<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1998
Registration No.___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COPELCO CAPITAL FUNDING LLC 99-1
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6799 PENDING
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
</TABLE>
COPELCO CAPITAL FUNDING LLC 99-1
700 EAST GATE DRIVE
MOUNT LAUREL, NEW JERSEY 08054-5404
(609) 231-9600
(Name, address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Copies to:
SPENCER LEMPERT, ESQ. PETER HUMPHREYS, ESQ.
COPELCO CAPITAL FINANCIAL SERVICES GROUP, INC. DEWEY BALLANTINE
700 EAST GATE DRIVE 1301 AVENUE OF THE AMERICAS
MOUNT LAUREL, NJ 08054 NEW YORK, NEW YORK 10019
(609) 231-9600 (212) 259-6730
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If 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 aggregate Amount of
Title of each class of Amount to be offering offering registration
securities to be registered registered price per unit(1) price(1) fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 Lease-Backed Notes ...... $1,000,000 100% 100% $278.00
- -------------------------------------------------------------------------------------------------
Class A-2 Lease-Backed Notes ...... $1,000,000 100% 100% $278.00
- -------------------------------------------------------------------------------------------------
Class A-3 Lease-Backed Notes ...... $1,000,000 100% 100% $278.00
- -------------------------------------------------------------------------------------------------
Class A-4 Lease-Backed Notes ...... $1,000,000 100% 100% $278.00
- -------------------------------------------------------------------------------------------------
Class B Lease-Backed Notes......... $1,000,000 100% 100% $278.00
- -------------------------------------------------------------------------------------------------
Class C Lease-Backed Notes......... $1,000,000 100% 100% $278.00
- -------------------------------------------------------------------------------------------------
Class D Lease-Backed Notes......... $1,000,000 100% 100% $278.00
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE> 2
COPELCO CAPITAL FUNDING LLC 99-1
CROSS REFERENCE SHEET
(PURSUANT TO RULE 404(A) AND ITEM 501 OF REGULATION S-K)
<TABLE>
<CAPTION>
ITEM
NO. NAME AND CAPTION IN FORM S-1 CAPTION IN PROSPECTUS
- ---- ---------------------------- ---------------------
<S> <C> <C>
1. Forepart of the Registration Forepart of the Registration Statement;
Statement; Front Cover Page Front Cover Page of Prospectus; Cross
of Prospectus Reference Sheet
2. Inside Front and Outside Inside Front Cover and Outside Back Cover
Back Cover Pages of the Pages of Prospectus; Terms of the Notes;
Prospectus Available Information; Table of Contents
3. Summary Information; Risk Prospectus Summary; Risk Factors; Certain
Factors and Ratio of Legal Aspects; Prepayment and Yield
Earnings to Fixed Charges Considerations
4. Use of Proceeds Use of Proceeds
5. Determination of Offering *
Price
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Underwriting
9. Description of Securities to Prospectus Summary; Description of the
be Registered Notes;
10. Interest of Named Experts *
and Counsel
11. Material Changes *
12. Disclosure of Commission *
Position on Indemnification
for Securities Act
Liabilities
</TABLE>
* Not Applicable
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
(SUBJECT TO COMPLETION, DATED DECEMBER 30, 1998)
$__________________
COPELCO CAPITAL FUNDING LLC 99-1, ISSUER
COPELCO CAPITAL, INC., SERVICER
<TABLE>
<S> <C>
$_________ __% CLASS A-1 LEASE-BACKED NOTES, SERIES 1999-A $_________ __% CLASS A-4 LEASE-BACKED NOTES, SERIES 1999-A
$_________ __% CLASS A-2 LEASE-BACKED NOTES, SERIES 1999-A $_________ __% CLASS B LEASE-BACKED NOTES, SERIES 1999-A
$_________ __% CLASS A-3 LEASE-BACKED NOTES, SERIES 1999-A $_________ __% CLASS C LEASE-BACKED NOTES, SERIES 1999-A
</TABLE>
$ ________ __% CLASS D LEASE-BACKED NOTES, SERIES 1999-A
[COPELCO LOGO]
YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" STARTING ON PAGE __ OF THIS
PROSPECTUS AND CONSIDER THESE FACTORS BEFORE MAKING A DECISION TO INVEST IN THE
NOTES.
The notes represent non-recourse obligations of the Issuer only and are not
interests in or obligations of any other person.
The notes will not be insured or guaranteed by any governmental agency or
instrumentality.
THE ISSUER WILL ISSUE --
- Seven classes of notes which are to be offered pursuant to this
prospectus;
- Class E Lease-Backed Notes, Series 1999-A which are not offered
hereby; and
- Residual Notes which are not offered hereby.
THE NOTES --
- Represent debt obligations of Copelco Capital Funding LLC 99-1;
- Are backed by a pledge of assets of the Issuer. The assets of the
Issuer securing the Notes will include a pool of healthcare,
manufacturing and business equipment leases, and all of its interest
in the equipment underlying the leases;
- Receive distributions beginning ________, 1999; and
- Currently have no trading market.
<TABLE>
<CAPTION>
=====================================================================================
Initial Public Proceeds to
Offering Price Underwriting(1) Issuer(2)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Lease-Backed Note % % %
- -------------------------------------------------------------------------------------
Per Class A-2 Lease-Backed Note % % %
- -------------------------------------------------------------------------------------
Per Class A-3 Lease-Backed Note % % %
- -------------------------------------------------------------------------------------
Per Class A-4 Lease-Backed Note % % %
- -------------------------------------------------------------------------------------
Per Class B Lease-Backed Note % % %
- -------------------------------------------------------------------------------------
Per Class C Lease-Backed Note % % %
- -------------------------------------------------------------------------------------
Per Class D Lease-Backed Note % % %
- -------------------------------------------------------------------------------------
Total............................ $ $ $
=====================================================================================
</TABLE>
(1) Copelco Capital, Inc. has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(2) Before deducting expenses estimated to be $______.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
[underwriter]
The date of this Prospectus is __________.
<PAGE> 4
We include cross-references in this prospectus to captions in these
materials where you can find further related discussions. The following table of
contents provides the pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under "Index of Terms" beginning on page _____ in this
prospectus. Some persons participating in this offering may engage in
transactions that stabilize, maintain, or in some way affect the price of the
notes. These types of transactions may include stabilizing the purchase of notes
to cover syndicate short positions and the imposition of penalty bids. For a
description of these activities, please read the section entitled "Underwriting"
in this prospectus.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has been no change in the affairs
of the Seller or the Issuer or any affiliate thereof or the Leases since the
date hereof. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so to
anyone to whom it is unlawful to make such offer or solicitation.
2
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION......................................... 4
PROSPECTUS SUMMARY.......................................................... 5
RISK FACTORS................................................................ 9
USE OF PROCEEDS............................................................. 13
THE SERIES POOL............................................................. 13
COPELCO CAPITAL'S UNDERWRITING AND SERVICING PRACTICES...................... 20
FORMATION OF THE ISSUER..................................................... 26
DESCRIPTION OF THE NOTES.................................................... 26
PREPAYMENT AND YIELD CONSIDERATIONS......................................... 42
SECURITY FOR THE NOTES...................................................... 46
THE INDENTURE TRUSTEE....................................................... 46
CERTAIN LEGAL MATTERS AFFECTING A LESSEE'S RIGHTS AND OBLIGATIONS.......... 46
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS.................................. 47
ERISA CONSIDERATIONS........................................................ 51
UNDERWRITING................................................................ 52
LEGAL MATTERS............................................................... 53
RATING OF THE OFFERED NOTES................................................. 54
INDEX OF TERMS.............................................................. A-1
</TABLE>
3
<PAGE> 6
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with the
Securities and Exchange Commission (the "SEC"), including annual, quarterly and
special reports, proxy statements and other information. You can read and copy
these documents at the public reference facility maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, DC 20549. You can
also copy and inspect such reports, proxy statements and other information at
the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. SEC filings are also available to the public on the SEC's web
site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that [______].
This prospectus is part of a registration statement filed by the Sponsor
with the SEC (Registration No. 333-_______). You may request a free copy of this
filing by writing or calling:
Copelco Capital, Inc.
700 East Gate Drive
Mount Laurel, New Jersey 08054-5404
Attention: Stephen W. Shippie
(609) 231-9600
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the cover page of
this prospectus supplement or the accompanying prospectus.
4
<PAGE> 7
PROSPECTUS SUMMARY
- This summary highlights select information from this prospectus and
does not contain all of the information that you need to consider in
making your investment decision. To understand all of the terms of the
offering of the notes, read carefully this entire prospectus.
- This summary provides an overview of certain calculations, cash flows
and other information to aid your understanding and is qualified by
the full description of these calculations, cash flows and other
information in this prospectus.
LEASE-BACKED NOTES
SERIES 1999-A
<TABLE>
<CAPTION>
INITIAL RATING
OF OFFERED
FINAL NOTES(1)
INITIAL INTEREST SCHEDULED ---------------
PRINCIPAL RATE (PER DISTRIBUTION S&P MOODY'S
CLASS BALANCE ANNUM) DATE RATING RATING
- -------------------- --------- --------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
Class A-1.......... $ %
Class A-2.......... $ %
Class A-3.......... $ %
Class A-4.......... $ %
Class B............ $ %
Class C............ $ %
Class D............ $ %
</TABLE>
(1) A description of the ratings of the Notes is set forth under the heading
"Note Rating" in this prospectus.
The Trust will issue the Notes in book-entry form through the facilities of
The Depository Trust Company. The Certificates will be physical
certificates. We refer you to ["Description of the Notes--General"] and
["--Book-Entry Notes" for more detail.]
ISSUER
- - Copelco Capital Funding LLC 99-1. The address of the Issuer is 700 East Gate
Drive, Mt. Laurel, NJ 08054.
- - The Issuer will be a limited liability company formed under the laws of the
State of Delaware.
SERVICER
- - Copelco Capital, Inc. The address of the Servicer is 700 East Gate Drive, Mt.
Laurel, NJ 08054.
TRUSTEE
- - Manufacturers and Traders Trust Company. The address of the Trustee is One M&T
Plaza, Buffalo, NY 14248.
CUT-OFF DATE
- - On or about ____________, 1999.
PAYMENT DATE
- - The 20th day of each month or if such day is not a business day, the next
business day. The first payment date will be ____________, 1999.
5
<PAGE> 8
DETERMINATION DATE
- - Five business days before the Payment Date. Amounts to be paid on the Notes
will be calculated as of this date.
RECORD DATE
- - The last business day preceding a payment date unless the Notes are no longer
book-entry notes in which case the record date is the last business day of the
preceding month of a payment date.
DENOMINATIONS
The Notes will be issued in minimum denominations of $1,000 and integral
multiples of $______ in excess thereof, except that one Note of each class may
be issued in another denomination.
LEASES
- - On ____________, 1999, the Issuer will purchase a pool of leases and the
related equipment from Copelco Capital Inc. Payments on the Notes will be made
from payments on these leases.
- - The leases will include healthcare, manufacturing and business equipment
leases.
- - The lessees under the leases are primarily hospitals, non-hospital medical
facilities, physicians, businesses and individual businesses.
- - The leases are triple-net leases, requiring the lessee to pay all taxes,
maintenance and insurance associated with the equipment. The leases are
non-cancelable by the lessees. All payments under the leases are absolute,
unconditional obligations of the lessees without right of offset for any reason.
- - We will calculate the principal value of the pool of leases at any time by
discounting their remaining payments (except for certain minor charges and
delinquent payments) at a rate of ___%.
TRUST PROPERTY
- - The Issuer will pledge its property to secure payments on the Notes. In
addition to the pool of leases, the trust property will also include cash on
deposit in a reserve account and other assets as described in detail elsewhere
in this prospectus.
- - We refer you to "__________" in this prospectus for more detail.
PRIORITY OF DISTRIBUTIONS
- - Funds available from payments and other amounts received on the leases and any
amounts available as property of the trust on any Payment Date will be
distributed as follows:
INTEREST DISTRIBUTIONS
On each Payment Date you will be entitled to interest at the applicable interest
rate that accrued during the prior month.
PRINCIPAL DISTRIBUTIONS
Principal will be paid on the notes on each payment date in reduction of the
outstanding principal balance of the notes.
Principal will be paid to the Noteholders in an amount usually equal to the
decrease in the principal value of the leases between Determination Dates.
Principal Payments will be made in the following priority:
- - to the Class A-1 Noteholders only, until the principal amount on the Class
A-1 Notes has been reduced to zero;
- - when the Class A-1 Notes have been paid in full:
- to the Class A-2 Noteholders, until the principal amount on the Class
A-2 Notes has been reduced to zero, ___% of the decrease in the
principal value of the leases;
6
<PAGE> 9
- when the Class A-2 Notes have been paid in full, to the Class A-3
Noteholders, until the principal amount on the Class A-3 Notes has
been reduced to zero, the ___% of the decrease in the principal value
of the leases;
- when the Class A-3 Notes have been paid in full, to the Class A-4
Noteholders, until the principal amount on the Class A-4 Notes has
been reduced to zero, the ___% of the decrease in the principal value
of the leases;
- to the Class B Noteholders, ___% of the decrease in the principal
value of the leases;
- to the Class C Noteholders, ___% of the decrease in the principal
value of the leases;
- to the Class D Noteholders, ___% of the decrease in the principal
value of the leases;
- to the Class E Noteholders, ___% of the decrease in the principal
value of the leases.
This general description of distributions of principal is subject to certain
exceptions if certain targets for distributions on the Notes are not met. We
refer you to "Descriptions of the Notes--Distributions" in this prospectus for
further information.
RESERVE ACCOUNT
- - After required payments of interest and principal on the notes on any Payment
Date, any remaining payments on the leases will be deposited in a reserve
account held by the Trustee until the balance in the reserve account is at a
required level. The required level is the lesser of [1%] of the principal value
of the leases at the Cut-off Date and the outstanding principal amount of the
Notes. Amounts on deposit in the reserve account will be used to pay any
shortfalls on accounts due to the Noteholders on future Payment Dates.
OPTIONAL REDEMPTION
- - On any Payment Date, when the total lease principal balance declines below 10%
of the total principal value of the leases as of the Cut-off Date, the Issuer
may elect to redeem the Notes subject to certain conditions herein. If such an
event occurs, you will receive a final distribution on such Payment Date.
We refer you to "Certain Provisions of the Sale and Servicing
Agreement--Termination; Retirement of the Notes" in this prospectus for more
detail.
FINAL SCHEDULED PAYMENT DATE
- - If the notes have not already been paid in full, the outstanding principal
amount of the Notes will be paid in full on the following payment dates:
Class A-1 ___ Class B ___
Class A-2 ___ Class C ___
Class A-3 ___ Class D ___
Class A-4 ___ Class E ___
Payment on the Notes will probably be earlier than the final scheduled payment
date for the related class of notes.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
- - Dewey Ballantine LLP, special tax counsel to the Issuer and counsel to [the
Underwriter], is of the opinion that the notes will be characterized as debt. By
your acceptance of a Note, you agree to treat the Notes as debt.
We refer you to "Certain Federal Income Tax Consequences" in this prospectus for
more detail.
7
<PAGE> 10
ERISA CONSIDERATIONS
- - Subject to the considerations and conditions described under "ERISA
Considerations" in this prospectus, we expect that pension, profit-sharing or
other employee benefit plans, as well as individual retirement accounts and
certain types of Keogh Plans may purchase the notes. You should consult with
your counsel regarding the applicability of the provisions of ERISA before
purchasing a note.
We refer you to "ERISA Considerations" in this prospectus.
RATINGS
- - The issuer will not issue the notes unless they have been assigned the rating
designated on page S-4.
- - You must not assume that the rating initially assigned to the notes will not
subsequently be lowered, qualified or withdrawn by the rating agencies.
We refer you to "Ratings" in this prospectus for more detail.
8
<PAGE> 11
RISK FACTORS
You should carefully consider, among other things, the following risk factors
before deciding to invest in the Notes offered by this prospectus.
Limited Liquidity There is currently no public market for the Notes. We
offer no assurance that one will develop. The
underwriters expect, but are not obligated, to make a
market in the Notes. There is no assurance that any
such market will be created or, if so created, will
continue. If no public market develops, as a
noteholder you may not be able to liquidate your
investment in the Notes prior to maturity.
Prepayments and Related The rate of payment of principal cannot be predicted.
Reinvestment Risk It is not predictable because the rate on the Notes
will depend on, among other things, the rate of payment
on the underlying equipment leases. In addition to the
normally scheduled payments on the leases, payments may
come from a number of different sources. Payments on
the leases will include the following:
- prepayments permitted by the servicer;
- payments as a result of leases which are defaulted;
- payments as a result of leases accelerated by
the servicer;
- payments due to loss, theft, destruction or other
casualty; and
- payments upon repurchases by Copelco Capital, Inc.
on account of a breach of certain representations
and warranties.
Copelco Capital, Inc. has the option, but not the
obligation, to reinvest the proceeds of a lease which
was partially or fully repaid or upgraded in one or
more leases having similar characteristics to such
terminated lease.
The rate of early terminations of leases due to
prepayments and various non-payments may be influenced
by a variety of economic and other factors. For
example, adverse economic conditions and certain
natural disasters such as floods, hurricanes,
earthquakes and tornadoes may affect prepayments. The
risk of reinvesting unscheduled distributions resulting
from prepayments of the Notes will be borne by you as a
noteholder.
We refer you to "Prepayment and Yield Considerations"
in this prospectus for more detail.
Security Interests in Prior to the Cut-off Date, Copelco Capital, Inc. will
the Equipment; have filed Uniform Commercial Code financing
Certain Security statements in its favor against lessees in respect of
Interests Not equipment with an original equipment cost equal to or
Perfected in excess of $25,000. We expect that financing
statements in favor of Copelco Capital, Inc. with
respect to approximately _____% of the
9
<PAGE> 12
discounted present value of the leases will be filed.
