<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1998
REGISTRATION STATEMENT NO. 333-56029
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
------------------------
AMENDMENT NO. 3 TO
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)
<TABLE>
<S> <C> <C>
DELAWARE 6799 APPLIED FOR
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
MITSUI VENDOR LEASING FUNDING CORP. II
6363 GREENWICH DRIVE, SUITE 100
SAN DIEGO, CALIFORNIA 92122
(619) 558-5004
(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:
<TABLE>
<S> <C>
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
</TABLE>
------------------------
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
TITLE OF EACH CLASS OF AMOUNT TO OFFERING AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1)
<S> <C> <C> <C>
Receivable-Backed Notes.................................. $160,000,000 100% $160,000,000
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF REGISTRATION
SECURITIES TO BE REGISTERED FEE(2) (3)
<S> <C>
Receivable-Backed Notes.................................. $44,497
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum offering price per unit.
(2) A total Registration Fee of $303.03 has been previously paid by the
Registrant.
(3) Pursuant to Rule 457(o) under the Securities Act of 1993, the registration
fee has been calculated on the basis of the proposed maximum offering price
for the Notes.
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Preliminary Prospectus dated November 10, 1998; Subject to Completion
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.
<PAGE>
PROSPECTUS
MITSUI VENDOR LEASING ASSET TRUST 1998-1
ISSUER
$50,487,428 (APPROXIMATE) % CLASS A-1 RECEIVABLE-BACKED NOTES
$23,301,890 (APPROXIMATE) % CLASS A-2 RECEIVABLE-BACKED NOTES
$36,247,384 (APPROXIMATE) % CLASS A-3 RECEIVABLE-BACKED NOTES
$45,913,353 (APPROXIMATE) % CLASS A-4 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 October 1, 1998, between Mitsui
Vendor Leasing Funding Corp. II ("MVLFC II"), as trust depositor (in such
capacity, the "TRUST DEPOSITOR") and Wilmington Trust Company, 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 the four
Classes of Notes listed above (collectively, the "OFFERED NOTES") pursuant to an
indenture, dated as of October 1, 1998 (the "INDENTURE"), between the Trust and
Bankers Trust Company, as indenture trustee (in such capacity, the "INDENTURE
TRUSTEE"). Pursuant to the Indenture, the Trust will also issue two other
classes of Notes, the % Class B Receivable-Backed Notes, and the % Class C
Receivable-Backed Notes, which are not offered hereby and which will be
subordinated to the Offered Notes to the extent described herein. The Notes will
represent asset-backed debt obligations of the Trust and will be secured
pursuant to the Indenture, as more fully described herein, by (i) a pool of
manufacturing, business and healthcare equipment leases and conditional sale
agreements, (the "CONTRACTS"), (ii) all of the Seller's interest in the related
equipment, and (iii) rights in the Sale and Servicing Agreement and Transfer and
Sale Agreement. See "Description of the Notes" herein.
(COVER CONTINUED ON NEXT PAGE)
------------------------------
THERE ARE MATERIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE OFFERED NOTES.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" ON PAGE 20 OF THIS PROSPECTUS.
THE OFFERED 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
DISCOUNTS AND PROCEEDS TO ISSUER
PRICE TO PUBLIC COMMISSIONS(1) (2)
<S> <C> <C> <C>
Per Class A-1 Note................................................ % % %
Per Class A-2 Note................................................ % % %
Per Class A-3 Note................................................ % % %
Per Class A-4 Note................................................ % % %
Total............................................................. $ $ $
</TABLE>
(1) 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."
(2) Before deducting expenses of this offering estimated to be $685,997.
The Offered 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 Offered 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.
<PAGE>
(COVER PAGE CONTINUED)
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 October 1, 1998 (the "TRANSFER AND SALE
AGREEMENT"), by and between the Seller and the Trust Depositor. The Trust
Depositor will concurrently convey such assets to the Trust pursuant to a sale
and servicing agreement, dated as of October 1, 1998 (the "SALE AND SERVICING
AGREEMENT"), among the Trust, the Trust Depositor, Mitsui Vendor Leasing, as
servicer (in its capacity as servicer, the "SERVICER") and Bankers Trust
Company, as back-up servicer (in such capacity, the "BACK-UP SERVICER") and as
Indenture Trustee.
Interest on the Notes will be payable monthly in arrears on the twenty-fifth
(25th day) day of the month (or, if such day is not a Business Day, the next
succeeding Business Day) beginning on November 25, 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 November
1999 Payment Date, with respect to the Class A-2 Notes is the November 2000
Payment Date, with respect to the Class A-3 Notes is the November 2001 Payment
Date and, with respect to the Class A-4 Notes and each other Class of Notes is
the February 2006 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" herein. In addition,
the Trust Depositor will have the option to repurchase all remaining Contracts
and related assets, and thus effect early redemption of the Notes, on any
Payment Date on or after which the aggregate of Discounted Contract Balances
(determined as described herein) of all Contracts included in the Contract Pool
has declined to 15% or less of such aggregate amount as of the initial Cutoff
Date. See "Summary of Terms--Terms of the Notes-- C. Optional Redemption"
herein.
Only the Offered Notes are being offered pursuant to this Prospectus. Sales
of the Offered Notes may not be consummated unless the purchaser has received
this Prospectus.
The Trust Depositor does not intend to apply for listing of the Offered
Notes on any securities exchange or for the inclusion of the Offered Notes on
any automated quotation system.
There currently is no secondary market for the Offered 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 OFFERED NOTES
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 Offered 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 Offered Notes. Such reports will be made available by
DTC, Euroclear or CEDEL and its participants to holders of interests in the
Offered 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.
2
<PAGE>
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 Offered Notes offered pursuant to this Prospectus and
described herein. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549; Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois
60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies
of the Registration Statement may be obtained from the Public Reference Branch
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Information on the operation of the public reference
facilities may be obtained by calling the Commission at 1-800-SEC-0330. 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.
3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. 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 Offered Notes.
See "Risk Factors" on page 20 for a discussion of certain factors that investors
should consider before making an investment in the Offered Notes.
<TABLE>
<S> <C>
Issuer.......................... Mitsui Vendor Leasing Asset Trust 1998-1, (the "ISSUER" or
the "TRUST"), a Delaware business trust. The Trust was
formed on November 4, 1998 by the Trust Depositor and the
Owner Trustee pursuant to the Trust Agreement, dated as of
October 1, 1998, which will be amended and restated on or
about the Closing Date (the "TRUST AGREEMENT"), among the
Trust Depositor, the Servicer 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) 558-5004. 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)
558-5004. See "Mitsui Vendor Leasing (U.S.A.) Inc."
herein.
Indenture Trustee............... Bankers Trust Company, a New York banking corporation, as
indenture trustee under the Indenture described herein (in
such capacity, the "INDENTURE TRUSTEE"). The Indenture
Trustee's corporate trust office is located at Four Albany
Street, New York, New York 10006. See "The Indenture--The
Indenture Trustee" herein.
Owner Trustee................... Wilmington Trust Company, a Delaware banking corporation,
as owner trustee under the Trust Agreement (the "OWNER
TRUSTEE"). The Owner Trustee's offices are located at
Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890, Attention: Corporate Trust Administration.
Back-up Servicer................ Bankers Trust Company, a New York banking corporation 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
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
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, the opening of business on October 1,
1998, and with respect to any Additional Contract or
Substitute Contract transferred to the Trust thereafter,
the opening 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 twenty-fifth (25th) 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 or a day that Mitsui Vendor Leasing is not
open for business, then on the next succeeding Business
Day) of each calendar month commencing November 25, 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 Offered Notes............... $50,487,428 (approximate) aggregate principal amount (the
"CLASS A-1 INITIAL NOTE PRINCIPAL BALANCE") of % Class
A-1 Receivable-Backed Notes (the "CLASS A-1 NOTES"),
$23,301,890 (approximate) aggregate principal amount (the
"CLASS A-2 INITIAL NOTE PRINCIPAL BALANCE") of % Class
A-2 Receivable-Backed Notes (the "CLASS A-2 NOTES"),
$36,247,384 (approximate) aggregate principal amount (the
"CLASS A-3 INITIAL NOTE PRINCIPAL BALANCE") of % Class
A-3 Receivable-Backed Notes (the "CLASS A-3 NOTES"), and
$45,913,353 (approximate) aggregate principal amount (the
"CLASS A-4 INITIAL NOTE PRINCIPAL BALANCE") of % Class
A-4 Receivable-Backed Notes (the "CLASS A-4 NOTES," and
together with the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes, the "CLASS
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
A NOTES" or the "OFFERED NOTES"). The Class A-1 Initial
Note Principal Balance, Class A-2 Initial Note Principal
Balance, Class A-3 Initial Note Principal Balance and the
Class A-4 Initial Note Principal Balance are collectively
referred to as the "CLASS A INITIAL NOTE PRINCIPAL
BALANCE."
The Class A Initial Note Principal Balance will be equal
to 90.35% of the sum of the Discounted Contract Balances
of all Contracts included in the Contract Pool (such sum,
the "ADCB") as of the initial Cutoff Date (with the Class
A-1 Initial Note Principal Balance, the Class A-2 Initial
Note Principal Balance, the Class A-3 Initial Note
Principal Balance and the Class A-4 Initial Note Principal
Balance equal to 29.25%, 13.50%, 21.00% and 26.60%,
respectively, of the initial ADCB of the Contract Pool).
Notes Other than the Offered
Notes......................... $6,472,747 (approximate) aggregate principal amount (the
"CLASS B INITIAL NOTE PRINCIPAL BALANCE") of % Class B
Receivable-Backed Notes (the "CLASS B NOTES"), and
$5,609,714 (approximate) aggregate principal amount (the
"CLASS C INITIAL 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 Class B Initial Note Principal Balance will be equal
to 3.75% of the initial ADCB of the Contract Pool, and the
Class C Initial Note Principal Balance will be equal to
3.25% of the initial ADCB of the Contract Pool.
The Class B and Class C Notes are not offered hereby. Any
information herein regarding the Class B and Class C Notes
is presented solely to provide a better understanding of
the Offered Notes.
The Notes Generally............. The Notes will be issued by the Trust pursuant to an
indenture dated as of October 1, 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. See "Description of the Notes--Allocations"
herein.
Trust Assets.................... The assets pledged to the Indenture Trustee to secure the
Notes will consist the following (the "TRUST ASSETS"): (i)
all right, title and
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
interest of the Seller conveyed pursuant to the Transfer
and Sale Agreement in and to (A) the Contracts (including
all Additional Contracts and Substitute Contracts, if
any), (B) all monies due or to become due in payment of
such Contracts after the related Cutoff Date, including
any prepayments, and any Recoveries received with respect
thereto, but excluding any Scheduled Payments due prior to
the related Cutoff Date and any Excluded Amounts, (C) the
related Equipment (which may be limited to a security
interest therein) including all proceeds from any sale or
other disposition of such Equipment, (D) the related
Contract files (including the executed copy of the
Contract, any title document with respect to the
Equipment, and any related documents delivered to the
Seller or held by the Servicer with respect to the
Contracts) (the "CONTRACT FILES"), (E) any proceeds with
respect to each such Contract under any related Vendor
Assignment, Vendor Program Agreement and any other
guarantee or similar credit enhancement with respect
thereto and (F) any Insurance Proceeds with respect to
each Contract, (ii) such amounts as from time to time may
be held in the Collection Account and the Reserve Fund,
together with all net investment earnings on funds
therein, (iii) the rights of the Trust Depositor under the
Transfer and Sale Agreement, (iv) the rights of the Trust
under the Sale and Servicing Agreement and (v) proceeds of
any of the foregoing. See "The Transfer and Sale Agreement
and Sale and Servicing Agreement Generally--Conveyance of
Contracts" herein. For a description of Excluded Amounts,
see "The Contracts Generally".
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 have the characteristics specified in the
Transfer and Sale Agreement and described herein, and will
be conveyed by the Seller to the Trust Depositor 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
conveyance pursuant to the Transfer and Sale Agreement.
See "The Transfer and Sale Agreement and Sale and
Servicing Agreement Generally-- Representations and
Warranties" 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):
(i) there were 3,005 Contracts in the Contract Pool;
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(ii) the ADCB of the Contract Pool was $172,606,591;
(iii) the final scheduled payment date of the Contract
with the latest maturity or expiration was in July, 2005;
(iv) the average Discounted Contract Balance was
approximately $57,440;
(v) all of the Contracts had (A) original terms to
maturity of not less than 11 months and not more than 90
months, with a weighted average original term to maturity
of approximately 59.5 months and (B) a remaining term to
maturity of not less than 5 months and not more than 82
months, with a weighted average remaining term to maturity
of approximately 43.3 months; and
(vi) the underlying end-users of the Equipment (the "END-
USERS") in respect of approximately 32.38% of the
Contracts were located in the State of California;
approximately 6.38% were located in the State of Texas;
and in no other state represented more 5.00% of the
Contracts. See "Risk Factors--Certain Risks Associated
with Geographic Concentrations of Contracts" and "The
Transfer and Sale Agreement and Sale and Servicing
Agreement Generally--Concentration Amounts" herein.
None of the Contracts was originated outside the United
States or was sold to an End-User located, or permits the
related Equipment to be located, outside the United
States. For further information regarding the Contracts,
see "The Contract Pool" and "The Contracts Generally," as
well as "The Transfer and Sale Agreement and Sale and
Servicing Agreement Generally--Representations and
Warranties" and "--Concentration Amounts" herein.
The statistical information concerning the Contracts set
forth in this Prospectus is based upon information as of
the opening of business on the Cutoff Date and, to the
extent it involves calculations of Discounted Contract
Balances or the ADCB, upon an assumed discount rate for
the Contracts that is equal to 7.505% (the "STATISTICAL
DISCOUNT RATE"). The actual Discount Rate for the
Contracts will be calculated as determined under "ADCB"
below. 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.
Between the initial Cutoff Date and the Closing Date some
amortization of 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
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requirements described herein (a "SUBSTITUTE CONTRACT").
The combined effect of amortization of the Contract Pool,
and any such repurchases or substitutions, together with
the calculation in this Prospectus of Discounted Contract
Balances and the ADCB using the Statistical Discount Rate
will be to cause the statistical distribution of the
characteristics as of the Closing Date for the Contract
Pool to vary somewhat from the statistical distribution of
such characteristics as of the initial Cutoff Date as
presented in this Prospectus. However, the variance of the
statistical distribution of the characteristics for the
Contract Pool presented herein will in no case be greater
than 5% (plus or minus) of the ADCB of the statistical
distribution of the characteristics for the actual
Contract Pool.
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 Seller 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 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. See "The Transfer
and Sale Agreement and Sale and Servicing Agreement
Generally--Collection and Other Servicing Procedures" for
a description of Contract modifications or adjustments
that are permissible servicing activities under the Sale
and Servicing Agreement.
The ADCB of the Defaulted Contracts and Adjusted Contracts
for which the Seller or Servicer may cause the
substitution of Substitute Contracts, together with the
maximum Prepayment Shortfall Amount which (as described
below) the Seller may remit during the term of the Notes,
is limited to an aggregate amount not in excess of 10% of
the ADCB of the Contract Pool as of the initial Cutoff
Date.
CSAs are generally prepayable by their terms, and the
Servicer will be authorized to accept prepayments on
Leases in certain circumstances. 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 that is not
otherwise prepayable at the option of the End-User, 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
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limitation, a full or partial buyout of the Equipment
which is the subject of the Contract, or an Equipment
upgrade. The amount of the prepayment in full must not be
less than the Discounted Contract Balance of such Contract
plus any accrued interest thereon at the Discount Rate to
the last day of the related Collection Period. Certain
CSAs included in the Contract Pool as of the initial
Cut-off Date permit prepayment at the option of the
End-User in an amount that is less than the amount set
forth in the preceding sentence (the amount of such
difference, a "PREPAYMENT SHORTFALL AMOUNT"). The Seller
and the Trust Depositor will be jointly liable to pay any
Prepayment Shortfall Amounts into the Collection Account,
but the Seller's liability therefor will be subject to the
10% limitation described in the preceding paragraph.
Prepayment Shortfall Amounts will be caused to the extent
prepayments occur with respect to those CSAs that use a
rate in excess of the Discount Rate to calculate the
amount required for the End-User to prepay that Contract.
The Seller will represent and warrant that no CSA will
utilize a rate for such purpose that exceeds 8%.
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 (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 or
addition 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
end of the Collection Period prior to the August 2005
Payment Date or, to the extent the final payment on such
Contract is due after the end of that Collection Period,
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
subject to each Lease and the security interest of the
Seller in the Equipment 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
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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 and computer equipment (such
as inventory control and tracking computer equipment,
computer work stations, personal computers, data storage
devices and other computer related peripheral 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 maintained 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 by assignments (each, a
"VENDOR ASSIGNMENT") from equipment manufacturers, dealers
and distributors (each, a "VENDOR") who originated the
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 98.75% of the ADCB of the
Contract Pool as of the initial Cutoff Date) were 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 "Risk
Factors--Certain Legal Risks--Risk of Ineffective Sale in
Vendor Bankruptcy" herein.
The Seller's rights under the Vendor Assignments and the
Vendor Program Agreements (to the extent related to the
Contracts) will
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be assigned 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 will be 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 an amount equal to 1.35% of the ADCB of the
Contract Pool as of the initial Cutoff Date (approximately
$2,330,189) (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 lesser of (a) the
Initial Reserve Fund Deposit and (b) the aggregate
outstanding principal amount of the Notes. Such amount
required to be held in the Reserve Fund is referred to
herein as the "REQUIRED RESERVE FUND AMOUNT." Other than
with respect to the Initial Reserve Fund Deposit made by
the Trust Depositor on the Closing Date, deposits in the
Reserve Fund shall be made solely from Available Amounts,
to the extent available after the payment of certain fees
and expenses, interest and principal on the Notes and
certain other amounts, as described under the heading
"Description of the Notes----Allocations" herein.
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 or principal
on the Notes at the related stated maturity date; provided
that upon the occurrence of an Event of Default or a
Restricting Event, any amounts remaining in the Reserve
Fund shall be applied on the next Payment Date to pay
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 Trust Depositor. Upon any such distributions to the
Trust Depositor, the Noteholders will have no further
rights in, or claims to, such amounts.
The Trust Depositor may, from time to time after the date
of this Prospectus, request each Rating Agency that rated
the Notes to approve a decrease in the Required Reserve
Fund Amount. If each Rating Agency delivers a letter to
the Issuer, the Trust Depositor and the Indenture Trustee
to the effect that such decrease in the Required Reserve
Fund Amount will not result in a qualification, withdrawal
or downgrade of its then current rating of any Class of
Notes, then the Required Reserve Fund Amount will be so
decreased.
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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"), except that interest on the Class A-1
Notes will be calculated on the basis of the actual number
of days in each Accrual Period divided by 360. 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 will be payable on each Payment Date
from Available Amounts for such Payment Date, to the
extent Available Amounts remain after payment of the
Trustees' Fee, any unpaid Servicer Advances, and the
Servicing Fee. If on any Payment Date, after the Trustees'
Fees, any unpaid Servicer Advances and the Servicing Fee
have been paid, Available Amounts are insufficient to pay
all interest due on the Notes, the remaining Available
Amounts will be allocated first to pay all interest due on
the Class A Notes (and will 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, Class A-3
Notes and Class A-4 Notes, as applicable, to the interest
payable on the Class A Notes as a whole), second to pay
all interest due on the Class B Notes, and third to pay
all interest due on the Class C Notes.
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 allocated from 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 remain after payment of the Trustees'
Fee, any unpaid Servicer Advances, the Servicing Fee and
interest payments due on the Notes. The Class A Principal
Payment Amount will be allocated sequentially among the
Class A-1, Class A-2, Class A-3 and Class A-4 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
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full, second, to the Class A-2 Notes until the Class A-2
Notes are paid in full, third, to the Class A-3 Notes
until the Class A-3 Notes are paid in full and fourth, to
the Class A-4 Notes until the Class A-4 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 continue to be
allocated first to the Class A-1 Notes until the Class A-1
Notes are paid in full but will otherwise be allocated
among the Class A-2, Class A-3 and Class A-4 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
the Trustees' Fee, any unpaid Servicer Advances, the
Servicing Fee, interest payments due 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
the Trustees' Fee, any unpaid Servicer Advances, the
Servicing Fee, interest payments due 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. As a result of the levels of the Applicable
Percentage described below, all amounts to be distributed
as principal of the Notes will be distributed on the Class
A-1 Notes until the Class A-1 Notes are paid in full. In
addition principal payment amounts on the Notes of each
Class are payable on any Payment Date only to the extent
that Available Amounts for such Payment Date remain after
payment of the Trustees' Fee, any unpaid Servicer
Advances, the Servicing Fee, interest payments on the
Notes and, in the case of the Class B Notes, the Class A
Principal Payment Amount and, in the case of the Class C
Notes, the Class A Principal Payment Amount and the Class
B Principal Payment Amount. 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."
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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, (i) for the Class A
Notes, 100% until the Class A-1 Notes are paid in full,
and thereafter approximately 87.2006%, (ii) for the Class
B Notes, 0% until the Class A-1 Notes are paid in full,
and thereafter approximately 5.3519%, and (iii) for the
Class C Notes, 0% until the Class A-1 Notes are paid in
full, and thereafter approximately 4.6383%. As of the
Closing Date, the aggregate initial principal amount of
the Notes will be equal to approximately 97.35% of the
initial ADCB of the Contract Pool.
After the occurrence and during the continuance of an
Event of Default or 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
first to the Class A-1 Notes until the Class A-1 Notes
have been paid in full and among the Class A-2, Class A-3
and Class A-4 Notes PRO RATA. See "Description of the
Notes--Allocations" herein.
Stated Maturity Date............ The stated maturity of the Class A-1 Notes is the November
1999 Payment Date; the stated maturity of the Class A-2
Notes is the November 2000 Payment Date; the stated
maturity of the Class A-3 Notes is the November 2001
Payment Date; and the stated maturity of the Class A-4
Notes and each other Class of Notes is the February 2006
Payment Date. However, if all payments on the Contracts
are made as scheduled, final payment with respect to the
Notes (other than the Class A-1 Notes) would occur earlier
than stated maturity.
C. Optional Redemption.......... The Trust Depositor will have the option to 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
or equal to 15% 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
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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 related Payment Date.
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
discounted 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
discounted 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" is equal to %. The Discount Rate is a
per annum rate calculated to equal the sum of (i) the
weighted average of the Class A-1 Interest Rate, Class A-2
Interest Rate, Class A-3 Interest Rate, the Class A-4
Interest Rate, Class B Interest Rate and Class C Interest
Rate, each weighted by (x) the Class A Initial Note
Principal Balance, Class B Initial Note Principal Balance
or Class C Initial Note Principal Balance, as applicable,
and (y) an assumed weighted average life of each Class of
Notes, as applicable, (calculated assuming, among other
things, no losses, delinquencies or prepayments on the
Contracts and the exercise by the Trust Depositor of its
option to cause a redemption of the Notes when the ADCB of
the Contract Pool is equal to 15% of the ADCB of the
Contract Pool as of the initial Cutoff Date), (ii) the
Servicing Fee Percentage and (iii) the Indenture Trustee
and Back-up Servicer Fee Percentage.
"SCHEDULED PAYMENTS" means, with respect to any Contract,
the rent or financing payment (whether principal or
principal and interest)
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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
provide for Scheduled Payments to be made monthly.
Subordination................... The Class B Notes and Class C Notes will be subordinate in
right of payment to the Class A 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 1.00% (the "SERVICING
FEE PERCENTAGE") and (ii) the ADCB of the Contract Pool as
of the last day of the second 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, documentation fees,
administrative charges and extension fees paid by the
End-Users (such fees and charges are included in
definition of Excluded Amounts and thus will not be
required to be deposited by the Servicer in the Collection
Account).
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 Transfer
and Sale Agreement and Sale and Servicing Agreement
Generally--Resignation and Certain Other Matters Regarding
the Servicer" and "--Servicer Termination Event" 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
subsequent payments and Recoveries with respect to 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.
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Repurchase or Substitution for
Certain Breaches of
Representations and
Warranties.................... Pursuant to the Transfer and Sale Agreement and the Sale
and Servicing Agreement, the Seller will be obligated to
accept the reconveyance of a Contract and the interest in
the related Equipment and to deposit the corresponding
Repurchase Amount, if the interest of the Issuer or the
Noteholders in the related Contract 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 by the second
Business Day prior to the third Determination Date
following the date the Seller becomes aware or receives
notice 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 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.
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Risk Factors.................... See "Risk Factors" for a discussion of certain material
risks that should be considered in connection with an
investment in the Offered Notes offered hereby, including
certain legal risks.
Federal Income Tax
Consequences.................. In the opinion of Brown & Wood LLP, federal tax counsel to
the Issuer, for federal income tax purposes, the Offered
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 Offered Notes will be eligible
for purchase by employee benefit plans. Any benefit plan
fiduciary considering purchase of the Offered 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 Offered Notes
that the Class A-1 Notes be rated at least "P-1" and
"D-1+" and that the Class A-2, Class A-3 and the Class A-4
Notes be rated at least "Aaa" and "AAA" by Moody's
Investors Service, Inc. and Duff & Phelps Credit Rating
Co. (collectively, the "RATING AGENCIES"), respectively. A
rating is not a recommendation to purchase, hold or sell
Offered 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
Offered 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.
</TABLE>
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RISK FACTORS
Prospective investors should carefully consider the following risk factors
before investing in the Offered Notes.
ABSENCE OF PUBLIC MARKET; LIMITED LIQUIDITY
There is currently no public market for the Offered Notes and there is no
assurance that one will develop. The Underwriter expects, but is not obligated,
to make a market in the Offered Notes. There is no assurance that any such
market will be created or, if so created, will continue. If no public market
develops, the Noteholders may not be able to liquidate their investment in the
Offered 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 as a result of the breach of certain
representations and warranties in the Transfer and Sale Agreement. 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 Discounted Contract Balance of such Contract on the
Determination Date immediately prior to the date of prepayment plus any accrued
interest thereon at the Discount Rate to the last day of the related Collection
Period.
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. In addition, since prevailing interest rates are
subject to fluctuation, there can be no assurance that Noteholders will be able
to reinvest the distributions on the Offered Notes at yields equaling or
exceeding the yields on the Offered Notes. It is possible that yields on any
such reinvestments will be lower, and may be significantly lower, than the
yields on the Offered Notes. 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 Offered Notes will address the likelihood of timely payment
of interest and the ultimate payment of principal on the Offered Notes pursuant
to their terms. The ratings of Offered 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 Offered 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.
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SUBORDINATION OF THE CLASS B NOTES AND THE CLASS C NOTES TO THE OFFERED 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
offered the Class A Noteholders by the Reserve Fund and 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 California and Texas equal to
32.38% and 6.38%, 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 ADCB 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 holders of the Offered Notes.
RATE AT WHICH EQUIPMENT BECOMES OBSOLETE AFFECTS PREPAYMENT RATE OF THE
CONTRACTS AND THE NOTES; REINVESTMENT RISK
Technological change could affect holders of the Offered Notes. For example,
to the extent that technological change results in changing demands for
Equipment, prepayments on the Contracts may increase. Such prepayments may
result in distributions to holders of the Offered Notes of amounts which would
otherwise have been distributed over the remaining term of the Contracts and
such distributions may require the holders of the Offered Notes to reinvest such
prepayments in a less attractive interest rate environment. See "Risk
Factors--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 are realized, such deficiencies may create a shortfall
with respect to payments on the Offered 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
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event, the remedy available to the Trust against the Servicer or the Indenture
Trustee (as applicable) would be limited to a claim for breach of contract for
violation of its obligations under those Operative Documents or to
indemnification to the extent of loss and expense caused by gross negligence,
willful misconduct or bad faith on its part. Any claim for breach or
indemnification would be subject to all available legal defenses, the delay
inherent in legal proceedings, and the ability of the breaching party to pay any
resulting damages of which there can be no assurance. Thus, even in the event of
recourse to the breaching party, 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
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sale, contribution 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 and contribution 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 Offered Notes may be subject to losses
if the remaining unaffected Contracts, and security interests in the Equipment
related thereto, are insufficient to cover the losses.
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. 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 Offered Notes, possible reductions in the amount of payment
of principal of and interest on the Offered Notes and limitations (including a
stay) on the exercise of remedies under the Indenture and the Sale and
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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.
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 Offered Notes or the Contracts. However, in
connection with the conveyance 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 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 will be a
limited purpose trust with no assets other than the Trust Assets, the holders of
the Offered Notes 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 Offered Notes. If
payments made or realized from the Contracts and the disposition proceeds of the
Equipment are insufficient to make payments on the Offered 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 Offered Notes 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."
RISKS ASSOCIATED WITH COMPUTER PROGRAMS AND THE YEAR 2000
As in the case with most companies using computers in their operations, the
Servicer has the task of assessing the effect of the Year 2000 issue on its
computer programs. The Year 2000 issue refers generally to computer programs and
embedded logic devices having historically been designed to utilize two digits
rather than four to define the applicable year, and the possible resulting
failure of these systems to properly recognize date-sensitive information when
the year changes to 2000.
The computer programs that are significant to Mitsui Vendor Leasing's
servicing operations are of relatively recent design and have been designed to
be Year 2000 compliant. If, nonetheless, problems associated with the Year 2000
issue were to occur with respect to the Servicer's operations, or in the event
that the computer systems of service providers or the Indenture Trustee are not
fully Year 2000 complaint,
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the resulting disruptions in the collection or distribution of receipts on the
Contracts could materially, adversely affect the holders of the Offered Notes.
RISKS ASSOCIATED WITH DTC AND THE YEAR 2000
With respect to Year 2000 issues, DTC has informed members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and income payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately on and after
January 1, 2000. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to its participating organizations
(through which Noteholders will hold their Offered Notes), as well as the
computer systems of third party service providers. DTC has informed the
financial community that it is contacting (and will continue to contact) third
party vendors from whom DTC acquires services to: (i) impress upon them the
importance of such services being year 2000 compliant; and (ii) determine the
extent of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, DTC has stated that it is in the process of
developing such contingency plans as it deems appropriate.
If problems associated with the Year 2000 issue were to occur with respect
to DTC and the services described above, distributors to Noteholders could be
delayed or otherwise adversely affected.
USE OF PROCEEDS
The proceeds from the sale of the Offered Notes, after paying the expenses
of the Issuer and the Trust Depositor, will be paid to Trust Depositor and in
turn to the Seller in consideration of the transfer to the Trust of the
Contracts and related rights.
THE TRUST
The Notes will be issued by the Trust which has been established by the
Trust Depositor pursuant to the Trust Agreement. The Trust will also issue one
or more trust certificates representing equity interests in the trust entitled
to receive distributions subordinate to the Notes, as described in paragraph (K)
under the heading "Description of the Notes--Allocations--AS LONG AS NO DEFAULT
OR RESTRICTING EVENT HAS OCCURRED AND IS CONTINUING" and in paragraph (J) under
the heading "Description of the Notes--Allocations-- FOLLOWING AN EVENT OF
DEFAULT OR RESTRICTING EVENT" herein. The Trust Depositer will initially be the
holder of such trust certificates. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OF THE TRUST
The Trust was formed on November 4, 1998 as a business trust formed in
accordance with the laws of the State of Delaware 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 and trust certificates, (c) making distributions and payments thereon and
(d) engaging in those activities, including entering into agreements, that are
incidental to and necessary or convenient for the accomplishment of the
foregoing purposes. 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.
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THE CONTRACT POOL
THE CONTRACTS
The Contracts will be conveyed by the Seller to the Trust Depositor on the
Closing Date (and as of the initial Cutoff Date) under a transfer and sale
agreement, dated as of October1, 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 October1, 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
conveyance pursuant to 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 in no case be
greater than 5% (plus or minus) of the ADCB. The percentages and balances set
forth in each of the following tables may not sum to the indicated totals due to
rounding.
