<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1999
REGISTRATION NO. 333-
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEWCOURT EQUIPMENT TRUST SECURITIES 1999-1
(ISSUER WITH RESPECT TO THE SECURITIES)
NCT FUNDING COMPANY, L.L.C.
(DEPOSITOR OF THE TRUST DESCRIBED HEREIN)
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
<TABLE>
<S> <C> <C>
DELAWARE 6799
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO. 22-363-4039)
</TABLE>
------------------------
NCT FUNDING COMPANY, L.L.C.
2 GATEHALL DRIVE
PARSIPPANY, NEW JERSEY 07054
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SCOTT MOORE, ESQ.
NCT FUNDING COMPANY, L.L.C.
2 GATEHALL DRIVE
PARSIPPANY, NEW JERSEY 07054
(973) 355-7053
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
M. DAVID GALAINENA, ESQ.
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601
(312) 558-5600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
(cover continued on following page)
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
(cover continued from previous page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Class A-1 Receivable-Backed Notes.................. $ 1,000,000 100% $ 1,000,000 $278
Class A-2 Receivable-Backed Notes.................. $ 1,000,000 100% $ 1,000,000 $278
Class A-3 Receivable-Backed Notes.................. $ 1,000,000 100% $ 1,000,000 $278
Class A-4 Receivable-Backed Notes.................. $ 1,000,000 100% $ 1,000,000 $278
Class A-5 Receivable-Backed Notes.................. $ 1,000,000 100% $ 1,000,000 $278
Class B Receivable-Backed Notes.................... $ 1,000,000 100% $ 1,000,000 $278
Class C Receivable-Backed Notes.................... $ 1,000,000 100% $ 1,000,000 $278
Class D Receivable-Backed Notes.................... $ 1,000,000 100% $ 1,000,000 $278
</TABLE>
(1) The amount of Securities being registered represents the maximum aggregate
principal amount of Securities currently expected to be offered for sale.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a).
<PAGE>
<PAGE>
THE INFORMATION IN THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS AND PROSPECTUS SUPPLEMENT ARE NOT AN OFFER TO SELL THESE SECURITIES
AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED [ ], 1999
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1999
[ ]
NEWCOURT EQUIPMENT TRUST SECURITIES 1999-1
RECEIVABLE-BACKED NOTES
NCT FUNDING COMPANY, L.L.C.
DEPOSITOR
[LOGO] [LOGO]
SERVICER A MEMBER OF THE NEWCOURT GROUP OF COMPANIES
CONSIDER CAREFULLY
THE RISK FACTORS
BEGINNING ON PAGE
S-17 IN THIS
PROSPECTUS SUPPLEMENT
AND ON PAGE 11 IN THE
PROSPECTUS.
The Notes represent
obligations of the
trust only and will
not represent
interests in or
obligations of
Newcourt Financial
USA Inc., Newcourt
Leasing Corporation,
Newcourt
Communications
Finance Corporation,
Newcourt Technologies
Corporation, Newcourt
Commercial Finance
Corporation, AT&T
Capital Corporation
or any of their
affiliates.
This prospectus
supplement may be
used to offer and
sell the Notes only
if accompanied by the
prospectus.
THE TRUST WILL ISSUE THE FOLLOWING CLASSES OF NOTES --
<TABLE>
<CAPTION>
Initial
Aggregate First Stated Price to Underwriting Proceeds to
Class of Principal Interest Rate Payment Maturity Public Discount Depositor
Notes Amount (per annum) Date(1) Date Per Note(2) Per Note(3) Per Note(4)
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 $ % % % %
A-2 $ % % % %
A-3 $ % % % %
A-4 $ % % % %
A-5 $ % % % %
B $ % % % %
C $ % % % %
D $ % % % %
</TABLE>
(1) Payment dates thereafter until maturity will be the 20th day of each month.
(2) Total price to public = $ .
(3) Total underwriting discount = $ .
(4) Total proceeds to Depositor (before deducting the Depositor's estimated
expenses of $ ) = $ .
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Delivery of the Notes in book-entry form will be made through the facilities of
The Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear
System on or about February , 1999 against payment in immediately available
funds.
[LIST UNDERWRITERS]
Prospectus Supplement dated , 1999
<PAGE>
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the Notes in two separate documents that progressively
provide more detail:
the accompanying prospectus, which provides general information, some
of which may not apply to a particular series of securities,
including your series; and
this prospectus supplement, which describes the particular terms of
your series of securities.
IF THE TERMS OF YOUR SERIES OF NOTES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT VARY FROM THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT. THE NOTES DISCUSSED IN THIS PROSPECTUS SUPPLEMENT
CONSTITUTE A SINGLE SERIES OF NOTES, AS DESCRIBED IN THE ACCOMPANYING
PROSPECTUS.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of pages where we define capitalized terms used in
this prospectus supplement under the caption 'Index of Defined Terms' beginning
on page S- in this prospectus supplement and under the caption 'Index of
Defined Terms' beginning on page in the accompanying prospectus.
You should rely only on the information contained in this document,
including the information described under the heading 'Where You Can Find More
Information' in this prospectus supplement. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these securities. The information in this document is
accurate only as of the date of this document regardless of when this prospectus
supplement and accompanying prospectus are delivered or when the Notes are sold
to you.
If you have received a copy of this prospectus supplement and prospectus in
an electronic format, and if the legal prospectus delivery period has not
expired, you may obtain a paper copy of this prospectus supplement and
prospectus from NCT Funding Company, L.L.C. or an underwriter by asking any of
them for it.
S-2
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT:
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN
THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS......................
REPORTS TO NOTEHOLDERS.........................
WHERE YOU CAN FIND MORE INFORMATION............
PROSPECTUS SUPPLEMENT SUMMARY..................
RISK FACTORS...................................
Limited Assets of the Owner Trust.........
Special Risks of the Subordinate Notes;
Limited Protection to Senior Classes of
Notes...................................
Risks of Prepayments on the Contracts;
Impact on the Yield of Your Notes.......
No Gross-Up for Withholding Tax...........
Limited Liquidity of Your Notes...........
THE OWNER TRUST................................
The Owner Trust...........................
Capitalization of the Owner Trust.........
The Owner Trustee.........................
THE CONTRACTS..................................
Description of the Contracts..............
Representations and Warranties Made by The
Originator..............................
Certain Statistics Relating to the Cut-Off
Date Contract Pool......................
Certain Statistics Relating to
Delinquencies and Defaults..............
Contract Prepayments......................
Liquidation of Contracts..................
Substitution of Contracts.................
WEIGHTED AVERAGE LIFE OF THE NOTES.............
DESCRIPTION OF THE NOTES.......................
General...................................
Distributions.............................
Class A Interest..........................
Class B Interest..........................
Class C Interest..........................
Class D Interest..........................
Principal.................................
Redemption of Notes.......................
Optional Purchase of Class................
Notes.....................................
Subordination of Subordinate Notes........
Cash Collateral Account...................
Optional Purchase of Contracts............
Reports to Noteholders....................
<CAPTION>
PAGE
----
<S> <C>
Servicing.................................
The Indenture Trustee.....................
UNITED STATES TAXATION.........................
Treatment of the Notes....................
Treatment of the Owner Trust..............
Payments of Interest......................
Original Issue Discount...................
Market Discount...........................
Amortizable Bond Premium..................
Constant Yield Election...................
Sale, Exchange or Retirement of Notes.....
Tax Consequences to United States Alien
Holders.................................
Backup Withholding........................
Possible Alternative Treatment of the
Notes...................................
ERISA CONSIDERATIONS...........................
RATINGS OF THE NOTES...........................
USE OF PROCEEDS................................
UNDERWRITING...................................
LEGAL MATTERS..................................
INDEX OF TERMS.................................
PROSPECTUS:
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN
THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT........................
REPORTS TO NOTEHOLDERS.........................
WHERE YOU CAN FIND MORE INFORMATION............
PROSPECTUS SUMMARY.............................
RISK FACTORS...................................
THE DEPOSITOR..................................
THE OWNER TRUSTS...............................
NEWCOURT CREDIT GROUP INC. ....................
THE ORIGINATORS................................
THE CONTRACTS..................................
DESCRIPTION OF THE NOTES.......................
DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENTS...................................
CERTAIN LEGAL ASPECTS OF THE CONTRACTS.........
UNITED STATES TAXATION.........................
ERISA CONSIDERATIONS...........................
RATINGS OF THE NOTES...........................
USE OF PROCEEDS................................
UNDERWRITING...................................
LEGAL MATTERS..................................
INDEX OF TERMS.................................
APPENDIX A.....................................
</TABLE>
<PAGE>
<PAGE>
REPORTS TO NOTEHOLDERS
Until the Notes are issued in physical, rather than book-entry, form,
unaudited monthly and annual reports, which contain information concerning the
Owner Trust prepared by the Servicer, will be sent only to Cede & Co by the
Indenture Trustee. You can find a more detailed description of this in the
accompanying prospectus under the caption 'Description of the Notes --
Book-Entry Registration.'
If you purchase a Note, you may receive these reports by making a written
request to the Indenture Trustee, together with a certification that you are an
owner of a Note. You should send any such request to the Indenture Trustee at
the following address: , Attention: ,
facsimile number . These reports do not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Neither the Servicer nor we intend to send any of our financial reports to
owners of the Notes. The Servicer, on behalf of the Owner Trust, will file with
the Securities and Exchange Commission periodic reports concerning the Owner
Trust as required by law.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with the
Securities and Exchange Commission 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 Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. You can also read and copy such reports, proxy
statements and other information at the following regional offices of the
Securities and Exchange Commission:
<TABLE>
<S> <C>
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, IL 60661
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
more information about the public reference rooms or visit the Securities and
Exchange Commission's web site at http://www.sec.gov to access available
filings.
The Securities and Exchange Commission allows us to 'incorporate by
reference' some of the information we file with it, which means that we can
disclose important information to you by referring you to those documents. The
information that we incorporate by reference is considered to be part of this
prospectus supplement, and later information that we file with the Securities
and Exchange Commission will automatically update and supersede the information
contained in this prospectus supplement.
All documents filed by the Servicer, on behalf of the Owner Trust, pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the 'Exchange Act'), after the date of this prospectus supplement and
prior to the termination of the offering of the Notes will be incorporated by
reference into this prospectus supplement.
S-4
<PAGE>
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information regarding the Notes, 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 Notes, read this
entire prospectus supplement and the accompanying prospectus. In addition, you
may wish to read principal documents governing the sale and transfer of the
contracts, the formation of the Trust and the issuance of Notes. Such documents
have been filed as exhibits to the registration statement of which this
prospectus supplement is a part. You can find an index of terms used in this
prospectus supplement on page .
There are material risks associated with an investment in the Notes. See
'Risk Factors' on page of in this prospectus supplement and on page in the
accompanying prospectus.
<TABLE>
<S> <C>
Depositor................................. NCT Funding Company, L.L.C. will transfer the contracts to a recently
formed owner trust called Newcourt Equipment Trust Securities 1999-1.
NCT Funding Company will be referred to herein as 'we,' 'our,'
'ours,' and 'us.' Our chief executive offices are currently located
at 2 Gatehall Drive, Parsippany, New Jersey 07054 and its telephone
number is (973) 606-4879. For more information, see 'The Depositor'
in the accompanying prospectus.
Owner Trust............................... Prior to the transfer of contracts discussed above, we will form
Newcourt Equipment Trust Securities 1999-1 which will in turn will
issue classes of receivable-backed notes. Newcourt Equipment Trust
Securities 1999-1 will be referred to herein as the 'Owner Trust.'
The receivable-backed notes will be referred to herein as the
'Notes.' The Owner Trust will own the contracts (described below) and
certain other assets. The Owner Trust's offices will be in care of
, as Owner Trustee, of , Wilmington Delaware
, and its telephone number is (302) . For
more information, see 'The Owner Trust' in this prospectus
supplement.
Servicer.................................. AT&T Capital Corporation will service the contracts. We will refer to
AT&T Capital Corporation in this prospectus supplement as 'AT&T
Capital.' AT&T Capital's chief executive offices are currently
located at 2 Gatehall Drive, Parsippany, New Jersey 07054 and its
telephone number is (973) 606-4879. For more information, see
'Description of the Pooling and Servicing Agreements -- Servicing'
and 'AT&T Capital Corporation,' in the accompanying prospectus.
The Originators........................... Newcourt Financial USA Inc., Newcourt Leasing Corporation (formerly
known as AT&T Capital Leasing Services, Inc.), Newcourt
Communications Finance Corporation (formerly known as AT&T Credit
Corporation), Newcourt Technologies Corporation (formerly known as
AT&T Systems Leasing Corporation) and Newcourt Commercial Finance
Corporation (formerly known as AT&T Commercial Finance Corporation).
Indenture and Indenture Trustee........... The Notes will be issued under an Indenture between the Owner Trust
and [ ], who will serve as Indenture Trustee.
</TABLE>
S-5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Owner Trustee............................. The Owner Trust will be created under a Trust Agreement.
[ ] will act as trustee under the Trust Agreement.
The Notes:................................ The Owner Trust will issue the following eight classes of Notes:
</TABLE>
<TABLE>
<CAPTION>
CLASS INTEREST RATE INITIAL PRINCIPAL BALANCE
----- ------------- -------------------------
<S> <C> <C> <C>
A-1 % $
A-2
A-3
A-4
A-5
B
C
D
</TABLE>
<TABLE>
<S> <C>
The Class D Notes will be subordinate to the Class A, Class B and
Class C Notes, the Class C Notes will be subordinate to the Class A
and Class B Notes, and the Class B Notes will be subordinate to the
Class A Notes. For a further explanation of this subordination, see
'Description of the Notes -- Subordination of Subordinate Notes' in
this prospectus supplement and in the accompanying prospectus.
Terms of the Notes:
Payment Dates......................... The 20th day of each month, beginning on 20, 1999 (or if
such day is not a business day, the next business day).
Interest.............................. Interest on the Notes will accrue at the applicable interest rate
from a payment date to the day before the next payment date. For the
first payment date, interest begins to accrue on the day the Notes
are issued.
The interest rate for each class of Notes is specified on the cover
page of this prospectus supplement.
Interest on the Class A-1 Notes will be computed on the basis of the
actual number of days elapsed and a 360-day year. Interest on the
Class A-2, Class A-3, Class A-4, Class A-5, Class B, Class C and
Class D Notes will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
On the 20th day of each month (or if that day is not a business day,
the next business day), after the Owner Trust repays any outstanding
Servicer advances and pay the Servicer's monthly servicing fee, the
Owner Trust will pay interest on the Notes (at the rates specified on
the cover of this prospectus) in the following order:
</TABLE>
S-6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CLASS OF SECURITIES RECEIVING INTEREST PAYMENT
NOTES PRIOR TO SPECIFIED CLASS
----- ------------------------
<S> <C> <C>
A-1, A-2, None
A-3, A-4, A-5
B Class A-1 Notes, Class A-2 Notes, Class A-3 Notes
Class A-4 Notes, Class A-5 Notes
C Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class A-5 Notes, Class B Notes
D Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class A-5 Notes, Class B Notes,
Class C Notes
See 'Description of the Notes -- Distributions' herein.
</TABLE>
<TABLE>
<S> <C>
Principal............................. On the 20th day of each month (or if that day is not a business day,
the next business day), after we pay interest on the Notes, prior to
an event of default with respect to the Notes, we will pay principal
on the Notes in the following order:
</TABLE>
<TABLE>
<CAPTION>
CLASS OF SECURITIES RECEIVING PRINCIPAL PAYMENT
NOTES PRIOR TO SPECIFIED CLASS
----- ------------------------
<S> <C> <C>
A-1 None
A-2 Class A-1 Notes
A-3 Class A-1 Notes
On the payment date on which the principal amount of the
Class A-1 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-2 Notes is reduced to $0,
Class A-2 Notes, Class B Notes, Class C Notes, Class D
Notes and Certificates
A-4 Class A-1 Notes
On the payment date on which the principal amount of the
Class A-1 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-2 Notes is reduced to $0,
Class A-2 Notes, Class B Notes, Class C Notes, Class D
Notes and Certificates
On the payment date on which the principal amount of
Class A-2 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-3 Notes is reduced to $0,
Class A-3 Notes, Class B Notes, Class C Notes, Class D
Notes and Certificates
A-5 Class A-1 Notes
On the payment date on which the principal amount of the
Class A-1 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-2 Notes is reduced to $0,
Class A-2 Notes, Class B Notes, Class C Notes, Class D
Notes and Certificates
On the payment date on which the principal amount of
Class A-2 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-3 Notes is reduced to $0,
Class A-3 Notes, Class B Notes, Class C Notes, Class D
Notes and Certificates
On the payment date on which the principal amount of
Class A-2 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-4 Notes is reduced to $0,
</TABLE>
S-7
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Class A-4 Notes, Class B Notes, Class C Notes, Class D
Notes and Certificates
B Class A-1 Notes, Class A-2 Notes
On the payment date on which the principal amount of
Class A-2 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-3 Notes is reduced to $0,
Class A-3 Notes
On the payment date on which the principal amount of
Class A-3 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-4 Notes is reduced to $0,
Class A-4 Notes
C Class A-1 Notes, Class A-2 Notes, Class B Notes
On the payment date on which the principal amount of
Class A-2 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-3 Notes is reduced to $0,
Class A-3 Notes
On the payment date on which the principal amount of
Class A-3 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-4 Notes is reduced to $0,
Class A-4 Notes
D Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C
Notes
On the payment date on which the principal amount of
Class A-2 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-3 Notes is reduced to $0,
Class A-3 Notes
On the payment date on which the principal amount of
Class A-3 Notes is reduced to $0 and on any payment date
on or prior to the payment date on which the outstanding
principal amount on the Class A-4 Notes is reduced to $0,
Class A-4 Notes
See 'Description of the Notes -- Distributions' herein.
</TABLE>
<TABLE>
<S> <C>
After the Class A-1 Notes have been paid in full, the amount of
principal paid on a Class A-2 Note, Class A-3 Note, Class A-4 Note or
Class A-5 Notes, as applicable, and Class B Note, Class C Note and
Class D Note will be the amount necessary to reduce the outstanding
principal of the respective class of Notes to the greater of:
(i) a specified percentage of the aggregate discounted
contract balance of the contracts as of the last day of the most
recent full collection period (such percentage shall be based on
the ratio of the initial principal amount of such class of Notes
to the aggregate initial principal amount of all classes of
Notes other than the Class A-1 Notes) or
(ii) a floor payment which is based on a number which is
intended to maintain [ ]% of the credit enhancement provided by
the classes of Notes subordinate to such class after taking into
account cumulative losses on the contracts.
</TABLE>
S-8
<PAGE>
<PAGE>
<TABLE>
<S> <C>
The amount of principal payable on the Notes on each payment date
will generally be equal to the difference between the aggregate
principal balance of the Notes on that payment date before any
distributions and the aggregate of the principal balances of the
contracts as of the last day of the previous month. The contract
principal balance of any contract is generally the present value of
the unpaid scheduled payments due on that contract discounted at a
discount rate generally equal to the weighted average of each class
of Notes and certificates representing beneficial ownership interests
in the Owner Trust (if applicable) each weighted by the initial
principal balance of each class of Notes and certificates
representing beneficial ownership interests in the Owner Trust (if
applicable) and the expected average life of such class assuming no
losses and an assumed constant prepayment rate and servicing fee
percentage. The aggregate of the contract principal balances is
referred to as the 'contract pool principle balance.'
Following an event of default with respect to the Notes, all
outstanding principal on the respective classes of Notes will be paid
in the following order of priority:
outstanding principal of Class A-1 Notes
outstanding principal of Class A-2 Notes, Class A-3 Notes, Class
A-4 Notes and Class A-5 Notes
outstanding principal of Class B Notes
outstanding principal of Class C Notes
outstanding principal of Class D Notes
See 'Description of the Notes and Indenture -- Allocations' herein.
Aggregate Discounted Contract Balance..... The 'aggregate discounted contract balance' with respect to the
contracts means the sum of the discounted contract balances of each
contract included in the group of contracts for which an aggregate
discounted contract balance determination is being made. As of the
cut-off date the initial aggregate discounted contract balance is
.
The 'discounted contract balance' means with respect to any contract
as of the last day of any collection period (1) the contract
prinicpal balance of such contract and (2) the aggregate amount of
all scheduled payments due and payable under such contract that have
not then been received by the servicer as of the last day of such
collection period.
The discounted contract balance for each contract shall be calculated
assuming:
(a) All payments due in any collection period are due on
the last day of the collection period; and
</TABLE>
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(b) Payments are discounted on a monthly basis using a 30
day month and a 360 day year.
The discounted contract balance of a contract is the present value of
scheduled payments to be paid on such contract calculated at a
discount rate of %.
The discount rate is equal to the sum of:
the weighted average of the Class A-1 interest rate, Class A-2
interest rate, Class A-3 interest rate, Class A-4 interest rate,
Class A-5 interest rate, Class B Interest Rate, Class C Interest
Rate, and Class D Interest Rate, each weighted by (x) the Initial
Class A-1 Note principal balance, Initial Class A-2 Note principal
balance, Initial Class A-3 Note principal balance, Initial Class
A-4 Note principal balance, Initial Class A-5 Note principal
balance, Initial Class B Note principal balance, Initial Class C
Note principal balance, or Initial Class D Note principal balance,
as applicable, and (y) the expected weighted average life of each
class of Notes or the subordinated Notes, as applicable, assuming
no losses and a constant prepayment rate of %; and
the servicing fee percentage.
The statistical discount rate is equal to %. The statistical
discount rate is based on a weighted average of the estimated
interest rate of Notes (weighted by estimated maturity date and
initial principal amounts of the respective classes).
The 'scheduled payments' means, with respect to any contract, the
monthly, quarterly, semi-annual or annual rent or financing (whether
principal or principal and interest) payment scheduled to be made by
the related obligor under the terms of such contract after the
related cutoff date (it being understood that scheduled payments do
not include any excluded amounts as discussed herein or payments with
respect to Excluded Residual Investments as defined in the
prospectus.
Collection Periods, Calculation Dates,
Distribution Dates and Record Dates..... A collection period is the period from and including the first day of
each calendar month to and including the last day of the calendar
month (such first day, the 'calculation date' and each such period, a
'collection period').
A distribution date is the twentieth (20th) day (or if any such date
is not a 'business day,' i.e., a day other than a Saturday, a Sunday
or a day on which banking institutions in New York, New York are
authorized or obligated by any law or regulation to be closed, then
on the next succeeding business day) of each calendar month (each, a
'distribution date') commencing. The collection period relating to
any particular distribution date shall be the collection period
</TABLE>
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occurring during the calendar month preceding the month in which such
distribution date occurs.
With respect to any distribution date and the Notes, the 'record
date' is the calendar day immediately preceding each distribution
date (or, with respect to any Definitive Note as defined in
'Description of the Notes -- Definitive Notes,' the last calendar day
of the month preceding the month in which such distribution date
occurs).
Stated Maturity Dates..................... Each class of Notes must be paid in full on or before the stated
maturity date of that class:
</TABLE>
<TABLE>
<CAPTION>
CLASS STATED MATURITY DATE
----- --------------------
<S> <C> <C>
A-1
A-2
A-3
A-4
A-5
B
C
D
</TABLE>
<TABLE>
<S> <C>
Except that if such day is not a business day, then the stated
maturity date will be the next business day.
Optional Purchase of Class A-5 Notes...... We will have the right to purchase all of the Class A-5 Notes, on any
payment date, at a purchase price equal to the principal balance of
the Class A-5 Notes plus a premium. Following such purchase, the
Class A-5 Notes will not be retired, but will continue to be entitled
to interest and principal payments on each payment date in the manner
described above. See 'Description of the Notes -- Optional Purchase
of Class A-5 Notes' in this prospectus supplement.
Denominations............................. The Trust will offer the Notes in minimum denominations of $1,000 and
integral multiples of that amount.
Closing Date.............................. On or about , 1999.
Servicing; Servicing Fee.................. The Servicer will be responsible for servicing, managing and
administering the contracts and related interests, and enforcing and
making collections on the contracts. AT&T Capital has in some cases
delegated servicing and collection functions to a vendor (or, in
certain limited instances, to a sub-servicer acceptable to them) with
respect to end-user contracts originated through such vendor, but in
such instances the Servicer retains through provisions in agreements
with such vendor (or agreement with such sub-servicer) the right to
determine or veto certain servicing decisions and/or to replace or
take over servicing and collection functions from the vendor in the
event of the vendor's default or non-compliance with its servicing or
other obligations. See 'The Pooling and Servicing
Agreement -- Collection and Other Servicing Procedures' herein. The
Servicer may also, at its option, make advances (each, a 'Servicer
Advance' for delinquent scheduled
</TABLE>
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payments, to the extent it determines in its sole discretion that
such advances will be recoverable in future periods. Such Servicer
Advances are reimbursable from Available Amounts herein.
The Servicer will be entitled to receiver a monthly fee equal to the
product of (i) one-twelfth of [ ]% and (ii) the aggregate discounted
contract balance of the contracts in the Trust as of the beginning of
payable out of amounts we receive with respect to the contracts.
Any servicing fees to be paid to any sub-servicers (including vendor
sub-servicers) will be paid by the Servicer from its monthly
servicing fee.
See 'The Sale and Servicing Agreement -- Certain Other Matters
Regarding the Servicer' and ' -- Servicer Default' herein.
Ratings................................... The Owner Trust will not issue the Notes unless Standard & Poor's
Ratings Services, Moody's Investors Service, Inc. and Fitch IBCA,
Inc. have assigned the following ratings (or higher) to each class of
Notes:
</TABLE>
<TABLE>
<CAPTION>
CLASS S&P MOODY'S FITCH
----- --- ------- -----
<S> <C> <C> <C> <C>
A-1
A-1
A-2
A-3
A-4
A-5
B
C
D
</TABLE>
<TABLE>
<S> <C>
The rating of each class of Notes addresses the likelihood of the
timely receipt of interest and the ultimate payment of principal on
that class according to its terms. A rating is not a recommendation
to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. The ratings of
the Notes do not address the likelihood of payment of principal on
any class of Notes prior to the stated maturity date thereof, or the
possibility of the imposition of United States withholding tax with
respect to non-United States Persons. For a more complete description
of the ratings of the Notes, see 'Ratings of the Notes' in this
prospectus supplement and in the accompanying prospectus.
Owner Trust Assets........................ The Owner Trust assets will primarily consist of the following type
of contracts:
equipment lease contracts,
installment sale contracts,
conditional sales/financing agreements,
promissory notes,
loan and security agreements, and
other similar types of receivables with various lessees, borrowers
or other obligors thereunder, including
</TABLE>
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<S> <C>
scheduled payments, prepayments and liquidation proceeds of the
contracts, but not the rights of the lessor in the equipment
subject to a contract that is a lease rather than a loan.
A. The Contracts..................... As of , 1999, the pool of contracts that we will transfer
to the Owner Trust had the following characteristics (unless
otherwise noted, percentages are by initial statistical contract pool
principal balance):
the initial statistical contract pool principal balance was $ ;
there were contracts;
the average contract principal balance was approximately $ ;
approximately % of the contracts were leases and approximately
% of the contracts were loans;
approximately % of the contracts related to telecommunications
equipment; approximately % of the contracts related to
manufacturing and construction equipment; and approximately % of
the contracts related to computers and point-of-sale equipment;
the obligors on approximately % of the contracts were located in
[ ]; approximately % were located in [ ]; approximately %
were located in [ ]; approximately % were located in [ ]; and
no other state represented more than % of the contracts;
the remaining terms of the contracts ranged from one month to
months; and
the weighted average remaining term of the contracts was
approximately months and the weighted average age of the
contracts was approximately months.
For more information about the contracts, see 'The
Contracts -- Certain Statistics Relating to the Cut-Off Date Contract
Pool' in this prospectus supplement.
As described under 'The Contracts -- Substitution' in this prospectus
supplement, under certain circumstances we may substitute new
contracts for contracts then in the Owner Trust.
B. Cash Collateral Account........... We will establish a cash collateral account and deposit an amount
equal to % of the initial contract pool therein (approximately
$ ). The Indenture Trustee will use amounts on deposit in the
cash collateral account to pay the following amounts if payments
received on the contracts are insufficient:
interest due on the Notes;
the amount, if any, by which the principal balance of the
contracts, plus any scheduled payments due thereon but not yet
paid, is less than the principal balance of the Notes as a result
of liquidation losses on the contracts; and
</TABLE>
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principal on the Notes at the applicable stated maturity date
thereof. For more information about the cash collateral account,
see 'Description of the Notes -- Cash Collateral Account.'
Allocation of Liquidation Proceeds........ The Servicer on behalf of the Owner Trust will allocate proceeds from
the liquidation of a defaulted contract as follows:
with respect to any contract that was a loan, all liquidation
proceeds to the Owner Trust; and
with respect to any contract that was a lease, liquidation proceeds
on a pro rata basis between us, on the one hand, and the Owner
Trust, on the other, based respectively on (a) the book value of
the leased equipment (as shown on the accounting books and records
of the respective originator as of the related cut-off date) and
(b) the sum of the current contract principal balance of that
contract plus any scheduled payments due thereon but not yet paid.
Substitution.............................. In addition, AT&T Capital, as the servicer, will have the option
pursuant to the terms of the pooling and servicing agreement, to
substitute into the Owner Trust one or more contracts having similar
characteristics for contracts in default as well as for contracts for
which a material modification to or adjustment of the terms of such
contract which modification or adjustment would not otherwise be
permissible under the pooling and servicing agreement (unless the
contract was to be prepaid in full to us and refinanced by the
related originator with a new, modified contract outside of our
trust). The contract principal balance of the defaulted contracts for
which an originator may cause the substitution of contracts is
limited to an amount not in excess of 10% of the contract principal
balance of the contracts as of the closing date. AT&T Capital, as the
servicer, and on behalf of the Originators will also be permitted to
substitute a contract for a contract which AT&T Capital, as the
Servicer, on behalf of the Originators would otherwise be required to
repurchase due to certain representations or warranties relating
thereto proving to have been incorrect without regard to the 10%
limitation described above. With respect to replacing a defaulted
contract with a substitute contract (which substitution is not an
obligation of an Originator or Newcourt USA, as the servicer, but is
in their respective sole and absolute discretion), such substitute
contract must meet the contract pool concentration limitation as
described in 'The Sale and Contribution Agreement and Pooling and
Servicing Agreement' as well as the other substitution requirements
described in this prospectus supplement.
Mandatory Purchase or Replacement of
Certain Contracts....................... Each originator will make certain representations and warranties with
respect to each contract and the related equipment, as more fully
described in 'The Contracts --
</TABLE>
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<S> <C>
Representations and Warranties Made by the Originators' in this
prospectus supplement and in the accompanying prospectus. If the
value of a contract is materially and adversely affected by a breach
of any of these representations or warranties which is not cured
within a specified period, the Indenture Trustee may require the
respective originator to purchase that contract. In lieu of such
purchase, the respective originator may choose to have such contract
replaced with a new contract. See 'The Contracts -- Substitution' in
this prospectus supplement.
Leased Equipment.......................... We will not transfer to the Owner Trust either our interest in the
equipment related to the contracts that are leases or the right to
receive the leased equipment upon expiration of the original term of
the related contract.
Priority of Payments...................... On each payment date, the Indenture Trustee will use payments
collected on the contracts and, if necessary (but only for certain
items described under 'Cash Collateral Account' above), amounts from
the cash collateral account, to pay the following:
reimbursement of Servicer Advances;
the servicing fee to the servicer for servicing the contracts;
interest on the Notes, as described under 'Interest' above;
principal on the Notes, allocated to the various classes as
described under 'Principal' above;
the amount, if any, necessary to increase the balance of the cash
collateral account to the amount required under ;
certain other amounts payable in connection with the cash
collateral account; and
the remainder, if any, to the holder of the equity certificate to
be originally issued by the Owner Trust to us.
Optional Purchase of Contracts............ Once the principal balance of the Notes is less than 10% of the
initial contract pool principal balance, we may repurchase all the
contracts from the Owner Trust. If we exercise this option, the
outstanding Notes would be prepaid. For a more complete description
of this repurchase right, see 'Description of the Notes -- Optional
Purchase of Contracts' in this prospectus supplement and in the
accompanying prospectus.
U.S. Taxation............................. In the opinion of our counsel, the Notes will be characterized as
indebtedness and we will not be characterized as an 'association' or
'publicly traded partnership' taxable as a corporation for federal
income tax purposes.
By purchasing a Note, you will agree to treat your Note as
indebtedness for federal, state and local income tax purposes. You
should consult your own tax advisor regarding the federal income tax
consequences of the
</TABLE>
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<TABLE>
<S> <C>
purchase, ownership and disposition of Notes, and the tax
consequences arising under the laws of any state or other taxing
jurisdiction. See 'United States Taxation' in this prospectus
supplement.
In the opinion of counsel, under United States federal income tax law
in effect as of the date hereof, payments of principal and interest
on the Notes to certain alien holders will not be subject to United
States federal withholding tax (subject to the exceptions noted in
'United States Taxation -- Tax Consequences to United States Alien
Holders' in this prospectus supplement). If such law were to change
and, as a result thereof, United States withholding tax were imposed
on such payments, these alien holders would receive payments on their
Notes net of such withholding tax, and neither we, the Owner Trust,
the originators nor any other party would have any obligation to make
any extra payments to compensate for such withholding tax.
ERISA Considerations...................... Subject to the considerations described in 'ERISA Considerations' in
this prospectus supplement, employee benefit plans that are subject
to the Employee Retirement Income Security Act of 1974, as amended,
or described in Section 4975(e)(1) of the Internal Revenue Code of
1986, as amended, may purchase the Notes.
Legal Investment.......................... The Class A-1 Notes will be eligible securities for purchase by money
market funds under Rule 2a-7 under the Investment Company Act of
1940.
</TABLE>
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RISK FACTORS
You should carefully consider the following risk factors in deciding
whether to purchase any Notes. You should also consider the risk factors
beginning on page 11 of the accompanying prospectus.
LIMITED ASSETS OF THE OWNER TRUST SECURE THE NOTES
Our ability to make payments on the Notes will depend primarily on payments
made on the contracts. You will not be entitled to receive proceeds from the
sale of the leased equipment following the expiration of any lease. The Notes
will not be insured or guaranteed, directly or indirectly, by us, the
originators, the Servicer, the Indenture Trustee or any affiliate of any of them
or any other person or entity. If the pool of contracts experiences a high rate
of payment delinquencies, you may not receive timely payment on your Notes. If
the pool of contracts experiences a high rate of defaults and severe liquidation
losses, you may suffer a loss on your investment in the Notes. There can be no
assurance that the delinquency and loss experience of the pool of contracts will
be comparable to the information set forth in 'The Contracts -- Certain
Statistics Relating to Delinquencies and Defaults.' SUBORDINATION OF THE CLASS
A-2 NOTES, CLASS A-3 NOTES, CLASS A-4 NOTES, CLASS A-5 NOTES, CLASS B NOTES, THE
CLASS C NOTES AND THE CLASS D NOTES MEANS SOME NOTES WILL RECEIVE PAYMENTS
SOONER THAN OTHERS.
The Owner Trust will pay interest and principal on certain classes of Notes
prior to paying interest and principal on other classes of Notes. See
'Description of the Notes and Indenture -- Allocations.'
Such subordination of interest and principal payments means that:
the Class D Notes are more likely to suffer the consequences of
delinquent payments and defaults on the contracts held by the Owner
Trust than are Class C Notes;
the Class C Notes are more likely to suffer the consequences of
delinquent payments and defaults on the contracts held by the Owner
Trust than the Class B Notes;
the Class B Notes are more likely to suffer the consequences of
delinquent payments and defaults on the contracts held by the Owner
Trust than the Class A Notes;
the Class A-5 Notes are more likely to suffer the consequences of
delinquent payments and defaults on the contracts held by the Owner
Trust than the Class A-4 Notes, Class A-3 Notes, Class A-2 Notes and
the Class A-1 Notes;
the Class A-4 Notes are more likely to suffer the consequences of
delinquent payments and defaults on the contracts held by the Owner
Trust than the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes;
the Class A-3 Notes are more likely to suffer the consequences of
delinquent payments and defaults on the contracts held by the Owner
Trust than the Class A-1 Notes and Class A-2 Notes;
the Class A-2 Notes are more likely to suffer the consequences of
delinquent payments and defaults on the contracts held by the Owner
Trust than the Class A-1 Notes.
