the event that the rating initially
assigned to any Note is subsequently lowered for any reason, no person or entity
is obligated to provide any additional credit support therefor. For more
detailed information regarding the ratings assigned to any Class of the Notes,
see "Rating of the Notes" herein.
Subordination of the Class B Notes and the Class C Notes
To the extent described herein under the heading "Description of the Notes
- -- Allocations": (i) payments of interest and principal on the Class B Notes
will be subordinated in priority of payment to interest and principal,
respectively, on the Class A Notes and (ii) payments of interest and principal
on the Class C Notes will be subordinated in priority of payment to interest and
principal, respectively, on the Class A Notes and the Class B Notes.
Delinquencies and defaults on the Contracts could eliminate the protection
afforded the Noteholders by the Reserve Fund, and the Class C Noteholders could
incur losses on their investment as a result. Further delinquencies and defaults
on the Contracts could eliminate the protection offered to the Class B
Noteholders by the subordination of the Class C Notes, and such Class B
Noteholders could also incur losses on their investment as a result.
Additionally, delinquencies and defaults on the Contracts could eliminate the
protection offered the Class A Noteholders, by the subordination of the Class B
Notes and the Class C Notes, and such Class A Noteholders could also incur
losses on their investment as a result.
Certain Risks Associated with Geographic Concentrations of Contracts
The Contracts constituting the initial Contract Pool reflect concentrations
of End-Users thereon located in the States of __________, _____ and __________
equal to ____%, ___% and ___%, respectively, of the ADCB of the Contract Pool as
of the initial Cutoff Date. No other state accounts for more than 5.00% of the
Contract Pool. To the extent adverse events or economic conditions particularly
affect any of these states or the related geographic regions, the delinquency
and default experience of the Contract Pool could be adversely impacted with
corresponding negative implications for the timing and amount of collections on
the Contracts and possible delays or insufficiencies in payments due to
Noteholders.
Rate at which Equipment Becomes Obsolete Affects Prepayment Rate of the
Contracts and the Notes; Reinvestment Risk
Technological change could affect the Noteholders. For example, to the
extent that technological change results in increased prepayment activity, it
may increase Prepayments of the Contracts. Such Prepayments may result in
distributions to Noteholders of amounts which would otherwise have been
distributed over the remaining term of the Contracts and such distributions may
require the Noteholders to reinvest such Prepayments in a less attractive
interest rate environment. See "--Prepayments on the Contracts Affect the Yield
of the Notes."
Declines in Market Value of Equipment; Shortfalls with respect to Available
Amounts to Pay the Notes
In the event a Contract becomes a Defaulted Contract, the only source of
payment for amounts expected to be paid on such Contract will be the income and
proceeds from the disposition of any related Equipment and a deficiency
judgment, if any, against the End-User under the Defaulted Contract. Since the
market value of the Equipment may decline faster than the Discounted Contract
Balance and may be subject to sudden, significant declines in value due to
technological advances, the Servicer might not recover the entire amount due on
the Contract and might not receive any Recoveries on the Equipment. To the
extent such deficiencies deplete the Reserve Fund and subordination with respect
to Notes and the collateral securing the Notes, respectively, such deficiencies
may create a shortfall with respect to payments on the Notes.
Certain Legal Risks
Legal Risks Associated With Servicer's Retention of Contract Files. To
facilitate servicing and reduce administrative costs, the Contract Files will be
retained in the possession of the Servicer and not be deposited with the
Indenture Trustee or any other agent or custodian for the benefit of the
Noteholders. UCC financing statements will be filed reflecting the sale and
assignment of the Contracts and related interests described herein by the Seller
to the Trust Depositor pursuant to the Transfer and Sale Agreement, and by the
Trust Depositor to the Trust pursuant to the Sale and Servicing Agreement, and
the pledge of Trust Assets by the Issuer to the Indenture Trustee pursuant to
the Indenture. The Servicer's accounting records and computer files will be
marked to reflect such conveyances and pledge. Because the Contract Files will
remain in the Servicer's possession, however, if the Servicer, the Indenture
Trustee or a third party, while in possession of the Contracts, sells or pledges
and delivers such Contracts to another party in violation of the Sale and
Servicing Agreement and the Indenture, there is a risk that such party could
acquire an interest in the Contracts that would have priority over that of the
Noteholders. In such event, distributions to Noteholders could be adversely
affected. See "Certain Legal Aspects of the Contracts--Transfer of Contracts"
herein.
Legal Risks Associated With Transfers of Interests in Equipment. In
connection with the conveyance of the Contracts to the Trust, the Seller's
right, title and interest in the related Equipment will be assigned by the
Seller to the Trust Depositor pursuant to the Transfer and Sale Agreement, and
by the Trust Depositor to the Trust pursuant to the Sale and Servicing
Agreement, and pledged by the Trust to the Indenture Trustee pursuant to the
Indenture. It has been the general policy of the Seller to file or cause to be
filed UCC financing statements with respect to Equipment relating to the
Contracts. Due, however, to the administrative burden and expense associated
with amending many filings in numerous states where Equipment is located, no
assignments of the UCC financing statements evidencing the security interest of
the Seller in the Equipment will be filed to reflect the Trust Depositor's, the
Trust's or the Indenture Trustee's interests therein. While failure to file such
assignments does not affect the Trust's interest in the Contracts (including the
security interest in the related Equipment granted pursuant to such Contract) or
perfection of the Indenture Trustee's interest in such Contracts, it does expose
the Trust (and thus Noteholders) to the risk that the Servicer could
inadvertently release its security interest in the Equipment of record, and it
could complicate or impede the Trust's (and the Indenture Trustee's)
enforcement, as assignee, of the Seller's right, title and interest in the
Equipment. While these risks should not affect the perfection or priority of the
interest of the Indenture Trustee in the Contracts or rights to payment
thereunder, they may adversely affect the right of the Indenture Trustee to
receive proceeds of a disposition of the Equipment related to Defaulted
Contracts. Additionally, statutory liens for repairs or unpaid taxes and other
liens arising by operation of law may have priority even over prior perfected
security interests in the Equipment assigned to the Indenture Trustee. See
"Certain Legal Aspects of the Contracts--Transfers of Interests in Equipment"
herein.
Risk of Ineffective Sale in Vendor Bankruptcy. The Seller initially
acquired the Contracts from Vendors. If the acquisition of a Contract by the
Seller is treated as a sale of such Contract from the applicable Vendor to the
Seller, such Contract generally would not be part of such Vendor's bankruptcy
estate and would not be available to such Vendor's creditors. If a Vendor became
a debtor in a bankruptcy case then, if an unpaid creditor of such Vendor or a
representative of such creditor, such as a trustee in bankruptcy, or such Vendor
acting as a debtor-in- possession, were to take the position that the sale of
such Contracts to the Seller was ineffective to remove such Contracts from such
Vendor's estate (for instance, that such sale should be recharacterized as a
pledge of Contracts to secure borrowings of such Vendor), then delays in
payments under the Contracts to the Issuer could occur and, should the court
rule in favor of such creditor, representative or Vendor, reductions in the
amount of such payments could result. Further, if the transfer of Contracts to
the Seller is recharacterized as a pledge, a tax or government lien on the
property of the pledging Vendor arising before the Contracts came into existence
may have priority over the Seller's (and hence the Trust Depositor's, the
Issuer's and the Indenture Trustee's) interest in the Contracts. In addition, to
the extent a Vendor has agreed under the related Vendor Assignment or Vendor
Program Agreement to perform certain obligations in connection with its sale of
Contracts to the Seller, application of federal and state bankruptcy and
insolvency laws in the event of the bankruptcy of such Vendor could affect the
interests of the Noteholders in the related Contracts if such laws result in any
obligations being written off as uncollectible or result in delay in payments
due in respect of such obligations. See "Certain Legal Aspects of the
Contracts--Certain Matters Relating to Bankruptcy."
Risk of Ineffective Sale in Bankruptcy of Mitsui Vendor Leasing. In the
Transfer and Sale Agreement, the Seller will warrant that the conveyance of the
Contracts to the Trust Depositor thereunder is a valid sale and transfer of such
Contracts to the Trust Depositor. Also pursuant to the Transfer and Sale
Agreement, the Seller and the Trust Depositor will covenant that they will each
treat the transactions described herein as a sale of the Contracts to the Trust
Depositor, and the Seller will agree to take all actions that are required under
applicable law to perfect the Issuer's ownership interest in the Contracts.
See "Certain Legal Aspects of the Contracts--Transfer of Contracts."
If, however, the transfer of the Contracts to the Trust Depositor were
treated as a pledge of the Contracts to secure a borrowing by the Seller, the
distribution of proceeds of the Contracts to the Issuer (and hence the
Noteholders) might be subject to the automatic stay provisions of the United
States Bankruptcy Code (Title 11 U.S.C. Section 101 et seq.) (the "Bankruptcy
Code") in the event of a bankruptcy proceeding with respect to the Seller, which
would delay the distribution of such proceeds for an uncertain period of time.
In addition, a bankruptcy trustee would have the power to sell the Contracts if
the proceeds of such sale could satisfy the amount of the debt deemed owed by
the Seller, or the bankruptcy trustee could substitute other collateral in lieu
of the Contracts to secure such debt, or such debt could be subject to
adjustment by the bankruptcy court if the Seller were to file for reorganization
under Chapter 11 of the Bankruptcy Code.
Risk of Rejection of "True Leases." A bankruptcy trustee or debtor in
possession under the Bankruptcy Code has the right to elect to assume or reject
any executory contract or unexpired lease which is considered to be a "true
lease" (and not a financing) under applicable law. Any rejection of such a
contract or lease would constitute a breach of such contract or lease, as
applicable, as of the day preceding the commencement of the applicable
bankruptcy case, entitling the nonbreaching party to a pre-petition claim for
damages.
Certain Contracts may be "true leases" under applicable law and thus
subject to rejection by the lessor under the Bankruptcy Code. Any such Contract
which is a "true lease" under applicable law and which is originated by a Vendor
and transferred to the Seller in a transaction whereby such Vendor continues to
be the "lessor" thereunder (such as a transfer by a Vendor to the Seller of a
security interest in such Contract or a transfer by a Vendor to the Seller of an
interest in the right to payments only under any such Contract), will be subject
to rejection by such Vendor, as debtor-in-possession, or by such Vendor's
bankruptcy trustee. Upon any such rejection, Scheduled Payments under such
rejected Contract may terminate and the Noteholders may be subject to losses if
the remaining unaffected Contracts, and security interests in the Equipment
related thereto, are insufficient to cover the losses.
The Seller will represent as of the initial Cutoff Date that, in the
Seller's reasonable judgment, the Discounted Contract Balance of the Contracts
in the Contract Pool that are "true leases" under applicable law does not exceed
__% of the ADCB of the Contract Pool as of such date.
Risks Associated with Insolvency of the Trust Depositor or the Trust.
Certain restrictions have been imposed on the Trust Depositor and the Trust and
certain other parties to the transactions described herein which are intended to
reduce the risk of an insolvency proceeding involving the Trust Depositor or the
Trust. These restrictions include incorporating the Trust Depositor as a
separate, special purpose corporation pursuant to a certificate of incorporation
containing certain restrictions on the nature and scope of its business.
Additionally, the Trust Depositor may commence a voluntary case or proceeding
under any bankruptcy or insolvency law, or cause the Trust to commence a
voluntary case or proceeding under any bankruptcy or insolvency law, only upon
the affirmative vote of all its directors, including its independent directors,
as long as the Trust Depositor is solvent and does not reasonably foresee
becoming insolvent. The Trust Depositor's certificate of incorporation requires
that the Trust Depositor have at all times at least two independent directors.
However, no assurance can be given that insolvency proceedings involving either
the Trust Depositor or the Trust will not occur. In the event the Trust
Depositor becomes subject to insolvency proceedings involving the Trust, the
Trust's interest in the Trust Assets and the Trust's obligation to make payments
on the Notes might also become subject to such insolvency proceedings. In the
event of insolvency proceedings involving the Trust, the Trust's interest in the
Trust Assets and the Trust's obligation to make payments on the Notes would
become subject to such insolvency proceedings. No assurance can be given that
insolvency proceedings involving the Seller would not lead to insolvency
proceedings of either, or both, of the Trust Depositor or the Trust. In either
such event, or if an attempt were made to litigate any of the foregoing issues,
delays of distributions on the Notes, possible reductions in the amount of
payment of principal of and interest on the Notes and limitations (including a
stay) on the exercise of remedies under the Indenture and the Sale and Servicing
Agreement could occur, although the Noteholders would continue to have the
benefit of the Indenture Trustee's security interest in the Trust Assets under
the Indenture.
Certain States May Limit the Enforceability of Certain Lease Provisions.
Certain states have adopted a version of Article 2A of the UCC ("Article 2A"),
which purports to codify many provisions of existing common law. Although there
is little precedent regarding how Article 2A will be interpreted, it may, among
other things, limit enforceability of any "unconscionable" lease or
"unconscionable" provision in a lease, provide a lessee with remedies, including
the right to cancel the lease contract, for certain lessor breaches or defaults,
and may add to or modify the terms of "consumer leases" and leases in which the
lessee is a "merchant lessee." However, in the Transfer and Sale Agreement, the
Seller will represent that (i) no Contract is a "consumer lease" as defined in
Section 2A-103(1)(e) of the UCC; and (ii) to the best of the Seller's knowledge,
each End-User has accepted the Equipment leased to it and, after reasonable
opportunity to inspect and test, has not notified the Seller of any defects
therein. Article 2A, moreover, recognizes typical commercial lease "hell or high
water" rental payment clauses (which clauses unconditionally obligate the lessee
to make all Scheduled Payments, without setoff) and validates reasonable
liquidated damages provisions in the event of lessor or lessee defaults. Article
2A also recognizes the concept of freedom of contract and permits the parties in
a commercial context a wide degree of latitude to vary from the provisions of
the law.
Risk of State Taxes. Because there may be "true leases" in the Contract
Pool, a risk exists that certain states may attempt to impose taxes on the
Issuer, thereby reducing the Available Amounts to make payments on the Notes.
Risks Associated With Limited Assets of the Issuer -- No Recourse to Mitsui
Vendor Leasing or its Affiliates
Neither the Seller nor any of its affiliates is generally obligated to make
any payments in respect of the Notes or the Contracts. However, in connection
with the sale of Contracts by the Seller to the Trust Depositor, and the
concurrent conveyance of such Contracts by the Trust Depositor to the Trust, the
Seller will make representations and warranties with respect to the
characteristics of such Contracts and, in certain circumstances, the Seller may
be required to repurchase Contracts from the Trust Depositor (and the Trust
Depositor concurrently from the Trust) with respect to which such
representations and warranties have been breached. See "The Transfer and Sale
Agreement and the Sale and Servicing Agreement Generally--Representations and
Warranties" herein. Because the Trust is a limited purpose trust with no assets
other than the Trust Assets, the Noteholders must rely solely upon the
Contracts, the Equipment and related security described herein as well as
amounts in the Reserve Fund, to the extent available, for payment of principal
and interest on the Notes. If payments made or realized from the Contracts and
the disposition proceeds of the Equipment are insufficient to make payments on
the Notes (and after all amounts in the Reserve Fund are used), no other assets
will be available for the payment of the deficiency.
Book-Entry Registration -- Noteholders Limited to Exercising Their Rights
Through DTC, Euroclear or CEDEL
The Notes offered hereby initially will be represented by one or more Notes
registered in the name of Cede & Co. and will not be registered in the names of
the beneficial owners or their nominees. As a result of this, unless and until
Definitive Notes are issued, beneficial owners will not be recognized by the
Issuer or the Indenture Trustee as Noteholders, as that term is used in the
Indenture. Hence, until such time, beneficial owners will only be able to
exercise the rights of Noteholders indirectly, through DTC, Euroclear or CEDEL
and their respective participating organizations, and will receive reports and
other information provided for under the Indenture only if, when and to the
extent provided by DTC, Euroclear or CEDEL, as the case may be, and its
participating organizations. See "Description of the Notes--Book-Entry
Registration."
USE OF PROCEEDS
The proceeds from the sale of the Notes, after paying the expenses of the
Issuer and the Trust Depositor, will be paid to Trust Depositor and in turn
the Seller in consideration of the transfer to the Trust of the Contracts and
related rights.
THE TRUST
The Notes offered hereby will be issued by the Trust which has been
established by the Trust Depositor pursuant to the Trust Agreement. The Contract
Pool will be formed and transferred to the Trust pursuant to the Sale and
Servicing Agreement and pledged to the Indenture Trustee pursuant to the
Indenture.
The Trust was organized as a business trust formed in accordance with the
laws of the State of Delaware, pursuant to the Trust Agreement, solely for the
purpose of effectuating the transactions described herein. Prior to formation,
the Trust will have had no assets or obligations and no operating history. The
Trust will not engage in any business activity other than (a) acquiring,
managing and holding the Contracts and related interests described herein, (b)
issuing the Notes, (c) making distributions and payments thereon and (d)
engaging in those activities, including entering into agreements, that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith. As a consequence, the Trust is not expected to
have any source of capital resources other than the Trust Assets. As of the date
of this Prospectus, neither the Trust Depositor nor the Trust is subject to any
legal proceedings.
THE CONTRACT POOL
The Contracts
The Contracts will be purchased by the Trust Depositor from the Seller on
the Closing Date (and as of the initial Cutoff Date) under a transfer and sale
agreement dated as of __________, 1998 (the "Transfer and Sale Agreement")
between the Trust Depositor and the Seller, as well as any Additional Contracts
and Substitute Contracts conveyed thereunder as described herein as of their
applicable Cutoff Dates. The Contracts will in turn be purchased by the Trust
from the Trust Depositor on the Closing Date (and as of the initial Cutoff Date)
under a sale and servicing agreement dated as of ______________, 1998 (the "Sale
and Servicing Agreement") among the Trust, the Trust Depositor, the Seller, the
Servicer, the Back-up Servicer and the Indenture Trustee, as well as any
Additional Contracts and Substitute Contracts conveyed thereunder as described
herein as of their applicable Cutoff Dates. The Contracts have been and will be
selected by the Seller from its portfolio of Contracts based on the criteria
specified in the Transfer and Sale Agreement. See "The Transfer and Sale
Agreement Generally--Representations and Warranties" and "--Concentration
Amounts" herein which specifically describe the criteria for eligibility in the
Contract Pool. The Seller will make certain representations and warranties
concerning the Contracts, including that all of the Contracts are commercial,
rather than consumer, leases or financing arrangements, and that no adverse
selection process was employed in the selection of Contracts for sale under the
Transfer and Sale Agreement.
For further information regarding the Contracts, see "The Contracts
Generally" herein and "The Contract Pool--Other Pool Data" below.
Other Pool Data
The statistical information concerning the Contracts set forth below is
based upon information as of the opening of business on the Cutoff Date and the
Statistical Discount Rate. Certain Contracts included in the Contract Pool as of
the initial Cutoff Date may be determined not to meet the eligibility
requirements for the final Contract Pool, and may not be included in the final
Contract Pool. While the statistical distribution of the characteristics as
of the Closing Date for the final Contract Pool and calculated at the actual
Discount Rate will vary somewhat from the statistical distribution of such
characteristics as of the initial Cutoff Date and calculated at the Statistical
Discount Rate as presented in this Prospectus, such variance will not be
material. The percentages and balances set forth in each of the following tables
may not sum to the indicated totals due to rounding.
Contracts representing approximately _____% of the ADCB of the Contract
Pool as of the initial Cutoff Date provide for payments by the End-User
thereunder on a basis other than monthly payments. The composition and
distribution of the Contracts by remaining term, original term, Discounted
Contract Balance, End-User industry, geographic distribution, type of equipment
and type of Contract are set forth in the following tables and are reported as
of the initial Cutoff Date. Classification by End-User industry and type of
equipment are based on Mitsui Vendor Leasing's customary procedures for
determining such classifications. The largest End-User industry concentration,
which represents an ADCB of $__________ or ____% of the ADCB of the Contract
Pool as of the initial Cutoff Date, relates to the industrial equipment
industry. See "Risk Factors--Certain Risks Associated with Geographic or
Industry Concentrations of Contracts" herein, and "The Contract
Pool--Delinquency and Loss Information" below.