Copelco Capital, Inc. will take no action to perfect
its interest in any equipment to the extent the
original equipment cost of the related equipment is
less than $25,000. As a result, Copelco Capital, Inc.
does not have a perfected security interest in
equipment with an original equipment cost of less than
or equal to $25,000, which represents approximately
____% of the discounted present value of the Leases.
The Indenture and the Sales and Servicing Agreement
require UCC financing statements for all security
interests in the equipment owned by Copelco Capital
Funding LLC 99-1 which are pledged to the Trustee to be
filed against Copelco Capital, Inc.
To the extent UCC financing statements evidencing
Copelco Capital Inc.'s security interest in the
equipment have not been filed against the lessee (i.e.,
with respect to those leases relating to equipment with
an original cost of less than $25,000), any such
security interests in the equipment will not be
perfected in favor of Copelco Capital Inc., Copelco
Capital Funding LLC 99-1 or the Trustee. In such a
case, another party, such as other creditors of Copelco
Capital, Inc., may acquire rights in Copelco Capital
Inc.'s interest in the equipment superior to those of
Copelco Capital Funding LLC 99-1 or Trustee. The lack
of a perfected security interest in certain equipment
will result in claims against lessees being unsecured
and may adversely affect the ability of Copelco Capital
Funding LLC 99-1 to realize on such equipment.
We refer you to "Certain Legal Matters Affecting a
Lessee's Rights and Obligations" in this prospectus for
more detail.
Restrictions on State laws impose requirements and restrictions
Recoveries relating to foreclosure sales and obtaining deficiency
judgments following such sales. In the event that
Copelco Capital Funding LLC 99-1 must rely on
repossession and disposition of equipment to cover
losses on non-performing leases, Copelco Capital
Funding LLC 99-1 may not realize the full amount due
because of the application of those requirements and
restrictions.
Additional factors that may affect the ability of
Copelco Capital Funding LLC 99-1 to realize the full
amount due on a lease include -
- the failure to file financing statements to perfect
Copelco Capital Funding LLC 99-1's security interest
in the Equipment against a lessee;
- depreciation;
- obsolescence;
- damage or loss of any item of equipment; and
- the application of federal and state bankruptcy
and insolvency laws.
As a result, the noteholders may be subject to delays
in receiving payments and losses.
We refer you to "Certain Legal Matters Affecting a
Lessee's Rights and Obligations" in this prospectus for
more detail.
Insolvency of Copelco Copelco Capital, Inc. believes that each transfer of
Capital, Inc. the leases should be
10
<PAGE> 13
treated as an absolute and unconditional sale or
assignment.
However, in the event of an insolvency of Copelco
Capital, Inc., a court could attempt to -
- recharacterize the sale of the related leases by
Copelco Capital, Inc. to Copelco Capital Funding
LLC 99-1 as a loan to Copelco Capital, Inc. from
Copelco Capital Funding LLC 99-1, secured by a
pledge of such leases or could allow Copelco
Capital Funding LLC 99-1 in bankruptcy to
repudiate the leases that are operating leases and
all obligations thereunder; or
- consolidate the assets of Copelco Capital
Funding LLC 99-1 with those of Copelco Capital,
Inc. since Copelco Capital, Inc. will indirectly
own all of the membership interests in Copelco
Capital Funding LLC 99-1.
Either attempt, even if unsuccessful, could result in
delays in payments to you. If such attempts were
successful, such Notes would be accelerated, and the
Trustee's recovery on behalf of you could be limited to
the then current value of the leases or the underlying
equipment. Thus, you could lose the right to future
payments and might incur reinvestment losses on amounts
recovered.
Although Copelco Capital, Inc. believes that the
transfers of the leases should be treated as an
absolute and unconditional sale or assignment, for
accounting and tax purposes, the leases will be treated
as [assets of Copelco Capital, Inc. on its consolidated
financial statements and on the tax return for its
consolidated group]. Such treatment of the assets might
increase the risk of recharacterization of the transfer
to Copelco Capital Funding LLC 99-1 as a financing.
We refer you to "Certain Legal Matters Affecting a
Lessee's Rights and Obligations" in this prospectus for
more detail.
Non-Recourse The Offered Notes represent debt obligations
Obligations of Copelco Capital Funding LLC 99-1 secured
by the Leases only and do not represent interests in or
recourse obligations of Copelco Capital, Inc. or any of
its affiliates other than Copelco Capital Funding LLC
99-1. Copelco Capital Funding LLC 99-1 is a limited
liability company with limited assets. Consequently,
the noteholders must rely solely upon the leases, the
equipment and funds in the Reserve Account, an account
established to cover shortfalls in payment of principal
of and interest on the Offered Notes. If no funds are
on deposit in the Reserve Account in the account
established to cover shortfalls and the payments made
on the Leases and the disposition proceeds of the
equipment upon a default are insufficient to make
payments on the Offered Notes, no other assets will be
available for the payment of the deficiency.
Geographic As of the Cut-Off Date, approximately ___%, ___%,
Concentration of ___%, ___%, and ___% of the leases (based on
Leases discounted present value of the leases) were located
in ________, ________, _________, __________ and
__________, respectively. No other state accounts for
more than 5% of
11
<PAGE> 14
the leases. Accordingly, adverse economic conditions
or other factors particularly affecting any of these
regions could adversely affect the performance on the
leases.
We refer you to "The Series Pool" in this prospectus
for more detail.
Commingling of Funds Under the Indenture, the Servicer is required to
deposit all periodic lease payments, payments
resulting from loss, theft or other casualty and
payments as a result of early termination received
after the [Cut-Off Date] to the Collection Account
within two business days of receipt thereof. If
bankruptcy or reorganization proceedings were
commenced with respect to the Servicer, those funds
held by the Servicer may be subject to an automatic
stay resulting in a delay in the transfer of such
funds to the trust fund.
Insolvency of Lessees; To the extent lessees default on the leases, including
Insolvency of Third through insolvency, lease payments will decrease and
Parties accordingly funds available for payment to you as a
noteholder will be reduced.
[Approximately __% of the leases were originated by a
third party who has sold the payment stream on the
leases to Copelco Capital, Inc. but has not sold its
interest in the equipment. In the event of a bankruptcy
of such third party, the trustee in bankruptcy may seek
to repudiate the leases and, if successful, lease
payments on such leases will cease. Accordingly, funds
available to pay you would be reduced.]
Risks Associated With The servicer is faced with the task of completing its
Year 2000 Compliance goals for compliance in connection with the year 2000
issue. The year 2000 issue is the result of prior
computer programs being written using two digits to
define the applicable year. Any computer programs that
have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. Any
such occurrence could result in major computer system
failure or miscalculations. Although the servicer
reasonably believes that its servicing system will be
year 2000 compliant prior to the year 2000, it is
presently engaged in various procedures to determine if
its computer systems and software, and those of its
material suppliers, customers, brokers and agents will
be year 2000 compliant.
In the event that the servicer, any subservicer or any
of their suppliers, customers, brokers or agents do not
successfully and timely achieve year 2000 compliance,
the Servicer's performance of its obligations under the
Sale and Servicing Agreement could be adversely
affected. This could result in delays in processing
payments on the Leases and could cause a delay in
distributions to you.
12
<PAGE> 15
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be distributed to the
owners of Copelco Capital Funding LLC 99-1 (The "Issuer"). The proceeds from
Copelco Capital, Inc.'s ("Copelco Capital") transfer of the healthcare,
manufacturing and business equipment lease contracts (each a "Lease Contract",
collectively the "Lease Contracts"), including payments due thereunder (the
"Lease Receivables", together with the Lease Contracts, the "Leases") and
interests in the related equipment (the "Equipment") will be utilized to repay
bank debt and for general corporate purposes.
THE SERIES POOL
THE LEASES. As of the close of business on __________ (the "Cut-Off Date"),
the Notes will be secured by the Leases. The Lessees (as defined herein) are
primarily hospitals, medical facilities, physicians and business owners
throughout the United States. The Leases were originated or acquired by the
Business Technology Division, the Healthcare Division and the Commercial &
Industrial Division of Copelco Capital (or their predecessors) (the "Origination
Divisions"). See "Risk Factors," "Security for the Notes" and "Certain Legal
Matters Affecting a Lessee's Rights and Obligations." The statistical
information included herein was computed using the Statistical Discounted
Present Value of the Leases as of the Cut-Off Date (as defined herein). The
actual principal value of the Leases at Closing will be calculated using the
Discounted Present Value of the Leases (as defined herein). The Statistical
Discounted Present Value of the Leases will not vary materially from the
Discounted Present Value of the Leases as of the Cut-Off Date.
Approximately __% of the Leases were originated by a third party who has
sold the payment stream on the Leases to Copelco Capital but has not sold its
interest in the Equipment. In the event of a bankruptcy of such third party, the
trustee in bankruptcy may seek to repudiate the Leases and, if successful, Lease
Payments on such Leases will cease. Accordingly, Available Funds (as defined
herein) received on or prior to the related Determination Date (as defined
herein) could be reduced.
The Leases are triple-net leases which impose no affirmative obligations on
the Lessor, and are non-cancelable by the Lessees (as defined herein). Under
certain conditions, however, Copelco Capital may consent to prepayment of the
Leases. Generally, Copelco Capital will consent to a prepayment of a Lease where
the Lessee is upgrading the Equipment. All payments under the Leases are
absolute, unconditional obligations of the hospitals, non-hospital medical
facilities, physicians, businesses and individual business owners who lease the
Equipment (each, a "Lessee," and collectively, the "Lessees"). Lessees are
without right of offset for any reason. Such payments will be made by the
Lessees to Copelco Capital for the account of Copelco Capital Funding LLC 99-1.
Each Lessee entered into its Lease for specified Equipment which may be
designated in schedules incorporated into the Lease. To the extent not set forth
in the Lease Contract, the schedules, among other things, establish the periodic
payments and the term of the Lease with respect to such Equipment. The Leases
follow one of several different forms of lease agreement, with occasional
modifications which do not materially affect the basic terms of the Leases. The
weighted average remaining term of the Series Pool is ___ months. Copelco
Capital will represent and warrant that, as of Cut-Off Date, all Leases will be
current or less than __ days delinquent and, as of the initial Determination
Date, all Lessees will have made at least one payment.
Lessees covenant to maintain the Equipment and install it at a place of
business agreed upon with Copelco Capital. Delivery, transportation, repairs and
maintenance are the obligation of the Lessees, and all Lessees are required to
carry, at their respective expense, liability and replacement cost insurance
under terms acceptable to Copelco Capital. Such insurance proceeds will
constitute Casualty Payments (as defined herein). Subject to certain exceptions,
if the Lessee does not provide evidence of
13
<PAGE> 16
insurance coverage within __ days of the commencement of the Lease, Copelco
Capital may obtain such insurance and invoice the Lessee for the cost thereof.
Any defaults under a Lease (as such, a "Non-Performing Lease," as defined
herein) permit a declaration as immediately due and payable all remaining Lease
payments under the Lease and the immediate return of the Equipment. Generally,
any payments received six days after the scheduled payment date are subject to
late charges.
"Non-Performing Leases" are (a) Leases that have become more than ___ days
delinquent or (b) Leases that have been accelerated by the Servicer or Leases
that the Servicer has determined to be uncollectible in accordance with its
customary practices.
At the end of the Lease term, the Lessee must return the Equipment with
certification from the manufacturer that the Equipment is in good working order,
normal wear and tear excepted, unless the Lease is renewed or the Equipment is
purchased by the Lessee.
Historically, approximately [___]% of the Equipment leased by the
Origination Divisions is purchased or re-leased by the original lessee at the
expiration of the lease term. "Nominal Buy-Out" Leases comprise [___]% of the
Leases (by Statistical Discounted Present Value). Pursuant to the terms of the
Leases, the Lessee is generally required to advise Copelco Capital 90 to 120
days prior to the Lease termination of its intent to return the Equipment at the
expiration of the Lease. In most cases, the failure by a Lessee to so advise
Copelco Capital results in an automatic renewal of the Lease for a specified
period. For Equipment which is returned to Copelco Capital by the Lessees,
Copelco Capital participates in an active secondary market for the sale of used
Equipment.
THE EQUIPMENT. The Equipment subject to the Leases is purchased by Copelco
Capital under direct specifications and instructions from the Lessees. As of the
Cut-Off Date, the Series Pool had approximately [__] equipment categories.
CERTAIN INFORMATION WITH RESPECT TO THE LEASES AND THE LESSEES. The
following tables summarize certain information with respect to the Leases and
the Lessees as of the Cut-Off Date.
14
<PAGE> 17
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Percentage of
Percentage of Discounted Discounted Aggregate Original
Number of Number of Present Value of Present Value Original Equipment
State Leases Leases Leases of Leases Equipment Cost Cost
- --------------- --------- ------------- ---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of
Columbia
Florida
Georgia
Guam
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
- ---------------------------------------------------------------------------------------------------------
Total 100.00% 100.00% 100.00%
=========================================================================================================
</TABLE>
15
<PAGE> 18
DISTRIBUTION OF LEASES BY LEASE BALANCE
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical Percentage of
Number Percentage of Discounted Discounted Aggregate Original
Statistical Discounted Present of Number of Present Value Present Value Original Equipment
Value of the Leases Leases Leases of Leases of Leases Equipment Cost Cost
- ------------------------------- ------ ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$0.01 - 5,000.00
5,000.01 - 10,000.00
10,000.01 - 15,000.00
15,000.01 - 20,000.00
20,000.01 - 25,000.00
25,000.01 - 30,000.00
30,000.01 - 35,000.00
35,000.01 - 40,000.00
40,000.01 - 45,000.00
45,000.01 - 50,000.00
50,000.01 - 60,000.00
60,000.01 - 70,000.00
70,000.01 - 80,000.00
80,000.01 - 90,000.00
90,000.01 - 100,000.00
100,000.01 - 125,000.00
125,000.01 - 150,000.00
150,000.01 - 175,000.00
175,000.01 - 200,000.00
200,000.01 - 300,000.00
300,000.01 - 400,000.00
400,000.01 - 500,000.00
500,000.01 - 600,000.00
600,000.01 - 700,000.00
700,000.01 - 800,000.00
800,000.01 - 900,000.00
900,000.01 - 1,000,000.00
1,000,000.01 - 1,500,000.00
1,500,000.01 - 2,000,000.00
greater than $2,000,000.01
- -------------------------------------------------------------------------------------------------------------------
Total...................... 100.00% 100.00% 100.00%
===================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
Statistical Percentage of
Discounted Statistical Aggregate Percentage of
Number Percentage of Present Discounted Original Original
of Number of Value of Present Value Equipment Equipment
Remaining Term Leases Leases Leases of Leases Cost Cost
- -------------- ------ ------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
- --------------------------------------------------------------------------------------------
Total.......... 100.00% 100.00% 100.00%
============================================================================================
</TABLE>
16
<PAGE> 19
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
Percentage of
Statistical Statistical
Number Percentage of Discounted Discounted Aggregate Percentage of
of Number of Present Value Present Value Original Original
Original Term Leases Leases of Leases of Leases Equipment Cost Equipment Cost
- ------------- ------ ------------- ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 12
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 84
85 - 96
- ---------------------------------------------------------------------------------------------------------------
Total....... 100.00% 100.00% 100.00%
===============================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
Statistical Percentage of
Discounted Statistical
Number Percentage of Present Discounted Aggregate Percentage of
of Number of Value of Present Value Original Original
Lease Type Leases Leases Leases of Leases Equipment Cost Equipment Cost
---------- ------ ------------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Finance Lease
Operating Lease
- ---------------------------------------------------------------------------------------------------------------
Total.......... 100.00% 100.00% 100.00%
===============================================================================================================
</TABLE>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
Statistical Percentage of
Number Percentage of Discounted Statistical Aggregate Percentage of
of Number of Present Value Discounted Present Original Original
Purchase Option Leases Leases of Leases Value of Leases Equipment Cost Equipment Cost
--------------- ------ ------------- ------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout
Fair Market Value
Fixed Purchase
Option
- -------------------------------------------------------------------------------------------------------------------
Total.......... 100.00% 100.00% 100.00%
===================================================================================================================
</TABLE>
17
<PAGE> 20
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Statistical Percentage of
Discounted Statistical Percentage of
Percentage of Present Discounted Aggregate Original
Number of Number of Value of Present Value Original Equipment
Equipment Type Leases Leases Leases of Leases Equipment Cost Cost
-------------- --------- ------------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anesthesia Equipment
Automated Chemistry
Systems
Automated Hematology
Systems
Automated Test Equipment
C.T. Systems
C-Arm; IMG Intensifer
Systems
Carts, Stretchers,
Wheel Chairs
Cash Registers
Cobalt and X-Ray
Therapy Equipment
Communication Equipment
Computer
Systems-Doctors &
Hospitals
Computers
Construction Equipment
Copiers
Dental Operatory
Equipment
Document Imaging
Equipment
ECG (EKG) and
Defibrillators
EEG
Electronics Production
Equipment
Facsimiles
Furniture and Fixtures
Gamma Cameras
Holter Monitors
Hosp Beds; Elec.
Stryker FRMS, Burn
Beds
Lasers
Laundry, Kitchen, Food
Srvc Eqp., Central
Supply
Linear Accelerators
Lithotripters and
Dialysis Equipment
Mailing Equipment
Mammography
Medical Equipment
Microfilm Equipment
Misc. Comm. & Indus.
Equip.