Substantially all Contracts provide for scheduled payments by the underlying
end-users of the Equipment (the "END-USERS") on a monthly basis. None of the
Contracts were originated outside the United States or were sold to an End-User
located, or permits the related Equipment to be located, outside the United
States.
At origination, the Contracts typically finance an amount substantially
equal to the dealer invoiced cost of the related Equipment. The amount financed
does not always exactly equal the dealer invoiced cost because the discount rate
established by Mitsui Vendor Leasing with the related Vendor under the related
Vendor Program Agreement may vary from the rate the Vendor uses in calculating
the Scheduled Payments due from the End-User. See "Mitsui Vendor Leasing
(U.S.A.) Inc.--Documentation and Pricing" herein.
The value of the Equipment may decline faster than the Discounted Contract
Balance and may be subject to sudden, significant declines in value. See "Risk
Factors--Declines in Market Value of Equipment; Shortfalls with respect to
Available Amounts to pay the Notes." The Equipment includes three general
equipment categories: machining equipment, medical equipment and photographic
equipment. Machining equipment consists of both cutting machines, such as lathes
and grinders, and forming
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machines, such as press brakes. Medical equipment consists of ultrasound and
mammography imagers and analyzers used for testing in laboratories. Photographic
equipment consists of film processors used in retail sales locations for on-site
photo processing. Classifications of Equipment types are based on Mitsui Vendor
Leasing's customary procedures for determining such classifications. The
composition and distribution of the Contracts by remaining term, original term,
Discounted Contract Balance, 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. See "Distributions of Contracts by Equipment Type" in the
tables below.
COMPOSITION OF THE CONTRACTS
<TABLE>
<S> <C>
ADCB.......................................................... $172,606,591
Number of Contracts........................................... 3,005
Weighted Average Original Term................................ 59.48
Range of Original Term (in months)............................ 11.00-90.00
Weighted Average Remaining Term............................... 43.34
Range of Remaining Term (in months)........................... 5.00-82.00
Average Discounted Contract Balance........................... $ 57,440
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY CONTRACT TYPE
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF NUMBER OF PERCENT OF
CONTRACT TYPE CONTRACTS CONTRACTS ADCB TOTAL ADCB
- ------------------------------------------------------------ ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Lease....................................................... 2,218 73.81% $ 123,890,757 71.78%
CSA......................................................... 787 26.19% 48,715,834 28.22%
----- ----------- -------------- -----------
TOTAL:...................................................... 3,005 100.00% $ 172,606,591 100.00%
----- ----------- -------------- -----------
----- ----------- -------------- -----------
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY STATE IN WHICH END-USERS ARE LOCATED
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF NUMBER OF PERCENT OF
STATE CONTRACTS CONTRACTS ADCB TOTAL ADCB
- ---------------------------------------------------------- ----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
Alabama................................................... 8 0.27% $ 722,139 0.42%
Alaska.................................................... 11 0.37% 805,456 0.47%
Arizona................................................... 127 4.23% 6,032,508 3.49%
Arkansas.................................................. 15 0.50% 1,076,450 0.62%
California................................................ 1,229 40.90% 55,890,934 32.38%
Colorado.................................................. 72 2.40% 4,016,642 2.33%
Connecticut............................................... 29 0.97% 2,295,091 1.33%
Delaware.................................................. 5 0.17% 261,088 0.15%
District of Columbia...................................... 2 0.07% 147,518 0.09%
Florida................................................... 41 1.36% 2,722,368 1.58%
Georgia................................................... 42 1.40% 2,604,905 1.51%
Hawaii.................................................... 10 0.33% 416,485 0.24%
Idaho..................................................... 11 0.37% 832,900 0.48%
Illinois.................................................. 75 2.50% 5,802,858 3.36%
Indiana................................................... 50 1.66% 3,797,795 2.20%
Iowa...................................................... 17 0.57% 1,604,681 0.93%
Kansas.................................................... 20 0.67% 1,356,216 0.79%
Kentucky.................................................. 18 0.60% 1,550,909 0.90%
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF NUMBER OF PERCENT OF
STATE CONTRACTS CONTRACTS ADCB TOTAL ADCB
- ---------------------------------------------------------- ----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
Louisiana................................................. 27 0.90% $ 2,256,386 1.31%
Maine..................................................... 8 0.27% 679,259 0.39%
Maryland.................................................. 27 0.90% 1,679,098 0.97%
Massachusetts............................................. 35 1.16% 3,231,299 1.87%
Michigan.................................................. 55 1.83% 4,522,086 2.62%
Minnesota................................................. 52 1.73% 2,687,124 1.56%
Mississippi............................................... 8 0.27% 452,121 0.26%
Missouri.................................................. 24 0.80% 1,637,931 0.95%
Montana................................................... 7 0.23% 358,900 0.21%
Nebraska.................................................. 23 0.77% 1,148,796 0.67%
Nevada.................................................... 33 1.10% 2,117,335 1.23%
New Hampshire............................................. 16 0.53% 1,033,435 0.60%
New Jersey................................................ 33 1.10% 2,158,208 1.25%
New Mexico................................................ 8 0.27% 649,050 0.38%
New York.................................................. 94 3.13% 6,266,284 3.63%
North Carolina............................................ 43 1.43% 2,782,893 1.61%
North Dakota.............................................. 1 0.03% 182,719 0.11%
Ohio...................................................... 83 2.76% 6,825,924 3.95%
Oklahoma.................................................. 22 0.73% 1,645,451 0.95%
Oregon.................................................... 47 1.56% 2,629,941 1.52%
Pennsylvania.............................................. 43 1.43% 3,614,196 2.09%
Rhode Island.............................................. 5 0.17% 219,112 0.13%
South Carolina............................................ 19 0.63% 1,161,935 0.67%
South Dakota.............................................. 10 0.33% 695,424 0.40%
Tennessee................................................. 27 0.90% 1,694,659 0.98%
Texas..................................................... 186 6.19% 11,010,285 6.38%
Utah...................................................... 52 1.73% 3,053,897 1.77%
Vermont................................................... 8 0.27% 887,694 0.51%
Virginia.................................................. 20 0.67% 1,184,100 0.69%
Washington................................................ 106 3.53% 5,372,432 3.11%
West Virginia............................................. 1 0.03% 115,312 0.07%
Wisconsin................................................. 93 3.09% 6,205,362 3.60%
Wyoming................................................... 5 0.17% 320,861 0.19%
Other..................................................... 2 0.07% 190,139 0.11%
----- ----------- ---------------- -----------
TOTAL:.................................................... 3,005 100.00% $ 172,606,591 100.00%
----- ----------- ---------------- -----------
----- ----------- ---------------- -----------
</TABLE>
28
<PAGE>
DISTRIBUTION OF THE CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
PERCENT OF
NUMBER
NUMBER OF PERCENT
EQUIPMENT TYPE OF CONTRACTS CONTRACTS ADCB OF TOTAL ADCB
- ------------------------------------------------------ ------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Machine Tools......................................... 1,065 35.44% $ 50,002,763 28.97%
Machining Centers..................................... 646 21.50% 38,703,877 22.42%
Photo Equipment....................................... 513 17.07% 32,982,965 19.11%
Diagnostic Ultrasound................................. 224 7.45% 19,571,281 11.34%
Lathes................................................ 133 4.43% 6,586,576 3.82%
Medical Diagnostic.................................... 59 1.96% 5,166,614 2.99%
Metal Working Tools................................... 57 1.90% 3,971,702 2.30%
Milling............................................... 103 3.43% 2,807,996 1.63%
Water Jet Cutting Machines............................ 18 0.60% 2,527,361 1.46%
Other................................................. 187 6.22% 10,285,455 5.96%
----- ----------- -------------- ------
TOTAL:................................................ 3,005 100.00% $ 172,606,591 100.00%
----- ----------- -------------- ------
----- ----------- -------------- ------
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY DISCOUNTED CONTRACT BALANCE
<TABLE>
<CAPTION>
PERCENT OF
NUMBER
NUMBER OF PERCENT
DISCOUNTED CONTRACT BALANCE OF CONTRACTS CONTRACTS ADCB OF TOTAL ADCB
- ------------------------------------------------------ ------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
$0 to $1,000.......................................... 2 0.07% $ 1,468 0.00%
Over $1,000 to $5,000................................. 69 2.30% 230,083 0.13%
Over $5,000 to $10,000................................ 167 5.56% 1,276,206 0.74%
Over $10,000 to $15,000............................... 174 5.79% 2,194,028 1.27%
Over $15,000 to $20,000............................... 219 7.29% 3,826,812 2.22%
Over $20,000 to $25,000............................... 221 7.35% 4,965,629 2.88%
Over $25,000 to $50,000............................... 784 26.09% 29,133,898 16.88%
Over $50,000 to $75,000............................... 627 20.87% 38,619,484 22.37%
Over $75,000 to $100,000.............................. 316 10.52% 27,243,136 15.78%
Over $100,000 to $150,000............................. 288 9.58% 34,482,832 19.98%
Over $150,000 to $200,000............................. 77 2.56% 13,272,182 7.69%
Over $200,000 to $250,000............................. 28 0.93% 6,233,320 3.61%
Over $250,000 to $300,000............................. 10 0.33% 2,732,181 1.58%
Over $300,000 to $350,000............................. 14 0.47% 4,477,435 2.59%
Over $350,000 to $400,000............................. 4 0.13% 1,484,049 0.86%
Over $400,000 to $450,000............................. 2 0.07% 860,522 0.50%
Over $450,000 to $500,000............................. 1 0.03% 495,708 0.29%
Over $500,000 to $600,000............................. 2 0.07% 1,077,616 0.62%
----- ----------- -------------- ------
TOTAL:................................................ 3,005 100.00% $ 172,606,591 100.00%
----- ----------- -------------- ------
----- ----------- -------------- ------
</TABLE>
29
<PAGE>
DISTRIBUTION OF THE CONTRACTS BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
PERCENT OF
NUMBER
NUMBER OF PERCENT
REMAINING TERM OF CONTRACTS CONTRACTS ADCB OF TOTAL ADCB
- ------------------------------------------------------ ------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
1 to 6 months......................................... 3 0.10% $ 71,604 0.04%
Over 6 to 12 months................................... 122 4.06% 2,268,746 1.31%
Over 12 to 24 months.................................. 501 16.67% 15,594,799 9.03%
Over 24 to 36 months.................................. 642 21.36% 28,382,965 16.44%
Over 36 to 48 months.................................. 852 28.35% 56,439,620 32.70%
Over 48 to 60 months.................................. 842 28.02% 64,220,938 37.21%
Over 60 to 72 months.................................. 34 1.13% 3,946,941 2.29%
Over 72 to 84 months.................................. 9 0.30% 1,680,980 0.97%
----- ----------- -------------- ------
TOTAL:................................................ 3,005 100.00% $ 172,606,591 100.00%
----- ----------- -------------- ------
----- ----------- -------------- ------
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY
ORIGINAL TERM
<TABLE>
<CAPTION>
PERCENT OF
NUMBER
NUMBER OF PERCENT
ORIGINAL TERM OF CONTRACTS CONTRACTS ADCB OF TOTAL ADCB
- ------------------------------------------------------ ------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Over 6 to 12 months................................... 3 0.10% $ 51,365 0.03%
Over 12 to 24 months.................................. 19 0.63% 394,715 0.23%
Over 24 to 36 months.................................. 149 4.96% 4,690,405 2.72%
Over 36 to 48 months.................................. 191 6.36% 6,939,906 4.02%
Over 48 to 60 months.................................. 2,128 70.82% 119,786,172 69.40%
Over 60 to 72 months.................................. 468 15.57% 33,152,320 19.21%
Over 72 to 84 months.................................. 43 1.43% 6,786,212 3.93%
Over 84 to 96 months.................................. 4 0.13% 805,497 0.47%
----- ----------- -------------- ------
TOTAL:................................................ 3,005 100.00% $ 172,606,591 100.00%
----- ----------- -------------- ------
----- ----------- -------------- ------
</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 leases
and/or loan contracts (including, but not limited to, the Contracts) for users
of a variety of manufacturing, business and medical equipment, consisting
primarily 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 and computer equipment (such as inventory control and tracking
computer equipment, computer work stations, personal computers, data storage
devices and other computer related peripheral equipment). There can be no
assurance that the levels of delinquency and loss experience on the Contracts
will be comparable to that set forth below. Moreover, 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.
30
<PAGE>
MITSUI VENDOR LEASING (U.S.A.) INC. PORTFOLIO
DELINQUENCY EXPERIENCE
AT
<TABLE>
<CAPTION>
OCTOBER 31,
1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
--------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Portfolio Investment(1)................... $ 275,408,547 $ 253,174,525 $ 215,607,093 $ 137,386,577
Delinquencies(2)
31 to 60 days............................... 4.63% 1.95% 2.28% 3.29%
61 to 90 days............................... 1.65% 0.65% 0.33% 2.21%
Over 90 days................................ 0.51% 0.72% 0.24% 0.85%
Total (Percent of Net
Portfolio Investment)(3).................... 6.79% 3.32% 2.85% 6.35%
</TABLE>
- ------------------------
(1) "Net Portfolio Investment" equals the sum of the aggregate amount of all
scheduled payments required to be made under the terms of the related
contracts plus the booked residual value of the related equipment, 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 Net Portfolio Investment. 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.
Mitsui Vendor Leasing's delinquency results at October 31, 1998 showed
increases in both the 31 to 60 day and 61 to 90 day ranges. Mitsui Vendor
Leasing attributes the increase primarily to the temporary effect of recent
changes in servicing personnel. Such personnel changes have been effected and
integrated, restoring the servicing staff to full coverage. No prediction can be
made, however, as to future delinquency levels.
For purposes of the following table, "gross losses" indicates the Net
Portfolio Investment represented by that portion of those contracts that were
written-off as uncollectible by Mitsui Vendor Leasing after giving effect to
amounts collectible under applicable vendor recourse and the net value of
equipment; and "net losses" represents gross losses after giving effect to
recoveries.
MITSUI VENDOR LEASING (U.S.A.) INC. PORTFOLIO
LOSS EXPERIENCE
FOR
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
OCTOBER 31, TWELVE MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED
1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
-------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Net Portfolio Investment(1).... $ 275,408,547 $ 253,174,525 $ 215,607,093 $ 137,386,577
Gross Losses................... $ 124,341 $ 326,084 $ 316,772 $ 126,687
Recoveries..................... $ 38,389 $ 125,514 $ 40,369 $ 9,597
Net Losses..................... $ 85,952 $ 200,570 $ 276,401 $ 117,090
Net Losses as a Percentage of
Average Net Portfolio
Investment(3)................ 0.04%(2) 0.09% 0.16% 0.12%
</TABLE>
- ------------------------
(1) "Net Portfolio Investment" equals the sum of the aggregate amount of all
scheduled payments required to be made under the terms of the related
contracts plus the booked residual value of the related equipment, if any,
plus the unamortized initial direct costs, less the unearned income.
(2) Annualized.
(3) Average Net Portfolio Investment is the average of the Net Portfolio
Investment at the beginning and at the end of each period indicated.
31
<PAGE>
Mitsui Vendor Leasing's delinquency and net loss experience has historically
been affected by prevailing economic conditions, particularly in industries and
geographic regions in which it has end-user concentrations. Recently, for
example, certain segments of the machine tool industry have experienced
declining demand and pricing due to weakened export demand and to general
economic conditions affecting the markets for certain types of machine tools. It
cannot be predicted whether these or other trends will continue, increase or
reverse, nor can any prediction be made as to the effect these trends, combined
with general and other specific economic developments, will have on delinquency
and net loss levels.
Proceeds from the resale or other disposition of the related equipment
constitute a significant component of Mitsui Vendor Leasing's recoveries on
defaulted contracts. The resale value of individual items of equipment may be
subject to obsolescence and sudden, significant decreases in value, whether or
not caused by changes in general economic conditions or conditions affecting
particular industries or geographic areas. Contractual recourse to Vendors, if
available, may be an additional source for recoveries on defaulted contracts.
The availability of such recourse is subject to economic conditions affecting
Vendors and the particular terms of the applicable Vendor Program Agreements.
See "The Contracts Generally--Vendor Program Agreements".
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."
32
<PAGE>
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
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 generally assigned to the Seller pursuant to
the related Vendor Program Agreements. 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 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
is (or its assignees are) 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
33
<PAGE>
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.
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 and computer equipment (such as inventory control and tracking
computer equipment, computer work stations, personal computers, data storage
devices and other computer related peripheral 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 98.75% 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 for 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).
34
<PAGE>
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.
CONTRACT FILES
The Seller will indicate in the appropriate computer files relating to the
Contracts that they 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.
35
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Offered Notes, the aggregate amount of
interest payments on the Offered Notes and the yield to maturity of the Offered
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, Adjusted 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 Offered 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 or an Adjusted Contract
or becomes an Illegible Contract or Warranty Contract which would otherwise be
required to be repurchased by the Seller, the Seller or, in the case of an
Adjusted Contract, the Servicer, 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 which, together with any Prepayment
Shortfall Amounts required to be remitted by the Seller, is not to exceed 10% of
the ADCB of the Contract Pool as of the initial Cutoff Date. In addition, CSAs
are generally prepayable by their terms and 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 not otherwise prepayable by
its terms 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. The amount of the prepayment in full must not be less than
the Discounted Contract Balance of such Prepaid Contract plus any accrued
interest thereon at the Discount Rate to the last day of the related Collection
Period. 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 beyond the end of the
Collection Period prior to the August 2005 Payment Date, or to the extent the
last Scheduled Payment on such Contract is due after the end of that Collection
Period, only Scheduled Payments due on or prior to such date may be included in
the Discounted Contract Balance of such Contract.
The yield to maturity to the holders of the Offered Notes may also be
affected 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 equal
to 15% or less 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 Class A-1, Class A-2,
Class A-3, and Class A-4 Note Initial Note Principal Balance which would be
outstanding on the Payment Dates set forth below assuming a constant payment
rate (a "CONSTANT PAYMENT RATE" or "CPR") of 0%, 6%, 12% and 18%,
36
<PAGE>
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 no
substitutions will be made for Prepaid Contracts, 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 equal to 15% of the ADCB of the Contract
Pool as of the initial Cutoff Date, assume the Closing Date is November 19, 1998
and are based upon the Statistical Discount Rate.
37
<PAGE>
PERCENTAGE OF THE
CLASS A-1 INITIAL PRINCIPAL AMOUNT,
CLASS A-2 INITIAL PRINCIPAL AMOUNT,
CLASS A-3 INITIAL PRINCIPAL AMOUNT, AND
CLASS A-4 INITIAL PRINCIPAL AMOUNT
AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1 NOTES
----------------------------------------------
PAYMENT DATE 0% CPR 6% CPR 12% CPR 18% CPR
<S> <C> <C> <C> <C>
Closing Date............................................. 100.00% 100.00% 100.00% 100.00%
November 25, 1998........................................ 90.71% 89.00% 87.19% 85.26%
December 25, 1998........................................ 82.71% 79.38% 75.86% 72.15%
January 25, 1999......................................... 74.59% 69.73% 64.64% 59.27%
February 25, 1999........................................ 66.39% 60.10% 53.53% 46.66%
March 25, 1999........................................... 58.14% 50.50% 42.57% 34.33%
April 25, 1999........................................... 49.83% 40.94% 31.77% 22.27%
May 25, 1999............................................. 41.48% 31.44% 21.12% 10.51%
June 25, 1999............................................ 33.11% 21.99% 10.64% 0.00%
July 25, 1999............................................ 24.78% 12.69% 0.40% 0.00%
August 25, 1999.......................................... 16.51% 3.52% 0.00% 0.00%
September 25, 1999....................................... 8.18% 0.00% 0.00% 0.00%
October 25, 1999......................................... 0.00% 0.00% 0.00% 0.00%
November 25, 1999........................................ 0.00% 0.00% 0.00% 0.00%
December 25, 1999........................................ 0.00% 0.00% 0.00% 0.00%
January 25, 2000......................................... 0.00% 0.00% 0.00% 0.00%
February 25, 2000........................................ 0.00% 0.00% 0.00% 0.00%
March 25, 2000........................................... 0.00% 0.00% 0.00% 0.00%
April 25, 2000........................................... 0.00% 0.00% 0.00% 0.00%
May 25, 2000............................................. 0.00% 0.00% 0.00% 0.00%
June 25, 2000............................................ 0.00% 0.00% 0.00% 0.00%
July 25, 2000............................................ 0.00% 0.00% 0.00% 0.00%
August 25, 2000.......................................... 0.00% 0.00% 0.00% 0.00%
September 25, 2000....................................... 0.00% 0.00% 0.00% 0.00%
October 25, 2000......................................... 0.00% 0.00% 0.00% 0.00%
November 25, 2000........................................ 0.00% 0.00% 0.00% 0.00%
December 25, 2000........................................ 0.00% 0.00% 0.00% 0.00%
January 25, 2001......................................... 0.00% 0.00% 0.00% 0.00%
February 25, 2001........................................ 0.00% 0.00% 0.00% 0.00%
March 25, 2001........................................... 0.00% 0.00% 0.00% 0.00%
April 25, 2001........................................... 0.00% 0.00% 0.00% 0.00%
May 25, 2001............................................. 0.00% 0.00% 0.00% 0.00%
June 25, 2001............................................ 0.00% 0.00% 0.00% 0.00%
July 25, 2001............................................ 0.00% 0.00% 0.00% 0.00%
August 25, 2001.......................................... 0.00% 0.00% 0.00% 0.00%
September 25, 2001....................................... 0.00% 0.00% 0.00% 0.00%
October 25, 2001......................................... 0.00% 0.00% 0.00% 0.00%
November 25, 2001........................................ 0.00% 0.00% 0.00% 0.00%
December 25, 2001........................................ 0.00% 0.00% 0.00% 0.00%
January 25, 2002......................................... 0.00% 0.00% 0.00% 0.00%
February 25, 2002........................................ 0.00% 0.00% 0.00% 0.00%
Weighted Average Life (To Call).......................... 0.47 0.40 0.34 0.29
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
CLASS A-2 NOTES
----------------------------------------------
PAYMENT DATE 0% CPR 6% CPR 12% CPR 18% CPR
<S> <C> <C> <C> <C>
Closing Date............................................. 100.00% 100.00% 100.00% 100.00%
November 25, 1998........................................ 100.00% 100.00% 100.00% 100.00%
December 25, 1998........................................ 100.00% 100.00% 100.00% 100.00%
January 25, 1999......................................... 100.00% 100.00% 100.00% 100.00%
February 25, 1999........................................ 100.00% 100.00% 100.00% 100.00%
March 25, 1999........................................... 100.00% 100.00% 100.00% 100.00%
April 25, 1999........................................... 100.00% 100.00% 100.00% 100.00%
May 25, 1999............................................. 100.00% 100.00% 100.00% 100.00%
June 25, 1999............................................ 100.00% 100.00% 100.00% 98.17%
July 25, 1999............................................ 100.00% 100.00% 100.00% 77.14%
August 25, 1999.......................................... 100.00% 100.00% 81.85% 56.77%
September 25, 1999....................................... 100.00% 89.40% 63.21% 36.87%
October 25, 1999......................................... 99.71% 72.31% 44.91% 17.51%
November 25, 1999........................................ 84.28% 65.67% 27.21% 0.00%
December 25, 1999........................................ 68.88% 39.22% 9.88% 0.00%
January 25, 2000......................................... 53.65% 23.09% 0.00% 0.00%
February 25, 2000........................................ 38.48% 7.16% 0.00% 0.00%
March 25, 2000........................................... 23.54% 0.00% 0.00% 0.00%
April 25, 2000........................................... 8.74% 0.00% 0.00% 0.00%
May 25, 2000............................................. 0.00% 0.00% 0.00% 0.00%
June 25, 2000............................................ 0.00% 0.00% 0.00% 0.00%
July 25, 2000............................................ 0.00% 0.00% 0.00% 0.00%
August 25, 2000.......................................... 0.00% 0.00% 0.00% 0.00%
September 25, 2000....................................... 0.00% 0.00% 0.00% 0.00%
October 25, 2000......................................... 0.00% 0.00% 0.00% 0.00%
November 25, 2000........................................ 0.00% 0.00% 0.00% 0.00%
December 25, 2000........................................ 0.00% 0.00% 0.00% 0.00%
January 25, 2001......................................... 0.00% 0.00% 0.00% 0.00%
February 25, 2001........................................ 0.00% 0.00% 0.00% 0.00%
March 25, 2001........................................... 0.00% 0.00% 0.00% 0.00%
April 25, 2001........................................... 0.00% 0.00% 0.00% 0.00%
May 25, 2001............................................. 0.00% 0.00% 0.00% 0.00%
June 25, 2001............................................ 0.00% 0.00% 0.00% 0.00%
July 25, 2001............................................ 0.00% 0.00% 0.00% 0.00%
August 25, 2001.......................................... 0.00% 0.00% 0.00% 0.00%
September 25, 2001....................................... 0.00% 0.00% 0.00% 0.00%
October 25, 2001......................................... 0.00% 0.00% 0.00% 0.00%
November 25, 2001........................................ 0.00% 0.00% 0.00% 0.00%
December 25, 2001........................................ 0.00% 0.00% 0.00% 0.00%
January 25, 2002......................................... 0.00% 0.00% 0.00% 0.00%
February 25, 2002........................................ 0.00% 0.00% 0.00% 0.00%
Weighted Average Life (To Call).......................... 1.25 1.09 0.96 0.84
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
CLASS A-3 NOTES
----------------------------------------------
PAYMENT DATE 0% CPR 6% CPR 12% CPR 18% CPR
<S> <C> <C> <C> <C>
Closing Date...................................................... 100.00% 100.00% 100.00% 100.00%
November 25, 1998................................................. 100.00% 100.00% 100.00% 100.00%
December 25, 1998................................................. 100.00% 100.00% 100.00% 100.00%
January 25, 1999.................................................. 100.00% 100.00% 100.00% 100.00%
February 25, 1999................................................. 100.00% 100.00% 100.00% 100.00%
March 25, 1999.................................................... 100.00% 100.00% 100.00% 100.00%
April 25, 1999.................................................... 100.00% 100.00% 100.00% 100.00%
May 25, 1999...................................................... 100.00% 100.00% 100.00% 100.00%
June 25, 1999..................................................... 100.00% 100.00% 100.00% 100.00%
July 25, 1999..................................................... 100.00% 100.00% 100.00% 100.00%
August 25, 1999................................................... 100.00% 100.00% 100.00% 100.00%
September 25, 1999................................................ 100.00% 100.00% 100.00% 100.00%
October 25, 1999.................................................. 100.00% 100.00% 100.00% 100.00%
November 25, 1999................................................. 100.00% 100.00% 100.00% 99.30%
December 25, 1999................................................. 100.00% 100.00% 100.00% 87.70%
January 25, 2000.................................................. 100.00% 100.00% 95.51% 76.50%
February 25, 2000................................................. 100.00% 100.00% 84.90% 65.63%
March 25, 2000.................................................... 100.00% 94.60% 74.61% 55.18%
April 25, 2000.................................................... 100.00% 84.78% 64.59% 45.08%
May 25, 2000...................................................... 96.30% 75.23% 54.92% 35.41%
June 25, 2000..................................................... 87.06% 65.84% 45.50% 26.07%
July 25, 2000..................................................... 77.92% 56.63% 36.34% 17.06%
August 25, 2000................................................... 68.86% 47.59% 27.42% 8.36%
September 25, 2000................................................ 60.04% 38.85% 18.86% 0.08%
October 25, 2000.................................................. 51.25% 30.21% 10.47% 0.00%
November 25, 2000................................................. 42.67% 21.85% 2.42% 0.00%
December 25, 2000................................................. 34.34% 13.78% 0.00% 0.00%
January 25, 2001.................................................. 26.14% 5.92% 0.00% 0.00%
February 25, 2001................................................. 18.03% 0.00% 0.00% 0.00%
March 25, 2001.................................................... 10.07% 0.00% 0.00% 0.00%
April 25, 2001.................................................... 2.21% 0.00% 0.00% 0.00%
May 25, 2001...................................................... 0.00% 0.00% 0.00% 0.00%
June 25, 2001..................................................... 0.00% 0.00% 0.00% 0.00%
July 25, 2001..................................................... 0.00% 0.00% 0.00% 0.00%
August 25, 2001................................................... 0.00% 0.00% 0.00% 0.00%
September 25, 2001................................................ 0.00% 0.00% 0.00% 0.00%
October 25, 2001.................................................. 0.00% 0.00% 0.00% 0.00%
November 25, 2001................................................. 0.00% 0.00% 0.00% 0.00%
December 25, 2001................................................. 0.00% 0.00% 0.00% 0.00%
January 25, 2002.................................................. 0.00% 0.00% 0.00% 0.00%
February 25, 2002................................................. 0.00% 0.00% 0.00% 0.00%
Weighted Average Life (To Call)................................... 2.00 1.80 1.61 1.45
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
CLASS A-4 NOTES
----------------------------------------------
PAYMENT DATE 0% CPR 6% CPR 12% CPR 18% CPR
<S> <C> <C> <C> <C>
Closing Date............................................. 100.00% 100.00% 100.00% 100.00%
November 25, 1998........................................ 100.00% 100.00% 100.00% 100.00%
December 25, 1998........................................ 100.00% 100.00% 100.00% 100.00%
January 25, 1999......................................... 100.00% 100.00% 100.00% 100.00%
February 25, 1999........................................ 100.00% 100.00% 100.00% 100.00%
March 25, 1999........................................... 100.00% 100.00% 100.00% 100.00%
April 25, 1999........................................... 100.00% 100.00% 100.00% 100.00%
May 25, 1999............................................. 100.00% 100.00% 100.00% 100.00%
June 25, 1999............................................ 100.00% 100.00% 100.00% 100.00%
July 25, 1999............................................ 100.00% 100.00% 100.00% 100.00%
August 25, 1999.......................................... 100.00% 100.00% 100.00% 100.00%
September 25, 1999....................................... 100.00% 100.00% 100.00% 100.00%
October 25, 1999......................................... 100.00% 100.00% 100.00% 100.00%
November 25, 1999........................................ 100.00% 100.00% 100.00% 100.00%
December 25, 1999........................................ 100.00% 100.00% 100.00% 100.00%
January 25, 2000......................................... 100.00% 100.00% 100.00% 100.00%
February 25, 2000........................................ 100.00% 100.00% 100.00% 100.00%
March 25, 2000........................................... 100.00% 100.00% 100.00% 100.00%
April 25, 2000........................................... 100.00% 100.00% 100.00% 100.00%
May 25, 2000............................................. 100.00% 100.00% 100.00% 100.00%
June 25, 2000............................................ 100.00% 100.00% 100.00% 100.00%
July 25, 2000............................................ 100.00% 100.00% 100.00% 100.00%
August 25, 2000.......................................... 100.00% 100.00% 100.00% 100.00%
September 25, 2000....................................... 100.00% 100.00% 100.00% 100.00%
October 25, 2000......................................... 100.00% 100.00% 100.00% 93.71%
November 25, 2000........................................ 100.00% 100.00% 100.00% 87.66%
December 25, 2000........................................ 100.00% 100.00% 95.82% 81.91%
January 25, 2001......................................... 100.00% 100.00% 89.93% 76.39%
February 25, 2001........................................ 100.00% 98.58% 84.20% 71.07%
March 25, 2001........................................... 100.00% 92.64% 78.66% 65.97%
April 25, 2001........................................... 100.00% 86.84% 73.30% 61.08%
May 25, 2001............................................. 95.60% 81.14% 68.08% 56.36%
June 25, 2001............................................ 89.63% 75.66% 63.09% 51.88%
July 25, 2001............................................ 83.83% 70.37% 58.32% 47.63%
August 25, 2001.......................................... 78.15% 65.22% 53.72% 0.00%
September 25, 2001....................................... 72.57% 60.22% 49.29% 0.00%
October 25, 2001......................................... 67.15% 55.39% 0.00% 0.00%
November 25, 2001........................................ 61.80% 50.67% 0.00% 0.00%
December 25, 2001........................................ 56.67% 0.00% 0.00% 0.00%
January 25, 2002......................................... 51.64% 0.00% 0.00% 0.00%
February 25, 2002........................................ 0.00% 0.00% 0.00% 0.00%
Weighted Average Life (To Call).......................... 3.06 2.88 2.70 2.51
</TABLE>
41
<PAGE>
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 equal to 15% or
less of the ADCB of the Contract Pool as of the initial Cutoff Date, the average
life of the Class A-4 Notes would be 3.33 years, 3.16 years, 2.98 years and 2.80
years, for the 0% CPR, 6% CPR, 12% CPR and 18% CPR scenarios, respectively.