COMPOSITION OF THE CONTRACT POOL
ADCB $___________
Number of Contracts ___________
Weighted Average Original Term (Range) ___________
(in months)
Weighted Average Remaining Term ___________
(Range)(in months)
Average Discounted Contract Balance $___________
DISTRIBUTION OF CONTRACTS BY CONTRACT TYPE
Percentage of Number
Number of Contacts of Contracts ADCD Percentage of ADCD
------------------ ------------ ---- ------------------
CSAs % $ %
Leases % $ %
Total % $ %
DISTRIBUTION OF CONTRACTS BY STATE IN WHICH END-USERS ARE LOCATED
<TABLE>
<CAPTION>
Percentage of
Number of Number of Discounted Percentage
State Contracts Contracts Contract Balance of ADCB
----- --------- ------------- ---------------- ----------
<S> <C> <C> <C> <C>
Alabama % $ %
Alaska % $ %
Arizona % $ %
Arkansas % $ %
California % $ %
Colorado % $ %
Connecticut % $ %
Delaware % $ %
District of Columbia % $ %
Florida % $ %
Georgia % $ %
Hawaii % $ %
Idaho % $ %
Illinois % $ %
Indiana % $ %
Iowa % $ %
Kansas % $ %
Kentucky % $ %
Louisiana % $ %
Maine % $ %
Maryland % $ %
Massachusetts % $ %
Michigan % $ %
Minnesota % $ %
Mississippi % $ %
Missouri % $ %
Montana % $ %
Nebraska % $ %
Nevada % $ %
New Hampshire % $ %
New Jersey % $ %
New Mexico % $ %
New York % $ %
North Carolina % $ %
North Dakota % $ %
Ohio % $ %
Oklahoma % $ %
Oregon % $ %
Pennsylvania % $ %
Rhode Island % $ %
South Carolina % $ %
South Dakota % $ %
Tennessee % $ %
Texas % $ %
Utah % $ %
Vermont % $ %
Virginia % $ %
Washington % $ %
West Virginia % $ %
Wisconsin % $ %
Wyoming % $ %
Total % $ %
_____ _________ ____
</TABLE>
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Percentage of
Number of Number of Discounted Percentage of
Equipment Type Contracts Contract Contract Balance ADCB
-------------- --------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Machining Centers % $ %
Miscellaneous Machine % $ %
Tools
Photo Finishing % $ %
Medical Diagnostic % $ %
Ultrasound
Lathes % $ %
Miscellaneous Medical % $ %
Diagnostic
Metal Working Tools % $ %
(Cutting Machinery)
Milling % $ %
Battery Chargers % $ %
Other % $ %
________ ___________ _______
Total % $ %
</TABLE>
DISTRIBUTION OF CONTRACTS BY CONTRACT BALANCE
<TABLE>
<CAPTION>
Percentage of
Discounted Contract Number of Number of Discounted Percentage of
Balance Contracts Contracts Contract Balance ADCB
------------------- --------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
$ 0 - $25,000 % $ %
$25,001 - $50,000 % $ %
$50,001 - $75,000 % $ %
$75,001 - $100,000 % $ %
$100,001 - $150,000 % $ %
$150,001 - $200,000 % $ %
$200,001 - $250,000 % $ %
$250,001 - $300,000 % $ %
$300,001 - $350,000 % $ %
$350,001 - $400,000 % $ %
greater than $400,000 _____________ % $ %
- - -
TOTAL % $ %
</TABLE>
DISTRIBUTION OF CONTRACTS BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
Percentage of
Remaining Term Number of Number of Discounted Percentage of
(Months) Contracts Contracts Contract Balance ADCB
-------------- --------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
0-6 % $ %
7-12 % $ %
13-24 % $ %
25-36 % $ %
37-48 % $ %
49-60 % $ %
61-72 % $ %
73-84 % $ %
_____________ _ _ _
Total % $ %
</TABLE>
DISTRIBUTION OF CONTRACTS BY
ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
Percentage of
Original Term Number of Number of Discounted Percentage of
(Months) Contracts Contracts Contract Balance ADCB
------------- --------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
% $ %
% $ %
% $ %
% $ %
% $ %
% $ %
% $ %
% $ %
% $ %
% $ %
% $ %
% $ %
_ _ _
Total % $ %
</TABLE>
Delinquency and Loss Information
Set forth below is certain information regarding the delinquency and loss
experience of Mitsui Vendor Leasing with respect to its portfolio of financing
agreements (including Contracts and other financing agreements that it
previously sold but continues to service) for users of a variety of machine
tools (such as machining centers, lathes, milling machines and cutting
machinery), medical equipment (such as diagnostic and therapeutic examination
equipment for radiology, nuclear medicine and ultrasound and laboratory analysis
equipment), photo-finishing equipment, plastic injection molding equipment,
textile equipment (such as knitting machines and textile manufacturing
machines), computer equipment (such as inventory control and tracking computer
equipment, computer work stations, personal computers, data storage devices and
other computer related peripheral equipment) and other types of equipment. The
information set forth below includes delinquency and loss experience of Mitsui
Vendor Leasing with respect to financing agreements which are included in Mitsui
Vendor Leasing's portfolio including Contracts serviced by Vendors and the
Contracts included in the Contract Pool. There can be no assurance that the
levels of delinquency and loss experience on the Contracts will be comparable to
that set forth below. Of the Contracts included in the Contracts Pool,
approximately __ of such Contracts (representing approximately __ of the ADCB of
the Contract Pool as of the initial Cut-off Date) are being serviced by the
related Vendors. Due to the acquisition of Contract portfolios from various
Vendors and the development of additional finance programs with various Vendors,
the data set forth is not necessarily comparable on a year-to-year basis.
<TABLE>
<CAPTION>
Mitsui Vendor Leasing (U.S.A.) Inc. Portfolio
Delinquency Experience(1) (2) (3)
At
-----------------------------------------------------------------------------------------------
[Three Months
Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended
March 31, 1998] December 31, 1997 December 31, 1996 December 31, 1995
--------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net Investment in
Contracts
31-60 days
61-90 days
91-120 days
Total (% of Net
Investment in Contracts)
</TABLE>
- ---------------------
(1) Net Investment equals the sum of the aggregate amount of all payments
required to be made under the terms of the contracts plus the booked
residual value, if any, plus the unamortized initial direct costs, less
the unearned income.
(2) Mitsui Vendor Leasing classifies contracts as delinquent at the time a
payment (or a portion thereof) remains unpaid 31 days or more following
the date on which such payment is due. The amount classified as
delinquent is the present value of all remaining scheduled payments
discounted at the applicable contract rate and any past due amounts
relating to such financing agreements. Delinquent contracts are
written-off in their entirety when a determination is made that the
contract is uncollectible. See "Mitsui Vendor Leasing (U.S.A.)
Inc.--Write-Off Policy" herein.
(3) The percentages in any column may not total 100% due to rounding.
<TABLE>
<CAPTION>
Mitsui Vendor Leasing (U.S.A.) Inc. Portfolio
Loss Experience(1)
At
-----------------------------------------------------------------------------------------
[Three Months
Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended
March 31, 1998] December 31, 1997 December 31, 1996 December 31, 1995
--------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net Investment in
Contracts
Gross Losses
Recoveries
Net Losses
Net Losses as a
Percentage of Average
Net Investment in
Contracts(3) (2)
</TABLE>
- ---------------------
(1) Net Investment equals the sum of the aggregate amount of all payments
required to be made under the terms of the contracts plus the booked
residual value, if any, plus the unamortized initial direct costs, less
the unearned income.
(2) Annualized.
(3) Average Net Investment is the average of the Net Investment at the end
of each period indicated.
THE DATA PRESENTED IN THE FOREGOING TABLES ARE FOR ILLUSTRATIVE PURPOSES ONLY
AND THERE IS NO ASSURANCE THAT THE DELINQUENCY OR LOSS EXPERIENCE OF THE
CONTRACTS WILL BE SIMILAR TO THAT SET FORTH ABOVE. SEE "RISK FACTORS" AND
"CERTAIN LEGAL ASPECTS OF THE CONTRACTS."
THE CONTRACTS GENERALLY
The Issuer will be entitled to all collections in respect of the Contracts
in the Contract Pool, except for (i) collections attributable to any taxes, fees
or other charges imposed by any governmental authority, (ii) collections
representing reimbursements of insurance premiums or payments for certain
services that were not financed by the Seller due on or after the applicable
Cutoff Date for such Contracts, (iii) all late charges and certain other fees
paid under the Contracts by the End-Users, (iv) collections (other than amounts
paid by the Seller or Servicer) in respect of Ineligible Contracts, Warranty
Contracts, Defaulted Contracts, Prepaid Contracts and Adjusted Contracts which
have been conveyed to the Seller or the Servicer as described herein (amounts
described in clauses (i) through (iv), "Excluded Amounts") and (v) collections
relating to payments which were scheduled to be made by the End-Users on the
Contracts pursuant to the terms of such Contracts prior to the related Cutoff
Date.
Contracts
Substantially all of the Contracts to be included in the Contract Pool are
either leases ("Leases") or conditional sale agreements ("CSAs"). There is no
limit on the number of Contracts in the Contract Pool which may consist of any
of the foregoing types, although each Contract included in the Contract Pool is
required to be an "Eligible Contract" as of the applicable Cutoff Date.
Contracts Generally. The initial terms of the Contracts in the Contract
Pool generally range from one to seven years. Each Contract in the Contract Pool
is originated in the ordinary course of business by the related Vendor on its
standard, pre-printed forms and is assigned to the Seller pursuant to the
related Vendor Program Agreements or, in the case of one Vendor, is assigned to
the Seller as described below under "--Other Vendor Arrangements." The Contract
forms set forth the description of the Equipment and the amount and number of
rental or installment payments the End-User is unconditionally obligated to pay;
provided that certain of the Contracts in the Contract Pool allow the End-User
to terminate the Contract prior to its stated maturity under a formula which
provides a return in excess of the rate of return that would be earned from
receipt of the Scheduled Payments due under such Contract. Generally, each
Scheduled Payment is due in arrears on a monthly basis from the End-User and
represents the amortization, on a level basis, of the total amount that an
End-User is required to pay throughout the term of a Contract.
While the terms and conditions of the Contracts do not generally permit
modification or termination by the End-User, such modification or termination
may be permitted with the consent of the Servicer. It is expected that the
Servicer will be allowed to consider and accommodate these modifications and
terminations with respect to Contracts included in the Contract Pool pursuant to
the authority delegated to it in the Sale and Servicing Agreement, subject to
certain conditions and covenants of the Servicer.
Contracts generally include the End-User's undertaking, at its expense, or
agreement to: (i) maintain the Equipment in accordance with manufacturer
specifications; (ii) keep the Equipment free and clear of liens and
encumbrances; (iii) pay all taxes related to the Contract payments and the
Equipment; (iv) not modify the Equipment if that would change its originally
intended use; (v) not dispose of the Equipment or assign the Contract; (vi)
waive any rights to assert defects in the Equipment as a basis for setoff,
counterclaim or nonperformance under the Contract; (vii) indemnify against
liabilities arising from the use, possession or ownership of the Equipment; and
(viii) insure the Equipment against casualty loss and from liability claims in
amounts customary to the End-User's business. The Contracts provide specifically
identifiable events of default and remedies therefor. In most cases, the Seller
(or its assignees) is authorized to perform the End-User's obligations under the
Contract at the End-User's expense, if it so elects, in cases where the End-User
has failed to perform.
The Leases to be included in the Contract Pool are substantially all "net
leases" under which the End-User assumes responsibility for the Equipment as
described in the preceding paragraph. Substantially all of the Leases are leases
intended for security as defined in Section 1-201(37) of the UCC. Under leases
intended for security, the lessor in effect finances the "purchase" of the
leased property by the lessee and retains a security interest in the leased
property. The lessee retains the leased property for substantially all its
economic life and the lessor retains no significant residual interest. Such
leases are considered conditional sales type leases for federal income tax
purposes and, accordingly, the lessor does not take any federal tax benefits
associated with the ownership of depreciable property. End of lease options for
such Leases depend on the terms of the related individual lease agreement, but
generally such terms provide for the purchase of the Equipment at a prestated
price, which may be nominal. It is not expected that any Leases will be included
in the Contract Pool that are "true leases" (that is, whereby the lessor bears
the risk of ownership (although the risk of loss of the Equipment is passed to
the End-User under the Leases) and takes any tax benefits associated with the
ownership of depreciable property under applicable law and no title is conferred
upon the lessee).
Equipment
The Contracts cover a variety of new and used equipment relating primarily
to machine tools (such as machining centers, lathes, milling machines and
cutting machinery), medical equipment (such as diagnostic and therapeutic
examination equipment for radiology, nuclear medicine and ultrasound and
laboratory analysis equipment), photo-finishing equipment, plastic injection
molding equipment, textile equipment (such as knitting machines and textile
manufacturing machines), computer equipment (such as inventory control and
tracking computer equipment, computer work stations, personal computers, data
storage devices and other computer related peripheral equipment) and other types
of equipment (collectively, the "Equipment"). All of the interests of the Seller
in the Equipment (which consists or will consist of either title to the
Equipment or a security interest in the Equipment) will be transferred to the
Trust Depositor and in turn to the Issuer and then pledged by the Issuer to the
Indenture Trustee under the Indenture as collateral security for the Issuer's
obligations in respect of the Notes.
Vendor Program Agreements
A substantial portion of the Contracts included in the Contract Pool
(representing approximately __% of the ADCB of the Contract Pool as of the
initial Cutoff Date) consist of Contracts originated by Vendors and assigned to
the Seller pursuant to the Vendor Program Agreements. The Vendor Program
Agreements are agreements between the Seller and equipment manufacturers,
dealers and distributors ("Vendors") which provide the Seller with the
opportunity to finance transactions relating to the acquisition or use by an
End-User of a Vendor's Equipment. The Vendor Program Agreements provide the
Seller with a steady, sustainable flow of new business, generally with lower
costs of origination than asset-based financing marketed directly to End-Users.
Many of the Vendor Program Agreements provide various forms of support from the
Vendor to the Seller, including representations and warranties by the Vendor in
respect of the Contracts and related Equipment, credit support with respect to
defaults by End-Users and Equipment repurchase and remarketing arrangements upon
early termination of Contracts upon a default by the End-User. Some of the
Vendor Program Agreements are exclusive and provide that the Seller will finance
all of the Vendor's equipment sales (other than equipment sales financed
independently by End-Users). Other Vendor Program Agreements are non-exclusive
and permit the Vendor to finance its Equipment sales through other entities.
Each Vendor Program Agreement generally includes the following provisions,
among others:
1. Vendor representations, warranties and covenants regarding
each Contract assigned to the Seller, including among other things
that: the obligations of the End-User under the assigned Contract are
absolute, unconditional, noncancellable, enforceable in accordance with
its terms and free from any rights of offset, counterclaim or defense;
the Seller holds the sole original of the Contract and has either title
to or a first priority perfected security interest in the Equipment;
the Equipment has been irrevocably accepted by the End-User and will
perform as warranted to the End-User; and the assigned Contract was
duly authorized and signed by the End-User.
2. Remedies in the event of a misrepresentation or breach of
a warranty or covenant by the Vendor regarding an assigned Contract,
usually require the Vendor to repurchase the affected Contract for the
Seller's investment balance in the Contract plus costs incurred by the
Seller in breaking any underlying funding arrangement (which may or may
not be calculated in accordance with a specified formula).
3. In the case of Equipment, remarketing support from the
Vendor in the event of an End- User default and subsequent repossession
or return of the Equipment under the Contract (to assist the Seller in
realizing proceeds from the Equipment assigned as collateral security
to support the obligations of the End-User under the Contract).
4. The right of the Seller to further assign its interests in
assigned Contracts, all payments thereunder and any related interest in
Equipment.
In addition to the foregoing, a Vendor Program Agreement may include
recourse against the Vendor with respect to End-User defaults under certain
identified Contracts, (i) by specifying that the assignment of the Contract from
the Vendor to the Seller is with full recourse against the Vendor for such
End-User defaults, (ii) by specifying that the Vendor will absorb a limited
fixed dollar or percentage amount of "first losses" on the Contract, (iii) by
inclusion of the Contract in an "ultimate net loss pool" ("UNL Pool") created
under the Vendor Program Agreement or (iv) by providing for Vendor repurchase of
the Contract or Vendor indemnification payments for breaches of certain
representations and warranties made by the Vendor with respect to such Contract.
In the event of an End- User default under a Contract which was assigned by the
Vendor to the Seller subject to a UNL Pool, the Seller may draw against the UNL
Pool up to the amount of the Seller's remaining unpaid investment balance in the
defaulted Contract, but not in excess of the UNL Pool balance then available.
Drawings may also be made against a UNL Pool with respect to Contracts that are
not included in the Contract Pool and, accordingly, there can be no assurance
that the UNL Pool will be available in the event of an End-User default under a
Contract included in the Contract Pool.
Other Vendor Arrangements
Some Contracts (representing approximately __% of the ADCB of the Contract
Pool as of the initial Cutoff Date) have been originated by Vendors and assigned
to the Seller without a Vendor Program Agreement in place. Like assignments of
Contracts under Vendor Program Agreements, these Contracts are typically
assigned by a Vendor Assignment from the Vendor. These Vendor Assignments will
also generally contain many, if not all, of the representations, warranties and
covenants typically contained in Vendor Program Agreements, as well as, in most
cases, a Vendor repurchase requirement in the event of a breach by the Vendor of
such representations, warranties or covenants and Vendor remarketing support in
the event of an End-User default. These assignments may or may not provide
recourse against the Vendor for End-User defaults.
Contract Files
The Seller will indicate in the appropriate computer files relating to the
Transferred Contracts that such Contracts have been transferred to the Issuer
and pledged by the Issuer to the Indenture Trustee under the Indenture as
collateral security for the Issuer's obligations in respect of the Notes. the
Seller 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 are
included in the Contract Pool, identified by account number and by the
Discounted Contract Balance as of the Cutoff Date.
Collections on Contracts
All collections received with respect to the Contracts will be allocated as
described herein. See "Description of the Notes--Allocations." Prepayments will
be given effect as of the last day of the Collection Period in which they are
received and Scheduled Payments of principal made in advance of their due date
will be given effect on their due date.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of
interest payments on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Contracts. The
payments on such Contracts may be in the form of Scheduled Payments,
Prepayments, made at the option or request of the related End-User or
liquidations due to default, casualty and other events, the likelihood of which
cannot be predicted. Any such payments may result in distributions to
Noteholders of amounts which would otherwise have been distributed over the
remaining term of the Contracts. In general, the rate of such payments may be
influenced by a number of factors, including general economic conditions. The
rate of principal payments with respect to any Class may also be affected by any
repurchase by the Seller or the Servicer pursuant to the Transfer and Sale
Agreement or Sale and Servicing Agreement, as applicable, of Ineligible
Contracts, Warranty Contracts and Defaulted Contracts. In the event of a
repurchase, the repurchase price will decrease the ADCB of the Contracts,
leading to a principal repayment and causing the corresponding weighted average
life of the Notes to decrease. See "Risk Factors--Prepayments on the Contracts
Affect the Yield of the Notes."
In the event a Contract becomes a Defaulted Contract, an Adjusted Contract
or a Warranty Contract, the Seller or the Servicer, as applicable, will have the
option to substitute for the affected Contract another of similar
characteristics (a "Substitute Contract"), subject to an overall limitation, in
respect of Defaulted Contracts or Adjusted Contracts only, of an aggregate
amount not to exceed 10% of the ADCB of the Contract Pool as of the initial
Cutoff Date. In addition, the Servicer may at its option, under the terms of the
Sale and Servicing Agreement, permit or agree to the early termination or full
prepayment of any Contract in certain circumstances, and on the terms and
subject to the conditions more fully specified in the Sale and Servicing
Agreement (any such Contract for which there is an early termination or full
prepayment, a "Prepaid Contract"). Such circumstances may include, without
limitation, a full or partial buyout of the Equipment which is the subject of
the Contract, or an equipment upgrade. With respect to any Prepaid Contract the
Servicer may at its option either (x) include such prepayment in full in the
Available Amount for the related Payment Date or (y) reinvest the prepayment
proceeds of such Prepaid Contract in one or more new Contracts having similar
characteristics to such Prepaid Contract (each, an "Additional Contract"). The
Additional Contracts and the Substitute Contracts will have a Discounted
Contract Balance equal to or greater than that of the Contracts being replaced
and the monthly payments on the Additional Contracts and Substitute Contracts
will be at least equal to those of the replaced Contracts through the term of
such replaced Contracts and shall provide for a last Scheduled Payment which is
not in excess of the Contract substituted for, unless the Servicer discounts the
Substitute Contract's cash flows up to and including such last Scheduled
Payment.
The yield to maturity to the holders of the Notes will also be effected by
the exercise of the Trust Depositor of its right of optional redemption of the
Notes if the ADCB of the Contract Pool at such time is less than 10% of the ADCB
of the Contract Pool as of the initial Cutoff Date. See "Description of the
Notes--Optional Redemption" herein.
The following chart sets forth the percentage of the Initial Principal
Amount of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class B Notes and the C Notes which would be outstanding on the Payment Dates
set forth below assuming a conditional payment rate (a "Conditional Payment
Rate" or "CPR") of ____%, ____%, ____% and ____%, respectively. Such information
is hypothetical and is set forth for illustrative purposes only. The CPR assumes
that a fraction of the outstanding Contract Pool is prepaid on each Payment
Date, which implies that each Contract in the Contract Pool is equally likely to
prepay. The CPR measures prepayments based on the outstanding Discounted
Contract Balances of the Contracts, after the payment of all Scheduled Payments
on the Contracts during such Collection Period. The CPR further assumes that all
Contracts are the same size and amortize at the same rate and that each Contract
will be either paid as scheduled or prepaid in full. The amounts set forth
below are based upon the timely receipt of scheduled monthly Contract payments
as of the initial Cutoff Date, assume that the Trust Depositor exercises its
option to cause a redemption of the Notes when the ADCB of the Contract Pool at
such time is less than 10% of the ADCB of the Contract Pool as of the initial
Cutoff Date, assumes the Closing Date is ________ __, 1998 and is based upon the
Discount Rate.
PERCENTAGE OF THE
INITIAL CLASS A PRINCIPAL AMOUNT,
INITIAL CLASS B PRINCIPAL AMOUNT,
AND INITIAL CLASS C PRINCIPAL AMOUNT
AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
% CPR % CPR
---------- ------------
Distribution Class Class Class Class Class Class Class Class Class Class
Date A-1 A-2 A-3 B C A-1 A-2 A-3 B C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date
</TABLE>
<TABLE>
<CAPTION>
% CPR % CPR
---------- ------------
Distribution Class Class Class Class Class Class Class Class Class Class
Date A-1 A-2 A-3 B C A-1 A-2 A-3 B C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date
</TABLE>
Weighted Average Life (Years)
If the Trust Depositor does not exercise its option to cause a redemption
of the Notes when the ADCB of the Contract Pool at such time is less than 10% of
the ADCB of the Contract Pool as of the initial Cutoff Date, the average life of
the Class A-1 Notes would be ____ years, ____ years, ____ years and ____ years,
the average life of the Class A-2 Notes would be ____ years, ____ years, ____
years and ____ years, the average life of the Class A-3 Notes would be ____
years, ____ years, ____ years and ____ years, the average life of the Class B
Notes would be ____ years, ____ years, ____ years and ____ years, and the
average life of the Class C Notes would be ____ years, ____ years, ____ years
and ____ years for the ____% CPR, ____% CPR, ____% CPR and ____% CPR scenarios,
respectively.
The weighted average life of a Class A-1 Note, a Class A-2 Note, a Class
A-3 Note, a Class B Note or a Class C Note is determined by (a) multiplying the
amount of cash distributions in reduction of the outstanding Principal Amount of
the Class A-1 Notes, outstanding Principal Amount of the Class A-2 Notes,
outstanding Principal Amount of the Class A-3 Notes, outstanding Principal
Amount of the Class B Notes or outstanding Principal Amount of the Class C
Notes, as the case may be, on any given Payment Date by the number of months
from the Closing Date to such Payment Date on which each such principal payment
is made, (b) adding the results and (c) dividing the sum by the Initial Class
A-1 Principal Amount, Initial Class A-2 Principal Amount, Initial Class A-3
Principal Amount, Initial Class B Principal Amount or Initial Class C Principal
Amount, as the case may be.