Misc X-Ray Eqp (TNKS,
Driers, TBLS)
Miscellaneous
Misc Hospital Equipment
Misc Lab Eqp (Pthlgy,
Gas, Chrmts, Cntr,
Spc)
Misc Vet Eqp; Cages,
Scales, Tables
MRI Systems
Office Furniture &
Equipment
Operating Microscopes
Opthlmc Diag Eqp (Slit
Lamps, Tonometers)
Opt Eqp; Lens Grinding,
Resurfacing
Patient Monitoring
Systems
Patient Room Furnishing
& Fixtures
Phone, TV, Comm
Equipment
Photo Equipment
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
Statistical Percentage of
Discounted Statistical Percentage of
Percentage of Present Discounted Aggregate Original
Number of Number of Value of Present Value Original Equipment
Equipment Type Leases Leases Leases of Leases Equipment Cost Cost
-------------- --------- ------------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Phys Misc Medical Eqp &
Exam Tables
Physician Office Furn,
Fixtures and Phones
Plastic Machinery
Podiatry Equipment
Printing Equipment
Pulse Oximetry Equipment
Radiographic
Fluoroscopic Systems
Respiratory Therapy
Equipment
Scanners
Software
Standard Printers
Standard X-Ray Systems
Surgical Equip. Scopes,
Electrosurgical
Typewriters
Ultrasound
Wide Format Printers
X-Ray Spec Systems;
Angiography
- -----------------------------------------------------------------------------------------------------------------------------
Total.......... 100.00% 100.00% 100.00%
=============================================================================================================================
</TABLE>
HISTORICAL DELINQUENCY INFORMATION. Lease receivables are generally
evaluated by Copelco Capital for write-down when they become over 92 days
delinquent. General delinquency information for equipment leases in the
Origination Divisions that are owned by Copelco Capital is set forth below.
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997 December 31, 1996 December 31, 1995 December 31, 1994
------------------ --------------------- --------------------- --------------------- ---------------------
$ % $ % $ % $ % $ %
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Receivables
Balance(1) $__________ $1,732,009,721 $1,503,055,810 $1,238,424,241 $1,000,488,313
- ---------------------------------------------------------------------------------------------------------------------------------
No. of Delinquent
Days
30-59 Days __________ ____% 38,613,963 2.23% 34,481,668 2.29% 26,255,335 2.12% 14,846,559 1.48%
60-89 Days __________ ____% 11,747,380 0.68% 8,136,578 0.54% 4,976,920 0.40% 3,971,389 0.40%
90 Days + __________ ____% 16,006,384 0.92% 7,587,972 0.50% 6,703,063 0.54% 6,748,827 0.67%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Delinquency $ $66,367,727 3.83% $ 50,206,218 3.34% $ 37,935,318 3.06% $ 25,566,775 2.56%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
-------------------
$ %
- --------------------------------------
<S> <C> <C>
Total Receivables
Balance(1) $736,373,700
- --------------------------------------
No. of Delinquent
Days
30-59 Days 9,184,216 1.25%
60-89 Days 1,886,765 0.26%
90 Days + 5,099,200 0.69%
- --------------------------------------
Total Delinquency $ 16,170,181 2.20%
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent owing
on the Leases.
19
<PAGE> 22
HISTORICAL DEFAULT EXPERIENCE. All accounts assessed over 92 days
past due automatically become non-accruing accounts. Any subsequent recoveries
offset net losses. General charge-off information for Leases in the Origination
Divisions that are owned and serviced by Copelco Capital for the period January
1, 1993 to March 31, 1998 is set forth below.
HISTORICAL CHARGE-OFF EXPERIENCE
<TABLE>
<CAPTION>
Three Months Ended Year Ended December 31
---------------------------------------------------------------
September 30, 1998 1997 1996 1995 1994 1993
------------------ ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)........ $ $1,617,532 $1,370,740 $1,119,456 $868,431 $649,278
Net Losses.............. $ $22,137 $15,713 $11,457 $10,328 $8,842
Net Losses as a Percentage
of Average Receivables $ 1.37% 1.15% 1.02% 1.19% 1.36%
</TABLE>
- -------------------
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the Leases.
(2) Annualized
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the Leases in the future.
COPELCO CAPITAL'S UNDERWRITING AND SERVICING PRACTICES
GENERAL. Copelco Capital, a Delaware corporation, was incorporated in
October 1986. Copelco Capital is a wholly-owned subsidiary of Copelco Financial
Services Group, Inc. ("Copelco Financial"). Copelco Capital's primary business
consists of originating and servicing leases to healthcare providers,
businesses, business owners and individuals in the United States and Canada.
Copelco Capital has multiple locations and is headquartered at 700 East Gate
Drive, Mount Laurel, New Jersey 08054-5400 (as is Copelco Financial) and its
phone number is (609) 231-9600.
In May 1993, Copelco Financial (which was incorporated in July 1982)
reorganized its two primary operating subsidiaries, Copelco Credit Corporation
("Copelco Credit") and Copelco Leasing Corporation ("Copelco Leasing"), into six
strategic business units (each, an "SBU"). Then, effective July 1994, Copelco
Leasing was merged into Copelco Credit with Copelco Credit as the surviving
legal entity; Copelco Credit then changed its name to Copelco Capital, Inc.
merging all of Copelco Leasing and Copelco Capital leasing operations.
Copelco Capital currently consists of three separate operating
divisions (each, a "Division"): the Business Technology Division, the Healthcare
Division and the Commercial & Industrial Division. The Business Technology
Division, the Healthcare Division and the Commercial & Industrial Division
originated ___%, ___% and ___%, respectively, of the Leases to be included in
the subject transaction (based upon the Statistical Discounted Present Value of
the Leases).
The Business Technology Division leases small-ticket office
equipment, primarily photocopiers and computers, to businesses and business
owners throughout the United States and Canada through multiple manufacturer,
vendor and dealer programs. The Business Technology Division is the successor
division to Copelco Capital's Document Imaging, Major Accounts, Computer and
Canadian SBUs. Copelco Capital merged these four units in January 1997 in order
to achieve greater operating and marketing efficiencies.
20
<PAGE> 23
The Healthcare Division provides a diversified range of leasing
services for the financing of healthcare equipment through multiple
manufacturer, vendor and dealer programs, with particular emphasis upon the
acquisition, leasing and remarketing of high-technology medical equipment to
hospitals, other healthcare facilities, healthcare providers and physicians. The
Healthcare Division is the successor of the Hospital and Healthcare SBU and the
Healthcare Vendor SBU which were consolidated in June, 1995 and the Ambulatory
Care SBU which was merged into the Healthcare Division in November 1996. The
rationale for the consolidation of the Healthcare Division was to achieve
greater operating efficiencies and eliminate certain operating and marketing
redundancies.
The Commercial & Industrial Division is segmented into three distinct
business units: the Electronics Manufacturing Group, the Financial Intermediary
Group and the Material Handling Group. The Electronics Manufacturing Group
provides equipment leasing services through multiple manufacturer, vendor and
dealer programs, primarily to mid-sized companies. The equipment financed
through this group includes high technology equipment for the electronics
manufacturing service industry, such as printed circuit board assembly and test
equipment. The Financial Intermediary Group purchases equipment lease
transactions from third parties involved in the electronics and other industrial
equipment industries. The Material Handling Group, established in 1998, provides
retail equipment leasing and financing specifically for vendors and
manufacturers in the material handling industry.
As of December 31, 1997, Copelco Capital had total assets of
$2,083,256,000 compared with $1,722,212,000 as of December 31, 1996, total
liabilities of $1,927,558,000 compared with $1,588,614,000 as of December 31,
1996, shareholder's equity of $155,698,000 compared with $133,598,000 as of
December 31, 1996 and total revenues and net income of $253,787,000 and
$32,137,000, respectively, for the year ended December 31, 1997, compared with
$210,461,000 and $29,655,000, respectively, for the year ended December 31,
1996.
Since 1986, Copelco Capital and its predecessors have participated in
35 equipment lease securitizations involving the issuance of in excess of $2.7
billion in securities. Copelco Capital and its predecessors performed all
servicing functions in each of these prior transactions, 16 of which remain
outstanding.
ORIGINATIONS. The Business Technology Division leases small-ticket
office equipment, primarily photocopiers and computers, to businesses and
business owners throughout the United States, Canada and western Europe. The
Business Technology Division originates substantially all of its leases through
marketing programs which are directed at major manufacturers and various
distributors of copier equipment (each, a "Vendor") with the balance obtained
through new leases with existing lessees and referrals. The Business Technology
Division establishes both formal and informal relationships with Vendors,
several of which provide Copelco Capital with a right of first refusal on all
equipment leases with the Vendor's customers. This arrangement provides the
division with a steady flow of lease referrals from Vendors which frequently use
lease financing as a marketing tool. In the majority of these vendor programs,
Copelco Capital generally owns the equipment subject to each lease and bills and
collects lease payments in its own name. For some select private label vendor
programs, Copelco Capital will bill and collect in the vendor's name.
The Business Technology Division also offers a cost per copy program
("Cost per Copy"), introduced in late 1990, pursuant to which lessees pay a
fixed monthly payment (the "Fixed Payment") for which they are allowed a certain
minimum monthly copy usage. The monthly Fixed Payment represents equipment
financing (the "Equipment Financing Portion") and a monthly maintenance charge
(the "Maintenance Charge"). Copelco Capital funds the Vendors on the basis of
the Equipment Financing Portion of the Fixed Payment and remits the Maintenance
Charge to the Vendors as it is collected every month. Copelco Capital calculates
usage monthly using automated dialed-in copier meter readings. To the extent
that the usage has exceeded the monthly copy allowance, Copelco Capital
21
<PAGE> 24
bills the lessee incremental charges for the excess copy usage ("Excess Copy
Charge"). This Excess Copy Charge is remitted to the Vendors upon collection by
Copelco Capital. Only the Equipment Financing Portion will be included in the
Discounted Present Value of the Leases.
Vendors may choose to use a Copelco Capital lease form or they may
use their own lease agreement. In either case, the credit approval remains with
Copelco Capital. Lease documents for all leasing programs are either identical
to Copelco Capital's standard lease documents or are reviewed by Copelco Capital
to ensure substantial compliance with its standard terms. Terms of Copelco
Capital's lease documents are standard for virtually all leases, as is
documentation for virtually all private label programs.
The Healthcare Division provides a range of leasing services for the
financing of healthcare equipment with emphasis on the acquisition, leasing and
remarketing of high-technology medical equipment to hospitals, other healthcare
facilities, healthcare providers and physicians. The Healthcare Division
originates leases through five sales groups: National Accounts, Medical
Business, Vendor Services, Home Care, and Ambulatory Care.
The National Accounts sales group solicits contractual arrangements
with major medical equipment manufacturers and distributors throughout the
United States. These contracts usually give Copelco exclusive rights to handle
the financing needs of the manufacturers' customers. Most manufacturers are
publicly-held or subsidiaries of international medical conglomerates.
The Medical Business sales group provides leasing services directly
to hospitals and to physician group practices rather than through vendors or
manufacturers. The Medical Business marketing unit operates Copelco Capital's
Hospital Instant Lease Line ("HILL") program which grants hospitals a
pre-approved line of credit for the leasing of medium-ticket medical equipment
such as computed tomography scanners, radiographic and other imaging equipment,
laboratory and patient monitoring systems.
The Vendor Services sales group solicits exclusive contractual
arrangements and informal non-exclusive arrangements with local and regional
vendors. Such vendors sell medical equipment to physician group medical
practices and to individual physicians who finance the acquisition of the
equipment by leasing it from Copelco Capital. The Vendor Services marketing unit
operates Copelco Capital's Physician's Instant Lease Line ("PILL") program,
which grants individual physicians and physician group practices a pre-approved
line of credit for use in leasing small- and medium-ticket medical equipment.
The Home Care Sales group leases durable medical equipment such as
respiratory care equipment, patient monitoring devices and medication delivery
systems for use by people who are being treated on an out-patient or in-home
basis for either temporary or chronic health problems. Lessees are typically
wholesalers, distributors and service providers that rent the equipment to
patients who are reimbursed for the rental payments by their health care
insurers.
The Ambulatory Care sales group provides equipment leasing to
out-patient sites providing healthcare services such as diagnostic imaging,
surgical procedures and radiation therapy. Customers range from start-up centers
(typically managed by established organizations) to publicly-held companies.
Transactions may involve new equipment or refinancing of existing equipment,
often in conjunction with expansion or upgrading.
In addition to making fixed payments with respect to certain health
care equipment leases, lessees may pay incremental monthly charges to the extent
the scan usage exceeds the monthly scan allowance ("Fee Per Scan Charges"). Fee
Per Scan Charges will not be included in the Discounted
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Present Value of the Leases. The Fee Per Scan Charges are remitted to the
Vendors upon collection by Copelco Capital.
The Commercial & Industrial Division: The Electronics Manufacturing
Group and the Financial Intermediary Group provide equipment leasing services
primarily to mid-sized companies. Since early 1993, the division has focused on
marketing through manufacturers and distributors in the electronics
manufacturing service industry. Currently, approximately [90]% of the leases
originated by this division relate to the electronics manufacturing service
industry and approximately [10]% represents machine tools and other production
equipment. The Material Handling Group originates [a majority] of its business
through its relationship with distributors of material handling equipment. The
Material Handling Group establishes both formal and informal relationships with
vendors, manufacturers, and distributors of material handling equipment and
provides retail leasing and financing for the end-user customers.
CREDIT REVIEW. Copelco Capital, in conjunction with the parent
holding company, provides organizational oversight for investment/risk
management policy, compliance, credit underwriting and due diligence standards,
and coordinates portfolio concentration guidelines and credit personnel training
for each of its Divisions. Within the parameters established by Copelco Capital,
each Division tailors its underwriting policies to reflect their unique
customers and markets.
Certain credit requests are evaluated under credit scoring models
utilized by Copelco Capital. All credit requests not subject to automated credit
scoring must be underwritten by a credit officer. Applicants declined by credit
scoring may be reviewed by a credit officer. Each credit officer has a specific
assigned lending limit based upon experience and seniority. Credit approval
limits, applicable to single transaction size and individual lessee exposure,
are also assigned to assistant credit managers, group credit officers, the
president of Copelco Capital, and the chief credit officer of Copelco Capital.
In general, transactions in excess of $3,000,000 must be approved by the senior
management of Copelco Financial.
Business Technology Division: Prior to a lease being approved by the
Business Technology Division, the vendor's sales personnel are required to
obtain from the prospective lessee historical financial data and/or bank and
trade references. New and repeat applicants must either complete a comprehensive
credit application or provide bank and trade references.
Credit data are submitted for credit review in Mahwah, New Jersey and
Moberley, Missouri for copiers and Mahwah, New Jersey for computers. Credit
review is performed and lease approvals are given at these locations, utilizing
a computer system designed to handle applications which are telephoned or
telecopied from vendors. Using the computer system, the applicant's credit is
investigated and a credit decision is made.
Lessee evaluation includes an analysis of credit payment history,
business structure, banking history and relationships, and economic conditions
as they relate to the prospective lessee. In the case of a credit request for
equipment having a cost greater than approximately $50,000, the information
collected includes the prospect's most recent financial statements. If
individual guarantors are involved, a consumer credit bureau report is generally
obtained for the guarantors. Potential lessees should generally have been in
business for at least two years and a minimum of two trade references are
required.
The Business Technology Division has also implemented an automated
credit scoring system. The system, designed by Dun & Bradstreet specifically for
the Business Technology Division, was in development over a two-year period and
was formally implemented on January 4, 1994. The system utilizes various filters
for adapting "approve" and "decline" threshold scores based upon criteria such
as credit exposure, payment history (by SIC code), Vendor and state. The model
is consistent with
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the Business Technology Division's traditional credit decision-making criteria
(i.e., Dun & Bradstreet data, consumer credit bureau information, and bank and
trade references).
Healthcare Division: For leases originated by the Medical Business
sales group, full financial statements are required for credit review, and a
thorough history of past payment patterns is examined. Other items such as a
hospital's location, utility to its community and ownership (public or private)
are also considered. Certain of these transactions are credit scored under HILL
credit scoring parameters. The HILL credit scoring parameters include, without
limitation, the number of beds of the potential lessee, its occupancy rate and
Dun & Bradstreet Information Services ("Dun & Bradstreet") financial highlight
information.
Certain of the leases originated by the Vendor Services group are
credit scored under PILL credit scoring parameters. The PILL credit scoring
parameters include, without limitation, the length of time in practice of the
potential lessee, the potential lessee's medical specialty and a consumer
bankruptcy predictor model acquired by Copelco Capital. The credit review
process for physicians is similar to that of personal lending because the
lessees are predominantly individual physicians (or groups of physicians). Many
of the leases to physicians have personal guarantees associated with them and
spousal guarantees as well. Lessees are not required, however, to give Copelco
Capital liens on property. The predominant reason for delinquencies in such
leases is cash flow deficiencies and, to a lesser extent, death of the lessee,
in which case settlement with the lessee's estate can take several months. Such
leases are typically processed under the PILL program. For inexpensive
equipment, credit review of physician lessees involves analysis of credit bureau
reports, bank references, duration of practice and medical specialty. For more
expensive equipment, the credit review involves analysis of personal income tax
returns and financial statements of the practice in addition to credit bureau
reports and bank references. There is also a focus on the length of time that
the physician has maintained his or her private practice.
The PILL and the HILL programs afford Copelco Capital the ability to
analyze physician, physician group practice and hospital credit quality in
advance of the lease decision, thus providing a means by which physicians in
certain medical specialties and certain hospitals may be pre-approved for a
leasing line of credit. They also provide rapid turnaround of a specific
application when it is submitted.
National Accounts, Home Health and Ambulatory Care generally utilize
a combination of transactional credit analysis and credit scoring. Transactions
not eligible for credit scoring are reviewed by the Healthcare Division's credit
staff under the supervision of a senior credit officer.
Commercial & Industrial Division: In the Electronic Manufacturing
Group and Financial Intermediary Group, all credit decisions are made by credit
analysts. Credit scoring is not used. In general, transactions in excess of
$50,000 require financial statement disclosure consisting of at least the three
most recent fiscal year-end financial statements and interim financial
statements. Additionally, Dun & Bradstreet reports, bank and other credit
references, trade references, and other information may be evaluated.