Moreover, the more senior classes of Notes could lose the credit
enhancement provided by the more subordinate classes and the Cash Collateral
Account if delinquencies and defaults on such contracts increase and the
collections on such contracts and amounts in the Cash Collateral Account are
insufficient to pay even the more senior classes of Notes.
THE RISK OF PREPAYMENTS ON THE CONTRACTS MAY IMPACT THE YIELD OF YOUR NOTES
The rate at which contracts are prepaid on the contracts may affect the
weighted average life of the Notes. This result would, in turn, affect the yield
on your Notes. See 'Weighted Average Life of the Notes' in this prospectus
supplement and 'Risk Factors -- Yield and Prepayment Considerations' in the
accompanying prospectus.
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NO GROSS-UP FOR WITHHOLDING TAX
In the opinion of counsel, under current United States federal income tax
law in effect as of the date of this prospectus supplement, payments of
principal and interest on the Notes to a United States Alien Holder will not be
subject to United States federal withholding tax (subject to the exceptions
noted in 'United States Taxation -- Tax Consequences to United States Alien
Holders'). If this law were to change and, as a result thereof, United States
withholding tax were imposed on such payments, a United States Alien Holder
would receive the payments net of such withholding tax. Neither we, the Owner
Trust, the Servicer, the Originators nor any other party has any obligation to
gross-up such payments to account for such withholding tax.
THE LIMITED LIQUIDITY OF YOUR NOTES MAY LIMIT YOUR ABILITY TO RESELL THE NOTES
There is currently no market for the Notes. The underwriters expect, but
will not be obligated, to make a market for the Notes. You must not assume that
a secondary market for the Notes will develop or, if it does develop, that it
will provide you with liquidity of investment or that such a secondary market
will continue for the life of your Notes. As a result, you may not be able to
resell your Notes at a favorable price.
THE OWNER TRUST
THE OWNER TRUST
We will create the Owner Trust on or prior to the Closing Date pursuant to
a Trust Agreement, dated as of , 1999, between us and the Owner
Trustee.
The contracts included in the initial pool of contracts transferred to our
trust have been originated or, in some cases, acquired by one or more of five
indirect subsidiaries of Newcourt Credit Group Inc.: Newcourt Financial USA
Inc., Newcourt Leasing Corporation (formerly known as AT&T Capital Leasing
Services, Inc.), Newcourt Communications Finance Corporation (formerly known as
AT&T Credit Corporation), Newcourt Technologies Corporation (formerly known as
AT&T Systems Leasing Corporation) and Newcourt Commercial Finance Corporation,
(formerly known as AT&T Commercial Finance Corporation). See 'Newcourt Credit
Group Inc.' and 'The Originators' in the accompanying prospectus. We have
acquired or will acquire the contracts and the originators' security interests
in the equipment subject to the contracts pursuant to substantially similar sale
and contribution agreements among us and the respective originators.
Pursuant to a pooling and servicing agreement, dated as of ,
1999, among us, the Indenture Trustee, the Owner Trustee, the Originators and
the Servicer, we will transfer all of the contracts and the related security
interests in the equipment to the Owner Trust. The Owner Trust and the Indenture
Trustee will execute and deliver the Indenture, and the Indenture Trustee will
authenticate and deliver the Notes.
The Owner Trust will issue a certificate, representing the beneficial
ownership interest in the Owner Trust, to us. The equity certificate will be
entitled to any excess amount available on any payment date after reimbursement
of Servicer Advances and payment of servicing fees, principal and interest on
the Notes and amounts payable in connection with the cash collateral account as
described under 'Description of the Notes -- Distributions' herein.
From and after the closing date, the Trust Assets will consist of:
(1) a pool of equipment lease contracts, installment sale contracts,
promissory notes, loan and security agreements and other similar types of
receivables, each, a contract, and which pool includes the contracts
transferred to the Owner Trust on the closing date, as well as any
contracts added through substitution at a later date, with various lessees,
borrowers or other obligors thereunder, including (a) all monies at any
time paid or payable thereon or in respect thereof from and after the
cut-off date, which, shall be for all contracts transferred
to the Owner Trust on the closing date, and the first day of the month of
transfer to the Owner Trust for each substitute contract, in the form of
(i) scheduled payments, including all scheduled payments due
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prior to, but not received as of, the cut-off date, but excluding any
scheduled payments due on or after, but received prior to, the cut-off
date, (ii) prepayments (but excluding, in the case of a contract structured
as a lease of the related equipment, any portion thereof allocated to us,
as described in clause (ii) of the definition of pledged revenues, and
(iii) liquidation proceeds (including any derived from the disposition of
the related equipment) received with respect to defaulted contracts
excluding, in the case of a contract structured as a lease, any portion
thereof allocable to us, as described under 'The Contracts -- Liquidation
of Contracts' herein, and (b) all rights of the secured party in the
equipment related to the contracts written as installment sales contracts,
promissory notes, loan and security agreements or other similar types of
receivables, but excluding the rights of the lessor in the equipment
subject to a contract structured as a lease, which rights, subject to the
allocation of liquidation proceeds received in respect thereof, have been
retained by us;
(2) amounts on deposit in, and eligible investments allocated to,
certain accounts established pursuant to the Indenture and the pooling and
servicing agreement, including the collection account;
(3) our rights under the sale and contribution agreements, to the
extent applicable; and
(4) our rights (but not its obligations) with respect to the cash
collateral account.
The Trust will not engage in any business activity other than (i) issuing
the Notes and the equity certificate, (ii) holding the assets, (iii) making
payments on the Notes and the equity certificates, (iv) entering into and
performing the duties, responsibilities and functions required under the pooling
and servicing agreements, the Indenture, the contracts, and related documents,
and (v) matters related to the foregoing.
CAPITALIZATION OF THE OWNER TRUST
The following table illustrates our capitalization of as of the cut-off
date, as if the issuance and sale of the Notes had taken place on the cut-off
date:
<TABLE>
<S> <C>
Class A-1 Receivable-Backed Notes.............................................
Class A-2 Receivable-Backed Notes.............................................
Class A-3 Receivable-Backed Notes.............................................
Class A-4 Receivable-Backed Notes.............................................
Class A-5 Receivable-Backed Notes.............................................
Class B Receivable-Backed Notes...............................................
Class C Receivable-Backed Notes...............................................
Class D Receivable-Backed Notes...............................................
Certificates..................................................................
------------
Total....................................................................
------------
------------
</TABLE>
THE OWNER TRUSTEE
[ ] will be the Owner Trustee under the Trust Agreement.
The Owner Trustee is a and its principal offices are located
at . The Owner Trustee's liability in connection with
the issuance and sale of the Notes is limited solely to the express obligations
of the Owner Trustee set forth in the Trust Agreement and the Indenture. The
Owner Trustee may resign at any time, in which event we will be obligated to
appoint a successor Owner Trustee. We may also remove the Owner Trustee if the
Owner Trustee ceases to be eligible to continue as such under the Trust
Agreement or if the Owner Trustee becomes insolvent. Any resignation or removal
of the Owner Trustee will not become effective until acceptance of the
appointment of a successor Owner Trustee.
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THE CONTRACTS
The aggregate of the contracts expected to be held by us as part of our
assets, as of any particular date, is referred to as the contract pool, and the
contract pool, as of the cut-off date, is referred to as the cut-off date
contract pool. The cut-off date shall be , 1999 for all contracts
transferred to the Owner Trust on the closing date, and the first day of the
month of transfer to the Owner Trust for each substitute contract.
DESCRIPTION OF THE CONTRACTS
All of the contracts are commercial, rather than consumer, leases or loans.
Certain information with respect to the contracts is set forth under the caption
'The Contracts' in the prospectus.
REPRESENTATIONS AND WARRANTIES MADE BY THE ORIGINATORS
Under the pooling and servicing agreement or sale and contribution
agreement, to the extent applicable, each originator will make the
representations and warranties regarding each contract (and the related
equipment) as of the cut-off date that are set forth under 'The
Contracts -- Representations and Warranties Made by the Originators' in the
prospectus. If the value of a contract is materially and adversely affected by a
breach of any of these representations or warranties which is not cured within a
specified period, the Indenture Trustee will be entitled to require an
originator to purchase the particular contract subject to a warranty claim and,
in the case of a contract structured as a lease, the related equipment, at a
price equal to (i) the amount required to payoff the contract, plus (ii) if
applicable, the book value of the related equipment, which book value amount
will be allocated to us. An originator may choose to have such contract replaced
with a substitute contract, as more fully described under 'Substitution of
Contracts' below.
CERTAIN STATISTICS RELATING TO THE CUT-OFF DATE CONTRACT POOL
The statistical information concerning the contracts set forth in this
section was calculated using a statistical discount rate of %, and the
percentages are by contract principal balances as of the cut-off date,
calculated using such statistical discount rate, and by the initial statistical
contract pool principal balance, which is the aggregate of such contract
principal balances. While the statistical distribution of the cut-off date
contract pool calculated at the discount rate, which will be determined after
the interest rates on the Notes are determined, will vary somewhat from the
statistical distribution presented in this section, we do not expect such
variance to be material. Certain tables presented in this section may not total
due to rounding.
GENERAL
We have prepared certain statistics relating to the cut-off date for the
contract pool. The initial statistical contract pool principal balance is
$ which is based upon the contract pool principal balance determined
as of the cut-off date, but also includes an amount in respect of scheduled
payments on the contracts due prior to, but not received as of, the cut-off
date. The total number of contracts in the cut-off date contract pool is .
The average contract principal balance of the contracts, as of the cut-off date,
was approximately $ .
COMPOSITION OF THE CUT-OFF DATE CONTRACT POOL
<TABLE>
<CAPTION>
INITIAL
STATISTICAL WEIGHTED WEIGHTED AVERAGE
CONTRACT AVERAGE AVERAGE CONTRACT
NUMBER POOL ORIGINAL REMAINING PRINCIPAL
OF PRINCIPAL TERM TERM BALANCE
CONTRACTS BALANCE (RANGE) (RANGE) (RANGE)
- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
.......................................... $ months months ($0.00 to $ )
(six months to (one months
months) to
months)
</TABLE>
TYPE OF CONTRACTS
The following table shows the distribution of the cut-off date contract
pool between contracts structured as a lease and contracts subject to financing
by the number of contracts in each category, the aggregate contract principal
balance of these contracts, and the percentage (by number of contracts and
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by aggregate contract principal balance) of these contracts relative to all of
the contracts in the cut-off date contract pool:
<TABLE>
<CAPTION>
AGGREGATE % OF INITIAL STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
TYPE OF CONTRACT CONTRACTS CONTRACTS BALANCE BALANCE
- ---------------- --------- --------- ------- -------
<S> <C> <C> <C> <C>
Contracts structured as a lease......................
Contracts subject to financing.......................
IPAs.................................................
Vendor loans.........................................
Secured notes........................................
Other financing arrangements.........................
--------- ---------- --------- -----
Totals..........................................
--------- ---------- --------- -----
--------- ---------- --------- -----
</TABLE>
GEOGRAPHICAL DIVERSITY
The following table shows the geographical diversity of the cut-off date
contract pool, by indicating the number of contracts, the aggregate contract
principal balance of these contracts and the percentage (by number of contracts
and by aggregate contract principal balance) of these contracts relative to all
of the contracts in the cut-off date contract pool by reference to the State in
which the obligors on these contracts are located:
<TABLE>
<CAPTION>
AGGREGATE % OF INITIAL STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
STATE CONTRACTS CONTRACTS BALANCE BALANCE
- ----- --------- ---------- --------- -------
<S> <C> <C> <C> <C>
Alabama....................................................
Alaska.....................................................
Arizona....................................................
Arkansas...................................................
California.................................................
Colorado...................................................
Connecticut................................................
Delaware...................................................
District of Columbia.......................................
Florida....................................................
Georgia....................................................
Hawaii.....................................................
Idaho......................................................
Illinois...................................................
Indiana....................................................
Iowa.......................................................
Kansas.....................................................
Kentucky...................................................
Louisiana..................................................
Maine......................................................
Maryland...................................................
Massachusetts..............................................
Michigan...................................................
Minnesota..................................................
Mississippi................................................
Missouri...................................................
Montana....................................................
Nebraska...................................................
Nevada.....................................................
New Hampshire..............................................
New Jersey.................................................
New Mexico.................................................
New York...................................................
North Carolina.............................................
North Dakota...............................................
Ohio.......................................................
Oklahoma...................................................
</TABLE>
(table continued on next page)
S-21
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
AGGREGATE % OF INITIAL STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
STATE CONTRACTS CONTRACTS BALANCE BALANCE
- ----- --------- ---------- --------- -------
<S> <C> <C> <C> <C>
Oregon.....................................................
Pennsylvania...............................................
Rhode Island...............................................
South Carolina.............................................
South Dakota...............................................
Tennessee..................................................
Texas......................................................
Utah.......................................................
Vermont....................................................
Virginia...................................................
Washington.................................................
West Virginia..............................................
Wisconsin..................................................
Wyoming....................................................
--------- ---------- --------- ---
Total..................................................
--------- ---------- --------- ---
--------- ---------- --------- ---
</TABLE>
Adverse economic conditions in States where a substantial number of
obligors are located, such as [ ], [ ], [ ] and
[ ], may adversely affect these obligors' ability to make payments on
the related contracts, and you could suffer a loss on your investment as a
result.
PAYMENT STATUS
The following table shows the payment status of the cut-off date contract
pool, by indicating the number of contracts, the aggregate contract principal
balance of these contracts and the percentage, by number of contracts and by
aggregate contract principal balance, of these contracts relative to all of the
contracts in the cut-off date contract pool by reference to whether these
contracts were current as of the cut-off date or were 31-60 days delinquent:
<TABLE>
<CAPTION>
% OF INITIAL
AGGREGATE STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
PAYMENT STATUS CONTRACTS CONTRACTS BALANCE BALANCE
- -------------- ---------- --------- ------- -------
<S> <C> <C> <C> <C>
Current(1)....................................................
31-60 Days Delinquent.........................................
---------- --------- ------------- ---------
Totals...................................................
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
- ------------
(1) Includes contracts not more than 30 days delinquent.
CONTRACTS BY EQUIPMENT TYPE
The following table shows the type of equipment securing or otherwise
related to the contracts, by the number of contracts, the aggregate contract
principal balance of these contracts, and the percentage,
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<PAGE>
<PAGE>
by number of contracts and by aggregate contract principal balance, of these
contracts relative to all of the contracts:
<TABLE>
<CAPTION>
% OF INITIAL
AGGREGATE STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
TYPE OF EQUIPMENT CONTRACTS CONTRACTS BALANCE BALANCE
- ----------------- ---------- --------- ------- -------
<S> <C> <C> <C> <C>
Telecommunications............................................
Computers and Point-of-Sale...................................
Medical/Healthcare............................................
Printing......................................................
General Office Equipment/Copiers..............................
Construction..................................................
Other.........................................................
Transportation................................................
Computer Software.............................................
Resources.....................................................
Industrial....................................................
Commercial/Retail Fixtures....................................
Automotive Diagnostic Equipment...............................
Manufacturing.................................................
---------- --------- ------------- ---------
Totals...................................................
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
CONTRACT PRINCIPAL BALANCES
The following table shows the distribution of the cut-off date contract
pool by contract principal balance by indicating the number of contracts which
have a contract principal balance within a defined range and the aggregate
contract principal balance of these contracts, and the percentage, by number of
contracts and by aggregate contract principal balance, of these contracts
relative to all of the contracts:
<TABLE>
<CAPTION>
% OF INITIAL
AGGREGATE STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS BALANCE BALANCE
- -------------------------- ---------- --------- ------- -------
<S> <C> <C> <C> <C>
$ 0 to $ 5,000.00..................................
$ 5,000.01 to $ 25,000.00..................................
$ 25,000.01 to $ 50,000.00..................................
$ 50,000.01 to $ 100,000.00..................................
$100,000.01 to $ 500,000.00..................................
$500,000.01 to $1,000,000.00..................................
Over $1,000,000.00............................................
---------- --------- ------------- ---------
Totals...................................................
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
REMAINING TERMS OF CONTRACTS
The following table shows the remaining term of the contracts from the
cut-off date to the scheduled expiration date of the contracts, by indicating
the number of contracts, the aggregate
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<PAGE>
<PAGE>
principal balance of these contracts, and the percentage (by number of contracts
and by aggregate contract principal balance) of these contracts relative to all
of the contracts:
<TABLE>
<CAPTION>
% OF INITIAL
AGGREGATE STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
REMAINING TERMS OF CONTRACTS CONTRACTS CONTRACTS BALANCE BALANCE
- ---------------------------- ---------- --------- ------- -------
<S> <C> <C> <C> <C>
One Month to 12 Months........................................
13 Months to 24 Months........................................
25 Months to 36 Months........................................
37 Months to 48 Months........................................
49 Months to 60 Months........................................
Over 60 Months................................................
---------- --------- ------------- ---------
Totals...................................................
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
TYPES OF OBLIGOR
The contracts with a single obligor (or group of affiliated obligors)
having the largest aggregate contract principal balance as of the cut-off date
represented no more than % of the initial statistical contract pool principal
balance. The following table shows the types of obligor on contracts within the
cut-off date contract pool, by the number of contracts, the aggregate contract
principal balance of such contracts, and the percentage, by number of contracts
and by aggregate contract principal balance, of such contracts relative to all
of the contracts:
<TABLE>
<CAPTION>
% OF INITIAL
AGGREGATE STATISTICAL
% OF TOTAL CONTRACT CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
TYPE OF OBLIGOR CONTRACTS CONTRACTS BALANCE BALANCE
- --------------- ---------- --------- ------- -------
<S> <C> <C> <C> <C>
Service Organizations.........................................
Construction..................................................
Printing and Copy Centers.....................................
Professionals (doctors, lawyers, etc.)........................
Retail and Wholesale Trade....................................
Medical/Healthcare............................................
Financial Services............................................
Other.........................................................
Transportation................................................
Resources.....................................................
Distribution..................................................
Government....................................................
Manufacturing.................................................
Machine tools.................................................
---------- --------- ------------- ---------
Totals...................................................
---------- --------- ------------- ---------
---------- --------- ------------- ---------
</TABLE>
CERTAIN STATISTICS RELATING TO DELINQUENCIES AND DEFAULTS
DELINQUENCIES
The following table sets forth statistics relating to delinquencies on
contracts within the originators' owned and managed portfolios of receivables
similar to the contracts, on an aggregate basis, as of December 31 in each of
the past [ ] years. These receivables did not constitute the originators'
entire portfolio of contracts. For these purposes, a 'delinquency' means that
the obligor on the contract has failed to make a required scheduled payment in
an amount equal to at least 90% of the required scheduled payment within 30 days
of the due date. For these purposes, any payment made by the obligor on a
contract subsequent to the required payment date is applied to the earliest
payment which was unpaid. The statistics set forth below relate to the entire
portfolio of receivables similar to the
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<PAGE>
<PAGE>
contracts serviced by the originators as of the date specified, and not only to
the contracts; and, accordingly, these statistics are not necessarily indicative
of the future performance of the contracts. The following table is based, where
indicated, on the gross receivable balance of the contracts, as it appears on
the accounting records of the servicer as of the date set forth below and not
solely the overdue payments.
<TABLE>
<CAPTION>
PERCENTAGE OF
GROSS RECEIVABLE BALANCE OF CONTRACTS
WHICH WERE DELINQUENT
GROSS RECEIVABLE ------------------------------------------------------
BALANCE OF 31 TO 60 61 TO 90 91 TO 120 OVER 120
DATE OF CONTRACTS CALCULATION DAYS DAYS DAYS DAYS TOTAL
- ----------------- ----------------- -------- -------- --------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
12/31/93....................................
12/31/94....................................
12/31/95....................................
12/31/96....................................
12/31/97....................................
12/31/98....................................
</TABLE>
LOSSES AND RECOVERIES
The following table sets forth statistics relating to gross losses and
losses net of recoveries on defaulted contracts within the originators' owned
and managed portfolios, of receivables similar to the contracts on an aggregate
basis, during the 12-month period ending December 31 in each of the past six
years. These receivables did not constitute the originators' entire portfolio of
contracts. For these purposes, gross losses means total losses before recoveries
measured against the net investment of the contracts, gross of any allowance for
losses, and losses net of recoveries means losses after recoveries measured
against the net investment of the contracts, gross of any allowance for losses.
The statistics set forth below relate to the portfolio of receivables similar to
the contracts serviced by the originators during the period indicated and not
only to the contracts; and, accordingly, these statistics are not necessarily
indicative of the future performance of the contracts.
<TABLE>
<CAPTION>
AGGREGATE NET GROSS LOSSES AS A NET LOSSES AS A
INVESTMENT OF PERCENTAGE OF NET PERCENTAGE OF NET
DATE OF CONTRACTS CALCULATION INVESTMENT INVESTMENT
- ----------------- -------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
12/31/93................................................... $ % %
12/31/94................................................... $ % %
12/31/95................................................... $ % %
12/31/96................................................... $ % %
12/31/97................................................... $ % %
12/31/98................................................... $ % %
</TABLE>
The originators' delinquency, non-accrual and net loss experience has
historically been affected by prevailing economic conditions, particularly in
industries and geographic regions where it has customer concentrations.
It has been the originators' experience that, unlike consumer receivables,
collections from the obligors constitute a significant portion of recoveries on
defaulted receivables, in addition to the proceeds from liquidation of the
related equipment. The resale value of individual items of equipment, which
would be collected by the servicer in the event of a default under the related
contract, will vary substantially, depending on such factors as the type of
equipment, the expected remaining useful life of the equipment at the time of
the default and the obsolescence of the equipment. It is possible that the
resale values for some equipment would be negligible or insufficient to justify
repossession and resale.
TWELVE MONTHS ENDED [ ] VERSUS TWELVE MONTHS ENDED [ ]
The amounts classified as delinquent as a percentage of the Originators'
owned and managed portfolios [ ] [increased/decreased] between
[ ] and [ ]. Net losses as a percentage of the
Originators' owned and managed portfolios decreased slightly in [ ]
as
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<PAGE>
<PAGE>
compared to [ ]. The slight decrease is not attributable to any one
factor and we have no basis to predict, and offer no assurances as to, whether
net losses as a percentage of the Originators' owned and managed portfolios will
continue to decrease in subsequent periods. The Originators' owned and managed
portfolios decreased approximately [ ]% from [ ] to [ ]
due to normal fluctuations in the amount of contracts originated. We believe
that stability in delinquency and loss experience is a result of continued
generally favorable economic conditions and consistent application of credit
standards on the part of the originators of such assets.
TWELVE MONTHS ENDED [ ] VERSUS TWELVE MONTHS ENDED [ ]
The amounts classified as delinquent as a percentage of the Originators'
owned and managed portfolios [ ] [increased/decreased] between
[ ] and [ ]. Net losses as a percentage of the
Originators' owned and managed portfolios increased slightly in [ ]
as compared to [ ]. Such increase is not attributable to any one
factor and we believe that it is partially attributable to the increase in the
Originators' owned and managed portfolios. The Originators' owned and managed
portfolios increased approximately [ ]% from [ ] to [ ]
due to an increase in financing activity. As noted above, we believe that
stability in delinquency and loss experience is a result of continued generally
favorable economic conditions and consistent application of credit standards on
the part of the originators of such assets.
TWELVE MONTHS ENDED [ ] VERSUS TWELVE MONTHS ENDED [ ]
The amounts classified as delinquent as a percentage of the Originators'
owned and managed portfolios [ ] [increased/decreased] between
[ ] and [ ]. Net losses as a percentage of the
Originators' owned and managed portfolios decreased slightly during the same
period while the Originators' owned and managed portfolios increased
approximately [ ]%. As noted above, we believe that stability in delinquency
and loss experience is a result of continued generally favorable economic
conditions and consistent application of credit standards on the part of the
originators of such assets.
CONTRACT PREPAYMENTS
The contracts may (i) not permit the obligor thereunder to prepay the
amounts due under such contract or otherwise terminate the contract prior to its
scheduled expiration date, or (ii) allow for a prepayment or early termination
only upon payment of an amount which is not less than the present value,
calculated in the manner specified in clause (1) of the definition of contract
principal balance, of the unpaid scheduled payments due on such contract after
the date of such prepayment, or (iii) permit prepayment or early termination
without the payment of an amount at least equal to the amount described in
clause (ii) above. As described herein under 'Description of the
Notes -- Principal,' the method for calculating the principal balance for any
contract is based upon the prepayment features of such contract. Any prepayment
in full of a contract, whether pursuant to its terms or in the servicer's
discretion, is referred to as an early termination, and the contract related
thereto is a prepaid contract. Under the pooling and servicing agreement, the
servicer will be permitted to allow prepayments of any of the contracts, but
only if the amount paid by or on behalf of the obligor (or, in the case of a
partial prepayment, the sum of such amount and the remaining principal balance
of the contract after application of such amount) is at least equal to the
required payoff amount for such contract. Under the pooling and servicing
agreement, we may (in our sole discretion) replace any repaid contract with a
substitute contract. See 'Substitution of Contracts' below.
The required payoff amount, with respect to any collection period for any
contract, is equal to the sum of: (i) the scheduled payment due in such
collection period and not yet received, together with any scheduled payments due
in prior collection periods and not yet received, plus (ii) the principal
balance of such contract as of the last day of such collection period, after
taking into account the scheduled payment due in such collection period. In no
event will pledged revenues include (nor will the Notes otherwise be payable
from) any portion of a prepayment on a contract which exceeds the required
payoff amount for such contract.
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<PAGE>
<PAGE>
LIQUIDATION OF CONTRACTS
Liquidation proceeds (which will consist generally of all amounts received
by the servicer in connection with the liquidation of a contract and disposition
of the related equipment, net of any related out-of-pocket liquidation expenses)
will be allocated as follows: (i) with respect to any contract subject to
financing, all such liquidation proceeds will be allocated to the Owner Trust;
and (ii) with respect to any contract structured as a lease, such liquidation
proceeds will be allocated on a pro rata basis between us, on the one hand, and
the Owner Trust, on the other, based on (a) the book value of the equipment
relating to a contract structured as a lease (which is a fixed amount equal to
the value of such equipment as shown on the accounting books and records of the
applicable originator, as appropriate, as of the cut-off date) and (b) the
required payoff amount for such contract (determined as of the collection period
during which such contract became a liquidated contract); provided that, in the
event the liquidation proceeds in respect of any contract structured as a lease
and the related equipment exceed the sum of the required payoff amount for such
contract and the book value of such related equipment, any such excess shall be
allocated solely to us. By way of example, if the servicer, in connection with a
defaulted contract structured as a lease, derived liquidation proceeds in the
amount of $100 from the liquidation of such contract and disposition of the
related equipment, and if the required payoff amount of such contract was, as of
the collection period during which such contract became a liquidated contract,
$120 and the book value of such related equipment was $30, such liquidation
proceeds would be allocated to the Owner Trust in the amount of $80 and to us in
the amount of $20. All liquidation proceeds which are so allocable to the Owner
Trust will be deposited in the collection account and constitute pledged
revenues to be applied to the payment of interest and principal on the Notes in
accordance with the priorities described under 'Description of the Notes --
Distributions' herein.
SUBSTITUTION OF CONTRACTS
Under certain circumstances, we will have the option under the pooling and
servicing agreement and the Indenture to substitute into the assets of the Owner
Trust one or more contracts having similar characteristics for contracts which
are in default or have been prepaid. In addition, in the case of a contract
subject to a warranty claim, as described in 'Representations and Warranties
Made by the Originator' in the prospectus, the applicable originator may choose
to have such contract replaced with a substitute contract.
As described in 'Contract Prepayments' above, certain contracts may permit
the obligor thereunder to prepay the amounts due under such contract or
otherwise to terminate the contract prior to its scheduled expiration date,
provided that the amount paid by or on behalf of the obligor is at least equal
to the required payoff amount for such contract. Under the pooling and servicing
agreement and the Indenture, we may, in our sole discretion, replace any prepaid
contract with a substitute contract in lieu of applying the proceeds of such
prepaid contract to the pledged revenues as described herein.
Any contract (i) that has become a liquidated contract or (ii) as to which
the obligor becomes the subject of a bankruptcy, insolvency or receivership is
herein referred to as a defaulted contract. Under the pooling and servicing
agreement, we may, in our sole discretion, replace any defaulted contract with a
substitute contract.
The aggregate principal balances of the defaulted contracts for which we
may cause the substitution of substitute contracts is limited to an amount not
in excess of 10% of the cut-off contract pool principal balance. We may replace
a prepaid contract with a substitute contract and the applicable originator may
choose to have contracts subject to a warranty claim replaced with substitute
contracts, in either case without regard to the 10% limitation described above.
Substitute contracts will be originated and added to the assets of the
Owner Trust using the same credit criteria and eligibility standards as the
contracts in the contract pool on the closing date. Information with respect to
such substitute contracts, to the extent deemed material, will be included in
periodic reports under the Securities Exchange Act of 1934 filed by the servicer
with the Securities and Exchange Commission on our behalf as are required under
the Securities Exchange Act of 1934. The substitute contracts will have an
aggregate contract principal balance equal to or greater than the contracts
being modified or replaced and the monthly payments on the substitute contracts
will be at
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<PAGE>
<PAGE>
least equal to those of the replaced contracts through the term of such replaced
contracts and shall provide for a last scheduled payment which is not in excess
of the contract substituted for unless such substitute contract's cash flows are
discounted up to and including such last scheduled payment.
The representations and warranties made by each originator with respect to
the contracts in 'The Contracts -- Representations and Warranties Made by the
Originator' in the accompanying prospectus will be equally applicable to
substitute contracts. A contract which satisfies all of the above
representations and warranties shall be termed an eligible contract. Contracts
with respect to which the representations in clauses (I) and (P) under 'The
Contracts -- Representations and Warranties Made by the Originator' in the
accompanying prospectus are not true shall also be eligible contracts if all
representations other than such representations are true and if we shall have
received confirmation from each rating agency that the discrepancy will not
result in the rating on any of the Notes being reduced, qualified or withdrawn.
WEIGHTED AVERAGE LIFE OF THE NOTES
THE FOLLOWING INFORMATION IS PROVIDED SOLELY TO ILLUSTRATE THE EFFECT OF
PREPAYMENTS ON THE CONTRACTS ON THE WEIGHTED AVERAGE LIFE OF THE NOTES UNDER THE
ASSUMPTIONS STATED BELOW. THIS INFORMATION IS NOT A PREDICTION OF THE PREPAYMENT
RATE THAT MIGHT ACTUALLY BE EXPERIENCED BY THE CONTRACTS.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Notes will be primarily
a function of the rate at which payments are made on the contracts. Payments on
the contracts may be in the form of scheduled payments or prepayments
(including, for this purpose, liquidations due to default).
The constant prepayment rate prepayment model ('CPR') employed below
represents an assumed constant rate of prepayment of contracts outstanding as of
the beginning of each month expressed as a per annum percentage. There can be no
assurance that contracts will experience prepayments at a constant prepayment
rate or otherwise in the manner assumed by the prepayment model. See 'The Risk
of Prepayments on the Contracts May Impact the Yield of Your Notes' in this
prospectus supplement and 'Risk Factors -- Yield and Prepayment Considerations'
in the accompanying prospectus.
The weighted average lives in the following tables were created assuming a
statistical discount rate of % and further assuming that: (i) scheduled
payments on the contracts are received in a timely manner and prepayments are
made at the percentages of the prepayment model set forth in the table; (ii) we
will exercise its right to purchase the contracts on any payment date following
the date on which the unpaid principal balance of all of the outstanding Notes
is less than 10% of the initial contract pool balance; (iii) payments are made
on the Notes on the 20th day of each month commencing , 1999; (iv) the
Notes are issued on , 1999 and (v) we do not substitute new contracts
for contracts that are prepaid in full. In addition, it was assumed for purposes
of preparing the following tables only that on the closing date the Owner Trust
will issue $ aggregate principal amount of % Class A-1 Notes,
$ aggregate principal amount of % Class A-2 Notes, $
aggregate principal amount of % Class A-3 Notes, $ aggregate
principal amount of % Class A-4 Notes, $ aggregate principal amount
of % Class A-5 Notes, $ aggregate principal amount of % Class B
Notes, $ aggregate principal amount of % Class C Notes, and
$ aggregate principal amount of % Class D Notes.
Under the pooling and servicing agreements and the Indenture, we have the
option of substituting new contracts for contracts which are prepaid in full or
are in default. See 'The Contracts -- Substitution of Contracts' herein. There
is no assurance that we will exercise our option to make any such substitutions
nor, should we intend to, that contracts meeting the eligibility criteria will
be available therefor. To the extent any such substitutions are made, the impact
on the pledged revenues and assets of the Owner Trust of what would otherwise
have constituted a prepayment in full or liquidation will be averted.
NO REPRESENTATION IS MADE THAT THE ASSUMPTIONS ABOVE WILL BE CORRECT,
INCLUDING THE ASSUMPTION THAT THE CONTRACTS WILL NOT EXPERIENCE DELINQUENCIES OR
LOSSES. IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE NOTES, YOU SHOULD
CONSIDER A VARIETY OF POSSIBLE PREPAYMENT SCENARIOS, INCLUDING THE LIMITED
SCENARIOS DESCRIBED IN THE TABLES BELOW.
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<PAGE>
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[TO COME]
DESCRIPTION OF THE NOTES
The following information supplements the information in the prospectus
under the caption 'Description of the Notes.'
GENERAL
The Notes will be issued pursuant to the terms of an Indenture, dated as of
, 1999 (the 'Indenture'), between the Owner Trust and
[ ], as indenture trustee. A copy of the execution form
of the Indenture will be filed with the Securities and Exchange Commission in a
Current Report on Form 8-K after the Notes are issued. The summary does not
purport to be complete and is subject to all the provisions of the Notes and the
Indenture.
Pursuant to the Indenture, we will issue eight classes of Notes, consisting
of five classes of senior notes, designated as the Class A-1, Class A-2, Class
A-3, Class A-4 and Class A-5 Notes (collectively, the 'Class A Notes'), and
three classes of subordinate Notes, designated as the Class B Notes, the Class C
Notes and the Class D Notes.
The Class A Notes will be senior in right of payment to the subordinate
Notes, the Class B Notes will be senior in right of payment to the Class C Notes
and the Class D Notes, and the Class C Notes will be senior in right of payment
to the Class D Notes.
Each class of Notes initially will be represented by one or more global
Notes registered in the name of the nominee of The Depository Trust Company or
any successor depository selected by the Indenture Trustee, except as set forth
below. Beneficial interests in each class of Notes will be offered in minimum
denominations of $1,000 and integral multiples thereof in book-entry form only.
We have been informed by The Depository Trust Company that its nominee will be
Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record of the
Notes. All references herein to holders or noteholders shall reflect the rights
of beneficial owners of Notes, as they may indirectly exercise such rights
through The Depository Trust Company and participating members of The Depository
Trust Company, except as otherwise specified herein. Unless and until definitive
Notes are issued under the limited circumstances described under 'Description of
the Notes -- Definitive Notes' in the prospectus, you will not be entitled to
receive a certificate representing your interest in such Notes. Until such time,
all references herein to actions by noteholders of any class of Notes will refer
to actions taken by The Depository Trust Company upon instructions from its
participating organizations and all references herein to distributions, notices,
reports and statements to noteholders of any class of Notes will refer to
distributions, notices, reports and statements to The Depository Trust Company
or its nominee, as the registered holder of the Notes of such class, for
distribution to note owners of such class in accordance with The Depository
Trust Company's procedures. See 'Description of the Notes -- Book-Entry
Registration' and ' -- Definitive Notes' in the prospectus. You may elect to
hold your Notes through The Depository Trust Company (in the United States) or
Cedel Bank or Euroclear (in Europe). Transfers will be made in accordance with
the rules and operating procedures described in Appendix A to the prospectus.
DISTRIBUTIONS
Principal of and interest on the Notes will be paid on each payment date,
after reimbursement of Servicer Advances and payment of the servicing fee,
solely from, and secured by, the amount available for such payment date, which
is equal to the sum of (a) those pledged revenues on deposit in the collection
account as of the last business day preceding the related determination date
(i) which were received by the servicer during the related collection period or
which represent amounts we paid to purchase contracts as of the end of such
collection period ('Related Collection Period Pledged Revenues'), or (ii) to the
extent necessary to pay interest on the Notes on such payment date, which were
received by the servicer after the end of the related collection period but on
or prior to such deposit date ('Current Collection Period Pledged Revenues' and,
together with the Related Collection Period Pledged Revenues, the 'Available
Pledged Revenues'), and (b) amounts permitted to be
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withdrawn therefor from the cash collateral account, as described under 'Cash
Collateral Account' below.