MITSUI VENDOR LEASING (U.S.A.) INC.
Mitsui Vendor Leasing (U.S.A.) Inc. ("Mitsui Vendor Leasing," and in its
capacity as the seller pursuant to the Transfer and Sale Agreement and as
servicer pursuant to the Sale and Servicing Agreement, the "Seller" and the
"Servicer," respectively) is a full service vendor leasing company which
originates and manages asset-based financing. Mitsui Vendor Leasing acquires
equipment leases and conditional sales contracts through various vendor programs
covering primarily machine tool equipment, medical diagnostic equipment,
photo-finishing equipment, plastic injection molding equipment, textile
equipment and computer equipment.
Mitsui Vendor Leasing, formerly known as Vendor Financial Services
Corporation, was incorporated in December 1992 in the State of Delaware. In
October 1993 it was acquired by Mitsui Vendor Leasing (which acquired 95.1% of
its voting capital stock) and The Sakura Bank Limited (which acquired 4.9% of
its voting capital stock). As of the date of this Prospectus, these shareholders
continue to hold these respective percentages of Mitsui Vendor Leasing's voting
capital stock.
Mitsui Vendor Leasing's strategy has been to specialize in providing
vendors with fully functional captive finance capabilities. In filling this need
of vendors, Mitsui Vendor Leasing promotes a long-term, tightly coupled
strategic alliance with its vendor customers and becomes integrated into the
sales and administrative processes of these vendors.
Mitsui Vendor Leasing's principal executive offices are located at 6363
Greenwich Drive, Suite 100, San Diego, California 92122.
Credit Underwriting Process
Mitsui Vendor Leasing's Risk Policy Manual provides the compliance
standards to be followed by all Mitsui Vendor Leasing credit analysts relating
to investment and risk management, credit underwriting and due diligence
standards. The primary factors involved in the extension of credit are (in order
of importance) (1) the credit strength of the underlying user of the Equipment
(each, an "End-User") , (2) the value of the equipment to be financed including
Vendor equipment remarketing support and (3) Vendor recourse.
A credit analyst must underwrite all credit requests. Each credit
analyst has an assigned approval authority based on experience and seniority
(reflecting an understanding of Mitsui Vendor Leasing's business), including
credit approval limits, applicable single transaction size and individual
End-User exposure. Personnel at Mitsui Vendor Leasing's offices have credit
approval authority up to $2,000,000.
Credit review procedures require the preparation of a credit application
setting out the structure and purpose of the transaction, the background and
business of the proposed End-User and the reasons for recommending approval.
Credit scoring is not used. In general, transactions in excess of $75,000
require financial statement disclosure consisting of at least the three most
recent fiscal year-end financial statements and interim financial statements.
Additionally, information from credit reporting agencies, bank and other credit
references, trade references, and other information may be evaluated.
Transactions involving small, privately held companies exhibiting limited
financial resources require financial disclosure by their principals. An
approval may contain restrictive conditions including a reduced financing term,
related party guarantees or down payments.
In initially establishing a Vendor Program Agreement or other form of
financing arrangement with a Vendor, Mitsui Vendor Leasing completes a formal
underwriting review of such Vendor to ensure that the Vendor can perform the
financial and other obligations contained in any Vendor Program Agreement. This
review encompasses financial information analysis, equipment evaluation, a
review of the quality of the End-User customer base and of relevant industry
data. Vendors are generally required to be established in their field and must
market industry-accepted equipment or other products. The Vendor must have
sufficient financial resources to support the financing relationship
contemplated by Mitsui Vendor Leasing, and the Vendor's equipment must maintain
a substantial market position or in some other appropriate manner demonstrate
marketplace acceptance.
Documentation and Pricing
Most Contracts are written as full-payout finance leases, although in some
instances they are documented as CSAs (see "The Contracts Generally" above).
Mitsui Vendor Leasing's documentation department both originates Contracts for
Vendors that do not have such capabilities and reviews Vendor originated
documentation. As a key control point within Mitsui Vendor Leasing, pricing and
credit approval is verified by this group and, when all requirements are
satisfied, transaction funding is authorized.
The interest rate to be received by Mitsui Vendor Leasing, or yield at
which Mitsui Vendor Leasing acquires a Contract from a Vendor, is set at the
time the End-User credit is approved. The Mitsui Vendor Leasing buy rate is
generally not the same rate as the End-User is paying under the Contract;
consequently, the Mitsui Vendor Leasing buy rate may result in the Vendor
receiving an amount other than the invoice cost of the equipment. End of the
Contract term fixed equipment purchase options under Contracts are priced at no
more than such fixed amount. Most Contracts acquired by Mitsui Vendor Leasing
provide for a end of Contract term fixed equipment purchase option (see "The
Contracts Generally" above).
Payment Processing
Payments by End-Users of amounts payable under their respective Contracts
are made by check mailed to a Mitsui Vendor Leasing post office box or by wire
transfer to a Mitsui Vendor Leasing lock-box account. Invoices are mailed to
End-Users instructing the End-Users to forward payments to such Mitsui Vendor
Leasing post office box for processing by the lock-box bank at which such Mitsui
Vendor Leasing lock-box account is maintained. End- Users that wish to remit by
wire transfer are provided with wire transfer instructions to remit to such
Mitsui Vendor Leasing lock-box account.
Invoices sent to End-Users contain a remittance advice. The lock-box bank
processes the deposits and credits Mitsui Vendor Leasing's lock-box account
daily. The lock-box bank transmits the data electronically to Mitsui Vendor
Leasing's accounts receivable system. Mitsui Vendor Leasing's accounts
receivable system matches remittance information to cash deposits and applies
payments to End-User accounts. The following day, a daily summary of deposits
received by the lock-box bank is forwarded to Mitsui Vendor Leasing, together
with copies of checks and remittance advices and any other information passed
along with the payment. Unmatched deposits are recorded as unapplied cash for
further review and processing after investigation by Mitsui Vendor Leasing.
Contract Collections
Portfolio administrators are responsible for monitoring any change in the
status of a Contract as well as collection of delinquent Contracts. Information
on the activity of the Mitsui Vendor Leasing portfolio is available through
lease management software licensed by Mitsui Vendor Leasing. All collection
activity is entered into the system which includes collection tracking
capabilities. Portfolio administrators have available at their computer
terminals the latest status and collection history on each Contract and related
End-User. Activity notes are input directly into the collection system in order
to facilitate monitoring of routine collection activity. Monthly portfolio
quality review meetings are held with senior managers to review the status of
various Contracts and related End- Users and of repossessed Equipment.
When a payment is determined to not have been received within 10 days of
the contractual due date, Mitsui Vendor Leasing's lease management system
automatically assesses a late charge and generates a computerized invoice which
is sent directly to the End-User. Telephone contact is normally initiated when a
Contract is 15 days past due. Generally, a demand letter is sent to the End-User
and all guarantors when a Contract becomes 45 days past due. Telephone contact
will be continued throughout the delinquency period. In most instances Mitsui
Vendor Leasing will accelerate and demand payment from the End-User of the
balance due under a Contract when it becomes more than 90 days past due, but
such action may be initiated more quickly, which subjects the End-User to
repossession of equipment and legal action to collect the balance due.
Mitsui Vendor Leasing's Risk Policy Manual provides the compliance
standards to be followed by all Mitsui Vendor Leasing portfolio administrators
relating to the rewriting of transactions, transfers of interest and the
extension of time to make payments due under contracts. The approval required in
the case of End-User requests for contract restructuring or payment rescheduling
is the same as that required for a new transaction. Such restructuring or
rescheduling generally will only be approved in cases where it is believed that
an End-User's financial difficulties are only temporary and that the equipment
value will not be seriously impaired by such undertaking.
Write-Off Policy
Mitsui Vendor Leasing's Credit and Collections Manual provides the
standards to be followed for write-off of a Contract balance, or a portion
thereof as uncollectible. Generally, such write-off is deemed appropriate when
one of two conditions is present. The first condition is when Mitsui Vendor
Leasing has determined that all or a portion of a receivable is uncollectible.
The second is when there is uncertainty as to the source or timing of the
eventual payoff of the Contract but certainty that such payoff, if it occurs,
will be protracted as described below. Mitsui Vendor Leasing's classification
system is designed so that when a Contract (or any portion thereof) is
classified as a loss, it must be written off as uncollectible within 30 days
after such classification.
When a Scheduled Payment under a Contract reaches 180 days contractually
past due, the portion of the account that exceeds the net asset value of the
related Equipment must be classified as a loss and written-off as uncollectible.
Mitsui Vendor Leasing then generally takes a reasonable period of time (up to 6
months) to liquidate such Equipment. If after such period the Equipment has not
been liquidated, then the liquidation effort is considered protracted and the
remaining balance of the account is written-off in full (regardless of the net
asset value of Equipment securing the Contract).
THE TRUST DEPOSITOR
Mitsui Vendor Leasing Funding Corp. II (the "Trust Depositor") is
incorporated under the laws of the State of Delaware and is a wholly owned
subsidiary of the Seller. On the Closing Date, the Contracts and related
interests described herein will be transferred by the Seller to the Trust
Depositor, and in return the Trust Depositor will pay to the Seller the net
proceeds received from the offering and sale of the Notes. See "Use of Proceeds"
herein.
The Trust Depositor has been formed solely for the purposes of the
transactions described in this Prospectus; and under its incorporation documents
and the Sale and Servicing Agreement, the Trust Depositor is not permitted to
engage in any activity other than (i) acquiring the Contracts and related
interests described herein, (ii) transferring and conveying the Contracts and
related interests described herein and its rights under the Transfer and Sale
Agreement to the Trust, and (iii) engaging in other transactions, including
entering into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith. The
Trust Depositor is prohibited from incurring any debt, issuing any obligations
or incurring any liabilities, except in connection with the formation of the
Trust and the issuance of the Notes. The Trust Depositor is not liable,
responsible or obligated, directly or indirectly, for payment of any principal,
interest or any other amount in respect of any of the Notes and will have no
significant assets other than those conveyed to the Trust.
DESCRIPTION OF THE NOTES
The statements under this caption are summaries, do not purport to be
complete and are subject to and qualified in their entirety by reference to the
Sale and Servicing Agreement and the Indenture (the "Operative Documents").
Forms of the Operative Documents have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
General
The Notes will consist of three Classes: the Class A Notes, the Class B
Notes and the Class C Notes. The Class A Notes are further divided into three
sub-Classes: the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes.
The Notes will be issued pursuant to the Indenture between the Issuer and the
Indenture Trustee. The following summary describes the material terms of the
Notes and is qualified in its entirety by reference to the Operative Documents.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class B
Notes and the Class C Notes will initially be represented by one or more
certificates registered in the name of the nominee of DTC (together with any
successor depositary selected by the Issuer, the "Depositary"), except as set
forth below under the heading "--Definitive Notes." The Notes will be available
for purchase in minimum denominations of $1,000 and in integral multiples
thereof in book-entry form. The Trust Depositor has been informed by DTC that
DTC's nominee will be Cede & Co. See "--Book-Entry Registration" and
"--Definitive Notes" below.
The Indenture Trustee will be granted a first priority lien on the Trust
Assets to secure the Notes. Distributions on the Notes (and each Class thereof)
will be allocated as provided herein. The Notes are nonrecourse obligations of
the Issuer only and do not represent interests in or obligations of the Seller,
the Servicer, the Trust Depositor, or any affiliate thereof.
Interest
Interest on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes,
the Class B Notes and the Class C Notes will accrue on the outstanding Principal
Amount thereof as of the preceding Payment Date (after giving effect to all
distributions and allocations on such date) (or, in the case of the initial
Payment Date, the as of the Closing Date) at the applicable Class A-1 Interest
Rate, the Class A-2 Interest Rate, the Class A-3 Interest Rate, the Class B
Interest Rate or the Class C Interest Rate, respectively, on the basis of a year
of 360 days consisting of twelve 30 day months from and including the most
recent Payment Date (or, in the case of the initial Payment Date, from and
including the Closing Date) to but excluding the following Payment Date (each
period for which interest accrues on the Notes, an "Accrual Period"). Interest
on the Notes will be payable on each Payment Date to the holders of record of
the Class A Notes (the "Class A Noteholders"), the holders of record of the
Class B Notes (the "Class B Noteholders") and the holders of record of the Class
C Notes (the "Class C Noteholders"; together with the Class A Noteholders and
the Class B Noteholders, the "Noteholders") as of the related Record Date.
Interest on the Class A Notes is payable on a Payment Date from
Available Amounts on such date (and after application of such Available Amounts
to repay any outstanding Servicer Advances and to pay the Servicing Fee).
Interest on the Class B Notes is payable on a Payment Date from Available
Amounts on such date, but only after the application of such Available Amounts
to repay any outstanding Servicer Advances, to pay the Servicing Fee, and to pay
interest on the Class A Notes. Interest on the Class C Notes is payable on a
Payment Date from Available Amounts on such date, but only after the application
of such Available Amounts to repay any outstanding Servicer Advances, to pay the
Servicing Fee, and to pay interest on the Class A Notes and the Class B Notes.
Principal
The stated maturity of the Class A-1 Notes is the Payment Date; the stated
maturity of the Class A2 Notes is the Payment Date; the stated maturity of the
Class A-3 Notes is the Payment Date; the stated maturity of the Class B Notes is
the Payment Date; and the stated maturity of the Class C Notes is the Payment
Date. However, if all payments on the Contracts are made as scheduled, final
payment with respect to the Notes would occur earlier than stated maturity.
Principal of the Class A Notes will be payable on each Payment Date in
an amount equal to the Class A Principal Payment Amount for such Payment Date to
the extent Available Amounts are available therefor, but after payment from such
Available Amounts of unpaid Servicer Advances, the Servicing Fee and interest
payments on the Notes. Principal of the Class B Notes will be payable on each
Payment Date in an amount equal to the Class B Principal Payment Amount for such
Payment Date to the extent Available Amounts are available therefor, but after
payment from such Available Amounts of unpaid Servicer Advances, the Servicing
Fee, interest payments on the Notes, and the payment of the Class A Principal
Payment Amount. Principal of the Class C Notes will be payable on each Payment
Date in an amount equal to the Class C Principal Payment Amount for such Payment
Date to the extent Available Amounts are available therefor, but after payment
from such Available Amounts of unpaid Servicer Advances, the Servicing Fee,
interest payments on the Notes, and the payment of the Class A Principal Payment
Amount and the Class B Principal Payment Amount. See "--Allocations" herein.
Failure to pay the Class A Principal Payment Amount, the Class B Principal
Payment Amount or the Class C Principal Payment Amount on any Payment Date prior
to the stated maturity date for such Class of Notes will not constitute an Event
of Default under the Indenture, except to the extent caused by any failure to
remit or allocate Available Amounts to be used to make such Class A Principal
Payment Amount, Class B Principal Payment Amount or Class C Principal Payment
Amount. See "--Events of Default."
As used herein, the following terms shall have the following meanings:
The "ADCB" means, with respect to the Contracts, the sum of the
Discounted Contract Balances of each Contract included in the group of
Contracts for which an ADCB determination is being made.
The "Aggregate Principal Paydown Amount" means, for any Payment Date,
an amount (not less than zero) equal to (a) the ADCB of the Contract Pool
as of the beginning of business on the first day of the immediately
preceding Collection Period, minus (b) the ADCB of the Contract Pool as of
the close of business on the last day of the immediately preceding
Collection Period. Such decline in the ADCB of the Contract Pool for such
immediately preceding Collection Period may be through payment, prepayment,
default and writeoff, determination of ineligibility, substitution or
addition of the Contracts or as may otherwise be described herein.
The "Applicable Percentage" means, (a) prior to the Cross Over Date,
(i) for the Class A Notes, ______%, (ii) for the Class B Notes, ______% and
(iii) for the Class C Notes, ______% and (b) after the Cross Over Date, (i)
for the Class A Notes, ______%, (ii) for the Class B Notes, ______% and
(iii) for the Class C Notes, ______%.
"Class A Principal Payment Amount" means, with respect to any Payment
Date, the lesser of (a) the aggregate Principal Amount of the Class A Notes
and (b) (i) the Applicable Percentage for the Class A Notes for such
Payment Date, multiplied by (ii) the Aggregate Principal Paydown Amount for
such Payment Date.
"Class B Principal Payment Amount" means, with respect to any Payment
Date, the lesser of (a) the Principal Amount of the Class B Notes and (b)
(i) the Applicable Percentage for the Class B Notes for such Payment Date,
multiplied by (ii) the Aggregate Principal Paydown Amount for such Payment
Date.
"Class C Principal Payment Amount" means, with respect to any Payment
Date, the lesser of (a) the Principal Amount of the Class C Notes and (b)
(i) the Applicable Percentage for the Class C Notes for such Payment Date,
multiplied by (ii) the Aggregate Principal Paydown Amount for such Payment
Date.
The "Cross Over Date" is the Payment Date on which aggregate principal
amount of the Notes is equal to ___% or less of the ADCB of the Contract
Pool as of the last day of the related Collection Period. As of the Closing
Date, the aggregate initial principal amount of the Notes will be equal to
approximately ___% of the initial ADCB of the Contract Pool.
"Discounted Contract Balance" means with respect to any Contract, (a)
as of the related Cutoff Date, the present value of all of the remaining
Scheduled Payments becoming due under such Contract after the applicable
Cutoff Date but not later than the ____________ _______ Payment Date,
discounted monthly at the Discount Rate and (b) as of any other date of
determination, the sum of (i) the present value of all of the remaining
Scheduled Payments becoming due under such Contract on or after such date
of determination but not later than the ____________ _______ Payment Date,
discounted monthly at the Discount Rate and (ii) 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; provided that the Discounted
Contract Balance of any Defaulted Contract will be equal to zero. The
Discounted Contract Balance for each Contract shall be calculated assuming:
(a) All payments due in any Collection Period are due on the last day
of the Collection Period;
(b) Payments are discounted on a monthly basis using a 30 day month
and a 360 day year; and
(c) All security deposits and drawings under letters of credit, if
any, issued in support of a Contract are applied to reduce
Scheduled Payments in inverse order of the due date thereof.
"Principal Amount" of a Class of Notes means, as of any date, the
aggregate initial principal amount thereof reduced by the aggregate amount
of any Distributions applied in reduction of such principal amount on or
prior to such date.
"Scheduled Payments" means, with respect to any Contract, rent or
financing payment (whether attributable to principal or interest) scheduled
to be made by the related End-User under the terms of such Contract after
the related Cutoff Date; provided that Scheduled Payments will not include
any Excluded Amounts. Substantially all of the Contracts included in the
Contract Pool provide for Scheduled Payments to be made monthly.
Allocations
As Long As No Event of Default or Restricting Event Has Occurred and Is
Continuing. So long as no Event of Default or Restricting Event has occurred and
is continuing, on the second Business Day prior to each Payment Date (each, a
"Determination Date"), the Servicer shall instruct the Indenture Trustee to
withdraw, and on such Payment Date the Indenture Trustee acting in accordance
with such instructions shall withdraw, the amounts required to be withdrawn from
the Collection Account in order to make the following payments or allocations
from the Available Amounts for the related Payment Date, in the following order
of priority (in each case, such payment or transfer to be made only to the
extent funds remain available therefor after all prior payments and transfers
for such Payment Date have been made):
(A) pay to the Servicer, the amount of any unreimbursed
Servicer Advances;
(B) pay to the Servicer, the monthly Servicing Fee for
the preceding monthly period together with any
amounts in respect of the Servicing Fee that were due
in respect of prior monthly periods that remain
unpaid;
(C) pay to the Indenture Trustee, on behalf of the Class
A Notes, an amount equal to (i) interest accrued in
respect of such Class A Notes for the Accrual Period
immediately preceding such Payment Date, plus (ii)
any accrued and unpaid interest from prior Accrual
Periods; provided that, if the Available Amounts
remaining to be allocated as described in this clause
are less than the full amount required to be so paid,
such remaining Available Amounts shall be allocated
among each Class of the Class A Notes pro rata based
on the ratio of the interest payable on the Class
A-1, Class A-2 and Class A-3 Notes, as applicable, to
the interest payable on the Class A Notes as a whole;
(D) pay to the Indenture Trustee, on behalf of the Class
B Notes, an amount equal to (i) the interest accrued
thereon for the Accrual Period immediately preceding
such Payment Date, plus (ii) any accrued and unpaid
interest from prior Accrual Periods;
(E) pay to the Indenture Trustee, on behalf of the Class
C Notes, an amount equal to (i) interest accrued
thereon for the Accrual Period immediately preceding
such Payment Date, plus (ii) any accrued and unpaid
interest from prior Accrual Periods;
(F) pay to the Indenture Trustee, on behalf of the Class
A Notes, an amount equal to (i) the Class A Principal
Payment Amount for such Payment Date, plus (ii) any
unpaid Class A Principal Payment Amount from prior
Payment Dates;
(G) pay to the Indenture Trustee, on behalf of the
holders of the Class B Notes, an amount equal to (i)
the Class B Principal Payment Amount for such Payment
Date, plus (ii) any unpaid Class B Principal Payment
Amount from prior Payment Dates;
(H) pay to the Indenture Trustee, on behalf of the
holders of the Class C Notes, an amount equal to (i)
the Class C Principal Payment Amount for such Payment
Date, plus (ii) any unpaid Class C Principal Payment
Amount from prior Payment Dates;
(I) pay to the Indenture Trustee for deposit into the
Reserve Fund, the Required Reserve Fund Amount; and
(J) Available Amounts remaining after the allocations
described in paragraphs (A) though (I) above shall be
paid to the Seller and will thereafter not be
available to make payments in respect of the Notes or
otherwise be part of Available Amounts.
So long as no Event of Default or Restricting Event has occurred and is
continuing, on each Payment Date the Class A Principal Payment Amount will be
allocated sequentially among the Class A-1, Class A-2 and Class A-3 Notes so
that the entire Class A Principal Payment Amount will be allocated, first, to
the Class A-1 Notes until the Class A-1 Notes are paid in full, second, to the
the Class A-2 Notes until the Class A-2 Notes are paid in full and, third, to
the Class A-3 Notes until the Class A-3 Notes are paid in full.