Transactions involving small, privately held companies exhibiting limited
financial resources require the financial disclosure and personal guaranty of
the principals. Consideration will also be given to the value of the equipment
securing the transaction, based upon a review by the Group's Asset Management
department. An approval might contain restrictive conditions, including, but not
limited to, a reduced term, guaranties, security deposits, down payments, or a
letter of credit.
The Material Handling Group utilizes a credit review system similar
to and based upon that of the Business Technology Division. The majority of
business originates through dealer/vendor networks, with retail and wholesale
credit applications submitted via fax. The assessment of creditworthiness is
determined through both automated systems and credit officer analysis with
emphasis on the following factors: time in business, financial strength,
payment/credit history, transaction structure, collateral and industry outlook.
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The evaluation of creditworthiness for retail end-user customers will
be accomplished through a modified version of the Business Technology Division's
credit scoring model, in which the filters and scoring thresholds are adapted to
the needs of the Material Handling Group. Retail lease applicants will generally
have been in business for at least two years with evidence of satisfactory bank
and/or comparable secured lender references. Consumer credit bureau reports will
be obtained if individual guarantors or sole proprietors are considered in the
transaction.
The terms of the Leases originated by each of the Divisions require
the Lessees to maintain the equipment and install it at a place of business
approved by Copelco Capital. Delivery, transportation, repairs and maintenance
are obligations of Lessees, and Lessees are required to carry, at their own
expense, liability and replacement cost insurance under terms acceptable to
Copelco Capital. Any Lease payment defaults permit Copelco Capital to declare
immediately due and payable all remaining lease payments. At the end of a lease
term, lessees must return the leased equipment to Copelco Capital in good
working order unless the lease is renewed or the leased equipment is purchased
by the Lessee.
COLLECTIONS. Collection procedures have been instituted by Copelco
Capital and are uniformally utilized throughout Copelco Capital's Divisions. A
late charge is generally assessed to Lessees 6 days after the payment due date.
Telephone contact is normally initiated when an account is 15 days past due, but
may be initiated more quickly. All collection activity is entered into the
computerized collection system. Activity notes are input directly into the
collection system in order to facilitate routine collection activity. Collectors
have available at their computer terminals the latest status and collection
history on each account.
Generally, on the day on which a Lease becomes 10 days delinquent,
Copelco Capital's credit and collection review system automatically generates a
computerized late notice which is sent directly to the lessee. When an account
becomes 30 days past due, a default letter is generally sent out to the Lessee
and to anyone providing personal guarantees on the Leases. An acceleration
letter is sent to all Lessees and guarantors when a Lease becomes 45 days past
due, as circumstances warrant. Telephone contact will be continued throughout
the delinquency period. Accounts which become over 90 days past due are subject
to repossession of Equipment and action by collection agencies and attorneys.
Prior to being written down (which is generally prior to the lease being 123
days delinquent), each lease is evaluated on the merits of the individual
situation, with equipment value being considered as well as the current
financial strength of the Lessee.
SALES AND SERVICING AGREEMENT. Copelco Capital will enter into an
agreement (the "Sales and Servicing Agreement") with Copelco Capital Funding LLC
99-1 as seller (in such capacity, the "Seller") and servicer (in such capacity,
the "Servicer") and Manufacturers and Traders Trust Company, a New York banking
corporation, as indenture trustee (the "Trustee"), pursuant to which Copelco
Capital will, among other things, service the Leases, make Servicer Advances and
forward Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges to
Vendors. In the Sales and Servicing Agreement, Copelco Capital will make certain
representations and warranties regarding the Leases and the Equipment. In the
event that (a) any of such representations and warranties made by Copelco
Capital proves at any time to have been inaccurate in any material respect as of
the Issuance Date (as defined herein) or (b) any Lease shall be terminated in
whole or in part by a Lessee, or any amounts due with respect to any Lease shall
be reduced or impaired, as a result of any action or inaction by Copelco Capital
(other than any such action or inaction of Copelco Capital, when acting as
Servicer, in connection with the enforcement of any Lease (other than an Early
Lease Termination (as defined herein) in a manner consistent with the provisions
of the Sales and Servicing Agreement) or any claim by any Lessee against Copelco
Capital and, in any such case, the event or condition causing such inaccuracy,
termination, reduction, impairment or claim shall not have been cured or
corrected within 30 days after the earlier of the date on which Copelco Capital
is given notice thereof by Copelco Capital Funding LLC 99-1 or the
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Trustee or the date on which Copelco Capital otherwise first has notice thereof,
Copelco Capital will repurchase such Lease (a "Warranty Lease") and the
Equipment subject thereto by paying to the Trustee for deposit into the
Collection Account, not later than the Determination Date next following the
expiration of such 30-day period, an amount at least equal to the Discounted
Present Value of such Lease plus any amounts previously due and unpaid thereon.
In the alternative, subject to the satisfaction of certain requirements set
forth in the Sales and Servicing Agreement, Copelco Capital will have the option
to substitute one or more Substitute Leases (as defined herein) for such
Warranty Lease (as defined herein). Any inaccuracy in any representation or
warranty with respect to (i) the priority of the lien of the Indenture with
respect to any Lease or (ii) the amount (if less than represented) of the Lease
Payments, Casualty Payments, Termination Payments or Booked Residual Value under
any Lease shall be deemed to be material. "Booked Residual Value" means the
amount booked by Copelco Capital as expected to be realized upon scheduled
termination of a Lease through sale or other disposition of the related
Equipment.
SERVICING FEE. The Servicing Fee with respect to the Notes will be
paid monthly on the twentieth day of each month (or if such day is not a
business day, the next succeeding business day) ("Payment Date") from amounts in
the Collection Account and will be calculated by multiplying one-twelfth of
0.75% times the Discounted Present Value of the Performing Leases, as of the
prior Payment Date (the "Servicing Fee").
The Servicing Fee will be paid to the Servicer for servicing the
Series Pool and for certain administrative expenses in connection with the
Notes, including Trustee fees.
FORMATION OF THE ISSUER
GENERAL. Copelco Capital Funding LLC 99-1 is a limited liability
company formed in accordance with the laws of the State of Delaware, pursuant to
the Limited Liability Company Agreement, solely for the purpose of effectuating
the transactions described herein. Prior to formation, the Issuer will have had
no assets or obligations and no operating history. Upon formation, the Issuer
will not engage in any business activity other than (i) acquiring, holding and
pledging the Leases and related interests and property related thereto, (ii)
issuing the Securities and (iii) distributing payments thereon.
TRUSTEE. Manufacturers and Traders Trust Company, the Trustee under
the Indenture, is a New York banking corporation and its principal offices are
located at One M&T Plaza, Buffalo, New York 14203.
TRUST FUNDS. The "Trust Fund" will consist of a pool (the "Series
Pool") of healthcare, manufacturing and business equipment lease contracts (the
"Lease Contracts"), including payments due thereunder and certain interest in
the related leased equipment (the "Equipment") acquired or originated by Copelco
Capital and transferred to the Issuer. The Trust Funds will, in addition,
include the funds on deposit in Collection Account and the Reserve Account.
DESCRIPTION OF THE NOTES
The Series 1999-A ___% Class A-1 Notes (the "Class A-1 Notes"), ____%
Class A-2 Notes (the "Class A-2 Notes"), ___% Class A-3 Notes (the "Class A-3
Notes") and _______% Class A-4 Notes (the "Class A-4 Notes", together with the
Class A-1 Notes, Class A-2 Notes and Class A-3 Notes, the "Class A Notes"),
____% Class B Notes (the "Class B Notes"), _____% Class C Lease-Backed Notes
(the "Class C Notes") and _____% Class D Notes (the "Class D Notes"), together
with the Class A Notes, the Class B Notes and the Class C Notes, the "Offered
Notes") and ______% Class E Notes (the "Class E Notes", together with the
Offered Notes, the "Notes") will be issued pursuant to the Indenture (the
"Indenture") between the Issuer and the Trustee. The following statements with
respect to the Notes are
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subject to the detailed provisions of the Indenture, the form of which is filed
as an exhibit to the registration statement of which this Prospectus forms a
part. Whenever any particular section of the Indenture or any term used therein
is referred to, the statement in connection with which such reference is made is
qualified in its entirety by such reference.
GENERAL. The Offered Notes represent secured debt obligations of the
Issuer secured by the Trust Fund, and the privately placed Class E Notes
represent subordinated debt obligations of the Issuer only secured by the Trust
Fund as provided in the related Indenture. Neither represents an interest in or
recourse obligation of Copelco Capital or any of its other affiliates other than
the Issuer. The Issuer is a Delaware limited liability company with limited
assets. Consequently, Noteholders must rely solely upon the Leases, the
interests in the Equipment, funds on deposit in the Collection Account (as
defined herein) and the Reserve Account (as defined herein), for payment of
principal of and interest on the Offered Notes.
The combined aggregate principal amount of the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes will
comprise the initial principal amount (the "Initial Principal Amount") of the
Notes. The Initial Principal Amount of the Notes shall be equal to the
Discounted Present Value of the Leases (as defined herein) as of the Cut-Off
Date. Such Discounted Present Value of the Leases, at any given time, shall
equal the future remaining scheduled payments from the related Leases (including
Non-Performing Leases), discounted at the Discount Rate, as set forth in the
Indenture.
Each Note will bear interest from _______, 1999 (the "Issuance Date")
at the applicable interest rate for the respective class (the "Interest Rate"),
calculated on the basis of a year of 360 days comprised of twelve 30-day months,
except in the case of the Class A-1 Notes, for which interest will be calculated
on the basis of a year of 360 days and the actual number of days in such
Interest Accrual Period, payable on the fifteenth day of each month (or if such
day is not a business day the next succeeding business day), to the person in
whose name the Note was registered at the close of business on the preceding
Record Date (as defined herein). Principal will be payable as set forth under
"Distributions on Notes." Notes may be presented to the corporate trust office
of the Trustee for registration of transfer or exchange [(Section 2.03)]. Notes
may be exchanged without a service charge, but the Issuer may require payment to
cover taxes or other governmental charges [(Section 2.03)].
BOOK-ENTRY REGISTRATION. The holders of the Class A-1 Notes (the
"Class A-1 Noteholders"), the holders of the Class A-2 Notes (the "Class A-2
Noteholders"), the holders of the Class A-3 Notes (the "Class A-3 Noteholders"),
the holders of the Class A-4 Notes ( the "Class A-4 Noteholders," together with
the Class A-1 Noteholders, the Class A-2 Noteholders and the Class A-3
Noteholders, the "Class A Noteholders"), the holders of the Class B Notes (the
"Class B Noteholders"), the holders of the Class C Notes (the "Class C
Noteholders") and the holders of the Class D Notes the ("Class D Noteholders,"
together with the Class A Noteholders, the Class B Noteholders and the Class C
Noteholders, the "Offered Noteholders") may hold their notes through The
Depository Trust Company ("DTC") (in the United States) or Cedel Bank, S.A.
("CEDEL") and the Euroclear System ("Euroclear") (in Europe) if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
Cede & Co. ("Cede"), as nominee for DTC, will hold the global Class A
Note or Notes, global Class B Note or Notes, global Class C Note or Notes and
the global Class D Note or Notes. CEDEL and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities accounts
in CEDEL's and Euroclear's names on the books of their respective Depositaries
(as defined herein) which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC. Citibank
will act as depositary for CEDEL, and Morgan Guaranty Trust will act as
depositary for Euroclear (in such capacities, the "Depositaries").
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DTC is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of notes. Participants include the
Underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Transfers between Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants (as defined herein) and Euroclear
Participants (as defined herein) will occur in accordance with their respective
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected through
DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its Depositary. Cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL Participants on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL Participant
or a Euroclear Participant to a Participant will be received with value on the
DTC settlement date but will be available in the relevant CEDEL or Euroclear
cash account only as of the business day following settlement in DTC. For
information with respect to tax documentation procedures relating to the Offered
Notes, see "Material Federal Income Tax Considerations."
Offered Noteholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Offered Notes may do so only through Participants and
Indirect Participants. In addition, Offered Noteholders will receive all
distributions of principal and interest on the Offered Notes from the Trustee
through DTC and its Participants. Under a book-entry format, Offered Noteholders
will receive payments after the related Distribution Date, as the case may be,
because, while payments are required to be forwarded to Cede, as nominee for
DTC, on each such date, DTC will forward such payments to its Participants which
thereafter will be required to forward them to Indirect Participants or holders
of beneficial interests in the Offered Notes. It is anticipated that the only
Noteholder of the Offered Notes will be Cede, as nominee of DTC, and that
holders of beneficial interests in the Offered Notes, under the Indenture will
only be permitted to exercise rights under the Indenture indirectly through DTC
and its Participants who in turn will exercise their rights through DTC.
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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 Issuer that it will take any action permitted to
be taken by a Class A Noteholder, Class B Noteholder, Class C Noteholder or
Class D Noteholder under the Indenture only at the direction of one or more
Participants to whose account with DTC the Class A Notes, Class B Notes, Class C
Notes or Class D Notes are credited. Additionally, DTC has advised the Issuer
that it may take actions with respect to the applicable Offered Notes that
conflict with other of its actions with respect thereto.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriters. Indirect access to CEDEL is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a CEDEL Participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 29 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the Underwriters.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
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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 system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Material Federal Income Tax Considerations." CEDEL or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by an Offered Noteholder under the Indenture on behalf of a CEDEL
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Offered Notes among participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE NOTES. The Offered Notes will be issued in fully registered,
authenticated form to Beneficial Owners or their nominees (the "Definitive
Notes"), rather than to DTC or its nominee, only if (a) the Issuer advises the
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as Depository with respect to such Notes, and the Trustee
or the Issuer is unable to locate a qualified successor or (b) the Issuer at its
option elects to terminate the book-entry system through DTC (Section 2.06).
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee is required to notify all Beneficial Owners
through DTC of the availability of Definitive Notes for such Class. Upon
surrender by DTC of the Definitive Note representing the Notes and instructions
for reregistration, the Trustee will issue such Definitive Notes, and thereafter
the Trustee will recognize the holders of such Definitive Notes as Offered
Noteholders under the related Indenture (the "Holders") (Section 2.07). The
Trustee will also notify the Holders of any adjustment to the Record Date with
respect to the Notes necessary to enable the Trustee to make distributions to
Holders of the Definitive Notes for such Class of record as of each Payment
Date.
Additionally, upon the occurrence of any such event described above,
distribution of principal of and interest on the Offered Notes will be made by
the Trustee directly to Holders in accordance with the procedures set forth
herein and in the Indenture. Distributions will be made by check, mailed to the
address of such Holder as it appears on the Note register upon at least 10 days
notice to Noteholders for such Class; however, the final payment on any Note
(whether the Definitive Notes or the Note for such Class registered in the name
of Cede representing the Notes of such Class) will be made
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only upon presentation and surrender of such Note at the office or agency
specified in the notice of final distribution to Noteholders.
Definitive Notes of each Class will be transferable and exchangeable at
the offices of the Trustee or its agent in New York, New York, which the Trustee
shall designate on or prior to the issuance of any Definitive Notes with respect
to such Class. No service charge will be imposed for any registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith
(Section 2.03(e)).
INITIAL PRINCIPAL AMOUNT. $_______ for the Class A-1 Notes (the "Class
A-1 Initial Principal Amount"), $_______ for the Class A-2 Notes (the "Class A-2
Initial Principal Amount"), $_______ for the Class A-3 Notes (the "Class A-3
Initial Principal Amount"), $________ for the Class A-4 Notes (the "Class A-4
Initial Principal Amount", together with the Class A-1 Initial Principal Amount,
the Class A-2 Initial Principal Amount and the Class A-3 Initial Principal
Amount, the "Class A Initial Principal Amount"), $________ for the Class B Notes
(the "Class B Initial Principal Amount"), $__________ for the Class C Notes (the
"Class C Initial Principal Amount"), $_________ for the Class D Notes (the
"Class D Initial Principal Amount") and $________ for the Class E Notes (the
"Class E Initial Principal Amount"). See "Description of the Notes."
DISCOUNTED PRESENT VALUE OF THE LEASES. The Discounted Present Value of
the Leases (the "Discounted Present Value of the Leases"), at any given time,
shall equal the future remaining scheduled payments (not including delinquent
amounts, Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges) from
the Leases (including non-performing leases), discounted at a rate equal to
______%, which rate is equal to the sum of (a) the weighted average interest
rate of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class
E Notes, each weighted by (i) the initial principal amount of the Class A-1
Notes, the initial principal amount of the Class A-2 Notes, the initial
principal amount of the Class A-3 Notes, the initial principal amount of the
Class A-4 Notes, the initial principal amount of the Class B Notes, the initial
principal amount of the Class C Notes, the initial principal amount of the Class
D Notes, and the initial principal amount of the Class E Notes, as applicable,
and (ii) the expected weighted average life (under a zero prepayment, and no
loss scenario) of each class of Notes, as applicable, and (b) the servicing fee
rate of 0.75% per annum. The Discounted Present Value of the Performing Leases
(the "Discounted Present Value of the Performing Leases") equals the Discounted
Present Value of the Leases, reduced by all future remaining scheduled payments
on the Non-Performing Leases (not including delinquent amounts, Excess Copy
Charges, Maintenance Charges or Fee Per Scan Charges), discounted at the
Discount Rate. See "Description of the Notes -- General." Each of the Indenture
and the Sales and Servicing Agreement will provide that any calculation of
future remaining scheduled payments made on a Determination Date or with respect
to a Payment Date will be calculated after giving effect to any payments
received prior to such date of calculation to the extent such payments relate to
scheduled payments due and payable by the Lessees with respect to the related
Due Period (defined herein) and all prior Due Periods. "Statistical Discounted
Present Value of the Leases" means an amount equal to the future remaining
scheduled payments (not including delinquent amounts, Excess Copy Charges,
Maintenance Charges and Fee Per Scan Charges) from the Leases as of the Cut-Off
Date, discounted at a rate equal to ______% (the "Statistical Discount Rate").