The weighted average life of a Class A-1 Note, a Class A-2 Note, a Class A-3
Note or a Class A-4 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 or outstanding principal amount of the
Class A-4 Notes, as the case may be, on any given Payment Date by the number of
months (including any fractional period of any such month) 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 Class A-1 Initial Note Principal
Balance, Class A-2 Initial Note Principal Balance, Class A-3 Initial Note
Principal Balance or Class A-4 Note Initial Principal Balance, as the case may
be.
SCHEDULED PAYMENTS
The aggregate amount of Scheduled Payments scheduled to be received for the
Contract Pool by the terms of the related Contracts is set forth in Annex A to
this Prospectus. The information set forth in such Annex A is for informational
purposes and does not purport to be a prediction of actual payments on the
Contract Pool. Actual payments on the Contract Pool will differ, and may differ
significantly, from the information presented therein.
42
<PAGE>
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 and computer
equipment.
Mitsui Vendor Leasing was formerly known as Vendor Financial Services
Corporation, which was incorporated in December 1992 in the State of Delaware.
In October 1993 Vendor Financial Services Corporation was acquired by Mitsui
Leasing Capital Corporation (which acquired 95.1% of its voting capital stock)
and The Sakura Bank Limited (which acquired 4.9% of its voting capital stock).
Mitsui Leasing Capital Corporation is a wholly-owned subsidiary of Mitsui
Leasing and Development, Limited. 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.
As of the date of this Prospectus, Mitsui Vendor Leasing is involved in
various lawsuits arising in the ordinary course of its business. In the opinion
of management of Mitsui Vendor Leasing, the outcome of these matters will not
have a material adverse effect on the financial condition or results of
operations of Mitsui Vendor Leasing.
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 end-user of the equipment,
(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
43
<PAGE>
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 conditional sales contracts (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 are verified by this group and, when all
requirements are satisfied, transaction funding is authorized.
The yield at which Mitsui Vendor Leasing acquires a contract from a vendor
(in other words, the discount rate applied by Mitsui Vendor Leasing to the
scheduled payments to be received from the end-user), is set at the time the
end-user credit is approved by Mitsui Vendor Leasing. However, the discount rate
established by Mitsui Vendor Leasing with such vendor may vary from the rate the
vendor uses in calculating the scheduled payments due from the end-user, thus
resulting in an amount financed by Mitsui Vendor Leasing that is not exactly
equal to the dealer invoiced cost. End of the contract term fixed equipment
purchase options under contracts are priced at no more than such amount financed
by Mitsui Vendor Leasing. Most contracts acquired by Mitsui Vendor Leasing
provide for an 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 its
contractual due date, Mitsui Vendor Leasing's lease management system
automatically assesses a late charge and generates a
44
<PAGE>
computerized invoice which is sent directly to the end-user. Telephone contact
is normally initiated when a contract payment is 15 days past due. Generally, a
demand letter is sent to the end-user and all guarantors when a contract payment
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 a
contract payment 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 RISK POLICY 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 Mitsui Vendor Leasing. 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.
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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 the Class A Notes, the Class B Notes and the Class
C Notes. The Class A Notes are further divided into four sub-Classes: the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes. The
Notes will be issued pursuant to the Indenture between the Issuer and the
Indenture Trustee. Only the Class A Notes are offered hereby (the "OFFERED
NOTES").
Each Class of the Offered 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 "Description of the Notes--Definitive Notes." The
Offered 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 A-4 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, 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 A-4 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"), except that interest on the Class A-1 Notes
will be calculated on the basis of the actual number of days in each Accrual
Period divided by 360. 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 pay the
Trustees' Fee, any outstanding Servicer Advances and 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 pay the Trustees' Fee, any outstanding Servicer Advances, the Servicing Fee,
and 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 pay the Trustees' Fee, any outstanding Servicer
Advances, the Servicing Fee, and interest on the Class A Notes and the Class B
Notes.
If on any Payment Date, after the Trustees' Fee, any unpaid Servicer
Advances and the Servicing Fee have been paid, Available Amounts are
insufficient to pay all interest due on the Notes, the remaining
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Available Amounts will be allocated first to pay all interest due on the Class A
Notes (and will 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, Class
A-3 and Class A-4 Notes, as applicable, to the interest payable on the Class A
Notes as a whole), second to pay all interest due on the Class B Notes, and
third to pay all interest due on the Class C Notes.
PRINCIPAL
The stated maturity of the Class A-1 Notes is the November 1999 Payment
Date; the stated maturity of the Class A-2 Notes is the November 2000 Payment
Date; the stated maturity of the Class A-3 Notes is the November 2001 Payment
Date; and the stated maturity of each other Class of Notes is the February 2006
Payment Date. However, if all payments on the Contracts are made as scheduled,
final payment with respect to the Notes (other than the Class A-1 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 the Trustees' Fee, any unpaid Servicer Advances, the
Servicing Fee and interest payments due 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 the
Trustees' Fee, any unpaid Servicer Advances, the Servicing Fee, interest
payments due 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 the Trustees' Fee, any unpaid Servicer Advances, the
Servicing Fee, interest payments due on the Notes, and the payment of the Class
A Principal Payment Amount and the Class B Principal Payment Amount. See
"--Allocations" herein.
As a result of the levels of the Applicable Percentage described below, all
amounts to be distributed as principal of the Notes will be distributed on the
Class A-1 Notes until the Class A-1 Notes are paid in full. In addition, 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, (i) for the Class A Notes, 100% until
the Class A-1 Notes are paid in full, and thereafter approximately 87.2006%,
(ii) for the Class B Notes, 0% until the Class A-1 Notes are paid in full,
and thereafter approximately 5.3519%, and (iii) for the Class C Notes, 0%
until the Class A-1 Notes are paid in full, and thereafter approximately
4.6383%.
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"CLASS A PRINCIPAL PAYMENT AMOUNT" means, with respect to any Payment
Date, the lesser of (a) the aggregate outstanding principal amount of the
Class A Notes and (b) the Applicable Percentage for the Class A Notes for
such Payment Date, multiplied by the Aggregate Principal Paydown Amount for
such Payment Date; provided, that, on the stated maturity date of the Class
A-1, Class A-2, Class A-3 or Class A-4 Notes, the Class A Principal Payment
Amount shall in no event be less than the amount necessary to reduce the
outstanding principal balance of the maturing Class to zero.
"CLASS B PRINCIPAL PAYMENT AMOUNT" means, with respect to any Payment
Date, the lesser of (a) the aggregate outstanding principal amount of the
Class B Notes and (b) the Applicable Percentage for the Class B Notes for
such Payment Date, multiplied by 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 aggregate outstanding principal amount of the
Class C Notes and (b) the Applicable Percentage for the Class C Notes for
such Payment Date, multiplied by the Aggregate Principal Paydown Amount for
such Payment Date.
"DISCOUNTED CONTRACT BALANCE" means with respect to any Contract, (a) as
of the related Cutoff Date, the present value of all of the remaining
Scheduled Payments becoming due under such Contract after the applicable
Cutoff Date discounted monthly at the Discount Rate and (b) as of any other
date of determination, the sum of (i) the present value of all of the
remaining Scheduled Payments becoming due under such Contract on or after
such date of determination 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.
"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):
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(A) pay to the Trustees their respective portions (if any) of the Trustees'
Fee for such Payment Date together with any unpaid Trustees' Fees from
previous Payment Dates;
(B) pay to the Servicer, the amount of any unreimbursed Servicer Advances;
(C) pay to the Servicer, the monthly Servicing Fee for the preceding
Collection Period together with any amounts in respect of the Servicing
Fee that were due in respect of prior Collection 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, Class A-3 and Class A-4 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 thereon 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 (i) the Class A Principal Payment Amount for such Payment Date,
plus (ii) any unpaid Class A Principal Payment Amount from prior Payment
Dates;
(H) 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;
(I) 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;
(J) pay to the Indenture Trustee for deposit into the Reserve Fund, an
amount equal to the difference between the Required Reserve Fund Amount
and the Reserve Fund Amount on deposit in the Reserve Fund; and
(K) Available Amounts remaining, after the allocations described in
paragraphs (A) through (J) above, shall be paid to the holder of the
trust certificates issued by the Trust 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, Class A-3 and Class A-4
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,
third, to the Class A-3 Notes until the Class A-3 Notes are paid in full and,
fourth, to the Class A-4 Notes until the Class A-4 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 due on or before,
as well as prepayments (and any Prepayment Shortfall Amounts)
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received on or before, the last day of the Collection Period immediately
preceeding such Payment Date (in each case other than Excluded Amounts); (ii)
amounts received upon the repurchase of Contracts by the Seller, (iii)
Recoveries received during the preceding Collection Period from the liquidation
of the Contracts and disposition of the related Equipment upon defaults
thereunder (net of the expenses of such liquidation or disposition), (iv)
proceeds of any Servicer Advances, (v) any amounts allocated from the Reserve
Fund and (vi) earnings on amounts held in the Collection Account and the Reserve
Fund.
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 A-4, 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 Trustees their respective portions (if any) of the Trustees'
Fee for such Payment Date together with any unpaid Trustees' Fees from
previous Payment Dates;
(B) pay to the Servicer, the amount of any unreimbursed Servicer Advance;
(C) pay to the Servicer, the monthly Servicing Fee for the preceding
Collection Period together with any amounts in respect of the Servicing
Fee that were due in respect of prior Collection 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, Class A-3 and Class A-4 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 outstanding principal amount of the Class A Notes has been paid
in full; with all amounts paid as described in this clause to be
allocated first to the Class A-1 Notes until the Class A-1 Notes have
been paid in full and then among the Class A-2, Class A-3 and Class A-4
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 outstanding
principal amount of the Class B Notes has been paid in full;
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(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 outstanding principal amount of the
Class C Notes has been paid in full; and
(J) Available Amounts remaining, after the allocations described in
paragraphs (A) through (I) above, shall be paid to the holder of the
trust certificates issued by the Trust and will thereafter not be
available to make payments in respect of the Notes or otherwise be part
of Available Amounts.
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 an amount equal to 1.35% of the ADCB of the Contract Pool as of the initial
Cutoff Date (approximately $2,330,189) (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 lesser of (a) the Initial Reserve Fund Deposit and (b) the aggregate
outstanding principal amount of the Notes. Such amount required to be held in
the Reserve Fund is referred to herein as the "REQUIRED RESERVE FUND AMOUNT."
Other than with respect to the Initial Reserve Fund Deposit made by the Trust
Depositor on the Closing Date, deposits in the Reserve Fund shall be made solely
from Available Amounts, to the extent available after the payment of certain
fees and expenses, interest and principal on the Notes and certain other
amounts, as described above under "--Allocations--AS LONG AS NO EVENT OF DEFAULT
OR RESTRICTING EVENT HAS OCCURRED AND IS CONTINUING." Amounts on deposit in the
Reserve Fund generally will be invested in Eligible Investments at the direction
of the Servicer (or, if a Servicer Termination Event has occurred and is
continuing, the Indenture Trustee shall direct such investments in accordance
with the Sale and Servicing Agreement). Any earnings (net of losses and
investment expenses) on funds in the Reserve Fund will be deposited in the
Collection Account held therein and be treated as Available Amounts. Losses on
funds in the Reserve Fund will be charged against the amounts on deposit in the
Reserve Fund.
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 or principal on the Notes at the related stated maturity date;
provided that upon the occurrence of an Event of Default or a Restricting Event,
any amounts remaining in the Reserve Fund shall be applied on the next Payment
Date to pay principal on the Notes as described above under "--Allocations--
FOLLOWING AN EVENT OF DEFAULT OR RESTRICTING EVENT." 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 Trust Depositor. Upon any such
distributions to the Trust Depositor, the Noteholders will have no further
rights in, or claims to, such amounts.
The Trust Depositor may, from time to time after the date of this
Prospectus, request each Rating Agency that rated the Notes to approve a
decrease in the Required Reserve Fund Amount. If each Rating Agency delivers a
letter to Issuer, the Trust Depositor and the Indenture Trustee to the effect
that such decrease in the Required Reserve Fund Amount will not result in a
qualification, reduction, withdrawal or downgrade of its then current rating of
any Class of Notes, then the Required Reserve Fund Amount will be so decreased.
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
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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 the related Equipment on behalf of the
Issuer. In the event of a failure to pay and an inability to collect amounts due
from the End-User, the Trust will be dependent on recoveries from the sale of
the related Equipment and, if available, Insurance Proceeds and amounts received
in respect of Vendor recourse to pay the Discounted Contract Balance and any
delinquent Scheduled Payments or other amounts due on the Defaulted Contract.
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 and Indenture Trustee shall cause to be established and
maintained in the name of the Indenture Trustee for the benefit of the
Noteholders, 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"); 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"). The Collection Account will initially be established and
maintained with the Indenture Trustee.
Funds in the Collection Account generally will be invested at the direction
of the Servicer (or, if a Servicer Termination Event has occurred and is
continuing the Indenture Trustee shall direct such investments in accordance
with the Sale and Servicing Agreement) 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 each 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. Losses on
funds in the Collection Account will be charged against the amounts on deposit
in the Collection Account.
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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 and is continuing, 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) a default for five or more calendar days in the payment of 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 outstanding principal amount of any Note, if any, on
its related stated maturity date;
(c) 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 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 Trust or the Trust
Depositor was appointed or if certain other events relating to the
bankruptcy, insolvency or receivership of the Trust or the Trust
Depositor 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 Indenture Trustee has actual
knowledge of an Event of Default, it will be required to notify, among others,
the Issuer, the Servicer and the Seller.
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 Indenture 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
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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 aggregate outstanding
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 66 2/3% of the aggregate outstanding principal amount of the Class A
Notes, (ii) from and after the payment in full of the Class A Notes, Class B
Noteholders holding Class B Notes evidencing more than 66 2/3% of the aggregate
outstanding principal amount of the Class B Notes and (iii) from and after the
payment in full of the Class B Notes outstanding, Class C Noteholders holding
Class C Notes evidencing more than 66 2/3% of the aggregate outstanding
principal amount of the Class C Notes.
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 and is continuing,
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 3.0% 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 sum of the ADCB for each of 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 3.0% of the weighted average
ADCB of all Contracts in the Contract Pool during such six Collection
Periods; or
(c) a Servicer Termination Event has occurred and is continuing.
SERVICING COMPENSATION
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) 1.00% (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,
documentation fees, administrative charges and extension fees paid by the
End-Users (such fees and charges are included in definition of Excluded
Amounts).
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 Administrator 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, the Noteholders
or the Trust Depositor (other than federal, state, local and foreign income,
franchise or
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other taxes based on income, if any, or any interest or penalties with respect
thereto, imposed upon the Trust).
RECORD DATE
Payments on the Offered Notes will be made as described herein to the
Noteholders in whose names the Offered 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 Offered 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 Offered 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 equal to 15% or less 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 Trustees' Fee and
Servicing Fee for such Payment Date; (vi) the ADCB of all Substitute Contracts
and Additional Contracts during such Collection Period and collectively during
such Collection Period and all preceding Collection Periods; and (vii) 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 January 31 of each calendar year, commencing January 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
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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 "Federal Income Tax Consequences."
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
Holders may only hold their Offered 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, and the
global Class A-4 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 hand, 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
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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,
Offered Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
on the Offered 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 Offered Notes. It is anticipated that the only Class A-1 Noteholder, Class
A-2 Noteholder, Class A-3 Noteholder, and Class A-4 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, or Class A-4 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 A-4 Noteholders,
respectively, under the Indenture indirectly through DTC and its Participants
who in turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Offered Notes and is required to
receive and transmit distributions of principal of and interest on the Offered
Notes. Participants and Indirect Participants with which holders of beneficial
interests in the Offered Notes have accounts similarly are required to make
book-entry transfers and receive and transmit such payments on behalf of these
respective holders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of holders of
beneficial interests in the Offered Notes to pledge Offered Notes to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such Offered Notes, may be limited due to the lack of a Definitive
Note for such Offered Notes.
DTC has advised the 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 or Class A-4 Noteholder under the Indenture only at the direction of
one or more Participants to whose account with DTC the Offered 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
Offered 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
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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 Offered Notes held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant 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 Offered Notes among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
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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 Offered Notes held
through DTC, or for maintaining, supervising or reviewing any records or actions
relating to such beneficial ownership interests.
DEFINITIVE NOTES
The Offered Notes will be issued in fully registered, authenticated form to
beneficial owners or their nominees (the "DEFINITIVE NOTES"), rather than to DTC
or its nominee, only if (a) the Issuer (through the Administrator) 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 Offered Notes,
and the Indenture Trustee or the Issuer is unable to locate a qualified
successor or (b) the Issuer (through the Administrator) 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 Offered Notes held through DTC of the availability of
Definitive Notes for such Class. Upon surrender by DTC of the Definitive Note
representing the Offered 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 Indenture Trustee will also notify the holders of any
adjustment to the Record Date with respect to the Offered 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 Offered 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
Offered Note (whether the Definitive Notes or the Offered Note for such Class
registered in the name of Cede representing the Offered Notes of such Class)
will be made only upon presentation and surrender of such Offered 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 Indenture 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, which will be paid by the Servicer out
of the Servicing Fee, if available, and will not be separately payable from or
reduce the Available Amounts.
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THE TRANSFER AND SALE AGREEMENT AND
SALE AND SERVICING AGREEMENT GENERALLY
The following is a summary of the material terms of the Transfer and Sale
Agreement and Sale and Servicing Agreement, the forms of which were filed as
exhibits to the Registration Statement of which this Prospectus is a part, and
this summary is qualified in its entirety by reference to the Transfer and Sale
Agreement and Sale and Servicing Agreement, respectively.
CONVEYANCE OF CONTRACTS
Pursuant to the Transfer and Sale Agreement, the Seller will sell or
contribute, 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),
(ii) all monies due or to become due in payment of such Contracts on and after
the related Cutoff Date, any prepayments, and any Recoveries received with
respect thereto, but excluding any Scheduled Payments due prior to the related
Cutoff Date and any Excluded Amounts, (iii) the related Equipment (which may be
limited to a security interest therein), including all proceeds from any sale or
other disposition of such Equipment, (iv) the related Contract Files, (v) any
proceeds with respect to each such Contract under any related Vendor Assignment,
Vendor Program Agreement and any other guarantee or similar credit enhancement
with respect thereto, (vi) all payments made with respect to each such Contract
under any insurance policy covering physical damage to the related Equipment
(the "INSURANCE PROCEEDS") and (vii) all income and proceeds of the foregoing.
Pursuant to the Sale and Servicing Agreement, the Trust Depositor in turn will
transfer, 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 (vii) 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 (i) the
Transferred Assets and (ii) such amounts as from time to time may be held in the
Collection Account and the Reserve Fund, together with any net investment
earnings on funds therein, (iii) the rights of the Issuer under the Sale and
Servicing Agreement, and (iv) proceeds of any of the foregoing (collectively,
the "TRUST ASSETS"), in favor of the Indenture Trustee to secure payment of its
obligations under the Notes and the Indenture. For a description of Excluded
Amounts, see "The Contracts Generally."
Under the Sale and Servicing Agreement, the Servicer 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. From and after 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 on the 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
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and Substitute Contract as of its related Cutoff Date, including that: (i) the
information with respect to the Contracts listed on the Schedule of Contracts
attached to the Sale and Servicing Agreement is true and correct in all material
respects; (ii) immediately prior to the transfer of a Contract and any related
Equipment (or security interest therein) to the Trust Depositor, such Contract
was owned by the Seller free and clear of any adverse claim; (iii) no Scheduled
Payment related to the Contract is (A) as of the date of sale or transfer more
than 60 days delinquent, (B) a payment as to which the related Equipment has
been repossessed or (C) a payment as to which the related Equipment has been
charged-off in accordance with the credit and collection policies of the
Servicer; (iv) no provision of the Contract has been either waived, altered or
modified in any respect, except as allowed under the credit and collection
policies of the Servicer and 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 or other similar laws affecting
enforceability of creditors' rights generally and the availability of equitable
remedies); (vi) the Contract is not 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 state in
any manner which would materially and adversely affect the enforceability or
collectibility of such Contract; (viii) (A) the Contract and any related
Equipment have not been sold, transferred, assigned or pledged by the Seller to
any other person and (B) such contract is secured by a fully perfected Lien of
the first priority on the related Equipment (except to the extent such
perfection is not required in accordance with the applicable End-User UCC Filing
Requirement); (ix) all filings and other actions required to be made, taken or
performed by any Person in any jurisdiction to give the Trust a first priority
perfected Lien or ownership interest in the Contracts and a first priority
perfected security interest in the Seller's interest in the Equipment have been
made, taken or performed; (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 be made, which are principally due and payable on a monthly or
quarterly basis; (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 (without the right to set off for any reason
and net of any maintenance or cost per copy charges); (xv) the Contract does not
have a stated maturity of longer than 82 months; (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 or to self-insure
with respect to the related Equipment; (xviii) such Contract provides that in
the event of a casualty loss in respect of the related Equipment, the End-User
is required to repair or replace the related Equipment or pay an amount not less
than the present value of all remaining Scheduled Payments discounted at the
Discount Rate plus any past due amounts as of the date of determination; (xix)
the Contract constitutes chattel paper, an account, or a general intangible as
defined under the UCC and if the Contract constitutes "chattel paper" for
purposes of the UCC, there exists an original counterpart of the Contract in the
Contract file; (xx) no Contract 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; (xxii) no Contract permits the End-User to make a prepayment of such
Contract in full in an amount less than the Discounted Contract Balance of such
Contract plus any accrued interest thereon at the Discount Rate to the last day
of the related Collection Period (except that the CSAs included in the Contract
Pool as of the initial Cutoff Date may utilize a discount rate not greater than
8% to calculate the amount required for the End-User to exercise its option to
prepay the Contract in full); (xxiii) by the Closing Date or the related Cutoff
Date (as applicable), the portions of the electronic master record of the Seller
relating to such Contract will have been clearly and unambiguously marked to
show
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that such Contract constitutes part of the Trust Assets and is owned by the
Trust in accordance with the terms of the Sale and Servicing Agreement; (xxiv)
the computer tape prepared by the Seller and containing information with respect
to such Contract that was made available by the Seller to the Indenture Trustee
on the Closing Date or the related Cutoff Date (as applicable) and was used to
select such Contract was complete and accurate in all material respects as of
the applicable Cut-off Date; (xxv) such Contract was originated directly by the
Seller or acquired by the Seller and has been sold and assigned by the Seller to
the Trust Depositor without any fraud or misrepresentation on the part of the
Seller; (xxvi) such Contract is not subject to any guarantee by the Seller nor
has the Seller established any specific credit reserve with respect to the
related End-User; (xxvii) such Contract provides that (A) the Seller (or its
assignees) may accelerate all remaining Scheduled Payments if the related
End-User is in default under any of its obligations under such Contract and (B)
the related End-User may not elect to utilize its security deposit to offset any
remaining Scheduled Payment; (xxviii) the related End-User is required to
maintain the related Equipment in good working order and bear all costs of
operating the related Equipment (including the payment of taxes); (xxix) such
Contract has not been terminated as a result of a casualty loss to the related
Equipment or for any other reason; (xxx) the Discounted Contract Balance of such
Contract does not include the amount of any security deposit held by the
Servicer or the Seller; (xxxi) the related End-User has represented to the
Seller that such End-User has accepted the related Equipment and has had a
reasonable opportunity to inspect and test such Equipment and the Seller has not
been notified of any defects therein; (xxxii) all payments in respect of such
Contract will be made free and clear of, and without deduction or withholding
for or on account of, any taxes, unless such withholding or deduction is
required by law; (xxxiii) the related End-User is unconditionally obligated to
make periodic lease payments (including taxes) notwithstanding damage to or
destruction of the related Equipment, or any other event in respect of the
related Equipment, including equipment obsolescence; and (xxxiv) such Contract
is not a Defaulted Contract;
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 as of the applicable Cut-off Date shall be termed an "ELIGIBLE
CONTRACT." 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 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 Contracts.
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 Seller will be obligated to repurchase from the
Trust any Ineligible Contract transferred by the Seller and any interest in
Equipment that is subject to such Ineligible Contract no later than the second
Business Day prior to the third Determination Date after the Seller becomes
aware, or receives written notice from the Servicer, the Issuer, the Trust
Depositor or the Indenture Trustee of the breach of any representation or
warranty made by the Seller in the Transfer and Sale Agreement, that materially
adversely affects the interests of the Issuer or the Noteholders in such
Contract, 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 Trust Depositor, the Indenture Trustee and the Noteholders for a
breach of a representation or warranty by the Seller under the Transfer and Sale
Agreement with respect to such a Contract.
Pursuant to the Sale and Servicing Agreement, an Ineligible Contract shall
be reassigned to the Seller pursuant to the Transfer and Sale Agreement and the
Sale and Servicing Agreement as described in the
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preceding paragraph, and the Seller shall make a deposit in the Collection
Account in immediately available funds in an amount equal to the sum of the
Discounted Contract Balance of the Ineligible Contract plus any accrued interest
thereon at the Discount Rate to the last day of the related Collection Period.
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 "REPURCHASE AMOUNT" shall be considered payment in full
of the Ineligible Contract. Any such Repurchase Amount shall be treated as an
Available Amount. In the alternative, the Seller may convey to the Trust 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
reconveyed by the Trust to the Seller.
CONCENTRATION AMOUNTS
In addition to the representations and warranties made by the Seller with
respect to the Contracts as described above under "--Representations and
Warranties," the Seller will represent and warrant in the Transfer and Sale
Agreement, 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 approximately 0.66% 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 approximately 6.72% 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 approximately 19.09% 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
approximately 32.38% 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 approximately 28.97% 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, 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 Transfer and Sale Agreement and the Sale and Servicing
Agreement, the Seller will be obligated to repurchase from the Issuer such
number of Contracts as shall be necessary to remedy a breach of any of the
foregoing representations or warranties, which breach has not been cured or
waived in all material respects (each such Contract, a "WARRANTY CONTRACT").
Such repurchase shall occur no later than the second Business Day prior the
third Determination Date after the Seller becomes aware, or receives written
notice from the Indenture Trustee or the Servicer of such breach. This
repurchase obligation will constitute the sole remedy against the Seller
available to the Issuer, the Trust Depositor, the Indenture Trustee and the
Noteholders for a breach of one of the foregoing representations or warranties.
Pursuant to the Transfer and Sale Agreement and the Sale and Servicing
Agreement, the Seller shall make a deposit in the Collection Account in
immediately available funds in an amount equal to the sum of the Discounted
Contract Balance of the Warranty Contract (together with accrued interest
thereon at the Discount Rate) and any outstanding Servicer Advances thereon
(unless the Seller is the Servicer, in which
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case such Servicer Advances need not be so deposited). Such 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 "REPURCHASE AMOUNT" and shall be treated as an Available Amount. In
the alternative, the Seller may to convey to the Issuer 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 reconveyed by the
Issuer to the Seller.
INDEMNIFICATION
The Sale and Servicing Agreement provides that the Servicer will indemnify
the Issuer, the Trust Depositor, the Indenture Trustee, their respective
officers, directors, agents and employees and the holders of any Notes from and
against any and all costs, expenses, losses, claims, damages and liabilities to
the extent that such cost, expense, loss, claim, damage or liability arose out
of, or was imposed upon the Issuer, the Trust Depositor, the Indenture Trustee
or the holders of any Notes through the Servicer's breach of the Sale and
Servicing Agreement, the gross negligence willful misfeasance or bad faith of
the Servicer in the performance of its duties under the Sale and Servicing
Agreement or by reason of reckless disregard of its obligations and duties under
the Sale and Servicing Agreement. Except as provided in the preceding sentence,
the Sale and Servicing Agreement provides that neither the Servicer nor any of
its directors, officers, employees or agents will be under any other liability
to the Issuer, the Trust Depositor, 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; provided
that neither the Servicer, nor any of its 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, the state courts in the
Borough of Manhattan in the City 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.
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 and Recoveries with respect to the
Contract. The Servicer shall be entitled to
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reimbursement of Servicer Advances from subsequent payments on or with respect
to the Contract, including collections of any prepayments, Repurchase Amounts 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.
The Servicer may, consistent with its customary and usual servicing
procedures, agree to modifications or adjustments in Contract terms so long as
such adjustments do not (i) change the amount of any Scheduled Payment, (ii)
extend any Scheduled Payment (unless such extension is made in order to avoid
liquidation and maximize recoveries on the Contract and the term thereof does
not exceed six months or the stated maturity date of the Class A-4 Notes), (iii)
cause the release of any Equipment from the lien of the Indenture (unless
Equipment of comparable value is substituted) or (iv) cause any representation
or warranty made with respect to such Contract to become untrue.
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 TERMINATION EVENT
In the event of any Servicer Termination Event, the Indenture Trustee may,
at the direction of 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 TERMINATION EVENT" 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 received
by the Servicer from 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 aggregate outstanding principal amount of any Class of
Notes affected thereby) or after the Servicer's discovery of such
failure; or
(b) failure on the part of the Servicer to deliver to the Indenture Trustee
and the Trust the "Servicer's Certificate" as and when required to be
delivered by the terms of the Sale and Servicing Agreement which
continues unremedied for a period of more than three (3) Business Days;
or
(c) 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 (or, if Mitsui Vendor Leasing
is the Servicer, the Transfer and Sale Agreement) which has a material
adverse effect on the Trust or the Noteholders, which continues
unremedied for a period of 30 days after the date on which written notice
of such failure requiring the same to be remedied shall
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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 the Noteholders representing in
aggregate not less than 25% of the aggregate outstanding principal amount
of any Class of Notes affected thereby) or after the Servicer's discovery
of such failure; or
(d) 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 in
any material respect when made, which incorrectness has a material
adverse effect on the Trust or Noteholders and which continues to be
incorrect in any material respect for a period of 30 days after 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 aggregate outstanding principal amount of any Class
of Notes adversely affected thereby) and such incorrectness continues to
affect such Noteholders materially and adversely for such period; or
(e) 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 (c) or (d) for a period of 60 days (in addition to any period
provided in (a), (c) or (d)) shall not constitute a Servicer Termination Event
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 promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, notify the Indenture Trustee, the
Issuer and the Trust Depositor in writing of any Servicer Termination Event.
BACK-UP SERVICER
Bankers Trust Company 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, unless and until another successor is appointed pursuant to the terms
of the Sale and Servicing Agreement. Prior to termination or resignation of the
Servicer, the Back-up Servicer will receive data in electronic format from the
Servicer with respect to payments made in respect of, and the outstanding
balances of, each Contract, however, it will have no obligation, with respect to
such data (other than to verify such data is in computer readable form). The
Back-up Servicer will have no other duties or obligations under the Sale and
Servicing Agreement, 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.
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement provides that on or before April 30th of
each calendar year (commencing April 30, 1999) 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
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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 April
30th of each calendar year (commencing April 30, 1999) 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 the
parties thereto; provided, that any such amendment shall be accompanied by a
letter from each Rating Agency to the effect that such amendment shall not
result in a reduction, withdrawal or downgrade of the then current ratings of
the Notes.