Pledged revenues will consist of (i) scheduled payments on the contracts
(which will consist of all payments under the contracts other than those
portions of such payments which, under the contracts, are to be (A) applied by
the servicer to the payment of insurance charges, maintenance, taxes and other
similar obligations, or (B) retained by the servicer in payment of
administrative fees) received on or after the cut-off date and due during the
term of the contracts, without giving effect to end-of-term extensions or
renewals thereof (including all scheduled payments due prior to, but not
received as of, the cut-off date, but excluding any scheduled payments due on or
after, but received prior to, the cut-off date); (ii) any voluntary prepayments
received on or after the cut-off date under the contracts (other than, in the
case of a prepaid contract for which a substitute contract has been substituted
in accordance with the pooling and servicing agreements and the Indenture, that
portion thereof which is in excess of the scheduled payments due during or prior
to the collection period during which the prepayment in full was received, which
portion will be paid to us), provided that the amount, if any, by which any such
prepayment exceeds the required payoff amount of a contract structured as a
lease will not constitute pledged revenues but will be allocated to us; (iii)
any amounts paid by an originator to purchase contracts subject to a warranty
claim, as described under 'The Contracts -- Representations and Warranties Made
by the Originator' herein and in the accompanying prospectus, excluding, in the
case of a contract structured as a lease, any portion thereof allocable to us;
(iv) any amounts we paid to purchase the contracts as described under 'Optional
Purchase of Contracts' below; (v) certain of the liquidation proceeds derived
from the liquidation of the contracts and the disposition of the related
equipment, as described under 'The Contracts -- Liquidation of Contracts'
herein; and (vi) any earnings on the investment of amounts credited to the
collection account.
Interest and principal on the Notes will be paid on the 20th day of each
month (or, if such 20th day is not a business day, the next succeeding business
day), commencing , 1999, to persons in whose names the Notes are
registered as of the related record date. The record date for any payment date
will be the business day immediately preceding the payment date (so long as the
Notes are held in book-entry form), or the last day of the prior calendar month
(if definitive Notes have been issued). If the Class A-1 Notes have not been
paid in full on or before the [ ] payment date, the payment date
for the Class A-1 Notes in will be .
On each payment date, the Indenture Trustee will be required to make the
following payments in the following order of priority (except as otherwise
described under 'Description of the Notes -- Events of Default; Rights Upon
Event of Default' in the prospectus):
(i) reimbursement of Servicer Advances;
(ii) the servicing fee;
(iii) interest on the Notes in the following order of priority:
(a) interest on the Class A Notes (including any overdue interest
and interest thereon);
(b) interest on the Class B Notes (including any overdue interest
and interest thereon);
(c) interest on the Class C Notes (including any overdue interest
and interest thereon); and
(d) interest on the Class D Notes (including any overdue interest
and interest thereon);
(iv) principal on the Notes in the amounts and priority described
under 'Principal' below;
(v) the amount, if any, necessary to increase the balance in the cash
collateral account to the requisite amount;
(vi) certain amounts payable in connection with the cash collateral
account; and
(vii) the remainder, if any, to the holder of the equity certificate.
The Indenture Trustee shall make the foregoing payments, first, from Related
Collection Period Pledged Revenues, second, to the extent the Related Collection
Period Pledged Revenues are insufficient to pay interest on the Notes on such
payment date, the amount necessary to cure such insufficiency from Current
Collection Period Pledged Revenues, and third (but only as to amounts
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described in clause (ii) and certain amounts included in clause (iii)), from
amounts permitted to be withdrawn from the cash collateral account as described
under 'Cash Collateral Account.'
CLASS A INTEREST
Interest will be paid to the holders of each Class of the Class A Notes on
each payment date, to the extent the amount available (after taking into account
any prior applications described under 'Distributions' above) is sufficient
therefor, at the interest rate for such class specified on the cover of this
prospectus supplement (in each case, the interest rate for such class), from and
including the closing date to but excluding , 1999, and
thereafter for each successive interest period. Interest on the Class A-1 Notes
will be computed on the basis of the actual number of days elapsed and a 360-day
year. Interest on the Class A-2, Class A-3, Class A-4 and Class A-5 Notes will
be computed on the basis of a 360-day year comprised of twelve 30-day months. To
the extent the amount available is sufficient therefor after payment of the
servicing fee, the amount of interest to be paid on the Class A Notes on each
payment date will be the interest accrued during the related interest period
(computed on the basis described above) and will be equal to the product of (i)
the applicable interest rate, (ii) the principal balance of the related class as
of the immediately preceding payment date (after giving effect to reductions in
principal balance on such immediately preceding payment date) and (iii) except
in the case of the Class A-1 Notes, a fraction equal to one-twelfth (or, for the
first payment date, [ ] divided by 360), and, in the case of the Class A-1
Notes, a fraction equal to the number of days in such interest period divided by
360.
In the event that, on any payment date, the amount available after payment
of the servicing fee is not sufficient to make a full payment of interest to the
holders of Class A Notes, the amount of interest to be paid on the Class A Notes
will be allocated among each Class thereof (and within a class among the Notes
of such class) pro rata in accordance with their respective entitlements to
interest, and the amount of such shortfall will be carried forward and, together
with interest thereon at the applicable interest rate, added to the amount of
interest Class A noteholders will be entitled to receive on the next payment
date.
The interest periods for each class of the Class A Notes will consist of an
initial period from and including the closing date to but excluding
, 1999, and thereafter each successive period (i) for the Class
A-2, Class A-3, Class A-4 and Class A-5 Notes, from and including the first day
following completion of the preceding period to but excluding the [15th] day of
the following month (in each case without respect to whether such days are
business days) and (ii) for the Class A-1 Notes, from and including each payment
date to but excluding the following payment date, until the principal balance of
such class has been reduced to zero. The payment date with respect to each such
interest period will be the payment date next succeeding the end of such
interest period.
CLASS B INTEREST
Interest will be paid to the holders of Class B Notes on each payment date,
to the extent the remaining amount available (after taking into account any
prior applications described under 'Distributions' above) is sufficient
therefor, at the interest rate for such class specified on the cover of this
prospectus supplement, from and including the closing date to but excluding
, 1999, and thereafter for each successive interest period.
Interest on the Class B Notes will be computed on the basis of a 360-day year
comprised of twelve 30-day months. To the extent the amount available is
sufficient therefor after payment of the servicing fee and interest on the
Class A Notes, the amount of interest to be paid on the Class B Notes on each
payment date will be the interest accrued during the related interest period
(computed on the basis described above) and will be equal to the product of (i)
the Class B Interest Rate, (ii) the Class B principal balance as of the
immediately preceding payment date (after giving effect to reductions in
principal balance on such immediately preceding payment date) and (iii) a
fraction equal to one-twelfth (or, for the first payment date, [ ] divided
by 360).
In the event that, on a given payment date, the amount available, after
reimbursement of Servicer Advances and payment of the servicing fee and interest
on the Class A Notes, is not sufficient to make a full payment of interest to
the holders of Class B Notes, the amount of interest to be paid on the
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Class B Notes will be allocated among the Class B Notes pro rata, and the amount
of such shortfall will be carried forward and, together with interest thereon at
the Class B Interest Rate, added to the amount of interest Class B noteholders
will be entitled to receive on the next payment date.
The interest periods for the Class B Notes will consist of an initial
period from and including the closing date to but excluding [ ],
and thereafter each successive period from and including the first day following
completion of the preceding period to but excluding the 20th day of the
following month (in each case without respect to whether such days are business
days) until the principal balance of the Class B Notes has been reduced to zero.
The payment date with respect to each such interest period will be the payment
date next succeeding the end of such interest period.
CLASS C INTEREST
Interest will be paid to the holders of Class C Notes on each payment date,
to the extent the remaining amount available (after taking into account any
prior applications described under 'Distributions' above) is sufficient
therefor, at the interest rate for such class specified on the cover of this
prospectus supplement, from and including the closing date to but excluding
[ ], and thereafter for each successive interest period. Interest
on the Class C Notes will be computed on the basis of a 360-day year comprised
of twelve 30-day months. To the extent the amount available is sufficient
therefor after payment of the servicing fee and interest on the Class A Notes
and the Class B Notes, the amount of interest to be paid on the Class C Notes on
each payment date will be the interest accrued during the related interest
period (computed on the basis described above) and will be equal to the product
of (i) the Class C Interest Rate, (ii) the Class C principal balance as of the
immediately preceding payment date (after giving effect to reductions in
principal balance on such immediately preceding payment date) and (iii) a
fraction equal to one-twelfth (or, for the first payment date, [ ] divided
by 360).
In the event that, on a given payment date, the amount available, after
reimbursement of Servicer Advances and payment of the servicing fee and interest
on the Class A and Class B Notes, is not sufficient to make a full payment of
interest to the holders of Class C Notes, the amount of interest to be paid on
the Class C Notes will be allocated among the Class C Notes pro rata, and the
amount of such shortfall will be carried forward and, together with interest
thereon at the Class C Interest Rate, added to the amount of interest Class C
noteholders will be entitled to receive on the next payment date.
The interest periods for the Class C Notes will consist of an initial
period from and including the closing date to but excluding ,
1999, and thereafter each successive period from and including the first day
following completion of the preceding period to but excluding the 20th day of
the following month (in each case without respect to whether such days are
business days) until the principal balance of the Class C Notes has been reduced
to zero. The payment date with respect to each such interest period will be the
payment date next succeeding the end of such interest period.
CLASS D INTEREST
Interest will be paid to the holders of Class D Notes on each payment date,
to the extent the remaining amount available (after taking into account any
prior applications described under 'Distributions' above) is sufficient
therefor, at the interest rate for such class specified on the cover of this
prospectus supplement, from and including the closing date to but excluding
, 1999, and thereafter for each successive interest period.
Interest on the Class D Notes will be computed on the basis of a 360-day year
comprised of twelve 30-day months. To the extent the amount available is
sufficient therefor after payment of the servicing fee and interest on the
Class A, Class B and Class C Notes, the amount of interest to be paid on the
Class D Notes on each payment date will be the interest accrued during the
related interest period (computed on the basis described above) and will be
equal to the product of (i) the Class D Interest Rate, (ii) the Class D
principal balance as of the immediately preceding payment date (after giving
effect to reductions in principal balance on such immediately preceding payment
date) and (iii) a fraction equal to one-twelfth (or, for the first payment date,
[ ] divided by 360).
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In the event that, on a given payment date, the Amount Available, after
reimbursement of Servicer Advances and payment of the servicing fee and interest
on the Class A, Class B and Class C Notes, is not sufficient to make a full
payment of interest to the holders of Class D Notes, the amount of interest to
be paid on the Class D Notes will be allocated among the Class D Notes pro rata,
and the amount of such shortfall will be carried forward and, together with
interest thereon at the Class D Interest Rate, added to the amount of interest
Class D noteholders will be entitled to receive on the next payment date.
The interest periods for the Class D Notes will consist of an initial
period from and including the closing date to but excluding ,
1999, and thereafter each successive period from and including the first day
following completion of the preceding period to but excluding the 20th day of
the following month (in each case without respect to whether such days are
business days) until the principal balance of the Class D Notes has been reduced
to zero. The payment date with respect to each such interest period will be the
payment date next succeeding the end of such interest period.
PRINCIPAL
On each payment date (prior to the occurrence of an event of default), to
the extent funds are available therefor as described under 'Distributions'
above, principal will be paid to you in the following amounts and order of
priority:
(1) before the payment date on which the Class A-1 principal balance
has been reduced to zero, to the Class A-1 and Class A-5
noteholders, the Class A Principal Payment Amount, allocated [ ]%
to the Class A-1 Notes and [ ]% to the Class A-5 Notes;
(2) on the payment date on which the Class A-1 principal balance is
reduced to zero, to the Class A noteholders, the Class A Principal
Payment Amount, allocated as follows:
(i) the remaining Class A-1 principal balance to the Class A-1
noteholders;
(ii) an amount equal to [ ]% of the total principal payment
amount to the Class A-5 noteholders; and
(iii) the remaining Class A Principal Payment Amount to the Class
A-2 noteholders until the Class A-2 principal balance has
been reduced to zero, then to the Class A-3 noteholders until
the Class A-3 principal balance has been reduced to zero,
then to the Class A-4 noteholders until the Class A-4
principal balance has been reduced to zero and then to the
Class A-5 noteholders until the Class A-5 principal balance
has been reduced to zero;
provided that if the remaining amount available is not
sufficient to pay the full Class A principal amount, such
remaining amount available shall be allocated, first, to the
Class A-1 Notes and the Class A-5 Notes as provided in
clauses (i) and (ii) above (and, if such remaining amount
available is not sufficient to pay the full amounts so
provided for, to the Class A-1 Notes and the Class A-5 Notes
pro rata based upon the amounts otherwise payable pursuant to
such clauses), and, thereafter, to the Class A-2, Class A-3,
Class A-4 and Class A-5 Notes as provided in clause (iii)
above;
(3) after the payment date on which the Class A-1 principal balance
has been reduced to zero, to the Class A noteholders, the Class A
Principal Payment Amount, allocated as follows:
(i) on and prior to the payment date on which the Class A-4
principal balance has been reduced to zero:
(a) an amount equal to [ ]% of the total principal payment amount
to the Class A-5 noteholders, and
(b) the remaining Class A Principal Payment Amount to the Class A-2
noteholders until the Class A-2 principal balance has been
reduced to zero, then to the Class A-3 noteholders until the
Class A-3 principal balance has been reduced to zero, then to
the Class A-4 noteholders until the Class A-4 principal balance
has been reduced to
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zero and then to the Class A-5 noteholders until the Class A-5
principal balance has been reduced to zero;
provided that if the remaining amount available is not
sufficient to pay the full Class A Principal Payment Amount,
such remaining amount available shall be allocated between the
Class A-5 Notes, on the one hand, and the Class A-2, Class A-3
and Class A-4 Notes, on the other, pro rata based upon the
amounts otherwise payable pursuant to the above clauses (a) and
(b); and
(ii) after the payment date on which the Class A-4 principal
balance has been reduced to zero, to the Class A-5 Notes until
the Class A-5 principal balance has been reduced to zero;
(4) to the Class B noteholders, the Class B Principal Payment Amount;
(5) to the Class C noteholders, the Class C Principal Payment Amount;
(6) to the Class D noteholders, the Class D Principal Payment Amount;
and
(7) the additional principal, if any, sequentially to the Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5, Class B, Class C, and
Class D noteholders.
The Class A Principal Payment Amount will equal
(i) for any payment date on or prior to the later of (a) the
payment date in May 1999 or (b) the payment date on which the
Class A-1 principal balance is reduced to zero, the total
principal payment amount, provided that if, for any payment
date after the payment date in [ ], the total
principal payment amount would result in the Class A-1
principal balance equaling zero, an amount equal to (x) the
Class A-1 principal balance plus (y) the remainder of (1) the
sum of the Class A-2 principal balance, the Class A-3
principal balance, the Class A-4 principal balance and the
Class A-5 principal balance minus (2) the Class A Target
Principal Amount; and
(ii) for any payment date thereafter, the remainder of (x) the sum
of the Class A-2 principal balance, the Class A-3 principal
balance, the Class A-4 principal balance and the Class A-5
principal balance minus (y) the Class A Target Principal
Amount;
provided, however, that in no event will the Class A Principal Payment Amount
exceed the Class A principal balance.
The total principal payment amount for any payment date will equal the
remainder of (x) the aggregate Note principal balance minus (y) the contract
pool principal balance as of the last day of the collection period immediately
preceding such payment date; provided that the amount referred to in clause (y)
shall be deemed to be zero on any payment date on which the contract pool
principal balance is less than $1,000,000.
The Class A Target Principal Amount for any payment date will be the
product of (a) the Class A Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding such
payment date.
The Class A Percentage will be approximately [ ]%.
The Class B Principal Payment Amount will equal
(i) zero for any payment date prior to the later of (a) the payment
date in [ ] or (b) the payment date on which the Class A-1
principal balance is reduced to zero; and
(ii) for any payment date thereafter, (a) the Class B principal
balance minus (b) the greater of (x) the Class B Target Principal
Amount and (y) the Class B Floor, if any; provided, however, that
in no event will the Class B Principal Payment Amount exceed the
Class B principal balance.
The Class B Target Principal Amount for any payment date will be the
product of (a) the Class B Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding such
payment date.
The Class B Percentage will be approximately [ ]%.
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The Class B Floor for any payment date will equal (i) [ ]% of the initial
contract pool principal balance, plus (ii) the principal differential, if any,
for such payment date, minus (iii) the sum of the Class C principal balance, the
Class D principal balance (prior to giving effect to any payments of principal
on the Class C or D Notes on such payment date) and the amount on deposit in the
cash collateral account after giving effect to withdrawals to be made on such
payment date; provided, however, that the Class B Floor will never be greater
than the Class B principal balance nor less than zero.
The principal differential for any payment date will equal the excess, if
any, of
(i) the remainder, if any, of
(a) the aggregate Note principal balance (prior to giving effect to
the payment of principal on the Notes on such payment date),
minus
(b) the lesser of (A) the contract pool principal balance as of the
last day of the collection period immediately preceding the
preceding payment date, minus the contract pool principal
balance as of the last day of the collection period immediately
preceding such payment date, or (B) the related collection
period pledged revenues remaining after the payment of amounts
owing to the servicer and the payment of all interest due on
the Notes on such payment date,
over
(ii) the aggregate of the required payoff amounts for all contracts as
of the last day of the collection period immediately preceding
such payment date.
The Class C Principal Payment Amount will equal
(i) zero for any payment date prior to the later of (a) the payment
date in June 1999 or (b) the payment date on which the Class A-1
principal balance is reduced to zero; and
(ii) for any payment date thereafter, (a) the Class C principal
balance minus (b) the greater of (x) the Class C Target Principal
Amount and (y) the Class C Floor, if any; provided, however, that
in no event will the Class C principal payment amount exceed the
Class C principal balance.
The Class C Target Principal Amount for any payment date will be the
product of (a) the Class C Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding such
payment date.
The Class C Percentage will be approximately [ ]%.
The Class C Floor for any payment date will equal (i) [ ]% of the initial
contract pool principal balance, plus (ii) the principal differential, if any,
for such payment date, minus (iii) the sum of the Class D principal balance
(prior to giving effect to any payments of principal on the Class D Notes on
such payment date) and the amount on deposit in the cash collateral account
after giving effect to withdrawals to be made on such payment date; provided,
however, that the Class C Floor will never be greater than the Class C principal
balance nor less than zero. Furthermore, if the Class B principal balance on any
payment date is less than or equal to the Class B Floor on such payment date,
the Class C Floor for such payment date will equal the Class C principal balance
immediately prior to such payment date.
The Class D Principal Payment Amount will equal
(i) zero for any payment date prior to the later of (a) the payment
date in [ ] or (b) the payment date on which the Class
A-1 principal balance is reduced to zero; and
(ii) for any payment date thereafter, the remainder of (a) the Class D
principal balance minus (b) the greater of (x) the Class D Target
Principal Amount and (y) the Class D Floor, if any; provided,
however, that in no event will the Class D Principal Payment
Amount exceed the Class D principal balance.
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The Class D Target Principal Amount for any payment date will be the
product of (a) the Class D Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding such
payment date.
The Class D Percentage will be approximately [ ]%.
The Class D Floor for any payment date will equal (i) [ ]% of the initial
contract pool principal balance, plus (ii) the principal differential, if any,
for such payment date, minus (iii) the amount on deposit in the cash collateral
account after giving effect to withdrawals to be made on such payment date;
provided, however, that the Class D Floor will never be greater than the Class D
principal balance nor less than zero. Furthermore, if the Class C principal
balance on any payment date is less than or equal to the Class C Floor on such
payment date, the Class D Floor for such payment date will equal the Class D
principal balance immediately prior to such payment date.
The additional principal for any payment date will equal the excess, if
any, of (i) the total principal payment amount, over (ii) the sum of the Class A
Principal Payment Amount, the Class B Principal Payment Amount, the Class C
Principal Payment Amount and the Class D Principal Payment Amount.
The aggregate Note principal balance for any payment date will equal the
sum of the Class A-1 principal balance, the Class A-2 principal balance, the
Class A-3 principal balance, the Class A-4 principal balance, the Class A-5
principal balance, the Class B principal balance, the Class C principal balance
and the Class D principal balance.
The contract principal balance of any contract as of the last day of any
collection period is:
(1) in the case of any contract that does not by its terms permit
prepayment or early termination, the present value of the unpaid
scheduled payments due on such contract after such last day of the
collection period (excluding all scheduled payments due on or
prior to, but not received as of, such last day, as well as any
scheduled payments due after such last day and received on or
prior thereto), after giving effect to any prepayments received on
or prior to such last day, discounted monthly at the rate of [ ]%
per annum (assuming, for purposes of such calculation, that each
scheduled payment is due on the last day of the applicable
collection period);
(2) in the case of any contract that permits prepayment or early
termination only upon payment of an amount that is at least equal
to the present value (calculated in the manner described in clause
(1) above) of the unpaid scheduled payments due on such contract
after the date of such prepayment, the amount specified in clause
(1) above; and
(3) in the case of any contract that permits prepayment or early
termination without payment of an amount at least equal to the
amount specified in clause (2) above, the lesser of (a) the
outstanding principal balance of such contract after giving effect
to scheduled payments due on or prior to such last day of the
collection period, whether or not received, as well as any
prepayments, and any scheduled payments due after such last day,
received on or prior to such last day, and (b) the amount
specified in clause (1) above.
The contract principal balance of any contract which became a liquidated
contract during a given collection period or which was a contract subject to a
warranty claim which TCC was obligated to purchase as of the end of a given
collection period will, for purposes of computing the total principal payment
amount and the requisite amount for the cash collateral account, be deemed to be
zero on and after the last day of such collection period.
A liquidated contract is any contract (a) which the servicer has charged
off as uncollectible in accordance with its credit and collection policies and
procedures (which shall be no later than the date as of which the servicer has
repossessed and disposed of the related equipment, or otherwise collected all
proceeds which, in the servicer's reasonable judgment, can be collected under
such contract), or (b) as to which 10% or more of a scheduled payment is
delinquent 180 days or more.
The collection period for any payment date will be the calendar month
preceding the month in which such payment date occurs.
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The initial contract pool principal balance is $ (which amount is
based upon the contract pool principal balance determined as of the cut-off
date, but also includes an amount in respect of scheduled payments on the
contracts due prior to, but not received as of, the cut-off date).
Principal balance means, when used with respect to a class of Notes, the
initial principal balance of such class set forth on page S-[ ], less all
distributions previously made to such class in respect of principal.
REDEMPTION OF NOTES
The Notes are subject to redemption in whole as referred to under 'Optional
Purchase of Contracts' below.
OPTIONAL PURCHASE OF CLASS A-5 NOTES
We will have the right to purchase all of the Class A-5 Notes, on any
payment date, at a purchase price equal to the Class A-5 principal balance plus
a premium equal to the excess, discounted as described below, of (i) the amount
of interest that would have accrued on the Class A-5 Notes at the Class A-5
interest rate during the period commencing on and including the payment date on
which the Class A-5 Notes are to be so purchased to but excluding the stated
maturity date of the Class A-5 Notes, over (ii) the amount of interest that
would have accrued on the Class A-5 Notes over the same period at a per annum
rate of interest equal to the bond equivalent yield to maturity on the fifth
business day preceding such payment date of a United States Treasury security,
which is trading in the public securities market, maturing on a date closest to
the date equal to the remaining average life of the Class A-5 Notes. Such excess
shall be discounted to present value to such payment date at the yield described
in clause (ii) above. For purposes of this paragraph only, (i) the Class A-5
principal balance upon which interest will be deemed to accrue, and (ii) the
weighted average remaining life of the Class A-5 Notes, shall be determined
based upon the amortization of the contract pool principal balance remaining at
such payment date at a rate of [ ]% CPR. Interest payable on the Class A-5
Notes on any such payment date shall be paid to the holders of record on the
related record date in the ordinary manner. Following such purchase, the Class
A-5 Notes will not be retired, but will continue to be entitled to interest and
principal payments on each payment date in the manner described above.
SUBORDINATION OF SUBORDINATE NOTES
The likelihood of payment of interest on each class of Notes will be
enhanced by the application of the amount available, after payment of the
servicing fee, to the payment of such interest prior to the payment of principal
on any of the Notes, as well as by the preferential right of the holders of
Class A, Class B and Class C Notes to receive such interest:
(1) in the case of the Class A Notes, prior to the payment of any
interest on the Class B, Class C and Class D Notes,
(2) in the case of the Class B Notes, prior to the payment of any
interest on the Class C or Class D Notes, and
(3) in the case of the Class C Notes, prior to the payment of any
interest on the Class D Notes.
Likewise, the likelihood of payment of principal on the Class A, Class B and
Class C Notes will be enhanced by the preferential right of the holders of Notes
of each such Class to receive such principal, to the extent of the amount
available, after payment of the servicing fee and interest on the Notes as
aforesaid:
(i) in the case of the Class A Notes, prior to the payment of
principal on the subordinate Notes,
(ii) in the case of the Class B Notes, prior to the payment of
principal on the Class C or Class D Notes, and
(iii) in the case of the Class C Notes, prior to the payment of
principal on the Class D Notes.
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CASH COLLATERAL ACCOUNT
The cash collateral account will be established on or prior to the closing
date and will be available to the indenture trustee. The cash collateral account
will initially be funded in an amount equal to [ ]% of the initial contract
pool principal balance (approximately $[ ]). Amounts on deposit from
time to time in the cash collateral account (up to, but not in excess of, the
requisite amount (as defined below), and not including any investment earnings
on such funds) shall be used to fund the amounts specified below in the
following order of priority (to the extent that amounts on deposit in the
collection account as of any deposit date are insufficient therefor):
(i) to pay interest on the Notes in the following order of priority:
(a) interest on the Class A Notes (including any overdue interest
and interest thereon), (b) interest on the Class B Notes
(including any overdue interest and interest thereon), (c)
interest on the Class C Notes (including any overdue interest and
interest thereon), and (d) interest on the Class D Notes
(including any overdue interest and interest thereon);
(ii) to pay any principal deficiency amount (which is equal to the
lesser of: (a) the aggregate liquidation losses on all contracts
that became liquidated contracts during the related collection
period, or (b) the excess, if any, of (A) the aggregate
principal balance of the Notes (after giving effect to all
distributions of principal from available pledged revenues on
such payment date), over (B) the aggregate of the required
payoff amounts for all contracts as of the last day of the
related collection period); and
(iii) to pay principal on the Notes at the applicable stated maturity
date thereof and on the first payment date on which the contract
pool principal balance is less than $1,000,000.
Liquidation loss means, as to any liquidated contract, the excess, if any,
of (1) the required payoff amount of such contract for the collection period
during which such contract became a liquidated contract, over (2) that portion
of the liquidation proceeds for such liquidated contract allocated to us (as
described under 'Description of Contracts -- Liquidation of Contracts' herein).
If and to the extent that the amount on deposit in the cash collateral
account as of any payment date is less than the requisite amount, such
deficiency is to be restored from the remaining amount available, after
reimbursement of any Servicers Advances and payment of the servicing fee and
interest and principal on the Notes, as described under 'Distributions' above.
The requisite amount will be (i) for any payment date on or prior to the payment
date occurring in [ ], [ ]% of the initial contract pool
principal balance, and (ii) for any payment date thereafter, an amount equal to
the greater of (a) the sum of (1) [ ]% of the contract pool principal balance
for such payment date, plus (2) the excess, if any, of (A) the sum of the
principal balances of the Notes (after giving effect to all distributions of
principal on such payment date), over (B) the contract pool principal balance
for such payment date, and (b) $[ ] (which is [ ]% of the initial
contract pool principal balance); provided that in no event will the requisite
amount exceed the sum of the principal balances of the Notes. Any amount on
deposit in the cash collateral account in excess of the requisite amount, and
all investment earnings on funds in the cash collateral account, will be
released from the cash collateral account and paid to or upon our order, and
will not be available to make payments on the Notes.
The cash collateral account must be an eligible account, and funds on
deposit in the cash collateral account will be invested in eligible investments
(each as defined under 'Description of the Notes -- Trust Accounts' in the
prospectus).
OPTIONAL PURCHASE OF CONTRACTS
We may purchase all of the contracts on any payment date following the date
on which the unpaid principal balance of the Notes is less than 10% of the
initial contract pool principal balance. The purchase price that we pay in
connection with a purchase shall be at least equal to the unpaid principal
balance of the Notes as of such payment date plus interest to be paid on the
Notes on such payment date. The proceeds of the purchase shall be applied on
such payment date to the payment of the remaining principal balance of the
Notes, together with accrued interest thereon.
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REPORTS TO NOTEHOLDERS
The servicer will furnish to the Indenture Trustee, and the Indenture
Trustee will include with each distribution to you, a statement in respect of
the related payment date setting forth, among other things:
(i) the amount of interest paid on each class of the Class A Notes,
including any unpaid interest from the prior payment date, and
any remaining unpaid interest on each class of the Class A Notes;
(ii) the amount of interest paid on each class of the subordinate
Notes, including any unpaid interest from the prior payment
date, and any remaining unpaid interest on each class of the
subordinate Notes;
(iii) the amount of principal paid on each class of the Class A Notes;
(iv) the amount of principal paid on each class of the subordinate
Notes;
(v) the principal deficiency amount, if any, for such payment date;
and
(vi) the requisite amount of the cash collateral account and the
amount on deposit in the cash collateral account (after giving
effect to any deposits and withdrawals to be made on the payment
date).
The Notes will be registered in the name of a nominee of The Depository Trust
Company and will not be registered in the names of the beneficial owners or
their nominees. As a result, unless and until definitive Notes are issued in the
limited circumstances described in the accompanying prospectus under
'Description of the Notes -- Definitive Notes,' beneficial owners will not be
recognized by the Indenture Trustee as noteholders, as that term is used in the
indenture. Hence, until such time, beneficial owners will receive reports and
other information provided for under the indenture only if, when and to the
extent provided by The Depository Trust Company and its participating
organizations. The servicer will file a copy of each such report with the
Securities and Exchange Commission on Form 8-K. However, in accordance with the
Securities Exchange Act of 1934 and the rules and regulations of the Securities
and Exchange Commission thereunder, we expect that our obligation to file such
reports will be terminated at the end of [2000].
SERVICING
The servicer will be responsible for managing, administering, servicing and
making collections on the contracts. Compensation to the servicer will include
(i) a monthly servicing fee, which will be payable to the servicer from the
amount available on each payment date, in an amount equal to the product of
one-twelfth of [ ]% per annum multiplied by the contract pool principal balance
determined as of the last day of the second preceding collection period (or, in
the case of the servicing fee with respect to the collection period commencing
on the cut-off date, the contract pool principal balance as of the cut-off
date); (ii) any late fees, late payment interest, documentation fees, insurance
administration charges and other administrative charges and a portion of any
extension fees, collectively, the administrative fees, collected with respect to
the contracts during the related collection period; and (iii) any investment
earnings on collections prior to their deposit thereof in the collection
account. The servicer may be terminated as servicer under certain circumstances,
in which event a successor servicer would be appointed to service the contracts.
See 'Newcourt Credit Group Inc.' and 'Description of the Sale and Contribution
Agreements -- Servicing -- Events of Termination' in the prospectus.
THE INDENTURE TRUSTEE
The [ ] will serve as the Indenture Trustee. The
Indenture Trustee may resign at any time, in which event we will be obligated to
appoint a successor trustee. We may also remove the Indenture Trustee if the
Indenture Trustee ceases to be eligible to continue as such under the indenture,
if the Indenture Trustee becomes insolvent or if the rating assigned to the
long-term unsecured debt obligations of the Indenture Trustee (or the holding
company thereof) by the rating agencies shall be lowered below the rating of
'BBB,' 'Baa3' or equivalent rating or be withdrawn by any rating agency. In such
circumstances, we will be obligated to appoint a successor trustee. Any
resignation or removal
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of the Indenture Trustee and appointment of a successor trustee will not become
effective until acceptance of the appointment by a successor trustee.
CONCENTRATION AMOUNTS
In addition to the representations and warranties made by the originators
and us with respect to the contracts as described above under 'The
Contracts -- Representations and Warranties Made by the Originator,' we will
represent and warrant as of the statistical calculation date (calculated
utilizing the statistical discount rate equal to [ ]) as follows:
(i) the aggregate discounted contract balance of all
end-user contracts with obligors that are governmental entities
or municipalities does not exceed [ ]% of the aggregate
discounted contract balance of the contract pool;
(ii) the aggregate discounted contract balance of all end-user
contracts which finance, lease or which are predominately
related to software will not exceed [ ]% of the aggregate
discounted contract balance of the contract pool; and
(iii) the aggregate discounted contract balance of all
end-user contracts with obligors who comprise the five (5)
largest obligors (measured by aggregate discounted contract
balance as of the date of determination) does not
exceed [ ]% of the aggregate discounted contract balance of the
contract pool.
On the date an additional contract or a substitute contract is added to the
contract pool and we will make the foregoing representations and warranties as
if such transfer occurred on the closing date; provided, that, for the purposes
thereof (i) the contract pool on the closing date shall be deemed to include
such additional contract or substitute contract in lieu of the contract being
replaced or substituted and (ii) the discounted contract balance of such
additional contract or substitute contract shall be equal to the discounted
contract balance thereof as of the related cut-off date.
The Indenture Trustee shall reassign to us, and the originator will be
obligated to purchase from us, any contract transferred by the seller (and any
related equipment or applicable security) selected by the servicer at such time
as there is a breach of any of the foregoing representations or warranties,
which breach has not been cured or waived in all material respects, the removal
of which shall remedy such breach. Such purchase shall occur no later than 90
days after we or the seller becomes aware, or receives written notice from the
servicer or us, of such breach. This purchase obligation will constitute the
sole remedy against the seller available to us, the Indenture Trustee and the
noteholders or certificateholder for a breach of one of the foregoing
representations or warranties.
Pursuant to the Pooling and Servicing Agreement, a contract transferred by
the seller shall be reassigned to us and we shall make a deposit in the
collection account in immediately available funds in an amount equal to the sum
of the discounted contract balance of such contract (together with accrued
interest thereon at the discount rate) and any outstanding servicer advances
thereon. Any amount deposited into the collection account in connection with the
reassignment of a contract transferred by the seller shall be considered payment
in full of the ineligible contract. Any such amount shall be considered a
transfer deposit amount and shall be treated as an available amount. In the
alternative, we may instead cause the seller, to convey to us, for concurrent
conveyance to the trust and concurrent pledge to the Indenture Trustee, a
substitute contract (otherwise satisfying the terms and conditions generally
applicable to substitute contracts in other situations described herein) in
replacement for the affected contract, which shall thereupon be deemed released
by the trust (and Indenture Trustee) and reconveyed through us to the seller
thereof.
INDEMNIFICATION
The pooling and servicing agreement provides that the servicer will
indemnify us, the Owner Trust, the Owner Trustee, and the Indenture Trustee from
and against any loss, liability, expense, damage or injury suffered or sustained
arising out of the servicer's actions or omissions with respect to the trust
pursuant to the pooling and servicing agreement except where arising out of
indemnified party's bad faith, willful misconduct or gross negligence. Pursuant
to the pooling and servicing agreement, the
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servicer, irrevocably and unconditionally, (i) submits for itself and its
property in any legal action arising out of the pooling and servicing agreement
and the other operative documents, to the nonexclusive general jurisdiction of
the courts of the United States of America for the Southern District of New
York, and appellate courts therefrom and (ii) waives any objection it may have
that any action therein was brought in an inconvenient court. Notwithstanding
the foregoing, a court may determine, on its own motion, that an action brought
against the servicer in any such court was brought in an inconvenient forum.
Except as provided in the preceding paragraph, the pooling and servicing
agreement provides that none of us, the servicer or any of their directors,
officers, employees or agents will be under any other liability to the trust,
the Owner Trustee, the Indenture Trustee, the holders of Notes or subordinated
securities or any other person for any action taken, or for refraining from
taking any action, in good faith pursuant to the pooling and servicing
agreement. However, none of us, the servicer or any of their directors,
officers, employees or agents will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties thereunder.