The Statistical Discounted Present Value of the Leases as of the Cut-Off Date is
$___________ and will not vary materially from the Discounted Present Value of
the Leases as of the Cut-Off Date. See "The Series Pool -- The Equipment." The
aggregate Discounted Present Value of the Leases as of the Cut-Off Date,
calculated at the Discount Rate is $_____________.
"Non-Performing Leases" are (a) Leases that have become more than 123
days delinquent or (b) Leases that have been accelerated by the Servicer or
Leases that the Servicer has determined to be uncollectible in accordance with
its customary practices. See "The Series Pool -- The
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Leases." The Seller will represent in the Sales and Servicing Agreement that at
the time of transfer of any Lease to Copelco Capital Funding LLC 99-1, such
Lease was not a Non-Performing Lease.
EXPECTED MATURITY; STATED MATURITY. The expected maturity dates with
respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4
Notes are the Payment Dates on ________, _________, _________ and _________,
respectively. The expected maturity date with respect to the Class B Notes,
Class C Notes and Class D Notes are the Payment Dates on ________, _________ and
_________, respectively. The stated maturity date with respect to the Class A-1
Notes is the Payment Date in __________ (the "Class A-1 Stated Maturity Date"),
the stated maturity date with respect to the Class A-2 Notes is the Payment Date
in __________ (the "Class A-2 Stated Maturity Date"), the stated maturity date
with respect to the Class A-3 Notes is the Payment Date in ___________ (the
"Class A-3 Stated Maturity Date"), the stated maturity date with respect to the
Class A-4 Notes is the Payment Date in __________ (the "Class A-4 Stated
Maturity Date"), the stated maturity date with respect to the Class B Notes is
the Payment Date in _________ (the "Class B Stated Maturity Date"), the stated
maturity date with respect to the Class C Notes is the Payment Date in ________
(the "Class C Stated Maturity Date") and the stated maturity date with respect
to the Class D Notes is the Payment Date in __________ (the "Class D Stated
Maturity Date", together with the Class A-1 Stated Maturity Date, the Class A-2
Stated Maturity Date, the Class A-3 Stated Maturity Date, the Class A-4 Stated
Maturity Date, the Class B Stated Maturity Date and the Class C Stated Maturity
Date, the "Offered Note Stated Maturity Dates"). However, if all payments on the
Leases are made as scheduled, final payment with respect to the Notes would
occur prior to stated maturity.
DETERMINATION DATE. The fifth day prior to each Payment Date (or the
preceding business day, if such day is not a business day). On such date (each,
a "Determination Date"), the Servicer will determine the amount of payments
received on the Leases in respect of the immediately preceding calendar month
(each such period, a "Due Period") which will be available for distribution on
the Payment Date. See "Description of the Notes -- Distributions on Notes."
PAYMENT DATE. Payments on the Notes will be made on the twentieth day
of each month (or if such day is not a business day, the next succeeding
business day), commencing on ___________ (each, a "Payment Date"), to holders of
record on the last day of the immediately preceding calendar month (each, a
"Record Date"). See "Description of the Notes -- Distributions on Notes."
INTEREST PAYMENTS. On each Payment Date, the interest due (the
"Interest Payments") with respect to the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes,
the Class D Notes and the Class E Notes since the last Payment Date will be the
interest that has accrued on such Notes since the last Payment Date (or in the
case of the first Payment Date, with respect to the Class A-1 Notes, since the
Issuance Date, and with respect to all other Notes, since __________) (the
"Interest Accrual Period") at the applicable Interest Rate applied to the then
unpaid principal amounts (the "Outstanding Principal Amounts") of the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class
B Notes, the Class C Notes, the Class D Notes and the Class E Notes,
respectively, after giving effect to payments of principal to the Class A-1
Noteholders, the Class A-2 Noteholders, the Class A-3 Noteholders, the Class A-4
Noteholders, the Class B Noteholders, the Class C Noteholders, the Class D
Noteholders and the Class E Noteholders, respectively, on the preceding Payment
Date. See "Description of the Notes -- General" and "Distributions on Notes."
PRINCIPAL PAYMENTS. For each Payment Date, each of the Class A
Noteholders, the Class B Noteholders, the Class C Noteholders, the Class D
Noteholders and the Class E Noteholders will be entitled to receive payments of
principal ("Principal Payments"), to the extent funds are available therefor, in
the priorities set forth in the Indenture and described herein below and under
"Application of Payments" and "Description of the Notes -- Distributions on
Notes." On each Payment Date, to the extent
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funds are available therefor, the Principal Payment will be paid to the
Noteholders in the following priority: (a) (i) to the Class A-1 Noteholders
only, until the Outstanding Principal Amount on the Class A-1 Notes has been
reduced to zero, the Class A Principal Payment, then (ii) to the Class A-2
Noteholders only, until the Outstanding Principal Amount on the Class A-2 Notes
has been reduced to zero, the Class A Principal Payment, then (iii) to the Class
A-3 Noteholders only, until the Outstanding Principal Amount on the Class A-3
Notes has been reduced to zero, the Class A Principal Payment, and (iv) to the
Class A-4 Noteholders, until the Outstanding Principal Amount on the Class A-4
Notes has been reduced to zero, the Class A Principal Payment, (b) to the Class
B Noteholders, the Class B Principal Payment, (c) to the Class C Noteholders,
the Class C Principal Payment, (d) to the Class D Noteholders, the Class D
Principal Payment, (e) to the Class E Noteholders, the Class E Principal Payment
and (f) to the extent that the Class B Floor exceeds the Class B Target Investor
Principal Amount, the Class C Floor exceeds the Class C Target Investor
Principal Amount, the Class D Floor exceeds the Class D Target Investor
Principal Amount and/or the Class E Floor exceeds the Class E Target Investor
Principal Amount, Additional Principal (defined below) shall be distributed,
sequentially, as an additional principal payment 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,
the Class C Notes, the Class D Notes and the Class E Notes as applicable, until
the Outstanding Principal Amount of each Class has been reduced to zero.
The "Class A Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, (i) on all Payment Dates prior to the _______ Payment
Date, the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the previous
Determination Date and (B) the Discounted Present Value of the Performing Leases
as of the related Determination Date, and (ii) on and after the ________ Payment
Date, the entire Outstanding Principal Amount on the Class A-1 Notes and (b)
after the Class A-1 Notes have been paid in full, the amount necessary to reduce
the aggregate Outstanding Principal Amount on the Class A Notes to the Class A
Target Investor Principal Amount.
The "Class B Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor.
The "Class C Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class C Notes to the greater of the Class C
Target Investor Principal Amount and the Class C Floor.
The "Class D Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class D Notes to the greater of the Class D
Target Investor Principal Amount and the Class D Floor.
The "Class E Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class E Notes to the greater of the Class E
Target Investor Principal Amount and the Class E Floor.
The "Class A Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
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The "Class B Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class B Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Class C Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class C Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Class D Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class D Percentage and
(b) the Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Class E Target Investor Principal Amount" (the Class A Target
Investor Principal Amount, the Class B Target Investor Principal Amount, the
Class C Target Investor Principal Amount, the Class D Target Investor Principal
Amount and the Class E Target Investor Principal Amount, collectively, the
"Class Target Investor Principal Amounts") with respect to each Payment Date is
an amount equal to the product of (a) the Class E Percentage and (b) the
Discounted Present Value of the Performing Leases as of the related
Determination Date.
The "Class A Percentage" will be equal approximately to ______%. The
"Class B Percentage" will be equal approximately to _____%. The "Class C
Percentage" will be equal approximately to ______%. The "Class D Percentage"
will be equal approximately to ______%. The "Class E Percentage" will be equal
approximately to _______%.
The "Class B Floor" with respect to each Payment Date means (a) ___% of
the initial Discounted Present Value of the Leases as of the Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the
sum of the Outstanding Principal Amount of the Class C Notes, the Outstanding
Principal Amount of the Class D Notes, the Outstanding Principal Amount of the
Class E Notes, and the Overcollateralization Balance as of the immediately
preceding Payment Date after giving effect to all principal payments made on
that day, minus (d) the amount on deposit in the Reserve Account after giving
effect to withdrawals to be made on such Payment Date.
The "Class C Floor" with respect to each Payment Date means (a) ___% of
the initial Discounted Present Value of the Leases as of the Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the
sum of the Outstanding Principal Amount of the Class D Notes, the Outstanding
Principal Amount of the Class E Notes, and the Overcollateralization Balance as
of the immediately preceding Payment Date after giving effect to all principal
payments made on that day, minus (d) the amount on deposit in the Reserve
Account after giving effect to withdrawals to be made on such Payment Date;
provided, however, that if the Outstanding Principal Amount of the Class B Notes
is less than or equal to the Class B Floor on such Payment Date, the Class C
Floor will equal the Outstanding Principal Amount of the Class C Notes utilized
in the calculation of the Class B Floor for such Payment Date.
The "Class D Floor" with respect to each Payment Date means (a) ___% of
the initial Discounted Present Value of the Leases as of the Cut-Off Date, plus
(b) the Cumulative Loss Amount with respect to such Payment Date, minus (c) the
sum of the Outstanding Principal Amount of the Class E Notes, and the
Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, minus (d) the amount
on deposit in the Reserve Account after giving effect to withdrawals to be made
on such Payment Date; provided, however, that if the Outstanding Principal
Amount of the Class C Notes is less than or equal to the Class C Floor on such
Payment Date, the Class D Floor will equal the Outstanding Principal Amount of
the Class D Notes utilized in the calculation of the Class C Floor for such
Payment Date.
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The "Class E Floor" (the Class B Floor, the Class C Floor, the Class D
Floor and the Class E Floor, collectively, the "Class Floors") with respect to
each Payment Date means (a) ___% of the initial Discounted Present Value of the
Leases as of the Cut-Off Date, plus (b) the Cumulative Loss Amount with respect
to such Payment Date, minus (c) the Overcollateralization Balance as of the
immediately preceding Payment Date after giving effect to all principal payments
made on that day, minus (d) the amount on deposit in the Reserve Account after
giving effect to withdrawals to be made on such Payment Date; provided, however,
that if the Outstanding Principal Amount of the Class D Notes is less than or
equal to the Class D Floor on such Payment Date, the Class E Floor will equal
the Outstanding Principal Amount of the Class E Notes utilized in the
calculation of the Class D Floor for such Payment Date.
"Additional Principal" with respect to each Payment Date equals (a)
zero if each of the Class Target Investor Principal Amounts for Classes B, C, D
and E exceed their respective Class Floors on such Payment Date and (b) in each
other case the excess, if any, of (i)(A) the Outstanding Principal Balance of
the Notes plus the Overcollateralization Balance as of the immediately preceding
Payment Date after giving effect to payments on such Payment Date, minus (B) the
Discounted Present Value of the Performing Leases as of the related
Determination Date, over (ii) the sum of the Class A Principal Payment, the
Class B Principal Payment, the Class C Principal Payment, the Class D Principal
Payment and the Class E Principal Payment to be paid on such Payment Date.
The "Overcollateralization Balance" with respect to each Payment Date
is an amount equal to the excess, if any, of (a) the Discounted Present Value of
Performing Leases as of the related Determination Date over (b) the Outstanding
Principal Amount of the Notes as of such Payment Date after giving effect to all
principal payments made on that day.
The "Cumulative Loss Amount" with respect to each Payment Date is an
amount equal to the excess, if any, of (a) the total of (i) the Outstanding
Principal Amount of the Notes as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, plus (ii) the
Overcollateralization Balance as of the immediately preceding Payment Date,
minus (iii) the lesser of (A) the Discounted Present Value of the Performing
Leases as of the Determination Date relating to the immediately preceding
Payment Date minus the Discounted Present Value of the Performing Leases as of
the related Determination Date and (B) Available Funds remaining after the
payment of amounts owing the Servicer and in respect of interest on the Notes on
such Payment Date, over (b) the Discounted Present Value of the Performing
Leases as of the related Determination Date.
COLLECTION ACCOUNT. The Trustee will establish and maintain an Eligible
Account (as defined herein) (the "Collection Account") into which the Servicer
will deposit all Lease Payments, Casualty Payments, Termination Payments and
recoveries from Non-Performing Leases to the extent Copelco Capital has not
substituted a Substitute Lease for such Non-Performing Lease (except to the
extent required to reimburse unreimbursed Servicer Advances) (each as defined
herein) on or in respect of each Lease included in the Series Pool within two
Business Days of receipt thereof; provided that Residual Realizations (as
defined herein) will not be deposited in the Collection Account. All Lease
Payments, Casualty Payments, Termination Payments and other payments relating to
a Lease received and so deposited in the Collection Account shall constitute
property of the Issuer, securing payments on the related Notes (Section
3.02(a)).
An "Eligible Account" means either (a) an account maintained with a
depository institution or trust company acceptable to the Rating Agency, or (b)
a trust account or similar account maintained with a federal or state chartered
depository institution, which may be an account maintained with the Trustee.
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A "Casualty Payment" is any payment pursuant to a Lease on account of
the loss, theft, condemnation, governmental taking, destruction, or damage
beyond repair (each, a "Casualty") of any item of Equipment subject thereto
which results, in accordance with the terms of the Lease, in a reduction in the
number or amount of any future Lease Payments due thereunder or in the
termination of the Lessee's obligation to make future Lease Payments thereunder.
A "Lease Payment" is each periodic installment of rent payable by a
Lessee under a Lease. Casualty Payments, Termination Payments, prepayments of
rent required pursuant to the terms of a Lease at or before the commencement of
the Lease, payments becoming due before the applicable Cut-Off Date and
supplemental or additional payments required by the terms of a Lease with
respect to taxes, insurance, maintenance (including, without limitation any
Maintenance Charges), or other specific charges, (including, without limitation,
any Excess Copy Charges and Fee Per Scan Charges), shall not be Lease Payments
hereunder.
A "Termination Payment" is a payment payable by a Lessee under a Lease
upon the early termination of such Lease (but not on account of a casualty or a
Lease default) which may be agreed upon by the Servicer, acting in the name of
the Issuer, and the Lessee.
The Trustee shall deposit the following funds into the Collection
Account (Section 3.03(a)), which funds received on or prior to the related
Determination Date with respect to the related Due Period, including any funds
deposited into the Collection Account from the Reserve Account, shall be
available for distribution ("Available Funds"), pursuant to the Indenture, on
the next succeeding Payment Date:
a) Lease Payments due during the prior Due Period (net of any
Excess Copy Charges, Maintenance Charges and Fee Per Scan
Charges);
b) recoveries from Non-Performing Leases to the extent Copelco
Capital has not substituted Substitute Leases (as defined
herein) for such Non-Performing Leases (except to the extent
required to reimburse unreimbursed Servicer Advances);
c) late charges received on delinquent Lease payments not
advanced by the Servicer;
d) proceeds from repurchases by Copelco Capital of Leases as a
result of breaches of representations and warranties to the
extent Copelco Capital has not substituted Substitute Leases
for such Leases other than with respect to a Warranty Lease,
the excess of (a) the repurchase price related to the Warranty
Lease over (b) the Discounted Present Value of the remaining
Lease Payments related to the Warranty Lease as of the
immediately following Payment Date (plus any amounts
previously due and unpaid) ("Residual Warranty Payments");
e) proceeds from investment of funds in the Collection Account
and the Reserve Account, if any;
f) Casualty Payments other than Residual Casualty Payments
("Residual Casualty Payments") which are, at any date with
respect to a Lease, the excess of (a) the Casualty Payment
related to the Lease over (b) the Discounted Present Value of
the remaining Lease Payments related to the Lease as of the
immediately following Payment Date (plus any amounts
previously unpaid);
g) Servicer Advances (as defined herein);
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h) Termination Payments to the extent the Issuer does not
reinvest such Termination Payments in Additional Leases other
than Residual Prepayments; and
i) to the extent there occurs an Available Funds Shortfall,
funds, if any, on deposit in the Reserve Account.
Available Funds will not include (a) cash flows realized from the sale
or release of the Equipment following the expiration dates of the Leases, other
than Equipment subject to Non-Performing Leases, (b) Residual Warranty Payments,
(c) Residual Casualty Payments and (d) Residual Prepayments ("Residual
Realizations").
RESERVE ACCOUNT. The Trustee will establish and maintain an Eligible
Account (the "Reserve Account"). On the Closing Date, the Issuer will make an
initial deposit in an amount equal to 1% of the Discounted Present Value of the
Leases as of the Cut-Off Date into the Reserve Account. In the event that
Available Funds (exclusive of amounts on deposit in the Reserve Account) are
insufficient to pay the amounts owing the Servicer, Interest Payments (as
defined herein) on the Notes and the Class A Principal Payment, the Class B
Principal Payment, the Class C Principal Payment, the Class D Principal Payment
and the Class E Principal Payment (such payments, the "Required Payments" and
such shortfall, an "Available Funds Shortfall"), the Trustee will withdraw from
the Reserve Account an amount equal to the lesser of the funds on deposit in the
Reserve Account (the "Available Reserve Amount") and such deficiency. In
addition, on each Payment Date, Available Funds remaining after the payment of
the Required Payments will be deposited into the Reserve Account to the extent
that the Required Reserve Amount exceeds the Available Reserve Amount. The
"Required Reserve Amount" equals the lesser of (a) 1.00% of the Discounted
Present Value of the Leases as of the Cut-Off Date and (b) the then unpaid
principal amounts (the "Outstanding Principal Amount") of the Notes. Any amounts
on deposit in the Reserve Account in excess of the Required Reserve Amount will
be released to the Issuer (Section 3.05(c)).
DISTRIBUTIONS ON NOTES. Payments on the Notes will commence on
____________. On the Determination Date, the Servicer will determine the
Available Funds and the Required Payments.