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 to the Trust Depositor.
THE OWNER TRUSTEE
Wilmington Trust Company will be the Owner Trustee under the Trust
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 Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration--Mitsui Vendor Leasing Asset Trust 1998-1.
The Owner Trustees' compensation with respect to its duties will be paid
annually in advance on the initial Payment Date and each twelfth Payment Date
thereafter in an amount equal to $2,500 (the "OWNER TRUSTEE FEE"). The Owner
Trustee Fee and The Indenture Trustee and Back-up Servicer Fee are referred to
herein collectively as the "TRUSTEES' FEE". 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 Trust Agreement. The Administrator
may also remove the Owner Trustee if such Owner Trustee ceases to be eligible to
continue as such under the Trust 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.
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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, the Trust Depositor, the Issuer and the
Servicer written notice of such waiver.
The Indenture Trustee may, and shall, if so directed by the Required
Controlling Holders in writing, after the occurrence and during the continuance
of an Event of Default: (i) institute proceedings in its own name and as or on
behalf of a trustee for the collection of all amounts then payable on the Notes,
(ii) institute proceedings for the complete or partial foreclosure against the
Trust Assets, (iii) exercise any remedies of a secured party under the Uniform
Commercial Code, and (iv) direct the Owner Trustee to sell the Trust Assets or
any portion thereof or rights or interest therein, at one or more public or
private sales; provided that the Indenture Trustee may not sell or otherwise
liquidate the Trust Assets following an Event of Default, other than an Event of
Default described in subparagraphs (a) and (b) under "Description of
Notes--Events of Default," unless (A) the holders of 100% of the aggregate
outstanding principal amount of the Notes consent thereto, (B) the proceeds of
such sale or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes or (C) the
Indenture Trustee determines that the Trust Assets will not continue to provide
sufficient funds for the payment of principal of and interest on the Notes and
the Indenture Trustee provides prior written notice to each Rating Agency and
obtains the consent of the Required Controlling Holders.
Except as otherwise provided above, following an Event of Default, the
Indenture Trustee may, but need not, elect to maintain possession of the Trust
Assets.
No holder of a Note will have any right to institute any proceeding, with
respect to the Indenture, unless (i) such holder has previously given notice to
the Indenture Trustee of a continuing Event of Default, (ii) the holders of not
less than 25% of the aggregate outstanding principal amount of the Notes have
made a written request to the Indenture Trustee to institute such proceeding in
respect of such Event of Default, (iii) such holder or holders have offered to
the Indenture Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request, (iv) the Indenture
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity has failed to institute such proceedings, and (v) no direction
inconsistent with such written request has been given to the Indenture Trustee
during such 60-day period by the holders of a majority of the aggregate
outstanding principal amount of the Notes.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing, the
Indenture Trustee will be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the holders of
the Notes, if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which it may
incur in complying with such request or direction.
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THE INDENTURE TRUSTEE
The Indenture Trustee with respect to the Notes is Bankers Trust Company, a
New York banking corporation. 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.
Bankers Trust Company's trust compensation for any Payment Date with respect
to its duties as Indenture Trustee and Back-up Servicer will be a fee (the
"INDENTURE TRUSTEE AND BACK-UP SERVICER FEE") calculated monthly, in an amount
equal to one twelfth of 0.0175% (the "INDENTURE TRUSTEE AND BACK-UP SERVICER FEE
PERCENTAGE") of the outstanding principal balance of the Notes as of the
immediately preceding Determination Date, subject to a minimum annual amount of
$14,000. The Indenture Trustee and Back-up Servicer Fee and the Owner Trustee
Fee are referred to herein collectively as the "TRUSTEES' FEES."
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
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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.
At any time and from time to time, the Trust and the Indenture Trustee,
without the consent of the holders of any Notes and with prior notice to each
Rating Agency, may execute a supplement to the Indenture for any of the
following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of the Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to
be subjected to the lien created by the Indenture, or to subject to
the lien created by the Indenture;
(ii) to evidence the succession, in compliance with the applicable
provisions thereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer
therein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of the holders
of the Notes, or to surrender any right or power herein conferred upon
the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision therein
or in any supplemental indenture which may be inconsistent with any
other provision therein or in any supplemental indenture or the
Operative Documents;
(vi) to evidence and provide for the acceptance of the appointment
thereunder by a successor Indenture Trustee with respect to the Notes
and to add to or change any of the provisions of the Indenture as
shall be necessary to facilitate the administration of the trusts
thereunder by more than one Indenture Trustee;
(vii) decrease the Required Reserve Fund Amount; provided that each Rating
Agency delivers a letter to the Seller and the Indenture Trustee to
the effect that action will not in and of itself result in a
qualification, reduction, withdrawal or downgrade of its then current
rating of any Class of Notes; and
(viii) to make any other provisions with respect to matters or questions
arising under the Indenture or in any supplemental indenture;
provided that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Indenture Trustee, adversely affect in any
material respect the interests of the holders of the Notes.
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.
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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
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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 Issuer'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
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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 assignment 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 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
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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 debtor's bankruptcy case unless, and then only to the
extent, the claims are oversecured.
If an Insolvency Event with respect to the Trust Depositor were to occur,
then an Event of Default would occur with respect to the Notes, and 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
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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 right to cancel the lease contract, for certain lessor breaches or defaults,
and may add to or modify the terms of "consumer leases" and leases where the
lessee is a "merchant lessee." However, in the Transfer and Sale Agreement, the
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.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a discussion of material United States federal income tax
consequences of the purchase, ownership and disposition of the Offered Notes.
The discussion that follows, and the opinion described below of Brown & Wood
LLP, federal 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 holders of the Offered Notes.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to holders of the Offered Notes 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 Offered
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 Offered Notes as "capital assets" within the meaning of Section 1221 of
the Code. It is recommended that taxpayers 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. IT IS RECOMMENDED
THAT PROSPECTIVE INVESTORS CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE
FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF OFFERED 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 Offered 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 Offered Notes will be characterized as indebtedness for
federal income tax purposes, no assurance can be given that such
characterization of the Issuer and the Offered 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 Offered Notes if the Offered
Notes are respected as debt of such corporation. Any such corporate income tax
could materially reduce cash available to make payments on the Offered Notes.
If, contrary to the opinion of Tax Counsel, the IRS also successfully asserted
that one or more of the Offered Notes did not represent debt for federal income
tax purposes, the Offered 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, (in which case the taxable
corporation would not be able to reduce its
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taxable income by deductions for interest expense on Offered Notes
recharacterized as equity) 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 Offered 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
holders of the Offered Notes without regard to (i) whether cash distributions
are made from the Issuer or (ii) the holders of the Offered Notes method of tax
accounting.
The discussion that follows assumes that the Offered 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 holders of the Offered Notes.
TAXATION OF INTEREST INCOME TO HOLDERS OF THE OFFERED NOTES
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 Offered 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., .25% 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 Offered 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 holders of the Offered Notes
general method of tax accounting.
OID
If an Offered Note is issued at a discount from its principal amount or if
the stated interest on such Offered Note is not treated as "qualified stated
interest," the Offered Note 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 Offered Notes should constitute a
remote contingency; the IRS, however, may disagree. In such case, the stated
interest on the Offered Notes would not be qualified stated interest and the
Offered Notes would be considered to have been issued with OID.
If the Offered 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 an Offered 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 Offered Notes
are sold to the public) will constitute OID. A holder of an Offered Note must
include OID in income as interest over the term of the Offered 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 Offered
Note for each day during the taxable year the holder of an Offered Note held the
Offered 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
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the excess of (i) the sum of the present value of the remaining payments on an
Offered Note as of the close of the accrual period and the payments made during
the accrual period that were included in the stated redemption price at
maturity, over (ii) the adjusted issue price of the Offered Note at the
beginning of the accrual period. No regulations have been issued under Code
section 1272(a)(6) and it is therefor not clear if such section would apply to
the Offered Notes if they are treated as having OID. Legislation has been
enacted, which requires any OID (or interest) on the Offered Notes to be
computed in accordance with the rules of Section 1272(a)(6) and certain
prepayment assumptions.
A holder of an Offered Note issued with DE MINIMIS OID must include such OID
in income proportionately as principal payments are made on such Offered Note.
ACQUISITION PREMIUM
A holder that purchases a Offered Note for an amount less than or equal to
the sum of all amounts payable on the Offered 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 Offered Note immediately after its purchase over the adjusted issue price of
the Offered Note, and the denominator of which is the excess of the sum of all
amounts payable on the Offered Note after the purchase date, other than payments
of qualified stated interest, over the Offered Note's adjusted issue price.
MARKET DISCOUNT
Whether or not the Offered Notes are issued with OID, a subsequent purchaser
(I.E., a purchaser who acquires a Note not at the time of original issue) of an
Offered 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 an Offered Note purchases the Offered 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 Offered Note multiplied by a fraction, the numerator
of which is the number of days the holder held the Offered Note and the
denominator of which is the number of days from the date the holder acquired the
Offered Note until its maturity date. The holder may elect, however, to
determine accrued market discount under the constant yield method. The adjusted
basis of an Offered 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 an
Offered Note with accrued market discount. A holder of an Offered Note 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 an Offered 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 Offered 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 Offered Note, and when such distribution is received, capital gain will be
recognized equal to discount allocated to such distribution.
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AMORTIZABLE BOND PREMIUM
In general, if a subsequent purchaser acquires an Offered Note at a premium
(I.E., an amount in excess of the amount payable upon the maturity thereof),
such holder of an Offered Note will be considered to have purchased the Offered
Note with "amortizable bond premium" equal to the amount of such excess. A
holder of an Offered Note may elect to deduct the amortizable bond premium as it
accrues under a constant yield method over the remaining term of the Offered
Note. 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
an Offered 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 an Offered Note with respect to which this election has been made, the
issue price of the Offered Note will equal the electing holders adjusted basis
in the Offered Note immediately after its acquisition, the issue date of the
Offered Note will be the date of its acquisition by the electing holder, and no
payments on the Offered 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 OFFERED NOTES
Generally, capital gain or loss will be recognized on a sale or other
taxable disposition of the Offered 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 Offered Notes. A holder of
the Offered Note's tax basis in an Offered Note will generally equal his or her
cost increased by any OID or market discount previously included by such holder
of an Offered Note in income with respect to the Offered Note and decreased by
any bond premium previously amortized and any principal payments previously
received by such holder of an Offered Note with respect to the Offered Note.
Subject to the market discount rules of the Code, any such gain or loss will be
capital gain or loss if the Offered Note was held as a capital asset. Capital
gain or loss will be long-term if the Offered Note was held by the holder for
more than one year and otherwise will be short-term. Any capital losses realized
generally may be used by a corporate taxpayer only to offset capital gains, and
by an individual taxpayer only to the extent of capital gains plus $3,000 of
other income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Indenture Trustee will be required to report annually to the IRS, and to
each holder of an Offered Note, the amount of interest paid on the Offered 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 holder of an Offered Note 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.
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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 Offered 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 an
Offered 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 an Offered 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
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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% 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 urged 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 Offered Notes. IT IS RECOMMENDED THAT PURCHASERS OF
NOTES CONSULT THEIR OWN TAX ADVISORS REGARDING THE STATE TAX CONSEQUENCES OF
PURCHASING ANY OFFERED NOTES.
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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
Offered 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 Offered 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, regulatory 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 Offered 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.
Any person who (a) has discretionary authority or control with respect to
the investment or management of the assets of a Plan or (b) has authority or
responsibility to give, or regularly gives, investment advice with respect to
the assets of a Plan 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, is a fiduciary of such
Plan, and should consider whether an investment in the Offered Notes would
involve a conflict of interest or an act of self-dealing, in view of the
identity of the parties to the transaction and service providers to the Trust
identified in this Prospectus.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the Offered
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 Offered
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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 Offered Notes
constitute debt with no substantial equity features for purposes of the Plan
Assets Regulation, then a Plan's acquisition of Offered Notes will not 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
Offered Notes constitute an equity interest for purposes of the Plan Assets
Regulation, then a Plan's acquisition of Offered 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 and there can be no
assurance in this regard, the Issuer believes that the Offered 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 or otherwise under ERISA as a result of the
purchase of Offered Notes by or with the assets of Plans. However, before
purchasing any Offered Notes on behalf of a Plan, an ERISA Plan fiduciary should
make its own determination that the Class of Offered 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
Offered 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 Offered 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 Offered 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 Offered Notes to the public at the respective
prices 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 Class A-1 Notes, % of the initial principal amount of the Class A-2
Notes, % of the initial principal amount of the Class A-3 Notes and % of
the initial principal amount of the Class A-4 Notes. The Underwriter may allow
and such dealers may reallow a concession not in excess of % of the initial
principal amount of the Class A-1 Notes, % of the initial principal amount of
the Class A-2 Notes, % of the initial principal amount of the Class A-3 Notes
and % of the initial principal amount of the
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Class A-4 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 connection with this offering, the Underwriter may over-allot or effect
transactions which stabilize or maintain the market price of the Offered Notes
at a level above that which might otherwise prevail in the open market. Such
stabilizing, if commenced, may be discontinued at any time.
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 Offered Notes that the Class A-1
Notes be rated at least "P-1" and "D-1+" and that the Class A-2, the Class A-3
and the Class A-4 Notes be rated at least "Aaa" and "AAA" by Moody's Investors
Service, Inc. and Duff & Phelps Credit Rating Co., (collectively, the "RATING
AGENCIES"), respectively.
The ratings are not a recommendation to purchase, hold or sell the Offered
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 Offered Notes. The rating of the Offered Notes addresses
the likelihood of the timely payment of interest and the ultimate payment of
principal on the 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 holders of the Offered Notes.
LEGAL MATTERS
Certain legal matters relating to the Offered 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 and,
with respect to certain matters arising under Delaware law, Richards, Layton &
Finger, Wilmington, Delaware. Certain legal matters for the Underwriter will be
passed upon by Cadwalader, Wickersham & Taft, New York, New York.
EXPERTS
The balance sheet included in this Prospectus has been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and is included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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INDEX OF TERMS
ACCRUAL PERIOD, 13, 46
ADCB, 6, 16, 47
ADDITIONAL CONTRACT, 10, 36
ADDITIONAL CONTRACT CUTOFF DATE, 5
ADJUSTED CONTRACT, 9
ADMINISTRATION AGREEMENT, 59
ADMINISTRATOR, 59
AGGREGATE PRINCIPAL PAYDOWN AMOUNT, 14, 47
APPLICABLE PERCENTAGE, 14, 47
ARTICLE 2A, 24, 75
AVAILABLE AMOUNTS, 49
BACK-UP SERVICER, 2, 4, 66
BANKRUPTCY CODE, 23
BUSINESS DAY, 5
CALCULATION DATE, 5
CEDE, 2
CEDEL, 2
CEDEL PARTICIPANTS, 57
CLASS A INITIAL NOTE PRINCIPAL BALANCE, 6
CLASS A NOTEHOLDERS, 13, 46
CLASS A NOTES, 6
CLASS A PRINCIPAL PAYMENT AMOUNT, 48
CLASS A-1 NOTES, 5
CLASS A-1 INITIAL NOTE PRINCIPAL BALANCE, 5
CLASS A-2 NOTES, 5
CLASS A-2 INITIAL NOTE PRINCIPAL BALANCE, 5
CLASS A-3 NOTES, 5
CLASS A-3 INITIAL NOTE PRINCIPAL BALANCE, 5
CLASS A-4 NOTES, 5
CLASS A-4 INITIAL NOTE PRINCIPAL BALANCE, 5
CLASS B NOTES, 6
CLASS B NOTEHOLDERS, 13, 46
CLASS C INITIAL NOTE PRINCIPAL BALANCE, 6
CLASS C NOTES, 6
CLASS C NOTEHOLDERS, 13, 46
CLOSING DATE, 5
CODE, 76
CODE PLANS, 82
COLLECTION ACCOUNT, 11,53
COLLECTION PERIOD, 5
COMMISSION, 3
CONDITIONAL PAYMENT RATE, 36
CONTRACT FILES, 7
CONTRACT POOL, 7
CONTRACTS, 1
COOPERATIVE, 59
CPR, 36
CSA, 7
CSAS, 33
CUTOFF DATE, 5
DEFAULTED CONTRACT, 9, 51
DEFINITIVE NOTES, 59
DEPOSITARIES, 56
DEPOSITARY, 46
DETERMINATION DATE, 48
DISCOUNT RATE, 16
DISCOUNTED CONTRACT BALANCE, 16, 48
DISQUALIFIED PERSONS, 82
DISTRIBUTION, 55
DTC, 2
ELIGIBLE CONTRACT, 62
ELIGIBLE INVESTMENTS, 53
END-USERS, 8, 26
EQUIPMENT, 34
ERISA, 82
ERISA PLANS, 82
EUROCLEAR, 2
EUROCLEAR OPERATOR, 59
EUROCLEAR PARTICIPANTS, 58
EVENT OF DEFAULT, 53
EXCHANGE ACT, 3
EXCLUDED AMOUNTS, 33
FDIC, 53
FINAL MATURITY DATE, 15
FOREIGN PERSON, 80
INDENTURE, 1, 6
INDENTURE TRUSTEE, 1,4
INDENTURE TRUSTEE AND BACK-UP SERVICER FEE, 69
INDENTURE TRUSTEE AND BACK-UP SERVICER FEE PERCENTAGE, 69
INDIRECT PARTICIPANTS, 56
INELIGIBLE CONTRACT, 62
INITIAL RESERVE FUND DEPOSIT, 12, 52
INSOLVENCY EVENT, 53
INSURANCE PROCEEDS, 60
IRS, 76
ISSUER, 1, 4
LEASE, 7
LEASES, 33
MITSUI VENDOR LEASING, 1, 4, 43
MONTHLY REPORT, 56
MVLFCII, 1
NEW WITHHOLDING REGULATIONS, 80
NOTE OWNERS, 6
NOTEHOLDERS, 13, 46
NOTES, 6
85
<PAGE>
OFFERED NOTES, 1, 6, 46
OID, 77
OPERATIVE DOCUMENTS, 46
OWNER TRUSTEE, 1, 4
OWNER TRUSTEE FEE, 67
OWNER TRUSTEE PERCENTAGE, 68
PARTICIPANTS, 56
PARTIES IN INTEREST, 84
PAYMENT DATE, 2
PERMITTED LIENS, 72
PLAN ASSETS, 82
PLAN ASSETS REGULATION, 83
PLANS, 84
PREPAID CONTRACT, 9, 36
PREPAYMENT SHORTFALL AMOUNT, 5
PRINCIPAL BALANCE, 5
PRINCIPAL SHORTFALL AMOUNT,
PTCE, 82
QUALIFIED INSTITUTION, 53
RATING AGENCIES, 19, 84
RECORD DATE, 5
RECOVERIES, 53
REGISTRATION STATEMENT, 3
REPURCHASE AMOUNT, 63, 64
REQUIRED CONTROLLING HOLDERS, 54
REQUIRED RESERVE FUND AMOUNT, 12, 52
RESERVE FUND, 12, 52
RESERVE FUND AMOUNT, 12, 52
RESTRICTING EVENT, 55
SALE AND SERVICING AGREEMENT, 2, 26
SCHEDULED PAYMENTS, 16, 48
SECURITIES ACT, 3
SELLER, 2, 4, 43
SERVICER, 2, 4, 43
SERVICER ADVANCE, 17, 64
SERVICER TERMINATION EVENT, 65
SERVICING FEE, 17, 55
SERVICING FEE PERCENTAGE, 17, 55
STATISTICAL DISCOUNT RATE, 8
SUBSTITUTE CONTRACT, 9, 36
SUBSTITUTE CONTRACT CUTOFF DATE, 5
TAX COUNSEL, 76
TERMINATION NOTICE, 65
TERMS AND CONDITIONS, 59
TIA, 69
TRANSFER AND SALE AGREEMENT, 2, 26
TRANSFERRED ASSETS, 60
TRUST, 1, 4
TRUST AGREEMENT, 4
TRUST ASSETS, 60
TRUST DEPOSITOR, 1, 4, 45
TRUSTEES' FEE, 67, 69
UNDERWRITER, 1, 83
UNL POOL, 35
VENDOR, 11
VENDOR ASSIGNMENT, 11
VENDOR PROGRAM AGREEMENT, 11
VENDORS, 34
WARRANTY CONTRACT, 63
86
<PAGE>
INDEX TO FINANCIAL STATEMENT
<TABLE>
<S> <C>
Independent Auditors' Report.......................................................... F-2
Balance Sheet as of November 5, 1998.................................................. F-3
Notes to Balance Sheet................................................................ F-4
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustee of
Mitsui Vendor Leasing Asset Trust 1998-1:
We have audited the accompanying balance sheet of Mitsui Vendor Leasing Asset
Trust 1998-1 (the "Trust") as of November 5, 1998. This financial statement is
the responsibility of the Trust's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of the Trust as of November 5, 1998 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
San Diego, California
November 6, 1998
F-2
<PAGE>
MITSUI VENDOR LEASING ASSET TRUST 1998-1
BALANCE SHEET
NOVEMBER 5, 1998
<TABLE>
<S> <C>
Assets.............................................................................. $ 0
---------
---------
Liabilities......................................................................... $ 0
---------
---------
Equity.............................................................................. $ 0
---------
---------
Liabilities and Equity.............................................................. $ 0
---------
---------
</TABLE>
See note to balance sheet.
F-3
<PAGE>
MITSUI VENDOR LEASING ASSET TRUST 1998-1
NOTE TO BALANCE SHEET
NOVEMBER 5, 1998
(1) ORGANIZATION
Mitsui Vendor Leasing Asset Trust 1998-1 (the "Trust") is a limited purpose
business trust formed under the laws of the State of Delaware pursuant to a
Trust Agreement dated as of October 1, 1998, between Mitsui Vendor Leasing
Funding Corp. II ("MVLFC II"), as trust depositor, and Wilmington Trust Company,
as owner trustee. MVLFC II is a wholly owned subsidiary of Mitsui Vendor Leasing
(U.S.A.) Inc. Prior to and including November 5, 1998, the Trust did not conduct
any activities.
The Trust was organized to engage exclusively in the following trust
activities for MVLFC II; to issue and sell notes collateralized by assets placed
on deposit with the Trust by MVLFC II; and to engage in any lawful act or
activity and to exercise any power that is incidental and is necessary or
convenient to the foregoing and permitted under the Trust Agreement and Delaware
law.
F-4
<PAGE>
ANNEX A
SCHEDULED PAYMENTS FOR THE CONTRACT POOL
The aggregate amount of Scheduled Payments scheduled to be received for the
Contract Pool by the terms of the related Contracts is set forth below. The
information set forth below is for information purposes and does not purport to
be a prediction of actual payments on the Contract Pool. Actual Payments on the
Contract Pool will differ, and may differ significantly, from the information
presented below. Among other things, the amounts below assume no prepayments,
delinquencies or defaults with respect to the Contracts, and no substitutes or
repurchases of Contracts by the Seller or the Servicer.
<TABLE>
<CAPTION>
AGGREGATE
SCHEDULED
COLLECTION PERIOD PAYMENTS
- ---------------------------------------- ------------
<S> <C>
October 1998............................ $ 5,767,529
November 1998........................... $ 5,093,656
December 1998........................... $ 5,121,613
January 1999............................ $ 5,139,666
February 1999........................... $ 5,141,270
March 1999.............................. $ 5,141,662
April 1999.............................. $ 5,134,510
May 1999................................ $ 5,123,591
June 1999............................... $ 5,072,216
July 1999............................... $ 5,019,179
August 1999............................. $ 5,019,778
September 1999.......................... $ 4,995,589
October 1999............................ $ 4,888,343
November 1999........................... $ 4,850,631
December 1999........................... $ 4,781,708
January 2000............................ $ 4,740,448
February 2000........................... $ 4,653,759
March 2000.............................. $ 4,591,485
April 2000.............................. $ 4,485,217
May 2000................................ $ 4,428,393
June 2000............................... $ 4,361,256
July 2000............................... $ 4,305,084
August 2000............................. $ 4,179,962
September 2000.......................... $ 4,149,792
October 2000............................ $ 4,033,148
November 2000........................... $ 3,911,861
December 2000........................... $ 3,833,043
January 2001............................ $ 3,776,449
February 2001........................... $ 3,694,547
March 2001.............................. $ 3,627,421
April 2001.............................. $ 3,580,458
May 2001................................ $ 3,463,932
June 2001............................... $ 3,354,364
July 2001............................... $ 3,278,395
August 2001............................. $ 3,198,069
September 2001.......................... $ 3,104,205
October 2001............................ $ 3,045,519
November 2001........................... $ 2,907,842
December 2001........................... $ 2,845,771
January 2002............................ $ 2,745,313
February 2002........................... $ 2,638,980
<CAPTION>
AGGREGATE
SCHEDULED
COLLECTION PERIOD PAYMENTS
- ---------------------------------------- ------------
<S> <C>
March 2002.............................. $ 2,501,057
April 2002.............................. $ 2,366,594
May 2002................................ $ 2,191,290
June 2002............................... $ 2,048,859
July 2002............................... $ 1,857,377
August 2002............................. $ 1,731,645
September 2002.......................... $ 1,632,450
October 2002............................ $ 1,538,458
November 2002........................... $ 1,658,938
December 2002........................... $ 1,188,878
January 2003............................ $ 1,104,562
February 2003........................... $ 898,106
March 2003.............................. $ 766,326
April 2003.............................. $ 603,813
May 2003................................ $ 451,873
June 2003............................... $ 338,533
July 2003............................... $ 216,725
August 2003............................. $ 175,990
September 2003.......................... $ 152,631
October 2003............................ $ 109,114
November 2003........................... $ 92,069
December 2003........................... $ 90,577
January 2004............................ $ 79,908
February 2004........................... $ 74,527
March 2004.............................. $ 68,140
April 2004.............................. $ 59,358
May 2004................................ $ 59,358
June 2004............................... $ 57,941
July 2004............................... $ 52,959
August 2004............................. $ 45,888
September 2004.......................... $ 30,281
October 2004............................ $ 22,864
November 2004........................... $ 22,763
December 2004........................... $ 22,763
January 2005............................ $ 20,006
February 2005........................... $ 20,006
March 2005.............................. $ 18,421
April 2005.............................. $ 14,688
May 2005................................ $ 22,394
June 2005............................... $ 829
July 2005............................... $ 829
</TABLE>
A-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST DEPOSITOR OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES TO ANY PERSON IN
ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION TO SUCH
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
REPORTS TO NOTEHOLDERS........................ 2
AVAILABLE INFORMATION......................... 3
SUMMARY OF TERMS.............................. 4
RISK FACTORS.................................. 20
USE OF PROCEEDS............................... 25
THE TRUST..................................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OF THE TRUST............ 25
THE CONTRACT POOL............................. 26
THE CONTRACTS GENERALLY....................... 33
PREPAYMENT AND YIELD CONSIDERATIONS........... 36
MITSUI VENDOR LEASING (U.S.A.) INC............ 43
THE TRUST DEPOSITOR........................... 45
DESCRIPTION OF THE NOTES...................... 46
THE TRANSFER AND SALE AGREEMENT AND SALE AND
SERVICING AGREEMENT GENERALLY............... 60
THE INDENTURE................................. 68
CERTAIN LEGAL ASPECTS OF THE CONTRACTS........ 71
FEDERAL INCOME TAX CONSEQUENCES............... 76
CERTAIN STATE TAX CONSEQUENCES................ 81
ERISA CONSIDERATIONS.......................... 82
PLAN OF DISTRIBUTION.......................... 83
RATING OF THE NOTES........................... 84
LEGAL MATTERS................................. 84
EXPERTS....................................... 84
INDEX OF TERMS................................ 85
INDEX TO FINANCIAL STATEMENTS................. F-1
</TABLE>
--------------------------
UNTIL , 1999, 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.
MITSUI VENDOR LEASING
ASSET TRUST 1998-1
ISSUER
MITSUI VENDOR LEASING II
FUNDING CORP.
TRUST DEPOSITOR
MITSUI VENDOR LEASING
(U.S.A.) INC.
SELLER AND SERVICER
---------------------
PROSPECTUS
---------------------
FIRST UNION CAPITAL MARKETS
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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:
<TABLE>
<S> <C>
SEC registration fee...................................................... $ 44,497
Legal fees and expenses................................................... $ 350,000
Accounting fees and expenses.............................................. $ 55,000
Blue sky fees and expenses................................................ $ 5,000
Rating Agency Fees........................................................ $ 105,000
Trustees' Fees and Expenses............................................... $ 16,500
Printing.................................................................. $ 50,000
Miscellaneous............................................................. $ 60,000
---------
Total..................................................................... $ 685,997
---------
---------
</TABLE>
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:
<TABLE>
<C> <S>
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(a) Trust Agreement
4.1(b) Form of Amended and Restated 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)*
4.4 Form of Administration Agreement*
4.5 Form of Transfer and Sale Agreement*
5.1(a) Opinion of Brown & Wood LLP with respect to legality
5.1(b) Opinion of Richards, Layton & Finger with respect to legality
8.1 Opinion of Brown & Wood LLP with respect to tax matters*
23.1(a) Consent of Brown & Wood LLP (included as part of Exhibit 5.1(a))
23.1(b) Consent of Richards Layton & Finger (included as part of Exhibit 5.1(b))
23.2 Consent of Brown & Wood LLP (included as part of Exhibit 8.1)*
23.3 Consent of Deloitte & Touche
24.1 Power of Attorney (included on page II-5)*
25.1 Statement of Eligibility and Qualification of Indenture Trustee
</TABLE>
- ------------------------
* Previously filed.
b. Financial Statement Schedules: Not applicable.
II-1
<PAGE>
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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to the Registration Statement on Form S-1
to be signed on its and the Trust's behalf by the undersigned, thereunto duly
authorized, in the City of San Diego and State of California, on the 8th day of
November, 1998.
<TABLE>
<S> <C> <C>
MITSUI VENDOR LEASING FUNDING CORP. II
By: /s/ JAMES F. BURKE
------------------------------------------
James F. Burke
SENIOR VICE PRESIDENT
MITSUI VENDOR LEASING ASSET TRUST 1998-1
By: Mitsui Vendor Leasing Funding Corp. II
By: /s/ JAMES F. BURKE
---------------------
James F. Burke
SENIOR VICE PRESIDENT
</TABLE>
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ PAUL A. RENNER* President (Principal
- ------------------------------ Executive Officer); November 9, 1998
Paul A. Renner Director
/s/ JUN-ICHI NAGATOISHI*
- ------------------------------ Executive Vice President; November 9, 1998
Jun-ichi Nagatoishi Director
Senior Vice President,
/s/ JAMES F. BURKE* Chief Financial Officer
- ------------------------------ (Principal Financial and November 9, 1998
James F. Burke Accounting Officer);
Director
/s/ JOHN L. PLUNKETT
- ------------------------------
</TABLE>
* John L. Plunkett, pursuant to a Power of Attorney (executed by each of the
officers and directors indicated above and filed as Exhibit 24.1 to the
Registration Statement), by signing his name does hereby sign and execute
this Amendment No. 3 to the Registration Statement on behalf of each such
officer and director.
II-4
<PAGE>
Exhibit 1.1
MITSUI VENDOR LEASING ASSET TRUST 1998-1
RECEIVABLE-BACKED NOTES, CLASS A-1, CLASS A-2,
CLASS A-3, and Class A-4
UNDERWRITING AGREEMENT
November [__], 1998
First Union Capital Markets, a division of Wheat First Securities, Inc.
[Other Underwriters]
c/o First Union Capital Markets, a division of Wheat First Securities, Inc.