As used herein, "Available Amounts" means as of any Payment Date, the sum
of (i) all amounts on deposit in the Collection Account as of the immediately
preceding Determination Date on account of Scheduled Payments, but excluding the
Excluded Amounts due on or before, as well as Prepayments received on or before,
the last day of the Collection Period immediately preceding such Payment Date
(in each case other than Excluded Amounts); (ii) Recoveries on account of
previously Defaulted Contracts received as of the immediately preceding
Determination Date; and (iii) such amounts as from time to time may be held in
the Collection Account, together with earnings on funds therein.
Pursuant to the Indenture, on each Payment Date the Indenture Trustee will
distribute all amounts paid to it on behalf of any one of the Class A-1, Class
A-2, Class A-3, Class B or Class C Notes as described in the foregoing
paragraphs to the Noteholders of such Class pro rata in accordance with the
respective amounts owed thereto.
Following an Event of Default or Restricting Event. On each
Determination Date after the occurrence and during the continuance of an
Event
of Default or Restricting Event, the Servicer shall instruct the Indenture
Trustee to withdraw, and on the related Payment Date the Indenture Trustee,
acting in accordance with such instructions, shall withdraw, the amounts
required to be withdrawn from the Collection Account in order to make the
following payments or allocations from the Available Amounts, in the following
order of priority (in each case, such payment or transfer to be made only to the
extent funds remain available therefor after all prior payments and transfers
for such Payment Date have been made):
(A) pay to the Owner Trustee and the Indenture Trustee,
the amount of any unpaid fees and expenses;
(B) pay to the Servicer, the amount of any unreimbursed
Servicer Advance;
(C) pay to the Servicer, the monthly Servicing Fee for
the preceding monthly period together with any
amounts in respect of the Servicing Fee that were due
in respect of prior monthly periods that remain
unpaid;
(D) pay to the Indenture Trustee, on behalf of the Class
A Notes, an amount equal to (i) interest accrued in
respect of such Class A Notes for the Accrual Period
immediately preceding such Payment Date, plus (ii)
any accrued and unpaid interest from prior Accrual
Periods; provided that, if the Available Amounts
remaining to be allocated as described in this clause
are less than the full amount required to be so paid,
such remaining Available Amounts shall be allocated
among each Class of the Class A Notes pro rata based
on the ratio of the interest payable on the Class
A-1, Class A-2 and Class A-3 Notes, as applicable, to
the interest payable on the Class A Notes as a whole;
(E) pay to the Indenture Trustee, on behalf of the Class
B Notes, an amount equal to (i) the interest accrued
thereon for the Accrual Period immediately preceding
such Payment Date, plus (ii) any accrued and unpaid
interest from prior Accrual Periods;
(F) pay to the Indenture Trustee, on behalf of the Class
C Notes, an amount equal to (i) interest accrued in
respect of the Class C Notes for the Accrual Period
immediately preceding such Payment Date, plus (ii)
any accrued and unpaid interest from prior Accrual
Periods;
(G) pay to the Indenture Trustee, on behalf of the Class
A Notes, an amount equal to all remaining Available
Amounts for such Payment Date, until the aggregate
Principal Amount of the Class A Notes has been paid
in full; with all amounts paid as described in this
clause to be allocated among the Class A-1, Class A-2
and Class A-3 Notes, pro rata, based on the
outstanding principal amounts thereof;
(H) after the Class A Notes have been paid in full, pay
to the Indenture Trustee, on behalf of the Class B
Notes, an amount equal to all remaining Available
Amounts for such Payment Date, until the aggregate
Principal Amount of the Class B Notes has been paid
in full; and
(I) after the Class B Notes have been paid in full, pay
to the Indenture Trustee, on behalf of the Class C
Notes, an amount equal to all remaining Available
Amounts until the aggregate Principal Amount of the
Class C Notes has been paid in full.
Reserve Fund
A trust account has been established by the Trust Depositor in the name
of, and maintained by, the Indenture Trustee (the "Reserve Fund"). On the
Closing Date the Trust Depositor will deposit (or cause to be deposited)
$___________ in the Reserve Fund (which is equal to % of the ADCB of the
Contract Pool as of the initial Cutoff Date) (the "Initial Reserve Fund
Deposit").
Pursuant to the Sale and Servicing Agreement, the amount on deposit at any
time in the Reserve Fund (the "Reserve Fund Amount") will be required to equal
the greater of (a) (i) from the Closing Date until such date as the Initial
Reserve Fund Deposit equals or exceeds ____ % of the then current ADCB of the
Contract Pool, the Initial Reserve Fund Deposit and (ii) from and after such
date as the Initial Reserve Fund equals of exceeds ___% of the then current ADCB
of the Contract Pool, ___% of the then current ADCB of the Contract Pool and (b)
% of the ADCB of the Contract Pool as of the initial Cutoff Date. The amount at
any time required to be held in the Reserve Fund is referred to herein as the
"Required Reserve Fund Amount."
Amounts held from time to time in the Reserve Fund will continue to be
held for the benefit of the Noteholders. On each Payment Date, funds will be
withdrawn from the Reserve Fund to the extent that Available Amounts with
respect to any Payment Date are less than the amount necessary to pay interest
on the Notes; provided that upon the occurrence of an Event of Default or a
Restricting Event, any amounts remaining in the Reserve Fund shall be applied to
pay the principal on the Notes. In addition, on any Payment Date if, after
giving effect to all allocations and distributions on such Payment Date, the
Reserve Fund Amount exceeds the Required Reserve Fund Amount, such excess will
be distributed to the Seller. Upon any such distributions to the Seller, the
Noteholders will have no further rights in, or claims to, such amounts.
If on any Payment Date amounts on deposit in the Reserve Fund have been
depleted as a result of losses in respect of the Contracts, the protection
afforded to the Noteholders by the Reserve Fund will be exhausted and the
Noteholders will bear directly the risks associated with the ownership of the
Contracts.
The Seller may, from time to time after the date of this Prospectus,
request each Rating Agency that rated the Notes to approve a formula for
determining the Reserve Fund Amount that is different from the formula described
above and would result in a decrease in the amount of the Required Reserve Fund
Amount or the manner by which the Reserve Fund is funded. If each Rating Agency
delivers a letter to the Indenture Trustee and the Seller to the effect that the
use of any such new formulation will not in and of itself result in a
qualification, reduction or withdrawal of its then current rating of any Class
of Notes, then the Reserve Fund Amount will be determined in accordance with
such new formula. The Sale and Servicing Agreement and the Indenture, as
applicable, will accordingly be amended to reflect such new calculation without
the consent of any Noteholder.
Defaulted Contracts
A Contract will be deemed to be in default (a "Defaulted Contract") if (i)
it is more than 120 days past due; or (ii) if at any time the Servicer
determines, in accordance with its customary and usual practices, that such
Contract is not collectible (taking into account any available Vendor recourse).
The current policy of the Servicer with respect to writing off Contracts is
described in "Mitsui Vendor Leasing (U.S.A.) Inc.--Write-Off Policy" above.
Upon classification as a Defaulted Contract, the Servicer shall accelerate
all payments due thereunder or take such other action as the Servicer reasonably
believes will maximize the amount of Recoveries in respect thereof and shall
otherwise follow its customary and usual collection procedures, which may
include the repossession and sale of any related Equipment on behalf of the
Issuer. Any recoveries on account of a previously Defaulted Contract (including
proceeds of repossessed Equipment or other property, Insurance Proceeds and
amounts subsequently received pursuant to a Vendor Program Agreement with a
Vendor, but net of amounts representing costs and expenses of liquidation
incurred by the Servicer, such recoveries net of such amounts, "Recoveries")
shall be deemed to be Available Amounts.
Collection Account
The Servicer, for the benefit of the Noteholders, shall cause to be
established and maintained in the name of the Indenture Trustee, with an office
or branch of a depositary institution or trust company (which may include the
Indenture Trustee) organized under the laws of the United States of America or
any one of the states thereof and located in the state designated by the
Servicer, a segregated corporate trust account (the "Collection Account")
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Noteholders; provided that at all times
such depositary institution or trust company shall be (a) the corporate trust
department of the Indenture Trustee or, (b) a depositary institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), (i) (A)
which has either (1) a long-term unsecured debt rating acceptable to the Rating
Agencies or (2) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies, (B) the parent corporation of which
has either (1) a long-term unsecured debt rating acceptable to the Rating
Agencies or (2) a short-term unsecured debt rating or certificate of deposit
rating acceptable to the Rating Agencies or (C) is otherwise acceptable to the
Rating Agencies and (ii) whose deposits are insured by the Federal Deposit
Insurance Corporation (the "FDIC," and any such depositary institution or trust
company, a "Qualified Institution"). Funds in the Collection Account generally
will be invested in (i) obligations fully guaranteed by the United States of
America, (ii) demand deposits, time deposits or certificates of deposit of
depositary institutions or trust companies having commercial paper with the
highest rating from each Rating Agency, (iii) commercial paper (or other
short-term obligations) having, at the time of the Indenture Trustee's
investment therein, the highest rating from each Rating Agency, (iv) demand
deposits, time deposits and certificates of deposit which are fully insured by
the FDIC, (v) notes or banker's acceptances issued by any depositary institution
or trust company described in (ii) above, (vi) money market funds which have the
highest rating from, or have otherwise been approved in writing by, each Rating
Agency, (vii) time deposits with an entity the commercial paper of which has the
highest rating from the Rating Agency, (viii) eligible repurchase agreements and
(ix) any other investments approved in writing by each Rating Agency
(collectively, "Eligible Investments"). Any earnings (net of losses and
investment expenses) on funds in the Collection Account will be held therein and
be treated as Available Amounts. The Servicer will have the revocable power to
instruct the Indenture Trustee to make withdrawals and payments from the
Collection Account for the purpose of carrying out its duties under the Sale and
Servicing Agreement.
Replacement Accounts
If any institution with which any of the accounts established pursuant to
the Sale and Servicing Agreement or the Indenture are established ceases to be a
Qualified Institution, the Servicer or the Indenture Trustee (as the case may
be) shall, within ten Business Days, establish a replacement account at a
Qualified Institution after notice thereof.
Events of Default
Allocations of Available Amounts will be made as described above under
"--Allocations--As Long As No Event of Default or Restricting Event Has Occurred
and Is Continuing" unless and until an Event of Default or Restricting Event has
occurred, in which case allocations of Available Amounts will be made as
described above under "--Allocations--Following an Event of Default or
Restricting Event." An "Event of Default" refers to any of the following events:
(a) failure to pay on each Payment Date the full amount
of accrued and unpaid interest on any Class A Note,
Class B Note or Class C Note;
(b) failure to pay the Principal Amount of any Note, if
any, on its related stated maturity date;
(c) (i) failure on the part of the Seller or the
Servicer to make any payment or deposit required
under the Sale and Servicing Agreement or the
Indenture within three (3) Business Days after the
date the payment or deposit is required to be made or
(ii) failure on the part of the Seller, the Servicer
or the Issuer to observe or perform any other
covenants or agreements of such entity set forth 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 that
only a five (5) day cure period shall apply in the
case of a failure by the Seller or the Issuer to
observe their respective covenants not to grant a
security interest in or otherwise intentionally
create a lien on the Contracts;
(d) any representation or warranty made by the Issuer,
the Trust Depositor or the Seller in the Sale and
Servicing Agreement or the Indenture or any
information required to be given by the Seller or the
Trust Depositor to the Indenture Trustee to identify
the Contracts proves to have been incorrect in any
material respect when made and continues to be
incorrect in any material respect, which failure has
a material adverse effect on the Noteholders and
which continues unremedied for a period of 60 days
after written notice (it being understood and
acknowledged that, if any such breach occurs with
respect to one or more Contracts, the Seller, through
the Trust Depositor, may remedy such breach by the
repurchase of such Contracts during such period in
accordance with the provisions of the Sale and
Servicing Agreement and the Transfer and Sale
Agreement);
(e) if a conservator, receiver or liquidator of the
Seller, the Issuer or the Trust was appointed or if
certain other events relating to the bankruptcy,
insolvency or receivership of the Seller, the Issuer
or the Trust were to occur (an "Insolvency Event");
or
(f) the Issuer becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as
amended.
An Event of Default may be waived if the Required Controlling Holders
provide written notice to the Issuer, the Trust Depositor, the Servicer and the
Indenture Trustee of such waiver. In the event the Trustee has actual knowledge
of an Event of Default, it will be required to notify, among others, the Issuer,
the Servicer and the Sellers.
If an Insolvency Event relating to the Trust Depositor or the Issuer
occurs, pursuant to the Sale and Servicing Agreement, on the day of such
Insolvency Event, the Trust Depositor will promptly give notice to the Trustee
of the Insolvency Event, and the Indenture Trustee will, if directed by the
Required Controlling 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 such sale, disposition or liquidation of
Contracts will be deposited in the Collection Account and allocated as described
in the Sale and Servicing Agreement and herein. If the proceeds of any
collections on Contracts in the Collection Account allocated to Noteholders of
any Class is not sufficient to pay the Principal Amount of the Notes of such
Class in full, such Noteholders will incur a loss.
As used herein, "Required Controlling Holders" means (i) prior to the
payment in full of the Class A Notes outstanding, Class A Noteholders evidencing
more than 662/3% of the Principal Amount of the Class A Notes, (ii) from and
after the payment in full of the Class A Notes outstanding, Class B Noteholders
holding Class B Notes evidencing more than 662/3% of the Principal Amount of the
Class B Notes outstanding and (iii) from and after the payment in full of the
Class B Notes outstanding, Class C Noteholders holding Class C Notes evidencing
more than 662/3% of the Principal Amount of the Class C Notes outstanding.
Restricting Events
Prior to the occurrence of a Restricting Event, allocations of Available
Amounts will be made as described above under "--Allocations--As Long As No
Event of Default or Restricting Event Has Occurred and Is Continuing" unless and
until an Event of Default or Restricting Event has occurred, in which case
allocations of Available Amounts will be made as described above under
"--Allocations--Following an Event of Default or Restricting Event." A
"Restricting Event" refers to any of the following events:
(a) as of any Payment Date, the weighted average ADCB during the
three (3) preceding Collection Periods of all Contracts in
respect to which a Scheduled Payment is more than sixty (60)
days past due at any time during such three (3) preceding
Collection Periods, exceeds ___% of the weighted average of
ADCB of all Contracts in the Contract Pool during such three
Collection Periods; or
(b) as of any Payment Date, the product of (i) two (2) multiplied
by (ii) the difference between (x) the weighted average ADCB
during the six (6) preceding Collection Periods of all
Contracts that became Defaulted Contracts during such six (6)
preceding Collection Periods and (y) Recoveries received
during such six preceding Collection Periods on account of all
Defaulted Contracts, exceeds ____% of the weighted average
ADCB of all Contracts in the Contract Pool during such six
Collection Periods; or
(c) a Servicer Default has occurred and is continuing.
Servicing Compensation and Payment of Expenses
The Servicer's compensation with respect to its servicing activities and
reimbursement for its expenses for any Collection Period will be a servicing fee
(the "Servicing Fee") calculated monthly, and payable on each Payment Date, in
an amount equal to the product of (i) one-twelfth, (ii) _____% (such percentage,
the "Servicing Fee Percentage") and (iii) the ADCB of the Contract Pool as of
the beginning of the related Collection Period. The Servicing Fee will be
funded from Available Amounts and will be paid on the Payment Date with
respect to each Collection Period from the Collection Account. In addition as
compensation for acting as Servicer, the Servicer will be entitled to all late
charges and certain other fees paid by the End-Users.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Contracts including, without
limitation, expenses related to the enforcement of the Contracts, payment of the
fees and disbursements of the Indenture Trustee and Owner Trustee and
independent accountants, casualty insurance on Equipment (to the extent the
Contracts provide for the Seller to pay for such insurance) and other fees which
are not expressly stated in the Sale and Servicing Agreement to be payable by
the Trust or the Noteholders, the Trust Depositor (other than federal, state,
local and foreign income, franchise or other taxes based on income, if any, or
any interest or penalties with respect thereto, imposed upon the Trust). In the
event that Mitsui Vendor Leasing is acting as Servicer and fails to pay the fees
and disbursements of the Indenture Trustee or the Owner Trustee ("the
Trustees"), such Trustee will be entitled to receive the portion of the
Servicing Fee that is equal to such unpaid amounts. In no event will the
Noteholders be liable to the Trustees for the Servicer's payment of such
amounts, and any such amounts so paid to the Trustees will be treated as paid to
the Servicer for all purposes of the Sale and Servicing Agreement.
Record Date
Payments on the Notes will be made as described herein to the Noteholders
in whose names the Notes were registered (expected to be Cede, as nominee of
DTC) at the close of business on the Record Date. However, the final payment on
the Notes offered hereby will be made only upon presentation and surrender of
such Notes. All payments with respect to the principal of and interest on the
Notes (each, a "Distribution") will be made to DTC in immediately available
funds. See "Description of the Notes--Book-Entry Registration."
Optional Redemption
The Trust Depositor may repurchase all remaining Contracts and related
assets, and thus effect the early redemption of the Notes on any Payment Date on
or after which the ADCB of the Contract Pool is less than 10% of the ADCB of the
Contract Pool as of the initial Cutoff Date. The price at which the Trust
Depositor will be required to purchase the Contracts in order to exercise such
option will be equal to the greater of (i) the ADCB of the Contract Pool and
(ii) the amount that when applied pursuant to the Indenture together with all
other amounts available thereunder will be sufficient to redeem the Notes at a
price equal to the unpaid principal amount of the Notes plus accrued and unpaid
interest thereon through the date of redemption.
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 a
statement (the "Monthly Report") prepared by the Servicer setting forth certain
information with respect to the Contract Pool and the Notes, including: (i) the
ADCB (A) as of the end of the related Collection Period and (B) as of the end of
the second Collection Period preceding such Payment Date (or, in the case of
Contracts that were first added to the Contract Pool during the related
Collection Period, as of the Cutoff Date for such Contracts); (ii) the Class A
Principal Payment Amount, the Class B Principal Payment Amount and the Class C
Principal Payment Amount (including the calculations utilized in the
determination thereof); (iii) the ADCB of Contracts held by the Issuer which
were more than 30, 60, and 90 days delinquent as of the end of such Collection
Period; (iv) the Discounted Contract Balance of each Contract in the Contract
Pool that became a Defaulted Contract during such Collection Period and
cumulatively for each preceding Collection Period; (v) the monthly Servicing Fee
for such Collection Period; and (vi) the Available Amounts with respect to the
related Collection Period (including the calculation utilized in the
determination thereof).
With respect to each Payment Date, the Monthly Report also will include the
following information with respect to the Notes: (i) the total amount
distributed; (ii) the amount allocable to interest on the Notes and each Class
thereof; and (iii) the amount allocable to principal on the Notes and each Class
thereof. 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 ______ 31 of each calendar year, commencing _______ 31, 1999,
the Indenture Trustee (or an agent on its behalf) will furnish (or cause to be
furnished) to each person who at any time during the preceding calendar year was
a Noteholder of record, a statement containing the information required to be
provided by an issuer of indebtedness under the Code for such preceding calendar
year or the applicable portion thereof during which such person was a
Noteholder, together with such other customary information as is necessary to
enable the Noteholders to prepare their tax returns. See "Certain Federal Income
Tax Matters."
List of Noteholders
At such time, if any, as Definitive Notes have been issued, upon written
request of any Noteholder or group of Noteholders of record holding Notes
evidencing not less than 10% of the aggregate unpaid principal amount of the
Notes, the Indenture Trustee will afford such Noteholders access during normal
business hours to the current list of Noteholders for purpose of communicating
with other Noteholders with respect to their rights under the Indenture, the
Sale and Servicing Agreement or the Notes. While the Notes are held in
book-entry form, holders of beneficial interests in the Notes will not have
access to a list of other holders of beneficial interests in the Notes, which
may impede the ability of such holders of beneficial interests to communicate
with each other. See "--Book-Entry Registration" below.
Book-Entry Registration
Noteholders may only hold their Notes through DTC (in the United States) or
CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems.
Cede, as nominee for DTC, will hold the global Class A-1 Note or Notes, the
global Class A-2 Note or Notes, the global Class A-3 Note or Notes, the global
Class B Note or Notes, and the global Class C Note or Notes. CEDEL and Euroclear
will hold omnibus positions on behalf of their participants through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective Depositaries which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC. Citibank
will act as depositary for CEDEL and Morgan Guaranty Trust will act as
depositary for Euroclear (in such capacities, the "Depositaries").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of notes. Participants include the
Underwriter, securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected through
DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its Depositary. Cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in CEDEL
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
CEDEL Participants on such business day. Cash received in CEDEL or Euroclear as
a result of sales of securities by or through a CEDEL Participant or a Euroclear
Participant to a Participant will be received with value on the DTC settlement
date but will be available in the relevant CEDEL or Euroclear cash account only
as of the business day following settlement in DTC. For information with respect
to tax documentation procedures relating to the Notes, see "Federal Income Tax
Consequences."
Noteholders that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
on the Notes from the Indenture Trustee through DTC and its Participants. Under
a book-entry format, Noteholders will receive payments after the related Payment
Date, as the case may be, because, while payments are required to be forwarded
to Cede, as nominee for DTC, on each such date, DTC will forward such payments
to its Participants which thereafter will be required to forward them to
Indirect Participants or holders of beneficial interests in the Notes. It is
anticipated that the only Class A-1 Noteholder, Class A-2 Noteholder, Class A-3
Noteholder, Class B Noteholder and Class C Noteholder will be Cede & Co., as
nominee of DTC, and that holders of beneficial interests in the Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class B Notes or Class C Notes, respectively,
under the Indenture will only be permitted to exercise the rights of Class A-1
Noteholders, Class A-2 Noteholders, Class A-3 Noteholders, Class B Noteholders
or Class C Noteholders, respectively, under the Indenture indirectly through DTC
and its Participants who in turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Notes and is required to receive and
transmit distributions of principal of and interest on the Notes. Participants
and Indirect Participants with which holders of beneficial interests in the
Notes have accounts similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of these respective holders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of holders of
beneficial interests in the Notes to pledge Notes to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
Notes, may be limited due to the lack of a Definitive Note for such Notes.
DTC has advised the Trust Depositor that it will take any action permitted
to be taken by a Class A-1 Noteholder, Class A-2 Noteholder, Class A-3
Noteholder, Class B Noteholder or Class C Noteholder under the Indenture only at
the direction of one or more Participants to whose account with DTC the Class A
Notes, Class B Notes or Class C Notes are credited. Additionally, DTC has
advised the Trust Depositor that it may take actions with respect to percentage
interests in any particular Class of the Notes represented by holders of
beneficial interests evidencing that percentage, which actions may conflict with
other of its actions with respect to other percentage interests therein.