For each Payment Date, the interest due with respect to the Notes will
be the interest that has accrued on such Notes since the last Payment Date (or,
in the case of the first Payment Date, with respect to the Class A-1 Notes,
since the Issuance Date, and with respect to all other Notes, since ___________)
at the applicable Interest Rates applied to the Outstanding Principal Amount of
each Class, after giving effect to payments of principal to Noteholders on the
preceding Payment Date, plus all previously accrued and unpaid interest on the
Interest Payments (Section 2.01(c)). Funds in the Collection Account, together
with reinvestment earnings thereon, will be used by the Trustee to make required
payments of principal and interest on the related Notes (Section 3.03(b)).
For each Payment Date, Principal Payments due with respect to the Class
A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E
Notes will be the Class A Principal Payment, the Class B Principal Payment, the
Class C Principal Payment, the Class D Principal Payment and the Class E
Principal Payment, respectively. In addition, to the extent that the Class B
Floor exceeds the Class B Target Investor Principal Amount, the Class C Floor
exceeds the Class C Target Investor Principal Amount, the Class D Floor exceeds
the Class D Target Investor Principal Amount and/or the Class E Floor exceeds
the Class E Target Investor Principal Amount, Additional Principal shall be
distributed, sequentially, as an additional principal payment 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, the Class C Notes, the Class D Notes and the Class E Notes until the
Outstanding Principal Amount of each Class has been reduced to zero (Section
3.03(b)).
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Unless an Event of Default and acceleration of the Notes has occurred,
on or before each Payment Date, the Servicer will instruct the Trustee to apply
or cause to be applied the Available Funds to make the following payments in the
following priority (Section 3.03(b)):
(a) to pay the Servicing Fee;
(b) to reimburse unreimbursed Servicer Advances (as defined
herein) in respect of a prior Payment Date;
(c) to make Interest Payments, owing on the Class A Notes
concurrently to the Class A-1 Noteholders, Class A-2
Noteholders, Class A-3 Noteholders and Class A-4 Noteholders;
(d) to make Interest Payments on the Class B Notes;
(e) to make Interest Payments on the Class C Notes;
(f) to make Interest Payments on the Class D Notes;
(g) to make Interest Payments on the Class E Notes;
(h) to make the Class A Principal Payment to (i) the Class A-1
Noteholders only, until the Outstanding Principal Amount on
the Class A-1 Notes is reduced to zero, then (ii) to the Class
A-2 Noteholders only, until the Outstanding Principal Amount
on the Class A-2 Notes is reduced to zero, then (iii) to the
Class A-3 Noteholders only, until the Outstanding Principal
Amount on the Class A-3 Notes is reduced to zero, and finally
(iv) to the Class A-4 Noteholders, until the Outstanding
Principal Amount on the Class A-4 Notes is reduced to zero;
(i) to make the Class B Principal Payment to the Class B
Noteholders;
(j) to make the Class C Principal Payment to the Class C
Noteholders;
(k) to make the Class D Principal Payment to the Class D Principal
Noteholders;
(l) to make the Class E Principal Payment to the Class E Principal
Noteholders;
(m) to pay the Additional Principal, if any, as an additional
reduction of principal, to the Class A Noteholders then
receiving the Class A Principal Payment, until the Outstanding
Principal Amount as provided in Clause (h) above on all of the
Class A Notes has been reduced to zero, then to Class B
Noteholders until the Outstanding Principal Amount on the
Class B Notes has been reduced to zero, then to the Class C
Noteholders until the Outstanding Principal Amount on the
Class C Notes has been reduced to zero, then to the Class D
Noteholders until the Outstanding Principal Amount on the
Class D Notes has been reduced to zero, and finally to the
Class E Noteholders, until the Outstanding Principal Amounts
on the Class E Notes has been reduced to zero;
(n) to make a deposit to the Reserve Account in an amount equal to
the excess of the Required Reserve Amount over the Available
Reserve Amount; and
(o) to the Issuer, the balance, if any.
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ADVANCES BY THE SERVICER. Prior to any Payment Date, the Servicer may,
but will not be required to, advance (each, a "Servicer Advance") to the Trustee
an amount sufficient to cover delinquencies on all Leases with respect to the
prior Due Period. The Servicer will be reimbursed for Servicer Advances from
Available Funds on the second following Payment Date. See "Distribution on
Notes" above.
REDEMPTION. The Issuer may, at its option, redeem the Notes, as a
whole, at their principal amount, without premium, together with interest
accrued to the date fixed for redemption if on any payment date the Discounted
Present Value of the Performing Leases is less than or equal to 5% of the
Discounted Present Value of the Leases as of the Cut-Off Date (Sections 2.01 and
1.06.). The Issuer will give notice of such redemption to each Noteholder and
the Trustee at least 30 days before the Payment Date fixed for such prepayment.
Upon deposit of funds necessary to effect such redemption, the Trustee shall pay
the remaining unpaid principal amount on the Notes and all accrued and unpaid
interest as of the Payment Date fixed for redemption. See "Description of the
Notes -- Redemption."
EVENTS OF DEFAULT AND NOTICE THEREOF. The following events will be
defined in the Indenture as "Events of Default" with respect to the Notes:
(a) default in making Interest Payments when such become due and
payable;
(b) default in making Principal Payments at Stated Maturity; or
(c) insolvency or bankruptcy events relating to the Issuer.
(Section 6.01)
The Indenture will provide that the Trustee shall give the Noteholders
notice of all uncured defaults known to it (the term "default" to include the
events specified above without grace periods) (Sections 6.03 and 7.02).
If an Event of Default occurs, the unpaid principal amount of the
related Notes shall automatically become due and payable together with all
accrued and unpaid interest thereon. The Trustee may, however, if the Event of
Default involves other than non-payment of principal or interest on the Notes,
not sell the related Leases and Equipment unless such sale is for an amount
greater than or equal to the Outstanding Principal Amount of the Notes unless
directed to do so by the holders of 66 - 2/3% of the then Outstanding Principal
Amount of the Notes and the Residual Notes (Section 6.03).
Subsequent to an Event of Default and following any acceleration of the
Notes pursuant to the Indenture, any moneys that may then be held or thereafter
received by the Trustee shall be applied in the following order of priority, at
the date or dates fixed by the Trustee and, in case of the distribution of the
entire amount due on account of principal or interest, upon presentation of the
Notes and surrender thereof:
First to the payment of all costs and expenses of collection incurred
----- by the Trustee and the Noteholders (including the reasonable
fees and expenses of any counsel to the Trustee and the
Noteholders);
Second if the person then acting as Servicer under the Sales and
------ Servicing Agreement is not Copelco Capital or an affiliate of
Copelco Capital, to the payment of all Servicer's Fees then due
to such person;
Third first, to the payment of all accrued and unpaid interest on the
----- Outstanding Principal Amount of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class A-4 Notes pro rata to the date
of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest
and principal from the maturity of such installment
39
<PAGE> 42
to the date of payment thereof at the rate per annum equal to the Class A-1
Interest Rate, Class A-2 Interest Rate, Class A-3 Interest Rate and Class
A-4 Interest Rate, respectively, second to the payment of all accrued and
unpaid interest on the Outstanding Principal Amount of the Class B Notes to
the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of such installment to the date of payment
thereof at the rate per annum equal to the Class B Interest Rate, third, to
the payment of all accrued and unpaid interest on the Outstanding Principal
Amount of the Class C Notes to the date of payment thereof, including (to
the extent permitted by applicable law) interest on any overdue installment
of interest and principal from the maturity of such installment to the date
of payment thereof at the rate per annum equal to the Class C Interest Rate,
fourth, to the payment of all accrued and unpaid interest on the Outstanding
Principal Amount of the Class D Notes to the date of payment thereof,
including (to the extent permitted by applicable law) interest on any
overdue installment of interest and principal from the maturity of such
installment to the date of payment thereof at the rate per annum equal to
the Class D Interest Rate, fifth to the payment of all accrued and unpaid
interest on the Outstanding Principal Amount of the Class E Notes to the
date of payment thereof, including (to the extent permitted by applicable
law) interest on any overdue installment of interest and principal from the
maturity of such installment to the date of payment thereof at the rate per
annum equal to the Class E Interest Rate, sixth to the payment of the
Outstanding Principal Amount of the Class A-1 Notes, seventh, to the payment
of the Outstanding Principal Amount of the Class A-2 Notes, Class A-3 Notes
and Class A-4 Notes pro rata to the date of payment thereof, eighth, to the
payment of the Outstanding Principal Amount of the Class B Notes to the date
of payment thereof, ninth, to the payment of the Outstanding Principal
Amount of the Class C Notes, tenth, to the payment of the Outstanding
Principal Amount of the Class D Notes, eleventh, to the payment of the
Outstanding Principal Amount of the Class E Notes; provided, that the
Noteholders may allocate such payments for interest, principal and premium
at their own discretion, except that no such allocation shall affect the
allocation of such amounts or future payments received by any other
Noteholder;
Fourth to the payment of amounts due under the Residual Notes;
------
Fifth to the payment of amounts then due the Trustee under the
----- Indenture; and
Sixth to the payment of the remainder, if any, to the Issuer or any
----- other Person legally entitled thereto (Section 6.06).
The Issuer will be required to furnish annually to the Trustee, a
statement of certain officers of the Issuer to the effect that to the best of
their knowledge the Issuer is not in default in the performance and observance
of the terms of the Indenture or, if the Issuer is in default, specifying such
default (Section 8.09).
The Indenture will provide that the holders of 66 - 2/3% in aggregate
principal amount of the Notes and the Residual Notes then outstanding will have
the right to waive certain defaults and, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee (Sections 6.12 and 6.13). The Indenture will provide that in case an
Event of Default shall occur (which shall not have been cured or waived), the
Trustee will be required to exercise such of its rights and powers under such
Indenture and to use the degree of care and skill in their exercise that a
prudent man would exercise or use in the conduct of his own affairs (Section
7.01(b)). Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under such Indenture at the request of any
of the Noteholders unless they shall have offered to the Trustee reasonable
security or indemnity (Section 6.12). Upon request of a Noteholder, the Trustee
will provide information as to the outstanding principal amount of each Class of
Notes and the Residual Notes.
40
<PAGE> 43
MODIFICATION OF THE INDENTURE. With certain exceptions, under the
Indenture, the rights and obligations of the Issuer and the rights of the
Noteholders may be modified by the Issuer with the consent of the holders of not
less than 66 - 2/3% in aggregate principal amount of the Notes and the Residual
Notes then outstanding under the Indenture; but no such modification may be made
which would (a) extend the fixed maturity of any Note, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of principal or
interest thereon, without the consent of the holder of each Note so affected or
(b) reduce the above-stated percentage of Notes, without the consent of the
holders of all Notes then outstanding under such Indenture (Section 9.02).
SERVICER EVENTS OF DEFAULT. The following events and conditions shall
be defined in the Sales and Servicing Agreement as "Servicer Events of Default":
(a) failure on the part of the Servicer to remit to the Trustee
within three Business Days following the receipt thereof any
monies received by the Servicer required to be remitted to the
Trustee under the Sales and Servicing Agreement;
(b) so long as Copelco Capital is the Servicer, failure on the
part of Copelco Capital to pay to the Trustee on the date when
due, any payment required to be made by Copelco Capital
pursuant to the Sales and Servicing Agreement;
(c) default on the part of either the Servicer or (so long as
Copelco Capital is the Servicer) Copelco Capital in its
observance or performance in any material respect of certain
covenants or agreements in the Sales and Servicing Agreement;
(d) if any representation or warranty of Copelco Capital made in
the Sales and Servicing Agreement shall prove to be incorrect
in any material respect as of the time made; provided,
however, that the breach of any representation or warranty
made by Copelco Capital in such Sales and Servicing Agreement
will be deemed to be "material" only if it affects the
Noteholders, the enforceability of the Indenture or of the
Notes; and provided, further, that such material breach of any
representation or warranty made by Copelco Capital in such
Sales and Servicing Agreement with respect to any of the
Leases or the Equipment subject thereto will not constitute a
Servicer Event of Default if Copelco Capital repurchases such
Lease and Equipment in accordance with the Sales and Servicing
Agreement to the extent provided therein;
(e) certain insolvency or bankruptcy events relating to the
Servicer;
(f) the failure of the Servicer to make one or more payments due
with respect to aggregate recourse debt or other obligations
exceeding $5,000,000, or the occurrence of any event or the
existence of any condition, the effect of which event or
condition is to cause (or permit one or more persons to cause)
more than $5,000,000 of aggregate recourse debt or other
obligations of the Servicer to become due before its (or
their) stated maturity or before its (or their) regularly
scheduled dates of payment so long as such failure, event or
condition shall be continuing and shall not have been waived
by the Person or Persons entitled to performance;
(g) a final judgment or judgments (or decrees or orders) for the
payment of money aggregating in excess of $5,000,000 and any
one of such judgments (or decrees or orders) has remained
unsatisfied and in effect for any period of 60 consecutive
days without a stay of execution.
41
<PAGE> 44
SERVICER TERMINATION. So long as a Servicer Event of Default under the
Sales and Servicing Agreement is continuing, the Trustee shall, upon the
instructions of the holders of 66 - 2/3% in principal amount of the Notes and
the Residual Notes, by notice in writing to the Servicer terminate all of the
rights and obligations of the Servicer (but not Copelco Capital's obligations
which shall survive any such termination) under the Sales and Servicing
Agreement (Section 5.01). On the receipt by the Servicer of such written notice,
all authority and power of the Servicer under the Sales and Servicing Agreement
to take any action with respect to any Lease or Equipment will cease and the
same will pass to and be vested in the Trustee pursuant to and under the Sales
and Servicing Agreement and the Indenture.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on such Notes and the yield to maturity of such Notes are
directly related to the rate of payments on the underlying Leases. The payments
on such Leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Any such payments may result in distributions to
Noteholders of amounts which would otherwise have been distributed over the
remaining term of the Leases. In general, the rate of such payments may be
influenced by a number of other factors, including general economic conditions.
The rate of Principal Payments with respect to any Class may also be affected by
any repurchase of the underlying Leases by Copelco Capital pursuant to the Sales
and Servicing Agreement. In such event, the repurchase price will decrease the
Discounted Present Value of the Performing Leases, causing the corresponding
weighted average life of the Notes to decrease. See "Risk Factors --
Prepayments."
In the event a Lease becomes a Non-Performing Lease, a Warranty Lease
or an Adjusted Lease, Copelco Capital will have the option to substitute for the
terminated lease another of similar characteristics (a "Substitute Lease") in an
aggregate amount not to exceed 10% of the Discounted Present Value of the Leases
as of the Cut-Off Date with respect to Non-Performing Leases and in an aggregate
amount not to exceed 10% of the Discounted Present Value of the Leases as of the
Cut-Off Date with respect to Adjusted Leases and Warranty Leases. In addition,
in the event of an Early Lease Termination which has been prepaid in full,
Copelco Capital will have the option to transfer an additional lease of similar
characteristics (an "Additional Lease"). The Substitute Leases and Additional
Leases will have a Discounted Present Value of the Leases equal to or greater
than that of the Leases being modified and replaced and the monthly payments on
the Substitute Leases or Additional Leases will be at least equal to those of
the terminated Leases through the term of such terminated Leases. In the event
that an Early Lease Termination is allowed by Copelco Capital and a Substitute
Lease is not provided, the amount prepaid will be equal to at least the
Discounted Present Value of the terminated Lease, plus any delinquent payments.
The effective yield to holders of the Notes will depend upon, among
other things, the amount of and rate at which principal is paid to such
Noteholders. The after-tax yield to Noteholders may be affected by lags between
the time interest income accrues to Noteholders and the time the related
interest income is received by the Noteholders.
The following chart sets forth the percentage of the Initial Principal
Amount of the Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C,
Class D, and Class E Notes which would be outstanding on the Payment Dates set
forth below assuming a CPR of 0% and 12%, respectively, and were calculated
using the Discount Rate. Such information is hypothetical and is set forth for
illustrative purposes only. The CPR ("Conditional Payment Rate") assumes that a
fraction of the outstanding Series Pool is prepaid on each Distribution Date,
which implies that each Lease in the Series Pool is equally likely to prepay.
This fraction, expressed as a percentage, is annualized to arrive at the
Conditional Payment Rate for the Contract Pool. The CPR measures prepayments
based on the outstanding Discounted Present Value of the Leases, after the
payment of all Scheduled Payments on the Leases
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<PAGE> 45
during such Due Period. The CPR further assumes that all Leases are the same
size and amortize at the same rate and that each Lease will be either paid as
scheduled or prepaid in full. The amounts set forth below are based upon the
timely receipt of scheduled monthly Lease payments as of the Cut-Off Date,
assume that the Issuer exercises its option to redeem the Notes and assume the
Issuance Date is _______________ and the first Payment Date is _______________.
43
<PAGE> 46
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET
FORTH BELOW
================================================================================
<TABLE>
<CAPTION>
0% CPR
------------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class B Class C Class D Class E
------------------------------------------------------------------------------------------------------
% % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date
January, 1999
February, 1999
March, 1999
April, 1999
May, 1999
June, 1999
July, 1999
August, 1999
September, 1999
October, 1999
November, 1999
December, 1999
January, 2000
February, 2000
March, 2000
April, 2000
May, 2000
June, 2000
July, 2000
August, 2000
September, 2000
October, 2000
November, 2000
December, 2000
January, 2001
February, 2001
March, 2001
April, 2001
May, 2001
June, 2001
July, 2001
August, 2001
September, 2001
October, 2001
November, 2001
December, 2001
January, 2002
February, 2002
March, 2002
April, 2002
May, 2002
June, 2002
July, 2002
August, 2002
WEIGHTED
AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
</TABLE>
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class B Note, Class C Note, Class D Note, and Class E
Note is determined by (a) multiplying the amount of cash distributions in
reduction of the Outstanding Principal Amount of the respective Offered
Note by the number of years from the Issuance Date to such Payment Date,
(b) adding the results, and (c) dividing the sum by the respective Initial
Principal Amount.