In addition, the Pooling and servicing agreement provides that the servicer
is not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the pooling and
servicing agreement. The servicer may, in its sole discretion, undertake any
such legal action which it may deem necessary or desirable for the benefit of
holders of Notes or subordinated securities with respect to the pooling and
servicing agreement and the rights and duties of the parties thereto and the
interest of noteholders or holders of the subordinated securities thereunder.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of the material United
States federal income tax consequences of the purchase, ownership and
disposition of the Notes. The discussion that follows, and the opinion described
below of Winston & Strawn, special tax counsel to us ('Tax Counsel'), are based
upon current provisions of the Internal Revenue Code of 1986, as amended,
existing and proposed Treasury Regulations, current administrative rulings,
judicial decisions and other applicable authorities in effect as of the date
hereof, all of which are subject to change, possibly with retroactive effect.
There are no cases, regulations, or Internal Revenue Service rulings on
comparable transactions or instruments to those described in this prospectus
supplement. As a result, there can be no assurance that the Internal Revenue
Service will not challenge the conclusions reached in this description of
Material Federal Income Tax Consequences, and no ruling from the Internal
Revenue Service has been or will be sought on any of the issues discussed below.
Furthermore, legislative, judicial or administrative changes may occur, perhaps
with retroactive effect, which could affect the accuracy of the statements set
forth below.
This summary of material federal income tax matters is divided into two
parts. The first part describes the classification of the Notes as debt and the
treatment of the trust as a pass-thru entity (i.e., rather than as a corporation
or other entity subject to tax at the entity level). The second part describes
the taxation of an investor in the Notes. BECAUSE THIS SUMMARY OF MATERIAL
FEDERAL INCOME TAX CONSEQUENCES IS INTENDED TO BE GENERAL IN NATURE, PROSPECTIVE
INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE,
LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE NOTES.
CLASSIFICATION OF THE NOTES AND THE TRUST
In connection with the issuance of the Notes, Tax Counsel will deliver its
opinion that, for federal income tax purposes, under existing law (1) the trust
will not be treated as an association (or publicly traded partnership) taxable
as a corporation and (2) the Notes will be treated as indebtedness. In rendering
these opinions, Tax Counsel has assumed that the terms of the various documents
relating to
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the issuance of the Notes will be complied with by all of the parties to the
transaction. Those terms include a requirement, which each investor agrees to by
virtue of acquiring ownership of any beneficial interest in a Note, that the
trust and the investors in the Notes treat the Notes as indebtedness for federal
income tax purposes. The opinion of Tax Counsel does not foreclose the
possibility of a contrary determination by the Internal Revenue Service or by a
court of competent jurisdiction, or of a contrary position by the Internal
Revenue Service or Treasury Department in regulations or rulings issued in the
future.
Although it is the opinion of Tax Counsel that the trust will not be
treated as an association (or publicly traded partnership) taxable as a
corporation and the Notes will be characterized as indebtedness for federal
income tax purposes, no assurance can be given that such characterization of the
trust or the Notes will prevail. If, contrary to the opinion of Tax Counsel, the
Internal Revenue Service successfully asserted that one or more of the Notes did
not represent debt for federal income tax purposes, such Notes might be treated
as equity interests in the trust. As a result, the trust might be classified as
a publicly traded partnership taxable as a corporation. If the trust were
classified as a publicly traded partnership taxable as a corporation, the trust
would be subject to United States federal income tax on its net income. An
imposition of such corporate-level income tax could materially reduce the amount
of cash that would be available to make payments of principal and interest on
the Notes. Alternatively, if the trust were classified as a partnership (other
than a publicly traded partnership taxable as a corporation), the trust itself
would not be subject to United States federal income tax. Instead, holders of
Notes that were determined to be equity interests in such partnership would be
required to take into account their allocable share of the trust's income and
deductions. Such treatment may have adverse federal income tax consequences for
certain noteholders. For example: (1) income to certain tax-exempt entities
(including pension funds) may constitute 'unrelated business taxable income,'
(2) income to foreign holders generally would be subject to U.S. tax and U.S.
tax return filing and withholding requirements, (3) individual holders might be
subject to certain limitations on their ability to deduct their share of trust
expenses, and (4) income from the trust's assets would be taxable to noteholders
without regard to whether cash distributions are actually made by the trust or
any particular noteholder's method of tax accounting.
The discussion that follows assumes that the Notes will be treated as
indebtedness for federal income tax purposes.
TAX TREATMENT OF NOTEHOLDERS
Payments of Interest. An investor will be taxed on the amount of payments
of interest on a Note as ordinary interest income at the time it accrues or is
received in accordance with the investor's regular method of accounting for
United States federal income tax purposes.
Sale or Other Disposition of a Note. An investor who disposes of a Note,
whether by sale, exchange for other property, or payment by the trust, will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale or other disposition (not including any amount attributable
to accrued but unpaid interest) and the investor's adjusted tax basis in the
Note. In general, an investor's adjusted tax basis in a Note will be equal to
the initial purchase price. Any gain or loss recognized upon the sale or other
disposition of a Note will be capital gain or loss. For non-corporate investors,
capital gain recognized on the sale or other disposition of a Note held by the
investor for more than one year will be taxed at a maximum rate of 20%. Capital
gain for a Note held for one year or less is taxed at the rates applicable to
ordinary income (i.e., up to 39.6%). Taxpayers must aggregate capital gains and
losses for each taxable year. In the event a taxpayer realizes a net capital
loss for any year there are limits on the amount of such capital losses which
can be deducted.
Information Reporting and Backup Withholding. The trust (or an agent acting
on its behalf) will be required to report annually to the Internal Revenue
Service, and to each non-corporate noteholder, the amount of interest paid on
the Notes for each calendar year. Each non-corporate noteholder (other than
noteholders who are not subject to the reporting requirements) will be required
to provide, under penalties of perjury, a certificate (Form W-9) containing the
noteholder's name, address, correct federal taxpayer identification number and a
statement that the noteholder is not subject to backup withholding. Should a
non-exempt noteholder fail to provide the required certification, the trust will
be
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required to withhold (or cause to be withheld) 31% of the interest otherwise
payable to the noteholder and remit the withheld amounts to the Internal Revenue
Service as a credit against the noteholder's federal income tax liability.
STATE AND LOCAL TAX CONSEQUENCES
Because of the differences in state and local tax laws and their
applicability to different investors, it is not possible to summarize the
potential state and local tax consequences of purchasing, holding or disposing
of the Notes. ACCORDINGLY, PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISERS REGARDING THE STATE AND LOCAL TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES.
ERISA CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the prospectus under 'ERISA
Considerations.'
Section 406 of the Employee Retirement Income Security Act, as amended
('ERISA'), and/or Section 4975 of the Internal Revenue Code, prohibits a
pension, profit-sharing or other employee benefit plan, as well as individual
retirement accounts and certain types of Keogh Plans (each a 'Benefit Plan')
from engaging in certain transactions with persons that are 'parties in
interest' under ERISA or 'disqualified persons' under the Internal Revenue Code
with respect to such Benefit Plan. A violation of these 'prohibited transaction'
rules may result in an excise tax or other penalties and liabilities under ERISA
and the Internal Revenue Code for such persons. Title I of ERISA also requires
that fiduciaries of a Benefit Plan subject to ERISA make investments that are
prudent, diversified (except if prudent not to do so) and in accordance with
governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Internal Revenue Code if assets of the Owner Trust were deemed to be assets of a
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the 'Plan Assets Regulation'), the assets of the Owner Trust would be treated
as plan assets of a Benefit Plan for the purposes of ERISA and the Internal
Revenue Code only if the Benefit Plan acquires an 'equity interest' in the Owner
Trust and none of the exceptions contained in the Plan Assets Regulation is
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest in an entity other than an instrument which is treated as indebtedness
under applicable local law and which has no substantial equity features. The
Plan Assets Regulation also provides that a beneficial interest in a trust is an
equity interest. Although there can be no assurances in this regard, it appears
that the Notes should be treated as debt without substantial equity features for
purposes of the Plan Assets Regulation and that the Notes do not constitute
beneficial interests in the Owner Trust for purposes of the Plan Assets
Regulation. However, without regard to whether the Notes are treated as an
equity interest for such purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Owner Trust, the Owner Trustee or the Indenture Trustee, or
any of their respective affiliates is or becomes a party in interest or a
disqualified person with respect to such Benefit Plan. In such case, 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') 96-23, regarding transactions effected by 'in-house
asset managers'; PTCE 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 95-60, regarding transactions effected by 'insurance
company general accounts'; PTCE 91-38, regarding investments by bank collective
investment funds; and PTCE 84-14, regarding transactions effected by 'qualified
professional asset managers.'
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF ANY OF THE NOTES SHOULD
CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING WHETHER THE ASSETS OF THE OWNER
TRUST WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBIL-
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ITY OF EXEMPTIVE RELIEF FROM THE PROHIBITED TRANSACTION RULES AND OTHER ISSUES
AND THEIR POTENTIAL CONSEQUENCES.
RATINGS OF THE NOTES
It is a condition of issuance that each of Standard & Poor's Ratings
Services, Moody's Investors Service, Inc. and Fitch IBCA, Inc. (i) rate the
Class A-1 Notes in its highest short-term rating category, (ii) rate the Class
A-2, Class A-3, Class A-4 and Class A-5 Notes in its highest long-term rating
category, (iii) rate the Class B Notes at least [ ], respectively,
(iv) rate the Class C Notes at least [ ], respectively, and (v)
rate the Class D Notes at least [ ], respectively. The rating of
each class of Notes addresses the likelihood of the timely receipt of interest
and payment of principal on such class of Notes on or before the stated maturity
date for such Class. The rating of the Notes will be based primarily upon the
pledged revenues, the cash collateral account and the subordination provided by
(1) the subordinate Notes, in the case of the Class A Notes, (2) the Class D and
Class C Notes, in the case of the Class B Notes and (3) the Class D Notes, in
the case of the Class C Notes. There is no assurance that any such rating will
not be lowered or withdrawn by the assigning rating agency if, in its judgment,
circumstances so warrant. In the event that a rating or ratings with respect to
the Notes is qualified, reduced or withdrawn, no person or entity will be
obligated to provide any additional credit enhancement with respect to the Notes
so qualified, reduced or withdrawn.
The rating of the Notes should be evaluated independently from similar
ratings on other types of securities. A rating is not a recommendation to buy,
sell or hold the Notes, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The ratings of the Notes do not
address the likelihood of payment of principal on any class of Notes prior to
the stated maturity date thereof, or the possibility of the imposition of United
States withholding tax with respect to non-United States Persons.
The term 'United States Person' means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States or any political subdivision thereof, (iii) an estate the
income of which is includable in gross income for United States federal income
tax purposes, regardless of its source, or (iv) a trust, (A) with respect to
which a court within the United States is able to exercise primary supervision
over its administration, and one or more United States fiduciaries have the
authority to control all of its substantial decisions, or (B) otherwise, the
income of which is subject to U.S. federal income tax regardless of its source.
USE OF PROCEEDS
We will use the proceeds from the offering and sale of the Notes, after
funding a portion of the cash collateral account and paying our expenses, to pay
down certain warehousing facilities, with any remaining funds to be paid to the
originators.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, [List Underwriters], collectively, the
underwriters, have severally agreed to purchase from us the following respective
initial principal amounts of Notes at the respective public offering prices less
the respective underwriting discounts set forth on the cover page of this
prospectus supplement:
<TABLE>
<CAPTION>
INITIAL INITIAL INITIAL INITIAL INITIAL
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES CLASS A-5 NOTES
----------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
</TABLE>
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any of such Notes are purchased. The underwriters have advised us that
they 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 A-5 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 A-5 Note, [ ]% per Class B Note, [ ]% per Class C Note and
[ ]% per Class D Note. After the Notes are released for sale to the public, the
offering prices and other selling terms may be varied by the underwriters.
In connection with the offering of the Notes, [List certain underwriters],
on behalf of the underwriters, may engage in overallotment, stabilizing
transactions and syndicate covering transactions in accordance with Regulation M
under the Exchange Act. Overallotment involves sales in excess of the offering
size, which creates a short position for the underwriters. Stabilizing
transactions involve bids to purchase the Notes in the open markets for the
purpose of pegging, fixing or maintaining the price of the Notes. Syndicate
covering transactions involve purchases of Notes in the open market after the
distribution has been completed in order to cover short positions. Stabilizing
transaction and syndicate covering transactions may cause the price of the Notes
to be higher than it would otherwise be in the absence of those transactions. If
the [List certain underwriters] engage in stabilizing or syndicate covering
transactions, they may discontinue them at any time.
[ and certain of its affiliates have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.]
The Notes are new issues of securities with no established trading market.
The underwriters have advised us that the underwriters intend to make a market
in the Notes but are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
We have estimated that we will spend approximately $ million for
printing, rating agency, trustee and legal fees and other expenses related to
the offering.
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LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
originators and us by Winston & Strawn. The validity of the Notes offered hereby
will be passed upon for the underwriters by . The
Indenture, the Sale and Contribution Agreement, the Trust Agreement, the
purchase agreements and the Notes will be governed by the laws of the State of
New York.
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Amount Available.................................................................................... S-29
Available Pledged Revenues.......................................................................... S-29
Benefit Plan........................................................................................ S-45
Cash Collateral Account............................................................................. S-10, S-38
Class A Notes....................................................................................... S-29
Class A Principal Payment Amount.................................................................... S-34
Class A Target Principal Amount..................................................................... S-34
Class A Percentage.................................................................................. S-34
Class B Interest Rate............................................................................... S-31
Class B Principal Payment Amount.................................................................... S-34
Class B Target Principal Amount..................................................................... S-34
Class B Percentage.................................................................................. S-35
Class B Floor....................................................................................... S-35
Class C Interest Rate............................................................................... S-32
Class C Principal Payment Amount.................................................................... S-35
Class C Target Principal Amount..................................................................... S-35
Class C Percentage.................................................................................. S-35
Class C Floor....................................................................................... S-35
Class D Interest Rate............................................................................... S-32
Class D Principal Payment Amount.................................................................... S-35
Class D Target Principal Amount..................................................................... S-36
Class D Percentage.................................................................................. S-36
Class D Floor....................................................................................... S-36
Closing Date........................................................................................ S-7
Internal Revenue Code............................................................................... S-40
CPR................................................................................................. S-23
Current Collection Period Pledged Revenues.......................................................... S-29
Depositor........................................................................................... S-5
The Depository Trust Company........................................................................ S-29
ERISA............................................................................................... S-45
Exchange Act........................................................................................ S-4
Indenture........................................................................................... S-5, S-29
Indenture Trustee................................................................................... S-5, S-29
Internal Revenue Service............................................................................ S-40
Notes............................................................................................... S-29
Owner Trust......................................................................................... S-5
Owner Trustee....................................................................................... S-5, S-15
Plan Assets Regulation.............................................................................. S-45
PTCE................................................................................................ S-45
Related Collection Period Pledged Revenues.......................................................... S-29
Servicer............................................................................................ S-5
Tax Counsel......................................................................................... S-5
Sale and Contribution Agreement..................................................................... S-14
Trust Agreement..................................................................................... S-14
Trust Assets........................................................................................ S-8, S-14
United States Alien Holder.......................................................................... S-40
United States Person................................................................................ S-46
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PROSPECTUS
NCT FUNDING COMPANY, L.L.C.
RECEIVABLE-BACKED NOTES
(ISSUABLE IN SERIES)
NCT FUNDING COMPANY, L.L.C.
DEPOSITOR
AT&T CAPITAL CORPORATION
SERVICER
We are offering receivable-backed notes under this prospectus and a
prospectus supplement, which will be prepared separately for each series of
notes offered. We refer to the receivable-backed notes as Notes. We will form a
trust for each series of Notes, which may include one or more classes of Notes,
and the trust will issue the Notes of that series. Each trust may also issue one
or more additional interests in such trust, which will not be offered under this
prospectus or the related prospectus supplement.
We will use the proceeds from the issuance of each series of Notes to
acquire or repurchase a pool of equipment leases, installment sale contracts,
promissory notes, loan and security agreements and similar types of receivables
which we will simultaneously transfer to a trust.
The right of each class of Notes of a series to receive payments may be
senior or subordinate to the rights of one or more of the other classes of
Notes. The rate of principal and interest payment on the Notes of any class will
depend on the priority of payment of such class and the rate and timing of
payments of the related contracts.
------------------------
THE NOTES OF A GIVEN SERIES WILL REPRESENT OBLIGATIONS OF THE RELATED OWNER
TRUST AND WILL NOT REPRESENT ANY INTEREST IN OR OBLIGATION OF NEWCOURT FINANCIAL
USA INC., NEWCOURT LEASING CORPORATION, NEWCOURT COMMUNICATIONS FINANCE
CORPORATION, NEWCOURT COMMERCIAL FINANCE CORPORATION, NEWCOURT TECHNOLOGIES
CORPORATION, NCT FUNDING COMPANY, L.L.C., AT&T CAPITAL CORPORATION OR ANY OF
THEIR RESPECTIVE AFFILIATES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------------
This prospectus may not be used to consummate sales of a series of Notes
unless accompanied by the prospectus supplement relating to such series.
Prospectus dated , 1999.
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TABLE OF CONTENTS
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT............................................................................................... 3
REPORTS TO NOTEHOLDERS..................................................................................... 3
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 3
PROSPECTUS SUMMARY......................................................................................... 5
RISK FACTORS............................................................................................... 11
THE DEPOSITOR.............................................................................................. 22
THE OWNER TRUSTS........................................................................................... 23
NEWCOURT CREDIT GROUP INC.................................................................................. 24
AT&T CAPITAL CORPORATION................................................................................... 25
THE ORIGINATORS............................................................................................ 26
THE CONTRACTS.............................................................................................. 32
DESCRIPTION OF THE NOTES AND INDENTURE..................................................................... 46
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS........................................................ 57
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................................................... 61
ERISA CONSIDERATIONS....................................................................................... 67
RATINGS OF THE NOTES....................................................................................... 68
USE OF PROCEEDS............................................................................................ 68
PLAN OF DISTRIBUTION....................................................................................... 68
LEGAL MATTERS.............................................................................................. 68
INDEX OF TERMS............................................................................................. 69
APPENDIX A................................................................................................. 70
PART II.................................................................................................... II-1
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the Notes in two separate documents that progressively
provide more detail:
this prospectus, which provides general information, some of which may not
apply to a particular series of securities, including your series of
Notes; and
the prospectus supplement related to the particular terms of your series
of securities.
IF THE TERMS OF YOUR SERIES OF NOTES DESCRIBED IN THE PROSPECTUS SUPPLEMENT
VARIES FROM THIS PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN YOUR
PROSPECTUS SUPPLEMENT.
We include cross-references in this prospectus and in your prospectus
supplement to captions in these materials where you can find further related
discussions. The table of contents above and the table of contents included in
your prospectus supplement provide the pages on which these captions are
located.
You can find a listing of pages where we define capitalized terms used in
this prospectus under the caption 'Index of Terms' beginning on page 68 in this
prospectus and under the caption 'Index of Terms' in your prospectus supplement.
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document is accurate only as
of the date of this document.
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 YOUR PROSPECTUS
SUPPLEMENT.
If you have received a copy of this prospectus and your prospectus
supplement in an electronic format, and if the legal prospectus delivery period
has not expired, you may obtain a paper copy of this prospectus and your
prospectus supplement from us or an underwriter by asking us or any of them for
it.
REPORTS TO NOTEHOLDERS
Until the Notes of a particular series are issued in physical, rather than
book-entry, form, unaudited monthly and annual reports, which contain
information concerning the owner trust prepared by the servicer, will be sent by
the indenture trustee on behalf of the owner trust only to Cede & Co. You can
find a more detailed description of this process in this prospectus under the
heading 'Description of the Notes and Indenture -- Book-Entry Registration.'
If you purchase a Note, you may receive these reports by making a written
request to the Indenture Trustee disclosed in the prospectus supplement. These
reports do not constitute financial statements prepared in accordance with
generally accepted accounting principles. Neither we nor the servicer intends to
send any of our financial reports to owners of a Note. The servicer, on behalf
of an owner trust, will file with the Securities and Exchange Commission
periodic reports concerning such owner trust as required by law.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with the
Securities and Exchange Commission, 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 Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. You can also read and copy such reports, proxy
statements and other information at the following regional offices of the
Securities and Exchange Commission:
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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, IL 60661
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Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
more information about the public reference rooms or visit the Securities and
Exchange Commission's web site at http://www.sec.gov to access available
filings.
The Securities and Exchange Commission allows us to 'incorporate by
reference' some of the information we file with it, which means that we can
disclose important information to you by referring you to those documents. The
information that we incorporate by reference is considered to be part of this
prospectus, and later information that we file with the Securities and Exchange
Commission will automatically update and supersede this information.
All documents filed by the servicer, on behalf of a respective owner trust,
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, after the date of this prospectus and prior to the termination
of the offering of the Notes will be incorporated by reference into this
prospectus.
Upon your request, we will provide to you, as a beneficial owner of the
Notes to whom a prospectus has been delivered, a copy of the information that
has been incorporated by reference in this prospectus. We will provide this
information to you at no cost to you. Please address such requests to: Newcourt
Credit Group, Inc., Attn: at , Telephone No.
.
4
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PROSPECTUS SUMMARY
On the cover page, in this summary and in the 'Risk Factors' section, the
words 'NCT Funding Company,' 'we,' 'our,' 'ours,' and 'us' refer only to NCT
Funding Company, L.L.C. This summary highlights selected information regarding
the notes. This summary 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 notes, you should read this entire prospectus and the prospectus supplement
prepared for your series of notes.
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Issuer.................................... For each series of Notes, we will form a trust and prepare a
prospectus supplement with respect to such series. We will refer to
each trust as an owner trust. Each owner trust will own a pool of
contracts and certain other assets. For more information, see 'The
Owner Trusts' in this prospectus and 'The Owner Trust' in your
prospectus supplement.
Depositor................................. We will transfer the contracts to the respective owner trusts. For
more information, see 'The Depositor' in this prospectus. Our chief
executive offices are currently located at 2 Gatehall Drive,
Parsippany, New Jersey 07054 and its telephone number is (973)
606-4879. For a more complete description of us, see 'The Depositor'
in this prospectus.
Servicer.................................. AT&T Capital Corporation will service the contracts. See 'Description
of the Pooling and Servicing Agreements -- Servicing' in this
prospectus. We will refer to AT&T Capital Corporation in this
prospectus as AT&T Capital and, sometimes, as the servicer. AT&T
Capital will manage, administer, service, and make collections on the
pool of contracts related to your series of Notes. Compensation to
the servicer will include a monthly fee in an amount specified in the
prospectus supplement. AT&T Capital's chief executive offices are
currently located at 2 Gatehall Drive, Parsippany, New Jersey 07054
and its telephone number is (973) 606-4879. AT&T Capital is a wholly
owned indirect subsidiary of Newcourt Credit Group Inc. For a more
complete description of Newcourt USA, see 'Newcourt Credit Group
Inc.' in this prospectus.
The servicer will be required to cause amounts collected on the
contracts on behalf of an Owner Trust to be deposited into a
collection account to be maintained by an Indenture Trustee no later
than two business days following the Servicer's determination that
such amounts related to the contracts. The servicer may also, at its
option, make advances (each, a 'Servicer Advance') for delinquent
scheduled payments, to the extent it determines in its sole
discretion that such advances will be recoverable in future periods;
such Servicer Advances are reimbursable from payments received on the
Contracts as described in the prospectus supplement.
Under certain limited circumstances, the Servicer may resign or be
removed, in which event either the Indenture Trustee or a third party
meeting the requirements set forth
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in the related pooling and servicing agreement will be appointed as
successor servicer.
Indenture Trustee......................... For your series of Notes, we will identify the indenture trustee in
your prospectus supplement.
Owner Trustee............................. For your series of Notes, we will identify the owner trustee in your
prospectus supplement.
The Notes................................. Each owner trust will issue one or more classes of notes pursuant to
an indenture. The owner trust may also issue one or more other
classes of notes and/or securities representing beneficial ownership
interests in a particular owner trust, which will not be offered by
this prospectus.
Terms of the Notes
Payment Dates......................... You will receive payments of interest and principal on your Notes on
the dates specified in your prospectus supplement. The interest rates
for each class of Notes in your series also will be set forth in your
prospectus supplement. For a complete description of the terms of the
Notes, see 'Description of the Notes and Indenture' in this
prospectus and in your prospectus supplement.
Interest.............................. You will receive payments of interest on the Notes of your series on
the dates specified in your prospectus supplement, commencing on the
date specified in your prospectus supplement. The interest rate for
each class of Notes of your series is set forth in your prospectus
supplement. See 'Description of the Notes and Indenture' in this
prospectus and in your prospectus supplement.
Principal............................. You will receive principal payments on the Notes on the dates
specified in your prospectus supplement. The amount of principal
payable on the Notes on each payment date will generally be equal to
the difference between the aggregate principal balance of the Notes
on that payment date and the aggregate of the contract principal
balances (as discussed herein) of the contracts. The contract
principal balance of any contract is generally the present value of
the unpaid scheduled payments due on that contract discounted at a
discount rate generally equal to the weighted average of each class
of Notes and certificates representing beneficial ownership interests
in the respective owner trust (if applicable) each weighted by the
initial principal balance of each class of Notes and certificates
representing beneficial ownership interests in the respective owner
trust (if applicable) and the expected average life of such class
assuming no losses and an assumed constant prepayment rate and
servicing fee percentage. The aggregate of the contract principal
balances is referred to as the 'contract pool principle balance'. See
'Description of the Notes and Indenture' in this prospectus and in
your prospectus supplement.
Subordination......................... The right of each class of Notes of a series to receive payments of
principal and interest may be senior or subordinate to the rights of
one or more of the other
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classes of Notes. This makes it more likely that senior Notes will be
paid all interest and principal due on them, and less likely that
subordinate Notes will be paid all interest and principal due on
them. For a more complete description of the subordination of the
Notes, see 'Description of the Notes and Indenture' in this
prospectus and in your prospectus supplement.
Ratings............................... An owner trust will not issue a series of Notes unless one or more
nationally recognized rating agencies have assigned ratings to the
Notes in a category that signifies investment grade. For a more
complete description of the ratings of the Notes, see 'Ratings of the
Notes' in this prospectus and in your prospectus supplement.
Use of Proceeds........................... Each owner trust will use a significant portion of the proceeds from
the offering and sale of each series of Notes to pay the depositor of
contracts for the transfer of the contracts to a respective trust.
Trust Assets.............................. Each owner trust will make payments on the Notes issued by such owner
trust primarily from funds received by the respective owner trust
from the following assets:
a pool of equipment lease contracts, installment sale contracts,
promissory notes, conditional sale/financing agreements, loan and
security agreements and other similar types of receivables, each,
a contract, with various lessees, borrowers or other obligors
thereunder, each, an obligor, including scheduled payments,
prepayments and liquidation proceeds of the contracts, but not the
rights of the lessor in the equipment subject to a contract that
is a lease rather than a loan;
amounts on deposit in certain accounts, including the Collection
Account (as described in this prospectus); and
certain other property and assets.
The Contracts............................. Your prospectus supplement provides the particular terms of your
series of Notes and information about:
the initial principal balance of the contracts transferred to the
respective owner trust;
the number of contracts;
the average contract principal balance;
the various types of contracts;
the geographical distribution of the contracts;
the approximate percentage amount of the contracts originated by
the originators and by third parties and purchased by an
originator;
the remaining term of the contracts; and
the weighted average remaining term of the contracts.
Originators............................... The contracts owned by each owner trust will have been originated or,
in some cases, acquired by one or more of the indirect subsidiaries
of Newcourt Credit Group Inc.: Newcourt USA, Newcourt Leasing
Corporation, Newcourt
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Communications Finance Corporation, Newcourt Technologies Corporation
and Newcourt Commercial Finance Corporation, collectively, the
originators. See 'Newcourt Credit Group Inc.' and 'The Originators'
in this prospectus.
Contract Prepayments...................... Some contracts may:
not permit the obligor to prepay the amounts due under the
contract or otherwise terminate the contract prior to its
scheduled expiration date, or
allow for a prepayment or early termination upon payment of an
amount that is at least equal to the present value of the future
scheduled payments on the contract determined using a discount
rate specified in your prospectus supplement, or
allow for a prepayment or early termination without the payment of
such an amount.
Some contracts permit the obligor to prepay the contract, in whole or
in part, at any time for an amount equal to the unpaid principal plus
accrued interest.
Liquidated Contracts...................... Proceeds from the liquidation of a defaulted contract will be
allocated as described in your prospectus supplement.
Mandatory Purchase or Replacement of
Certain
Contracts............................... Each originator will make certain representations and warranties
regarding the contracts and must purchase (or deliver a similar
contract as a replacement for) any contract in the event of a breach,
if not cured within a specified period, of any of these
representations or warranties that materially and adversely affects
the value of such contract. See 'The Contracts -- Representations and
Warranties made by the Originators' in this prospectus and in your
prospectus supplement.
Leased Equipment.......................... We will not transfer to any owner trust our interest in the equipment
related to the contracts that are leases, including the right to
receive the leased equipment upon expiration of the original term of
the related contract. Upon the sale of any leased equipment, the
proceeds an owner trust will receive from such sale will be limited
to the amount of the current balance on the related contract.
Credit Enhancement........................ The terms of a series of Notes may provide for credit enhancement
with respect to an owner trust or any class of Notes. Such credit
enhancement may include any one or more of the following: a cash
collateral account, a financial guaranty insurance policy issued by
an insurer specified in the related prospectus supplement,
subordination of one or more other classes of Notes, a reserve
account, overcollateralization, letters of credit or liquidity
facilities, repurchase obligations, third party payments or other
support, cash deposits or other arrangements. For a complete
description of the terms of any credit
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enhancement applicable to your series of Notes, see 'Description of
the Notes and Indenture -- Credit Enhancement' in your prospectus
supplement.
Priority of Payments...................... On each payment date, the indenture trustee on behalf of the
respective owner trust will use payments collected on the contracts
to pay the following:
reimbursement of Servicer Advances;
the servicing fee to the servicer for servicing the contracts;
interest on the Notes;
principal on the Notes, allocated to the various classes as
described under 'Principal' above;
certain amounts payable in connection with the credit enhancement
for that series of Notes; and
the remainder, if any, to the holder of the certificates, if any,
of a respective owner trust or, if none, then to us.
Optional Purchase of Contracts............ Once the principal balance of the Notes of a specific series is less
than 10% of the initial principal balance of the contracts
transferred to a respective owner trust, we may repurchase all the
contracts needed by such Owner Trust. That would result in a
prepayment of the outstanding Notes. For a more complete description
of this repurchase right, see 'Description of the Notes and
Indenture -- Optional Purchase of Contracts' in this prospectus and
in your prospectus supplement.
Substitution.............................. AT&T Capital, as the servicer, will have the option pursuant to the
terms of the related pooling and servicing agreement, to substitute
into the owner trust one or more contracts having similar
characteristics for contracts in default, and contracts following a
material modification to or adjustment of the terms of such contract
which modification or adjustment would not otherwise be permissible
under the related pooling and servicing agreement (unless the
contract was to be prepaid in full to the owner trust and refinanced
by the related originator with a new, modified contract outside of
the owner trust). The contract principal balance of the defaulted
contracts for which the servicer, on behalf of an originator, may
cause the substitution of contracts is limited to an amount not in
excess of 10% of the contract principal balance of the contracts as
of the closing date. AT&T Capital, as the servicer, will also be
permitted to substitute a contract on behalf of an originator which
would otherwise be required to be repurchased due to certain
representations or warranties relating thereto proving to have been
incorrect or a contract which terminates early, without regard to the
10% limitation described above. With respect to replacing a defaulted
contract with a substitute contract (which substitution is not an
obligation of AT&T Capital, as the servicer, or an originator but
rather is in their sole and
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absolute discretion), such substitute contract must meet the contract
pool concentration limitation as described in 'Description of the
Pooling and Servicing Agreements' as well as the other substitution
requirements described in this prospectus and your prospectus
supplement.
U.S. Taxation............................. In the opinion of our counsel, Winston & Strawn, the Notes will be
characterized as indebtedness and each owner trust will not be
characterized as an 'association' or 'publicly traded partnership'
taxable as a corporation for federal income tax purposes.
By purchasing a Note, you will agree to treat your Note as
indebtedness for federal, state and local income tax purposes. You
should consult your own tax advisor regarding the federal income tax
consequences of the purchase, ownership and disposition of Notes, and
the tax consequences arising under the laws of any state or other
taxing jurisdiction. See 'United States Taxation' in your prospectus
supplement.
In the opinion of counsel, under United States federal income tax law
in effect as of the date hereof, payments of principal and interest
on the Notes to certain alien noteholders will not be subject to
United States federal withholding tax (subject to the exceptions
noted in 'United States Taxation -- Tax Consequences to United States
Alien Holders' in your prospectus supplement). If such law were to
change and, as a result thereof, United States withholding tax were
imposed on such payments, these alien noteholders would receive
payments on their Notes net of such withholding tax, and neither we,
nor any owner trust, nor any originator nor any other party would
have any obligation to gross up such payments to compensate for such
withholding tax.
ERISA Considerations...................... Subject to the considerations described in 'ERISA Considerations' in
your prospectus supplement, employee benefit plans that are subject
to the Employee Retirement Income Security Act of 1974, as amended,
may purchase Notes.
Registration, Clearance and Settlement of
Notes................................... Each of the Notes of each series will be registered in the name of
Cede & Co., as the nominee of The Depository Trust Company, and will
be available for purchase only in book-entry form on the records of
The Depository Trust Company and participating members thereof. Notes
will be issued in definitive form only under the limited
circumstances described in this prospectus under 'Description of the
Notes and Indenture -- Definitive Notes.'
Governing Law............................. Unless otherwise set forth in your related prospectus supplement, the
pooling and servicing agreement, the indenture and the Notes of each
series will be governed by the laws of the State of New York and the
trust agreement will be governed by the laws of the State of
Delaware.
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RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any Notes. You should also consider the risk factors set forth under
the heading 'Risk Factors' in your prospectus supplement.
LIMITED ASSETS OF THE OWNER TRUST SECURE THE NOTES
An owner trust's ability to make payments on the Notes will depend
primarily on payments made on the contracts. You will not be entitled to receive
proceeds from the sale of the leased equipment following the expiration of any
lease. The Notes will not be insured or guaranteed, directly or indirectly, by
us, any originator, the servicer, the indenture trustee or any owner trustee (or
any affiliate of any of them) or any other person or entity. If the pool of
contracts experiences a high rate of payment delinquencies, you may not receive
timely payment on your Notes. If the pool of contracts experiences a high rate
of defaults and severe liquidation losses, you may suffer a loss on your
investment in the Notes. SUBORDINATION OF CERTAIN CLASSES OF NOTES MEANS SOME
NOTES WILL RECEIVE PAYMENTS SOONER THAN OTHERS; DELINQUENCIES AND DEFAULTS COULD
ELIMINATE PROTECTION FOR THE SENIOR CLASSES OF NOTES.
To the extent described in the prospectus supplement, payments of interest
and principal on the subordinate Notes of a series may be subordinated in
priority of payment to interest and principal, respectively, on the senior Notes
of such series. In addition, payments of principal on the Notes of a series may
be subordinated in priority of payment to payments of interest on the Notes of
such series. See 'Description of the Notes and Indenture -- Subordination of
Subordinate Notes' in your prospectus supplement.
Delinquencies and defaults on the contracts included in the assets of an
owner trust could eliminate the protection afforded the holders of subordinate
Notes of such series by the cash collateral account or other credit enhancement
for such series. The holders of such subordinate Notes may suffer losses on
their investment as a result. Further delinquencies and defaults on the
contracts could eliminate the protection offered to the holders of senior Notes
of a series by the subordination of the subordinate Notes of such series.
Holders of senior Notes may also suffer losses on their investment as a result.
POSSIBLE RECHARACTERIZATION OF THE TRANSFER OF THE CONTRACTS AND EQUIPMENT IN
BANKRUPTCY OR INSOLVENCY PROCEEDINGS COULD DELAY OR REDUCE PAYMENTS UNDER THE
CONTRACTS
If an originator were to become a debtor under the federal bankruptcy laws
or similar state laws, a creditor or trustee in bankruptcy of such originator,
or the originator as debtor-in-possession, might argue that the transfer of the
contracts and the equipment from such originator to us was, or should be
recharacterized as, a pledge of those assets rather than a sale. If this
position were accepted by a court, any contracts considered to be true leases
under the applicable insolvency laws, and any other contract considered to be
executory under such federal bankruptcy or similar state laws, could be rejected
by the trustee in bankruptcy or by such originator as debtor-in-possession,
which would result in the termination of scheduled payments to us under any of
these contracts and, therefore, reductions in distributions to you, and you may
suffer losses on your investment as a result.