CEDEL is incorporated under the laws of Luxembourg as a professional
depositary. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depositary, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriter. Indirect access to CEDEL is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a CEDEL Participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates, and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 29 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policies for Euroclear on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriter. Indirect access to Euroclear is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants in
accordance with the relevant systems rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See "Federal
Income Tax Consequences." CEDEL or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Noteholder under the
Indenture on behalf of a CEDEL Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of 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 Indenture Trustee, the Servicer, the
Seller, the Trust Depositor or the Owner Trustee will have any liability for any
aspect of the records relating to, actions taken or implemented by, or payments
made on account of, beneficial ownership interests in the Notes held through
DTC, or for maintaining, supervising or reviewing any records or actions
relating to such beneficial ownership interests.
Definitive Notes
The Notes will be issued in fully registered, authenticated form to
beneficial owners or their nominees (the "Definitive Notes"), rather than to DTC
or its nominee, only if (a) the Issuer advises the Indenture Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Depositary with respect to such Notes, and the Indenture Trustee or the
Issuer is unable to locate a qualified successor or (b) the Issuer at its option
elects to terminate the book-entry system through DTC.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee is required to notify all beneficial
owners for each Class of Notes held through DTC of the availability of
Definitive Notes for such Class. Upon surrender by DTC of the Definitive Note
representing the Notes and instructions for re-registration, the Indenture
Trustee will issue such Definitive Notes, and thereafter the Indenture Trustee
will recognize the holders of such Definitive Notes as Noteholders under the
Indenture (the "Holders"). The Indenture Trustee will also notify the Holders of
any adjustment to the Record Date with respect to the Notes necessary to enable
the Indenture Trustee to make distributions to Holders of the Definitive Notes
for such Class of record as of each Payment Date.
Additionally, upon the occurrence of any such event described above,
distribution of principal of and interest on the Notes will be made by the
Indenture Trustee directly to Holders in accordance with the procedures set
forth herein and in the Indenture. Distributions will be made by check, mailed
to the address of such Holder as it appears on the Note register. Upon at least
10 days' notice to Noteholders for such Class, however, the final payment on any
Note (whether the Definitive Notes or the Note for such Class registered in the
name of Cede representing the Notes of such Class) will be made only upon
presentation and surrender of such Note at the office or agency specified in the
notice of final distribution to Noteholders.
Definitive Notes of each Class will be transferable and exchangeable at the
offices of the Indenture Trustee or its agent in New York, New York, which the
Indenture Trustee shall designate on or prior to the issuance of any Definitive
Notes with respect to such Class. No service charge will be imposed for any
registration of transfer or exchange, but the Indenture Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
Administration Agreement
Mitsui Vendor Leasing, in its capacity as administrator (in such capacity,
the "Administrator"), will enter into an administration agreement (the
"Administration Agreement") with the Trust, the Trust Depositor and the
Indenture Trustee pursuant to which the Administrator 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. The Administrator in the
Administration Agreement agrees to perform certain accounting functions of the
Trust which the Owner Trustee is required to perform pursuant to the Trust
Agreement, including but not limited to maintaining the books of the Trust and
filing tax returns for the Trust. As compensation for the performance of the
Administrator's obligations under the Administration Agreement and as
reimbursement for its expenses related thereto, the Administrator will be
entitled to a monthly administration fee (the "Administration Fee"), which fee
will be paid by the Servicer out of the Servicing Fee, if available.
THE TRANSFER AND SALE AGREEMENT AND
SALE AND SERVICING AGREEMENT GENERALLY
The following is a summary of the material terms of the Transfer and Sale
Agreement and Sale and Servicing Agreement, the forms of which were filed as an
exhibits to the Registration Statement of which this Prospectus is a part, and
this summary is qualified in its entirety by reference to the Transfer and Sale
Agreement and Sale and Servicing Agreement, respectively.
Conveyance of Contracts
Pursuant to the Transfer and Sale Agreement, the Seller will sell,
transfer, assign, set over and otherwise convey to the Trust Depositor, without
recourse (except as expressly set forth in the Transfer and Sale Agreement) all
of the Seller's right, title and interest in and to (i) the Contracts (including
all Additional Contracts and Substitute Contracts, if any) identified therein
(ii) all monies due or to become due in payment of such Contracts on or after
the related Cutoff Date, including all Scheduled Payments thereunder due on or
after such Cutoff Date, any Prepayments, (including any payments in respect of a
casualty or early termination), and any Recoveries received with respect thereto
but excluding any Scheduled Payments due prior to the Cutoff Date or any
Excluded Amounts, (ii) the related Equipment (which may be limited to a security
interest therein), including all proceeds from any sale or other disposition of
such Equipment, (iii) any documents delivered to the Trust Depositor or held by
the Servicer on its behalf with respect to each such Contract (the "Contract
Files"), (iv) all payments made or to be made in the future with respect to each
such Contract and the Vendor thereunder under the related Vendor Assignment and
any related Vendor Program Agreement and under any other guarantee or similar
credit enhancement with respect to such Contracts, (v) all payments made with
respect to each such Contract under any insurance policy covering physical
damage to the related Equipment (the "Insurance Proceeds") and (vi) all income
and proceeds of the foregoing. Pursuant to the Sale and Servicing Agreement, the
Trust Depositor in turn will sell, transfer, assign, set over and otherwise
convey to the Issuer, without recourse (except as expressly set forth in the
Sale and Servicing Agreement) the assets described in clauses (i) through (vi)
in the preceding sentence and its rights under the Transfer and Sale Agreement
(referred to collectively as the "Transferred Assets"). Pursuant to the
Indenture, the Issuer will grant a lien on such Transferred Assets in favor of
the Indenture Trustee to secure payment of its obligations under the Notes and
the Indenture.
The Servicer under the Sale and Servicing Agreement, will retain custody of
(but not title to) the Contracts, the Contract Files and any related evidence of
insurance payments, Scheduled Payments and any other similar payments under the
Contracts. Prior to the conveyance of any Contracts to the Trust Depositor, the
Seller will cause its computer accounting systems to be marked to show that the
Contracts transferred thereunder have been conveyed to the Issuer (and have been
pledged by the Issuer to the Indenture Trustee under the Indenture), and prior
to conveyance the Seller or the Trust Depositor will file UCC financing
statements reflecting (A) the conveyance to the Trust Depositor pursuant to the
Transfer and Sale Agreement of the Transferred Assets (other than the Trust
Depositor's rights under the Transfer and Sale Agreement), (B) the conveyance to
the Issuer pursuant to the Sale and Servicing Agreement of Transferred Assets
and (C) the grant of a lien thereon and other Trust Assets in favor of the
Indenture Trustee pursuant to the Indenture. The Seller will notate in the
appropriate computer files relating to the Contracts, that all interests in the
Contracts have been conveyed to the Issuer pursuant to the Sale and Servicing
Agreement and have been pledged by the Issuer to the Indenture Trustee pursuant
to the Indenture. See "Certain Legal Aspects of the Contracts."
Representations and Warranties
The Seller has made certain representations and warranties in the Transfer
and Sale Agreement with respect to the Contracts transferred thereunder as of
the Cutoff Date, and the Seller will similarly make or be deemed to have made
certain representations and warranties with respect to each Additional Contract
and Substitute Contract as of its related Cutoff Date, including that: (i) the
information with respect to the Contract and the Equipment, if any, subject to
the Contract delivered under the Transfer and Sale Agreement is true and correct
in all material respects; (ii) immediately prior to the transfer of a Contract
to the Trust Depositor, such Contract was owned by the Seller free and clear of
any adverse claim; (iii) the Contract, as of the Cutoff Date, did not have a
Scheduled Payment that was a delinquent payment for more than 60 days, and the
Contract is not otherwise a Defaulted Contract; (iv) no provision of the
Contract has been either waived, altered or modified in any respect, except by
instruments or documents contained in the Contract File (other than payment
delinquencies permitted under clause (iii) above); (v) the Contract is a valid
and binding payment obligation of the End-User and is enforceable in accordance
with its terms (except as may be limited by applicable insolvency, bankruptcy,
moratorium, reorganization, or other similar laws affecting enforceability of
creditors' rights generally and the availability of equitable remedies); (vi)
the Contract is not and will not be subject to rights of rescission, setoff,
counterclaim or defense and, to the Seller's knowledge, no such rights have been
asserted or threatened with respect to the Contract; (vii) the Contract, at the
time it was made, did not violate the laws of the United States or any
applicable state, except for any such violations which do not materially and
adversely affect the collectibility of the Contracts in the Contract Pool taken
as a whole; (viii) (A) the Contract and any related Equipment have not been
sold, transferred, assigned or pledged by the Seller to any other person (other
than pursuant to such Contract in the case of Equipment and (B) such Contract
(if it is a CSA or a finance Lease) is secured by a fully perfected lien of the
first priority on the related Equipment; (ix) all filings necessary to evidence
the conveyance or transfer of the Contract to the Issuer have been made in all
appropriate jurisdictions; (x) the End-User is not to the Seller's knowledge,
subject to bankruptcy or other insolvency proceedings; (xi) the Contract is a
U.S. dollar-denominated obligation and the related End-User's billing address is
in the United States; (xii) the Contract provides for periodic Scheduled
Payments to made; (xiii) the Contract does not require the prior written consent
of an End-User or contain any other restriction on the transfer or assignment of
the Contract (other than a consent or waiver of such restriction that has been
obtained prior to the date of such Contract's conveyance to the Issuer); (xiv)
the obligations of the related End-User under such Contract are irrevocable and
unconditional and non-cancelable (or, if prepayable by its terms, such Contract
meets the criteria described in clause (xxii) below); (xv) the Contract has an
original maturity of not greater than the term specified in the Transfer and
Sale Agreement; (xvi) no adverse selection procedure was used in selecting the
Contract for transfer; (xvii) the End-User under the Contract is required to
maintain casualty insurance with respect to the related Equipment in accordance
with the Servicer's normal requirements; (xviii) in the event of a casualty loss
in respect of the Equipment, the Contract provides that the End-User must
replace such Equipment with like Equipment in good repair acceptable to the
Servicer or prepay such Contract in an amount not less than the Prepayment
Amount; (xix) the Contract constitutes chattel paper, an account, an instrument
or a general intangible as defined under the UCC; (xx) no Lease is a "consumer
lease" as defined in Section 2A-103(l)(e) of the UCC; (xxi) each Lease is a
"triple net lease" under which the End-User is responsible for the maintenance
of the related Equipment in accordance with general industry standards
applicable to such item of Equipment, which in all cases shall include the
payment of any taxes with respect to such Equipment; and (xxii) no Contract
permits the End-User to make a prepayment of such Contract in full in an amount
less than the Prepayment Amount.
As used above, "Prepayment Amount" shall mean, with respect to a Contract,
the sum of (i) the Discounted Contract Balance of such Contract on the
Determination Date immediately prior to the date of prepayment plus any accrued
and unpaid interest payments thereon (at the Discount Rate) and (ii) any
outstanding Servicer Advances thereon.
The foregoing representations and warranties, as appropriate, will be
reaffirmed by the Seller with respect to any Substitute Contract transferred to
the Trust Depositor. A Contract which satisfies all of the above representations
and warranties shall be termed an "Eligible Contract". Contracts with respect to
which the representations in clauses (iii), (xv) and (xxii) are not true shall
also be Eligible Contracts if all representations other than such
representations are true and if the Trust Depositor shall have received
confirmation from each Rating Agency that the discrepancy will not result in a
reduction or withdrawal of the then current ratings assigned to any Class of
Notes. (A Contract that is not an Eligible Contract is referred to herein as an
"Ineligible Contract.") In addition, the Seller will represent and warrant to
the Trust Depositor that the conveyance pursuant to the Transfer and Sale
Agreement constitutes a valid sale and assignment to the Trust Depositor of all
right, title and interest of the Seller in the related Contracts, whether then
existing or thereafter created, and the proceeds thereof, which is effective
as of the date of conveyance of such Contract.
The Trust Depositor will represent and warrant in the Sale and Servicing
Agreement, among other things, (i) that the conveyance of the Contracts to the
Issuer thereunder is a valid sale and transfer of such Contracts to the Issuer,
or such conveyance will provide a first perfected security interest therein and
that all filings necessary to evidence the same to the Issuer have been made in
all appropriate jurisdictions, (ii) that each Contract transferred by it to the
Issuer thereunder is an "Eligible Contract" and (iii) that the security interest
granted on the related Contracts, whether then existing or thereafter created,
and the proceeds thereof by the Issuer to the Indenture Trustee is effective to
create in favor of the Indenture Trustee a lien thereon and that such lien has
been duly perfected.
Neither the Owner Trustee (either as Owner Trustee or in its individual
capacity) nor the Indenture Trustee (either as Indenture Trustee or in its
individual capacity) shall make or be deemed to have made any representations or
warranties, express or implied, regarding the Trust Assets or the transfers
thereof by the Seller, the Trust Depositor or the Issuer.
Under the terms of the Transfer and Sale Agreement and the Sale and
Servicing Agreement, each Contract must be an Eligible Contract as of its date
of transfer to the Issuer. The Indenture Trustee will reassign to the Trust
Depositor, and the Seller will concurrently be obligated to repurchase from the
Trust Depositor, any Ineligible Contract transferred by the Seller and any
interest in Equipment that is subject to such Ineligible Contract no later than
90 days after the Seller or the Trust Depositor becomes aware, or receives
written notice from the Servicer, the Issuer or the Indenture Trustee of the
breach of any representation or warranty made by the Seller in the Transfer and
Sale Agreement or by the Trust Depositor in the Sale and Servicing Agreement, as
the case may be, that materially adversely affects the interests of the Trust
Depositor, the Issuer or the Noteholders in such Contract or the related
Contract File, which breach has not been cured or waived in all material
respects. This repurchase obligation will constitute the sole remedy available
to the Issuer, the Indenture Trustee and the Noteholders for a breach of a
representation or warranty under the Sale and Servicing Agreement or the
Transfer and Sale Agreement made by the Trust Depositor, the Seller, as the case
may be, with respect to such a Contract.
Pursuant to the Sale and Servicing Agreement, an Ineligible Contract shall
be reassigned to the Trust Depositor (and in turn reassigned to the Seller
pursuant to the Transfer and Sale Agreement) as described in the preceding
paragraph, and the Trust Depositor shall make (or shall cause the Seller to
make) a deposit in the Collection Account in immediately available funds in an
amount equal to the sum of the Discounted Contract Balance of the Ineligible
Contract (utilizing, for purposes of calculating the Discounted Contract
Balance, the Discount Rate at the time such Ineligible Contract was transferred
to the Issuer) and any outstanding Servicer Advances thereon. Any amount
deposited into the Collection Account in connection with the reassignment of an
Ineligible Contract (the amount of such deposit being referred to herein as a
"Transfer Deposit Amount" shall be considered payment in full of the Ineligible
Contract. Any such Transfer Deposit Amount shall be treated as an Available
Amount. In the alternative, the Seller may convey to the Trust Depositor and in
turn cause the Trust Depositor to convey to the Issuer, for concurrent pledge to
the Indenture Trustee, a Substitute Contract (otherwise satisfying the terms and
conditions generally applicable to Substitute Contracts in other situations
described herein) in replacement for the affected Ineligible Contract, which
shall thereupon be deemed released by the Indenture Trustee and reconveyed
through the Trust Depositor to the Seller.
Concentration Amounts
In addition to the representations and warranties made by the Seller and
the Trust Depositor with respect to the Contracts as described above under
"--Representations and Warranties," the Seller and the Trust Depositor will
represent and warrant in the Transfer and Sale Agreement and the Sale and
Servicing Agreement, respectively, as of the initial Cutoff Date as follows:
(i) the ADCB of all Contracts with a single End-User as
of the initial Cutoff Date does not exceed ____% of
the ADCB of the Contract Pool as of the initial
Cutoff Date;
(ii) the ADCB of all Contracts with the twenty (20)
largest End-Users (by ADCB of Contracts with such
End-Users) as of the initial Cutoff Date does not
exceed ____% of the ADCB of the Contract Pool as of
the initial Cutoff Date;
(iii) the ADCB of all Contracts related to a single Vendor
as of the initial Cutoff Date does not exceed ____%
of the ADCB of the Contract Pool as of the initial
Cutoff Date;
(iv) the ADCB of all Contracts with End-Users located in a
single State of the United States as of the initial
Cutoff Date does not exceed ____% of the ADCB of the
Contract Pool as of the initial Cutoff Date; and
(v) the ADCB of all Contracts with related Equipment of a
single type as of the Cutoff Date does not exceed
____% of the ADCB of the Contract Pool as of the
initial Cutoff Date.
On the date an Additional Contract or Substitute Contract is added to the
Contract Pool and the Seller will make the foregoing representations and
warranties as if such transfer occurred on the Closing Date; provided that, for
the purposes thereof (i) the Contract Pool on the Closing Date shall be deemed
to include such Additional Contract or Substitute Contract, as the case may be,
in lieu of the Contract being replaced or substituted and (ii) the Discounted
Contract Balance of such Additional Contract or Substitute Contract, as the case
may be, shall be equal to the Discounted Contract Balance thereof as of the
related Cutoff Date.
Pursuant to the Sale and Servicing Agreement, the Trust Depositor will be
obligated to repurchase from the Issuer and in turn pursuant to the Transfer and
Sale Agreement the Seller will be obligated to repurchase from the Trust
Depositor, at such time as there is a breach caused by any of the foregoing
representations or warranties proving to have been incorrect when made, which
breach has not been cured or waived in all material respects, any Additional
Contract or Substitute Contract causing such breach or such number of Contracts
as shall be necessary to remedy such breach (each such Contract, a "Warranty
Contract"). Such repurchase shall occur no later than 90 days after the Trust
Depositor or the Seller becomes aware, or receives written notice from the
Servicer, the Issuer or the Indenture Trustee of such breach. This repurchase
obligation will constitute the sole remedy against the Trust Depositor and the
Seller available to the Issuer, the Indenture Trustee and the Noteholders for a
breach of one of the foregoing representations or warranties.
Pursuant to the Sale and Servicing Agreement, the Trust Depositor shall
make (or cause the Seller to make pursuant to the Transfer and Sale Agreement) a
deposit in the Collection Account in immediately available funds in an amount
equal to the sum of the Discounted Contract Balance of the Warranty Contract
(together with accrued interest thereon at the Discount Rate) and any
outstanding Servicer Advances thereon. Any amount deposited into the Collection
Account in connection with the reassignment of a Warranty Contract shall be
considered payment in full thereof. Any such amount shall be considered a
Transfer Deposit Amount and shall be treated as an Available Amount. In the
alternative, the Trust Depositor may instead cause the Seller to convey to the
Trust Depositor, for concurrent conveyance to the Issuer and concurrent pledge
to the Indenture Trustee, a Substitute Contract (otherwise satisfying the terms
and conditions generally applicable to Substitute Contracts in other situations
described herein) in replacement for the affected Warranty Contract, which shall
thereupon be deemed released by the Issuer (and Indenture Trustee) and
reconveyed through the Trust Depositor to the Seller.
Indemnification
The Sale and Servicing Agreement provides that the Servicer will indemnify
the Issuer, the Trust Depositor, 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 Assets pursuant to the Sale and Servicing Agreement except where arising
out of Indemnified Party's bad faith, willful misconduct or negligence. Except
as provided in the preceding sentence, the Sale and Servicing Agreement provides
that none of the Seller, the Servicer, the Trust Depositor 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 holders of Notes or any
other person for any action taken, or for refraining from taking any action, in
good faith pursuant to the Sale and Servicing Agreement. However, none of the
Seller, the Servicer, the Trust Depositor or any of their directors, officers,
employees or agents will be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties thereunder.
In addition, the Sale and Servicing Agreement provides that the Servicer is
not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the Sale and
Servicing Agreement. The Servicer may, in its sole discretion, undertake any
such legal action which it may deem necessary or desirable for the benefit of
holders of Notes with respect to the Sale and Servicing Agreement and the rights
and duties of the parties thereto and the interest of Noteholders.
Pursuant to the Sale and Servicing Agreement, the Servicer, irrevocably and
unconditionally, (i) submits for itself and its property in any legal action
arising out of the Sale and Servicing Agreement and the other Operative
Documents, to the nonexclusive general jurisdiction of the courts of the United
States of America for the Southern District of New York, and appellate courts
therefrom and (ii) waives any objection it may have that any action therein was
brought in an inconvenient court. Notwithstanding the foregoing, a court may
determine, on its own motion, that an action brought against the Servicer in any
such court was brought in an inconvenient forum.
Collection and Other Servicing Procedures
Pursuant to the Sale and Servicing Agreement, the Servicer is responsible
for servicing, collecting, enforcing and administering the Contracts in
accordance with its customary and usual procedures for servicing contracts
comparable to the Contracts. _______ of the Contracts included in the Contract
Pool (representing ___% of the ADCB of the Contract Pool as of the initial
Cut-off Date) will be sub-serviced by the related Vendors, however, the Servicer
will remain primarily liable for all servicing functions with respect thereto.
In addition, the Servicer pursuant to the Sale and Servicing Agreement will
advance Scheduled Payments with respect to any Contract (a "Servicer Advance")
which were due in a Collection Period and were not received and identified to a
Contract by the close of business on the Determination Date, but only to the
extent that the Servicer, in its sole discretion, expects to recover the
Servicer Advance from subsequent payments on or with respect to the Contract.
The Servicer shall be entitled to reimbursement of Servicer Advances from
subsequent payments on or with respect to the Contract, including collections of
any Prepayment Amount, Transfer Deposit Amount or Recoveries with respect to
such Contract, and, if the Servicer determines that Servicer Advances will not
be recovered from the Contracts to which the Servicer Advances were related,
from other Contracts included in the Contract Pool.
Resignation and Certain Other Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the Sale
and Servicing Agreement, except upon determination that such duties are no
longer permissible under applicable law. No such resignation will become
effective until the Back-up Servicer has assumed the Servicer's responsibilities
and obligations as successor Servicer under the Sale and Servicing Agreement.
Any person into which, in accordance with the Sale and Servicing Agreement,
the Servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which the Servicer is a party, or any person
succeeding to the business of the Servicer, will be the successor to the
Servicer under the Sale and Servicing Agreement.