44
<PAGE> 47
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET
FORTH BELOW
================================================================================
<TABLE>
<CAPTION>
0% CPR
------------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class B Class C Class D Class E
------------------------------------------------------------------------------------------------------
% % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date
January, 1999
February, 1999
March, 1999
April, 1999
May, 1999
June, 1999
July, 1999
August, 1999
September, 1999
October, 1999
November, 1999
December, 1999
January, 2000
February, 2000
March, 2000
April, 2000
May, 2000
June, 2000
July, 2000
August, 2000
September, 2000
October, 2000
November, 2000
December, 2000
January, 2001
February, 2001
March, 2001
April, 2001
May, 2001
June, 2001
July, 2001
August, 2001
September, 2001
October, 2001
November, 2001
December, 2001
January, 2002
February, 2002
March, 2002
April, 2002
May, 2002
June, 2002
July, 2002
August, 2002
WEIGHTED
AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
</TABLE>
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class B Note, Class C Note, Class D Note, and Class E
Note is determined by (a) multiplying the amount of cash distributions in
reduction of the Outstanding Principal Amount of the respective Offered
Note by the number of years from the Issuance Date to such Payment Date,
(b) adding the results, and (c) dividing the sum by the respective Initial
Principal Amount.
45
<PAGE> 48
SECURITY FOR THE NOTES
GENERAL. Repayment of the Notes will be secured by (a) a first priority
security interest in the underlying Leases perfected both by filing UCC
financing statements against the Issuer and Copelco Capital and by taking
possession of the respective Lease documents, (b) a security interest in the
related Equipment owned by the Issuer and an assignment of the Issuer's security
interest in such Equipment subject to Nominal Buy-Out Leases, which security
interest was originally perfected by Copelco Capital (for Equipment with an
original cost in excess of $25,000 which assignment will be recorded in the
manner described below) and (c) all funds in the Collection Account and the
Reserve Account.
THE INDENTURE TRUSTEE
Manufacturers and Traders Trust Company will be the Trustee under the
Indenture. Copelco Capital, as Seller or Servicer, and its affiliates may from
time to time enter into normal banking and Trustee relationships with the
Trustee and its affiliates. The Trustee, the Servicer and any of their
respective affiliates may hold Notes in their own names. In addition, for
purposes of meeting the legal requirements of certain local jurisdictions, the
Trustee shall have the power to appoint a co- Trustee or a separate Trustee
under the Indenture. In the event of such appointment, all rights, powers,
duties and obligations conferred or imposed upon the Trustee by the Indenture
will be conferred or imposed upon the Trustee and such separate Trustee or co-
Trustee jointly, or in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such separate
Trustee or co-Trustee, who shall exercise and perform such rights, powers,
duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Issuer will be
obligated to appoint a successor Trustee. The Issuer may also remove each
Trustee if such Trustee ceases to be eligible to continue as such under the
Indenture, fails to perform in any material respect its obligations under such
Indenture, or becomes insolvent. In such circumstances, the Issuer will be
obligated to appoint a successor Trustee. Any resignation or removal of an
Trustee and appointment of a successor Trustee will not become effective until
acceptance of the appointment by the successor Trustee.
CERTAIN LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
GENERAL. The Leases are triple-net leases, requiring the Lessees to pay
all taxes, maintenance and insurance associated with the Equipment, and are
primarily non-cancelable by the Lessees.
The Leases are "hell or high water" leases, under which the obligations
of the Lessee is absolute and unconditional, regardless of any defense, setoff
or abatement which the Lessee may have against Copelco Capital, as Seller or
Servicer, the Issuer, or any other person or entity whatsoever.
Defaults under the Leases are generally the result of failure to pay
amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the Lessee under a Lease. The remedies of the Lessor (and the
Issuer as assignee) following a notice and cure period are generally to seek to
enforce the performance by the Lessee of the terms and covenants of the Lease
(including the Lessee's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the Lessee under such Lease.
Although the Leases permit the Lessor to repossess and dispose of the related
Equipment in the event of a lease default, and to credit such
46
<PAGE> 49
proceeds against the Lessee's liabilities thereunder, such remedies may be
limited where the Lessee thereunder is subject to bankruptcy, or other
insolvency proceedings.
UCC AND BANKRUPTCY CONSIDERATIONS. Pursuant to the Sales and Servicing
Agreement, Copelco Capital will sell the Leases to the Issuer, make a capital
contribution to the Issuer of Equipment owned by Copelco Capital and subject to
the Leases, and assign its security interests in the Equipment subject to
Nominal Buy-Out Leases. Copelco Capital will warrant that each of the transfer
of the Leases from Copelco Capital to the Issuer and is an absolute assignment,
that the contributions of its rights in the Equipment is a valid transfer of
Copelco Capital's title to the Equipment and that Copelco Capital is either the
owner of the Equipment or has a valid perfected first priority security interest
in the Equipment (for Leases with leased Equipment having an original equipment
cost in excess of $25,000), including Equipment, subject to Nominal Buy-Out
Leases, and accordingly, Copelco Capital has filed UCC financing statements in
its favor against Lessees in respect of all Equipment in the Series Pool with an
original Equipment cost in excess of $25,000. No action will be taken to perfect
the interest of Copelco Capital in any Equipment in the Series Pool with an
original Equipment cost of less than $25,000. In addition, UCC financing
statements identifying security interests in the Equipment as transferred to, or
obtained by, the Issuer or the Trustee and UCC Financing Statements identifying
equipment owned by Copelco Capital, transferred to the Issuer and pledged to the
Trustee will be filed in favor of the Issuer or the Trustee in the Filing
Locations. In the event of the repossession and resale of Equipment subject to a
superior lien, the senior lienholder would be entitled to be paid the full
amount of the indebtedness owed to it out of the sale proceeds before such
proceeds could be applied to the payment of claims by the Servicer on behalf of
the Issuer. Certain statutory provisions, including federal and state bankruptcy
and insolvency laws, may limit the ability of the Servicer to repossess and
resell collateral or obtain a deficiency judgment in the event of a Lessee
default. In the event of the bankruptcy or reorganization of a Lessee, or
Copelco Capital, as Seller or Servicer, various provisions of the Bankruptcy
Code of 1978, 11 U.S.C Sections 101-1330 (the "Bankruptcy Code"), and
related laws may interfere with, delay or eliminate the ability of Copelco
Capital or the Issuer to enforce its rights under the Leases.
In the case of operating leases, the Bankruptcy Code grants to the
bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of such a lease
or contract constitutes a breach of such lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described
herein. Upon the bankruptcy of a Lessee, if the bankruptcy trustee or
debtor-in-possession elected to reject a Lease, the flow of scheduled payments
to Noteholders would cease. In the event that, as a result of the bankruptcy of
a Lessee, the Servicer is prevented from collecting scheduled payments with
respect to Leases and such Leases become Non-Performing Leases, no recourse
would be available against Copelco Capital (except for misrepresentation or
breach of warranty) and the Noteholders could suffer a loss with respect to the
Notes. Similarly, upon the bankruptcy of the Issuer, if the bankruptcy trustee
or debtor-in-possession elected to reject a Lease, the flow of Lease payments to
the Issuer and the Noteholders would cease. As noted above, however, the Issuer
has been structured so that the filing of a bankruptcy petition with respect to
it is unlikely. See "The Issuer."
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of Equipment, may limit the amount
realized on the sale of Equipment to less than the amount due on the related
Lease.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of material federal income tax
consequences to the original purchasers of the Offered Notes of the purchase,
ownership and disposition of the Offered Notes.
47
<PAGE> 50
It does not purport to discuss all federal income tax consequences that may be
applicable to investment in the Offered Notes or to particular categories of
investors, some of which may be subject to special rules. In particular, this
discussion applies only to institutional investors that purchase Offered Notes
directly from the Issuer and hold the Offered Notes as capital assets.
The discussion that follows, and the opinion set forth below of Dewey
Ballantine LLP, special tax counsel to the Issuer ("Tax Counsel"), are based on
the provisions of the Internal Revenue Code of 1986, as amended (the "Code") and
treasury regulations promulgated thereunder as in effect on the date hereof and
on existing judicial and administrative interpretations thereof. These
authorities are subject to change and to differing interpretations, which could
apply retroactively. The opinion of Tax Counsel is not binding on the courts or
the Internal Revenue Service (the "IRS"). Potential investors should consult
their own tax advisors in determining the federal, state, local, foreign and any
other tax consequences to them of the purchase, ownership and disposition of the
Offered Notes.
Tax Counsel has prepared the following discussion and is of the opinion
that such discussion is correct in all material respects.
CHARACTERIZATION OF THE OFFERED NOTES AS INDEBTEDNESS. In the opinion
of Tax Counsel, although no transaction closely comparable to that contemplated
herein has been the subject of any treasury regulation, revenue ruling or
judicial decision, based on the application of existing law to the facts as set
forth in the applicable agreements, the proper treatment of the Offered Notes is
as indebtedness for federal income tax purposes.
Although it is the opinion of Tax Counsel that the Offered Notes are
properly characterized as indebtedness for federal income tax purposes, no
assurance can be given that such characterization of the Offered Notes will
prevail. If the Offered Notes were treated as an ownership interest in the
Leases, all income on such Leases would be income to the holders of the Offered
Notes, and related fees and expenses would generally be deductible (subject to
certain limitations on the deductibility of miscellaneous itemized deductions by
individuals) and certain market discount and premium provisions of the Code
might apply to a purchase of the Offered Notes.
If, alternatively, the Offered Notes were treated as an equity interest
in the Issuer, distributions on the Offered Notes probably would not be
deductible in computing the taxable income of the Issuer and all or a part of
distributions to the holders of the Offered Notes probably would be treated as
dividend income to those holders. Such an Issuer-level tax could result in a
reduced amount of cash available for distributions to the holders of the Offered
Notes.
TAXATION OF INTEREST INCOME OF NOTEHOLDERS. If characterized as
indebtedness, interest on the Offered Notes will be taxable as ordinary income
for federal income tax purposes when received by Noteholders using the cash
method of accounting and when accrued by Noteholders using the accrual method of
accounting. Interest received on the Offered Notes also may constitute
"investment income" for purposes of certain limitations of the Code concerning
the deductibility of investment interest expense.
Original Issue Discount. It is not anticipated that the Offered Notes
will have any original issue discount ("OID") other than possibly OID within a
de minimis exception and that accordingly the provisions of sections 1271
through 1273 and 1275 of the Code generally will not apply to the Offered Notes.
OID will be considered de minimis if it is less than 0.25% of the principal
amount of Note multiplied by its expected weighted average life.
Market Discount. A subsequent purchaser who buys a Note for less than
its principal amount may be subject to the "market discount" rules of Sections
1276 through 1278 of the Code. If a
48
<PAGE> 51
subsequent purchaser of a Note disposes of such Note (including certain
nontaxable dispositions such as a gift), or receives a principal payment, any
gain upon such sale or other disposition will be recognized, or the amount of
such principal payment will be treated, as ordinary income to the extent of any
"market discount" accrued for the period that such purchaser holds the Note.
Such holder may instead elect to include market discount in income as it accrues
with respect to all debt instruments acquired in the year of acquisition of the
Offered Notes and thereafter. Market discount generally will equal the excess,
if any, of the then-current unpaid principal balance of the Note over the
purchaser's basis in the Note immediately after such purchaser acquired the
Note. In general, market discount on a Note will be treated as accruing over the
term of such Note in the ratio of interest for the current period over the sum
of such current interest and the expected amount of all remaining interest
payments, or at the election of the holder, under a constant yield method. At
the request of a holder of a Note, information will be made available that will
allow the holder to compute the accrual of market discount under the first
method described in the preceding sentence.
The market discount rules also provide that a holder who incurs or
continues indebtedness to acquire a Note at a market discount may be required to
defer the deduction of all or a portion of the interest on such indebtedness
until the corresponding amount of market discount is included in income.
Notwithstanding the above rules, market discount on a Note will be
considered to be zero if it is less than a de minimis amount, which is 0.25% of
the remaining principal balance of the Note multiplied by its expected weighted
average remaining life. If OID or market discount is de minimis, the actual
amount of discount must be allocated to the remaining principal distributions on
the Note and, when each such distribution is received, capital gain equal to the
discount allocated to such distribution will be recognized.
Market Premium. A subsequent purchaser who buys a Note for more than
its principal amount generally will be considered to have purchased the Note at
a premium. Such holder may amortize such premium, using a constant yield method,
over the remaining term of the Note and, except as future regulations may
otherwise provide, may apply such amortized amounts to reduce the amount of
interest income reportable with respect to such Note over the period from the
purchase date to the date of maturity of the Note. Legislative history of the
Tax Reform Act of 1986 indicates that the amortization of such premium on an
obligation that provides for partial principal payments prior to maturity should
be governed by the methods for accrual of market discount on such an obligation
(described above). A holder that elects to amortize such premium must reduce tax
basis in the related obligation by the amount of the aggregate deductions (or
interest offsets) allowable for amortizable premium. If a debt instrument
purchased at a premium is redeemed in full prior to its maturity, a purchaser
who has elected to amortize premium should be entitled to a deduction for any
remaining unamortized premium in the taxable year of redemption.
SALE OR EXCHANGE OF OFFERED NOTES. If a Note is sold or exchanged, the
seller of the Note will recognize gain or loss equal to the difference between
the amount realized on the sale or exchange and the adjusted basis of the Note.
The adjusted basis of a Note will generally equal its cost, increased by any OID
or market discount includible in income with respect to the Note through the
date of sale and reduced by any principal payments previously received with
respect to the Note, any payments allocable to previously accrued OID or market
discount and any amortized market premium. Subject to the market discount rules,
gain or loss will generally be capital gain or loss if the Note was held as a
capital asset. Capital losses generally may be used only to offset capital
gains.
BACKUP WITHHOLDING WITH RESPECT TO OFFERED NOTES. Payments of interest
and principal, together with payments of proceeds from the sale of Offered
Notes, may be subject to the "backup withholding tax" under Section 3406 of the
Code at a rate of 31% if recipients of such payments
49
<PAGE> 52
fail to furnish to the payor certain information, including their taxpayer
identification numbers, or otherwise fail to establish an exemption from such
tax. Any amounts deducted and withheld from a payment to a recipient would be
allowed as a credit against such recipient's federal income tax. Furthermore,
certain penalties may be imposed by the IRS on a recipient of payments that is
required to supply information but that does not do so in the proper manner.
FOREIGN INVESTORS IN OFFERED NOTES; CERTAIN U.S. FEDERAL INCOME TAX
DOCUMENTATION REQUIREMENTS. A beneficial owner of Offered Notes holding
securities through CEDEL of Euroclear (or through DTC if the holder has an
address outside the U.S.) will be subject to the 30% U.S. withholding tax that
generally applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons (as defined below), unless (i) each
clearing system, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business in the chain of
intermediaries between such beneficial owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and (ii) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial Owners of Offered
Notes that are Non-U.S. Persons (as defined below) can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificates of
Foreign Status). If the information shown on Form W-8 changes, a new Form W-8
must be filed within 30 days of such change.
Exemption for Non-U.S. Persons with effectively connected income (Form
4224). A Non-U.S. Person (as defined below), including a non-U.S. corporation or
bank with a U.S. branch, for which the interest income is effectively connected
with its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a Trade
or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons residing in a country that has a tax
treaty with the United States can obtain an exemption or reduced tax rate
(depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or
Reduced Rate Certificates). If the treaty provides only for a reduced rate,
withholding tax will be imposed at that rate unless the filer alternatively
files Form W-8. Form 1001 may be filed by Certificate Owners or their agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Owner of a Note or, in
the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the
appropriate form to the person through whom it holds (the clearing agency, in
the case of persons holding directly on the books of the clearing agency). Form
W-8 and Form 1001 are effective for three calendar years and Form 4224 is
effective for one calendar year.
On April 22, 1996 the IRS issued proposed regulations relating to
withholding, backup withholding and information reporting that, if adopted in
their current form would, among other things, unify current certification
procedures and forms and clarify certain reliance standards. The regulations are
proposed to be effective for payments made after December 31, 1997 but provide
that certificates issued on or before the date that is 60 days after the
proposed regulations are made final will continue to be valid until they expire.
Proposed regulations, however, are subject to change prior to their adoption in
final form.
50
<PAGE> 53
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity organized in or under
the laws of the United States or any political subdivision thereof, (iii) an
estate that is subject to U.S. federal income tax regardless of the source of
its income. The term "Non-U.S. Person" means any person who is not a U.S. Person
or (iv) a trust if a court within the United States can exercise primary
supervision over its administration and at least one United States fiduciary has
the authority to control all substantial decisions of the trust. This summary
does not deal with all aspects of U.S. federal income tax withholding that may
be relevant to foreign holders of the Offered Notes. Investors are advised to
consult their own tax advisors for specific tax advice concerning their holding
and disposing of the Offered Notes.
STATE, LOCAL AND OTHER TAXES. Investors should consult their own tax
advisors regarding whether the purchase of the Offered Notes, either alone or in
conjunction with an investor's other activities, may subject an investor to any
state or local taxes based on an assertion that the investor is either "doing
business" in, or deriving income from a source located in, any state or local
jurisdiction. Additionally, potential investors should consider the state, local
and other tax consequences of purchasing, owning or disposing of a Note. State
and local tax laws may differ substantially from the corresponding federal tax
law, and the foregoing discussion does not purport to describe any aspect of the
tax laws of any state or other jurisdiction. Accordingly, potential investors
should consult their own tax advisors with regard to such matters.