301 South College Street, TW-9
Charlotte, North Carolina 28288-0610
Ladies and Gentlemen:
Mitsui Vendor Leasing Funding Corp. II, a Delaware corporation
(the "Trust Depositor"), proposes to cause Mitsui Vendor Leasing Asset Trust
1998-1 (the "Trust") to issue the asset backed notes identified in Schedule I
hereto (the "Notes"). The Notes will be issued pursuant to and secured by an
indenture (the "Indenture") to be entered into between the Trust and Bankers
Trust Company ("Bankers Trust"), as trustee (the "Indenture Trustee"), the form
of which has been filed as an exhibit to the Registration Statement (as defined
below). The Notes identified in Schedule I hereto will be sold in a public
offering through the underwriters listed in Schedule II hereto, one or more of
which may act as representative of such underwriters (any underwriter through
which Notes are sold shall be referred to herein as an "Underwriter" or,
collectively, all such Underwriters may be referred to as the "Underwriters";
any representatives thereof may be referred to herein as a "Representative"). To
the extent not defined herein, capitalized terms used herein have the meanings
assigned to such terms in the Sale and Servicing Agreement among the Trust, the
Trust Depositor, Bankers Trust, as back-up servicer, and Mitsui Vendor Leasing
Funding Corp., as the seller and the servicer (the "Seller" or the "Servicer"),
dated as of November [__], 1998.
Section 1. Representations and Warranties. The Trust Depositor, the
Servicer and Mitsui Leasing and Development, Limited ("Mitsui"), jointly and
severally, represent and warrant to each Underwriter that:
(a) The Trust Depositor has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement on Form S-1 (registration number 333-[_______]), including a form of
prospectus, relating to the Notes. The registration statement, and any
post-effective amendment thereto, each in the form heretofore delivered to you
and, excluding exhibits thereto, have been declared effective by the Commission.
As used in this Agreement, "Effective Time" means the date and the time as of
which such registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission and "Effective Date"
means the date of the Effective Time. The Trust Depositor has furnished to you,
for use by the Underwriters, copies of one or more preliminary prospectuses
(each, a "Preliminary Prospectus"), relating to the Notes. Except where the
context otherwise requires, the registration statement, as amended at the
Effective Time, including all documents filed as a part thereof, and including
any information contained in a prospectus subsequently filed with the Commission
pursuant to Rule 424(b) under the Securities Act and deemed to be part of the
registration statement as of the Effective Time pursuant to Rule 430A under the
Securities Act, is herein called the "Registration Statement", and the
prospectus, in the form filed by the Trust Depositor with the Commission
pursuant to Rule 424(b) under the Securities Act or, if no such filing is
required, the form of final prospectus included in the Registration Statement at
the time it became effective, is hereinafter called the "Prospectus".
(b) The Registration Statement relating to the Notes, has been filed with
the Commission and such Registration Statement has become effective. No stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceeding for that purpose has been instituted or, to the knowledge of
the Trust Depositor, the Servicer or Mitsui, threatened by the Commission. No
order preventing or suspending the use of any Preliminary Prospectus has been
issued by the Commission, and each Preliminary Prospectus, at the time of filing
<PAGE>
thereof, conformed in all material respects to the requirements of the
Securities Act, and the rules and regulations of the Commission thereunder, and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made (and
taking into account Rule 430A of the Securities Act, which permits certain
information to be omitted from a preliminary prospectus), not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon or conformity with the
Underwriters' Information (as defined in Section 10(d) herein).
(c) The Registration Statement conforms, and any amendments or supplements
thereto and the Prospectus will conform, in all material respects to the
requirements of the Securities Act and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto, as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, and as of the Closing Date, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however that this representation and warranty shall not apply to (i) that part
of the Registration Statement which shall constitute the Statement of
Eligibility and Qualification (Form T-1) of the Indenture Trustee under the
Trust Indenture Act or (ii) any Underwriters' Information (as defined in Section
10(d) herein) contained therein. The Indenture conforms in all respects to the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission thereunder.
(d) Mitsui and each of its subsidiaries have been duly incorporated and are
validly existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged, except where the failure to so qualify or
have such power or authority could not have, individually or in the aggregate, a
material adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of Mitsui and its subsidiaries taken as a
whole.
(e) All the outstanding shares of capital stock of the Trust Depositor have
been duly authorized and validly issued, are fully paid and nonassessable and
are owned, as described in the Prospectus, 95.1% by Mitsui and 4.9% by The
Sakura Bank Limited directly or indirectly through one or more wholly-owned
subsidiaries, free and clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third party.
(f) (i) the Sale and Servicing Agreement, when duly executed by the Trust
Depositor and the Servicer and delivered by such parties, will constitute a
valid and binding agreement of the Trust Depositor and the Servicer enforceable
against them in accordance with its terms; (ii) the Indenture, when duly
executed by the Indenture Trustee and delivered by the Indenture Trustee, will
constitute a valid and binding agreement of the Trust enforceable against the
Trust in accordance with its terms; (iii) the Notes, when duly executed,
authenticated, issued and delivered as provided in the Indenture, will be duly
and validly issued and outstanding and will constitute valid and binding
obligations of the Trust entitled to the benefits of the Indenture and
enforceable in accordance with its terms; and (iv) the Indenture, the Sale and
Servicing Agreement, the Trust Agreement among the Trust Depositor, the Servicer
and Wilmington Trust Company, as owner trustee (the "Owner Trustee"), and the
Transfer and Sale Agreement (the "Transfer and Sale Agreement") between the
Trust Depositor and the Servicer (collectively, the "Transaction Agreements")
and the Notes conform to the descriptions thereof contained in the Prospectus.
(g) The representations and warranties of the Trust Depositor in Section
2.4 of the Sale and Servicing Agreement and Section 3.2 of the Transfer and Sale
Agreement will be true and correct as of the Closing Date.
(h) The representations and warranties of the Servicer in Section 3.6 of
the Sale and Servicing Agreement and Section 3.1 of the Transfer and Sale
Agreement will be true and correct as of the Closing Date.
(i) The execution, delivery and performance of this Agreement, the
Transaction Agreements to which Mitsui or its subsidiaries, as the case may be,
is a party and the issuance and sale of the Notes, the consummation of the
transactions contemplated hereby and thereby will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Mitsui or any of its subsidiaries is a party or
by which Mitsui or any of its subsidiaries is bound or to which any of the
<PAGE>
property or assets of Mitsui or any of its subsidiaries is subject, nor will
such actions result in any violation of the provisions of the charter or by-laws
of Mitsui or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
Mitsui or any of its subsidiaries or any of their properties or assets; and
except for the registration of the Notes under the Securities Act, the
qualification of the Indenture under the Trust Indenture Act, such consents,
approvals, authorizations, registrations or qualifications as may be required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Exchange Act") and
applicable state securities laws in connection with the purchase and
distribution of the Notes by the Underwriters and the filing of any financing
statements required to perfect the Trust's interest in the Trust Assets, no
consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement or the Transaction Agreements, the
issuance and sale of the Notes and the consummation of the transactions
contemplated hereby and thereby.
(j) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any change, or any
development involving a prospective change, in or affecting the Trust Depositor,
the Servicer or Mitsui (other than as contemplated in the Registration
Statement) which would be expected to have a material adverse effect on either
(i) the ability of such person to consummate the transactions contemplated by,
or to perform its respective obligations under, this Agreement or the
Transaction Agreements or (ii) the Contracts or the Trust Assets.
(k) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act and which have not been so described or filed.
(l) Any taxes, fees and other governmental charges that are assessed and
due in connection with the execution, delivery and issuance of this Agreement or
the Transaction Agreements shall have been paid or will be paid at or prior to
the Closing Date to the extent then due.
(m) There are no legal or governmental proceedings pending to which Mitsui
or any of its subsidiaries is a party or of which any property or assets of
Mitsui or any of its subsidiaries is the subject which, individually or in the
aggregate, would (i) be reasonably likely to, if determined adversely to Mitsui
or any of its subsidiaries, have a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects of Mitsui
and its subsidiaries taken as a whole; and to the best of Mitsui's knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others, (ii) assert the invalidity of this Agreement or the
Transaction Agreements, (iii) seek to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement or the
Transaction Agreements, (iii) be reasonably likely to, if determined adversely
to Mitsui or any of its subsidiaries, materially and adversely affect the
performance by the Trust Depositor, the Servicer or Mitsui of their respective
obligations under, or the validity or enforceability of, this Agreement or the
Transaction Agreements, as applicable, or (iv) seek to affect adversely the
federal income tax attributes of the Notes described in the Prospectus.
(n) Neither Mitsui nor any of its subsidiaries (i) is in violation of its
charter or by-laws, (ii) is in default in any material respect, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or condition
contained in any material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject or (iii) is in violation in
any respect of any law, ordinance, governmental rule, regulation or court decree
to which it or its property or assets may be subject, except any violation or
default that could not have a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects of Mitsui
and its subsidiaries taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered by each
of the Trust Depositor, the Servicer and Mitsui.
(p) In accordance with General Accepted Accounting Principles, as currently
in effect, each party to the Sale and Servicing Agreement will treat the
transactions contemplated by the Sale and Servicing Agreement as a sale of the
Contracts and the Servicer's interest in the related Equipment to the Trust
Depositor.
(q) Neither the Trust Depositor nor the Servicer is required to be
registered under the Investment Company Act of 1940, as amended.
Section 2. Purchase and Sale. Subject to the terms and conditions and in
<PAGE>
reliance upon the covenants, representations and warranties herein set forth,
the Trust Depositor agrees to sell to each Underwriter, and each Underwriter
agrees, severally and not jointly, to purchase from the Trust Depositor, the
principal amount of Notes set forth opposite such Underwriter's name in Schedule
II hereto. The purchase price for the Notes shall be as set forth in Schedule I
hereto.
Section 3. Delivery and Payment. Payment for the Notes shall be made to the
Trust Depositor or to its order by wire transfer of same day funds at the office
of [Brown & Wood in New York, New York at 9:00 A.M., New York City time], on the
Closing Date (as hereinafter defined), or at such other time on the same or such
other date as the Representative and the Trust Depositor may agree upon. The
time and date of such payment for the Notes as specified in Schedule I hereto
are referred to herein as the "Closing Date." As used herein, the term "Business
Day" means any day other than a day on which banks are permitted or required to
be closed in New York City.
Payment for the Notes shall be made against delivery to the
Representative for the respective accounts of the several Underwriters of the
Notes registered in the name of Cede & Co. as nominee of The Depository Trust
Company and in such denominations as the Representative shall request in writing
not later than two full Business Days prior to the Closing Date. The Trust
Depositor shall make the Notes available for inspection by the Representative in
New York, New York not later than one full Business Day prior to the Closing
Date.
Section 4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Notes for sale to the public, which may
include selected dealers, as set forth in the Prospectus.
Section 5. Covenants of the Trust Depositor, the Servicer and Mitsui. The
Trust Depositor, the Servicer and Mitsui, jointly and severally, covenant and
agree with each Underwriter as follows:
(a) The Trust Depositor will prepare the Prospectus in a form approved by
the Representative and file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A(a)(3) under the
Securities Act.
(b) During the period that a prospectus relating to the Notes is required
to be delivered under the Securities Act in connection with sales of such Notes
(such period being hereinafter sometimes referred to as the "prospectus delivery
period"), before filing any amendment or supplement to the Registration
Statement or the Prospectus, the Trust Depositor will furnish to the
Representative a copy of the proposed amendment or supplement for review and
will not file any such proposed amendment or supplement to which the
Representative reasonably objects.
(c) During the prospectus delivery period, the Trust Depositor will advise
the Representative promptly after it receives notice thereof, (i) when any
amendment to the Registration Statement shall have become effective; (ii) of any
request by the Commission for any amendment or supplement to the Registration
Statement or the Prospectus or for any additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding for
that purpose, (iv) of the issuance by the Commission of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or the
initiation or threatening of any proceedings for that purpose and (v) of any
notification with respect to any suspension of the qualification of the Notes
for offer and sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and will use its best efforts to prevent the
issuance of any such stop order or suspension and, if any is issued, will
promptly use its best efforts to obtain the withdrawal thereof.
(d) If, at any time during the prospectus delivery period, any event occurs
as a result of which the Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it shall be necessary to amend or
supplement the Prospectus to comply with the Securities Act, the Trust Depositor
promptly will prepare and file with the Commission, an amendment or a supplement
which will correct such statement or omission or effect such compliance.
(e) The Trust Depositor will endeavor to qualify the Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions as the
<PAGE>
Representative shall reasonably request and will continue such qualification in
effect so long as reasonably required for distribution of the Notes; provided,
however, that the Trust Depositor shall not be obligated to qualify to do
business in any jurisdiction in which it is not currently so qualified; and
provided, further, that the Trust Depositor shall not be required to file a
general consent to service of process in any jurisdiction.
(f) The Trust Depositor will furnish to the Representative, without charge,
two copies of the Registration Statement (including exhibits thereto), one of
which will be signed, and to each Underwriter conformed copies of the
Registration Statement (without exhibits thereto) and, during the prospectus
delivery period, as many copies of any Preliminary Prospectus and the Prospectus
and any supplement thereto as the Underwriters may reasonably request.
(g) For a period from the date of this Agreement until the retirement of
the Notes, or until such time as the Underwriters shall cease to maintain a
secondary market in the Notes, whichever first occurs, the Trust Depositor will
deliver to the Underwriters (i) the annual statements of compliance, (ii) the
annual independent certified public accountants' reports furnished to the
Indenture Trustee, (iii) all documents required to be distributed to the
Noteholders of the Trust and (iv) all documents filed with the Commission
pursuant to the Exchange Act or any order of the Commission thereunder, in each
case as provided to the Indenture Trustee or filed with the Commission, as soon
as such statements and reports are furnished to the Indenture Trustee or filed
or as soon thereafter as practicable.
(h) To the extent, if any, that the rating provided with respect to the
Notes by the rating agency or agencies that initially rate the Notes is
conditional upon the furnishing of documents or the taking of any other actions
by the Trust Depositor, the Servicer or Mitsui, as the case may be, shall
furnish such documents and take any such other actions.
(i) The Trust Depositor will, or will cause the Trust to, furnish such
information, execute such instruments and take such actions, if any, as the
Representative may reasonably request in connection with the filing with the
NASD relating to the Notes should the Representative determine that such filing
is required or appropriate.
(j) The Trust Depositor will use the net proceeds received by it from the
issuance of the Notes in the manner specified in the Prospectus under the
caption "Use of Proceeds".
(k) The Trust Depositor will cause the Trust to make generally available to
Noteholders and to the Representative as soon as practicable an earnings
statement covering a period of at least twelve months beginning with the first
fiscal quarter of the Trust occurring after the Effective Date of the
Registration Statement, which shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 of the Commission promulgated thereunder.
(l) For a period of 90 days from the date hereof, the Trust Depositor will
not offer for sale, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file a registration statement for, or announce any offering of,
any securities collateralized by, or evidencing an ownership interest in, any
asset-backed securities of the Trust Depositor or the Trust (other than the
Notes purchased hereunder) without the prior written consent of the
Underwriters.
Section 6. Conditions to the Obligations of the Underwriters. The
respective obligations of the several Underwriters hereunder are subject to the
accuracy, when made and on the Closing Date, of the representations and
warranties of the Trust Depositor, the Servicer and Mitsui contained herein, to
the accuracy of the statements of the Trust Depositor, the Servicer and Mitsui
made in any certificates pursuant to the provisions hereof, to the performance
by the Trust Depositor, the Servicer and Mitsui of their respective obligations
hereunder and to each of the following additional terms and conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424 in the manner and within the applicable time period prescribed for such
filing by the rules and regulations of the Commission under the Securities Act
and in accordance with Section 5(a) of this Agreement; and, prior to the Closing
Date, no stop order suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no proceedings for such purpose
shall have been initiated or threatened by the Commission; and all requests for
additional information from the Commission with respect to the Registration
Statement shall have been complied with to the reasonable satisfaction of the
Representative.
(b) (i) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Transaction Agreements,
the Notes, the Registration Statement, the Preliminary Prospectus and the
<PAGE>
Prospectus, and all other legal matters relating to such agreements and the
transactions contemplated hereby and thereby shall be reasonably satisfactory in
all material respects to counsel for the Underwriters, and the Trust Depositor
shall have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters and (ii) prior to or
contemporaneously with the purchase of Notes hereunder, all transactions
contemplated to be consummated under such Transaction Documents on the Closing
Date (including, without limitation, the issuance and placement of any
subordinated, privately-placed securities) shall have been so consummated to the
reasonable satisfaction of the Underwriters.
(c) Brown & Wood shall have furnished to the Representative their written
opinion, as U.S. counsel to the Trust Depositor, the Servicer and Mitsui,
addressed to the Underwriters and dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriters.
(d) (x) [________________________] shall have furnished to the
Representative his written opinion, as Secretary to the Servicer, addressed to
the Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters and (y) [________________________] shall have
furnished to the Representative his written opinion, as General Counsel to the
Servicer, addressed to the Underwriters and dated the Closing Date, in form and
substance reasonably satisfactory to the Underwriters.
(e) Brown & Wood shall have furnished to the Representative their written
opinion, as U.S. counsel to the Trust Depositor, the Servicer and Mitsui,
addressed to the Underwriters and dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriters, with respect to the
characterization of the transfer of the Trust Assets by the Servicer to the
Trust Depositor pursuant to the Transfer and Sale Agreement as a sale and the
non-consolidation of the [Trust Depositor, the Servicer and Mitsui].
(f) The Representative shall have received from Cadwalader, Wickersham &
Taft, counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to such matters as the Underwriters may require, and the
Trust Depositor shall have furnished to such counsel such documents as they
reasonably request for enabling them to pass upon such matters.
(g) (i) [___________] shall have furnished to the Representatives their
written opinion, as counsel to the Indenture Trustee, addressed to the
Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters and (ii) [___________] shall have furnished to
the Representatives their written opinion, as counsel to the Owner Trustee,
addressed to the Underwriters and dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriters.
(h) Each of the Trust Depositor and the Servicer shall have furnished to
the Representative a certificate, dated the Closing Date, of any of its Chairman
of the Board, President or Vice President and its chief financial officer
stating that (i) such officers have carefully examined the Registration
Statement and the Prospectus, (ii) the Prospectus does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading (provided
that each of the Trust Depositor and the Servicer may exclude Underwriters'
Information (as defined in Section 10(d) herein) from such representation),
(iii) the representations and warranties of the Trust Depositor or the Servicer,
as the case may be, contained in this Agreement and the Transaction Agreements
are true and correct in all material respects on and as of the Closing Date,
(iv) the Trust Depositor or the Servicer, as the case may be, has complied in
all material respects with all agreements and satisfied in all material respects
all conditions on its part to be performed or satisfied hereunder and under such
agreements at or prior to the Closing Date, (v) no stop order suspending the
effectiveness of the Registration Statement has been issued and is outstanding
and no proceedings for that purpose have been instituted and not terminated or,
to the best of his or her knowledge, are contemplated by the Commission, and
(vi) since the date of its most recent financial statements, there has been no
material adverse change in the financial position or results of operations of
the Trust Depositor or the Servicer, as applicable, or any change, or any
development including a prospective change, in or affecting the condition
(financial or otherwise), results of operations or business of the Trust
Depositor or the Servicer except as set forth in or contemplated by the
Registration Statement and the Prospectus.
(i) Subsequent to the date of this Agreement, there shall not have occurred
(i) any change, or any development involving a prospective change, in or
affecting particularly the business or properties of the Trust Depositor, the
Servicer or Mitsui which materially impairs the investment quality of the Notes;
(ii) trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market shall have been suspended
or limited, or minimum prices shall have been established on either of such
<PAGE>
exchanges or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, or trading in
securities of the Trust Depositor, the Servicer or Mitsui on any exchange or in
the over-the-counter market shall have been suspended or (iii) a general
moratorium on commercial banking activities shall have been declared by Federal
or New York State authorities or (iv) an outbreak or escalation of hostilities
or a declaration by the United States of a national emergency or war or such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of the
Representative, impracticable or inadvisable to proceed with the public offering
or the delivery of the Notes on the terms and in the manner contemplated in the
Prospectus.
(j) With respect to the letter of [Ernst & Young LLP], delivered to the
Underwriters concurrently with the execution of this Agreement (the "initial
letter"), the Trust Depositor shall have furnished to the Underwriters a letter
(the "bring-down letter") of such accountants, addressed to the Underwriters and
dated the Closing Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualifications of accountants under
Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of
the bring-down letter (or with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of such bring-down letter), the conclusions and findings of
such firm with respect to the financial information and other matters covered by
its initial letter and (iii) confirming in all material respects the conclusions
and findings set forth in its initial letter.
(k) The Underwriters shall receive evidence satisfactory to them that, on
or before the Closing Date, UCC-1 financing statements have been or are being
filed in each office in each jurisdiction in which such financing statements are
required to perfect the first priority security interests created by the
Transfer and Sale Agreement reflecting the interest of the Trust Depositor in
the Contracts and the proceeds thereof.
(l) Subsequent to the execution and delivery of this Agreement, (i) no
downgrading shall have occurred in the rating accorded the Notes or any of the
Trust Depositor's other debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) of the Securities Act and (ii) no such organization
shall have publicly announced that it has under surveillance or review (other
than an announcement with positive implications of a possible upgrading), its
rating of the Notes or any of the Trust Depositor's other debt securities.
(m) At the Closing Date, the Class A Notes shall be rated by each of
[_________] and [_________] in their highest rating category; the Class B Notes
shall be rated at least "[___]" by [________] and "[___]" by [________]; and the
Class C Notes shall be rated at least "[___]" by [_______] and "[___]" by
[--------].
(n) The Trust Depositor shall have delivered to the Representative a copy,
certified by an officer of the Trust Depositor, of the Registration Statement as
initially filed with the Commission and of all amendments thereto (including all
exhibits) and full and complete sets of all comments of the Commission or its
staff and all responses thereto with respect to the Registration Statement.
All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Underwriters.
Section 7. Termination. The obligations of the Underwriters hereunder may
be terminated by the Representative, in its absolute discretion, by notice given
to and received by the Trust Depositor, the Servicer and Mitsui prior to
delivery of and payment for the Notes if, prior to that time, any of the events
described in Section 6(i) or Section 6(l) shall have occurred.
Section 8. Defaulting Underwriters. (a) If, on the Closing Date, any
Underwriter or Underwriters default in the performance of its or their
obligations under this Agreement, the Representative may make arrangements for
the purchase of such Notes by other persons satisfactory to the Trust Depositor
and the Representative, including any of the Underwriters, but if no such
arrangements are made by the Closing Date, then each remaining non-defaulting
Underwriter shall be severally obligated to purchase the Notes which the
defaulting Underwriter or Underwriters agreed but failed to purchase on the
Closing Date in the respective proportions which the principal amount of Notes
set forth opposite the name of each remaining non-defaulting Underwriter in
<PAGE>
Schedule I hereto bears to the aggregate principal amount of Notes set forth
opposite the names of all the remaining non-defaulting Underwriters in Schedule
I hereto; provided, however, that the remaining non-defaulting Underwriters
shall not be obligated to purchase any of the Notes on the Closing Date if the
aggregate principal amount of Notes which the defaulting Underwriter or
Underwriters agreed but failed to purchase on such date exceeds one-eleventh of
the aggregate principal amount of the Notes to be purchased on the Closing Date,
and any remaining non-defaulting Underwriter shall not be obligated to purchase
in total more than [____]% of the principal amount of the Notes which it agreed
to purchase on the Closing Date pursuant to the terms of Section 2. If the
foregoing maximums are exceeded and the remaining Underwriters or other
underwriters satisfactory to the Representative and the Trust Depositor do not
elect to purchase the Notes which the defaulting Underwriter or Underwriters
agreed but failed to purchase, this Agreement shall terminate without liability
on the part of any non-defaulting Underwriter or the Trust Depositor, except
that the provisions of Sections 9 and 13 shall not terminate and shall remain in
effect. As used in this Agreement, the term "Underwriter" includes, for all
purposes of this Agreement unless the context otherwise requires, any party not
listed in Schedule I hereto who, pursuant to this Section 8, purchases Notes
which a defaulting Underwriter agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If other Underwriters
are obligated or agree to purchase the Notes of a defaulting Underwriter, either
the Representative or the Trust Depositor may postpone the Closing Date for up
to seven full business days in order to effect any changes that in the opinion
of counsel for the Trust Depositor or counsel for the Underwriters may be
necessary in the Registration Statement, the Prospectus or in any other document
or arrangement, and the Trust Depositor agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus that effects any such
changes.
Section 9. Reimbursement of Underwriters' Expenses. If (i) the Trust
Depositor shall fail to tender the Notes for delivery to the Underwriters for
any reason permitted under this Agreement or (ii) the Underwriters shall decline
to purchase the Notes for any reason permitted under this Agreement, the Trust
Depositor shall reimburse the Underwriters for the fees and expenses of their
counsel and for such other out-of-pocket expenses as shall have been reasonably
incurred by them in connection with this Agreement and the proposed purchase of
the Notes, and upon demand the Trust Depositor shall pay the full amount thereof
to the Representative. If this Agreement is terminated pursuant to Section 8 by
reason of the default of one or more Underwriters, the Trust Depositor shall not
be obligated to reimburse any defaulting Underwriter on account of those
expenses.
Section 10. Indemnification.
(a) The Trust Depositor, the Servicer and Mitsui shall, jointly and
severally, indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Securities Act
(collectively referred to for the purposes of this Section 10 as the
Underwriter) against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which that Underwriter may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement as originally filed or in any amendment thereof or supplement thereto,
or in any Preliminary Prospectus or the Prospectus or in any amendment thereof
or supplement thereto or (ii) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each Underwriter for any
legal or other expenses reasonably incurred by that Underwriter directly in
connection with investigating or preparing to defend or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that neither the Trust Depositor, the Servicer nor Mitsui shall be liable in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue statement
in or omission or alleged omission from any Registration Statement as originally
filed or in any amendment thereof or supplement thereto, or in any Preliminary
Prospectus or the Prospectus or in any amendment thereof or supplement thereto
in reliance upon and in conformity with the Underwriters' Information (as
defined in Section 10(d) herein).
(b) Each Underwriter, severally and not jointly, shall indemnify and hold
harmless each of the Trust Depositor, the Servicer, Mitsui, and each of their
directors, each officer of the Trust Depositor, the Servicer or Mitsui who
signed the Registration Statement and each person, if any, who controls the
Trust Depositor, the Servicer or Mitsui within the meaning of the Securities Act
<PAGE>
(collectively referred to for the purposes of this Section 10 as the Trust
Depositor, the Servicer or Mitsui, as appropriate), against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Trust Depositor, the Servicer and Mitsui may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally filed or in any amendment thereof or supplement thereto, or in any
Preliminary Prospectus or the Prospectus or in any amendment thereof or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with the Underwriters' Information (as
defined in Section 10(d) herein), and shall reimburse the Trust Depositor, the
Servicer and Mitsui for any legal or other expenses reasonably incurred by the
Trust Depositor, the Servicer and Mitsui in connection with investigating or
preparing to defend or defending against or appearing as third party witness in
connection with any such loss, claim, damage or liability (or any action in
respect thereof) as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section 10 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 10, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 10 except to the extent it has been materially
prejudiced by such failure; and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 10. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party). After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 10 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that the Representative shall have the right to employ counsel to
represent jointly the Representative and the other Underwriters (and their
respective controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought under this Section 10) if,
in the reasonable judgment of the Representative, it is advisable for the
Representative and the other Underwriters and controlling persons to be jointly
represented by separate counsel, and in that event the fees and expenses of such
separate counsel shall be paid by the Trust Depositor, the Servicer and Mitsui.
Each indemnified party, as a condition of the indemnity agreements contained in
Sections 10(a) and 10(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) The Underwriters confirm that the information (such information, the
"Underwriters' Information") set forth (i) in the [last] paragraph on the cover
page, (ii) the [_____] paragraph on page [__] and (iii) in the [_____] and
[______] paragraphs under the caption "Plan of Distribution" in the Prospectus
is correct and constitutes the only information furnished in writing to the
Trust Depositor, the Servicer and Mitsui by or on behalf of the Underwriters
specifically for inclusion in the Registration Statement and the Prospectus.
(e) The obligations of the Trust Depositor, the Servicer and Mitsui in this
Section 10 shall be in addition to any liability which the Trust Depositor, the
Servicer or Mitsui may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Securities Act; and the obligations of the Underwriters under
this Section 10 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director and officer of the Trust Depositor, the Servicer or
Mitsui (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Trust Depositor) and
to each person, if any, who controls the Trust Depositor, the Servicer or Mitsui
<PAGE>
within the meaning of the Securities Act.
Section 11. Contribution. If the indemnification provided for in Section 10
is unavailable or insufficient to hold harmless an indemnified party under
Section 10(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
any action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Trust Depositor, the Servicer and
Mitsui on the one hand and the Underwriters on the other from the offering of
the Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Trust Depositor, the Servicer and Mitsui on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or any action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Trust Depositor, the Servicer and Mitsui on the one
hand and the Underwriters on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Notes purchased hereunder (before deducting expenses) received by the
Trust Depositor bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Notes purchased hereunder, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Trust Depositor, the Servicer and Mitsui on the one hand or the Underwriters on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Trust Depositor, the Servicer, Mitsui and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 11 were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim damage or liability referred to above in Section 10
shall be deemed to include, for purposes of this Section 11, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim or any action. Notwithstanding the
provisions of this Section 11, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Notes
underwritten by it and distributed to the public were offered to the public less
the amount of any damages which such Underwriter has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to indemnify and contribute as
provided in Section 10 and this Section 11 are several in proportion to their
respective underwriting obligations and not joint.
Section 12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Trust
Depositor, the Servicer and Mitsui and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters, the Trust
Depositor, the Servicer and Mitsui and their respective successors and the
controlling persons and officers, directors referred to in Sections 10 and 11
and their heirs and legal representatives, any legal or equitable light, remedy
or claim under or in respect of this Agreement or any provision contained
herein.
Section 13. Expenses. The Trust Depositor, the Servicer and Mitsui, jointly
and severally, agree with the Underwriters to pay (i) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Notes and any
taxes payable in that connection; (ii) the costs incident to the preparation,
printing and filing under the Securities Act of the Registration Statement and
any amendments and exhibits thereto; (iii) the costs of distributing the
Registration Statement as originally filed and each amendment thereto and any
post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus and the Prospectus, all as provided in this Agreement;
(iv) the costs of reproducing and distributing this Agreement and any other
underwriting and selling group documents by mail, telex or other means of
communications; (v) the fees and expenses of qualifying the Notes under the
securities laws of the several jurisdictions as provided in Section 5(e) and of
preparing, printing and distributing Blue Sky Memoranda and Legal Investment
Surveys (including the related reasonable and documented fees and expenses of
<PAGE>
counsel to the Underwriters); (vi) any fees charged by rating agencies for
rating the Notes; (vii) all fees and expenses of the Indenture Trustee and the
Owner Trustee and each of their counsel; (viii) any transfer taxes payable in
connection with its sale of the Notes pursuant to this Agreement; and (ix) all
other costs and expenses incident to the performance of the obligations of the
Trust Depositor, the Servicer and Mitsui under this Agreement; provided that,
except as otherwise provided in this Section 13, the Underwriters shall pay
their own costs and expenses, including, the costs and expenses of their counsel
and the expenses of advertising any offering of the Notes made by the
Underwriters.
Section 14. Survival. The respective indemnities, rights of
contribution, agreements, representations, warranties and other statements of
the Trust Depositor, the Servicer, Mitsui and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or
on behalf of any Underwriter or any controlling person of any Underwriter, or
the Trust Depositor, the Servicer or Mitsui, or any officer, director or
controlling person of the Trust Depositor, the Servicer or Mitsui, and shall
survive delivery of and payment for the Notes.