Servicer Default
In the event of any Servicer Default, either the Indenture Trustee or the
Required Controlling Holders, by written notice to the Servicer (and the
Indenture Trustee, if given by the Noteholders) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer, as servicer, under
the Sale and Servicing Agreement. Upon receipt by the Servicer of such a
Termination Notice, all authority and power of the Servicer under the Sale and
Servicing Agreement with respect to any Contract in the Contract Pool will cease
and the same will pass to and be vested in the Back-up Servicer, as the
successor Servicer pursuant to and under the Sale and Servicing Agreement.
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 notice to the Indenture Trustee to make any
payment, transfer or deposit pursuant to the Sale and
Servicing Agreement on or before the date occurring three (3)
Business Days after the date on which notice of such failure
requiring the same to be remedied shall have been given to the
Servicer by the Indenture Trustee, the Trust Depositor or the
Issuer or to the Servicer, the Issuer, the Trust Depositor and
the Indenture Trustee by the Noteholders representing in
aggregate no less than 25% of the Principal Amount of any
Class of Notes affected thereby; or
(b) failure on the part of the Servicer to duly 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 earlier
to occur of (i) the date on which written notice of such
failure requiring the same to be remedied shall have been
given to the Servicer by the Indenture Trustee, the Trust
Depositor or Issuer or to the Servicer, the Trust Depositor,
the Issuer and the Indenture Trustee by the Noteholders
representing in aggregate not less than 25% of the Principal
Amount of any Class of Notes affected thereby and (ii) the
date on which a responsible officer of the Servicer becomes
aware thereof and such failure continues to affect such
Noteholders materially and adversely for such period; or
(c) any representation, warranty or certification made by the
Servicer in the Sale and Servicing Agreement or in any
certificate delivered pursuant to the Sale and Servicing
Agreement shall prove to have been incorrect when made, which
has a material adverse effect on the Noteholders and which
continues to be incorrect in any material respect for a period
of 30 days after the first to occur of (i) the date on which
written notice of such incorrectness requiring the same to be
remedied shall have been given to the Servicer by the
Indenture Trustee, the Trust Depositor or the Issuer, or to
the Servicer, the Trust Depositor, the Issuer and the
Indenture Trustee by Noteholders or by the Indenture Trustee
on behalf of Noteholders representing in aggregate not less
than 25% of the Principal Amount of any Class of Notes
adversely affected thereby and (ii) the date on which a
responsible officer of the Servicer becomes aware thereof,
and such incorrectness continues to affect such Noteholders
materially and adversely for such period; or
(d) an Insolvency Event shall occur with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of five Business Days or
referred to under clause (b) or (c) for a period of 60 days (in addition to any
period provided in (a), (b) or (c)) shall not constitute a Servicer Default
until the expiration of such additional five Business Days or 60 days,
respectively, if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or other similar occurrences. Upon the occurrence of any such event
the Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Sale and
Servicing Agreement and the Servicer shall provide the Issuer, the Trust
Depositor and the Indenture Trustee prompt notice of such failure or delay by
it, together with a description of its efforts to so perform its obligations.
The Servicer shall immediately notify the Indenture Trustee, the Issuer and the
Trust Depositor in writing of any Servicer Default.
Back-up Servicer
___________________ will act as back-up servicer pursuant to the Sale and
Servicing Agreement (in such capacity, the "Back-up Servicer"). Under the Sale
and Servicing Agreement, following the termination or resignation of Mitsui
Vendor Leasing as Servicer, the Back-up Servicer has agreed to act as successor
Servicer. Prior to such event, the Back-up Servicer will have no other duties or
obligations under the Sale and Servicing Agreement, including, without
limitation, the obligation to supervise the performance of the Servicer, and
will have no liability for any action taken or omitted by the Servicer. In the
event that the Back-up Servicer is unable as a matter of law to act as successor
Servicer as provided in the Sale and Servicing Agreement, the Trust Depositor
has the right to contract for the performance of such services with others.
_________________ is a [national] [___________] banking [association]
[corporation] which is ______. _______ engages in [general commercial banking
and trust business, offering a comprehensive range of [corporate, commercial,
correspondent and individual banking services, both domestic and international,
as well as a wide range of trust and custodial services].
Evidence as to Compliance
The Sale and Servicing Agreement provides that on or before [ ] 31 of each
calendar year the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Trust Depositor) to furnish a report to the effect that such
firm has applied certain procedures agreed upon with the Servicer and enumerated
in the Sale and Servicing Agreement and examined certain documents and records
relating to the servicing of the related Contracts all as described in the Sale
and Servicing Agreement and that, on the basis of such procedures, nothing came
to the attention of such firm that caused them to believe that such servicing
was not conducted in compliance with the Sale and Servicing Agreement except for
such exceptions or errors as such firm shall believe to be immaterial and such
other exceptions as shall be set forth in such statement.
The Sale and Servicing Agreement provides for delivery to the Issuer, the
Trust Depositor, the Indenture Trustee and each Rating Agency on or before [ ]
31 of each calendar year of a statement signed by an officer of the Servicer to
the effect that, to the best of such officer's knowledge, the Servicer has
performed its obligations in all material respects under the Sale and Servicing
Agreement throughout the preceding year or, if there has been a default in the
performance of any such obligation, specifying the nature and status of the
default.
Copies of all statements, certificates and reports furnished to the
Indenture Trustee may be obtained by a request in writing delivered to the
Indenture Trustee.
Amendments
The Sale and Servicing Agreement may be amended from time to time by
agreement of the Seller, the Servicer, the Issuer, the Depositor, the Owner
Trustee and the Indenture Trustee without the consent of any Noteholder (i) to
cure any ambiguity or mistake or (ii) to add any consistent provisions; provided
that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of the Noteholders; provided
further that such amendment will be deemed not to affect adversely in any
material respect the interests of the Noteholders, and no such Opinion of
Counsel will be required, if each Rating Agency provides prior written
confirmation that such amendment will not result in a withdrawal or downgrade of
the ratings then assigned to the Notes.
The Sale and Servicing Agreement may also be amended from time to time by
the Seller, the Servicer, the Issuer, Trust Depositor, the Owner Trustee and the
Indenture Trustee with the consent of the Required Controlling Holders for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Sale and Servicing Agreement or of modifying in any
manner the rights of Noteholders. No such amendment, however, may:
(i) reduce in any manner the amount of, or delay the
timing of, distributions which are required to be
made on any Note without the consent of each
Noteholder affected thereby;
(ii) change the definition of (or that of any definition
included within the definition of) or the manner of
calculating the "Class A Principal Payment Amount,"
the "Class A-3 Principal Payment Amount," the "Class
B Principal Payment Amount," the "Class C Principal
Payment Amount," the "Applicable Percentage," the
"Discounted Contract Balance," the "Principal
Amount," or the "Available Amount" without the
consent of each Noteholder; or
(iii) reduce the aforesaid percentage required to consent
to any such amendment without the consent of each
Noteholder affected thereby; or
(iv) modify, amend or supplement the provisions of the
Sale and Servicing Agreement relating to the
allocation of Available Amounts (see "Description of
the Notes--Allocations") without the consent of each
Noteholder; or
(v) make any Note payable in money other than Dollars
without the consent of each Noteholder affected
thereby.
Promptly following the execution of any such amendment (other than an
amendment described in the preceding paragraph), the Indenture Trustee will
furnish written notice of the substance of such amendment to each affected
Noteholder.
Termination
The Sale and Servicing Agreement will terminate upon final distribution of
all moneys or other property or proceeds of the Trust Assets in accordance with
the terms of the Sale and Servicing Agreement and the Indenture. Upon
termination of the Sale and Servicing Agreement, all right, title and interest
in the Trust Assets (other than amounts in accounts maintained by the Indenture
Trustee for the final payment of principal and interest to Noteholders) will be
conveyed and transferred through the Trust Depositor to the Seller.
The Owner Trustee ____________ will be the Owner Trustee under the Sale and
Servicing Agreement. Mitsui Vendor Leasing and its affiliates may from time to
time enter into banking and trustee relationships with the Owner Trustee and its
affiliates. Mitsui Vendor Leasing and its affiliates may hold Notes in their own
names; however, any Notes so held shall not be entitled to participate in any
decisions made or instructions given to the Owner Trustee by the Noteholders as
a group. The Owner Trustee's address is __________________.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Owner Trustee
will have the power to appoint a co-owner trustee or separate trustee of all or
any part of the Trust Assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the Owner Trustee will
be conferred or imposed upon and exercised or performed by the Owner Trustee and
such separate trustee or co-trustee jointly, or, in any jurisdiction in which
the Owner Trustee will be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the Owner
Trustee.
The Owner Trustee may resign at any time, in which event a successor Owner
Trustee will be appointed as provided in the Sale and Servicing Agreement. The
Servicer may also remove the Owner Trustee if such Owner Trustee ceases to be
eligible to continue as such under the Sale and Servicing Agreement. Any
resignation or removal of the Owner Trustee and appointment of a successor Owner
Trustee shall not become effective until acceptance of the appointment by the
successor Owner Trustee.
THE INDENTURE
General
The Notes will be issued pursuant to an Indenture between the Issuer and
the Indenture Trustee. Pursuant to the Sale and Servicing Agreement, the
Indenture Trustee will obtain the benefits of the Sale and Servicing Agreement
for itself and the Noteholders represented thereby.
Events of Default and Restricting Events; Remedies
If an Event of Default referred to in subparagraph (e) (see "Description of
the Notes--Events of Default") has occurred, then and in every such case the
unpaid principal of the Notes, together with interest accrued but unpaid
thereon, and all other amounts due to the Noteholders under the Indenture, shall
immediately and without further act become due and payable.
If any other Event of Default shall have occurred and be continuing, then
and in every such case, the Notes shall be accelerated with accrued but unpaid
interest thereon; provided that such Event of Default may be waived if the
Required Controlling Holders provide the Indenture Trustee and the Issuer
written notice of such waiver.
The Indenture Trustee
The Indenture Trustee with respect to the Notes is
___________________________. Mitsui Vendor Leasing and its affiliates may from
time to time enter into banking and trustee relationships with the Indenture
Trustee and its affiliates. Mitsui Vendor Leasing 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 consist principally of the
distribution of monies received pursuant to the Sale and Servicing Agreement,
the authentication and registration of transfer of Notes under the Indenture,
and the delivery of certain information received from the Trust Depositor and
the Servicer.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the Trust Assets may at the time be located, the Indenture
Trustee will have the power to appoint a co-trustee or separate trustee of all
or any part of the Trust Assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the Indenture Trustee
will be conferred or imposed upon and exercised or performed by the Indenture
Trustee and such separate trustee or co-trustee jointly, or, in any jurisdiction
in which the Indenture Trustee will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Indenture Trustee.
The Indenture Trustee may resign at any time, in which event a successor
Indenture Trustee which meets the requirements of Section 310(a) of the Trust
Indenture Act of 1939, as amended (the "TIA"), 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 such under the Indenture. In such
circumstances, a successor Indenture Trustee which meets the requirements of
Section 310(a) of the TIA 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
At any time and from time to time, the Trust and the Indenture Trustee,
with the written consent of the Required Controlling Holders, may execute a
supplement to the Indenture for the purpose of adding provisions to, or changing
or eliminating provisions of, the Indenture (including any appendix or schedule
hereto); provided that without the consent of each Noteholder under the
Indenture, no such amendment, supplement, waiver or consent shall
(i) reduce the amount or extend the time of payment of any amount
owing or payable under any Note or (except as provided in the
Indenture) increase or reduce the interest payable on any Note
(except that only the consent of the affected holder of a Note
shall be required for any decrease in an amount of or the rate
of interest payable on such Note or any extension for the time
of payment of any amount payable under such Note), or alter or
modify the provisions with respect to the order of priorities
in which distributions thereunder shall be made or with
respect to the amount or time of payment of any such
distribution, or
(ii) reduce, modify or amend any indemnities in favor of any
Noteholder or in favor of or to be paid by the Trust
Depositor, or alter the definition of "Indemnities" to exclude
any Noteholder (except as consented to by each Noteholder
adversely affected thereby), or
(iii) make any Note payable in money other than U.S. dollars, or
(iv) modify the definitions in the Indenture of Required
Controlling Holders, or otherwise modify the percentage of
Noteholders required to effect any modification of the
Indenture.
Termination
The Indenture will terminate upon final distribution of all moneys or other
property or proceeds of the Trust Assets in accordance with the terms of the
Indenture and the Sale and Servicing Agreement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
Transfer of Contracts
As of the Cutoff Date, the Seller, will sell the Contracts to the Trust
Depositor pursuant to the Transfer and Sale Agreement which in turn will be
immediately conveyed to the Issuer pursuant to the Sale and Servicing Agreement.
Under commercial law, the transfer of the Contracts to the Issuer is either a
sale of the Contracts to the Issuer or a grant of a security interest in such
property to the Issuer. The Trust Depositor has taken and will take all actions
that are required under applicable law to perfect the Issuer's interest in the
Contracts in the event the transfer by the Trust Depositor to the Issuer is
deemed to be a loan for commercial law purposes, and, in the event such transfer
is under commercial law or a grant of a security interest, it is the intent of
the Trust Depositor that the Issuer will at all times have a first priority
perfected security interest in the Contracts and in the proceeds thereof, with
certain exceptions. The Trust Depositor will represent and warrant to the Issuer
that, in the event the sale of such Contracts by the Trust Depositor to the
Issuer is deemed to create a security interest under the UCC, there will exist a
valid, subsisting and enforceable first priority perfected security interest in
the Contracts, in existence at the time of the date of conveyance, in favor of
the Issuer. For a discussion of the Issuer's rights arising from these
representations and warranties not being satisfied, see "The Sale and Servicing
Agreement Generally--Representations and Warranties."
Financing statements covering the Contracts will be filed under the UCC by
or on behalf of the Trust Depositor, the Issuer and the Indenture Trustee to
perfect their respective interests in the Contracts and continuation statements
will be filed as required to continue the perfection of such interests. In
addition, the Seller will indicate in the appropriate computer files relating to
the Contracts, that such Contracts have been transferred to the Issuer, and have
been pledged by the Issuer to the Indenture Trustee, and the Seller will deliver
to the Indenture Trustee a computer file or microfiche or written list
containing a true and complete list of all Contracts then being transferred to
the Issuer, identified by account number and by the Discounted Contract Balance
as of the related Cutoff Date. To facilitate servicing and reduce administrative
costs, however, the Contract Files will be retained in the possession of the
Servicer and not deposited with the Indenture Trustee or any other agent or
custodian for the benefit of the Noteholders. Because the Contract Files will
remain in the Servicer's possession, if a subsequent purchaser were able to take
physical possession of the Contract Files without knowledge of such assignment,
the Indenture Trustee's priority interest in the Contracts could be defeated. In
such event, distributions to Noteholders could be adversely affected.
There are also certain limited circumstances under applicable federal or
state law in which prior transferees of Contracts could have an interest in such
Contracts with priority over the Indenture Trustee's interest. A tax or other
government lien on property of the Seller or the Trust Depositor arising prior
to the time a Contract was conveyed to the Trust Depositor or the Issuer,
respectively, may, in either case, have priority over the interest of the Issuer
in such Contract. Under the Transfer and Sale Agreement, the Seller will warrant
to the Trust Depositor, and under the Sale and Servicing Agreement the Trust
Depositor will warrant to the Issuer, that the Contracts have been transferred
free and clear of the lien of any third party other than Permitted Liens. Each
of the Seller and the Trust Depositor will also covenant that it will not sell,
pledge, assign, transfer or grant any lien on any Contract included in the
Contract Pool, other than transfers made pursuant to the Sale and Servicing
Agreement or the Indenture. In addition, as described above under "The Trust
Depositor," the Trust Depositor has been organized as a "bankruptcy remote"
entity which is not engaged in any business or activities unrelated to the
transactions described herein.
Similarly, a tax or other government lien on property of the Issuer arising
prior to the time a Contract is pledged to the Indenture Trustee may also have
priority over the interest of the Issuer in such Contract. Under the Indenture,
the Issuer will warrant to the Indenture Trustee that the Contracts have been
pledged free and clear of the lien of any third party other than Permitted
Liens. The Issuer will also covenant that it will not sell, pledge, assign,
transfer or grant any lien on any Contract included in the Contract Pool, other
than pledges to the Indenture Trustee pursuant to the Indenture.
As used above, "Permitted Liens" shall mean (a) with respect to Contracts
in the Contract Pool: (i) liens for state, municipal or other local taxes if
such taxes shall not at the time be due and payable and (ii) liens in favor of
the Indenture Trustee created pursuant to the Indenture; and (b) with respect to
the related Equipment: (i) materialmen's, warehousemen's, mechanics' and other
liens arising by operation of law in the ordinary course of business for sums
not due, (ii) liens for state, municipal or other local taxes if such taxes
shall not at the time be due and payable, (iii) liens in favor of the Indenture
Trustee created pursuant to the Indenture, (iv) other subordinated liens which
are subordinated to the prior payment of the Notes on terms described in the
Sale and Servicing Agreement and (v) liens granted by the End-Users or Vendors
which are subordinated to the interest of the Issuer and the Indenture Trustee
in such Equipment.
Transfers of Interests in Equipment
In connection with the conveyance of the Contracts to the Issuer, the
Seller's right, title and interest in the related Equipment securing such
Contracts will be assigned by the Seller to the Issuer pursuant to the Sale and
Servicing Agreement, and pledged by the Issuer to the Indenture Trustee pursuant
to the Indenture. It has been the general policy of the Seller to file or cause
to be filed UCC financing statements with respect to Equipment relating to the
Contracts. Due, however, to the administrative burden and expense associated
with amending many filings in numerous states where Equipment is located, no
assignments of the UCC financing statements evidencing the security interest of
the Seller in the Equipment will be filed to reflect the Trust Depositor's, the
Issuer's or the Indenture Trustee's interests therein. While failure to file
such assignments does not affect the Issuer's interest in the Contracts
(including the security interest in the related Equipment granted pursuant to
such Contract) or perfection of the Indenture Trustee's interest in such
Contracts, it does expose the Trust Depositor and the Issuer (and thus
Noteholders) to the risk that the Servicer could inadvertently release its
security interest in the Equipment of record, and it could complicate or impede
the Trust Depositor's, the Issuers's (and the Indenture Trustee's) enforcement,
as assignee, of the Seller's right, title and interest in the Equipment. While
these risks should not affect the perfection or priority of the interest of the
Trust Depositor, the Issuer and the Indenture Trustee in the Contracts or rights
to payment thereunder, they may adversely affect the right of the Trust
Depositor, the Issuer and the Indenture Trustee to receive proceeds of a
disposition of the Equipment related to Defaulted Contracts. Additionally,
statutory liens for repairs or unpaid taxes and other liens arising by operation
of law may have priority even over prior perfected security interests in the
Equipment assigned to the Trust Depositor, the Issuer and in turn the Indenture
Trustee.
Certain Matters Relating to Bankruptcy
The Seller acquired the Contracts from Vendors. If the acquisition of a
Contract by the Seller is treated as a sale of such Contracts from the Vendors
to the Seller, such Contracts generally would not be part of the related
Vendor's bankruptcy estate and would not be available to such Vendor's
creditors. If a Vendor became a debtor in a bankruptcy case then, if an unpaid
creditor of such Vendor or a representative of such creditor, such as a trustee
in bankruptcy, or such Vendor acting as a debtor-in-possession, were to take the
position that the sale of such Contracts to the Seller was ineffective to remove
such Contracts from such Vendor's estate (for instance, that such sale should be
recharacterized as a pledge of Contracts to secure borrowings of such Vendor),
then delays in payments under the Contracts to the Issuer could occur or, should
the court rule in favor of such creditor, representative or Vendor, reductions
in the amount of such payments could result. Further, if the transfer of
Contracts to the Seller is recharacterized as a pledge, a tax or government lien
on the property of the pledging Vendor arising before the Contracts came into
existence may have priority over the Seller's (and hence the Trust Depositor,
the Issuer's and the Indenture Trustee's) interest in the Contracts. Certain
Contracts may be "true leases" and thus subject to rejection by the lessor under
the Bankruptcy Code. Any such Contract which is a "true lease" originated by a
Vendor and transferred to the Seller in a transaction whereby such Vendor
continues to be the "lessor" thereunder (such as a transfer by a Vendor to the
Seller of a security interest in such Contract or a transfer by a Vendor to the
Seller of an interest in the right to payments only under any such Contract),
will be subject to rejection by such Vendor, as debtor-in-possession, or by such
Vendor's bankruptcy trustee. Upon any such rejection,Scheduled Payments under
such rejected Contract may terminate and the Noteholders may be subject to
losses if the remaining unaffected Contracts, and security interests in the
Equipment related thereto, are insufficient to cover the losses.
In the Transfer and Sale Agreement, Mitsui Vendor Leasing will warrant to
the Trust Depositor that the conveyance of the Contracts by the Seller to the
Trust Depositor is a valid sale and transfer of such Contracts to the Trust
Depositor. In addition, the Seller and the Trust Depositor will treat the
transactions described herein as a sale of the Contracts to the Trust Depositor,
and the Seller will take all actions that are required under applicable law to
perfect the Trust Depositor's ownership interest in the Contracts.
Notwithstanding the foregoing, if the Seller became a debtor in a bankruptcy
case and an unpaid creditor of the Seller or a representative of creditors of
the Seller, such as a trustee in bankruptcy, or the Seller acting as a
debtor-in-possession, were to take the position that the sale of Contracts to
the Trust Depositor was ineffective to remove such Contracts from the Seller's
estate (for instance, that such sale should be recharacterized as a pledge of
Contracts to secure borrowings of the Seller), then delays in payments under the
Contracts to the Trust Depositor (and consequently to the Noteholders) could
occur or, should the court rule in favor of such creditor, representative or
debtor, reductions in the amount of such payments could result. If the transfer
of Contracts to the Trust Depositor is recharacterized as a pledge, a tax or
government lien on the property of the Seller arising before the Contracts came
into existence may have priority over the Trust Depositor's (and consequently
the Issuer's and the Indenture Trustee's) interest in the Contracts.
The Trust Depositor will warrant in the Sale and Servicing Agreement that
the security interest therein granted by the Issuer in favor of the Indenture
Trustee is a valid and duly perfected security interest, and will take all
actions that are required under applicable law to perfect the Issuer's and the
Indenture Trustee's respective interests in the Contracts sold by it.