To reduce the likelihood of such rejection, financing statements perfecting
a security interest for our benefit in the equipment, and assignments of such
perfected security interest to the respective owner trust and the respective
indenture trustee, will be filed against such originator pursuant to the Uniform
Commercial Code (unless otherwise specified in your prospectus supplement). Even
if such contracts were not so rejected in the event of an insolvency of any of
the originators, the owner trust and the indenture trustee could experience a
delay in or reduction of collections on all of the contracts, and you may suffer
losses on your investment as a result. Our counsel, Winston & Strawn, will
deliver a legal opinion that states that the transfer of the contracts and the
equipment which is subject to a true lease from the originators to us
constitutes a sale or absolute assignment, rather than a pledge to secure
indebtedness of the originators. The legal opinion will also state that in the
event that any of the originators were to become a debtor under the federal
bankruptcy code:
a creditor or trustee in bankruptcy would be unable to successfully
challenge the transfer of the contracts and the equipment, which is
subject to a true lease, to the depositor and
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the contracts, the payments made under the contracts and the
equipment would not be property of the bankruptcy estate.
Each originator will either originate contracts or acquire contracts from a
vendor, which contracts will be transferred to us. If the acquisition of a
contract by an originator is treated as a sale of such contract from the
applicable vendor to each originator, except in certain limited circumstances,
such contract would not be part of such vendor's bankruptcy estate and would not
be available to such vendor's creditors. If a vendor became a debtor in a
bankruptcy case and, in the case of contracts acquired by an originator, if an
unpaid creditor of such vendor or a representative of creditors of such vendor,
such as a trustee in bankruptcy, or such vendor acting as a
debtor-in-possession, were to take the position that the sale of such contracts
to the applicable originator was ineffective to remove such contracts from such
vendor's estate (for instance, that such sale should be recharacterized as a
pledge of contracts to secure borrowings of such vendor), then delays in
payments under the contracts to the owner trust could occur or, should the court
rule in favor of such creditor, representative or vendor, reductions in the
amount of such payments could result. If the transfer of contracts to an
originator by a vendor is recharacterized as a pledge, a tax or government lien
on the property of the pledging vendor arising before the contracts came into
existence may have priority over the applicable originator's, and our, the owner
trust's and the indenture trustee's interest in the contracts. As a result, you
may suffer losses on your investment.
POSSIBLE CONSOLIDATION OF US OR THE OWNER TRUST WITH AN ORIGINATOR IN A
BANKRUPTCY CASE COULD DELAY OR REDUCE PAYMENTS UNDER THE CONTRACTS
Winston & Strawn will deliver a legal opinion that states if any of the
originators were to become a debtor in a bankruptcy case, a bankruptcy court
would not order that our assets and liabilities be consolidated with those of
such originator. We have taken steps in structuring the transactions described
herein that are intended to prevent the voluntary or involuntary application for
relief by or on behalf of any originator under any federal bankruptcy or similar
state laws from resulting in the consolidation of our assets and liabilities
with those of such originator. Such steps include the maintenance of separate
books and records and the insistence on arm's-length terms in all agreements
with the originators and their affiliates. Nevertheless, we cannot provide any
assurance that, in the event of a bankruptcy or insolvency of any originator, a
court would not order that our or an owner trust's assets and liabilities be
consolidated with those of such originator. Any such order would adversely
affect your ability to receive payments on the related contracts and you may
suffer losses on your investment as a result. We believe that the owner trust
will be considered bankruptcy remote from the originators; however, no law firm
is rendering an opinion to that effect.
POSSIBLE CHARACTERIZATION OF A TRANSFER AS A FRAUDULENT TRANSFER COULD RESULT IN
SUBORDINATION OF YOUR RIGHTS
A court could subordinate your rights in the related contracts and
equipment to the rights of creditors of an originator if a court were to find,
among other things, that an originator received less than reasonably equivalent
value or fair consideration for the contracts and the equipment and, at the time
of any transfers, such originator was insolvent or rendered insolvent as a
result of such transfer. You may suffer losses on your investment as a result.
COMMINGLING OF COLLECTIONS COULD RESULT IN THE OWNER TRUST LOSING ITS INTEREST
IN COLLECTIONS
While AT&T Capital is the servicer, cash collections held by AT&T Capital
may, subject to certain conditions, be commingled and used for the benefit of
AT&T Capital prior to the date on which such collections are required to be
deposited in a collection account as described under 'Description of the Pooling
and Servicing Agreements -- Collections on Contracts.' In the event of the
insolvency or receivership of AT&T Capital or, in certain circumstances, the
lapse of certain time periods, an owner trust may not have a perfected ownership
or security interest in these collections; you may suffer losses on your
investment as a result.
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BANKRUPTCY OF US OR THE TRUST MAY CAUSE DELAYS IN OR REDUCE COLLECTION UNDER THE
CONTRACTS
If we were to become insolvent under any federal bankruptcy or similar
state laws, delays and reductions in the amount of distributions to you could
occur. We have taken certain steps to minimize the likelihood that we will
become bankrupt or otherwise insolvent. We are prohibited by our organizational
documents and the pooling and servicing agreement with respect to each series
from engaging in activities, including the incurrence or guaranty of debt, other
than those permitted by the trust agreement and the pooling and servicing
agreement. See 'The Depositor.' Our certificate of formation also contains
restrictions on our ability to commence a voluntary case or proceeding under any
federal bankruptcy or similar state laws without the affirmative vote of all of
our directors, including our independent directors. The indenture trustee, on
your behalf, will agree not to subject us to bankruptcy proceedings until the
Notes have been paid in full and one year and one day has elapsed. We believe
that such actions substantially mitigate the risk of an involuntary bankruptcy
petition being filed against us.
The right of an indenture trustee, as a secured party under the related
indenture for your benefit, to foreclose upon and sell the assets of an owner
trust is likely to be significantly impaired by applicable bankruptcy laws,
including the automatic stay pursuant to section 362 of the federal bankruptcy
code, if a bankruptcy proceeding were to be commenced by or against an owner
trust, and possibly us, before or possibly even after an indenture trustee has
foreclosed upon and sold the assets of an owner trust. Under the bankruptcy
laws, payments on debts are not made and secured creditors are prohibited from
repossessing their security from a debtor in a bankruptcy case or from disposing
of security repossessed from such a debtor, without bankruptcy court approval.
Moreover, the bankruptcy laws generally permit the debtor to continue to retain
and to use collateral even though the debtor is in default under the applicable
debt instruments, provided generally that the secured creditor has the right to
seek adequate protection. The meaning of the term adequate protection may vary
according to circumstances, but it is intended in general to protect the value
of the security from any diminution in the value of the collateral as a result
of the use of the collateral by the debtor during the pendency of the bankruptcy
case. In view of the lack of a precise definition of the term adequate
protection and the broad discretionary powers of a bankruptcy court, it is
impossible to predict whether or to what extent you would be compensated for any
diminution in value of the assets of an owner trust. Furthermore, in the event a
bankruptcy court determines that the value of the assets of an owner trust is
not sufficient to repay all amounts due on the Notes, you would hold a secured
claim only to the extent of the value of the assets of an owner trust to which
you are entitled, and unsecured claims with respect to such shortfall. The
bankruptcy laws do not permit the payment or accrual of post-petition interest,
costs and attorneys' fees during a debtor's bankruptcy case unless, and then
only to the extent, the claims are oversecured.
OBLIGATION TO REPURCHASE CONTACTS COULD BE IMPAIRED BY AN ORIGINATOR'S
BANKRUPTCY
The originators will make certain representations and warranties regarding
the contracts, the equipment and certain other matters (see 'The
Contracts -- Representations and Warranties Made by the Originators'). In the
event that any such representation or warranty with regard to a specific
contract is breached, is not cured within a specified period of time, and the
value of such contract is materially and adversely affected by such breach, the
applicable originator shall be required to purchase the contract from the
applicable owner trust at a price equal to the amount required to payoff such
contract, and, in the case of a contract which is subject to a true lease, shall
be required to purchase the related equipment from us at a price equal to the
book value thereof. In the event of a bankruptcy or insolvency of any of the
originators, each indenture trustee's right to compel a purchase would both be
impaired and have to be satisfied out of the available assets, if any, of such
originator 's bankruptcy estate, and you may suffer a loss on your investment in
a Note as a result.
NO GROSS-UP FOR WITHHOLDING TAX
In the opinion of Winston & Strawn, under current United States federal
income tax law in effect as of the date this prospectus, payments of principal
and interest on the Notes to a United States Alien Holder will not be subject to
United States federal withholding tax (subject to the exceptions noted in
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'United States Taxation -- Tax Consequences to United States Alien Holders' in
your prospectus supplement). If this law was to change and, as a result thereof,
United States withholding tax were imposed on such payments, a United States
Alien Holder would receive such payments net of such withholding tax; and
neither any owner trust, us, any originator nor any other party has any
obligation to gross-up such payments to account for such withholding tax.
LIMITED LIQUIDITY OF YOUR NOTES MAY LIMIT YOUR ABILITY TO RESELL THE NOTES
There is currently no market for the Notes. The underwriters expect, but
will not be obligated, to make a market for the Notes. You must not assume that
a secondary market for the Notes will develop or, if it does develop, that it
will provide you with liquidity of investment or that such a secondary market
will continue for the life of your Notes. Thus, you may not be able to resell
your Notes at a favorable price.
THE RISK OF PREPAYMENTS ON THE CONTRACTS MAY IMPACT THE YIELD OF YOUR NOTES
The weighted average life of the Notes of a series will be reduced by
prepayments and early terminations of the related contracts. Prepayments may
result from:
payments by the obligor;
certain amounts received as a result of default or early termination
of a contract;
the receipt of proceeds from the physical damage to the equipment to
the extent described in this prospectus under 'The Contracts';
purchases by an originator of contracts as a result of certain
uncured breaches of the representations and warranties made by such
originator with respect thereto, see 'The
Contracts -- Representations and Warranties Made by the Originator';
or
the exercise of our option to purchase all of the remaining contracts
held by an owner trust, see 'Description of the Notes and
Indenture -- Optional Purchase of Contracts.'
Most contracts do not permit prepayment or early termination. Nevertheless,
AT&T Capital, as servicer, historically has permitted lessees to terminate
leases early, either in connection with the execution of a new lease of
replacement equipment or upon payment of a negotiated prepayment premium, or
both. The pooling and servicing agreement with respect to each series will
permit the servicer to allow a voluntary prepayment of a contract by an obligor
at any time so long as the amount paid by or on behalf of the obligor (or, in
the case of a partial prepayment, the sum of such amount and the remaining
principal balance of the contract after application of such amount) is at least
equal to the amount required to payoff such contract. The amount required to
payoff such contract received from the prepayment or early termination of a
contract (or the amount of any partial prepayment of a contract) will be added
to the amount available to a related owner trust and applied in the priority
described in your prospectus supplement.
We can provide no assurance as to the rate of prepayments or as to whether
there will be a substantial amount of prepayments, nor can we provide any
assurance as to the level or timing of any prepayments that do occur. Because
the rate of payment of principal of the Notes will depend on the rate of payment
(including prepayments) on the contracts, final payment of a class of Notes
could occur significantly earlier than the stated maturity date of the class. We
can provide no assurance that you will be able to reinvest principal paid on any
class of Notes at an interest rate equal to the interest rate for the class, and
you will bear all reinvestment risk resulting from the timing of payments of
principal on the Notes. See 'Weighted Average Life of the Notes' in your
prospectus supplement.
If so specified in your prospectus supplement, we will have the right, but
not the obligation, to deliver a similar contract to replace any contract that
has been the subject of a prepayment or early termination, or that the servicer
has declared to be in default. Similarly, each originator will have the right,
in lieu of repurchasing a contract that such originator was required to
repurchase due to a breach of representations or warranties, to cause us to
deliver a similar contract to replace that contract.
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DECLINES IN MARKET VALUE OF EQUIPMENT OR SOFTWARE AFFECTS PAYMENTS UNDER
CONTRACTS AND MAY CREATE SHORTFALLS WITH RESPECT TO AVAILABLE AMOUNTS TO PAY THE
NOTES
In the event a contract is in default, the only source of payment for
amounts expected to be paid on such contract will be the income and proceeds
from the disposition of any related equipment and a deficiency judgment, if any,
against the obligor under the contract. Since the market value of the equipment
may decline faster than the principal balance of the contract related to the
equipment, AT&T Capital, as servicer may not recover the entire amount due on
the contract and might not recover any money on the sale of the equipment.
Typically, an owner trust will have no interest in any software and may
therefore only have a deficiency claim against the obligor. To the extent such
deficiencies deplete the protection afforded by the subordinated Notes, such
deficiencies may create a shortfall with respect to payments on the more senior
Notes.
THE PRICE AT WHICH YOU CAN RESELL YOUR NOTES MAY DECREASE IF THE RATINGS OF YOUR
NOTES ARE LOWERED OR WITHDRAWN
A rating is not a recommendation to purchase, hold or sell Notes inasmuch
as such rating does not comment as to market price or suitability for a
particular investor. Ratings of Notes will address the likelihood of timely
payment of interest and the ultimate payment of principal on the Notes pursuant
to their terms. The ratings of Notes will not address the likelihood of an early
return of invested principal. There can be no assurance that a rating will
remain for a given period of time or that a rating will not be lowered or
withdrawn entirely by a rating agency if in its judgment circumstances (i.e.,
such as the performance of the contracts or the servicer) in the future so
warrant. In the event that the rating initially assigned to any Note is
subsequently lowered or withdrawn for any reason, you may not be able to resell
your Notes at a favorable price.
GEOGRAPHIC CONCENTRATIONS OF CONTRACTS MAY RESULT IN INCREASED DEFAULTS AND
DELINQUENCIES
The obligors under the contracts are likely to be concentrated in certain
states as more fully described in your prospectus supplement. To the extent
adverse events or economic conditions were particularly severe in any of these
particular states or geographic regions or in the event an obligor under a large
amount of contracts within such region were to experience financial
difficulties, the delinquency and default experience of a pool of contracts
could be adversely impacted with corresponding negative implications for the
timing and amount of collections on the contracts and possible delays or
insufficiencies in payments due to you.
CERTAIN LEGAL RISKS
LIMITATIONS ON ENFORCEMENT OF SECURITY INTERESTS IN THE EQUIPMENT MAY HINDER OUR
ABILITY TO REALIZE THE VALUE OF EQUIPMENT SECURING THE CONTRACTS
In the event of a default by the obligor under a contract intended for
security, the servicer on behalf of the owner trust and us may take action to
enforce the originator's interest in the related equipment by repossession and
resale or re-lease of the equipment. Under the Uniform Commercial Code in most
states, a creditor can, without prior notice to the debtor, repossess assets
securing a defaulted contract by the obligor's voluntary surrender, or by
'self-help' repossession that does not involve a breach of the peace and by
judicial process. In the event of bankruptcy or insolvency of the obligor these
remedies may require the permission of a bankruptcy court or may otherwise not
be immediately available. See ' -- Insolvency Matters' below.
In the event of a default by the obligor under a contract intended for
security, some jurisdictions require that the obligor be notified of the default
and be given a time period within which it may cure the default prior to
repossession. Generally, this right of reinstatement may be exercised on a
limited number of occasions in any one-year period.
The Uniform Commercial Code and other state laws place restrictions on
repossession sales, including requirements that the secured party provide the
debtor with reasonable notice of the date,
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time and place of any public sale and/or the date after which any private sale
of the collateral may be held and that any such sale be conducted in a
commercially reasonable manner.
Under most state laws, an obligor under a contract intended for security
has the right to redeem collateral for its obligations prior to actual sale by
paying the lessor or secured party the unpaid balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, to the extent provided for in the
written agreement of the parties, reasonable attorneys' fees.
In addition, because the market value of equipment of the type subject to
the contracts generally declines with age, due to obsolescence, the net
disposition proceeds of equipment at any time during the term of the contracts
may not equal or exceed the contract principal balance on the related contract.
Because of this, and because other creditors may in certain cases have rights in
the related equipment superior to those of the owner trust, the servicer may not
be able to recover the entire amount due on a defaulted contract in the event
that the servicer elects to repossess and dispose of such equipment at any time.
Under the Uniform Commercial Code and laws applicable in most states, a
creditor is entitled to obtain a deficiency judgment from an obligor under a
contract intended for security for any deficiency on repossession and resale of
the asset securing the unpaid balance of such obligor's contract. However, some
states impose prohibitions or limitations on deficiency judgments. In most
jurisdictions, the courts, in interpreting the Uniform Commercial Code, would
impose upon a creditor an obligation to repossess the equipment in a
commercially reasonable manner and to 'mitigate damages' in the event of an
obligor's failure to cure a default. The creditor would be required to exercise
reasonable judgment and follow acceptable commercial practice in seizing,
selling or re-leasing the equipment and to offset the net proceeds of such
disposition against its claim. In addition, an obligor may successfully invoke
an election of remedies defense to a deficiency claim in the event that the
servicer's repossession and sale of the equipment is found to be a retention
discharging the obligor from all further obligations under the uniform
commercial code. If a deficiency judgment were granted, the judgment would be a
personal judgment against the obligor for the shortfall, but a defaulting
obligor may have limited assets or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
CERTAIN STATES MAY LIMIT THE ENFORCEABILITY OF CERTAIN LEASE PROVISIONS
Certain states have adopted a version of Article 2A of the Uniform
Commercial Code, which purports to codify many provisions of existing common
law. Although there is little precedent regarding how Article 2A will be
interpreted, it may, among other things, limit enforceability of any
'unconscionable' lease or 'unconscionable' provision in a lease, provide a
lessee with remedies, including the right to cancel the lease contract, for
certain lessor breaches or defaults, and may add to or modify the terms of
'consumer leases' and leases in which the lessee is a 'merchant lessee'.
However, in each pooling and servicing agreement, the originator will represent
that:
no end-user contract is a 'consumer lease' as defined in Section
2A-103(1)(e) of the Uniform Commercial Code; and
to the best of the originator's knowledge, each end-user has accepted
the delivery of the equipment leased to it and, after reasonable
opportunity to inspect and test.
Article 2A, moreover, recognizes typical commercial lease 'hell or high water'
rental payment clauses (which clauses unconditionally obligate the lessee to
make all scheduled payments, without setoff) and validates reasonable liquidated
damages provisions in the event of lessor or lessee defaults. Article 2A also
recognizes the concept of freedom of contract and permits the parties in a
commercial context a wide degree of latitude to vary from the provisions of the
law.
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SERVICER'S OR VENDOR'S RETENTION OF CONTRACT FILES MAY HINDER OWNER TRUST'S
ABILITY TO REALIZE THE VALUE OF EQUIPMENT SECURING THE CONTRACTS
In certain instances, the servicer on behalf of the originators, instead of
the related indenture trustee, will maintain possession of the files related to
a contract instead of the related indenture trustee. However, the servicer will
notate on the appropriate electronic records the transfer of the contracts to
the respective owner trust. Also, financing statements will be filed reflecting
the sale and assignment of the contracts and related interests by the originator
to us, and by us to the respective owner trust, and each of the originator's
accounting records and computer files will be marked to reflect such sales and
assignments. Because the files related to a contract will remain in the
servicer's possession, if a subsequent purchaser were able to take physical
possession of such files without knowledge of such assignment, such purchaser
could have a security interest in the contracts senior to the indenture
trustee's security interest (as assignee of our and the owner trust's interest).
In the event that the owner trust must rely upon repossession and sale of the
related equipment and other assets securing contracts that are in default to
recover principal and interest due thereon, the owner trust's ability to realize
upon such assets may be limited due to the existence of a third party's senior
security interest in the contracts. In such event, distributions to you could be
adversely affected.
Similarly, with respect to end-user contracts securing loans originated by
a vendor, in some instances a vendor will retain the original contract files
associated with the related end-user contracts which are secondary contracts
securing such vendor loan. Although financing statements generally are filed
reflecting the pledge of such contracts to the originator as security for the
vendor loans, because these contract files will remain in the vendor's
possession, if a subsequent purchaser were able to take physical possession of
such contract files without knowledge of the pledge to the originator, the
indenture trustee's priority security interest in such secondary contracts, as
assignee of the originator's, depositor's and the owner trust's interest, could
be defeated. In such event, distributions to you could be adversely affected.
Each vendor represents, warrants and covenants in the applicable agreement
evidencing a vendor loan, however, that such vendor has not and will not sell,
pledge or otherwise assign or convey to any other party, other than the
Originator, any interest in the secondary contracts securing such vendor loan,
and agrees that such vendor will maintain possession of the related contract
files as custodian for the benefit of the originator as secured party with
respect to such secondary contracts.
FAILURE TO RECORD ASSIGNMENT OF PERFECTED SECURITY INTEREST MAY IMPEDE OWNER
TRUST'S
ABILITY TO REALIZE THE VALUE OF THE EQUIPMENT SECURING THE CONTRACTS
In connection with the conveyance of the contracts to an owner trust,
security interests in the related financed equipment securing such contracts
will be assigned by the originator to us and by us to the owner trust. In
certain instances, the originator may not file financing statements with respect
to equipment relating to a single obligor in a single jurisdiction when
aggregate value for such equipment is less than certain amounts. With respect to
Newcourt Commercial Finance Corporation, Newcourt Leasing Corporation, Newcourt
Communications Finance Corporation and Newcourt Technologies Corporation, no
financing statements are filed against an obligor in the appropriate 'filing'
jurisdiction, unless the fair market value of the equipment relating to a
contract is at least $20,000 (or, in the alternative, at least $50,000 if such
contract is a lease with a 'fair market value' purchase option). With respect to
Newcourt Financial USA Inc., no financing statements are filed against an
obligor in the appropriate 'filing' jurisdiction, unless the fair market value
of the related equipment relating to a contract is at least $25,000.
Additionally, due to the administrative burden and expense associated with
amending many filings in numerous states where equipment is located, no
assignments of the financing statements evidencing the applicable originator's
security interest in the equipment will be filed to reflect our, the owner
trust's or the indenture trustee's interests therein. Failure to file such
assignments does not affect either the owner trust's perfected security interest
in the contracts (assigned to it by us) or the indenture trustee's perfected
security interest in such contracts (assigned to it by the owner trust). Because
neither our, the owner trust's, owner trustee's or the indenture trustee's name
appears on the UCC financing statements, an originator or the servicer could
inadvertently release the security interest in the equipment securing a
contract. In such event, the owner trust would not have a perfected security
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interest in such equipment. Without a perfected security interest, the owner
trust may not be able to fully realize the value of such equipment if the
related contract becomes a defaulted contract. Additionally, statutory liens for
repairs or unpaid taxes and other liens arising by operation of law may have
priority even over prior perfected security interests in the equipment assigned
to the indenture trustee, which will limit proceeds to an owner trust upon a
disposition of equipment related to a contract in default.
Also, any transfer to us of an originator's security interest in motor
vehicles securing certain contracts, or its ownership interest in motor vehicles
subject to leases, loans, or conditional sale agreements, and the transfer of
any such security interest by us to the owner trust, is subject to state vehicle
registration laws in the case of the motor vehicles. Due to the significant
administrative burden and expense associated with re-registering transfers of
security interests with respect to the motor vehicles, the certificates of title
or similar instruments or registrations of title with respect to the motor
vehicles securing contracts will not identify the owner trust as secured party
of such equipment. There exists a risk in not so identifying the owner trust as
the new secured party or owner that, through fraud or negligence, a third party
could acquire an interest in the motor vehicles superior to that of the owner
trust. In addition, statutory liens for repairs or unpaid taxes may have
priority even over a perfected security interest in the motor vehicles.
In addition, some of the equipment related to the contracts may constitute
fixtures under the real estate or Uniform Commercial Code provisions of the
jurisdiction in which such equipment is located. In order to perfect a security
interest in such equipment, the holder of the security interest must file either
a fixture filing under the provisions of the Uniform Commercial Code or a real
estate mortgage under the real estate laws of the state where the equipment is
located. These filings must be made in the real estate records office of the
county in which such equipment is located. So long as an obligor does not
permanently attach the equipment to the real estate, a security interest in the
equipment will be governed by the Uniform Commercial Code, and the filing of a
financing statement will be effective to maintain the priority of the security
interest in such equipment. If any equipment is permanently attached to the real
estate in which it is located, other parties could obtain an interest in the
equipment which is prior to the security interest originally obtained by the
originator and transferred to us.
We will be obligated to reacquire any contract transferred to the owner
trust, subject to the originator's reacquisition thereof, in the event it is
determined that a first priority perfected security interest in the name of the
owner trustee, or ownership interest in the case of leases in the name of the
originator, in the equipment related to such contract did not exist as of the
date such contract was conveyed to the owner trust, if:
such breach shall materially adversely affect the rights of the
holder of such contract in such equipment; and
such failure or breach shall not have been cured by the last day of
the second, or, if we elect, the first month following the discovery
by or notice to us of such breach, and the originator will be
obligated to reacquire such contract from us contemporaneously with
our reacquisition from the owner trust.
If there is any equipment as to which the originator failed to perfect its
security interest, the originator's security interest, and our security interest
and the owner trust's security interest, and the indenture trustee as assignee,
would be subordinated to, among others, subsequent purchasers of the equipment
and holders of perfected security interests with respect thereto. To the extent
the security interest of an originator in the related equipment is perfected,
subject to the exceptions set forth in the following sentence, the owner trust
will have a prior claim over subsequent purchasers from the obligor of such
equipment and holders of subsequently perfected security interests granted by
obligors. However, as against mechanics' liens or liens for taxes and other
non-consensual liens unpaid by an obligor under a contract, or in the event of
fraud or negligence of the originator or servicer, the owner trust could lose
the priority of its interest or its interest in such equipment following the
conveyance of such contract to the owner trust. Neither the depositor nor the
servicer nor the originator will have any obligation to reacquire a contract if
any of the occurrences described in the foregoing sentence, other than fraud or
negligence of the originator, result in the owner trust's losing the priority of
its security interest or its security interest in such equipment after the date
such contract is conveyed to the owner trust.
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REPURCHASE OBLIGATION PROVIDES YOU ONLY LIMITED PROTECTION AGAINST PRIOR LIENS
ON THE CONTRACTS
There are limited circumstances under the Uniform Commercial Code and
applicable federal law in which prior or subsequent transferees of contracts or
end-user contracts securing a vendor loan, referenced to herein as a 'secondary
contract', could have an interest in such contracts with priority over the owner
trust's interest. Under each vendor agreement, the vendor:
has or will warrant to the originator that the contracts transferred
to the originator thereunder will be transferred free and clear of
the lien of any third party and that the interests in secondary
contracts transferred thereunder will be transferred free and clear
of the lien of any third party; and
has or will also covenant that it will not sell, pledge, assign,
transfer or grant any lien on any contract, or secondary contract.
Under either the related pooling and sale agreement or the sale and contribution
agreement, as applicable, the originator will warrant to us and pursuant to the
related pooling and servicing agreement, we will warrant to the owner trust,
that the contracts and security interests in secondary contracts transferred
thereunder will be transferred free and clear of the lien of any third party.
Also, under either the related pooling and servicing agreement or the sale and
contribution agreement, as applicable, the originator will warrant to us and
pursuant to the related pooling and servicing agreement, we will warrant to the
owner trust, that we will not sell, pledge, assign, transfer or grant any lien
on any contract or secondary contract transferred to us or the owner trust. In
the event that such warranties are not true with respect to any contract, we
(either under the pooling and servicing agreement if a transfer is made pursuant
to the sale and contribution agreement) and the originators (under the sale and
contribution agreement or the pooling and servicing agreement, to the extent
applicable) agree to repurchase such contract. There can be no assurance that we
or the originators will be able to repurchase such contract at the time the
owner trust requests it. Consequently, the value of such contract as a trust
asset may be less than you expected due to the existence of a prior lien.
RISK OF REJECTION OF 'TRUE LEASES'
A bankruptcy trustee or debtor-in-possession under federal bankruptcy or
similar state laws has the right to elect to assume or reject any executory
contract or unexpired lease which is considered to be a true lease, and not a
financing, under applicable law. Any rejection of such a contract or lease would
constitute a breach of such contract or lease, as applicable, as of the day
preceding the commencement of the applicable bankruptcy case, entitling the
nonbreaching party to a pre-petition claim for damages.
Certain contracts will be true leases and thus subject to rejection by the
lessor under federal bankruptcy or similar state laws. Any such contract
originated by an originator or acquired by an originator in a transaction
whereby the applicable originator is the lessor thereunder, will be subject to
rejection by such originator, as debtor-in-possession, or by such originator's
bankruptcy trustee. Upon any such rejection, payments to the applicable
originator under such rejected contract may terminate and your investment may be
subject to losses if proceeds realizable from security interests in the related
equipment are insufficient to cover the losses. In addition, any contract which
is a true lease originated by a vendor and transferred to an originator in a
transaction whereby such vendor continues to be the lessor thereunder, such as a
transfer by a vendor to an originator of a security interest in such contract or
a transfer by a vendor to an originator of an interest in the right to payments
only under any such contract, will be subject to rejection by such vendor, as
debtor in possession, or by such vendor's bankruptcy trustee. Upon any such
rejection, payments to the applicable originator under such rejected contract
may terminate and your investment may be subject to losses if the proceeds
realizable from security interests in the related equipment are insufficient to
cover the losses.
INSOLVENCY MATTERS
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may also limit the ability of the servicer to repossess and
resell or re-lease equipment or obtain a deficiency judgment. In the event of
the bankruptcy or reorganization of an obligor, various provisions of the
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Bankruptcy Code of 1978 and related laws may interfere with or eliminate the
ability of the servicer to enforce the owner trust's rights under the contracts.
For example, although the bankruptcy or reorganization of an obligor would
constitute an event of default under such contract, the Bankruptcy Code provides
generally that rights and obligations under an unexpired lease or an executory
contract may not be terminated or modified solely because of a provision in the
lease or executory contract conditioned upon the commencement of a case under
the Bankruptcy Code. If bankruptcy proceedings were instituted in respect of an
obligor under such a contract, the owner trust could be prevented from
continuing to collect payments due from or on behalf of such obligor or
exercising any remedies assigned to the owner trust without the approval of the
bankruptcy court, and, with respect to a contract intended as security, the
bankruptcy court could permit the obligor, as owner of the equipment, to use or
dispose of the equipment and provide the owner trust with a lien on substitute
collateral, so long as the court held that such substitute collateral
constituted 'adequate protection' within the meaning of the Bankruptcy Code.
In the case of a contract subject to a true lease that is deemed not to be
intended as security, 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 such rejection by the lessee would result in
the return of the leased equipment to the lessor. Any rejection of such a lease
or contract constitutes a breach of such lease or contract, entitling the
non-breaching party to a claim for breach of contract, which claim would be
payable only from the assets of the debtor's bankruptcy estate. The net proceeds
from any resulting judgment would be allocated by the servicer between the owner
trust and the depositor as described under 'Description of the Notes and
Indenture -- Liquidation Proceeds.'
In the event that, as a result of the bankruptcy or reorganization of an
obligor, the related contract becomes a defaulted contract, the amount available
to be withdrawn from, or drawn on, the cash collateral account or other form of
credit enhancement for the related series has been reduced to zero and the
contract has become a defaulted contract without breach of any representation or
warranty of an originator or the depositor, no recourse would be available
against an originator or the depositor and you could suffer a loss with respect
to such contract.
These Uniform Commercial Code and bankruptcy provisions, in addition to the
possible decrease in the value of a repossessed item of equipment, may limit the
amount realized on the sale of equipment securing the contracts to less than the
amount due thereunder.
INSOLVENCY OF THE VENDORS COULD DELAY OR REDUCE PAYMENTS ON THE NOTES
In the event a vendor under a vendor loan becomes subject to insolvency
proceedings, the contracts and other security for such vendor loan as well as
such vendor's obligation to make payments thereon would also become subject to
such insolvency proceedings. In such event, delays of distributions on the
Notes, possible reductions in the amount of payment of principal of and interest
on the Notes and limitations (including a stay) on the exercise of remedies
under the applicable indenture and the applicable pooling and servicing
agreement could occur, although you would continue to have the benefit of the
indenture trustee's security interest in the vendor loans and other security
therefor under the applicable indenture.
The right of the other indenture trustee, as secured party for your
benefit, to foreclose upon and sell any secondary contracts or other security
relating to the vendor loan is likely to be significantly impaired by applicable
bankruptcy laws, including the automatic stay pursuant to section 362 of the
federal bankruptcy code, if a bankruptcy proceeding were to be commenced by or
against a vendor obligated on a vendor loan, before or possibly even after the
indenture trustee has foreclosed upon and sold such secondary contracts or other
security relating to the vendor loan for the reasons described above.
Certain vendor assignments and certain assignments executed under various
program agreements will provide that the applicable originator will have
recourse to the related vendor for all or a portion of the losses the applicable
originator may incur as a result of a default under the contracts sold under
such vendor assignment or program assignment. In the event of a vendor's
bankruptcy, a bankruptcy trustee, a creditor or the vendor, as debtor in
possession, might attempt to characterize sales to the
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applicable originator pursuant to such vendor assignments or program assignments
as loans to the vendor from the applicable originator secured by the contracts
sold thereunder. If such an attempt is successful, such vendor assignment or
program assignment would be subject to the risks described herein for vendor
loans. In such case, the contracts sold under such vendor assignment or program
assignment would constitute secondary contracts under the recharacterized vendor
assignment or program assignment.
PROCEEDS FROM REQUIRED SALE OF CONTRACTS RESULTING FROM OUR BANKRUPTCY MAY NOT
BE SUFFICIENT TO REPAY THE NOTES IN FULL
If a conservator, receiver or liquidator of the depositor was appointed or
if certain other events relating to the bankruptcy, insolvency or receivership
of the depositor were to occur, then an event of default would occur with
respect to the Notes and, pursuant to the terms of the applicable indenture and
the pooling and servicing agreement, and assuming the applicable owner trust was
not then a debtor in a bankruptcy case, the indenture trustee, at the direction
of the required number of holders of Notes, will be required to sell the
contracts, thereby causing early termination of the owner trust and a possible
loss to your investment if the sum of the proceeds of the sale allocable to
holders of Notes and the proceeds of any collections on the contracts in the
collection account allocable to the holders of Notes, is insufficient to pay the
holders of Notes in full.
END-USER AND VENDOR BANKRUPTCY COULD DELAY OR REDUCE COLLECTIONS ON THE
CONTRACTS
Application of federal and state bankruptcy and insolvency laws in the
event of bankruptcy of end-users of equipment or services relating to a contract
could affect your interest in the contracts and secondary contracts if such laws
result in any such contracts being written off as uncollectible or result in
delay in payments due on any contracts. In addition, application of federal and
state bankruptcy and insolvency laws in the event of bankruptcy of vendors could
affect your interest in the vendor loans and secondary contracts if such laws
result in any such vendor loans or secondary contracts being written off as
uncollectible or result in delay in payments due on any such vendor loans or
secondary contracts. See ' -- Insolvency of the Vendors Could Delay or Reduce
Payments on the Notes'. State laws impose requirements and restrictions relating
to foreclosure sales and obtaining deficiency judgments following such sales. In
the event that you must rely on repossession and disposition of equipment to
recover amounts due on contracts in default, such amounts may not be realized
because of the application of these requirements and restrictions. Other factors
that may affect your ability to realize the full amount due on a contract or a
secondary contract include the failure to file financing statements to perfect
the originator's, our, the owner trust's or the indenture trustee's security
interest, as applicable, in the equipment or other security relating to the
contract and the depreciation, obsolescence, damage or loss of any item of
equipment. As a result, you may be subject to delays in receiving payments and
you may suffer losses if the over collateralization represented by each class of
Notes that is subordinated thereto, the subordinated Notes or the cash
collateral account is insufficient to cover such losses.