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Trust Depositor, the Servicer and Mitsui in subsection (a) of
Section 10 hereof, the representations and warranties in subsections (b) and (c)
of Section 1 hereof and any representation or warranty as to the accuracy of the
Registration Statement or the Prospectus contained in any certificate furnished
by the Trust Depositor, the Servicer or Mitsui pursuant to Section 6 hereof,
insofar as they may constitute a basis for indemnification for liabilities
(other than payment by the Trust Depositor, the Servicer or Mitsui, of expenses
incurred or paid in the successful defense of any action, suit or proceeding)
arising under the Securities Act, shall not extend to the extent of any interest
therein of a controlling person or partner of an Underwriter who is a director,
officer or controlling person of the Trust Depositor when the Registration
Statement has become effective or who, with his or her consent, is named in the
Registration Statement as about to become a director of the Trust Depositor,
except in each case to the extent that such interest shall have been determined
by a court of appropriate jurisdiction as not against public policy as expressed
in the Securities Act. Unless in the opinion of counsel for the Trust Depositor
the matter has been settled by controlling precedent, the Trust Depositor will,
if a claim for such indemnification is asserted, submit to a court of
appropriate jurisdiction the question of whether such interest is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Section 15. Notices. All communication hereunder shall be in writing and,
(i) if sent to the Underwriters will be mailed, delivered or telecopied and
confirmed to them at First Union Capital Markets, a division of Wheat First
Securities, Inc., Asset Securitization Division, 301 South College Street, TW-9,
Charlotte, North Carolina 28288-0610, Telecopy Number: (704) 374-3254; provided,
however, that any notice to an Underwriter pursuant to Section 9(c) shall be
delivered or sent by mail, delivery or telecopy to such Underwriter at its
address set forth in its acceptance telex to the Representative, which address
will be supplied to any other party hereto by the Representative upon request;
(ii) if sent to the Trust Depositor, will be mailed, delivered or telecopied and
confirmed to them at the address of the Trust Depositor set forth in the
Registration Statement, Attention: [Chief Financial Officer]; (iii) if sent to
the Servicer, will be mailed, delivered or telecopied and confirmed to them at
the address of the Servicer set forth in the Registration Statement, Attention:
[Vice President and Treasurer] and (iv) if sent to Mitsui, will be mailed,
delivered or telecopied and confirmed to them at the address of Mitsui set forth
in the Registration Statement, Attention: [Vice President and Treasurer]. Any
such statements, requests, notices or agreements shall take effect at the time
of receipt thereof. The Trust Depositor, the Servicer and Mitsui shall be
entitled to act and rely upon any request, consent, notice or agreement given or
made on behalf of the Underwriters by the Representative.
Section 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 17. Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity.
(a) To the fullest extent permitted by applicable law, each of the Trust
Depositor, the Servicer and Mitsui irrevocably submits to the jurisdiction of
any Federal or State court in the City, County and State of New York, United
<PAGE>
States of America, in any suit or proceeding based on or arising under this
Agreement, and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in any such court. Each of the Trust Depositor, the
Servicer and Mitsui hereby irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. Each of the
Trust Depositor, the Servicer and Mitsui hereby irrevocably designates and
appoints [CT Corporation] (the "Process Agent"), as its authorized agent upon
whom process may be served in any such suit or proceeding, it being understood
that the designation and appointment of [CT Corporation] as such authorized
agent shall become effective immediately without any further action on the part
of the Trust Depositor, the Servicer or Mitsui. Each of the Trust Depositor, the
Servicer and Mitsui represents to each Underwriter that it has notified the
Process Agent of such designation and appointment and that the Process Agent has
accepted the same in writing. Each of the Trust Depositor, the Servicer and
Mitsui hereby irrevocably authorizes and directs the Process Agent to accept
such service. Each of the Trust Depositor, the Servicer and Mitsui further
agrees that service of process upon the Process Agent and written notice of said
service to the Trust Depositor, the Servicer or Mitsui, as the case may be,
mailed by first class mail or delivered to the Process Agent at its principal
office, shall be deemed in every respect effective service of process upon the
Trust Depositor, the Servicer or Mitsui, as the case may be, in any such suit or
proceeding. Nothing herein shall affect the right of any Underwriter or any
person controlling any Underwriter to serve process in any other manner
permitted by law. Each of the Trust Depositor, the Servicer and Mitsui agrees
that a final action in any such suit or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
lawful manner.
(b) The obligation of the parties to make payments hereunder is in U.S.
dollars (U.S. dollars and such other currencies referred to above being called
the "Obligation Currency") and such obligation shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of set-off, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder, and the party liable to make such
payment agrees to indemnify the party which is to receive such payment (as an
additional, separate and independent cause of action) for the amount (if any) by
which such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation to
indemnify shall not be affected by judgment being obtained for any other sums
due under this Agreement.
Section 18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
Section 19. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
Section 20. Effectiveness. This Agreement shall become effective upon
execution and delivery.
<PAGE>
If you are in agreement with the foregoing, please sign the counterpart
hereof and return it to the Trust Depositor, whereupon this letter and your
acceptance shall become a binding agreement among the Trust Depositor, the
Servicer, Mitsui and the several Underwriters.
Very truly yours,
MITSUI VENDOR LEASING FUNDING CORP. II
By:
--------------------------------------
Name:
Title:
MITSUI VENDOR LEASING (U.S.A.) INC.
By:
--------------------------------------
Name:
Title:
MITSUI LEASING AND DEVELOPMENT, LIMITED
By:
--------------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date hereof.
FIRST UNION CAPITAL MARKETS, A DIVISION
OF WHEAT FIRST SECURITIES, INC.,
as Representative of the Underwriters
By:
--------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Date of Underwriting Agreement: November [__], 1998
Underwriters: First Union Capital Markets,
a division of Wheat First
Securities, Inc.
Representative and Address: First Union Capital Markets, a
division of Wheat First
Securities, Inc.
One First Union Center, TW-9
301 South College Street
Charlotte, NC 28288-0610
Title, Purchase Price and Description of Notes:
Class A-1 Notes
---------------
Title: $[_______] [_____]% Class A-1 Receivable-
Backed Notes, Series 1998-1
Price to public: [_____]%
Purchase price: [_____]%
Underwriting discount: [______]%
Payment Dates: The 25th calendar day of each month (if such day
is not a Business Day, the next succeeding
Business Day), commencing November 25, 1998
Maturity: [_________] [____] Payment Date
Redemption provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment Date at
the Trust Depositor's option if the ADCB of the
Contract Pool at such time is less than 10% of the
initial ADCB of the Contract Pool as of the Cutoff
Date.
Class A-2 Notes
---------------
Title: $[___________] [_____]% Class A-2
Receivable-Backed Notes, Series 1998-1
Price to public: [_____]%
Purchase price: [_____]%
Underwriting discount: [______]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the next
succeeding Business Day), commencing
November 25, 1998
Maturity: [_________] [____] Payment Date
Redemption provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment Date at
the Trust Depositor's option if the ADCB of the
Contract Pool at such time is less than 10% of the
initial ADCB of the Contract Pool as of the Cutoff
Date.
Class A-3 Notes
---------------
Title: $[___________] [_____]% Class A-3 Receivable-
Backed Notes, Series 1998-1
Price to public: [_____]%
Purchase price: [_____]%
Underwriting
discount: [______]%
Payment Dates: The 25th calendar day of each month (if
such day is not a Business Day, the
next succeeding Business Day), commencing
November 25, 1998
Maturity: [_________] [____] Payment Date
Redemption
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment Date at
the Trust Depositor's option if the ADCB of the
Contract Pool at such time is less than 10% of the
initial ADCB of the Contract Pool as of the Cutoff
Date.
Class B Notes
-------------
Title: $[__________] [_____]% Class B Receivable-
Backed Notes, Series 1998-1
<PAGE>
Price to public: [_____]%
Purchase price: [_____]%
Underwriting
discount: [______]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the
next succeeding Business Day), commencing
November 25, 1998
Maturity: [_________] [____] Payment Date
Redemption
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment Date at
the Trust Depositor's option if the ADCB of the
Contract Pool at such time is less than 10% of the
initial ADCB of the Contract Pool as of the Cutoff
Date.
Class C Notes
-------------
Title: $[_________] [_____]% Class C Receivable-
Backed Notes, Series 1998-1
Price to public: [______]%
Purchase price: [______]%
Underwriting
discount: [______]%
Payment Dates: The 25th calendar day of each month (if such
day is not a Business Day, the next succeeding
Business Day), commencing November 25, 1998
Maturity: [________] [____] Payment Date
Redemption
provisions: Notes remaining outstanding may be redeemed
in whole, but not in part, on any Payment Date at
the Trust Depositor's option if the ADCB of the
Contract Pool at such time is less than 10% of the
initial ADCB of the Contract Pool as of the Cutoff
Date.
Closing Date, Time and Location:
Date: November [__], 1998
Time: [9:00 New York City time]
Location: [Brown & Wood, _________________________,
New York, New York]
<PAGE>
SCHEDULE II
UNDERWRITERS
$[__________] Principal Amount of Class A-1 Notes to be Purchased
Principal Amount
----------------
First Union Capital Markets, a division of Wheat
First Securities, Inc. $ __________
[Other Underwriters] __________
----------
----------
UNDERWRITERS
$[__________] Principal Amount of Class A-2 Notes to be Purchased
Principal Amount
----------------
First Union Capital Markets, a division of
Wheat First Securities, Inc. $ __________
[Other Underwriters] __________
----------
----------
UNDERWRITERS
$[__________] Principal Amount of Class A-3 Notes to be Purchased
Principal Amount
----------------
First Union Capital Markets, a division of
Wheat First Securities, Inc. $ __________
[Other Underwriters] __________
----------
----------
UNDERWRITER
$[__________] Principal Amount of Class B Notes to be Purchased
Principal Amount
----------------
First Union Capital Markets, a division of
Wheat First Securities, Inc. $__________
UNDERWRITER
$[__________] Principal Amount of Class C Notes to be Purchased
Principal Amount
-----------------
First Union Capital Markets, a division of
Wheat First Securities, Inc. $__________
<PAGE>
Exhibit 4.1(a)
MITSUI VENDOR LEASING ASSET TRUST 1998-1
TRUST AGREEMENT, dated as of October 1, 1998, between Mitsui Vendor
Leasing Funding Corp. II, a Delaware corporation, as depositor (the "Depositor")
and Wilmington Trust Company, a Delaware banking corporation, not in its
individual capacity but solely as trustee (the "Trustee"). The Depositor and the
Trustee hereby agree as follows:
1. The Trust created hereby shall be known as "Mitsui Vendor Leasing
Asset Trust 1998-1," (the "Trust") in which name the Trustee may conduct the
business of the Trust, make and execute contracts, and sue and be sued.
2. (a) The Depositor hereby assigns, transfers, conveys and sets over
to the trustee the sum of $1. The Trustee hereby acknowledges receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustee hereby declares that it will hold the trust estate in
trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. Section 3801 et seq. and that this document
constitute the governing instrument of the Trust. The Trustee is hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in the form attached hereto as Exhibit A.
(b) The Trustee accepts the trust hereby created and agrees to perform
its duties hereunder with respect to the same but only upon the terms of this
Trust Agreement. The Trustee shall not be answerable or accountable hereunder,
except for its own willful misconduct, bad faith or negligence. In particular,
but not by way of limitation (and subject to the exceptions set forth in the
preceding sentence):
(i) The Trustee shall not be liable for any error of
judgement made by an officer or employee of the Trustee;
(ii) No provision of this Trust Agreement shall require the
Trustee to expend or risk funds or otherwise incur any financial liability in
the performance of any of its rights or powers hereunder, if the Trustee shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or provided
to it;
(iii) The Trustee shall not be responsible for or in respect
of the genuineness, form or value of the Trust property, the validity or
sufficiency of this Trust Agreement or for the due execution hereof by the
Depositor; and
(iv) In the event that the Trustee is unsure of the course
of action to be taken by it hereunder, the Trustee may request instructions from
the Depositor and to the extent the Trustee follows such instructions in good
faith it shall not be liable to any person. In the event that no instructions
are provided within the time requested by the Trustee, it shall have no duty or
liability for its failure to take any action, or for any action it takes not
contrary to this Trust Agreement as it shall deem to be in the best interests of
the Trust.
(c) The Trustee shall incur no liability to anyone in acting upon
any document believed by it to be genuine and believed by it to be signed by the
proper party or parties. The Trustee may accept a certified copy of a resolution
of the board of directors or other governing body of any corporate party as
conclusive evidence that such resolution has been duly adopted by such body and
that the same is in full force and effect. As to any fact or matter the manner
of ascertainment of which is not specifically prescribed herein, the Trustee may
for all purposes hereof rely on a certificate, signed by the Depositor, as to
such fact or matter, and such certificate shall constitute full protection to
the Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(d) In the exercise or administration of the trusts hereunder,
the Trustee (i) may act directly or through agents or attorneys, and the Trustee
shall not be liable for the default or misconduct of such agents or attorneys if
such agents or attorneys shall have been selected by the trustee with reasonable
care, and (ii) may consult with counsel, accountants and other skilled persons
to be selected with reasonable care and employed by it, and it shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the advice or opinion of any such counsel, accountants or other such
persons and not contrary to this Trust Agreement.
(e) Except as expressly provided in this Section 2, in accepting
and performing the trusts hereby created, the trustee acts solely as trustee
hereunder and not in its individual capacity, and all persons having any claim
against the Trustee by reason of the transactions contemplated by this Trust
Agreement shall look only to the Trust's property for payment or satisfaction
thereof.
3. The Depositor hereby agrees to reimburse the Trustee for all
reasonable expenses (including reasonable fees and expenses of counsel and other
experts) and to indemnify the trustee and its successors, assigns, agents and
<PAGE>
servants (the "Indemnified Persons") from and against any and all losses,
damages, liabilities, claims, actions, and suits, and any and all reasonable
costs, expenses and disbursements (including the reasonable fees and expenses of
counsel) of any kind and nature whatsoever (collectively, "Expenses"), to the
extent that such Expenses arise out of or are imposed upon or asserted at any
time against such Indemnified Persons with respect to the performance of this
Trust Agreement, the creation, operation or termination of the Trust or the
transactions contemplated hereby; provided, however, that the Depositor shall
not be liable for or required to indemnify any Indemnified Person for any
Expenses which are a result of the willful misconduct, bad faith or negligence
of such Indemnified Person or the Trustee. The obligations of the Depositor
under this Section 3 shall survive the termination of this Trust Agreement or
the removal or resignation of the Trustee. The Trustee's choice of legal counsel
shall be subject to the approval of the Depositor, which approval shall not be
unreasonably withheld.
4. The Depositor and the Trustee will enter into an amended and
restated Trust Agreement, satisfactory to each such party, to provide for the
contemplated operation of the Trust created hereby. Prior to the execution and
delivery of such amended and restated Trust Agreement, the Trustee shall not
have any duty or obligation hereunder or with respect to the trust estate,
except as otherwise required by applicable law or, as instructed by the
Depositor, as may be necessary to obtain prior to such execution and delivery
any licenses, consents or approvals required by applicable law or otherwise.
5. This Trust Agreement may be executed in one or more counterparts.
6. The Trustee may resign upon thirty days prior notice to the
Depositor.
7. This Trustee Agreement shall be governed by and construed in
accordance with the laws of the Sate of Delaware.
[SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
MITSUI VENDOR LEASING FUNDING
CORP. II, as Depositor
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, as Trustee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
MITSUI VENDOR LEASING ASSET TRUST 1998-1
THIS Certificate of Trust of MITSUI VENDOR LEASING ASSET TRUST 1998-1
(the "Trust"), dated as of October 1, 1998, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code. Section 3801
et seq.) (the "Act").
1. Name. The name of the business trust formed by this Certificate of
Trust is Mitsui Vendor Leasing Asset Trust 1998-1.
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Trust in accordance with Section 3811(a)(1) of the Act.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as trustee
By: _____________________________________
Name:
Title:
<PAGE>
Exhibit 4.1(b)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDED AND RESTATED TRUST AGREEMENT
between
MITSUI VENDOR LEASING FUNDING CORP. II
as Trust Depositor,
MITSUI VENDOR LEASING (U.S.A.) INC.
as Servicer
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of October 1, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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Table of Contents
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ARTICLE I
DEFINITIONS
SECTION 1.01. Capitalized Terms............................................1
SECTION 1.02. Other Definitional Provisions................................3
SECTION 1.03. Usage of Terms...............................................3
SECTION 1.04. Section References...........................................3
SECTION 1.05. Accounting Terms.............................................3
ARTICLE II
ORGANIZATION
SECTION 2.01. Name.........................................................3
SECTION 2.02. Office.......................................................3
SECTION 2.03. Purposes and Powers..........................................3
SECTION 2.04. Appointment of Owner Trustee.................................4
SECTION 2.05. Capital Contribution of Owner Trust Estate...................5
SECTION 2.06. Declaration of Trust.........................................5
SECTION 2.07. Liability of Trust Depositor.................................5
SECTION 2.08. Title to Trust Property......................................5
SECTION 2.09. Situs of Trust...............................................6
SECTION 2.10. Representations And Warranties of the Trust Depositor........6
SECTION 2.11. Federal Income Tax Treatment.................................7
ARTICLE III
THE INVESTOR CERTIFICATES
SECTION 3.01. Initial Ownership............................................7
SECTION 3.02. The Investor Certificates....................................7
SECTION 3.03. Execution, Authentication and
Delivery of Investor Certificates............................8
SECTION 3.04. Registration of Transfer and
Exchange of Investor Certificates............................8
SECTION 3.05. Mutilated, Destroyed, Lost or
Stolen Investor Certificates.................................9
SECTION 3.06. Persons Deemed Owners........................................9
SECTION 3.07. Access to List of Owners' Names and Addresses................9
SECTION 3.08. Maintenance of Office or Agency.............................10
SECTION 3.09. Appointment of the IC Paying Agent..........................10
SECTION 3.10. Definitive Certificates.....................................10
SECTION 3.11. Restrictions on Transfer....................................11
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.01. Prior Notice to Trust Depositor
with Respect to Certain Matters.............................14
SECTION 4.02. [Reserved]..................................................15
SECTION 4.03. Action by the Trust Depositor
with Respect to Bankruptcy..................................15
SECTION 4.04. Restrictions on the Trust Depositor's and
the Administrator's Power...................................15
ARTICLE V
CERTAIN DUTIES
SECTION 5.01. [Reserved]..................................................15
SECTION 5.02. [Reserved]..................................................15
SECTION 5.03. [Reserved]..................................................15
SECTION 5.04. [Reserved]..................................................16
SECTION 5.05. The Internal Revenue Service and Others.....................16
SECTION 5.06. Signature on Returns; Tax Matters Partner...................16
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.01. General Authority..........................................16
SECTION 6.02. General Duties.............................................16
SECTION 6.03. Action upon Instruction....................................17
SECTION 6.04. No Duties Except as Specified in
this Agreement or in Instructions..........................18
SECTION 6.05. No Action Except Under Specified
Documents or Instructions..................................18
SECTION 6.06. Restrictions...............................................19
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ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.01. Acceptance of Trusts and Duties............................19
SECTION 7.02. Furnishing of Documents....................................20
SECTION 7.03. Representations and Warranties.............................20
SECTION 7.04. Reliance; Advice of Counsel................................21
SECTION 7.05. Not Acting In Individual Capacity..........................21
SECTION 7.06. Owner Trustee Not Liable for Notes,
Investor Certificates or the Contracts.....................21
SECTION 7.07. Owner Trustee May Own Notes................................22
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.01. Owner Trustee's Fees and Expenses..........................22
SECTION 8.02. Indemnification............................................22
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.01. Termination of Trust Agreement.............................23
SECTION 9.02. [Reserved].................................................23
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.01. Eligibility Requirements for Owner Trustee.................24
SECTION 10.02. Resignation or Removal of Owner Trustee....................24
SECTION 10.03. Successor Owner Trustee....................................25
SECTION 10.04. Merger or Consolidation of Owner Trustee...................25
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee..............25
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Supplements and Amendments.................................27
SECTION 11.02. No Legal Title to Trust Estate
In the Trust Depositor.....................................28
SECTION 11.03. Limitations on Rights of Others............................28
SECTION 11.04. Notices....................................................28
SECTION 11.05. Severability of Provisions.................................28
SECTION 11.06. Counterparts...............................................28
SECTION 11.07. Successors And Assigns.....................................29
SECTION 11.08. [Reserved].................................................29
SECTION 11.09. No Petition................................................29
SECTION 11.10. [Reserved].................................................29
SECTION 11.11. Headings...................................................29
SECTION 11.12. Governing Law..............................................29
SECTION 11.13. [Reserved].................................................29
SECTION 11.14. [Reserved].................................................29
[remainder of this page intentionally left blank]............................29
EXHIBITS
Exhibit A - Form of Certificate of Trust.............................A-1
Exhibit B - Form of Investor Certificate.............................B-1
Exhibit C - Form of Investment Letter................................C-1
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<PAGE>
This Amended and Restated Trust Agreement dated as of October 1, 1998
between Mitsui Vendor Leasing Funding Corp. II, a Delaware corporation, as Trust
Depositor (the "Trust Depositor"), Mitsui Vendor Leasing (U.S.A.) Inc., as
Servicer (the "Servicer") and Wilmington Trust Company, a Delaware banking
corporation, as owner trustee (the "Owner Trustee").
WHEREAS, a trust agreement dated as of October 1, 1998 between the
Depositor and the Owner Trustee (the "Original Trust Agreement") was entered
into on November 5, 1995; and
WHEREAS, this Trust Agreement is being entered into by the parties
hereto to amend and restate the Original Trust Agreement.
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the
Depositor, the Servicer and the Owner Trustee agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Capitalized Terms. Except as otherwise provided in this
Agreement, whenever used in this Agreement the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Agreement: This Amended and Restated Trust Agreement.
Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code,
12 DEL. CODE Section 3801 ET SEQ., as the same may be amended from time to time.
Certificate Register and Certificate Registrar: The register mentioned
and the registrar appointed pursuant to Section 3.04.
Certificate of Trust: The Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Business Trust Statute, substantially in the
form of Exhibit A hereto.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
Expenses: As defined in Section 8.02.
Holder: With respect to the Investor Certificate, a Person in whose
name an Investor Certificate is registered in the Certificate Register.
IC Paying Agent: The Indenture Trustee or any other paying agent or
co-paying agent appointed pursuant to Section 3.09 and authorized by the Issuer
to make payments to and distributions to the Holders of the Investor
Certificates as provided in subsections 4.10(a)(x) and (b)(ix) of the Sale and
Servicing Agreement.
Indemnified Parties: As defined in Section 8.02.
Investment Letter: An investment letter substantially in the form of
Exhibit C hereto.
Investor Certificate: An Investor Certificate substantially in the form
attached as Exhibit B hereto and issued pursuant to Article III hereof.
Non-U.S. Person: An individual, corporation, partnership or other person
other than a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust that
is subject to U.S. federal income tax regardless of the source of its income.
Owner Trustee: Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity but solely as owner trustee under this Agreement,
and any successor Owner Trustee hereunder.
<PAGE>
Owner Trustee Corporate Trust Office: The office of the Owner Trustee at
which its corporate trust business shall be administered, which initially shall
be Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890,
Attention: Corporate Trust Administration, or such other office at such other
address as the Owner Trustee may designate from time to time by notice to the
Owner, the Seller, the Servicer, the Indenture Trustee, the Trust Depositor and
the Holders of the Investor Certificates.
Percentage Interest: With respect to any Investor Certificate, the
percentage portion of all of the Investor Certificates evidenced thereby as
stated on the face of such Investor Certificate.
Prospective Owner: The meaning set forth in Section 3.11(a).
Sale and Servicing Agreement: The Sale and Servicing Agreement, dated as of
the date hereof, among the Trust, the Trust Depositor, the Seller, the Servicer,
the Indenture Trustee and the Back-up Servicer.
Secretary of State: The Secretary of State of the State of Delaware.
Treasury Regulations: The regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust: The trust established by this Agreement.
Trust Depositor: Mitsui Vendor Leasing Funding Corp. II in its capacity as
Trust Depositor hereunder, and its successors.
Trust Estate: All right, title and interest of the Trust in and to the
Trust Assets.
U.S. Person: A citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any State (other than a partnership that is not treated as a
U.S. Person under any applicable Treasury Regulations), or an estate whose
income is subject to United States federal income tax regardless of its source,
or a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. Persons
have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence on August 20, 1996 and treated as U.S.
Persons prior to such date that elect to continue to be treated as U.S. Persons,
also will be U.S. Persons.
SECTION 1.02. Other Definitional Provisions. Capitalized terms used that
are not otherwise defined herein shall have the meanings ascribed thereto in the
Sale and Servicing Agreement.
SECTION 1.03. Usage of Terms. With respect to all terms in this Agreement,
the singular includes the plural and the plural the singular; words importing
any gender include the other genders; references to "writing" include printing,
typing, lithography and other means of reproducing words in a visible form;
references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation".
SECTION 1.04. Section References. All section references, unless otherwise
indicated, shall be to Sections in this Agreement.
SECTION 1.05. Accounting Terms. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
ARTICLE II
ORGANIZATION
<PAGE>
SECTION 2.01. Name. The Trust created hereby shall be known as "Mitsui
Vendor Leasing Asset Trust 1998-1," in which name the Owner Trustee may conduct
the activities of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the Owner
Trustee at the Owner Trustee Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the Trust
Depositor, the Indenture Trustee, the Administrator and the Holders of the
Investor Certificates.
SECTION 2.03. Purposes and Powers.
(a) The sole purpose of the Trust is to manage the Trust Estate and
collect and disburse the periodic income therefrom for use in accordance with
this Agreement and the other Basic Documents, and in furtherance of such purpose
the Trust has the power and authority and is hereby authorized to engage in the
following ministerial activities:
(i) to execute, deliver and issue the Notes pursuant to the Indenture
and to sell the Notes;
(ii) with the proceeds of the sale of the Notes, to purchase the
Contracts and other Trust Assets, and to pay the organizational, start-up
and transactional expenses of the Trust and to pay the balance to the Trust
Depositor pursuant to the Sale and Servicing Agreement;
(iii) to execute, deliver and issue the Investor Certificates pursuant
to this Agreement;
(iv) to assign, grant, transfer, pledge, mortgage and convey the Trust
Estate pursuant to the Indenture and to hold, manage and distribute
pursuant to the Sale and Servicing Agreement any portion of the Trust
Estate released from the Lien of, and remitted to the Trust pursuant to,
the Indenture;
(v) to enter into, execute, deliver and perform its obligations under
the Basic Documents to which it is to be a party;
(vi) to engage in those activities, including, entering into,
executing, delivering and performing its obligations under agreements, that
are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith; and
(vii) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation of
the Trust Estate and the making of distributions in accordance with the
Sale and Servicing Agreement and other Basic Documents.
The Trust shall not engage in any activities other than in connection
with the foregoing. Nothing contained herein shall be deemed to authorize the
Owner Trustee to engage in any business operations or any activities other than
those set forth in this Section 2.03. Specifically, the Owner Trustee shall have
no authority to engage in any business operations, or acquire any assets other
than those specifically included in the Trust Estate under Section 1.01, or
otherwise vary the assets held by the Trust. Similarly, the Owner Trustee shall
have no discretionary duties other than performing those ministerial acts set
forth above (which it is hereby authorized to perform) necessary to accomplish
the purpose of this Trust as set forth in this Section 2.03.
SECTION 2.04. Appointment of Owner Trustee. The Trust Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein, and the
Owner Trustee hereby accepts such appointment.
SECTION 2.05. Capital Contribution of Owner Trust Estate. The Trust
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Trust Depositor, as of the date hereof,
of the foregoing contribution, which shall constitute the initial Trust Estate
(prior to giving effect to the conveyances described in the Sale and Servicing
Agreement). The Trust Depositor shall pay organizational expenses of the Trust
as they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares that
it will hold the Trust Estate in trust upon and subject to the conditions set
forth herein for the sole purpose of conserving the Trust Estate and collecting
and disbursing the periodic income therefrom, subject to the obligations of the
Trust under the Basic Documents. It is
<PAGE>
the intention of the parties hereto that the Trust constitute a business trust
under the Business Trust Statute and that this Agreement constitute the
governing instrument of such business trust. It is the intention of the parties
hereto that the Trust be disregarded as a separate entity for federal income tax
purposes pursuant to Treasury Regulation Section 301.7701-3(b)(1)(ii) as in
effect for periods after January 1, 1997. The Trust Depositor agrees not to take
(or cause the Trust or the Owner Trustee to take) (and the Owner Trustee shall
not otherwise take) any action inconsistent with such intended federal income
tax treatment. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers, authority, authorization and duties set forth herein and in the
Business Trust Statute for the sole purpose and to the extent necessary,
convenient or incidental to accomplish the purposes of this Trust as set forth
in Section 2.03.
SECTION 2.07. Liability of Trust Depositor.
(a) Pursuant to Section 3803(a) of the Business Trust Statute, the
Trust Depositor shall be liable directly to and will indemnify any injured party
or any other creditor of the Trust for all losses, claims, damages, liabilities
and expenses of the Trust to the extent that the Trust Depositor would be liable
if the Trust were a partnership under the Delaware Revised Uniform Limited
Partnership Act in which Trust Depositor were a general partner (including any
personal property replacement tax that is imposed on the Trust as a
partnership); provided that the Trust Depositor shall not be liable for any
losses incurred by a Noteholder in the capacity of an investor in the Notes or
any losses incurred by any Holder of an Investor Certificate in the capacity of
an investor in an Investor Certificate. In addition, any third party creditors
of the Trust (other than in connection with the obligations described in the
immediately preceding sentence for which the Trust Depositor shall not be
liable) shall be deemed third party beneficiaries of this paragraph.
SECTION 2.08. Title to Trust Property. Legal title to the Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in an owner trustee or owner trustees, in which case title
shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and administered in
the State of Delaware. The Trust shall not have any employees in any state other
than Delaware; provided that nothing herein shall restrict or prohibit the Owner
Trustee from having employees within or without the State of Delaware. The only
office of the Trust will be at the Owner Trustee Corporate Trust Office.
SECTION 2.10. Representations And Warranties of the Trust Depositor. The
Trust Depositor hereby represents and warrants to the Owner Trustee that:
(i) The Trust Depositor is duly organized and validly existing as a
corporation organized and existing and in good standing under the laws of
the State of Delaware, with power and authority to own its properties and
to conduct its business and had at all relevant times, and has, power,
authority and legal right to acquire and own the Contracts.
(ii) The Trust Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business requires such qualifications.
(iii) The Trust Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Trust Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Owner Trustee on behalf of the Trust as
part of the Trust Estate and has duly authorized such sale and assignment
and deposit with the Owner Trustee on behalf of the Trust by all necessary
corporate action; and the execution, delivery and performance of this
Agreement have been duly authorized by the Trust Depositor by all necessary
corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any material breach of any of the material terms and provisions
of, nor constitute (with or without notice or lapse of time) a material
default under, the articles of incorporation or bylaws of the Trust
Depositor, or any indenture, agreement or other instrument to which the
Trust Depositor is a party or by which it is bound; nor result in any
branch of any of the terms and provisions of or constitute (with or without
notice or lapse of time, or both) a default under any indenture, agreement,
mortgage, deed of trust or other instrument to which the Trust Depositor is
a party or by which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than the Basic Documents, or violate any law, order, rule or regulation
applicable to the Trust Depositor of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Trust Depositor or any of its
properties, except in each case to the extent it would not have a material
adverse effect on the validity or enforceability of, or its performance
<PAGE>
under, the Basic Documents.
(v) The Trust Depositor holds all necessary licenses, certificates and
permits from all Government Authorities necessary for conducting its
business as it is presently conducted, and is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any Governmental
Authority, bureau or agency in connection with the delivery, performance,
validity or enforceability of the Basic Documents, to which it is a party,
except for such consents, licenses, approvals or authorizations, or
registrations or declarations, as shall have been obtained or filed, as the
case may be, prior to the Closing Date.