Nevertheless, if the Trust Depositor were to become a debtor in a bankruptcy
case and an unpaid creditor of the Trust Depositor or a representative of
creditors of the Trust Depositor, such as a trustee in bankruptcy, or the Trust
Depositor acting as a debtor-in-possession, were to take the position that the
sale of Contracts to the Issuer was ineffective to remove such Contracts from
the Trust Depositor's estate (for instance, that such sale should be
recharacterized as a pledge of Contracts to secure borrowings of the Trust
Depositor), then delays in payments under the Contracts to the Issuer could
occur or, should the court rule in favor of such creditor, representative or
debtor, reductions in the amount of such payments could result. If the transfer
of Contracts to the Issuer is recharacterized as a pledge, a tax or government
lien on the property of the Trust Depositor arising before the Contracts came
into existence may have priority over the Issuer's and hence the Noteholder's
interest in the Contracts. If the transactions are treated as a sale of
Contracts, generally, the Contracts would not be part of the Trust Depositor's
estate and would not be available to the Trust Depositor's creditors.
Certain restrictions have been imposed on the Trust Depositor and the
Issuer and certain other parties to the transactions described herein which are
intended to reduce the risk of an insolvency proceeding involving the Trust
Depositor or the Issuer. These restrictions include incorporating the Trust
Depositor as a separate, special purpose corporation pursuant to a certificate
of incorporation containing certain restrictions on the nature of its business.
Additionally, the Trust Depositor may commence a voluntary case or preceding
under any bankruptcy or insolvency law, or cause the Trust to commence a
voluntary case or preceding under any bankruptcy or insolvency law, only upon
the affirmative vote of all its directors, including its independent directors,
as long as the Trust Depositor is solvent and does not reasonably foresee
becoming insolvent. The Trust Depositor's certificate of incorporation requires
that the Trust Depositor have at all times at least two independent directors.
However, no assurance can be given that insolvency proceedings involving either
the Trust Depositor or the Trust will not occur. In the event the Trust
Depositor becomes subject to insolvency proceeding, the Trust, the Trust's
interest in the Trust Assets, and the Trust's obligation to make payments on the
Notes might also become subject to such insolvency proceedings. In the event of
insolvency proceedings involving the Trust, the Trust's interest in the Trust
Assets and the Trust's obligation to make payments on the Notes would become
subject to such insolvency proceedings. No assurance can be given that
insolvency proceedings involving Mitsui Vendor Leasing would not lead to
insolvency proceedings of either, or both, of the Trust Depositor or the Trust.
In either such event, or if an attempt were made to litigate any of the
foregoing issues, delays of distributions on the Notes, possible reductions in
the amount of payment of principal of and interest on the Notes and limitations
(including a stay) on the exercise of remedies under the indenture and the Sale
and Servicing Agreement could occur, although the Noteholders would continue
to have the benefit of the Indenture Trustee's security interest in the Trust
Assets under the Indenture.
The right of the Indenture Trustee, as secured party under the Indenture
for the benefit of the Noteholders, to foreclose upon and sell the Trust Assets
is likely to be significantly impaired by applicable bankruptcy laws, including
the automatic stay pursuant to Section 362 of the Bankruptcy Code, if a
bankruptcy proceeding were to be commenced by or against the Trust, and possibly
the Trust Depositor, before or possibly even after the Indenture Trustee has
foreclosed upon and sold the Trust Assets. Under the bankruptcy laws, payments
on debts are not made and secured creditors are prohibited from repossessing
their security from a debtor in a bankruptcy case or from disposing of security
repossessed from such a debtor, without bankruptcy court approval. Moreover, the
bankruptcy laws generally permit the debtor to continue to retain and to use
collateral even though the debtor is in default under the applicable debt
instruments, provided generally that the secured creditor has the right to seek
"adequate protection." The meaning of the term "adequate protection" may vary
according to circumstances, but it is intended in general to protect the value
of the security from any diminution in the value of the collateral as a result
of the use of the collateral by the debtor during the pendency of the bankruptcy
case. In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict whether or to what extent the holders of the Notes would
be compensated for any diminution in value of the Trust Assets. Furthermore, in
the event a bankruptcy court determines that the value of the Trust Assets is
not sufficient to repay all amounts due on the Notes, the Noteholders would hold
secured claims only to the extent of the value of the Trust Assets to which the
holders are entitled, and unsecured claims with respect to such shortfall. The
bankruptcy laws do not permit the payment or accrual of post-petition interest,
costs and attorneys' fees during a debtors bankruptcy case unless, and then only
to the extent, the claims are oversecured.
If an Insolvency Event with respect to the Trust Depositor were to occur,
then an Event of Default would occur with respect to the Notes, and assuming the
Trust Assets were not then subject to being involved in a bankruptcy case, the
Indenture Trustee would sell the Contracts and would use the proceeds of such
sale to pay the outstanding principal of and accrued interest on the Notes to
the extent and in the order of priority described under "Description of the
Notes-Allocations, Following an Event of Default or Restricting Event." The
Noteholders would suffer a loss if the sum of (i) the proceeds of the sale
allocable to the Noteholders and (ii) the proceeds of any collections on the
Contracts in the Collection Account allocable to the Noteholders is insufficient
to pay the Noteholders in full.
State laws impose requirements and restrictions relating to foreclosure
sales and obtaining deficiency judgments following such sales. In the event that
the Noteholders must rely on repossession and disposition of any Equipment to
recover amounts due on Defaulted Contracts, such amounts may not be realized
because of the application of these requirements and restrictions. Other factors
that may affect the ability of the Noteholders to realize the full amount due on
a Contract include the failure to file financing statements to perfect the
Seller's, the Trust Depositor's, the Trust's or the Indenture Trustee's, as
applicable, interest in the Equipment, depreciation, obsolescence, damage or
loss of any item of Equipment, and the application of federal and state
bankruptcy and insolvency laws. As a result, the Noteholders may be subject to
delays in receiving payments and losses if the remaining unaffected Contracts
are insufficient to cover such losses.
In addition, if a court, in a lawsuit by an unpaid creditor of the Seller
or by a representative of creditors of the Seller, such as a trustee in
bankruptcy, or by the Seller acting as a debtor-in-possession, were to find
that, at the time of or as a result of any transfer by the Seller of Contracts
to the Trust Depositor, (i) (A) the Seller entered into such transaction with
the intent of hindering, delaying or defrauding creditors or (B) the Seller
received less than a reasonably equivalent value or fair consideration as a
result of such transfer and (ii) the Seller (A) was insolvent or would be
rendered insolvent by such transfer, (B) was engaged in a business or
transaction for which its assets constituted unreasonably small capital after
such transfer or (C) intended to incur, or believed that it would incur,
indebtedness beyond its ability to pay as the obligations under such
indebtedness matured (as the foregoing terms are defined in or interpreted under
the relevant fraudulent conveyance statutes), such court could invalidate such
transfer to the Trust Depositor or the Trust, or substantively consolidate the
Trust Depositor, the Trust and the Seller, or subordinate the rights of the
Noteholders to the rights of unsecured creditors of the Seller, or take other
actions that would be adverse to the Noteholders.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction that is being applied. Generally, however, an
entity would be considered insolvent if the fair saleable value of its assets is
less than the amount of its liabilities (including contingent liabilities) or
the amount that will be required to pay its probable liabilities on its existing
debts as they become absolute and matured. The Trust Depositor believes that it
and the Seller have entered into these transactions for proper purposes and in
good faith and that the purchase price for the Contracts represents reasonably
equivalent value or fair consideration for the transfers of such Contracts by
the Seller to the Trust Depositor.
The Issuer will receive, on the Closing Date, a certificate from the Seller
to the effect that (i) the Seller did not intend, in entering into the Transfer
and Sale Agreement and consummating the transactions contemplated thereby, to
hinder, delay or defraud either then present or future creditors or any other
person to which the Seller was or would thereafter become, as of or after the
consummation of such transactions, indebted and (ii) the purchase price for the
Contracts sold under the Transfer and Sale Agreement represented reasonably
equivalent value or fair consideration as a result of the transfers of such
Contracts to the Trust Depositor. However, there can be no assurance, however,
that a court would reach the same conclusion.
Certain states have adopted a version of Article 2A of the UCC ("Article
2A"), which purports to codify many provisions of existing common law. Although
there is little precedent regarding how Article 2A will be interpreted, it may,
among other things, limit enforceability of any "unconscionable" lease or
"unconscionable" provision in a lease, provide a lessee with remedies, including
the fight to cancel the lease contract, for certain lessor breaches or defaults,
and may add to or modify the terms of "consumer leases" and leases where the
lessee is a "merchant lessee." However, in the Transfer and Sale Agreement, the
Seller will represent that (i) no Contract is a "consumer lease" and (ii) each
End-User has accepted the equipment leased to it and, after reasonable
opportunity to inspect and test, has not notified the Seller of any defects
therein. Article 2A, moreover, recognizes typical commercial lease "hell or high
water" rental payment clauses and validates reasonable liquidated damages
provisions in the event of lessor or lessee defaults. Article 2A also recognizes
the concept of freedom of contract and permits the parties in a commercial
context wide degree of latitude to vary provisions of the law.
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general and brief discussion of certain United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes. The discussion that follows, and the opinion described below of Brown
& Wood LLP, special tax counsel to the Trust Depositor ("Tax Counsel"), are
based upon current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations promulgated thereunder, current
administrative rulings, judicial decisions and other applicable authorities in
effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect. There are no cases, regulations, or Internal Revenue Service
("IRS") rulings on comparable transactions or instruments to those described
herein. As a result, there can be no assurance that the IRS will not challenge
the conclusions reached herein, and no ruling from the IRS has been or will be
sought on any of the issues discussed below. Furthermore, legislative, judicial
or administrative changes may occur, perhaps with retroactive effect, which
could affect the accuracy of the statements and conclusions set forth herein as
well as the tax consequences to Noteholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to Noteholders in light of their personal
investment or tax circumstances nor to certain types of holders who may be
subject to special treatment under the federal income tax laws (including,
without limitation, financial institutions, broker-dealers, Insurance companies,
foreign persons, tax-exempt organizations, and persons who hold the Notes as
part of a straddle, hedging, or conversion transaction). The discussion is
generally directed to prospective purchasers who purchase Notes at the time of
original issue, who are citizens or residents of the United States, and who hold
the Notes as "capital assets" within the meaning of Section 1221 of the Code.
Taxpayers and preparers of tax returns (including those filed by any partnership
or other issuer) should be aware that under applicable Treasury Regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should consult
their own tax advisors and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax treatment has been
discussed herein. PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES
TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES.
Opinion
In the opinion of Tax Counsel, for federal income tax purposes, although no
transaction closely comparable to that contemplated herein has been the subject
of any Treasury Regulation, revenue ruling, or judicial decision, based on the
application of existing law to the facts as set forth in the applicable
agreements, (i) the Issuer will not be treated as an association (or publicly
traded partnership) taxable as a corporation and (ii) the Notes will be treated
as indebtedness. An opinion of counsel does not foreclose the possibility of a
contrary determination by the IRS or by a court of competent jurisdiction, or of
a contrary position by the IRS or Treasury Department in regulations or rulings
issued in the future.
Although it is the opinion of Tax Counsel that the Issuer will not be
treated as an association (or publicly traded partnership) taxable as a
corporation and the Notes will be characterized as indebtedness for federal
income tax purposes, no assurance can be given that such characterization of the
Issuer and the Notes will prevail. If the Issuer were taxable as a corporation
for federal income tax purposes, it would be subject to corporate income tax on
its taxable income. The Issuer's taxable income would include all its income on
the related Contracts and other assets, which may be reduced by its interest
expense on the Notes if the Notes are respected as debt of such corporation. Any
such corporate income tax could materially reduce cash available to make
payments on the Notes. If, contrary to the opinion of Tax Counsel, the IRS also
successfully asserted that one or more of the Notes did not represent debt for
federal income tax purposes, the Notes might be treated as equity interests in
the Issuer. If so treated, it is possible that the Issuer might be treated as a
publicly traded partnership taxable as a corporation unless the Issuer is able
to meet certain qualifying income tests or otherwise qualifies for an exemption
from the publicly traded partnership rules. Even if the Issuer is not taxed as a
corporation, treatment of the Notes as equity interests in a publicly traded
partnership could have adverse tax consequences to certain holders. For example,
income to certain tax-exempt entities (including pension funds) may constitute
"unrelated business taxable income," income to foreign holders generally would
be subject to U.S. tax and U.S. tax return filing and withholding requirements,
individual holders might be subject to certain limitations on their ability to
deduct their share of Issuer expenses, and income from the Issuer's assets would
be taxable to Noteholders without regard to whether cash distributions are made
from the Issuer or the Noteholders' method of tax accounting.
The discussion that follows assumes that the Notes will be treated as
indebtedness for federal income tax purposes. The following discussion is also
based in part upon Treasury regulations interpreting the original issue discount
("OID") provisions of the Code. The OID regulations, however, are subject to
varying interpretations and do not address all issues that would affect
Noteholders.
Taxation of Interest Income to Noteholders
Based upon the discussion below under the heading "OID," Tax Counsel's
interpretation of (i) the definition of "qualified stated interest" and (ii)
other provisions of the OID Code sections and regulations, it is not expected
that the Notes will be issued with OID (i.e., any excess of the stated
redemption price at maturity over their issue price), other than perhaps with a
de minimis amount (i.e., 1/4 of the Notes stated redemption price at maturity
multiplied by the number of full years to maturity). In such case, the stated
interest on each class of Notes should be treated as qualified stated interest
and will be taxable as ordinary income for federal income tax purposes when
received or accrued in accordance with the Noteholders general method of tax
accounting.
OID
If Notes were issued at a discount from their principal amounts or if the
stated interest were not treated as "qualified stated interest," the Notes would
be treated as having OID. Under the OID regulations currently in effect, in
order to have qualified stated interest, the stated interest must be
"unconditionally payable" in cash or property at least once annually. Interest
is unconditionally payable only if reasonable legal remedies exist to compel
timely payment or the debt instrument otherwise provides terms and conditions
that make the likelihood of late payment (other than a late payment that occurs
within a reasonable grace period) or nonpayment a remote contingency. The Issuer
believes that the likelihood of late payment or nonpayment of the stated
interest on the Notes should constitute a remote contingency; the IRS, however,
may disagree. In such case, the stated interest on the Notes would not be
qualified stated interest and the Notes would be considered to have been issued
with OID.
If the Notes are in fact issued with a greater than de minimis amount of
OID or are otherwise treated as having been issued with OID, the following rules
should apply. The excess of the "stated redemption price at maturity" of a Note
(generally equal to its principal amount as of the date of issuance plus all
interest other than "qualified stated interest" payable prior to or at maturity)
over the original issue price (in this case, the initial offering price at which
a substantial amount of the Notes are sold to the public) will constitute OID. A
Noteholder must include OID in income as interest over the term of the Note
under a constant yield method. OID must be included in income in advance of the
receipt of cash representing that income. In general, the amount of OID included
in income is the sum of the "daily portions" of the OID with respect to the Note
for each day during the taxable year the Noteholder held the Note. The daily
portion generally is determined by allocating to each day in an accrual period a
ratable portion of the OID allocable to such accrual period. The amount of OID
allocable to an accrual period is generally equal to the difference between (i)
the product of the Notes adjusted issue price and its yield to maturity and (ii)
the amount of qualified stated interest payments allocable to such accrual
period. The "adjusted issue price" of an OID Note at the beginning of any
accrual period is the sum of its issue price plus the amount of OID allocable to
prior accrual periods minus the amount of prior payments that were not qualified
stated interest.
Alternatively, because the payments on the Notes may be accelerated by
reason of prepayments on the Contracts, OID, other than de minimis OID, on the
Notes, if any, may have to be accrued under Code section 1272(a)(6), which
allocates OID to each day in an accrual period by taking the ratable portion of
the excess of (i) the sum of the present value of the remaining payments on a
Note as of the close of the accrual period and the payments made during the
accrual period that were included in stated redemption price at maturity, over
(ii) the adjusted issue price of the Note at the beginning of the accrual
period. No regulations have been issued under Code section 1272(a)(6) so it is
not clear if such section would apply to the Notes if they are treated as having
OID. Legislation has been proposed which if enacted, would require any OID (or
interest) on the Notes to be computed in accordance with the rules of Section
1272(a)(6) and certain prepayment assumptions.
A holder of a Note issued with de minimis OID must include such OID in
income proportionately as principal payments are made on such Note.
Acquisition Premium
A holder that purchases a Note for an amount less than or equal to the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest but in excess of its adjusted issue price (any such
excess being "acquisition premium") and that does not make the election
described below under "Election to Treat All Interest as Original Issue
Discount" is permitted to reduce the daily portions of OID, if any, by a
fraction, the numerator of which is the excess of the holder's adjusted basis in
the Note immediately after its purchase over the adjusted issue price of the
Note, and the denominator of which is the excess of the sum of all amounts
payable on the Note after the purchase date, other than payments of qualified
stated interest, over the Notes adjusted issue price.
Market Discount
Whether or not the Notes are issued with OID, a subsequent purchaser (i.e.,
a purchaser who acquires a Note not at the time of original issue) of a Note at
a discount will be subject to the "market discount rules" of Sections 1276
through 1278 of the Code. In general, these rules provide that if the holder of
a Note purchases the Note at a market discount (i.e., a discount from its
original issue price plus any accrued OID that exceeds a de minimis amount
specified in the Code) and thereafter recognizes gain upon a disposition (or
receives a principal payment), the lesser of (i) such gain (or the principal
payment) or (ii) the accrued market discount (not previously included in income)
will be taxed as ordinary income. Generally, the accrued market discount will be
the total market discount (not previously included in income) on the Note
multiplied by a fraction, the numerator of which is the number of days the
holder held the Note and the denominator of which is the number of days from the
date the holder acquired the Note until its maturity date. The holder may elect,
however, to determine accrued market discount under the constant yield method.
The adjusted basis of a Note subject to such election will be increased to
reflect market discount included in gross income, thereby reducing any gain or
increasing any loss on a subsequent sale or taxable disposition. Holders should
consult with their own tax advisors as to the effect of making this election.
Limitations imposed by the Code, which are intended to match deductions
with the taxation of income, may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder who elects to include market
discount in gross income as it accrues, however, is exempt from this rule.
Notwithstanding the above rules, market discount on a Note will be
considered to be zero if it is less than a de minimis amount, which is .25% of
the remaining principal balance of the Note multiplied by its expected weighted
average remaining life. If market discount is de minimis, the actual amount of
discount must be allocated to the remaining principal distributions on the Note,
and when such distribution is received, capital gain will be recognized equal to
discount allocated to such distribution.
Amortizable Bond Premium
In general, if a subsequent purchaser acquires a Note at a premium (i.e.,
an amount in excess of the amount payable upon the maturity thereof), such
Noteholder will be considered to have purchased the Note with "amortizable bond
premium" equal to the amount of such excess. A Noteholder may elect to deduct
the amortizable bond premium as it accrues under a constant yield method over
the remaining term of the Note. Under proposed regulations, if finalized,
accrued amortized bond premium may only be used as an offset against qualified
stated interest income when such income is included in the holder's gross income
under the holder's normal accounting system.
Election to Treat All Interest as Original Issue Discount
A holder may elect to include in gross income all interest that accrues on
a Note using the constant yield method described above under the heading "OID,"
with modifications described below. For purposes of this election, interest
includes stated interest, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. In applying the constant yield method to a Note
with respect to which this election has been made, the issue price of the Note
will equal the electing holders adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing holder, and no payments on the Note will be treated as payments of
qualified stated interest. This election, if made, may not be revoked without
the consent of the IRS. Holders should consult with their own tax advisors as to
the effect of making this election in light of their individual circumstances.
Disposition of Notes
Generally, capital gain or loss will be recognized on a sale or other
taxable disposition of the Notes in an amount equal to the difference between
the amount realized (other than amounts attributable to, and taxable as, accrued
interest) and the Issuer's tax basis in the Notes. A Noteholders tax basis in a
Note will generally equal his or her cost increased by any OID or market
discount previously included by such Noteholder in income with respect to the
Note and decreased by any bond premium previously amortized and any principal
payments previously received by such Noteholder with respect to the Note.
Subject to the market discount rules of the Code, any such gain or loss will be
capital gain or loss if the Note was held as a capital asset. Capital gain or
loss will be long-term if the Note was held by the holder for more than one year
and otherwise will be short-term. In the case of a taxable individual
Noteholder, capital gain income will be long-term capital gain if the Notes have
been held for more than eighteen months, mid-term capital gain if the Notes have
been held for more than one year but not more than eighteen months, or
short-term capital gain if the Notes have been held for one year or less. Any
capital losses realized generally may be used by a corporate taxpayer only to
offset capital gains, and by an individual taxpayer only to the extent of
capital gains plus $3,000 of other income.
Information Reporting and Backup Withholding
The Indenture Trustee will be required to report annually to the IRS, and
to each Noteholder, the amount of interest paid on the Notes (and the amount
withheld for federal income taxes, if any) for each calendar year, except as to
exempt recipients (generally, corporations, tax-exempt organizations, qualified
pension and profit-sharing trusts, individual retirement accounts, or
nonresident aliens who provide certification as to their status). Each holder
(other than holders who are not subject to the reporting requirements) will be
required to provide, under penalties of perjury, a certificate (Form W-9)
containing the holder's name, address, correct federal taxpayer identification
number and a statement that the holder is not subject to backup withholding.
Should a non-exempt Noteholder fail to provide the required certification, the
Indenture Trustee will be required to withhold (or cause to be withheld) 31% of
the interest otherwise payable to the holder, and remit the withheld amounts to
the IRS as a credit against the holder's federal income tax liability.
Final regulations dealing with backup withholding and information reporting
on income paid to a foreign person and related matters (the "New Withholding
Regulations") were published in the Federal Register on October 14, 1997. In
general, the New Withholding Regulations do not significantly alter the
substantive withholding and information reporting requirements, but do unify
current certification procedures and forms and clarify reliance standards. The
New Withholding Regulations generally will be effective for payments made after
December 31, 1999, subject to certain transition rules. The discussion set forth
above does not take the New Withholding Regulations into account. Prospective
Noteholders are strongly urged to consult their own tax advisor with respect to
the New Withholding Regulations.