CERTAIN CONTRACTS RELATING TO SOFTWARE OR SERVICES ARE NOT SECURED BY SUCH
SOFTWARE OR SERVICES
Certain contracts may relate not to equipment but rather to software or
services that are not owned by the originator. In such cases, the vendor or a
licensor traditionally owns the software or services and in which no related
interest will be transferred to the owner trust. The owner trust will own solely
the associated contracts' cash flow. The software and services do not serve as
collateral for the contracts. Accordingly, if a default should occur under any
such contract, the owner trust will not be entitled to receive any proceeds from
the sale of such related software or services following a default. Because there
will be no proceeds from the software or services which could be used to make
payments to you, the trust must look solely to the obligor to collect amounts
due on such contract. There can be no assurance that such obligor will be able
to pay in full amounts due under such contract. Furthermore, because software is
generally eligible for protection under federal copyright laws, a security
interest in software generally cannot be perfected without a filing at the U.S.
Copyright Office. Some legal authority indicates that this filing requirement
also extends to a sale or grant of a security interest in software licenses and
the proceeds thereof, while some other legal authority suggests that where there
is
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an outright assignment of certain payments (such as royalties) associated with
copyrightable materials, the rights to receive such payments constitute property
separate from the copyrightable material and that no filing in the U.S.
Copyright Office is required in connection with such assignment.
NON-RECOURSE NATURE OF VENDOR LOANS COULD LIMIT COLLECTIONS UNDER CONTRACTS
With respect to vendor loans, you will generally have to rely solely upon
the secondary contracts to secure such vendor loans, together with the equipment
and related security securing such secondary contracts, should the end-user
default in its obligation to pay such secondary contracts, since vendor loans
will generally be non-recourse to the vendors. As a result, the holder of such
vendor loan is limited to recovering amounts solely from the secondary contracts
and related security therefor. If payments made or realized from the contracts,
including secondary contracts securing vendor loans, and the disposition
proceeds of the equipment are insufficient to make payments on the Notes, no
other assets will be available for the payment of the deficiency which could
adversely affect your investment.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to define a year in the
date field. These programs could fail or produce erroneous results during the
transition from the year 1999 to the year 2000. The originators' and servicer's
indirect parent, Newcourt Credit Group Inc., has established procedures for
evaluating and managing the risks and costs associated with this problem, but
there can be no assurance that all of Newcourt Credit Group Inc.'s internal
computer systems will be able to handle all Year 2000 problems. Furthermore,
Newcourt Credit Group Inc. does not guarantee that the systems and software of
other companies on which its systems and operations rely will be able to handle
all Year 2000 problems. If AT&T Capital, as servicer, the owner trustee or the
indenture trustee do not have computerized systems that are Year 2000 compliant
by the year 2000, the ability to service the contracts, in the case of the
servicer, and to make distributions to you may be materially and adversely
affected.
RISKS ASSOCIATED WITH DTC AND THE YEAR 2000
With respect to Year 2000 issues, DTC has informed members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and income payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC continue to function appropriately on and after
January 1, 2000. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent upon
other parties, including but not limited to, its participating organizations
(through which you may hold your Notes), as well as the computer systems of
third party service providers. DTC has informed the financial community that it
is contacting (and will continue to contact) third party vendors from whom DTC
acquires services to: (i) impress upon them the importance of such services
being Year 2000 compliant and (ii) determine the extent of their efforts for
Year 2000 remediation (and, as appropriate, testing) of their services. In
addition, DTC has stated that it is in the process of developing such
contingency plans as it deems appropriate.
If problems associated with the Year 2000 issue were to occur with respect
to DTC and the services described above, distributions to you could be delayed
or otherwise adversely affected.
THE DEPOSITOR
NCT Funding Company, L.L.C. is a limited liability company organized under
the laws of the State of Delaware and all of our membership interests are owned
by Newcourt Financial USA Inc. On or before the closing date for a series of
Notes, all of the related contracts and the interests of the originators in the
related equipment will be transferred by the applicable originators to us in
return for cash proceeds. We will pay to the applicable originators the net
proceeds received from the offering and sale of the Notes of such series.
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NCT Funding Company, L.L.C. has been formed solely for the purposes of the
transactions described in this prospectus and other similar transactions
including warehouse financing. Under our formation documents and the pooling and
servicing agreement, as such term is defined in your prospectus supplement,
executed in connection with each owner trust, we are not permitted to engage in
any activity other than:
acquiring contracts and interests of the originators in the
equipment;
transferring and conveying the contracts and the security interests
in the related equipment to owner trusts and other similar trusts;
transferring and conveying the contracts subject to a true lease to
owner trusts;
executing and performing our obligations under the trust agreements
and the sale and contribution agreements, to the extent applicable,
as such terms are defined in your prospectus supplement, and the
pooling and servicing agreements covering the transfer and servicing
of a pool of contracts;
holding or transferring other securities issued by each owner trust;
engaging in other transactions, including entering into agreements,
that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
other transactions of the type described in this prospectus.
We are prohibited from incurring any debt, issuing any obligations or incurring
any liabilities, except in connection with the formation of any owner trust, the
issuance of the related series of securities issued by such owner trust, and
other transactions of the type described in this prospectus. We are not liable,
responsible or obligated, directly or indirectly, for payment of any principal,
interest or any other amount in respect of any series of Notes.
THE OWNER TRUSTS
Each owner trust will be formed pursuant to a trust agreement between us
and the owner trustee, as described in your prospectus supplement. Each owner
trust may issue one or more other classes of other securities, representing debt
of or beneficial ownership interests in the owner trust which will not be
offered pursuant to this prospectus.
The assets of each owner trust, as further specified in your prospectus
supplement, will consist of:
(1) a pool of equipment lease contracts, conditional sale agreements,
installment payment/financing agreements, promissory notes, loan and security
agreements and other similar types of receivables, each, a contract, with
various lessees, borrowers or other obligors thereunder, including:
all monies at any time paid or payable thereon or in respect thereof
from and after the date we transfer the contracts to an owner trust
in the form of:
scheduled payments (including all scheduled payments due prior
to, but not received as of, the date we transfer the contracts
to an owner trust, but excluding any scheduled payments due on
or after, but received prior to, the date we transfer the
contracts to an owner trust);
prepayments (but excluding, in the case of a contract structured
as a lease of the related equipment, any portion thereof
allocated to us, as described in your prospectus supplement);
and
liquidation proceeds (including any derived from the disposition
of the related equipment) received with respect to defaulted
contracts (excluding, in the case of a contract structured as a
lease of the related equipment, any portion thereof allocable to
us, as described in your prospectus supplement), and
all rights of the secured party in the equipment related to the
contracts written as installment sales contracts, promissory notes,
loan and security agreements or other similar types of receivables,
but excluding the rights of the lessor in the equipment subject to a
contract
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structured as a 'true lease' of the related equipment (which rights,
subject to the allocation of proceeds from a liquidation received in
respect thereof, may be retained by us to the extent specified in
your prospectus supplement);
(2) amounts on deposit in (and any eligible investments allocated to)
certain accounts established pursuant to the related indenture and the
related pooling and servicing agreement, including the collection account;
(3) our rights under the related sale and contribution agreement, if
any; and
(4) our rights (but not our obligations) with respect to any cash
collateral account or other form of credit enhancement for such series of
Notes.
No owner trust will engage in any business activity other than (i) issuing
the Notes and ownership interests in such owner trust, if any, (ii) holding and
dealing with (including disposing of) the assets of such owner trust, (iii)
making payments on the Notes and other securities issued thereby, (iv) entering
into and performing the duties, responsibilities and functions required under
any of the related pooling and servicing agreement, indenture, contracts, and
related documents, and (v) matters related to the foregoing.
The assets of an owner trust will be separate from the assets of all other
owner trusts created by us, and the assets of one owner trust will not be
available to make payments on the securities issued by any other owner trust.
The owner trustee for each owner trust will be specified in your prospectus
supplement. The owner trustee's liability in connection with the issuance and
sale of any series of Notes will be limited solely to the express obligations of
the owner trustee set forth in the related trust agreement and indenture. An
owner trustee may resign at any time, in which event we will be obligated to
appoint a successor owner trustee. We may also remove an owner trustee if such
owner trustee ceases to be eligible to continue as such under the related trust
agreement or if the owner trustee becomes insolvent. Any resignation or removal
of an owner trustee will not become effective until acceptance of the
appointment of a successor owner trustee.
NEWCOURT CREDIT GROUP INC.
GENERAL
Newcourt Credit Group Inc. was formed in 1984 as an investment bank which
originated and structured asset-based financings for the corporate and
institutional asset finance market and syndicated such financings to Canadian
financial institutions. In 1988, Newcourt Credit Group Inc. broadened its
activities to include vendor and direct equipment financing. Today, Newcourt
Credit Group Inc. is one of the world's largest providers of vendor finance and
one of the world's largest non-bank commercial asset finance companies, having
approximately U.S. $23.4 billion (Canadian $36.2 billion) of owned and managed
assets and U.S. $3.0 billion (Canadian $4.7 billion) shareholders' equity at
December 31, 1998.
Newcourt Credit Group Inc.'s international origination and servicing
capabilities span 26 countries around the globe. Newcourt Credit Group Inc.
serves clients in Canada, the United States, the United Kingdom, the
Asia/Pacific region, Europe, Mexico and South America.
Newcourt Credit Group Inc.'s United States asset-based operations are
conducted through indirect subsidiaries owned by Newcourt Credit Group USA Inc.,
a wholly owned subsidiary.
Newcourt Credit Group Inc.'s principal executive offices are located at BCE
Place, 181 Bay Street, Suite 3500, P.O. Box 827, Toronto, Ontario M5J 2T3,
telephone number (416) 594-2400. Newcourt Credit Group Inc. will be relocating
to Queens Quay Terminal, 207 Queens Quay West, Floors 6 & 7, Toronto, Ontario
M5J 1A7, (416) 507-2400.
ACQUISITIONS
During the fiscal year ended December 31, 1997, in addition to the growth
and expansion in Newcourt Credit Group Inc.'s current business and the continued
diversification of its loan origination, Newcourt Credit Group Inc. completed
several major acquisitions in the commercial finance segment of
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the asset-based finance market. In August, 1997, Newcourt Credit Group Inc.
acquired all of the issued and outstanding shares of Commcorp Financial Services
Inc., a Canadian asset finance and associated management service company. In
September 1997, Newcourt Credit Group Inc. acquired the Business Technology
Finance division of Lloyds Bowmaker Limited, a United Kingdom-based asset
finance company. Also in September 1997, Newcourt Credit Group Inc. acquired the
micro-balance origination and financing division of Lease Finance Group of
Chicago, Illinois. In October 1997, Newcourt Credit Group Inc. acquired the
small-balance loan processing capabilities of Omni Financial Services of
America, Inc.
In January 1998, Newcourt Credit Group Inc. consummated the acquisition of
all of the issued and outstanding shares of AT&T Capital Corporation. The
aggregate purchase price paid by Newcourt Credit Group Inc. on the acquisition
closing was approximately Canadian $2.4 billion (U.S. $1.7 billion). As a result
of this acquisition, AT&T Capital Corporation became a wholly owned subsidiary
of Newcourt Credit Group USA Inc.
ANNOUNCED ACQUISITION OF NEWCOURT CREDIT GROUP INC.
On March 8, 1999, Newcourt Credit Group Inc. announced that it had entered
into an Agreement and Plan of Reorganization with The CIT Group, Inc. pursuant
to which outstanding shares of capital stock of Newcourt Credit Group Inc. will
be converted into common stock of The CIT Group or into a new class of Newcourt
Credit Group Inc. stock exchangeable into common stock of The CIT Group, and
Newcourt Credit Group Inc. will become a wholly-owned subsidiary of The CIT
Group. Consummation of the transaction is subject to a number of conditions set
forth in the Agreement and Plan of Reorganization, which is on file with the
Commission. The preceding description of the Agreement and Plan of
Reorganization is qualified in its entirety by reference to the full and
complete text of the agreement. No assurance can be given as to whether the
transaction contemplated by the Agreement and Plan of Reorganization will be
consummated. Preparing for the consummation of this combination and, if
consummated, integration of Newcourt Credit Group Inc. and The CIT Group will
require a substantial amount of management's time. Diversion of management
attention from Newcourt Credit Group Inc.'s existing business as well as
problems that may arise in connection with the integration of Newcourt Credit
Group Inc.'s and The CIT Group's operations may have a material adverse impact
on Newcourt's revenues and results of operations. The integration of Newcourt
Credit Group Inc. and The CIT Group may result in additional expenses which
could negatively impact Newcourt Credit Group Inc.'s results of operations.
Further, the uncertainty created by the combination may result in the loss of
management and other employees. The unavailability of such persons and the
resulting disruption in Newcourt Credit Group Inc.'s operations could have a
material adverse effect on Newcourt.
AT&T CAPITAL CORPORATION
AT&T Capital Corporation is a full-service, diversified equipment leasing
and finance company that operates principally in the United States and also has
operations in the Asia/Pacific region, Mexico and South America. AT&T Capital
Corporation is one of the largest equipment leasing and finance companies in the
United States and is the largest lessor of telecommunications equipment in the
United States, in each case, based on the aggregate value of equipment leased or
financed.
AT&T Capital Corporation, a Delaware corporation, is a wholly owned
subsidiary of Newcourt Credit Group USA Inc., which in turn is a wholly owned
subsidiary of Newcourt Credit Group Inc. AT&T Capital Corporation's chief
executive offices are currently located at 2 Gatehall Drive, Parsippany, New
Jersey 07054 and its telephone number is (973) 606-4879.
AT&T Capital Corporation, through certain of the originators, leases and
finances a wide variety of equipment, including telecommunications equipment
(such as private branch exchanges, telephone systems and voice processing
units), information technology equipment (such as personal computers, retail
point of sale systems and automated teller machines), general office,
manufacturing and medical equipment, and transportation equipment. In addition,
the group provides franchise financing for franchises and financing
collateralized by real estate. As of December 31, 1998, AT&T Capital
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Corporation consolidated portfolio assets (investment in finance receivables,
capital leases and operating leases) were comprised of, or collateralized by,
general equipment, information technology equipment, telecommunications
equipment, loans secured by real estate and transportation equipment. AT&T
Capital Corporation's leasing and financing services are marketed (i) to
customers of equipment manufacturers, distributors and dealers with which AT&T
Capital Corporation has a marketing relationship for financing services and (ii)
directly to end-users of equipment. AT&T Capital Corporation's approximately
500,000 customers include large global companies, small and mid-sized businesses
and federal, state and local governments and their agencies.
As of December 31, 1998, AT&T Capital Corporation had, on a consolidated
basis, total assets of $10.8 billion, total liabilities of $9.9 billion and net
income for the year ended December 31, 1998 of $97.5 million.
AT&T Capital Corporation was founded in 1985 by AT&T Corp. as a captive
finance company to assist AT&T Corp.'s equipment marketing and sales efforts by
providing its customers with sophisticated financing.
THE ORIGINATORS
Each of the Originators is an indirect wholly owned subsidiary of Newcourt
Credit Group Inc.
NEWCOURT FINANCIAL USA INC.
Newcourt Financial USA Inc. ('Newcourt USA') was incorporated on January 8,
1992 in Delaware and is a wholly-owned subsidiary of Newcourt Credit Group USA
Inc. which in turn is a wholly owned subsidiary of Newcourt Credit Group Inc.
Newcourt USA originates and acquires conditional sales agreements, leases,
secured promissory notes, purchase arrangements covering a variety of
transportation, construction, information technology, communications, commercial
and industrial, and resource equipment. Newcourt USA's vendor financing
arrangements are typically structured as (i) direct originations with customers
and end-users of a vendor's products, either with or without recourse, or (ii)
assignments of contracts, either with or without recourse, by a vendor to
Newcourt USA.
Newcourt USA's principal executive offices are located at 2 Gatehall Drive,
Parsippany, New Jersey 07054 and its telephone number is (973) 355-7053.
NEWCOURT LEASING CORPORATION
Newcourt Leasing Corporation, formerly known as AT&T Capital Leasing
Services, Inc., provides leasing and financing programs for certain targeted
manufacturers and distributors as well as leasing and financing to existing
customers. Newcourt Leasing Corporation was acquired by Newcourt Credit Group
Inc. as part of the acquisition of AT&T Capital Corporation. Newcourt Leasing
Corporation is a wholly owned subsidiary of AT&T Capital Corporation.
Newcourt Leasing Corporation is currently headquartered in Framingham,
Massachusetts. Newcourt Leasing Corporation anticipates moving its headquarters
to Westborough, Massachusetts during the first six months of 1999. Newcourt
Leasing Corporation's portfolio of contracts includes leases and loans on a
variety of equipment types, including office automation and general-purpose
business equipment such as copiers and computers, as well as industry-specific
equipment such as printing, machine tools, automobile test/repair equipment, and
medical/dental equipment. The Newcourt Leasing Corporation portfolio, which
includes both contracts owned by Newcourt Leasing Corporation and contracts
serviced on behalf of others, is primarily comprised of leases and loans on the
following equipment types: computers, machine tool manufacturing equipment,
copiers, medical/dental equipment, printing equipment and automobile test/repair
equipment.
NEWCOURT COMMUNICATIONS FINANCE CORPORATION
Newcourt Communications Finance Corporation, formerly known as AT&T Credit
Corporation, supports the sales of Lucent Technologies Inc. and NCR Corporation
equipment by providing leasing and financing options to customers who have
selected equipment manufactured or supplied by these
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vendors. Newcourt Communications Finance Corporation's predecessor was
established as a captive finance company of AT&T Corp. in 1985. Newcourt Credit
Group Inc. acquired Newcourt Communications Finance Corporation as a result of
the acquisition of AT&T Capital Corporation. Newcourt Communications Finance
Corporation is a wholly owned subsidiary of AT&T Capital Corporation.
Substantially all of Newcourt Communications Finance Corporation's
transactions are generated through Lucent Technologies and NCR Corporation.
Until recently, Lucent Technologies and NCR Corporation each were subsidiaries
of AT&T Corp. Lucent Technologies manufactures and distributes
telecommunications and related equipment, and NCR Corporation manufactures and
distributes information technology, including retail point-of-sale systems,
automated teller machines and computers. The Newcourt Communications Finance
Corporation portfolio of contracts is primarily comprised of both leases and
loans on the following equipment types: telecommunications equipment, retail
point-of-sale systems, automatic teller machines and computer equipment.
NEWCOURT COMMERCIAL FINANCE CORPORATION
Newcourt Commercial Finance Corporation provides financing and leasing
programs for manufacturers and distributors of material handling and
construction equipment. Newcourt Commercial Finance Corporation is a wholly
owned subsidiary of AT&T Capital Corporation. Prior to being acquired by
Newcourt Credit Group Inc., Newcourt Commercial Finance Corporation operated as
the Portland division of AT&T Commercial Finance Corporation. Newcourt
Commercial Finance Corporation was formed in December 1989 in connection with
the acquisition of substantially all the assets of two divisions of Pacificorp
Credit, Inc.
Newcourt Commercial Finance Corporation is headquartered in Parsippany, New
Jersey. The Newcourt Commercial Finance Corporation portfolio, which includes
both contracts owned by Newcourt Commercial Finance Corporation and contracts
serviced on behalf of others, is comprised entirely of leases and loans on
construction and material handling equipment.
NEWCOURT TECHNOLOGIES CORPORATION
Newcourt Technologies Corporation, formerly known as AT&T Systems Leasing
Corporation, provides leasing, financing and remarketing of computer equipment,
electronics, manufacturing and other capital equipment. Newcourt Technologies
Corporations predecessor was established in 1987 and acquired by AT&T Capital in
1990. Newcourt Credit Group Inc. acquired Newcourt Technologies as a result of
the acquisition of AT&T Capital. Newcourt Technologies Corporation is a wholly
owned subsidiary of AT&T Capital and is headquartered in Bloomfield Hills,
Michigan.
UNDERWRITING AND SERVICING
CREDIT MANAGEMENT PHILOSOPHY
Each originator strives to manage certain risks in connection with its
business, including credit risk and residual value risk associated with the
acquisition and holding of receivables such as the contracts. The management of
these risks is critical to the success of each originator. As such, each
originator has in place policies, controls, systems and procedures intended to
manage and limit such risks, promote early problem recognition and corrective
action as well as facilitate consistent portfolio performance measurements. Such
policies, controls, systems and procedures are subject to periodic review by
Newcourt Credit Group Inc.'s risk management department, which includes credit
and asset management personnel, by Newcourt Credit Group Inc.'s internal and
external auditors and Newcourt Credit Group Inc.'s audit committee. In addition,
the investment committee of Newcourt Credit Group Inc. monitors overall risk
profile.
The control of credit losses is an important element of each originator's
business. Each originator seeks to minimize its credit risk through
diversification of its portfolio by customer, industry segment, equipment type,
geographic location and transaction maturity. Each originator's financing
activities have been spread across a wide range of equipment types, including,
general equipment, telecommunications
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equipment, office equipment, information technology and transportation
equipment, and a large number of end-users located throughout the United States
and, to a lesser extent, abroad.
Each originator has a chief credit officer who is responsible for
overseeing the quality, integrity and performance of respective credit
portfolios. Before any transaction can be committed to, it must first be credit
approved by one of Newcourt Credit Group Inc.'s proprietary credit scoring
models or by a duly authorized credit officer in accordance with clearly defined
authorities, policies and procedures. Each originator's chief credit officer is
charged with the responsibility of establishing credit policies appropriate for
such originator's business and periodically reviewing its credit personnel's
exercise of credit authority for adherence to the established credit policies.
Credit authorities are an important tool that each originator uses to manage and
control its portfolio risk. Credit authorities are set in order to enable
individual credit officers to handle approximately 80-85% of the transactions
flowing to them. This approach results in approximately 15-20% of the
transactions being reviewed by higher credit authorities. This ensures oversight
of an individual's judgment, credit skills and compliance with credit policy by
more senior credit officials. Each originator's chief credit officer is
empowered to establish credit authorities for qualified members of their credit
staff for up to $500,000. Approval of new credit authorities up to $5,000,000
requires the approval of Newcourt Credit Group Inc.'s chief investment officer
in addition to the approval of the originator's chief credit officer. Approval
of new credit authorities in excess of $5,000,000 also requires the approval of
the president of Newcourt Credit Group Inc. services business unit or Newcourt
Credit Group Inc.'s chief executive officer. The existing credit authorities
allow each originator's chief credit officer to approve transactions up to
$7,500,000 in the case of Newcourt Communications Finance Corporation, up to
$5,000,000 in the case of Newcourt Leasing Corporation up to $1,500,000 in the
case of Newcourt Commercial Finance Corporation and up to $5,000,000 in the case
of Newcourt Technologies Corporation and Newcourt Financial USA. Approval of
Newcourt Credit Group Inc.'s chief investment officer is required for
transactions in excess of an originator's credit authority and for certain other
matters. The credit authority granted to approve transactions may not be
delegated. Portfolio quality is monitored regularly to assess the overall
condition of the portfolio and identify the major exposures within the
portfolio. Each originator utilizes the 'one obligor concept' in computing total
credit exposure; this means that the level of credit authority required to
approve an incremental transaction must be sufficient to approve the customer's
total credit exposure. Newcourt Credit Group Inc. tracks credit exposure in an
automated fashion aggregating all originators' exposure to each customer
including its subsidiaries, affiliates and commonly controlled companies. Unless
otherwise specifically approved, credit approvals are valid for up to 180 days
unless specified otherwise.
UNDERWRITING -- GENERAL
Each originator's underwriting standards are intended to evaluate a
prospective customer's credit standing and repayment ability. Credit decisions
are made based upon the credit characteristics of the applicant, loss experience
with comparable customers, the amount and terms and conditions of the proposed
transaction and the type of equipment to be leased or financed. For almost all
transactions under $50,000 originated by the originators (other than Newcourt
Commercial Finance Corporation), credit scoring systems (where a computer makes
the initial credit decision after consideration of many variables from the
credit application data and credit bureau information, based on a statistical
model of such originator's prior loss experience) are utilized to make credit
decisions. Newcourt Credit Group Inc.'s proprietary credit scoring systems are
designed to improve credit decisions on new lease applications, expedite
response times to customers and increase business volume and portfolio
profitability while maintaining credit quality. With respect to credit decisions
for those transactions which are not based on credit scoring, each originator's
credit officers conduct various credit investigations including reference
calling and the procurement and analysis of data from credit reporting agencies
such as Dun & Bradstreet and other credit bureaus. In the case of larger sized
transactions (generally over $100,000), each originator's credit officers will
obtain and analyze financial statements from the customer. Analysis will be
conducted to determine the reliability of the financial statements and to
ascertain the financial condition and operating performance of the potential
customer. Asset quality is carefully reviewed and stated liabilities are
compared to the information obtained from reference checking and credit reports.
Cash flow is checked for reliability and adequacy to service
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funded debt maturities and other fixed charges. The financial analysis would
typically involve a review of the potential customer's leverage, profitability,
liquidity and cash flow utilizing a variety of financial ratios and comparing
the company to other companies its size in similar businesses. In this
connection, various reference sources are utilized such as Robert Morris
Associates Annual Statement Studies. Additionally, information may be obtained
from rating agencies, securities firms, Bloomberg and numerous other sources. A
written analysis is then prepared by the credit officer summarizing the amount
and terms of the credit request and setting forth the credit officer's
recommendation including detailed supporting rationale. Alternative exit
strategies, including an analysis of the value of the equipment as well as its
essentiality of use, are also considered in the event the customer fails to
honor its payment obligations, but no originator imposes rigid loan-to-value
ratios in its underwriting processes, nor is a maximum loan-to-value ratio
imposed. The credit approval will also set forth any conditions of approval such
as personal or corporate guarantees, shorter lease terms, more advance payments
or other credit enhancements, and it will dictate the necessary documentation.
Any subsequent modification of approval terms or required documentation must be
re-approved by one of Newcourt Credit Group Inc.'s authorized credit officers.
Newcourt Credit Group Inc. also requires the credit personnel of each originator
to rate the creditworthiness of each of such unit's customer accounts over
$100,000 and, in connection therewith, to take into account certain other
factors affecting the credit risk of a particular transaction, such as
collateral value, credit enhancement and duration of the credit.
UNDERWRITING -- ADVANCED CREDIT SCORING SYSTEMS
In 1992, AT&T Capital Corporation commissioned the Bell Laboratories
Operations Research Department to design decision support systems and associated
strategies for credit risk management throughout the customer's financing life
cycle. This life cycle approach, while commonplace in the consumer credit field,
is not common in commercial leasing. Three sets of decision support systems were
developed and implemented, covering each stage of the small ticket leasing life
cycle; front-end credit decisions, credit line management, and delinquent
account collections (see ' -- Collections' below). Each system is comprised of a
suite of statistically derived risk prediction models, a sequential decision
strategy which determines the model to be used in each instance, and a risk
based strategy which determines the optimal decision based upon the model
results.
The current front-end credit decisioning systems follow a series of steps
including the selection and electronic retrieval of credit bureau information,
the quantification of credit risk and the decision to accept, reject or manually
review the credit applicant. While both Newcourt Leasing Corporation and
Newcourt Communications Finance Corporation have been using credit application
scoring models based on more traditional credit scorecards since 1991 and 1989,
respectively, Newcourt Leasing Corporation implemented an improved decisioning
system in March 1993, while Newcourt Communications Finance Corporation
implemented such system in May 1995. Additionally, credit line management models
have been developed and implemented within Newcourt Communications Finance
Corporation since May 1995. The credit scoring systems are monitored using
various reporting mechanisms and have been upgraded over time to incorporate the
value of more recent data and to take advantage of improved statistical
techniques. Overrides of credit scoring decisions by authorized credit officers
are permitted, but are discouraged unless additional information is uncovered
which materially strengthens the transaction or if sufficient credit
enhancements can be obtained to mitigate the risk. Overrides are tracked by the
operating units each month, and are more common at Newcourt Communications
Finance Corporation than they are at Newcourt Leasing Corporation. Such advanced
credit scoring systems are not used by Newcourt Commercial Finance Corporation
because the contracts originated by each of them have larger original balances.
Contracts representing smaller ticket commercial assets originated through
certain of Newcourt USA's vendor programs are also underwritten utilizing
computerized credit scoring models. The computer makes the initial credit
decision after consideration of the credit application data and credit bureau
information based on statistical historical loss analysis and developed in
conjunction with Fair Isaac. Fair Isaac is a major credit scoring company and
has a long history of consumer, small business and related credit data. This
empirical data is used to develop specific parameters within a designated
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group and to predict future delinquency and default rates. By setting approval
cutoff levels on total scores at levels associated with predetermined default
rates, Newcourt USA is able to provide a program level credit score according to
its internal policies.
UNDERWRITING -- VENDOR PROGRAMS
In initially establishing a program agreement or other form of financing
arrangement with a vendor, Newcourt USA completes a formal underwriting review
of such vendor to ensure that the vendor can perform the financial and other
obligations contained in any vendor agreement. This review encompasses a
financial review, a product review (including an analysis of market acceptance
of the vendor's products) and a general operational and managerial review of the
vendor. Vendors must generally be established in their field and must market
industry accepted equipment or other products. The vendor must have sufficient
financial resources to support the financing relationship contemplated by the
respective originator. Program agreements are continually monitored by the
respective originator. Each originator performs a formal annual review of a
vendor's financial condition for a vendor which generates a substantial amount
of contracts.
DOCUMENTATION
Prior to funding leasing and financing transactions, a complete
documentation package (including generally a credit application, signed
lease/installment sale or financing agreement, vendor invoice, initial
lease/advance payment, proof of insurance (where relevant), delivery and
acceptance acknowledgments and appropriate financing statements) is required.
Filing of financing statements typically is required:
by Newcourt Commercial Finance Corporation, Newcourt Leasing
Corporation, Newcourt Communications Finance Corporation and Newcourt
Technologies Corporation in the appropriate 'filing' jurisdiction if
the fair market value of the equipment is at least $20,000 (or, in
the alternative, at least $50,000 if the equipment relates to a lease
with a 'fair market value' purchase option).
by Newcourt Financial USA Inc. in the appropriate 'filing'
jurisdiction if the fair market value of the related equipment is at
least $25,000.
BILLING
Billing for the originators is handled by third parties, which prepare and
mail monthly invoices. All customers are assigned a billing cycle and invoices
are automatically generated and mailed out before the due date (except for those
end-users whose payment obligations are evidenced by payment coupon books or
whose payments are automatically debited from their accounts). From time to time
to facilitate customer needs, the originators will provide manual invoices.
Monthly invoices include the scheduled payment, taxes, insurance and late
charges, if any. The vast majority of contracts provide for level payments
throughout their term. Substantially all customers forward payments to lockboxes
with certain financial institutions.
PORTFOLIO MONITORING
Delinquency is tracked and calculated monthly for each major portfolio
segment, including segmentation by classification of days past due. Credit
losses are monitored each month and are compared with credit losses for previous
months and the corresponding month in a number of prior years. Each originator
also employs other techniques in evaluating the performance of its portfolio.
These techniques include roll rate analysis (a type of portfolio analysis
examining the rate at which accounts in various stages of delinquency become, or
'roll' into, losses), a type of vintage analysis (another type of portfolio
analysis in which each originator's assets are classified by age and then
compared across different years (e.g., comparing loss experience for
two-year-old portfolio in 1996 with that in 1995)) as well as other types of
analysis. For transactions over $1,000,000, each originator conducts annual
reviews of customer financial condition and risk rating. Such annual reviews are
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conducted on transactions over $500,000 in the event of certain higher risk
ratings. All other transactions are monitored via the normal collection process,
meaning that they would receive individual attention only if they became
delinquent or for some other reason came to the attention of the company's
credit and collections personnel -- for example, a material adverse change in
the financial condition of the obligor in the transaction.
In addition to providing an initial credit review, ongoing credit review
procedures exist to identify at an early stage those customers that may be
experiencing financial difficulty. Once identified, these customers are
monitored by credit personnel, who periodically make recommendations to such
originator's chief credit officer about what remedial actions should be taken;
what portion, if any, of total credit exposures should be written off; or
whether a specific allocation of such originator's loss reserves should be made.
In establishing allowances for credit losses, each originator's management
reviews, among other things, the aging of such originator's portfolio, all
non-performing leases and receivables and prior collection experience, as well
as such originator's overall exposure and changes in credit risk.
COLLECTIONS
Each originator collects overdue payments using several different methods.
At Newcourt Communications Finance Corporation and Newcourt Leasing Corporation,
computerized collection management systems have been developed and deployed.
Newcourt Leasing Corporation has used outbound call management systems and
behavioral scoring systems in prioritizing collection activities in its
collection process since March 1994. Newcourt Communications Finance Corporation
has utilized similar technology in its collection activities since 1989 with the
exception of behavioral scoring, which was implemented in September 1996
following a testing period in several of Newcourt Communications Finance
Corporation's units. The collection management systems prioritize delinquent
accounts into automated queues using delinquent account scoring systems (also
referred to as behavioral scoring). Telephone calls to delinquent accounts are
automatically dialed by the system eliminating no answer and busy line calls
(which are automatically rescheduled).
Accounts are ranked using a suite of statistically-derived risk prediction
indicators (behavioral scoring) for handling in order of risk weighted exposure.
The collection management systems utilize different account collection
strategies as a function of risk level and account balance. Accounts with low
balances and/or low risk are assigned to a low impact collection strategy which
involve greater reliance upon letters in the early stages of delinquency and
less reliance on telephone calls until the later stages of delinquency. Also,
the number of days between actions are greater for a low risk account than in
the case of a high risk account. A high impact collection strategy is assigned
to accounts with high balances and/or high risk scores. In this case, telephone
calls are commenced sooner in the collection process and collection actions are
more closely spaced.
During the first half of 1999, Newcourt will continue to move some of its
small to mid ticket collection activities into a centralized call center located
in Memphis, Tennessee. The call center employs approximately 200 people
(primarily collectors and customer service representative) and utilizes a Davox
call management system and other collection technologies such as behavioral
scoring to efficiently collect on past due accounts.
Outside collection agencies and attorneys are frequently used to supplement
collection activity. Typically an account is placed with an outside collection
agency or attorney when it is 180 days or more past due. However, accounts past
due less than 180 days may be placed with a collection agency or attorney
depending upon the circumstances of its delinquency. Equipment may be
repossessed at any time after the contractual default but repossession typically
is not made until the account is past due between 90 and 180 days, or earlier if
the equipment is determined to be at risk.
NON-ACCRUAL AND WRITE-OFF POLICY
Each originator maintains non-accrual and write-off policies. The policies
require that all accounts which are 90 days past due (or sooner in the event of
a bankruptcy or other appropriate evidence of impairment) be placed on
non-accrual, and be written off or specifically reserved at 180 days past due.
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Smaller transactions (generally $100,000 or less) will be written off at such
time. Larger transactions (generally more than $100,000) will utilize specific
reserves to appropriately reduce the carrying value of the equipment to an
amount which may be 'covered' by collateral value.
THE CONTRACTS
With respect to any series of Notes, the aggregate of the contracts
expected to be held by an owner trust as part of its assets, as of any
particular date, is referred to as the contract pool, and the contract pool, as
of the date we transfer the contracts to the respective owner trust, is referred
to as the cut-off date contract pool.
DESCRIPTION OF THE CONTRACTS
All of the contracts in each owner trust will be commercial, rather than
consumer, leases or loans. The following description of the contracts generally
describes the material terms of the contracts to be included in each contract
pool, although an immaterial number of contracts in a contract pool may differ
in one or more provisions from the description below.
END-USER CONTRACTS
Each owner trust will include contracts to which end-user of the equipment
is a party which consist of conditional sale agreements, leases, secured notes,
installment payment agreements and financing agreements in respect of equipment,
software and services. There will be no limit on the number of contracts in a
particular contract pool which may consist of any of the foregoing types. Each
contract is required, however, to be an eligible contract, as defined under
'Description of the Pooling and Servicing Agreements', as of the date we
transfer the contracts to the respective owner trust.
Conditional Sale Agreements. Each originator will offer financing for
equipment under conditional sale agreements assigned to the applicable
originator by a vendor. Each originator will generally use its standard
pre-printed form to document the conditional sale agreements in a contract pool.
In certain instances, a vendor's standard, pre-printed form will be used. The
conditional sale agreements sets forth the description of each financed item and
the schedule of installment payments. Generally, loans under conditional sale
agreements are fixed rate and are for a term of one to seven years. Payments
under conditional sale agreements generally are due monthly. Conditional sale
agreements terms:
provide for a grant by the end-user of the equipment thereunder of a
security interest in any related equipment (which security interest
is assigned by the vendor to the originator);
may allow prepayment of the obligation upon payment, where allowed by
applicable state law, of an additional prepayment fee;
require the end-user to maintain the equipment, keep it free and
clear of liens and encumbrances and pay all taxes related to the
equipment;
restrict the modification or disposal of the equipment without the
seller's, or its assignee's, consent;
include a disclaimer of warranties;
include the end-user's indemnity against liabilities arising from the
use, possession or ownership of the equipment;
include the end-user's absolute (except as provided in second bullet
point above) and unconditional obligation to pay the installment
payments thereunder; and
include specifically identifiable events of default and remedies
therefor.