(vi) There are no proceedings or investigations pending, or to the
Trust Depositor's best knowledge threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Trust Depositor or its properties: (A) asserting the
invalidity of this Agreement or any of the other Basic Documents, (B)
seeking to prevent the issuance of the consummation of any of the
transactions contemplated by this Agreement or any of the other Basic
Documents, (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Trust Depositor of its
obligations under, or the validity or enforceability of, this Agreement or
any of the other Basic Documents or (D) involving the Trust Depositor and
which might adversely affect the federal income tax or other federal, state
or local tax attributes of the Trust.
SECTION 2.11. Federal Income Tax Treatment.
(a) It is the intention of the Trust Depositor that the Trust be
disregarded as a separate entity for federal income tax purposes pursuant to
Treasury Regulations Section 301.7701-3(b)(1)(ii) as in effect for periods after
January 1, 1997. The Trust Depositor agrees not to take any action inconsistent
with such intended federal income tax treatment. Because for federal income tax
purposes the Trust will be disregarded as a separate entity, items of income,
gain, loss and deduction for any month as determined for federal income tax
purposes shall be allocated entirely to the Trust Depositor as the sole
beneficiary of the Trust.
ARTICLE III
THE INVESTOR CERTIFICATES
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Trust Depositor pursuant to Section 2.05 and until the
issuance of the Investor Certificates, the Trust Depositor shall be the sole
owner of the Trust.
SECTION 3.02. The Investor Certificates. Each Investor Certificate shall be
issued as Percentage Interests of all Investor Certificates and not with a
principal amount. The Investor Certificates shall be executed on behalf of the
Trust by manual or facsimile signature of a Responsible Officer of the Owner
Trustee. Any Investor Certificate bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trust, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Investor Certificate or did not hold such offices at the date of
authentication and delivery of such Investor Certificates.
A transferee of an Investor Certificate shall become a Holder of the
Investor Certificate, and shall be entitled to the rights and subject to the
obligations of a Holder of the Investor Certificate hereunder and under
subsections 4.10(a)(x) and (b)(ix) of the Sale and Servicing Agreement, upon
such transferee's acceptance of an Investor Certificate duly registered in such
transferee's name pursuant to Section 3.04.
SECTION 3.03. Execution, Authentication and Delivery of Investor
Certificates. On the Closing Date the Owner Trustee shall cause one or more
Investor Certificates representing in aggregate 100% of the Percentage Interests
of the Investor Certificates to be executed on behalf of the Trust,
authenticated and delivered to or upon the written order of the Trust Depositor,
signed by an authorized signatory, without further corporate action by the Trust
Depositor. No Investor Certificate shall entitle its holder to any benefit under
this Agreement, or shall be valid for any purpose, unless there shall appear on
such Investor Certificate a certificate of authentication substantially in the
form as set forth in Exhibit B, executed by the Owner Trustee, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Investor Certificate shall have been duly authenticated and delivered
hereunder. All Investor Certificates shall be dated the date of their
authentication.
SECTION 3.04. Registration of Transfer and Exchange of Investor
<PAGE>
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Investor Certificates and of
transfers and exchanges of Investor Certificates as herein provided. The Owner
Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Investor Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Investor Certificates in like
Percentage Interest dated the date of authentication by the Owner Trustee or any
authenticating agent. At the option a Holder of an Investor Certificate,
Investor Certificates may be exchanged for other Investor Certificates of like
aggregate Percentage Interests upon surrender of the Investor Certificates to be
exchanged at the office or agency maintained pursuant to Section 3.08.
Every Investor Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee, the Indenture Trustee (so long as the
Indenture Trustee's office is designated by the Owner Trustee as its corporate
trust office for certain purposes as provided in Section 3.8) and the
Certificate Registrar duly executed by the Holder of an Investor Certificate or
his attorney duly authorized in writing. In addition, each Investor Certificate
presented or surrendered for registration of transfer and exchange must be
accompanied by an Investment Letter from the Prospective Owner. Each Investor
Certificate surrendered for registration of transfer or exchange shall be
canceled and disposed of by the Owner Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Investor Certificates.
The preceding provisions of this Section notwithstanding, the Owner Trustee
shall not make and the Certificate Registrar shall not register transfer or
exchanges of Investor Certificates for a period of 5 Business Days preceding any
Payment Date.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Investor Certificates.
If (a) any mutilated Investor Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Investor Certificate
and (b) there shall be delivered to the Certificate Registrar and the Owner
Trustee such security or indemnity as may be required by them to save each of
them harmless, then in the absence of notice that such Investor Certificate
shall have been acquired by a bona fide purchaser, the Owner Trustee on behalf
of the Trust shall execute and the Owner Trustee shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Investor Certificate, a new Investor Certificate of like tenor and denomination.
In connection with the issuance of any new Investor Certificate under this
Section, the Owner Trustee or the Certificate Registrar may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Investor Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or destroyed
Investor Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of an
Investor Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar and the IC Paying Agent may treat the Person in whose name
any Investor Certificate shall be registered in the Certificate Register as the
Holder and owner of such Investor Certificate for all purposes whatsoever, and
none of the Owner Trustee, the Certificate Registrar or the IC Paying Agent
shall be bound by any notice to the contrary.
SECTION 3.07. Access to List of Owners' Names and Addresses. The Owner
Trustee shall furnish or cause to be furnished to the Servicer, the Indenture
Trustee and the Trust Depositor, within 5 Business Days after receipt by the
Owner Trustee of a request therefor from the Servicer, the Trust Depositor or
the Indenture Trustee in writing, a list, in such form as the Servicer, the
Trust Depositor or the Indenture Trustee may reasonably require, of the names
and addresses of the Holders of the Investor Certificates as of the most recent
Payment Date. If Holders of Investor Certificates together evidencing not less
than 25% of the Percentage Interest of all Investor Certificates apply in
writing to the Owner Trustee, and such application states that the applicants
desire to communicate with other Holders of Investor Certificates with respect
to their rights under this Agreement or under the Investor Certificates and such
application is accompanied by a copy of the communication that such applicants
propose to transmit, then the Owner Trustee shall, within five Business Days
after the receipt of such application, afford such applicants access during
normal business hours to the current list of Certificateholders. Each Holder of
an Investor Certificate, by receiving and holding an Investor Certificate, shall
<PAGE>
be deemed to have agreed not to hold any of the Trust Depositor, the Servicer,
the Certificate Registrar, the Indenture Trustee, the Owner Trustee or any other
Person accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Investor Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Investor Certificates and the Basic
Documents may be served. The Owner Trustee initially designates the Indenture
Trustee's office in New York as its principal corporate trust office for such
purposes. The Owner Trustee shall give prompt written notice to the Holders of
the Investor Certificates of any change in the location of the Certificate
Register or any such office or agency.
SECTION 3.09. Appointment of the IC Paying Agent. The Owner Trustee hereby
appoints the Indenture Trustee as the IC Paying Agent under this Agreement. The
IC Paying Agent shall make distributions to the Holders of the Investor
Certificates pursuant to subsections 4.10(a)(x) and (b)(ix) of the Sale and
Servicing Agreement and shall report the amounts of such distributions to the
Owner Trustee. Distributions required to be made to Holders of Investor
Certificates pursuant to Section 4.10(a)(x) of the Sale and Servicing Agreement
on any Payment Date shall be made by the IC Paying Agent to each Holder of
record at the close of business on the last day of the calendar month preceding
such Payment Date either by wire transfer, in immediately available funds, to
the account of such Holder at a bank or other entity having appropriate
facilities therefor, if such Holder shall have provided to the IC Paying Agent
appropriate written instructions at least five Business Days prior to such
Payment Date and such Holder's Investor Certificates in the aggregate evidence a
Percentage Interest of not less than 25%, or, if not, by check mailed to such
Holder at the address of such holder appearing in the Certificate Register. The
Certificate Registrar shall, upon written request, provide the IC Paying Agent
the information in the Certificate Register required in order for the IC Paying
Agent to perform its obligations pursuant to the preceding sentence.
SECTION 3.10. Definitive Certificates. The Investor Certificates
Instruments will be issued in definitive, fully registered form. The Investor
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Owner Trustee, as evidenced
by its execution thereof.
SECTION 3.11. Restrictions on Transfer. (a) Each prospective purchaser and
any subsequent transferee of an Investor Certificate (each, a "Prospective
Owner"), other than the Trust Depositor or any of its affiliates, shall
represent and warrant in writing (which may be effected by delivery of a signed
Investment Letter from such Prospective Owner) , to the Owner Trustee and the
Certificate Registrar and any of their respective successors that:
(i) Such Person is duly authorized to purchase the Investor
Certificates and its purchase of investments having the characteristics of
the Investor Certificates is authorized under, and not directly or
indirectly in contravention of, any law, charter, trust instrument or other
operative document, investment guidelines or list of permissible or
impermissible investments that is applicable to the investor.
(ii) Such Person understands that each holder of an Investor
Certificate, by virtue of its acceptance thereof, assents to the terms,
provisions and conditions of this Agreement and the Basic Documents,
including the many significant limitations on the rights of the holders of
Investor Certificates under this Agreement and the Basic Documents
(including in Section 11.01(c) hereof).
(iii) Such Person is a U.S. Person that is not an organization exempt
from tax under Section 501 of the Code including the many significant
limitations on the rights of holders of Investor Certificates under this
Agreement.
(iv) In the case of a proposed transfer of an Investor Certificate,
such Person understands that the Investor Certificates will bear legends to
the following effect:
THIS INVESTOR CERTIFICATE MAY ONLY BE PURCHASED BY A UNITED STATES
PERSON WITHIN THE MEANING OF SECTION 7701(a) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE") THAT IS NOT AN ORGANIZATION
EXEMPT FROM TAX UNDER SECTION 501 OF THE CODE IN COMPLIANCE WITH THE
REQUIREMENTS OF THE TRUST AGREEMENT.
(b) Each Prospective Owner (other than the Trust Depositor or any of
its affiliates) of an Investor Certificate shall represent and warrant in
writing (which may be effected by delivery of a signed Investment Letter from
such Prospective Owner) to the Owner Trustee and the Certificate Registrar and
any of their respective successors that:
<PAGE>
(i) Such Person is (A) a "qualified institutional buyer" as defined in
Rule 144A under the Securities Act, and is aware that the seller of the
such Investor Certificate may be relying on the exemption from the
registration requirements of the Securities Act provided by Rule 144A and
is acquiring such Investor Certificate for its own account or for the
account of one or more qualified institutional buyers for whom it is
authorized to act, or (B) an institutional investor that is an
institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act).
(ii) It understands that such Investor Certificates have not been
registered under the Securities Act, and that, if in the future it decides
to offer, resell, pledge or otherwise transfer such Investor Certificates,
such Investor Certificates may be offered, resold, pledged or otherwise
transferred only (A) for so long as such Investor Certificates are eligible
for resale pursuant to Rule 144A under the Securities Act, to a person whom
the seller reasonably believes is a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act that is purchasing such
Investor Certificates for its own account or for the account of a qualified
institutional buyer to whom notice is given that the transfer is being made
in reliance on Rule 144A, or (B) to an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) that is acquiring such Investor Certificates for its own
account or for the account of such an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act), for investment purposes (other than in the case where the
owner of such Investor Certificate is a broker-dealer) and not with a view
to, or for offer or sale in connection with, any distribution in violation
of the Securities Act, in each case in compliance with the requirements of
this Agreement. It also (x) understands that an employee benefit plan
subject to ERISA or Section 4975 of the Code, and entities using the assets
of any such employee benefit plan, are prohibited from acquiring the
Investor Certificates (except to the extent that an exemption from such
prohibition is available, as described herein), (y) is not a person which
is an employee benefit plan, trust or account subject to Title I of ERISA
or Section 4975 of the Code or a governmental plan, defined in Section
3(32) of ERISA subject to any federal, state or local law which is, to a
material extent, similar to the foregoing provisions of ERISA or the Code
(any such person being a "Plan") and (z) is not an entity, including an
insurance company separate account or general account, whose underlying
assets include Plan assets by reason of a Plan's investment in the entity.
(iii) Such person understands that the Certificate bears legends (in
addition to the legend identified in Section 3.11(a)(iv)) to the following
effect:
THIS INVESTOR CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. THIS INVESTOR CERTIFICATE MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO
RULE 144A, (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF
THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE
3a-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND SUCH LAWS OR (III) AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7)
OF REGULATION D UNDER THE SECURITIES ACT) THAT IS ACQUIRING THE
INVESTOR CERTIFICATE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES (OTHER
THAN IN THE CASE WHERE THE OWNER OF THE INVESTOR CERTIFICATE IS A
BROKER DEALER) AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT.
NO PERSON IS OBLIGATED TO REGISTER THIS INVESTOR CERTIFICATE UNDER THE
ACT OR ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS INVESTOR CERTIFICATE OR ANY BENEFICIAL INTEREST
HEREIN SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS
RECEIVED AN INVESTMENT LETTER FROM THE TRANSFEREE TO THE EFFECT THAT
SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN,
TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF THE CODE
OR A GOVERNMENTAL PLAN, DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO
ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH
PERSON BEING A "PLAN") AND (II) IS NOT AN ENTITY, INCLUDING AN
INSURANCE COMPANY SEPARATE ACCOUNT OR GENERAL ACCOUNT, WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT
IN THE ENTITY.
<PAGE>
THIS INVESTOR CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT IS A "NON-U.S. PERSON". THE TERM "NON-U.S. PERSON"
MEANS A PERSON WHO IS NOT ONE OF THE FOLLOWING: A CITIZEN OR RESIDENT
OF THE UNITED STATES, A CORPORATION OR PARTNERSHIP INCLUDING AN ENTITY
TREATED AS A CORPORATION OR PARTNERSHIP FOR FEDERAL INCOME TAX
PURPOSES CREATED OR ORGANIZED IN OR UNDER THE LAWS OF THE UNITED
STATES, ANY STATE THEREOF OR THE DISTRICT OF COLUMBIA (UNLESS, IN THE
CASE OF A PARTNERSHIP, TREASURY REGULATIONS ARE ADOPTED THAT PROVIDE
OTHERWISE), AN ESTATE THAT IS SUBJECT TO U.S. FEDERAL INCOME TAX
REGARDLESS OF THE SOURCE OF ITS INCOME OR A TRUST IF (I) A COURT
WITHIN THE UNITED STATES IS ABLE TO EXERCISE PRIMARY SUPERVISION OVER
THE ADMINISTRATION OF THE TRUST AND ONE OR MORE UNITED STATES
FIDUCIARIES HAVE AUTHORITY TO CONTROL ALL SUBSTANTIAL DECISIONS OF THE
TRUST OR (II) THE TRUST IS ELIGIBLE AND DOES ELECT TO BE TREATED AS A
U.S. PERSON.
(c) By its acceptance of an Investor Certificate, each Prospective
Owner agrees and acknowledges that no legal or beneficial interest in all or any
portion of an Investor Certificate may be transferred directly or indirectly to
an entity that holds residual securities as nominee to facilitate the clearance
and settlement of such securities through electronic book-entry changes in
accounts of participating organizations.
(d) The Owner Trustee shall not execute, and shall not countersign and
deliver, an Investor Certificate in connection with any transfer thereof unless
the transferor shall have provided to the Owner Trustee an Investment Letter,
signed by the transferee, which Investment Letter shall contain, among other
things, an agreement by the transferee that it will not transfer such Investor
Certificate without providing to the Owner Trustee an Investment Letter from the
prospective transferee.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.01. Prior Notice to Trust Depositor with Respect to Certain
Matters. Subject to the provisions and limitation of Section 4.04, with respect
to the following matters, the Owner Trustee shall not take any of the following
actions unless consented to in writing by Holders of the Investor Certificates
representing 100% Percentage Interests in the Investor Certificates:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Contracts) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Contracts);
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the removal of the Administrator or the appointment of a
successor Administrator pursuant to Section 8(b) of the Administration
Agreement;
(e) the approval of the merger or consolidation of the Trust with or
into any other business trust or entity;
(f) the sale of the Trust Estate after termination of the Indenture;
or
(g) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent, IC Paying Agent, Certificate Registrar or Indenture
Trustee, or the consent to the assignment by the Note Registrar, Paying Agent,
IC Paying Agent, Certificate Registrar or Indenture Trustee of its obligations
under the Basic Documents.
SECTION 4.02. [Reserved]
SECTION 4.03. Action by the Trust Depositor with Respect to Bankruptcy. The
Owner Trustee shall not have the power to commence a voluntary proceeding in a
bankruptcy relating to the Trust without the prior written approval of Holders
of the Investor Certificates representing 100% Percentage Interests in the
Investor Certificates and the delivery to the Owner Trustee by such Holders of
the Investor Certificates of a certificate certifying that they reasonably
believe that the Trust is insolvent.
SECTION 4.04. Restrictions on the Trust Depositor's and the Administrator's
<PAGE>
Power. Neither the Administrator nor the Trust Depositor shall direct the Owner
Trustee to take or to refrain from taking any action if such action or inaction
would be contrary to any obligation of the Trust or the Owner Trustee under this
Agreement or any of the Basic Documents, as the case may be, or would be
contrary to the purpose of this Trust as set forth in Section 2.03. The Owner
Trustee shall not be obligated to follow any such direction, if given.
ARTICLE V
CERTAIN DUTIES
SECTION 5.01. [Reserved]
SECTION 5.02. [Reserved]
SECTION 5.03. [Reserved]
SECTION 5.04. [Reserved]
SECTION 5.05. The Internal Revenue Service and Others. The Owner Trustee
shall (a) maintain (or cause to be maintained) the books of the Trust on a
calendar year basis and the accrual method of accounting, (b) deliver to the
Trust Depositor, as may be required by the Code and applicable Treasury
Regulations, such information as may be required to enable the Trust Depositor
to prepare its federal and state income tax returns, (c) file such tax returns
relating to the Trust and make such elections as from time to time may be
required or appropriate under any applicable state or federal statute or any
rule or regulation thereunder so as to maintain the federal income tax treatment
for the Trust as set forth in Section 2.11, (d) cause such tax returns to be
signed in the manner required by law and (e) collect or cause to be collected
any withholding tax. The Owner Trustee shall elect under Section 1278 of the
Code to include in income currently any market discount that accrues with
respect to the Contracts. If applicable, the Owner Trustee shall not make the
election provided under Section 754 or Section 761 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner.
(a) The Trust Depositor shall sign on behalf of the Trust the tax
returns of the Trust.
(b) If Subchapter K of the Code should be applicable to the Trust, the
Trust Depositor shall be designated the "Tax Matters Partner" of the Trust
pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver on behalf of the Trust (in each case in such
form as is furnished to the Owner Trustee from time to time by or on behalf of
the Trust Depositor) the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement. In addition to the foregoing, the Owner Trustee is authorized,
but shall not be obligated, to take any and all actions required of the Trust
pursuant to the Basic Documents. The Owner Trustee is further authorized to take
such action on behalf of the Trust as the Administrator recommends in writing
from time to time with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee to
discharge (or cause to be discharged through the Administrator) all of its
responsibilities pursuant to the terms of this Agreement and the Basic Documents
to which the Trust is a party and to administer the Trust, subject to the Basic
Documents in accordance with the provisions of this Agreement. Without limiting
the foregoing, the Owner Trustee shall on behalf of the Trust file and prove any
claim or claims that may exist against Mitsui Vendor Leasing (U.S.A.) Inc. in
connection with any claims paying procedure as part of an insolvency or
receivership proceeding involving Mitsui Vendor Leasing U.S.A. (Inc.).
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee or
the Trust hereunder or under any Basic Document, and the Owner Trustee shall not
be held liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement.
SECTION 6.03. Action upon Instruction.
(a) Subject to Article IV hereof, in accordance with the terms of the
Basic Documents, the Holders of the Investor Certificates representing 100%
<PAGE>
Percentage Interests in the Investor Certificates may, with the consent of the
Indenture Trustee (if any Notes are Outstanding), by written instruction direct
the Owner Trustee in the management of the Trust consistent with the Basic
Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is contrary
to the terms hereof or of any other Basic Document or is otherwise contrary to
law.
(c) Whenever (x) the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any other Basic Document, or (y) in the event that the Owner
Trustee is unsure as to the applicability or performance of any provision of
this Agreement or any other Basic Document or any such provision is ambiguous as
to its application, or is, or appears to be, in conflict with any other
applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or incomplete as to the course
of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee shall promptly give notice (in such
form as shall be appropriate under the circumstances) to the Holders of the
Investor Certificates (with a copy to the Indenture Trustee) requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction of
the Holders of the Investor Certificates representing 100% Percentage Interests
in the Investor Certificates received by the Owner Trustee, the Owner Trustee
shall not be liable on account of such action to any Person. If the Owner
Trustee shall not have received appropriate instruction within ten days of such
notice (or within such shorter period of time as may be specified in such notice
or may be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action not inconsistent with this Agreement
and the other Basic Documents, as it shall deem to be in the best interests of
the Noteholders and the Holders of the Investor Certificates, and shall have no
liability to any Person for such action or inaction.
(d) [Reserved]
(e) Notwithstanding anything contained herein or in any other Basic
Document to the contrary, the Owner Trustee shall not be required to take any
action in any jurisdiction other than in the State of Delaware if the taking of
such action will:
(i) require the registration with, licensing by or the taking of any
other similar action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of Delaware by
or with respect to the Owner Trustee;
(ii) result in any fee, tax or other governmental charge under the
laws of any jurisdiction or any political subdivisions thereof in existence
on the date hereof other than the State of Delaware being payable by the
Owner Trustee; or
(iii) subject the Owner Trustee to personal jurisdiction in any
jurisdiction other than the State of Delaware for causes of action arising
from acts unrelated to the consummation of the transactions by the Owner
Trustee contemplated in this Agreement. In the event that the Owner Trustee
has determined that any action set forth in clauses (i)-(iii) will result
in the consequences stated therein, the Administrator and the Owner Trustee
shall appoint one or more Persons to act as co-trustee pursuant to Section
10.05.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or any document or written instruction received by the Owner
Trustee pursuant to Section 6.03; and no implied duties or obligations shall be
read into this Agreement or any other Basic Document against the Owner Trustee.
The Owner Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder or under any other Basic Document or to prepare or file any Commission
filing for the Trust or to record this Agreement or any other Basic Document.
Wilmington Trust Company, in its individual capacity, nevertheless agrees that
it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Trust Estate that result
from actions by, or claims against, Wilmington Trust Company, in its individual
capacity, that are not related to the ownership or the administration of the
Trust Estate.
<PAGE>
SECTION 6.05. No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the other Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action (i)
that is inconsistent with the purposes of the Trust set forth in Section 2.03 or
(ii) that, to the actual knowledge of a Responsible Officer of the Owner
Trustee, would result in the Trust's becoming taxable as a corporation for
federal or state income tax purposes. None of the Administrator, the Trust
Depositor or any Holder of an Investor Certificate shall direct the Owner
Trustee to take actions that would violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received in accordance with
this Agreement and the other Basic Documents by it constituting part of the
Trust Estate upon the terms of the Basic Documents and this Agreement. The Owner
Trustee shall not be answerable or accountable hereunder or under any other
Basic Document under any circumstances, except (i) for its own willful
misconduct or negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made by a Responsible Officer of the Owner Trustee which did not result from
gross negligence on the part of such Responsible Officer;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
instructions of the Administrator, the Trust Depositor or the Holders of the
Investor Certificates as provided herein;
(c) no provision of this Agreement or any other Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes or payments made in respect of the
Investor Certificates pursuant to Section 4.10(a)(x) of the Sale and Servicing
Agreement;
(e) the Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution hereof by
the Trust Depositor or for the form, character, genuineness, sufficiency, value
or validity of any of the Trust Estate, or for or in respect of the validity or
sufficiency of the Basic Documents, and the Owner Trustee shall in no event
assume or incur any liability, duty, or obligation to any Noteholder or to any
Holder of an Investor Certificate, other than as expressly provided for herein
or expressly agreed to in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Trust Depositor, the Indenture Trustee or
the Servicer under any of the Basic Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations of the Trust
under this Agreement or the other Basic Documents that are required to be
performed by the Administrator under the Administration Agreement, the Indenture
Trustee under the Indenture or the Servicer or the Trust Depositor under the
Sale and Servicing Agreement and/or the Transfer and Sale Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any other Basic Document, at the request, order or direction of the
Trust Depositor, unless the Trust Depositor has offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any other Basic Document shall not be construed as a duty, and
the Owner Trustee shall not be liable to any Person for other than its
negligence or willful misconduct in the performance of any such act.
<PAGE>
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish to
the Trust Depositor, the Indenture Trustee and the Holder of the Holders of
Investor Certificates, promptly upon receipt of a written request therefor from
such Person, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Trust Depositor that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement,
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene any
federal or Delaware law, governmental rule or regulation governing the banking
or trust powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound or result in the creation or imposition of
any lien, charge or encumbrance on the Trust Estate resulting from actions by or
claims against the Owner Trustee individually which are unrelated to this
Agreement or the other Basic Documents.
SECTION 7.04. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the other
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into by any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys as shall have been selected by the Owner Trustee with reasonable care,
and (ii) may consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it. The Owner Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or other
such persons.
SECTION 7.05. Not Acting In Individual Capacity. Except as otherwise
expressly provided in this Article VII, in accepting the trusts hereby created,
Wilmington Trust Company acts solely as Owner Trustee hereunder and not in its
individual capacity, and all Persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Agreement or any other Basic
Document shall look only to the Trust Estate for payment or satisfaction
thereof.
SECTION 7.06. Owner Trustee Not Liable for Notes, Investor Certificates or
the Contracts. The recitals contained herein shall be taken as the statements of
the Trust Depositor, and the Owner Trustee assumes no responsibility for the
correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, or any other Basic Document or the
Notes, the Investor Certificates or of any Contract or related documents. The
Owner Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Contract, or the
perfection and priority of any security interest created by any Contract in any
Equipment or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Trust Estate or the ability of the Trust
<PAGE>
Estate to generate the payments to be distributed to the Noteholders or the
Holders of the Investor Certificates under the Indenture or the Sale and
Servicing Agreement (as applicable), including the existence, condition and
ownership of any Equipment; the existence and enforceability of any insurance
thereon; the existence and contents of any Contract on any computer or other
record thereof; the validity of the assignment of any Contract to the Trust or
of any intervening assignment; the completeness of any Contract; the performance
or enforcement of any Contract; the compliance by the Trust Depositor or the
Servicer with any warranty or representation made under any Basic Document or in
any related document or the accuracy of any such warranty or representation; or
any action of the Trust Depositor, the Administrator, the Indenture Trustee or
the Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Notes. Wilmington Trust Company in its
individual or any other capacity may become the owner or pledgee of Notes and
may deal with the Trust Depositor, the Administrator, the Indenture Trustee and
the Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive from the Servicer (from amounts the Servicer receives as Servicing Fees)
as compensation for its services hereunder such fees as have been separately
agreed upon in writing between the Owner Trustee and the Servicer. Additionally,
the Owner Trustee shall be entitled to be reimbursed by the Servicer for its
other reasonable expenses hereunder, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Owner Trustee may employ in connection with the exercise and performance
of its rights and its duties hereunder.
SECTION 8.02. Indemnification. The Servicer shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns
and servants (collectively, the "Indemnified Parties") from and against, any and
all liabilities, obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by or
asserted against any Indemnified Party in any way relating to or arising out of
this Agreement, the other Basic Documents, the Trust Estate, the administration
of the Trust Estate or the action or inaction of the Owner Trustee hereunder;
provided that the Servicer shall not be liable for or required to indemnify an
Indemnified Party from and against Expenses arising or resulting from any of the
matters described in the proviso contained in the third sentence of Section
7.01. Notwithstanding anything to the contrary, the Servicer shall not reimburse
or pay any expense or indemnify against any loss, liability or expense incurred
as a result of any Indemnified Party 's willful misconduct, negligence or bad
faith. The parties hereto agree and acknowledge that, notwithstanding anything
to the contrary, all payments required to be made pursuant to this Section 8.02
shall not be made from the Trust Assets. The indemnities contained in this
Section shall survive the resignation, removal or termination of the Owner
Trustee and shall survive the termination of this Agreement. In the event of any
claim, action or proceeding for which indemnity will be sought pursuant to this
Section, the Owner Trustee's choice of legal counsel shall be subject to the
approval of the Trust Depositor, which approval shall not be unreasonably
withheld.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.01. Termination of Trust Agreement.
(a) The Trust shall be dissolved and this Agreement (other than
Article Eight) shall terminate and be of no further force or effect upon the
final distribution by the Owner Trustee of all moneys or other property or
proceeds of the Trust Estate in accordance with the terms of this Agreement and
the other Basic Documents. The bankruptcy, liquidation, dissolution, death or
incapacity of the Trust Depositor as described in Section 9.02, shall not (i)
operate to terminate this Agreement or the Trust, (ii) entitle the Trust
Depositor's legal representatives or heirs to claim an accounting or to take any
action or proceeding in any court for a partition or winding up of all or any
part of the Trust or Trust Estate or (iii) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Trust Depositor
nor any Holder shall be entitled to revoke or terminate the Trust or this
Agreement.
(c) Notice of any dissolution of the Trust and termination of this
Agreement shall be given by the Owner Trustee by letter to the Trust Depositor
<PAGE>
and the Indenture Trustee mailed within five Business Days of receipt of written
notice of such dissolution and termination from the Servicer given pursuant to
Section 5.1(b) of the Sale and Servicing Agreement, stating the date of such
dissolution and termination.
(d) [Reserved]
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. [Reserved]
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND
ADDITIONAL OWNER TRUSTEES
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; and (a) having a combined capital and surplus of at least $50,000,000
and subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) an implied senior long-term public debt
rating (without direct third party credit enhancements) of at least Baa3 by
Moody's; or (b) which the Rating Agencies have otherwise indicated in writing is
an entity acceptable to act as Owner Trustee hereunder. If such corporation
shall publish reports of condition at least annually pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Owner Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Administrator. Upon receiving such notice
of resignation, the Administrator shall promptly appoint a successor Owner
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee. If at any time
the Owner Trustee shall cease to be eligible in accordance with the provisions
of Section 10.01 and shall fail to resign after written request therefor by the
Administrator, or if at any time the Owner Trustee shall be legally unable to
act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner
Trustee or of its property shall be appointed or any public officer shall take
charge or control of the Owner Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then the Administrator
may remove the Owner Trustee. If the Administrator shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the
Administrator shall promptly appoint a successor Owner Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed and one copy to the successor Owner Trustee,
and shall pay all fees owed to the outgoing Owner Trustee. Any resignation or
removal of the Owner Trustee and appointment of a successor Owner Trustee
pursuant to any of the provisions of this Section shall not become effective
until acceptance of appointment by the successor Owner Trustee pursuant to
Section 10.03 and payment of all fees and expenses owed to the outgoing Owner
Trustee. The Administrator shall provide notice of such resignation or removal
of the Owner Trustee to each Rating Agency.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator, and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations. No
successor Owner Trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor Owner Trustee shall be
eligible pursuant to Section 10.01. Upon acceptance of appointment by a
<PAGE>
successor Owner Trustee pursuant to this Section, the Administrator shall mail
notice thereof to the Trust Depositor, the Indenture Trustee, the Noteholders,
the Holders of the Investor Certificates and each Rating Agency. If the
Administrator shall fail to mail such notice within ten days after acceptance of
such appointment by the successor Owner Trustee, the successor Owner Trustee
shall cause such notice to be mailed at the expense of the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any Person into
which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding; provided
that such Person shall be eligible pursuant to Section 10.01; provided further
that the Owner Trustee shall mail notice of such merger, consolidation or
succession to each Rating Agency.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any financed Equipment may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power,
authority and authorization, and shall execute and deliver all instruments to
appoint one or more Persons approved by the Administrator and Owner Trustee to
act as co-trustee, jointly with the Owner Trustee, or as separate trustee or
separate trustees, of all or any part of the Trust Estate, and to vest in such
Person, in such capacity, such title to the Trust or any part thereof and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Administrator and the Owner Trustee may
consider necessary or desirable. If the Administrator shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
the Owner Trustee alone shall have the power, authority and authorization to
make such appointment. No co-trustee or separate trustee under this Agreement
shall be required to meet the terms of eligibility as a successor Owner Trustee
pursuant to Section 10.01 and no notice of the appointment of any co-trustee or
separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction of the
Administrator;
(b) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) the Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
ARTICLE XI
<PAGE>
MISCELLANEOUS
SECTION 11.01. Supplements and Amendments.