THE FEDERAL AND STATE INCOME TAX DISCUSSIONS SET FORTH ABOVE ARE
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
NOTEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT
THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE OFFERED NOTES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS OR IN THE INTERPRETATIONS THEREOF.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements and restrictions on those pension and
other employee benefits plans to which it applies and on those persons who are
fiduciaries with respect to such plans. In accordance with ERISA's fiduciary
standards, before purchasing the Offered Notes, a fiduciary should determine
whether such an investment is permitted under the documents and instruments
governing the plan and is appropriate for the plan in view of its overall
investment policy and the composition of its portfolio.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of certain plans subject thereto (each a
"Benefit Plan") and persons who are "parties in interest," within the meaning of
ERISA, or "disqualified persons," within the meaning of the Code. Certain
transactions involving the purchase, holding or transfer of the Offered Notes
might be deemed to constitute prohibited transactions under ERISA and the Code
if assets of the Issuer were deemed to be assets of a Benefit Plan. Under
regulations issued by the United States Department of Labor set forth in 29
C.F.R. Section 2510.3101 (the "Plan Asset Regulations"), the assets of the
Issuer would be treated as plan assets of a Benefit Plan for the purposes of
ERISA and the Code only if the Benefit Plan acquires an "Equity Interest" in the
Issuer and none of the exceptions contained in the Plan Asset Regulations is
applicable. An Equity Interest is defined under the Plan Asset Regulations as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. It is
anticipated that the Offered Notes should be treated as indebtedness without
substantial equity features for purposes of the Plan Asset Regulations. However,
even if the Offered Notes are treated as indebtedness for such purposes, the
acquisition or holding of Offered Notes by or on
51
<PAGE> 54
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Issuer or any of its respective affiliates is or becomes a
party in interest or disqualified person with respect to such Benefit Plan. In
this event, certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire a Note. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 91-38 regarding investments by bank
collective investment funds; PTCE 84-14, regarding transactions effected by
"qualified professional asset managers;" PTCE 95-60, regarding investments by
insurance company general accounts and PTCE 96-23 regarding transactions
effected by In-House Asset Managers. Each investor using assets of a Benefit
Plan which acquires the Offered Notes, or to whom the Offered Notes are
transferred, will be deemed to have represented that the acquisition and
continued holding of the Offered Notes will be covered by one of the exemptions
listed above or another Department of Labor class exemption.
Insurance companies considering the purchase of the Offered Notes
should also consult their own counsel as to the application of the recent
decision by the United States Supreme Court in John Hancock Mutual Life
Insurance Co. v. Harris Trust and Savings Bank (114 S. Ct. 517 (1993)) to such a
purchase. Under that decision, assets held in an insurance company's general
account may be deemed assets of ERISA plans under certain circumstances.
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that a
fiduciary investing assets of an ERISA plan consult with counsel regarding the
consequences under ERISA of the acquisition and holding of Offered Notes,
including the availability of any administrative exemptions from the prohibited
transaction rules.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement (the "Underwriting Agreement") for the sale of the
Offered Notes, the Issuer has agreed to sell and ____________________, and
____________________ (the "Underwriters") have agreed to purchase the principal
amount of the Offered Notes set forth below:
<TABLE>
<CAPTION>
Underwriters of the Class A Notes Principal Amount of Principal Amount of Principal Amount of Principal Amount of
--------------------------------- ------------------- ------------------- ------------------- -------------------
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
---------------------------------
---------------------------------
</TABLE>
____________________ will be the sole underwriter in connection with
the Class B, Class C and Class D Notes.
In the Underwriting Agreement, the Underwriters have agreed to purchase
the Offered Notes in the amounts set forth above, subject to the terms and
conditions set forth therein. The Issuer has been advised by
____________________, as the representative of the Underwriters, that the
Underwriters propose initially to offer the Notes to the public at the
respective public offering prices set forth on the cover page of this
Prospectus, and to certain dealers at such price, less a concession not in
excess of ___% per Class A-1 Note, ___% per Class A-2 Note, ___% per Class A-3
Note, ___% per Class A-4 Note, ___% per Class B Note, ___% per Class C Note and
___% per Class D Note. The Underwriters may allow and such dealers may reallow
to other dealers a discount not in excess of ___% per Class A-1 Note, ___% per
Class A-2 Note, ___% per Class A-3 Note, .___% per Class A-4 Note, ___% per
Class B Note, ___% per Class C Note and ___% per Class D Note. After the initial
public offering, the public offering price may be changed.
52
<PAGE> 55
The Underwriters will each represent and agree that:
(a) it has not offered or sold, and, prior to the expiry of six
months from the Closing Date, will not offer or sell, any
Offered Notes to persons in the United Kingdom, except to
persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
agent) for purposes of their business, or otherwise in
circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995;
(b) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 with respect to anything
done by it in relation to the Offered Notes in, from or
otherwise involving the United Kingdom; and
(c) it has only issued or passed on and will only issue or pass on
in the United Kingdom any document received by it in
connection with the issue of the Offered Notes to a person who
is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or persons to whom such document may otherwise
lawfully be issued, distributed or passed on.
The Issuer has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Issuer has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Offered Notes, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however, to
make a market in the Offered Notes and any such market making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the Offered Notes.
In connection with the offering of the Offered Notes, certain
Underwriters and selling group members and their respective affiliates may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Offered Notes. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M, pursuant to
which such person may bid for or purchase the Offered Notes for the purpose of
stabilizing its market price. In addition, First Union, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriter (or dealer participating
in the offering) for the account of the other Underwriters, the selling
concession with respect to the Offered Notes that it distributed in the offering
but subsequently purchased for the account of the Underwriters in the open
market. Any of the transactions described in this paragraph may result in the
maintenance of the price of the Offered Notes at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are taken, may be discontinued at any time
without notice.
____________________ is serving as the placement agent for the Class E
Notes and the Residual Notes.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for
Copelco Capital, Inc., the Sponsor and the Issuer by Spencer N. Lempert, General
Counsel of Copelco Capital Financial Services Group, Inc., and for Copelco
Capital, the Issuer and the Underwriter by Dewey Ballantine LLP, New York, New
York.
53
<PAGE> 56
RATING OF THE OFFERED NOTES
It is a condition to the issuance of the Offered Notes that the Class
A-1 Notes be rated at least "A-1+", "D-1+" and "F1+/AAA" , that the Class A-2,
A-3 and A-4 Notes be rated at least "AAA", "AAA" and "AAA", that the Class B
Notes be rated at least "AA", "AA+" and "AA", that the Class C Notes be rated at
least "A", "A+" and "A+" and that the Class D Notes be rated at least "BBB",
"BBB+" and "BBB+" by Standard & Poor's Ratings Group ("S&P"), Duff & Phelps
Credit Ratings Co. ("DCR") and Fitch IBCA, Inc. ("Fitch"), respectively (each a
"Rating Agency").
Such rating will reflect only the views of the Rating Agency and will
be based primarily on the amount of subordination, the availability of funds on
deposit in the Reserve Account and the value of the Leases and Equipment. The
ratings are not a recommendation to purchase, hold or sell the related Offered
Notes, inasmuch as such ratings do not comment as to market price or suitability
for a particular investor. There is no assurance that any such rating will
continue for any period of time or that it will not be lowered or withdrawn
entirely by the Rating Agency if, in its judgment, circumstances so warrant. A
revision or withdrawal of such rating may have an adverse affect on the market
price of the Offered Notes. The rating of the Offered Notes addresses the
likelihood of the timely payment of interest and the ultimate payment of
principal on the Offered Notes by the Stated Maturity Date. The rating does not
address the rate of Prepayments that may be experienced on the Leases and,
therefore, does not address the effect of the rate of Lease Prepayments on the
return of principal to the Offered Noteholders.
54
<PAGE> 57
INDEX OF TERMS
TERM(S) PAGE(S)
Additional Lease..............................................................42
Available Funds...............................................................36
Available Funds Shortfall.....................................................37
Available Reserve Amount......................................................37
Bankruptcy Code...............................................................47
Benefit Plan..................................................................51
Booked Residual Value.........................................................26
Casualty......................................................................36
Casualty Payment..............................................................36
Cede..........................................................................27
CEDEL.........................................................................27
CEDEL Participants............................................................29
Class A Initial Principal Amount..............................................31
Class A Noteholders...........................................................27
Class A Notes.................................................................26
Class A Percentage............................................................34
Class A Principal Payment.....................................................33
Class A Target Investor Principal Amount......................................33
Class A-1 Initial Principal Amount............................................31
Class A-1 Noteholders.........................................................27
Class A-1 Notes...............................................................26
Class A-1 Stated Maturity Date................................................32
Class A-2 Initial Principal Amount............................................31
Class A-2 Noteholders.........................................................27
Class A-2 Notes...............................................................26
Class A-2 Stated Maturity Date................................................32
Class A-3 Initial Principal Amount............................................31
Class A-3 Noteholders.........................................................27
Class A-3 Notes...............................................................26
Class A-3 Stated Maturity Date................................................32
Class A-4 Initial Principal Amount............................................31
Class A-4 Noteholders.........................................................27
Class A-4 Notes...............................................................26
Class A-4 Stated Maturity Date................................................32
Class B Floor.................................................................34
Class B Initial Principal Amount..............................................31
Class B Noteholders...........................................................27
Class B Percentage............................................................34
Class B Principal Payment.....................................................33
Class B Stated Maturity Date..................................................32
Class B Target Investor Principal Amount......................................34
Class C Floor.................................................................34
Class C Initial Principal Amount..............................................31
Class C Noteholders...........................................................27
Class C Percentage............................................................34
Class C Principal Payment.....................................................33
Class C Stated Maturity Date..................................................32
A-i
<PAGE> 58
Class C Target Investor Principal Amount......................................34
Class D Floor.................................................................34
Class D Initial Principal Amount..............................................31
Class D Noteholders...........................................................27
Class D Notes.................................................................26
Class D Percentage............................................................34
Class D Stated Maturity Date..................................................32
Class D Target Investor Principal Amount......................................34
Class E Floor.................................................................35
Class E Initial Principal Amount..............................................31
Class E Notes.................................................................26
Class E Percentage............................................................34
Class Floors..................................................................35
clearing agency...............................................................28
clearing corporation..........................................................28
Code..........................................................................48
Collection Account............................................................35
Conditional Payment Rate......................................................42
Cooperative...................................................................29
Copelco Capital...............................................................13
Copelco Credit................................................................20
Copelco Financial.............................................................20
Copelco Leasing...............................................................20
Cost per Copy.................................................................21
Cumulative Loss Amount........................................................35
Cut-Off Date..................................................................13
DCR...........................................................................54
Definitive Notes..............................................................30
Depositaries..................................................................27
Determination Date............................................................32
Discounted Present Value of the Leases........................................31
Discounted Present Value of the Performing Leases.............................31
Division......................................................................20
DTC...........................................................................27
Due Period....................................................................32
Dun & Bradstreet..............................................................24
Eligible Account..............................................................35
Equipment.....................................................................13
Equipment Financing Portion...................................................21
ERISA.........................................................................51
Euroclear.....................................................................27
Euroclear Operator............................................................29
Euroclear Participants........................................................29
Events of Default.............................................................39
Excess Copy Charge............................................................22
Fee Per Scan Charges..........................................................22
Filing Locations...............................................................9
Fitch.........................................................................54
Fixed Payment.................................................................21
HILL..........................................................................22
Holders.......................................................................30
A-ii
<PAGE> 59
Indenture.....................................................................26
Indirect Participants.........................................................28
Initial Principal Amount......................................................27
Interest Accrual Period.......................................................32
Interest Payments.............................................................32
Interest Rate.................................................................27
IRS...........................................................................48
Issuance Date.................................................................27
Issuer........................................................................13
Lease Contracts...............................................................13
Lease Payment.................................................................36
Lease Receivables.............................................................13
Leases........................................................................13
Lessee........................................................................13
Lessees.......................................................................13
Maintenance Charge............................................................21
Nominal Buy-Out...............................................................14
Non-Performing Leases.....................................................14, 31
Non-U.S. Person...............................................................51
Notes.........................................................................26
Offered Note Stated Maturity Dates............................................32
Offered Noteholders...........................................................27
Offered Notes.................................................................26
OID...........................................................................48
Original Divisions............................................................13
Outstanding Principal Amount..................................................37
Outstanding Principal Amounts.................................................32
Overcollateralization Balance.................................................35
Participants..................................................................28
Payment Date..............................................................26, 32
PILL..........................................................................22
Plan Asset Regulations........................................................51
Principal Payments............................................................32
PTCE..........................................................................52
Rating Agency.................................................................54
Record Date...................................................................32
Required Payments.............................................................37
Required Reserve Amount.......................................................37
Reserve Account...............................................................37
Residual Warranty Payments...................................................36
Residual Casualty Payments....................................................36
Residual Realizations.........................................................37
S&P...........................................................................54
Sales and Servicing Agreement.................................................25
SBU...........................................................................20
Seller........................................................................25
Service Advance...............................................................39
Servicer......................................................................25
Servicer Events of Default....................................................41
Servicing Fee.................................................................26
Statistical Discount Rate.....................................................31
A-iii
<PAGE> 60
Statistical Discounted Present Value of the Leases............................31
Substitute Lease..............................................................42
Tax Counsel...................................................................48
Termination Payment...........................................................36
Terms and Conditions..........................................................30
Trust Fund....................................................................26
Trustee.......................................................................25
U.S. Person...................................................................51
Underwriters..................................................................52
Underwriting Agreement........................................................52
Vendor........................................................................21
Warranty Lease................................................................26
A-iv
<PAGE> 61
$
_____________________
COPELCO CAPITAL
FUNDING LLC 99-1
_______________
P R O S P E C T U S
_______________
[UNDERWRITER]
[UNDERWRITER]
Dated _______, 1999
Until _____, all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
$_____________ ___% Class A-1
Lease-Backed Notes, Series 1999-A
$______________ ___% Class A-2
Lease-Backed Notes, Series 1999-A
$______________ ___% Class A-3
Lease-Backed Notes, Series 1999-A
$______________ ___% Class A-4
Lease-Backed Notes, Series 1999-A
$________________ ___% Class B
Lease-Backed Notes, Series 1998-A
$________________ ___% Class C
Lease-Backed Notes, Series 1999-A
$________________ ___% Class D
Lease-Backed Notes, Series 1999-A
<PAGE> 62
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee............................ *
Printing and Engraving Expenses............. *
Trustee's Fees.............................. *
Legal Fees and Expenses..................... *
Blue Sky Fees and Expenses.................. *
Accountants' Fees and Expenses.............. *
Rating Agency Fees.......................... *
Miscellaneous Fees.......................... *
======
Total $ *
</TABLE>
-------------
*To be completed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Limited Liability Company Act (Section 18-108) gives
Delaware limited liability companies broad powers to indemnify and hold harmless
any member or manager or other person from and against any and all claims and
demands whatsoever. The Company shall, to the fullest extent permitted by the
Act, indemnify and hold harmless, and advance expenses to, each member or
manager against any losses, claims, damages or liabilities to which the
Indemnified party may become subject in connection with any matter arising from,
related to, or in connection with, the Company's business or affairs.
Copelco Financial Services Group, Inc. has also purchased liability
policies which indemnify the Registrant's [manager(s)] against loss arising from
claims by reason of their legal liability for acts as officers and directors,
subject to limitations and conditions as set forth in the policies.
Pursuant to agreements which the Registrant may enter into with
underwriters or agents (forms of which will be included as exhibits to this
Registration Statement), officers and directors of the Registrant, and
affiliates thereof, may be entitled to indemnification by such underwriters or
agents against certain liabilities, including liabilities under the Securities
Act of 1933, arising from information which has been or will be furnished to the
Registrant by such underwriters or agents that appears in the Registration
Statement or any Prospectus.
II-1
<PAGE> 63
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
1.1* -- Form of Underwriting Agreement for the Offered Notes.
3.1* -- Certificate of Incorporation of the Issuer.
3.2* -- By-laws of the Issuer.
3.5* -- Certificate of Formation of Copelco Capital Funding
LLC 99-1
3.6* -- Limited Liability Company Agreement of Copelco
Capital Funding LLC 99-1
4.1* -- Form of Indenture, including forms of the Notes and
certain other related agreements as Exhibits thereto.
5.1* -- Opinion of Dewey Ballantine LLP regarding the
securities being registered.
8.1* -- Opinion of Dewey Ballantine LLP regarding the tax
treatment of the Notes.
10.1* -- Form of Sales and Servicing Agreement.
10.2* -- Form of Placement Agent Agreement.
23.1* -- Consent of Dewey Ballantine LLP is included in the
opinion filed as Exhibit 5.1 hereto.
24.1* -- Power of Attorney (Included on Page II-4 hereof).
25.1* -- Statement of Eligibility and Qualification of Trustee
(Form T-1).
*To Be Completed by Amendment
(b) All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(a) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the 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 the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of
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<PAGE> 64
1933 shall be deemed to be part of this Registration Statement as of the time it
was declared effective.
(c) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Mount
Laurel, State of New Jersey, on December 30, 1998.
COPELCO CAPITAL FUNDING LLC 99-1,
Registrant
By: COPELCO CAPITAL FUNDING CORP. XI,
as Manager of the Registrant
By /s/ Ian J. Berg
---------------------------------------------------
Name: Ian J. Berg
Title: Chief Executive Officer and Acting Chief
Financial Officer
Each person whose signature appears below constitutes and appoints
[STEPHEN W. SHIPPIE] as his/her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him/her in his/her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Form S-1 and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
such attorney-in-fact and agent or his substitute may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities indicated on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ian J. Berg Chairman of the Board December 30, 1998
- ---------------------------------- Director
Ian J. Berg
/s/ John Hakemian Director December 30, 1998
- ----------------------------------
John Hakemian
/s/ Tadayuki Seki Director December 30, 1998
- ----------------------------------
Tadayuki Seki
</TABLE>
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