A conditional sale agreement typically requires each end-user to maintain
insurance, the terms of which may vary. The terms of a conditional sale
agreement may be modified at its inception at the end-user's request. Such
modifications must either be approved by the originator's legal department and
certain levels of management before the originator will agree to accept an
assignment of the conditional sale
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agreements from a vendor, or the vendor must indemnify the originator against
any losses or damages it may suffer as a result of such modifications.
Leases. Each originator, either directly or by assignment from vendors,
will offer financing of equipment, software and services under leases. Leases
may consist of individual lease agreements relating to a single, separate
transaction and financed item, or may consist of individual transactions written
under and governed by a master lease agreement which contains the general terms
and conditions of the transaction. Specific terms and conditions, such as
descriptions of the specific equipment, software and services being leased or
financed and the schedule of related rental payments, are typically contained in
a supplement or schedule to the master lease agreement, which is signed by the
end-user as lessee, and either the vendor or the originator, as lessor. The
supplement to the master lease agreement incorporates the master lease agreement
by reference, and is treated by the originator as a separate lease. Each lease
is originated in the ordinary course of business by either the originator or a
vendor (and assigned to the originator pursuant to a vendor agreement);
provided, however, certain leases may be purchased on a portfolio basis.
The initial terms of the leases in the contract pool generally range from
one to seven years. Each lease provides for the periodic payment by the end-user
of rent in advance or arrears, generally monthly or quarterly. Such periodic
payments represent the amortization, generally on a level basis, of the total
amount that an end-user is required to pay throughout the term of a lease.
A contract pool will include 'net leases' under which the end-user assumes
responsibility for the financed items, including operation, maintenance, repair,
insurance or self-insurance, return of any equipment at the expiration or
termination of the lease and the payment of all sales and use and property taxes
relating to the financed items during the lease term. The end-user further
agrees to indemnify the lessor for any liabilities arising out of the use or
operation of the financed items. In most cases, the lessor is also authorized to
perform the end-user's obligations under the lease at the end-user's expense, if
it so elects, in cases where the end-user has failed to perform. In addition,
the leases generally contain 'hell or high water' clauses unconditionally
obligating the end-user to make periodic payments, without setoff, at the times
and in the amounts specified in the lease. If the originator is the lessor, the
lease will contain no express or implied warranties with respect to the financed
items other than a warranty of quiet enjoyment. If a vendor is the lessor, the
lease or a related agreement may contain certain representations and warranties
with respect to the financed items in addition to a warranty of quiet enjoyment;
however, the end-user typically agrees not to assert any warranty claims against
any assignee of the vendor (which would include the originator) by way of
setoff, counterclaim or otherwise, and further agrees that it may only bring
such claims against the vendor. All leases of equipment generally require the
end-user to maintain, at its expense, casualty insurance covering damage to or
loss of the equipment during the lease term or to self-insure against such
risks, if approved in advance by the originator or vendor, as applicable.
The leases will include both 'true leases' and leases intended for security
as defined in Section 1-201(37) of the Uniform Commercial Code. Under a 'true
lease', the lessor bears the risk of ownership (although the risk of loss of the
equipment is passed to the end-user under the leases), takes any tax benefits
associated with the ownership of depreciable property under applicable law and
no title is conferred upon the lessee. The lessee under a 'true lease' has the
right to the temporary use of property for a term shorter than the economic life
of such property in exchange for payments at scheduled intervals during the
lease term and the lessor retains a significant 'residual' economic interest in
the leased property. End of lease options for 'true leases' include purchase or
renewal at fair market value. Under leases intended for security, the lessor in
effect finances the 'purchase' of the leased property by the lessee and retains
a security interest in the leased property. The lessee retains the leased
property for substantially all its economic life and the lessor retains no
significant residual interest. Such leases are considered conditional sales type
leases for federal income tax purposes and, accordingly, the lessor does not
take any federal tax benefits associated with the ownership of depreciable
property. End of lease options for such leases depend on the terms of the
related individual lease agreement or master lease agreement supplement, but
generally such terms provide for the purchase of the equipment at a prestated
price, which may be nominal. The inclusion of 'true leases' in a contract pool
should have no federal income tax impact on holders of Notes since the Notes are
treated as debt for federal income tax
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purposes although the inclusion of such leases may result in the imposition of
state and local taxes which would reduce cash available for payment on the
Notes. True leases are treated differently under the Federal bankruptcy code
from leases intended for security.
End-users under a lease will be either prohibited from altering or
modifying the equipment or permitted to alter or modify the equipment only to
the extent the alterations or modifications are readily removable without damage
to the equipment. Under certain master lease agreements, the end-user may assign
its rights and obligations under the lease, but only upon receiving the prior
written consent of the lessor, or may relocate the equipment upon giving the
lessor prompt written notice of such relocation. The right to grant or deny such
consent or to receive such written notice will be exercised by the servicer
pursuant to the authority delegated to it in the related pooling and servicing
agreement. Certain leases will permit the end-user to substitute substantially
identical leased equipment for leased equipment scheduled to be returned to the
lessor under the lease.
While the terms and conditions of the leases will not generally permit
cancellation by the end-user, certain leases may be modified or terminated
before the end of the lease term. Modifications to a lease term or early lease
terminations may be permitted by the originator, or by a vendor, with the
consent of the originator, and are generally associated with additional
financing opportunities from the same end-user. End-users may also negotiate
with the originator, at the originator's discretion, an early termination
arrangement allowing the end-user to purchase the equipment during the term of a
lease for an amount generally equal to or in excess of the present value of the
remaining rental payments under the lease plus the anticipated market value of
the related equipment as of the end of the lease term. In some circumstances,
early termination of a lease may be permitted in connection with the acquisition
of new technology requiring replacement of the equipment. In such cases, the
related equipment is returned to the vendor or originator and an amount
generally equal to the present value of the remaining rental payments under the
lease plus an early termination fee is paid by the end-user to the originator.
Modifications usually involve repricing a lease or modification of the lease
term. Occasionally a lease may be modified in connection with an increase in the
capacity or performance of equipment by adding additional equipment that
includes new technology. Coincident with the financing of an upgrade to such
equipment, the originator may reprice and extend the related base lease term to
be coterminous with the desired term of the lease relating to the upgrade. In
certain cases, subject to certain conditions described under 'Description of the
Notes and Indenture -- Prepaid Contracts', such base lease extensions may remain
in a contract pool. AT&T Capital, as servicer, expects to continue to permit
these modifications and terminations with respect to leases included in a
contract pool pursuant to the authority delegated to it in the related pooling
and servicing agreement, subject to certain conditions and covenants of the
servicer described under 'Description of the Notes and Indenture -- Prepaid
Contracts.'
In certain circumstances, the standard terms and conditions of the lease
agreement are modified at the inception of a lease at the request of the
end-user. Such modifications must either be approved by the originator's legal
department and/or certain levels of management before the originator will agree
to enter into the lease or accept an assignment of the lease from a vendor, or
the vendor must indemnify the originator against any losses or damages it may
suffer as a result of such modifications. Common permitted modifications
include, but are not limited to:
a one dollar purchase option at the end of the lease term;
prearranged mid-lease purchase options, early termination options and
lease extension options as described above;
modifications to the lessor's equipment inspection rights;
modifications to the end-user's insurance requirements permitting the
end-user to self-insure against casualty to the equipment;
the end-user's right to assign the lease or sub-lease the financed
items to an affiliated entity, so long as the end-user remains liable
under the lease and promptly notifies the lessor or its assignee of
such assignment or sublease; and
extended grace periods for late payments of rent.
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Secured Notes. Each originator will also provide direct initial financing
or refinancing of equipment and software under secured promissory notes, which
consist of an installment note and a separate security agreement. In an initial
financing transaction, the originator pays to the vendor the purchase price for
the equipment and software and in a refinancing transaction, the originator pays
off an end-user's existing financing source, and the initial financing or
refinancing is documented as a direct loan by the originator to the end-user of
the equipment or software using a secured note. In the case of a refinancing
transaction, upon payment to the existing financing source, the originator
obtains a release of such party's lien on the financed equipment. In either
case, the originator records its own lien against the financed equipment or
software and takes possession of the secured note. Except for the lack of
references to 'sale' or 'purchase' of equipment, the terms and conditions
contained in a secured note are substantially similar to those contained in a
conditional sale agreements.
Installment Payment/Financing Agreements. Each originator will provide
financing for certain software license fees and related support and consulting
services under installment payment supplements to software license agreements,
separate installment payment agreements as well as other forms of financing
agreements assigned to the originator by vendors of software. Each such
financing agreement is an unsecured obligation of the end-user; generally
provides for a fixed schedule of payments with no end-user right of prepayment;
is noncancellable for its term and generally contains a 'hell or high water'
clause unconditionally obligating the end-user to make periodic payments,
without setoff, at the times and in the amounts specified therein (in the event
a financing agreement does not provide for noncancellability or a 'hell or high
water' clause such financing agreement will have the benefit of a vendor
guarantee, see 'The Contracts -- Program Agreements with Vendors'; permits the
assignment of the payment agreement to a third party (including the originator)
and include the end-user's agreement, upon such assignment, not to assert
against such assignee any claims or defenses the end-user may have against the
vendor; and contains default and remedy provisions that generally include
acceleration of amounts due and to become due and, in certain cases, the right
of the vendor, or the originator by assignment, to terminate the underlying
software license and all related support and consulting activities.
EQUIPMENT
The end-user contracts and secondary contracts will cover a wide variety of
new and used equipment relating to a wide variety of new and used information
technology equipment (including: computer work stations, personal computers,
data storage devices, mainframe and mini computers and other computer related
peripheral equipment), communications equipment (such as telephone switching and
networking systems), commercial business and industrial equipment (such as
printing presses, machine tools and other manufacturing equipment, photocopiers,
facsimile machines and other office equipment, energy savings and control
equipment, automotive diagnostic and automated testing equipment), medical
equipment (such as diagnostic and therapeutic examination equipment for
radiology, nuclear medicine and ultrasound and laboratory analysis equipment),
resources equipment (such as feller-bunchers and grapplers), transportation and
construction equipment (such as heavy and medium duty trucks and highway
trailers, school buses, bulldozers, loaders, graters, excavators, forklifts and
other materials handling equipment, golf carts and other road and off-road
machinery) and electronics manufacturing equipment. In each case, all of the
interests of the originator in the equipment subject to each related end-user
contract (which consists of a security interest in the equipment) will be
transferred to the owner trust.
SOFTWARE AND SERVICES
Certain of the end-user contracts will cover license fees and other fees
owed by the end-user under either perpetual or term software license agreements
and other related agreements in connection with the use by such end-user of
computer software programs, and such end-user contracts may also cover related
support and consulting services which are provided by the vendor, an affiliate
thereof or a third party contract party and which facilitate the obligor's use
of such software. No interest in the software, the software license agreement
(other than the right to collect the payment of software license fees and, in
certain cases, to exercise certain rights and remedies under the software
license agreement or other
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agreements related thereto) or the related services will be conveyed to the
originator by either the vendors or licensors of the software or by the end-user
under the related end-user contracts. Consequently, an owner trust will not have
title to or a security interest in such software, nor will it own such services,
and would not be able to realize any value therefrom under a related end-user
contract upon a default by the end-user. Equipment, software and services are
collectively referred to as financed items.
VENDOR LOANS
The contracts may include limited recourse loan or repayment obligations
(which may take the form of promissory notes with related security interests
documented by security agreements or specific provisions in related program
agreements) each of which is payable by a vendor and secured by all of the
vendor's interest in an individual end-user contract originated by such vendor
and by the equipment related to such end-user contract.
Vendor loans may be originated through, and incorporate terms and
conditions of, a program agreement including a program agreement under which
end-user contracts also may be originated by an originator directly, or
purchased by an originator from the vendor, in separate transactions not giving
rise to vendor loans. Vendor loans generally are non-recourse to the vendor
meaning that the originator may obtain repayment solely from the proceeds of the
end-user contracts and related equipment securing the vendor loan. In a few
instances, however, recourse to a vendor for nonpayment of a vendor loan may be
available through a limited recourse arrangement included in the related program
agreement. The repayment terms under a vendor loan, including periodic amounts
payable and schedule of payments, will correspond to the payment terms of the
end-user under the end-user contract collaterally assigned under such vendor
loan. Each vendor loan will either include most, if not all, of the
representations and warranties regarding the end-user contract and related
equipment typically included in a vendor agreement, or incorporate such
representations and warranties included in any related program agreement by
reference.
PROGRAM AGREEMENTS WITH VENDORS
An originator's program agreement is generally an agreement with equipment
manufacturers, dealers and distributors, or software licensors or distributors,
located in the United States which provide an originator with the opportunity to
finance transactions relating to the acquisition or use by an end-user of a
vendor's equipment, software, services or other products. Vendor finance
arrangements provide an originator with a steady, sustainable flow of new
business, generally with lower costs of origination than asset-based financings
marketed directly to end-users. Many of the program agreements provide various
forms of support to an originator, including representations and warranties by
the vendor in respect of the contracts assigned by the vendor to the originator
and related equipment, software or services, credit support with respect to
defaults by end-users and equipment repurchase and remarketing arrangements upon
early termination of such contracts upon a default by the end-user. Some of the
program agreements take the form of a referral relationship which is less
formal, and may or may not include credit or remarketing support to the
originator from the vendor.
Each program agreement established with respect to a referral relationship,
generally include the following provisions, among others:
1. Vendor representations, warranties and covenants regarding each contract
assigned to an originator, including among other things that:
the obligations of the end-user under the assigned contract are
absolute, unconditional, noncancellable, enforceable in accordance with
its terms and free from any rights of offset, counterclaim or defense;
the originator holds the sole original of the contract and has either
title to or a first priority perfected security interest in the
equipment, except with respect to situations where no financing
statement is filed due to the minimum value involved;
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the equipment and the contract are free and clear of all liens, claims
or encumbrances except for certain permitted liens;
the equipment or the software has been irrevocably accepted by the
end-user and will perform as warranted to the end-user; and
the assigned contract was duly authorized and signed by the end-user.
2. Remedies in the event of a misrepresentation or breach of a warranty or
covenant by the vendor regarding an assigned contract, which usually
require the vendor to repurchase the affected end-user contract for the
originator's investment balance in the contract plus costs incurred by
the originator in breaking any underlying funding arrangement, which may
or may not be calculated in accordance with a specified formula.
3. In the case of contracts covering equipment, remarketing support from
the vendor in the event of an end-user default and subsequent
repossession or return of the equipment under the contract, to assist
the originator in realizing proceeds from the equipment assigned as
collateral security to support the obligations of the end-user under the
contract.
4. The right of an originator to further assign its interests in assigned
contracts, all payments thereunder and any related interest in
equipment.
In addition to the foregoing, a program agreement may include recourse
against a vendor with respect to end-user defaults under certain identified
end-user contracts,
by specifying that the assignment of the contract from the vendor to
the originator is with full recourse against the vendor;
by specifying that the vendor will absorb a limited fixed dollar or
percentage amount of 'first losses' on the contract;
by inclusion of the contract in an ultimate net loss pool created
under the program agreement as well as certain guarantees by the
applicable vendor with respect to certain contracts which are
cancelable or which do not contain hell or high water provisions; or
by providing for vendor repurchase of the contract or vendor
indemnification payments for breaches of certain representations and
warranties made by the vendor with respect to such contract.
In the event of an end-user default under a contract which was assigned by the
vendor to the originator subject to a net loss pool, the originator may, to the
extent permitted, draw against the net loss pool up to the amount of the
originator's remaining unpaid investment balance in the defaulted. Drawings may
also be made against the ultimate net loss pool with respect to contracts that
are not included in the pool of contracts in a particular owner trust and,
accordingly, there can be no assurance that any amounts contributed by a vendor
to a net loss pool will be available in the event of an end-user default under a
contract included in the pool of contracts in a particular owner trust.
The manner in which contracts are assigned to the originator by the vendors
differs under each program agreement, depending upon the nature of the items
financed, the form of the contract, the accounting treatment sought by the
vendor and the end-user, and certain tax considerations.
For example, an originator might:
accept a vendor loan and collateral assignment of the contract and
related equipment (or security interest therein) from the vendor; or
accept a full assignment of such contract and a collateral assignment
of the related equipment (or security interest therein) from the
vendor, which collateral assignment secures the end-user's
obligations under the contract or lease.
The originator also may receive, from a vendor with respect to software, a full
assignment of leases, installment payment agreements, installment payment
supplements to license agreements, and other types of financing agreements used
in financing software license payments and related support and consulting
services. Such assignments may include an assignment of the software vendor's or
licensor's right, or the agreement of the vendor or licensor, at the
originator's instructions, to terminate the
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software license covered by the contract and suspend related support in the
event of an end-user default under the contract. In some cases, the software
vendor also agrees not to relicense the same or similar software to a defaulted
end-user for some period of time (e.g., one year) unless the end-user cures its
default.
It is also expected that some portion of the contracts included in the pool
of contracts, especially in the case of conditional sale agreements, will
consist of contracts originated by vendors and assigned to the originator
pursuant to vendor assignments, each of which relates to an individual contract,
rather than pursuant to a program agreement. Each vendor assignment will either
be made with or without recourse against the vendor for end-user defaults and
will generally contain many, if not all, of the representations, warranties and
covenants typically contained in program agreements, as well as a vendor
repurchase requirement in the event of a breach by the vendor of such
representations, warranties or covenants. Vendor assignments may or may not
provide for any vendor remarketing support in the event of an end-user default.
RESIDUAL INVESTMENTS
Any of the originators may finance all or a portion of the residual
interest in the equipment under certain program agreements and under direct
transactions between an obligor and the applicable originator. Any investment by
the originator in such residual interest shall be referred to as a residual
investment. Certain program agreements may provide that the originator may, at
its sole discretion and in connection with the funding of a true lease of
equipment make a residual investment in the equipment subject to a contract by
advancing additional funds against a portion of the anticipated residual value
of the equipment, and not just against the discounted present value of the
rental payments due under the contract. Such residual investments may take the
form of an advance of the present value of some specified percentage of the
anticipated residual value of the equipment or a specified percentage, generally
not greater than 10%, of the amount to be paid by the originator in funding the
present value of the rental payments due under the contract. Certain
transactions involving vendor assignments may result in the originator advancing
the entire purchase price of the equipment subject to a true lease, taking title
to the equipment, and accepting an assignment of the true lease contract from a
vendor. Certain direct transactions between an obligor under a true lease
contract and the originator may also result in the originator advancing the
entire purchase price of the equipment to the vendor, taking title to the
equipment from the vendor, and entering into a true lease contract with an
obligor, with the originator named as lessor under such contract. In either of
the two foregoing types of transactions, the originator will have advanced more
than the discounted present value of the rents payable under the true lease
contracts by paying the purchase price for the equipment, and so will have made
a residual investment in the equipment.
In some program agreements, the originator may make the residual investment
in the form of a full recourse loan of additional funds to the vendor, repayable
by the vendor at the expiration or termination of the contract with interest,
secured by a security interest in the equipment covered by the contract. In some
transactions involving vendor assignments or direct transactions with obligors
under true lease contracts, the originator may obtain the obligation of either
the vendor or the obligor to purchase the equipment at the end of the lease term
for the full amount of the originator's residual investment in such equipment
with interest thereon. Any such transaction in which the originator may look to
either the vendor or the obligor, and not just the value of equipment itself, to
recover its residual investment with interest shall be referred to as a
'Guaranteed Residual Investment'. Other than Guaranteed Residual Investments, a
residual investment will not be included in the discounted contract balance of
any contract and, therefore, would not be financed with the proceeds of the
Notes. This type residual investment is referred to herein as the Excluded
Residual Investment.
The Excluded Residual Investment associated with any contract included in a
pool of contracts will be transferred to the depositor or other affiliate
pursuant to the terms of a sale and contribution agreement or other transfer
agreement, but will not be sold to an owner trust under the related pooling and
servicing agreement. The related owner trust's interest in contracts with
associated residual investments, other than with Guaranteed Residual
Investments, will be limited to the discounted present value of the rental
payments due under the contract and a security interest in the related
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equipment. The originator may assign its Excluded Residual Investment to a third
party, including the security interest in the equipment in respect of such
residual investment. Under the related pooling and servicing agreement the
originator will warrant and covenant to the related owner trust, that any
subordinated residual interest will be subordinated to the interests of the
depositor and that any assignee of the residual interest will bear the full risk
of any deficiency in respect of the residual investment as a result of prior
satisfaction of the owner trust's interest in the related contract and the
related equipment.
CONTRACT FILES
Each originator will indicate in the appropriate computer files relating to
the contracts being transferred to an owner trust that such contracts have been
transferred to the owner trust for the benefit of the holders of the Notes. Each
originator will also deliver to the indenture trustee a computer file or
microfiche or written list containing a true and complete list of all contracts
which have been transferred to an owner trust, identified by account number and
by the discounted contract balance of the contracts as of the date of transfer.
COLLECTIONS ON CONTRACTS
All collections received with respect to the contracts will be allocated as
described in your prospectus supplement.
PAYMENTS GENERALLY
Generally, the contracts require that an obligor make periodic payments on
a monthly basis, while a number of contracts provide for quarterly, semi-annual
or annual payments. The payments under all of the contracts are required to be
made in United States dollars and are fixed and specified payments, rather than
payments which are tied to a formula or are otherwise at a floating rate.
Payments under the contracts are ordinarily payable in advance, although a small
percentage provide for payments in arrears.
EXPENSES RELATING TO EQUIPMENT
The contracts require the obligors to assume the responsibility for payment
of all expenses of the related equipment including, without limitation, any
expenses in connection with the maintenance and repair of the related equipment,
the payment of any and all premiums for casualty and liability insurance and the
payment of all taxes relating to the equipment.
INSURANCE; REPAIR AND REPLACEMENT
Most contracts which are subject to a true lease require the obligors to
maintain liability insurance which must name the lessor as additional insured.
Contracts which are subject to a true lease and contracts which are subject to
installment sales contracts, promissory notes, loan and security agreements or
other similar types of receivables require obligors to procure property
insurance against the loss, theft or destruction of, or damage to, the equipment
for its full replacement value, naming the lessor, or lender, as loss payee.
This requirement is, from time to time, waived by an originator for a small
number of transactions and, for some contracts which are subject to a true
lease, the obligor is permitted to self-insure the equipment under the obligor's
already existing self-insurance program.
For contracts which are subject to a true lease originated by Newcourt
Communications Finance Corporation relating to equipment with a cost of $100,000
or less, and for contracts which are subject to a true lease originated after
March 4, 1997 by Newcourt Leasing Corporation relating to equipment with a cost
of $250,000 or less, the obligor is generally provided with written information
concerning its property insurance obligations under the contract which is
subject to a true lease and the originator's own property insurance coverage
that will be provided at the expense of the obligor if the obligor does not
provide the originator with satisfactory evidence of its own insurance coverage.
The obligor is given a specified time period in which to provide such evidence.
Proper evidence of coverage is verified independently and tracked by a third
party tracking company and licensed broker. If the originator provides the
insurance coverage, the obligor is charged a monthly fee covering the insurance
charges
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and other related administrative charges. If, at any time, the obligor provides
evidence of its own coverage, such monthly charges cease. The obligor has the
ability to opt out of the program by providing evidence of its own coverage.
For transactions involving equipment with a cost of more than $100,000, in
the case of contracts which are subject to a true lease and which are originated
by Newcourt Communications Finance Corporation, or more than $250,000, in the
case of contracts which are subject to a true lease originated by Newcourt
Leasing Corporation after March 4, 1997, insurance coverage generally is
verified and tracked by the respective originator, and the failure to maintain
such insurance constitutes an event of default under the applicable contract.
Generally, the obligor also agrees to indemnify the originator for all liability
and expenses arising from the use, condition or ownership of the equipment.
Under each contract which is subject to a true lease, if the equipment is
damaged or destroyed, the obligor is required to:
repair such equipment;
make a termination payment to the lessor in an amount not less than
the amount required to payoff the contract; or
in some cases, replace such damaged or destroyed equipment with other
equipment of comparable use and value.
Under the related pooling and servicing agreement, the servicer will be
permitted, in the case of the destruction of the equipment related to a
particular contract which is subject to a true lease, either to allow the lessee
to replace such equipment, provided that the replacement equipment is, in the
judgment of the servicer, of comparable use and at least equivalent value to the
value of the equipment which was destroyed, or to accept the termination payment
referred to above.
ASSIGNMENT OF CONTRACTS
The contracts will generally permit the assignment of the contract by the
lessor or secured party without the consent of the obligor, except for a small
number of contracts which require notification of the assignment to, or the
consent of, the obligor and each applicable originator will represent and
warrant in the applicable purchase agreement that such notices have been given,
or such approvals will have been received, not more than ten days following the
date the contract is transferred to the depositor. The contracts do not permit
the assignment thereof, or the equipment related thereto, by the obligor without
the prior consent of the lessor or secured party, other than contracts which:
may permit assignments to a parent, subsidiary or affiliate;
permit the assignment to a third party, provided the obligor remains
liable under the contract; or
permit assignment to a third party with a credit standing, determined
by the originator in accordance with its underwriting policy and
practice at the time for an equivalent contract type, term and
amount, equal to or better than the original obligor.
Under the related pooling and servicing agreement, the servicer may permit an
assignment of a particular contract from an obligor to a third party only if the
servicer, utilizing the current underwriting criteria for its contract
origination activities generally, determines that such third party is of
sufficient credit quality that the servicer would permit such third party to
become an obligor with respect to a lease or loan contract originated by the
servicer generally.
EVENTS OF DEFAULT AND REMEDIES
Events of default under the contracts generally include:
the failure to pay all amounts required by the contract when due;
the failure of the obligor to perform its agreements and covenants
under the applicable contract;
material misrepresentations made by the obligor;
the bankruptcy or insolvency of the obligor or the appointment of a
receiver for the obligor; and
in some cases, default by the obligor under other contracts or
agreements.
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Some of these default provisions are, in some instances, subject to notice
provisions and cure periods. Remedies available to the lessor or secured party
upon the occurrence of an event of default by the obligor include the right to
cancel or terminate in the case of a contract subject to a true lease, or to
accelerate payments in the case of a contract subject to original financing, to
recover possession of the related equipment, and to receive an amount intended
to make the lessor or secured party, as the case may be, whole plus costs and
expenses, including legal fees, incurred by the lessor or secured party as a
result of such default. Notwithstanding such events of default and remedies,
under the pooling and servicing agreement, the servicer is permitted to take
such actions, with respect to delinquent and defaulted contracts, as a
reasonably prudent creditor would do under similar circumstances. See
'Description of the Pooling and Servicing Agreements -- Servicing'. The
originators may occasionally provide payment extensions, generally of three
months or less, although longer extensions are occasionally granted, to
customers experiencing delays in payment due to cash flow shortages or other
reasons. However, it is not intended that extensions be used to provide a
temporary solution for a delinquent account. Rather, extensions are intended to
be used when, in the judgment of the relevant credit authority, the extension is
necessary to avoid a termination and liquidation of such contract and will
maximize the amount to be received by the related owner trust with respect to
such contract.
PREPAYMENTS AND EARLY TERMINATION
Any contract may either:
not permit the obligor thereunder to prepay the amounts due under
such contract or otherwise terminate the contract prior to its
scheduled expiration date; or
allow for a prepayment or early termination upon payment of an amount
that is at least equal to the present value of the future scheduled
payments on such contract, determined using a discount rate specified
in your prospectus supplement; or
allow for a prepayment or early termination without the payment of
such an amount.
Some contracts, often written as installment sales contracts, promissory notes
or loan and security agreements, permit the obligor thereunder to prepay the
contract, in whole or in part, at any time at par plus accrued interest.
Under each pooling and servicing agreement, the servicer will be permitted
to allow the prepayment of any contract, but only if the amount paid by or on
behalf of the obligor, or, in the case of a partial prepayment, the sum of such
amount and the remaining principal balance of the contract after application of
such amount, is at least equal to the amount required to payoff such contract.
The required payoff amount, with respect to any collection period for any
contract, is equal to the sum of:
the scheduled payment due in such collection period and not yet
received, together with any scheduled payments due in prior
collection periods and not yet received; plus
the contract principal balance of such contract as of the last day of
such collection period, after taking into account the scheduled
payment due in such collection period.
In no event will revenues pledged for a series of Notes include, nor will the
Notes otherwise be payable from, any portion of a prepayment on a contract that
exceeds the required payoff amount for such contract.
In no event will revenues pledged for a series of Notes include, nor will
the Notes otherwise be payable from, any portion of a prepayment on a contract
that exceeds the required payoff amount for such contract.
DISCLAIMER OF WARRANTIES
The contracts which are subject to a true lease contain provisions whereby
the lessor, or the originator, as assignee of the lessor, disclaims all
warranties with respect to the equipment and, in the majority of cases, the
lessor assigns the manufacturer's warranties to the obligor for the term of the
lease. Under the contracts which are subject to a true lease, the obligor
accepts the equipment under the applicable contract following delivery and an
opportunity to inspect the related equipment.
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ADDITIONAL EQUIPMENT
Some of the contracts which are subject to a true lease constitute leases
of additional equipment, generally costing $25,000 or less, with existing
obligors. Pursuant to the terms of the original contract between the lessor and
the obligor, these leases for additional equipment are documented on a written
form prepared by the lessor and delivered to, but not executed by, the obligor,
which written form describes all of the terms of the lease. Under the terms of
the contract, the obligor agrees that unless it objects in writing within a
specified period of time, it is deemed to have accepted the lease of such
additional equipment.
REPRESENTATIONS AND WARRANTIES MADE BY THE ORIGINATORS
Except as otherwise specified in your prospectus supplement, each
originator will make the following representations and warranties regarding the
contracts and the related equipment included in each pool of contracts
transferred to an Owner Trust as of the related transfer date:
(A) Each contract:
constitutes a valid, binding and enforceable payment obligation
of the obligor in accordance with its terms (except as may be
limited by applicable bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights generally
and the availability of equitable remedies), and
contains customary and enforceable provisions adequate to enable
realization against the obligor and/or the related equipment
(although no representation or warranty is made with respect to
the perfection or priority of any security interest in such
related equipment);
(B) No provisions of any contract have been waived, altered or
modified in any material respect, except as indicated in the files for such
contract;
(C) No contract is a consumer lease as defined in Article 2A of the
Uniform Commercial Code;
(D) To the best of the originator's knowledge, each obligor has
accepted the related equipment and has had reasonable opportunity to
inspect and test such equipment;
(E) All requirements of applicable federal, state and local laws, and
regulations thereunder, in respect of all of the contracts, have been
complied with in all material respects;
(F) There is no known default, breach, violation or event permitting
cancellation or termination of the contract by the lessor in the case of
contracts which are subject to a true lease or by the secured party in the
case of other contracts under the terms of any contract, other than
scheduled payment delinquencies, in excess of 10% of the scheduled payment
due, of not more than 60 days, and, except for payment extensions and
waivers of administrative fees in accordance with the originator's
servicing and collection policies and procedures, there has been no waiver
of any of the foregoing; and as of the date of transfer of such contracts,
no related equipment had been repossessed;
(G) The obligor's billing address is in the United States or Puerto
Rico, and the obligor is not (i) the United States of America or any state
or local government or any agency, department, subdivision or
instrumentality thereof or (ii) the depositor, an originator, or any
subsidiary thereof;
(H) Each contract was entered into by an obligor who, at the transfer
date, had not been identified on the records of the originators as being
the subject of a current bankruptcy proceeding;
(I) No contract has a scheduled payment delinquency, in excess of 10%
of the scheduled payment due, of more than 60 days past due as of the
transfer date (although some contracts may have experienced such
delinquencies prior to the transfer date);
(J) Each contract may be sold, assigned and transferred by the
originator to the depositor, and may be assigned and transferred by the
depositor to the owner trust, without the consent of, or prior approval
from, or any notification to, the applicable obligor, other than (i)
certain contracts (which, in proportion to the aggregate of all of the
contracts, are not material) that require notification of the assignment to
the obligor, which notification will be given by the servicer not later
than 10 days following the transfer date, and (ii) contracts (which, in
proportion to the
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aggregate of all of the contracts, are not material) that require the
consent of the obligor, which consent will be obtained by the servicer not
later than 10 days following the transfer date;
(K) Each contract prohibits the sale, assignment or transfer of the
obligor's interest therein, the assumption of the contract by another
person in a manner that would release the obligor thereof from the
obligor's obligation, or any sale, assignment or transfer of the related
equipment, without the prior consent of the lessor in the case of contracts
which are subject to a true lease or the secured party in the case of other
contracts other than contracts which may:
permit assignment to a subsidiary, corporate parent or other
affiliate;
permit the assignment to a third party, provided the obligor
remains liable under the contract, or
permit assignment to a third party with a credit standing
(determined by the originator in accordance with its
underwriting policy and practice at the time for an equivalent
contract type, term and amount) equal to or better than the
original obligor;
(L) The obligor under each contract is required to make payments
thereunder in United States dollars, and in fixed amounts and on fixed and
predetermined dates;
(M) Each contract requires the obligor to assume responsibility for
payment of all expenses in connection with the maintenance and repair of
the related equipment, the payment of all premiums for insurance of such
equipment and the payment of all taxes (including sales and property taxes)
relating to such equipment;
(N) Each contract requires the obligor thereunder to make all
scheduled payments thereon under all circumstances and regardless of the
condition or suitability of the related equipment and notwithstanding any
defense, set-off or counterclaim that the obligor may have against the
manufacturer, lessor or lender, as the case may be;
(O) Under each contract which is subject to a true lease, if the
equipment is damaged or destroyed, the obligor is required either:
to repair such equipment;
to make a termination payment to the lessor in an amount not
less than the required payoff amount; or
in some cases, to replace such damaged or destroyed equipment
with other equipment of comparable use and value;
(P) Other than with respect to a deminimis portion of the contract
pool, each contract either does not permit the obligor to terminate the
contract prior to the latest stated maturity date or to otherwise prepay
the amounts due and payable thereunder, or allows for an early termination
or prepayment upon payment of an amount which is not less than the required
payoff amount;
(Q) It is not a precondition to the valid transfer or assignment of
the originator's interest in any of the equipment related to any contract
that title to such equipment be transferred on the records of any
governmental or quasi-governmental agency, body or authority;
(R) Each contract was originated by one of the originators in the
ordinary course of such originator's business, or (in the case of any
contract purchased by one of the originators) was acquired by such
originator for proper consideration and was validly assigned to such
originator by the seller of such contract. Immediately prior to the sale,
assignment and conveyance of such contract by the originator to the
depositor, such originator had good title to such contract and the
originator's interest in the related equipment (subject to the terms of
such contract) and was the sole owner thereof, free of any lien. Such
contract has been duly and properly sold, assigned and conveyed by the
applicable originator to the depositor pursuant to a purchase agreement.