(a) The Agreement may be amended by the Trust Depositor and the Owner
Trustee, without the consent of any of the Noteholders (or the Indenture Trustee
on behalf of any Noteholder) or any Holder of an Investor Certificate, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or to
add any other provisions with respect to matters or questions arising under this
Agreement that shall not be inconsistent with the provisions of this Agreement;
provided that any such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder.
(b) This Agreement may also be amended from time to time by the Trust
Depositor, and the Owner Trustee, with the consent of the Required Holders, but
without the consent of any Holder of an Investor Certificate, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Noteholders or the Holders of the Investor Certificates; provided that no such
amendment shall increase or reduce in any manner the amount of, or accelerate or
delay the timing of, (i) collections of payments on Contracts or distributions
that shall be required to be made for the benefit of the Noteholders or (ii)
reduce the aforesaid percentage of the outstanding principal amount of the Notes
required to consent to any such amendment, without the consent of the Holders of
all Outstanding Notes.
(c) By way of clarification, it is the express intent of the parties
hereto (and by its acceptance of an Investor Certificate, each Holder of an
Investor Certificate agrees) that the Holder of the Investor Certificate does
not have any rights to consent or otherwise with respect to any amendment hereto
notwithstanding any effect such amendment might have on the rights of the Holder
of the Investor Certificate under this Agreement and the Basic Documents.
(d) Prior to the execution of any such amendment or consent, the Trust
Depositor shall furnish written notification of the substance of such amendment
or consent, together with a copy thereof, to the Indenture Trustee, the
Administrator and each Rating Agency.
(e) It shall not be necessary for the consent of the Noteholders or
the Indenture Trustee pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof shall be subject to
such reasonable requirements as the Owner Trustee may prescribe.
(f) Promptly after the execution of any amendment to the Certificate
of Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
(g) Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the other Basic Documents, and
that all conditions precedent to the execution and delivery of such amendment as
set forth in Basic Documents have been satisfied. The Owner Trustee may, but
shall not be obligated to, enter into any such amendment that affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Trust Estate In the Trust Depositor. The
Trust Depositor shall not have legal title to any part of the Trust Estate. No
transfer, by operation of law or otherwise, of any right, title or interest of
the Trust Depositor of any beneficial interest in the Trust Estate shall operate
to terminate this Agreement or the trusts hereunder or entitle any transferee to
an accounting or to the transfer to it of legal title to any part of the Trust
Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Trust Depositor, the Administrator and, to the extent expressly
provided herein, the Indenture Trustee, the Noteholders and the Holders of the
Investor Certificates, and nothing in this Agreement (other than Section 2.07),
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in the Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 11.04. Notices. All notices, demands, certificates, requests and
communications hereunder ("Notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient at the address specified in the Sale and Servicing
<PAGE>
Agreement for such recipient.
Each party hereto may, by notice given in accordance herewith to each
of the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 11.06. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 11.07. Successors And Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Trust Depositor and the Owner Trustee, and their respective successors and
permitted assigns, all as herein provided.
SECTION 11.08. [Reserved]
SECTION 11.09. No Petition.
(a) The Trust Depositor will not at any time institute against the
Trust any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Agreement or any of the other Basic Documents.
(b) The Owner Trustee, by entering into this Agreement, and the
Indenture Trustee and each Noteholder and each Holder of an Investor
Certificate, by accepting the benefits of this Agreement, hereby covenant and
agree that they will not at any time institute against the Trust Depositor or
the Trust, or join in any institution against the Trust Depositor, or the Trust
of, any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Agreement or any of the other Basic Documents.
SECTION 11.10. [Reserved]
SECTION 11.11. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.12. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. [Reserved]
SECTION 11.14. [Reserved]
[remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
MITSUI VENDOR LEASING FUNDING CORP II.,
as Trust Depositor
By: _________________________________________
Name: ___________________________________
Title: __________________________________
MITSUI VENDOR LEASING (U.S.A.) INC.,
as Servicer
By: _________________________________________
Name: ___________________________________
Title: __________________________________
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By: _________________________________________
Name: ___________________________________
Title: __________________________________
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF MITSUI VENDOR
LEASING ASSET TRUST 1998-1
This Certificate of Trust of Mitsui Vendor Leasing Asset Trust 1998-1
(the "TRUST"), dated October __, 1998, is being duly executed and filed by the
undersigned trustee to form a business trust under the Delaware Business Trust
Act (12 DEL. CODE, Section 3801 ET SEQ.).
1. Name. The name of the business trust formed hereby
is Mitsui Vendor Leasing Asset Trust 1998-1.
2. Delaware Trustee. The name and business address of
the trustee of the Trust which has its principal place of
business in the State of Delaware is: Wilmington Trust
Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
IN WITNESS WHEREOF, the undersigned, being the sole Owner Trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
Wilmington Trust Company,
not in its individual capacity
but solely as trustee
By: ____________________________________
Printed Name: ______________________
Title:
<PAGE>
EXHIBIT B
[FORM OF INVESTOR CERTIFICATE]
THIS INVESTOR CERTIFICATE MAY ONLY BE PURCHASED BY A UNITED STATES PERSON WITHIN
THE MEANING OF SECTION 7701(a) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE") THAT IS NOT AN ORGANIZATION EXEMPT FROM TAX UNDER SECTION 501 OF
THE CODE IN COMPLIANCE WITH THE REQUIREMENTS OF THE TRUST AGREEMENT.
THIS INVESTOR CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS.
THIS INVESTOR CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR
OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO
RULE 144A, (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST
OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED, IN A TRANSACTION THAT IS REGISTERED
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS OR (III) AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or
(7) OF REGULATION D UNDER THE SECURITIES ACT) THAT IS ACQUIRING THE INVESTOR
CERTIFICATE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES (OTHER THAN IN THE CASE WHERE THE
OWNER OF THE INVESTOR CERTIFICATE IS A BROKER DEALER) AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT. NO PERSON IS OBLIGATED TO REGISTER THIS INVESTOR CERTIFICATE
UNDER THE ACT OR ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS INVESTOR CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL
BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED AN INVESTMENT LETTER
FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH
IS AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO
ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN") AND
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY.
THIS INVESTOR CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON
THAT IS A "NON-U.S. PERSON". THE TERM "NON-U.S. PERSON" MEANS A PERSON WHO IS
NOT ONE OF THE FOLLOWING: A CITIZEN OR RESIDENT OF THE UNITED STATES, A
CORPORATION OR PARTNERSHIP INCLUDING AN ENTITY TREATED AS A CORPORATION OR
PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES CREATED OR ORGANIZED IN OR UNDER THE
LAWS OF THE UNITED STATES, ANY STATE THEREOF OR THE DISTRICT OF COLUMBIA
(UNLESS, IN THE CASE OF A PARTNERSHIP, TREASURY REGULATIONS ARE ADOPTED THAT
PROVIDE OTHERWISE), AN ESTATE THAT IS SUBJECT TO U.S. FEDERAL INCOME TAX
REGARDLESS OF THE SOURCE OF ITS INCOME OR A TRUST IF (I) A COURT WITHIN THE
UNITED STATES IS ABLE TO EXERCISE PRIMARY SUPERVISION OVER THE ADMINISTRATION OF
THE TRUST AND ONE OR MORE UNITED STATES FIDUCIARIES HAVE AUTHORITY TO CONTROL
ALL SUBSTANTIAL DECISIONS OF THE TRUST OR (II) THE TRUST IS ELIGIBLE AND DOES
ELECT TO BE TREATED AS A U.S. PERSON.
MITSUI VENDOR LEASING ASSET TRUST 1998-1
INVESTOR CERTIFICATE
Percentage Interest: [100%]
No. [001]
THIS CERTIFIES THAT [Mitsui Vendor Leasing Funding Corp. II.], a
Delaware corporation (the "Owner") is the registered owner of a 100% Percentage
Interest of the Investor Certificates in Mitsui Vendor Leasing Asset Trust
1998-1 (the "Trust") existing under the laws of the State of Delaware and
created pursuant to the Amended and Restated Trust Agreement, dated as of
October 1, 1998 (the "Trust Agreement"), among Mitsui Vendor Leasing Funding
Corp. II, as Trust Depositor, Mitsui Vendor Leasing (U.S.A.) Inc., as Servicer,
and Wilmington Trust Company, as Owner Trustee. Capitalized terms used but not
defined herein have the meanings assigned to such terms in the Trust Agreement.
The Owner Trustee, on behalf of the Issuer and not in its individual capacity,
has executed this Investor Certificate by one of its duly authorized signatories
as set forth below. This Investor Certificate is one of the Investor
Certificates referred to in the Trust Agreement and is issued under and is
subject to the terms, provisions and conditions of the Trust Agreement to which
the holder of this Investor Certificate by virtue of the acceptance hereof
agrees and by which the holder hereof is bound. Reference is hereby made to the
Trust Agreement and Section 4.10(a)(x) of the Sale and Servicing Agreement for
the rights of the holder of this Investor Certificate, as well as for the terms
and conditions of the Trust created by the Trust Agreement.
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Investor Certificate to be duly
executed.
Mitsui Vendor Leasing Asset Trust 1998-1
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By: _________________________________________
Authorized Signature
DATED:_____________
CERTIFICATE OF AUTHENTICATION
This is one of the Investor Certificates referred to in the
within-mentioned Trust Agreement.
Wilmington Trust Company
As Authenticating Agent
By: _________________________________________
Authorized Signature
<PAGE>
THIS INVESTOR CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
________________________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within Instrument and all rights thereunder, hereby irrevocably constitutes
and appoints ___________________________________, attorney, to transfer said
Instrument on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ____________________*/
Signature Guaranteed:
_______________________________*/
*/NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within Instrument
in every particular, without alteration, enlargement or any change whatever.
Such signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Certificate Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee program"
as may be determined by the Certificate Registrar in addition to, or in
substitution for, STAMP, all accordance with the Securities Exchange Act of
1934, as amended.
<PAGE>
EXHIBIT C
FORM OF INVESTMENT LETTER
[Date]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890 00001
Attention: Corporate Trust Administration
Re: Mitsui Vendor Leasing Asset Trust 1998-1 (the "Issuer")
Ladies and Gentlemen:
Reference is hereby made to the Amended and Restated Trust Agreement
(the "Trust Agreement") among ______________________________, as Trust
Depositor, Mitsui Vendor Leasing U.S.A. Inc., as Servicer, and Wilmington Trust
Company, as Owner Trustee, dated as of October 1, 1998. This letter is delivered
to you in connection with the transfer of an Investor Certificate by
(the "Transferor") to
_____________________ (the "Transferee") and in accordance with
Section 3.11 of the Trust Agreement. Capitalized terms used but not defined
herein have the meanings set forth in the Trust Agreement.
The undersigned, on behalf of and as an officer of the Transferee, HEREBY
CERTIFIES as follows:
1. The undersigned is a duly authorized officer of the Transferee, and the
Transferee is an entity that is duly organized and existing under the laws of
the jurisdiction of formation.
2. The Transferee hereby acknowledges that no transfer of an Investor
Certificate may be made unless such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws, or is made in accordance with the
Securities Act and such laws.
3. The Transferee understands that the Investor Certificate has not been
and will not be registered under the Securities Act and may be offered, sold,
pledged or otherwise transferred (except as otherwise provided in the first
paragraph of Section 3.14 of the Trust Agreement) only to a person whom the
seller thereof reasonably believes is (A) a qualified institutional buyer (as
defined in Rule 144A under the Securities Act), (B) a Person involved in the
organization or operation of the Trust or an affiliate of such Person, in a
transaction meeting the requirements of Rule 144A under the Securities Act and
in accordance with any applicable securities laws of any state of the United
States or (C) an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) that is
acquiring the Investor Certificate for its own account, or for the account of
such an institutional "accredited investor," for investment purposes (other than
in the case where the Transferee is a broker-dealer) and not with a view to, or
for offer or sale in connection with, any distribution in violation of the
Securities Act. The Transferee understands that the Investor Certificate bears a
legend to the foregoing effect.
4. The Transferee is acquiring the Investor Certificate for its own account
[for investment]* and not with a view to offer, sell or distribute the Investor
Certificate in any manner that would violate Section 5 of the Securities Act or
any applicable state securities laws.
5. The Transferee is either (i) a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act, and is aware that the Transferor
of the Investor Certificate may be relying on the exemption from the
registration requirements of the Securities Act provided by Rule 144A and is
acquiring the Investor Certificate for its own account or for the account of one
or more qualified institutional buyers for whom it is authorized to act or (ii)
an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act) that is acquiring the Investor
Certificate for its own account, or for the account of such an institutional
"accredited investor," for investment purposes (other than in the case where the
Owner is a broker dealer) and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act.
6. The Transferee will not authorize nor has it authorized any person to
make any public offering or general solicitation by means of general advertising
or to take any other action that would constitute a sale or distribution of the
Investor Certificate under the Securities Act, in violation of Section 5 of the
Securities Act or any state securities law, or that would require registration
or qualification pursuant thereto.
<PAGE>
7. If the Transferee sells or otherwise transfers the registered ownership
of the Investor Certificate, the Transferee will comply with the restrictions
and requirements with respect to the transfer of the ownership of the Investor
Certificate under the applicable provisions of the Trust Agreement, and the
Transferee will obtain from any subsequent purchaser or transferee substantially
the same certifications, representations, warranties and covenants as required
under the Trust Agreement in connection with such subsequent sale or transfer
thereof, including a certificate substantially in the form hereof.
______________
*Not required if the transferee is a broker/dealer.
8. The Transferee is not a Non-U.S. Person and will not sell or otherwise
transfer the Investor Certificate to a Non-U.S. Person.
9. The Transferee is not an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a "plan" within the meaning of Section 4975(e)(1) of the Code (any
such plan or employee benefit plan, a "Plan") and is not directly or indirectly
purchasing the Investor Certificate on behalf of, as investment manager of, as
named fiduciary of, as trustee of, or with assets of a Plan.
10. The Transferee hereby indemnifies each of the Issuer, the Indenture
Trustee and the Owner Trustee against any liability that may result if the
Transferee's transfer of the Investor Certificate (or portion thereof) is not
exempt from the registration requirements of the Securities Act and any
applicable state securities laws or is not made in accordance with such federal
and state laws. Such indemnification of the Issuer, the Owner Trustee and the
Indenture Trustee shall survive the termination of the related Trust Agreement.
11. Transferee hereby acknowledges that it has received and reviewed the
representations and warranties contained in Section 3.11 of the Trust Agreement,
and hereby represents and warrants that said representations and warranties are
true and correct as of the date hereof.
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its duly authorized signatory as of the date first set forth above.
[NAME OF TRANSFEREE]
By:
Name:
Title:
<PAGE>
Exhibit 5.1(a)
November 9, 1998
Mitsui Vendor Leasing Funding Corp. II
6363 Greenwich Drive, Suite 100
San Diego, California 92122
Re: Mitsui Vendor Leasing Funding Corp. II
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as special counsel for Mitsui Vendor Leasing Funding
Corp. II, a Delaware corporation (the "Depositor"), in connection with the
filing by Depositor of a registration statement on Form S-1 (such registration
statement, together with the exhibits and amendments thereto, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), for the registration under
the Act of the Receivable-Backed Notes (the "Notes") of Mitsui Vendor Leasing
Asset Trust 1998-1 (the "Trust") formed under the Delaware Business Trust Act
(the "Delaware Act"). The Notes will be issued by the Trust pursuant to an
Indenture (the "Indenture") between the Trust and an Indenture Trustee. The
Notes will be sold pursuant to an underwriting agreement (the "Underwriting
Agreement") to be entered into by the Depositor with the underwriterto be
named therein (the "Underwriter").
We have examined and relied upon the Registration Statement . We have
also examined and considered executed originals or counterparts, or certified or
other copies of such certificates, instruments, documents and other corporate
records of the Depositor and matters of fact and law as we have deemed necessary
for the purposes of the opinion expressed below.
In our examination we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such documents. As
to any facts material to the opinions expressed herein which were not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Depositor and
others.
Based on and subject to the foregoing, we are of the opinion that when
the Notes have been duly executed, authenticated and delivered in
accordance with the Indenture and sold by the Depositor and paid for by the
Underwriterin accordance with the Underwriting Agreement and in the manner
described in the Registration Statement, the Notes will be legally issued, fully
paid and nonassessable and will be valid and legally binding obligations of the
Trust, subject to bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally and to general principles of equity
(regardless of whether enforceability is sought in a proceeding in equity or at
law).
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the laws of the State of New York (excluding
choice of law principles therein) and the federal laws of the United States of
America. As to matters relating to the Trust under Delaware law, we have relied
on the opinion of Richards, Layton & Finger, P.A., addressed to you of even date
herewith.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm under the heading "Legal
Matters" in the Prospectus forming a part of the Registration Statement, without
implying or admitting that we are "experts" within the meaning of the Act or the
Rules and Regulations of the Commission issued thereunder, with respect to any
part of the Registration Statement, including this exhibit.
<PAGE>
Very truly yours,
/s/ Brown & Wood LLP
-------------------------
<PAGE>
Exhibit 5.1(b)
[Letterhead of Richards, Layton & Finger, P.A.]
November 9, 1998
Mitsui Vendor Leasing Funding Corp. II
6363 Greenwich Drive, Suite 100
San Diego, California 92122
Re: Mitsui Vendor Leasing Asset Trust 1998-1
Registration Statement on Form S-1 (File No. 333-56029)
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Mitsui Vendor Leasing Funding
Corp. II (the "Registrant") in connection with the Registration Statement on
Form S-1 (File No. 333-56029) (the "Registration Statement"), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), for the registration under the Act of Receivable-Backed Notes (the
"Notes") to be issued by Mitsui Vendor Leasing Asset Trust 1998-1, a Delaware
business trust (the "Trust"). This opinion is being delivered to you at your
request.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies of the
following:
(a) The Trust Agreement, dated as of October 1, 1998, between Wilmington
Trust Company, a Delaware banking corporation, and the Registrant;
(b) The Certificate of Trust, dated as of October 1, 1998, of the Trust
(the "Certificate of Trust"), as filed on November __, 1998 in the office of the
Secretary of State of the State of Delaware (the "Secretary of State");
(c) The form of Amended and Restated Trust Agreement attached as Exhibit
4.1 of the Registration Statement;
<PAGE>
Mitsui Vendor Leasing Funding Corp. II
October 7, 1998
Page 2
(d) The Registration Statement; and
(e) A Good Standing Certificate, dated November 5, 1998, obtained from the
Secretary of State with respect to the Trust.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Trust Agreement.
For purposes of this opinion, we have reviewed such documents which we have
deemed necessary to give the opinions expressed herein (which documents are
listed in paragraphs (a) through (e) above). We have not reviewed any documents
other than the documents listed above, and we have assumed that there exists no
provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust Agreement
will constitute the entire agreement among the parties thereto with respect to
the subject matter thereof, including with respect to the creation, operation
and termination of the Trust, (ii) the due creation or due organization or due
formation, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its creation, organization or formation (other than the Trust), (iii)
the legal capacity of natural persons who are parties to the documents examined
by us, (iv) that each of the parties to the documents examined by us has the
power and authority to execute and deliver, and to perform its obligations
under, such documents (other than the Trust), and (v) that each of the parties
to the documents examined by us has duly authorized, executed and delivered such
documents (other than the Trust). We have not participated in the preparation of
the Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
<PAGE>
Mitsui Vendor Leasing Funding Corp. II
October 7, 1998
Page 3
Based upon the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly formed and is validly existing in good standing
as a business trust under the Delaware Business Trust Act; and
2. The Trust Agreement will constitute a valid and binding obligation of
the Registrant enforceable against the Registrant in accordance with its terms.
The foregoing opinion regarding enforceability is subject to (i) applicable
bankruptcy, insolvency, moratorium, reorganization, receivership, fraudulent
transfer and similar laws relating to or affecting the rights and remedies of
creditors generally, (ii) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law) and (iii) the effect of
applicable public policy on the enforceability of provisions relating to
indemnification or contribution.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving the foregoing consents, we do not thereby admit that we come within
the category of Persons whose consent is required under Section 7 of the Act, or
the rules and regulations of the Securities and Exchange Commission thereunder
with respect to any part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Richards, Layton & Finger
EAM
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Mitsui Vendor Leasing
Asset Trust 1998-1 of our report dated November 6, 1998, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
San Diego, California
November 6, 1998
<PAGE>
Exhibit 25.1
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2)
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
MITSUI VENDOR LEASING FUNDING CORP. II
(Exact name of Registrant as specified in its charter)
Delaware Applied For
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
Mitsui Vendor Leasing Funding Corp. II
6363 Greenwich Drive, Suite 100
San Diego, California 92122
(619) 558-5004
(Address, including zip code of principal executive offices)
$__________% Class A-1 Receivable-Backed Notes, $_________% Class A-2
Receivable-Backed Notes,
$_________% Class A-3 Receivable-Backed Notes, $_________% Class A-4
Receivable-Backed Notes, and
(Title of the indenture offered securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
Item 3.-15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1- Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of
Amendment of the Organization Certificate of Bankers
Trust Company dated June 21, 1995 - Incorporated
herein by reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 33-65171, Certificate of
Amendment of the Organization Certificate of Bankers
Trust Company dated March 20, 1996, incorporated by
reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 333-25843 and Certificate
of Amendment of the Organization Certificate of
Bankers Trust Company dated June 19, 1997, copy
attached.
Exhibit 2- Certificate of Authority to commence business
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
Exhibit 3- Authorization of the Trustee to exercise corporate
trust powers Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
Exhibit 4- Existing By-Laws of Bankers Trust Company, as amended
on November 18, 1997. Copy attached.
<PAGE>
Exhibit 5- Not applicable.
Exhibit 6- Consent of Bankers Trust Company required by Section
321(b) of the Act. Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration
No. 22-18864.
Exhibit 7- The latest report of condition of Bankers Trust
Company dated as of June 30, 1998. Copy attached.
Exhibit 8- Not Applicable.
Exhibit 9- Not Applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 6th day
of November, 1998.
BANKERS TRUST COMPANY
By: /s/ Franco Talavera
-------------------
Assistant Treasurer
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF
THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the
Banking Law," dated June 19, 1997, providing for an increase in authorized
capital stock from $1,601,666,670 consisting of 100,166,667 shares with a par
value of $10 each designated as Common Stock and 600 shares with a par value of
$1,000,000 each designated as Series Preferred Stock to $2,001,666,670
consisting of 100,166,667 shares with a par value of $10 each designated as
Common Stock and 1,000 shares with a par value of $1,000,000 each designated as
Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at
the City of New York, this 27th day of June in the Year
of our Lord one thousand nine hundred and ninety-seven.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby
certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended to
increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into One
Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 600 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred Million,
One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (100,166,667)
shares with a par value of $10 each designated as Common Stock and 1000
shares with a par value of One Million Dollars ($1,000,000) each designated
as Series Preferred Stock."
<PAGE>
5. The foregoing amendment of the organization certificate was authorized
by unanimous written consent signed by the holder of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 19th
day of June, 1997.
James T. Byrne, Jr.
----------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
----------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
Lea Lahtinen
--------------------
Lea Lahtinen
Sworn to before me this 19th day of June, 1997.
Sandra L. West
- -----------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE>
BY-LAWS
NOVEMBER 18, 1997
Bankers Trust Company
New York
<PAGE>
BY-LAWS
of
Bankers Trust Company
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than ten nor more than twenty-five, as may from time to time be fixed
by resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board of
Directors or any Committee thereof may participate in a meeting of the Board of
Directors or Committee thereof by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
No person who
<PAGE>
shall have attained age 72 shall be eligible to be elected or re-elected a
director. Such director may, however, remain a director of the Company until the
next annual meeting of the stockholders of Bankers Trust New York Corporation
(the Company's parent) so that such director's retirement will coincide with the
retirement date from Bankers Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board of
Directors may be filled by the affirmative vote of a majority of the directors
then in office, and the directors so elected shall hold office for the balance
of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time to
time on the third Tuesday of the month. If the day appointed for holding such
regular meetings shall be a legal holiday, the regular meeting to be held on
such day shall be held on the next business day thereafter. Special meetings of
the Board of Directors may be called upon at least two day's notice whenever it
may be deemed proper by the Chairman of the Board or, the Chief Executive
Officer or, in their absence, by such other director as the Board of Directors
may have designated pursuant to Section 3 of this Article, and shall be called
upon like notice whenever any three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
<PAGE>
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or members of the Committee present, even though
less than a quorum, may designate any one or more of such directors as a
substitute or substitutes for any absent member or members of the Committee, and
each such substitute or substitutes shall be counted for quorum, voting, and all
other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall conduct
the annual directors' examinations of the Company as required by the New York
State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
Committee shall hold regular quarterly meetings and during the intervals thereof
shall meet at other times on call of the Chairman.
<PAGE>
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a Chairman
of the Board and a Chief Executive Officer; and shall also elect a President,
and may also elect a Senior Vice Chairman, one or more Vice Chairmen, one or
more Executive Vice Presidents, one or more Senior Managing Directors, one or
more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer of
the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these
By-Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records and
premises of the Company and shall delegate such authority to his subordinates.
He shall have the duty to report to the Audit Committee on all matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company which he deems advisable or which the Audit Committee
may request. Additionally, the General
<PAGE>
Auditor shall have the duty of reporting independently of all officers of the
Company to the Audit Committee at least quarterly on any matters concerning the
internal audit program and the adequacy of the system of internal controls of
the Company that should be brought to the attention of the directors except
those matters responsibility for which has been vested in the General Credit
Auditor. Should the General Auditor deem any matter to be of special immediate
importance, he shall report thereon forthwith to the Audit Committee. The
General Auditor shall report to the Chief Financial Officer only for
administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018 of
the New York Banking Law, indemnify any person who is or was made, or threatened
to be made, a party to an action or proceeding, whether civil or criminal,
whether involving any actual or alleged breach of duty, neglect or error, any
accountability, or any actual or alleged misstatement, misleading statement or
other act or omission and whether brought or threatened in any court or
administrative or legislative body or agency, including an action by or in the
right of the Company to procure a judgment in its favor and an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Company is servicing or served
in any capacity at the request of the Company by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Company, or is
serving or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement, and costs, charges and expenses, including
attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief Executive
Officer or the President, and (ii) only if and to the extent that, after making
such efforts as the Chairman of the Board, the Chief Executive Officer or the
President shall deem adequate
<PAGE>
in the circumstances, such person shall be unable to obtain indemnification from
such other enterprise or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement of
expense pursuant to this Article V (i) is a contract right pursuant to which the
person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
<PAGE>
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE>
I, Franco B. Talavera, Assistant Treasurer of Bankers Trust Company, New York,
New York, hereby certify that the foregoing is a complete, true and correct copy
of the By-Laws of Bankers Trust Company, and that the same are in full force and
effect at this date.
--------------------------
ASSISTANT TREASURER
DATED: November 9, 1998
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
----------------------
| C400 |
------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS | //////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | //////////////////
a. Noninterest-bearing balances and currency and coin (1) ............................. | 0081 1,868,000 |1.a.
b. Interest-bearing balances (2) ...................................................... | 0071 2,041,000 |1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) ......................... | 1754 0 |2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........................ | 1773 7,419,000 |2.b.
3. Federal funds sold and securities purchased under agreements to resell................. | 1350 41,837,000 |3.
4. Loans and lease financing receivables: | ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 20,707,000 | ////////////////// |4.a.
b. LESS: Allowance for loan and lease losses........................ ..RCFD 3123 629,000 | ////////////////// |4.b.
c. LESS: Allocated transfer risk reserve ........................... ..RCFD 3128 0 | ////////////////// |4.c.
d. Loans and leases, net of unearned income, allowance, and reserve | ////////////////// |
(items 4.a minus 4.b and 4.c)....................................................... | 2125 20,078,000 |4.d
5. Trading Assets (from schedule RC-D) .................................................. | 3545 49,665,000 |5.
6. Premises and fixed assets (including capitalized leases) .............................. | 2145 848,000 |6.
7. Other real estate owned (from Schedule RC-M) .......................................... | 2150 180,000 |7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 92,000 |8.
9. Customers' liability to this bank on acceptances outstanding .......................... | 2155 512,000 |9.
10. Intangible assets (from Schedule RC-M) ................................................ | 2143 270,000 |10.
11. Other assets (from Schedule RC-F) ..................................................... | 2160 6,442,000 |11.
12. Total assets (sum of items 1 through 11) .............................................. | 2170 131,252,000 |12.
---------------------
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION>
-----------------------------
Dollar Amounts in Thousands | //////// Bil Mil Thou _ |
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES | ///////////////////////|
13. Deposits: | ///////////////////////|
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) | RCON 2200 26,791,000 |13.a
(1) Noninterest-bearing(1) ............................ .....RCON 6631 3,362,000....... | /////////////////////|13.a(1)
(2) Interest-bearing .................................. .....RCON 6636 23,429,000....... | /////////////////////|13.a(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | ////////////////////// |
part II) | RCFN 2200 22,089,000 |13.b.
(1) Noninterest-bearing ....................................RCFN 6631 1,810,000 | ///////////////////////
(2) Interest-bearing .......................................RCFN 6636 20,279,000 | /////////////////////// |
14. Federal funds purchased and securities sold under agreements to repurchase | RCFD 2800 19,274,000 |14.
15. a. Demand notes issued to the U.S. Treasury .................................................. | RCON 2840 0 |15.a.
b. Trading liabilities (from Schedule RC-D)................................................... | RCFD 3548 30,729,000 |15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): | ///////////////////// |
a. With a remaining maturity of one year or less ............................................. | RCFD 2332 7,891,000 |16.a.
b. With a remaining maturity of more than one year through three years....................... | A547 3,576,000 |16.b.
c. With a remaining maturity of more than three years......................................... | A548 2,872,000 |16.c.
17. Not Applicable. | ////////////////////// |17.
18. Bank's liability on acceptances executed and outstanding .................................... | RCFD 2920 512,000 |18.
19. Subordinated notes and debentures (2)........................................................ | RCFD 3200 1,534,000 |19.
20. Other liabilities (from Schedule RC-G) ...................................................... | RCFD 2930 9,202,000 |20.
21. Total liabilities (sum of items 13 through 20) .............................................. | RCFD 2948 124,470,000 |21.
22. Not Applicable | //////////////////////|
| //////////////////////|22.
EQUITY CAPITAL | //////////////////////|
23. Perpetual preferred stock and related surplus ............................................... | RCFD 3838 1,000,000 |23.
24. Common stock ................................................................................ | RCFD 3230 2,001,000 |24.
25. Surplus (exclude all surplus related to preferred stock) .................................... | RCFD 3839 540,000 |25.
26. a. Undivided profits and capital reserves ................................................... | RCFD 3632 3,693,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................... | RCFD 8434 (71,000) |26.b.
27. Cumulative foreign currency translation adjustments ......................................... | RCFD 3284 (381,000) |27.
28. Total equity capital (sum of items 23 through 27) ........................................... | RCFD 3210 6,782,000 |28.
29. Total liabilities and equity capital (sum of items 21 and 28)................................ | RCFD 3300 131,252,000 |29.
| |
------------------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
-------------
auditors as of any date during 1997 ..............................................| RCFD 6724 N/A | M.1
-----------------------
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit
work accordance with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering authority)
- ----------------------
(1) Including total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