Tax Consequences to Foreign Investors
Based upon Tax Counsel's opinion that the Notes will be treated as
indebtedness for federal income tax purposes, the following information
describes the general United States federal income tax treatment of investors
that are not United States persons (each a "Foreign Person"). The term "Foreign
Person" means any person other than (i) a citizen or resident of the United
States, (ii) a corporation or partnership (including any entity treated as a
corporation or a partnership for United States federal income tax purposes)
organized in or under the laws of the United States, unless, in the case of a
partnership, Treasury regulations provide otherwise, (iii) an estate the income
of which is includible in gross income for United States federal income tax
purposes, regardless of its source, or (iv) 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. Notwithstanding the preceding sentence, to
the extent provided in regulations, certain trusts in existence on August 20,
1996, and treated as United States persons prior to such date that elect to
continue to be so treated also shall be considered United States persons.
(a) Interest paid or accrued to a Foreign Person that is not
effectively connected with the conduct of a trade or business
within the United States by the Foreign Person, will generally
be considered "portfolio interest" and generally will not be
subject to United States federal income tax and withholding
tax, as long as the Foreign Person (i) is not actually or
constructively a "10 percent shareholder" of the Issuer or a
"controlled foreign corporation" with respect to which the
Issuer is a "related person" within the meaning of the Code,
and (ii) provides an appropriate statement (Form W-8 or
similar acceptable certification) to the Indenture Trustee or
paying agent (generally the clearing agency, financial
intermediary, or broker) that is signed under penalties of
perjury, certifying that the beneficial owner of the Note is a
Foreign Person and providing that Foreign Person's name and
address. If the information provided in this statement
changes, the Foreign Person must provide a new Form W-8 within
30 days. The Form W-8 is generally effective for three years.
If such interest were not portfolio interest, then it would be
subject to United States federal income and withholding tax at
a rate of 30 percent unless reduced or eliminated pursuant to
an applicable income tax treaty. To qualify for any reduction
as the results of an income tax treaty, the Foreign Person
must provide the paying agent with Form 1001. This form is
also effective for three years.
(b) Any capital gain realized on the sale or other taxable
disposition of a Note by a Foreign Person will be exempt from
United States federal income and withholding tax, provided
that (i) the gain is not effectively connected with the
conduct of a trade or business in the United States by the
Foreign Person, and (ii) in the case of an individual Foreign
Person, the Foreign Person is not present in the United States
for 183 days or more in the taxable year. If an individual
Foreign Person is present in the United States for 183 days or
more during the taxable year, the gain on the disposition of
the Notes could be subject to a 30% withholding tax unless
reduced by treaty.
(c) If the interest, gain or income on a Note held by a Foreign
Person is effectively connected with the conduct of a trade or
business in the United States by the Foreign Person, the
holder (although exempt from the withholding tax previously
discussed if an appropriate statement (Form 4224) is furnished
to the paying agent) generally will be subject to United
States federal income tax on the interest, gain or income at
regular federal income tax rates. Form 4224 is effective for
only one calendar year. In addition, if the Foreign Person is
a foreign corporation,it may be subject to a branch profits
tax equal to 30 percent of its "effectively connected earnings
and profits" within the meaning of the Code for the taxable
year, as adjusted for certain items,unless it qualifies for a
lower rate under an applicable tax treaty.
As discussed above, the New Withholding Regulations were published in the
Federal Register on October 14, 1997, and generally will be effective for
payments made after December 31, 1999, subject to certain transition rules. The
discussion set forth above does not take the New Withholding Regulations into
account. Prospective investors that are Foreign Persons are strongly urges to
consult their own tax advisor with respect to the New Withholding Regulations.
CERTAIN STATE TAX CONSEQUENCES
Because of the differences in state tax laws and their applicability to
different investors, it is not possible to summarize the potential state tax
consequences of holding the Notes. ACCORDINGLY, PURCHASERS OF NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE STATE TAX CONSEQUENCES OF
PURCHASING ANY NOTES.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA ("ERISA
Plans") and prohibits certain transactions between ERISA Plans and persons who
are "parties in interest" (as defined under ERISA) with respect to assets of
such Plans. Section 4975 of the Code prohibits a similar set of transactions
between certain plans or individual retirement accounts ("Code Plans," and
together with ERISA Plans, "Plans") and persons who are "disqualified persons"
(as defined in the Code) with respect to Code Plans. Certain employee benefit
plans, such as governmental plans and church plans (if no election has been made
under Section 410(d) of the Code), are not subject to the requirements of ERISA
or Section 4975 of the Code, and assets of such plans may be invested in the
Notes, subject to the provisions of other applicable federal and state law. Any
such plan which is qualified under Section 401(a) of the Code and exempt from
taxation under Section 501(a) of the Code is, however, subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that investments be made in accordance with
the documents governing the ERISA Plan. Before investing in the Notes, an ERISA
Plan fiduciary should consider, among other factors, whether to do so is
appropriate in view of the overall investment policy and liquidity needs of the
ERISA Plan.
Prohibited Transactions
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit
parties in interest and disqualified persons with respect to ERISA Plans and
Code Plans from engaging in certain transactions involving such Plans or "plan
assets" of such Plans, unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code and Sections 502(i) and 502(l) of
ERISA provide for the imposition of certain excise taxes and civil penalties on
certain persons that engage or participate in such prohibited transactions. The
Issuer, the Underwriter, the Seller, the Servicer, the Trust Depositor, the
Owner Trustee, the Indenture Trustee or certain affiliates thereof may be
considered or may become parties in interest or disqualified persons with
respect to a Plan. If so, the acquisition or holding of the Notes by, on behalf
of or with "plan assets" of such Plan may be considered to give rise to a
"prohibited transaction" within the meaning of ERISA or Section 4975 of the
Code, unless an administrative exemption described below or some other exemption
is available.
The Notes may not be purchased with the assets of a Plan if the Issuer, the
Underwriter, the Servicer, the Owner Trustee, the Indenture Trustee or an
affiliate thereof either (a) has discretionary authority or control with respect
to the investment or management of such assets or (b) has authority or
responsibility to give, or regularly gives, investment advice with respect to
such assets pursuant to an agreement or understanding that such advice will
serve as a primary basis for investment decisions with respect to such assets
and that such advice will be based on the particular needs of the Plan or (c)
is an employer of employees covered under the Plan, unless such investment is
made through an insurance company general or pooled separate account or a bank
collective investment fund and an exemption is available.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the Notes -- for
example, Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager"; PTCE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest; PTCE 91-38, which exempts
certain transactions between bank collective investment funds and parties in
interest; PTCE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest; or PTCE 84-14, which
exempts certain transactions effected on behalf of a Plan by a "qualified
professional asset manager." There can be no assurance that any of these
exemptions will apply with respect to any Plan's investment in the Notes or,
even if an exemption were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment.
Plan Asset Regulation
Pursuant to a Department of Labor regulation codified at 29 C.F.R. section
2510.3-101 (the "Plan Assets Regulation"), in general when a Plan acquires an
equity interest in an entity such as the Issuer and such interest does not
represent a "publicly offered security" or a security issued by an investment
company registered under the Investment Company Act of 1940, as amended, the
Plan's assets include both the equity interest and an undivided interest in each
of the underlying assets of the entity, unless it is established either that the
entity is an "operating company" or that equity participation in the entity by
"benefit plan investors" is not "significant." In general, an "equity interest"
is defined under the Plan Assets Regulation as any interest in an entity other
than an instrument which is treated as indebtedness under applicable local law
and which has no substantial equity features. Thus, if the Notes constitute debt
with no substantial equity features for purposes of the Plan Assets Regulation,
then a Plan's acquisition of Notes will to cause the assets of the Issuer to be
deemed assets of such Plan for purposes of section 404 and 406 of ERISA or
section 4975 of the Code, and the Plan's interest will be deemed to include
solely an interest in such Notes. Conversely, if the Notes constitute an equity
interest for purposes of the Plan Assets Regulation, then a Plan's acquisition
of Notes may cause the assets of the Issuer to be deemed to be assets of such
Plan for purposes of sections 404 and 406 of ERISA and section 4975 of the Code.
In such event, the fiduciary and prohibited transaction restrictions of ERISA
and section 4975 of the Code would apply to transactions involving the assets of
the Issuer, and could give rise to a prohibited transaction for which no
exemption is available.
Although there is little published authority available, the Issuer believes
that the Class A Notes, the Class B Notes and the Class C Notes should be
treated as debt rather than equity interests under the Plan Assets Regulation.
Accordingly, the assets of the Issuer should not be deemed to be assets of Plans
under the Plan Assets Regulation otherwise under ERISA as a result of the
purchase of Notes by or with the assets of Plan. However, before purchasing any
Notes on behalf of a Plan, and ERISA Plan fiduciary should make its own
determination that the Class of Notes being purchased will not constitute equity
interests of the Issuer for purposes of the Plan Assets Regulation.
Due to the complexity of these rules and the penalties imposed, any
fiduciary or other Plan investor who proposes to invest assets of a Plan in the
Notes should consult with its counsel with respect to the potential consequences
under ERISA and Section 4975 of the Code of doing so.
PLAN OF DISTRIBUTION
General
Subject to the terms and conditions set forth in an underwriting agreement
dated ________ __, 1998 for the sale of the Notes, the Trust Depositor has
agreed to sell to First Union Capital Markets, a division of Wheat First
Securities, Inc. (the "Underwriter") and the Underwriter has agreed, subject to
the terms and conditions set forth therein, to purchase all the Notes offered
hereby if any of such Notes are purchased.
The Underwriter has advised the Trust Depositor that the Underwriter
proposes initially to offer the Notes to the public at the price set forth on
the cover page hereof and to certain dealers at such price less a selling
concession not in excess of ____% of the initial principal amount of the Notes.
The Underwriter may allow and such dealers may reallow a concession not in
excess of ____% of the initial principal amount of the Notes. After the initial
public offering, the public offering price and such concessions may be changed.
The underwriting agreement provides that the Trust Depositor and Mitsui
Vendor Leasing, jointly and severally, will indemnify the Underwriter against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or contribute to payments the Underwriter may be required to
make in respect thereof.
In the ordinary course of its business, the Underwriter and its affiliates
have engaged and may engage in commercial banking and investment banking
transactions with Mitsui Vendor Leasing and its affiliates, including the Trust
Depositor.
RATING OF THE NOTES
It is a condition to the issuance of the Notes that the Class A Notes be
rated at least _______, that the Class B Notes be rated at least _____, and that
the Class C Notes be rated at least _______, by _______________ and
__________________, respectively.
The ratings are not a recommendation to purchase, hold or sell the Notes,
inasmuch as such ratings do not comment as to market price or suitability for a
particular investor. Each rating may be subject to revision or withdrawal at any
time by the assigning Rating Agency. There is no assurance that any such rating
will continue for any period of time or that it will not be lowered or withdrawn
entirely by the Rating Agency if, in its judgment, circumstances so warrant. A
revision or withdrawal of such rating may have an adverse effect on the market
price of the Notes. The rating of the Notes addresses the likelihood of the
timely payment of interest and the ultimate payment of principal on the Notes
pursuant to their terms. The rating does not address the rate of Prepayments
that may be experienced on the Contracts and, therefore, does not address the
effect of the rate of Prepayments on the return of principal to the Noteholders.
LEGAL MATTERS
Certain legal matters relating to the Notes, including certain federal
income tax matters, as well as other matters, will be passed upon for the Trust
Depositor and the Seller by Brown & Wood LLP, New York, New York. Certain legal
matters for the Underwriter will be passed upon by Cadwalader, Wickersham &
Taft, New York, New York.
INDEX OF TERMS
Accrual Period..........................................12, 44
ADCB....................................................14, 45
Additional Contract......................................9, 36
Additional Contract Cutoff Date..............................5
Adjusted Contract............................................8
Administration Agreement....................................57
Administration Fee..........................................58
Administrator...............................................57
Aggregate Principal Paydown Amount......................13, 45
Applicable Percentage...................................13, 45
Article 2A..............................................23, 72
Available Amounts...........................................48
Back-up Servicer......................................2, 4, 64
Bankruptcy Code.............................................22
Business Day.................................................5
Calculation Date.............................................5
Cede.........................................................2
CEDEL........................................................2
CEDEL Participants..........................................56
Class A Noteholders.....................................12, 44
Class A Notes.............................................1, 5
Class A Principal Payment Amount............................45
Class A-1 Notes...........................................1, 5
Class A-2 Notes...........................................1, 5
Class A-3 Notes...........................................1, 5
Class B Noteholders.....................................12, 44
Class B Notes.............................................1, 6
Class B Principal Payment Amount............................46
Class C Noteholders.....................................12, 44
Class C Notes.............................................1, 6
Class C Principal Payment Amount............................46
Closing Date.................................................5
Code........................................................72
Code Plans..................................................78
Collection Account......................................10, 50
Collection Period............................................5
Commission...................................................3
Conditional Payment Rate....................................36
Contract Files..............................................58
Contract Pool................................................7
Contracts....................................................2
Cooperative.................................................56
CPR.........................................................36
Cross Over Date.........................................13, 46
CSA..........................................................7
CSAs.....................................................2, 33
Cutoff Date..................................................5
Defaulted Contract.......................................8, 50
Definitive Notes............................................57
Depositaries................................................54
Depositary..................................................44
Determination Date..........................................46
Discount Rate...............................................15
Discounted Contract Balance.............................14, 46
Disqualified persons........................................78
Distribution................................................53
DTC..........................................................2
Eligible Contract.......................................59, 60
Eligible Investments........................................50
Equipment................................................2, 34
ERISA.......................................................78
ERISA Plans.................................................78
Euroclear....................................................2
Euroclear Operator..........................................56
Euroclear Participants......................................56
Event of Default............................................51
Exchange Act.................................................3
Excluded Amounts............................................33
FDIC........................................................50
Foreign Person..............................................77
Holders.....................................................57
Indenture.................................................1, 6
Indenture Trustee............................................1
Indirect Participants.......................................54
Ineligible Contract.........................................60
Initial Class A Note Principal Balance.......................5
Initial Class A-1 Note Principal Balance.....................5
Initial Class A-2 Note Principal Balance.....................5
Initial Class A-3 Note Principal Balance.....................5
Initial Class B Note Principal Balance.......................5
Initial Class C Note Principal Balance.......................6
Initial Reserve Fund Deposit............................11, 49
Insolvency Event............................................51
Insurance Proceeds..........................................58
Investment company..........................................52
IRS.........................................................72
Issuer....................................................1, 4
Lease........................................................7
Leases...................................................2, 33
Mitsui Vendor Leasing.................................1, 4, 41
Monthly Report..............................................53
MVLFCII......................................................1
New Withholding Regulations.................................76
Note Owners..................................................6
Noteholders.............................................12, 44
Notes.....................................................1, 6
OID.........................................................73
Operative Documents.........................................44
Owner Trustee.............................................1, 4
Participants................................................54
Payment Date..............................................2, 5
Permitted Liens.............................................69
Plan Assets Regulation......................................79
Plans.......................................................78
Prepaid Contract.........................................9, 36
Prepayment..................................................19
Prepayment Amount...........................................59
Principal Amount............................................46
PTCE........................................................79
Qualified Institution.......................................50
Rating Agencies.............................................17
Record Date..................................................5
Recoveries..................................................50
Registration Statement.......................................3
Required Controlling Holders................................52
Required Reserve Fund Amount............................11, 49
Reserve Fund............................................11, 49
Reserve Fund Amount.....................................11, 49
Restricting Event ..........................................52
Sale and Servicing Agreement.............................2, 24
Sale and Servicing Agreements...............................24
Scheduled Payments......................................15, 46
Securities Act...............................................3
Seller............................................2, 4, 24, 41
Servicer..............................................2, 4, 41
Servicer Advance........................................16, 62
Servicer Default............................................63
Servicing Fee...........................................16, 52
Servicing Fee Percentage................................16, 52
Statistical Discount Rate....................................8
Substitute Contract......................................8, 36
Substitute Contract Cutoff Date..............................5
Tax Counsel.................................................72
Termination Notice..........................................63
Terms and Conditions........................................56
TIA.........................................................67
Transfer and Sale Agreement..............................2, 24
Transfer Deposit Amount.....................................60
Transferred Property........................................20
True Leases.................................................22
Trust.....................................................1, 4
Trust Agreement..............................................4
Trust Assets.................................................6
Trust Depositor.............................................43
Trustee......................................................4
Trustees....................................................53
Underwriter..............................................1, 80
UNL Pool....................................................35
Vendor......................................................10
Vendor Assignment...........................................10
Vendor Program Agreement....................................10
Vendors.....................................................34
Warranty Contract...........................................61
<TABLE>
<S> <C>
- ------------------------------------------------------- ------------------------------------------------------
- ------------------------------------------------------- ------------------------------------------------------
No dealer, salesman or other person is authorized
to give any information or to make any representation
not contained in this Prospectus and, if given or made, MITSUI VENDOR LEASING
tus and, if given or made, such information or ASSET TRUST 1998-1
representation must not be relied upon as having been Issuer
authorized by the Trust Depositor or the Underwriter.
This prospectus does not constitute an offer to sell or
a solicitation of any offer to buy any security other
than the Securities offered hereby, nor does it
constitute an offer to sell or a solicitation of an MITSUI VENDOR LEASING II
offer to buy any of the Securities to any person in FUNDING CORP.
any jurisdiction in which the person making such offer Trust Depositor
or solicitation to such person. Neither the delivery of MITSUI VENDOR LEASING
this Prospectus nor any sale made hereunder shall under (U.S.A.) INC.
any circumstance create any implication that the Seller and Servicer
information contained herein is correct as of any date
subsequent to the date hereof.
-----------------
TABLE OF CONTENTS ____________________
Page PROSPECTUS
REPORTS TO NOTEHOLDERS................................2 ____________________
AVAILABLE INFORMATION.................................3
SUMMARY OF TERMS......................................4
RISK FACTORS.........................................19
USE OF PROCEEDS......................................24
THE TRUST............................................24
THE CONTRACT POOL....................................24
THE CONTRACTS GENERALLY..............................33
PREPAYMENT AND YIELD
CONSIDERATIONS.......................................36
MITSUI VENDOR LEASING (U.S.A.) INC...................41 First Union Capital Markets
DESCRIPTION OF THE NOTES.............................44
THE SALE AND SERVICING AGREEMENT
GENERALLY..........................................58
THE INDENTURE........................................66
CERTAIN LEGAL ASPECTS
OF THE CONTRACTS...................................68
FEDERAL INCOME TAX CONSEQUENCES......................72
CERTAIN STATE TAX CONSEQUENCES.......................78
ERISA CONSIDERATIONS.................................78
PLAN OF DISTRIBUTION.................................80
RATING OF THE NOTES..................................80
LEGAL MATTERS........................................80 _______________, 1998
Until ___________________, 1998, all dealers
effecting transactions in the registered securities,
whether or not participating in this distribution, may
be required to deliver a Prospectus. This is in addition
to the obligations of dealers to deliver a Prospectus
when acting as underwriters and with respect to their
unsold allotment or subscriptions.
- ------------------------------------------------------- ------------------------------------------------------
- ------------------------------------------------------- ------------------------------------------------------
</TABLE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Notes being registered
hereby are estimated as follows:
SEC registration fee . . . . . . . . . . . . . . . . . . $ *
Legal fees and expenses . . . . . . . . . . . . . . . . . *
Accounting fees and expenses . . . . . . . . . . . . . . *
Blue sky fees and expenses . . . . . . . . . . . . . . . *
Rating agency fees . . . . . . . . . . . . . . . . . . . *
Owner Trustee fee's and expenses . . . . . . . . . . . . *
Indenture Trustee's fees and expenses . . . . . . . . . . *
Printing . . . . . . . . . . . . . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . *
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $
=======
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Mitsui Vendor Leasing Funding Corp. II, the registrant, has undertaken
in its articles of incorporation and bylaws to indemnify, to the maximum
extent permitted by the Delaware General Corporation Law as from time to time
amended, any currently acting or former director, officer, employee and agent
of the registrant against any and all liabilities incurred in connection with
their services in such capacities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits:
1.1 Form of Underwriting Agreement*
3.1 Articles of Incorporation of Mitsui Vendor Leasing Funding Corp. II*
3.2 Bylaws of Mitsui Vendor Leasing Funding Corp. II*
4.1 Form of Trust Agreement*
4.2 Form of Sale and Servicing Agreement*
4.3 Form of Indenture (including forms of Class A Notes, Class B Notes
and Class C Notes)*
5.1 Opinion of Brown & Wood LLP with respect to legality*
8.1 Opinion of Brown & Wood LLP with respect to tax matters*
23.1 Consent of Brown & Wood LLP (included as part of Exhibit 5.1)*
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)*
24.1 Power of Attorney (included on page II-5)
25.1 Statement of Eligibility and Qualification of Indenture Trustee*
-------------------
* To be filed by amendment.
b. Financial Statement Schedules:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of such 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) For purposes of determining any liability under the Act, 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 Act will be deemed to be part of this
registration statement as of the time it was declared effective.
(c) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus will be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will
be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Diego and State of California, on the 3rd day of June, 1998.
MITSUI VENDOR LEASING FUNDING CORP. II
By: /s/ Paul A. Renner
-------------------------------------
Paul A. Renner
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Directors and
Officers of the registrant hereby constitute and appoint John L. Plunkett and
James F. Burke, each with full power of substitution and resubstitution,
their true and lawful attorneys and agents to sign the names of the
undersigned in the capacities indicated below to the registration statement
to which this Power of Attorney is filed as an exhibit, and all amendments
(including post-effective amendments) and supplements thereto, and all
instruments or documents filed as a part thereof or in connection therewith,
with the Securities and Exchange Commission; and each of the undersigned
hereby ratifies and confirms all that said attorneys, agents, or any of them,
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ---------
/s/ Paul A. Renner President (Principal June 3,1998
- ---------------------- Executive Officer);
Paul A. Renner Director
/s/ Jun-ichi Nagatoishi Executive Vice President; June 3, 1998
- -------------------------- Director
Jun-ichi Nagatoishi
/s/ James F. Burke Senior Vice President, June 3, 1998
- -------------------------- Chief Financial Officer
James F. Burke (Principal Financial and
Accounting Officer);
Director