Immediately prior to the transfer and conveyance of such contract to the
owner trust, the depositor had the right to transfer such contract and such
interest in the related equipment free of any lien (other than the rights
of the obligor under the related contract). Such contract has been duly and
properly transferred and conveyed by the depositor to the owner trust
pursuant to the pooling and servicing agreement free of any lien (other
than the rights of the obligor under the related contract);
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(S) No person has a participation in or other right to receive
scheduled payments under any contract, and neither the depositor nor any of
the originators has taken any action to convey any right to any person that
would result in such person having a right to scheduled payments received
with respect to any contract;
(T) The sale, transfer and assignment of such contract and the
originators' interest in the related equipment to the depositor under the
related purchase agreement, and the transfer and conveyance of such
contract from, and the grant of a security interest in the related
equipment by, the depositor to the owner trust under the related pooling
and servicing agreement, are not unlawful, void or voidable under the laws
of the jurisdiction applicable to such contract;
(U) All filings and other actions required to be made, taken or
performed by any person in any jurisdiction to give the owner trust a first
priority perfected lien or ownership interest in the contracts and a first
priority perfected security interest in the originator's interest in the
equipment have been made, taken or performed;
(V) There exists a contract file pertaining to each contract, and such
contract file contains the contract or a facsimile copy thereof;
(W) There is only one original executed copy of each contract or, if
there are multiple originals, all such originals are in the possession of
the originator or the signed original in the possession of the originator
is noted thereon as being the only copy that constitutes chattel paper;
(X) The contracts constitute either chattel paper, accounts,
instruments or general intangibles within the meaning of the Uniform
Commercial Code as in effect in the states where the originators are
located;
(Y) By the transfer date of the contracts, the portions of the
electronic master record of each originator relating to the contracts will
have been clearly and unambiguously marked to show that the contracts
constitute part of the assets of an owner trust and are owned by the owner
trust in accordance with the terms of the related pooling and servicing
agreement;
(Z) The computer tape containing information with respect to the
contracts that was made available by the depositor to the owner trustee and
the indenture trustee on the transfer date and was used to select the
contracts was complete and accurate in all material respects as of the
transfer date and includes a description of the same contracts that are
described in the schedule of contracts to the related pooling and servicing
agreement;
(AA) The information with respect to the contracts listed on the
schedule of contracts attached to the related pooling and servicing
agreement is true, correct and complete in all material respects;
(BB) Each contract was originated or purchased by an originator and
was sold and assigned by such originator to the depositor without any fraud
or misrepresentation on the part of such originator; and
(CC) No selection procedures adverse to the holders of the Notes were
utilized in selecting those contracts transferred by the originators to the
depositor from those lease and loan contracts available therefor or in
selecting those contracts transferred by the depositor to the owner trust
from those lease and loan contracts available therefor.
In the event of a breach of any such representation or warranty with
respect to a contract that materially and adversely affects the value of such
contract, the applicable originator, unless it cures the breach by the end of
the second collection period after the date on which such originator or the
depositor becomes aware of or receives written notice from the related indenture
trustee or the servicer of such breach, will be obligated to purchase the
contract and, in the case of a contract subject to a true lease, the related
equipment. Any such purchase shall be made on the deposit date immediately
following the end of such second collection period at a price equal to the
required payoff amount applicable to such contract (which will be allocated to
the related owner trust) plus, if applicable, the book value of the related
equipment which will be allocated to the depositor. This purchase obligation may
be enforced by the related indenture trustee on your behalf, and will constitute
your sole remedy available against the applicable originator for any such
uncured breach, except that pursuant to the applicable pooling and servicing
agreement, sale and contribution agreement, as applicable, such
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originator will indemnify the related indenture trustee, the related owner
trustee, the related owner trust and you against losses, damages, liabilities
and claims which may be asserted against any of them as a result of third-party
claims arising out of the facts giving rise to such breach. If so specified in
your prospectus supplement, the applicable originator may, in lieu of
repurchasing the contract, cause the depositor to deliver a substitute contract
meeting the criteria described in your prospectus supplement.
Upon the purchase by the applicable originator of a contract and, in the
case of a contract subject to a true lease, any related equipment, such contract
and related equipment will be released to such originator.
DELINQUENCY AND NET LOSS EXPERIENCE
Statistics relating to the delinquency and net loss experience on lease
and/or loan contracts within the originators' owned and managed portfolios of
receivables similar to the contracts in a contract pool will be set forth in
your prospectus supplement.
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DESCRIPTION OF THE NOTES AND INDENTURE
GENERAL
Each series of Notes will be issued pursuant to the terms of an indenture,
a form of which was filed with the Securities and Exchange Commission as an
exhibit to the registration statement of which this prospectus is a part. In
addition, a copy of the indenture for a series of Notes will be filed with the
Securities and Exchange Commission following the issuance of such series. The
following summary describes certain material terms expected to be common to each
indenture and the related Notes, but does not purport to be complete and is
subject to all of the provisions of the indenture, the related Notes and the
description set forth in your prospectus supplement.
The Notes of each series will be issued in fully registered form only and
will represent the obligations of a separate owner trust created pursuant to the
related trust agreement.
Payments on the Notes will be made by the indenture trustee on each payment
date to persons in whose names the Notes are registered as of the related record
date. Unless otherwise specified in your prospectus supplement, the payment date
for the Notes will be the 20th day of each month, or if such 20th day is not a
business day, the next succeeding business day). The record date for any payment
date will be the business day immediately preceding the payment date so long as
the Notes are held in the book-entry form, or the last day of the prior calendar
month if definitive Notes have been issued to each holder.
A business day is any day other than a Saturday, Sunday or legal holiday on
which commercial banks in New York City, or any other location of a successor
servicer or indenture trustee, are open for regular business.
Each class of Notes initially will be represented by one or more global
Notes registered in the name of the nominee of The Depository Trust Company,
except as set forth below. Beneficial interests in each class of Notes will be
available for purchase in minimum denominations of $10,000 and integral
multiples thereof in book-entry form only. The depositor has been informed by
The Depository Trust Company that The Depository Trust Company's nominee will be
Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record of the
Notes. All references herein to holders or noteholders shall reflect the rights
of beneficial owners of Notes, as they may indirectly exercise such rights
through The Depository Trust Company and The Depository Trust Company
participants (as defined below), except as otherwise specified herein. Unless
and until definitive Notes are issued under the limited circumstances described
herein, you will not be entitled to receive a certificate representing your
interest in such Notes. Until such time, all references herein to actions by
holders of Notes of any class of Notes will refer to actions taken by the
depository upon instructions from its participating organizations and all
references herein to distributions, notices, reports and statements to holders
of any class of Notes will refer to distributions, notices, reports and
statements to the depository or its nominee, as the registered holder of the
Notes of such class, for distribution to Note owners of such class in accordance
with the depository's procedures. See ' -- Book-Entry Registration' and
' -- Definitive Notes'.
Subject to applicable laws with respect to escheat of funds, any money held
by an indenture trustee or any paying agent in trust under an indenture for the
payment of any amount due with respect to any Note and remaining unclaimed for
two years after such amount has become due and payable shall be discharged from
such trust and, upon request of the related owner trustee, shall be deposited by
the indenture trustee in the collection account; and the holder of such Note
shall thereafter, as an unsecured general creditor, look only to the owner trust
for payment thereof, and all liability of the indenture trustee or such paying
agent with respect to such money shall thereupon cease.
DISTRIBUTIONS
The timing and priority of distributions, seniority, allocations of loss,
interest rate and amount or method of determining distributions with respect to
principal and interest on the Notes of any series will be described in your
prospectus supplement. Principal of and interest on the Notes will be paid on
the payment date specified in your prospectus supplement. Your prospectus
supplement will specify the
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interest rate for each class of Notes. Unless otherwise specified in your
prospectus supplement, interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months. Distributions in respect of principal
and interest on the Notes of any class will be made on a pro rata basis among
all of the holders of Notes of such class.
CREDIT ENHANCEMENT
As further specified in the your prospectus supplement, a cash collateral
account, subordinated notes, reserve fund or other form of credit enhancement
will be established on or prior to the date the contracts are transferred and
may be available to the related indenture trustee to pay interest and principal
on the Notes in the manner and to the extent specified in your prospectus
supplement.
LIQUIDATION PROCEEDS
Liquidation proceeds which will consist generally of all amounts received
by the servicer in connection with the liquidation of a contract and disposition
of the related equipment, net of any related out-of-pocket liquidation expenses
will be allocated as follows:
with respect to any contract subject to financing, all such liquidation
proceeds will be allocated to the owner trust; and
with respect to any contract subject to a true lease, such liquidation
proceeds will, unless otherwise specified in your prospectus
supplement, be allocated on a pro rata basis between the depositor, on
the one hand, and the owner trust, on the other, based respectively on
(a) the book value of the related equipment and (b) the required payoff
amount for such contract; provided that, in the event the liquidation
proceeds in respect of any contract subject to a true lease and the
related equipment exceed the sum of the required payoff amount for such
contract and the book value of such equipment, any such excess shall be
allocated solely to the depositor.
For example, if the servicer, in connection with a defaulted contract subject to
a true lease, derived liquidation proceeds in the amount of $100 from the
liquidation of such contract and disposition of the related equipment, and if
the required payoff amount of such contract was, as of the collection period
during which such contract became a liquidated contract, $120 and the book value
of such equipment was $30, such liquidation proceeds would be allocated to the
owner trust in the amount of $80 and to the depositor in the amount of $20. All
liquidation proceeds which are so allocable to the owner trust will be deposited
in a collection account and constitute pledged revenues to be applied to the
payment of interest and principal on the Notes in accordance with the priorities
described under ' -- Distributions' above.
OPTIONAL PURCHASE OF CONTRACTS
The depositor may purchase all of the contracts owned by an owner trust on
any payment date following the date on which the unpaid principal balance of the
related Notes is less than 10% of the initial contract pool principal balance.
The purchase price to be paid in connection with such purchase shall be at least
equal to the unpaid principal balance of the related Notes as of such payment
date plus interest to be paid on the related Notes on such payment date. The
proceeds of such purchase shall be applied on such payment date to the payment
of the remaining principal balance of the related Notes, together with accrued
interest thereon.
TRUST ACCOUNTS
Except as otherwise specified in your prospectus supplement, the applicable
indenture trustee will establish and maintain under each indenture segregated
trust accounts which need not be deposit accounts, but which must be eligible
accounts consisting of the 'Collection Account,' and the 'Note Distribution
Account' (collectively, the 'Trust Account'). An eligible account means any
account which is:
an account maintained with an eligible institution (as defined below);
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an account or accounts the deposits in which are fully insured by
either the Bank Insurance Fund or the Savings Association Insurance
Fund of the Federal Deposit Insurance Corporation;
a 'segregated trust account' maintained with the corporate trust
department of a federal or state chartered depository institution or
trust company with trust powers and acting in its fiduciary capacity
for the benefit of the related indenture trustee, which depository
institution or trust company has capital and surplus (or, if such
depository institution or trust company is a subsidiary of a bank
holding company system, the bank holding company has capital and
surplus) of not less than $50,000,000 and the securities of such
depository institution or trust company (or, if such depository
institution or trust company is a subsidiary of a bank holding company
system and such depository institution's or trust company's securities
are not rated, the securities of the bank holding company) have a
credit rating from each of the rating agencies which signifies
investment grade; or
an account that will not cause any rating agency to reduce, qualify or
withdraw its then-current rating assigned to any series of Notes, as
confirmed in writing by such rating agency.
Eligible institution means any depository institution organized under the laws
of the United States or any state, the deposits of which are insured to the full
extent permitted by law by the Bank Insurance Fund, whose short-term deposits or
unsecured long-term debt have a credit rating from each of the rating agencies
and which is subject to supervision and examination by federal or state
authorities.
The servicer, as agent for the indenture trustee of any series, may
designate, or otherwise arrange for the purchase by the indenture trustee of,
investments to be made with funds in the trust accounts, which investments shall
be eligible investments as defined in the related indenture that will mature not
later than the business day preceding the applicable monthly payment date.
Eligible investments include, among other investments:
obligations of the United States or of any agency thereof backed by the
full faith and credit of the United States;
federal funds, certificates of deposit, time deposits and bankers'
acceptances sold by eligible financial institutions; and
certain repurchase agreements with eligible institutions and other
investments which would not result in the reduction, qualification or
withdrawal of any rating of the Notes by any rating agency.
REPORTS TO NOTEHOLDERS
With respect to each series of Notes, the servicer will furnish to the
applicable indenture trustee, and such indenture trustee will include with each
distribution to you, a statement, as specified in your prospectus supplement, in
respect of the related payment date setting forth, among other things:
the amount of interest paid on each class of the Notes, including any
unpaid interest from the prior payment date and any remaining unpaid
interest on each class of the Notes;
the amount of principal paid on each class of the Notes;
the principal deficiency amount, if any, for such payment date; and
information regarding any credit enhancement with respect to such
series.
With respect to any series, the Notes will be registered in the name of a
nominee of The Depository Trust Company and will not be registered in the names
of the beneficial owners or their nominees. As a result, unless and until
definitive Notes are issued in the limited circumstances described under
' -- Definitive Notes' below, you will not be recognized by the indenture
trustee as a noteholder, as that term is used in the related indenture. Hence,
until such time, you will receive reports and other information provided for
under the related indenture only if, when and to the extent provided by The
Depository Trust Company and its participating organizations. The servicer will
file a copy of each such report with the Securities and Exchange Commission on
Form 8-K to the extent required under the
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Securities Exchange Act of 1934 and the rules and regulations of the Securities
and Exchange Commission thereunder.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in your prospectus supplement, each class of
Notes in any series will initially be represented by one or more global Notes
registered in the name of the nominee of The Depository Trust Company. We have
been informed by The Depository Trust Company that The Depository Trust
Company's nominee for each series of Notes will be Cede & Co. You may hold your
Notes through The Depository Trust Company (in the United States) or, if so
specified in your prospectus supplement, through Cedel Bank or Euroclear (in
Europe), which in turn hold through The Depository Trust Company, if they are
participants of such systems, or indirectly through organizations that are
participants in such systems. If your prospectus supplement states that the
Notes of such series may be held through Cedel Bank or Euroclear, Cedel Bank and
Euroclear will hold omnibus positions on behalf of the Cedel Bank participants
and the Euroclear participants, respectively, through customers' securities
accounts in Cedel Bank's and Euroclear's names on the books of their respective
depositories which in turn will hold such positions in customers' securities
accounts in the respective depositories' names on the books of The Depository
Trust Company.
The Depository Trust Company is a New York-chartered limited-purpose trust
company, a member of the Federal Reserve System, a 'clearing corporation' within
the meaning of the Uniform Commercial Code in effect in the State of New York,
and a 'clearing agency' registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934. The Depository Trust Company holds
securities for its participants and facilitates the clearance and settlement
among participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic book-entry changes in participants'
accounts, thereby eliminating the need for physical movement of securities.
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. Indirect access to The
Depository Trust Company system is also available to others such as securities
brokers and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
rules applicable to The Depository Trust Company and its participants are on
file with the Securities and Exchange Commission.
Transfers between The Depository Trust Company participants will occur in
accordance with The Depository Trust Company rules. Transfers between Cedel Bank
participants and Euroclear participants will occur in the ordinary way in
accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through The Depository Trust Company in the United States, on the one hand, and
directly or indirectly through Cedel Bank participants or Euroclear
participants, on the other hand, will be effected through The Depository Trust
Company in accordance with The Depository Trust Company rules on behalf of the
relevant European international clearing system by its international depository;
however, such 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 international depository to take action to effect final settlement on its
behalf by delivering or receiving securities in The Depository Trust Company,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to The Depository Trust Company. Cedel Bank
participants and Euroclear participants may not deliver instructions directly to
the international depositories.
Because of time-zone differences, credits of securities received in Cedel
Bank or Euroclear as a result of a transaction with The Depository Trust Company
participant will be made during the subsequent securities settlement processing,
dated the business day following The Depository Trust Company settlement date,
and such credits or any transactions in such securities settled during such
processing will be reported to the relevant Cedel Bank participant or Euroclear
participant on such business day. Cash received in Cedel Bank or Euroclear as a
result of sales of securities by or through a Cedel Bank participant or a
Euroclear participant to The Depository Trust Company participant will be
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received with value on The Depository Trust Company settlement date but will be
available in the relevant Cedel Bank or Euroclear cash account only as of the
business day following settlement in The Depository Trust Company. For
additional information regarding clearance and settlement procedures and with
respect to tax documentation procedures, see 'Global Clearance, Settlement and
Tax Documentation Procedures' and 'Certain U.S. Federal Income Tax Documentation
Requirements' in Appendix A.
If you are not a participant or indirect participant but desire to
purchase, sell or otherwise transfer ownership of, or other interests in, Notes,
you may do so only through participants and indirect participants. You will
receive all distributions from the indenture trustee through participants and
indirect participants. You may experience some delay in your receipt of
payments, since such payments will be forwarded by the indenture trustee to The
Depository Trust Company nominee. The Depository Trust Company will forward such
payments to its participants, which thereafter will forward them to indirect
participants or you. You will not be recognized by the indenture trustee as a
noteholder and you will be permitted to exercise the rights of noteholders only
indirectly through The Depository Trust Company and its participants.
Under the rules, regulations and procedures creating and affecting The
Depository Trust Company and its operations, The Depository Trust Company is
required to make book-entry transfers of Notes among participants on whose
behalf it acts with respect to the Notes and to receive and transmit
distributions of amounts payable on the Notes. Participants and indirect
participants with which you have accounts similarly are required to make
book-entry transfers and receive and transmit such payments on your behalf.
Accordingly, although you will not possess Notes, The Depository Trust Company
rules provide a mechanism by which participants will receive payments and will
be able to transfer their interests.
Because The Depository Trust Company can act only on behalf of
participants, who in turn act on behalf of indirect participants and certain
banks, your ability to pledge Notes to persons or entities that do not
participate in The Depository Trust Company system, or to otherwise act with
respect to such Notes, may be limited due to the lack of a physical certificate
for such Notes.
The Depository Trust Company has advised the depositor that it will take
any action permitted to be taken by a noteholder under the indenture, only at
the direction of one or more participants to whose accounts with The Depository
Trust Company the Notes are credited. The Depository Trust Company may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of participants whose holdings include such
undivided interests.
Except as required by law, we, the owner trust, and the indenture trustee
will not have any liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the Notes held by
The Depository Trust Company's nominee, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Depository Trust Company may discontinue providing its services as
securities depository with respect to the Notes at any time by giving reasonable
notice to the indenture trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, definitive Notes are required
to be printed and delivered. See ' -- Definitive Notes.'
The information in this section concerning The Depository Trust Company and
The Depository Trust Company's book-entry system has been obtained from sources
that the depositor believes to be reliable, but the depositor takes no
responsibility for the accuracy or completeness thereof.
Cedel Bank, societe anonyme is incorporated under the laws of Luxembourg as
a professional depository. Cedel Bank holds securities for its participants and
facilitates the clearance and settlement of securities transactions between
Cedel Bank participants through electronic book-entry changes in accounts of
Cedel Bank participants, thereby eliminating the need for physical movement of
securities. Transactions may be settled by Cedel Bank in numerous currencies,
including United States dollars. Cedel Bank provides to its Cedel Bank
participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel Bank interfaces with domestic markets in several
countries. As a professional depository, Cedel Bank is subject to regulations by
the Luxembourg Monetary Institute. Cedel Bank
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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 of
the Notes. Indirect access to Cedel Bank is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Bank participant, either directly or
indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System 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
securities and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in numerous currencies, including United
States dollars. The Euroclear System 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
The Depository Trust Company described above. The Euroclear System is operated
by Morgan Guaranty Trust Company of New York, Brussels, Belgium office, under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation. 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 Euroclear Clearance System. The Euroclear
Clearance System establishes policy for the Euroclear System 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 the
Euroclear System is also available to other firms that clear through or maintain
a custodial relationship with a Euroclear participant, either directly or
indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State 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.
These terms and conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear System,
and receipts of payments with respect to securities in the Euroclear System. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific securities to specific securities clearance accounts.
The Euroclear operator acts under these terms and conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions with respect to Notes held through Cedel Bank or Euroclear
will be credited to the cash accounts of Cedel Bank participants or Euroclear
participants in accordance with the relevant system's rules and procedures, to
the extent received by its international depository. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. Cedel Bank or the Euroclear operator, as the case may be, will take
any other action permitted to be taken by a noteholder under the indenture on
behalf of a Cedel Bank participant or a Euroclear participant only in accordance
with its relevant rules and procedures and subject to its international
depository's ability to effect such actions on its behalf through The Depository
Trust Company.
Although The Depository Trust Company, Cedel Bank and Euroclear have agreed
to the foregoing procedures in order to facilitate transfers of Notes among
participants of The Depository Trust Company, Cedel Bank and Euroclear, they are
under no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
If your prospectus supplement states that the Notes of a series will be
listed on the Luxembourg Stock Exchange, a paying agent shall be maintained in
respect of the Notes in Luxembourg for so long as the Notes of such series are
listed on the Luxembourg Stock Exchange. In such event, Kredietbank S.A.
Luxembourgeoise will be appointed as the initial Luxembourg paying agent. In
addition, Kredietbank S.A. Luxembourgeoise would be appointed transfer agent in
Luxembourg, with respect to the Notes of such series, in case the global Notes
for any series are replaced by definitive Notes.
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DEFINITIVE NOTES
The Notes of each class of a series will be issued in registered,
certificated form to you or your nominee, rather than to the depository or its
nominee, only if:
the depository advises the indenture trustee in writing that it is no
longer willing or able to discharge properly its responsibilities as
depository with respect to the Notes of such class, and the indenture
trustee is unable to locate a qualified successor; or
Note owners representing not less than 50% of the principal balance of
such class advise the indenture trustee and the depository through
participants in writing that the continuation of a book-entry system
through the depository is no longer in the best interest of the Note
owners of such class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the depository is required to notify all participants of
the availability through the depository of definitive Notes. Upon surrender by
the depository of the definitive certificate representing the Notes of the
affected class and instructions for registration, the indenture trustee will
issue the Notes of such class as definitive Notes, and thereafter the indenture
trustee will recognize the Note owners of such definitive Notes as noteholders
under the indenture.
Distributions of principal and interest on the Notes of a series will be
made by the indenture trustee directly to you in accordance with the procedures
set forth herein and in the indenture. Interest payments and any principal
payments on each payment date will be made to noteholders in whose names the
definitive Notes were registered at the close of business on the related record
date. Distributions will be made by check mailed to the address of such
noteholder as it appears on the register maintained by the indenture trustee.
The final payment on any Note, however, will be made only upon presentation and
surrender of such Note at the office or agency specified in the notice of final
distribution to noteholders. The indenture trustee will provide such notice to
registered noteholders mailed not later than the fifth day of the month of such
final distributions.
Definitive Notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which initially will be the indenture trustee
and, if the Notes of such series are listed on the Luxembourg Stock Exchange,
the offices of Kredietbank S.A. Luxembourgeoise which shall be appointed as
transfer agent in Luxembourg in respect of such definitive Notes. No service
charge will be imposed for any registration of transfer or exchange, but the
transfer agent and registrar may require payment of a sum sufficient to cover
any tax or other governmental charge imposed in connection therewith. The
transfer agent and registrar will not be required to register the transfer or
exchange of definitive Notes for the period from the record date preceding the
due date for any payment to the payment date with respect to such definitive
Notes.
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT
Unless otherwise specified in your prospectus supplement, with respect to a
series of Notes, the owner trust and the indenture trustee may, without your
consent, enter into one or more supplemental indentures for any of the following
purposes:
to correct or amplify the description of the collateral or add
additional collateral;
to provide for the assumption of the Notes and the indenture
obligations by a permitted successor to the owner trust (as described
under ' -- Certain Covenants');
to add additional covenants for your benefit, or to surrender any
rights or power conferred upon the owner trust;
to convey, transfer, assign, mortgage or pledge any property to or with
the indenture trustee;
to cure any ambiguity or correct or supplement any provision in the
indenture or in any supplemental indenture which may be inconsistent
with any other provision of the indenture;
to provide for the acceptance of the appointment of a successor
indenture trustee or to add to or change any of the provisions of the
indenture or in any supplemental indenture as shall be necessary and
permitted to facilitate the administration by more than one trustee;
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to modify, eliminate or add to the provisions of the indenture in order
to comply with the Trust Indenture Act of 1939, as amended;
to avoid a reduction, qualification or withdrawal of any rating of the
Notes; or
to add any provisions to, or change in any manner or eliminate any of
the provisions of, the indenture or to modify in any manner your rights
under the indenture, provided that no such supplemental indenture may
(a) result in a reduction, qualification or withdrawal of the
then-current ratings of the Notes, or (b) as evidenced by an opinion of
counsel, adversely affect in any material respect your interests.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT
Unless otherwise specified in your prospectus supplement, with the consent
of the holders representing a majority of the principal balance of each class of
the related series of Notes then outstanding, the owner trustee and the
indenture trustee may execute a supplemental indenture to add provisions to
change in any manner or eliminate any provisions of, the indenture, or modify in
any manner your rights.
Without the consent of the holder of each outstanding Note affected
thereby, however, no supplemental indenture may:
change the date, timing or method of determination of any installment
of principal of or interest on any Note or reduce the principal amount
thereof, the interest rate specified thereon or the redemption price
with respect thereto or change the manner of calculating any such
payment or any place of payment where, or the coin or currency in
which, any Note or any interest thereon is payable;
impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
reduce the percentage of each class of the Notes then outstanding the
consent of the holders of which is required for any such supplemental
indenture or for any waiver of compliance with certain provisions of
the indenture or of certain defaults thereunder and their consequences;
modify or alter the provisions of the indenture regarding the voting of
Notes held by the owner trust, any other obligor on the Notes, the
depositor or an affiliate of any of them;
reduce the percentage of the Notes the consent of the holders of which
is required to direct the indenture trustee to sell or liquidate the
pledged revenues if the proceeds of such sale would be insufficient to
pay the principal amount and accrued but unpaid interest on the
outstanding Notes;
reduce the percentage of each class of the Notes then outstanding
required to amend the sections of the indenture which specify the
applicable percentage of each class of the Notes then outstanding
necessary to amend the indenture or certain other related agreements;
permit the creation of any lien ranking prior to or on a parity with
the lien of the indenture with respect to any of the collateral for the
Notes or, except as otherwise permitted or contemplated in the
indenture, terminate the lien of the indenture on any such collateral
or deprive the holder of any Note of the security afforded by the lien
of the indenture; or
result in a reduction, qualification or withdrawal of the rating of any
class of Notes by a rating agency, as confirmed in writing by each
rating agency.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
'Events of Default' under each indenture will consist of:
a default for five calendar days or more in the payment of interest due
on any Note of such series;
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failure to pay the unpaid principal amount of any class of notes of
such series on the stated maturity date or any redemption date for such
class;
a default in the observance or performance in any material respect of
any covenant or agreement of the owner trust made in the indenture, or
any representation or warranty made by the owner trust in the indenture
or in any certificate delivered pursuant thereto or in connection
therewith having been incorrect as of the time made, and the
continuation of any such default or the failure to cure such breach of
a representation or warranty for a period of 30 calendar days after
notice thereof is given to the owner trust by the indenture trustee or
to the owner trust and the indenture trustee by the holders of at least
25% in principal amount of the Notes then outstanding; or
certain events of bankruptcy, insolvency, receivership or liquidation
of the owner trust or the depositor.
If an event of default should occur and be continuing with respect to the
Notes of a series, the applicable indenture trustee or a majority of the holders
of the Notes may declare the principal of the Notes of such series to be
immediately due and payable. Such declaration may, under certain circumstances,
be rescinded by a majority of the holders of the Notes.
If the Notes of a series have been declared due and payable following an
event of default, the applicable indenture trustee may institute proceedings to
collect amounts due or foreclose on pledged revenues, exercise remedies as a
secured party, sell the related pledged revenues or elect to have the owner
trust maintain possession of the pledged revenues and continue to apply
collections on the pledged revenues as if there had been no declaration of
acceleration. The indenture trustee, however, will be prohibited from selling
the pledged revenues following an event of default, unless:
the holders of all the outstanding Notes consent to such sale;
the proceeds of such sale distributable to holders of the Notes are
sufficient to pay in full the principal of and the accrued interest on
all the outstanding Notes at the date of such sale; or
the indenture trustee determines that the pledged revenues would not be
sufficient on an ongoing basis to make all payments on the Notes as
such payments would have become due if such obligations had not been
declared due and payable, and the indenture trustee obtains the consent
of the holders of 66 2/3% of the aggregate outstanding amount of the
Notes.
Following a declaration upon an event of default that the Notes are immediately
due and payable, any proceeds of liquidation of the pledged revenues will be
applied in the following order of priority:
to the reimbursement of the trustee for its expenses;
to the payment of interest and then principal on the senior Notes;
to the payment of interest and then principal on the subordinate Notes;
to the payment of interest and then principal on the certificates of
the owner trust (if any); and
the remainder, if any, to payment of certain amounts payable in
connection with any credit enhancement with respect to such series and
thereafter to the holders of certificates in the owner trust.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if an event of default occurs and is continuing, the
indenture trustee will be under no obligation to exercise any of the rights or
powers under the indenture at the request or direction of any of the holders of
the Notes, if the indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the indenture, a majority
of the noteholders will have the right to direct the time, method and place of
conducting any proceeding or any remedy available to the indenture trustee, and
a majority of the noteholders may, in certain cases, waive any default with
respect thereto, except a default in the payment of principal or interest or a
default in respect of a covenant or provision of the indenture that cannot be
modified without the waiver or consent of all of the holders of such outstanding
Notes.
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No holder of a Note will have the right to institute any proceeding with
respect to the indenture, unless:
such holder previously has given to the indenture trustee written
notice of a continuing event of default;
the holders of not less than 25% in principal amount of the
outstanding Notes have made written request of the indenture trustee
to institute such proceeding in its own name as indenture trustee;
such holder or holders have offered the indenture trustee reasonable
indemnity;
the indenture trustee has for 60 days failed to institute such
proceeding; and
no direction inconsistent with such written request has been given to
the indenture trustee during such 60-day period by the holders of a
majority in principal amount of such outstanding Notes.
If an event of default occurs and is continuing and if it is known to the
indenture trustee, the indenture trustee will mail to each noteholder notice of
the event of default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the indenture trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in your interests.
In addition, the indenture trustee and you, by accepting the Notes, will
covenant that they will not at any time institute against the depositor or the
owner trust any bankruptcy, reorganization or other proceeding under any federal
or state bankruptcy or similar law.
Neither the indenture trustee nor the owner trustee in its individual
capacity, nor any holder of a Note including, without limitation, the depositor,
nor any of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will, in the absence of an express
agreement to the contrary, be personally liable for the payment of the Notes or
for any agreement or covenant of the owner trust contained in the indenture.
CERTAIN COVENANTS
Each indenture will provide that the related owner trust may not
consolidate with or merge into any other entity, unless:
the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States or any state;
such entity expressly assumes the owner trust's obligation to make
due and punctual payments upon the Notes and the performance or
observance of every agreement and covenant of the owner trust under
the indenture;
no event of default shall have occurred and be continuing immediately
after such merger or consolidation;
the owner trustee has been advised that the rating of the Notes then
in effect would not be reduced or withdrawn by the rating agencies as
a result of such merger or consolidation;
the owner trustee has received an opinion of counsel to the effect
that such consolidation or merger would have no material adverse tax
consequence to the owner trust or to any noteholder or equity
certificate holder; and
the owner trust or the person (if other than the owner trust) formed
by or surviving such consolidation or merger has a net worth,
immediately after such consolidation or merger, that is (a) greater
than zero and (b) not less than the net worth of the owner trust
immediately prior to giving effect to such consolidation or merger.
Each owner trust will not, among other things:
except as expressly permitted by the related indenture or trust
agreement, sell, transfer, exchange or otherwise dispose of any of
the assets of such owner trust;
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claim any credit on or make any deduction from the principal and
interest payable in respect of the related Notes (other than amounts
withheld under the bankruptcy code or applicable state law) or assert
any claim against any present or former holder of such Notes because
of the payment of taxes levied or assessed upon the owner trust;
dissolve or liquidate in whole or in part;
permit the validity or effectiveness of the indenture to be impaired
or permit any person to be released from any covenants or obligations
with respect to the Notes under the indenture except as may be
expressly permitted thereby; or
except as expressly permitted by the indenture, the pooling and
servicing agreement or the trust agreement, permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance to be
created on or extend to or otherwise arise upon or burden the assets
of the owner trust or any part thereof, or any interest therein or
proceeds thereof.
No owner trust may engage in any activity other than as specified under
'The Owner Trusts.' Each owner trust will not incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the related Notes and
the related indenture or otherwise in accordance with the related indenture,
trust agreement and pooling and servicing agreement.
ANNUAL COMPLIANCE STATEMENT
Each owner trust will be required to file annually with the applicable
indenture trustee a written statement as to the fulfillment of its obligations
under the indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
Each indenture trustee will be required to mail each year to all
noteholders of the related series a brief report relating to its eligibility and
qualification to continue as indenture trustee under the related indenture, any
amounts advanced by it under the indenture, the amount, interest rate and
maturity date of certain indebtedness owing by the owner trust to the indenture
trustee in its individual capacity, the property and funds physically held by
the indenture trustee as such and any action taken by it that materially affects
the Notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
An indenture will be discharged with respect to the collateral securing the
Notes of such series upon the delivery to the related indenture trustee for
cancellation of all such Notes or, with certain limitations, upon deposit with
the indenture trustee of funds sufficient for the payment in full of all of such
Notes.
THE INDENTURE TRUSTEE
The indenture trustee for any series will be specified in your prospectus
supplement. An indenture trustee may resign at any time, in which event the
depositor will be obligated to appoint a successor trustee. The depositor may
also remove an indenture trustee if such indenture trustee ceases to be eligible
to continue as such under the indenture, if such indenture trustee becomes
insolvent or if the rating assigned to the long-term unsecured debt obligations
of such indenture trustee (or the holding company thereof) by the rating
agencies shall be lowered below the rating of 'BBB', 'Baa3' or equivalent rating
or be withdrawn by any rating agency. In such circumstances, the depositor will
be obligated to appoint a successor trustee. Any resignation or removal of an
indenture trustee and appointment of a successor trustee will not become
effective until acceptance of the appointment by a successor trustee.
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DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS
The following is a summary of the material terms of each pooling and
servicing agreement, a form of which was filed with the registration statement
of which this prospectus is a part. In addition, a copy of the pooling and
servicing agreement relating to a series of Notes will be filed with the
Securities and Exchange Commission following the issuance of such series. The
following summary describes certain terms expected to be common to each pooling
and servicing agreement, but does not purport to be complete and is subject to
all of the provisions of the pooling and servicing agreement relating to a
particular series and the description set forth in your prospectus supplement.
TRANSFER AND ASSIGNMENT OF CONTRACTS AND EQUIPMENT
On or before the applicable closing date, the originators will transfer to
the depositor pursuant to one or more purchase agreements all of their right,
title and interest in the contracts and the related equipment, including all
security interests created thereby and therein, the right to receive all
scheduled payments and prepayments received on the contracts on or after the
date of transfer (including all scheduled payments due prior to, but not
received as of, the transfer date, but excluding any scheduled payments due on
or after, but received prior to, the transfer date), all rights under insurance
policies maintained on the equipment pursuant to the contracts, all documents
contained in the files and all proceeds derived from any of the foregoing.
Pursuant to the pooling and servicing agreement, on the applicable closing date,
the depositor will transfer all of its rights in the contracts and certain
rights in the equipment (including, to the extent specified in your prospectus
supplement, (i) the depositor's ownership or security interest in the equipment
subject to a true lease, (ii) prepayments received on contracts and (iii)
liquidation proceeds received with respect to the liquidation of defaulted
contracts subject to a true lease and the disposition of the related equipment),
together with all its rights under the purchase agreements, to the owner trust.
Each pooling and servicing agreement will designate the servicer as
custodian to maintain possession, as the owner trust's agent, of the contracts
and all documents related thereto. To facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in the servicer's possession. Financing statements
will be filed on the transfer date in the applicable jurisdictions reflecting
the transfer of the contracts and the equipment by the originators to the
depositor, the transfer by the depositor to the owner trust, and the pledge by
the owner trust to the indenture trustee, and the originators' accounting
records and computer systems will also reflect such assignments and pledge. The
contracts will not, however, be stamped or otherwise physically marked to
reflect their assignment to the owner trust. If, through fraud, negligence or
otherwise, a subsequent purchaser were able to take physical possession of the
contracts without knowledge of the assignment, the owner trust's interest in the
contracts could be defeated. See 'Risk Factors -- Certain Legal
Risks -- Servicer's or Vendor's Retention of Contract Files May Hinder Our
Ability to Realize the Value of Equipment Securing the Contracts.'
COLLECTIONS ON CONTRACTS
The applicable indenture trustee will establish and maintain a collection
account, into which the servicer will deposit, no later than the second business
day after the date of processing, the following amounts:
all scheduled payments made by or on behalf of obligors under the
contracts;
all prepayments, excluding any portion thereof allocable to the depositor,
as specified in your prospectus supplement;
amounts constituting liquidation proceeds on liquidated contracts, to the
extent specified in your prospectus supplement;
any and all payments made by an originator pursuant to the pooling and
servicing agreement in connection with the purchase of any contracts as a
result of a breach of a representation or warranty with respect thereto,
as described under 'The Contracts -- Representations and
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Warranties Made by the Originators,' excluding, in the case of a contract
subject to a true lease, any portion thereof allocable to the depositor as
specified in your prospectus supplement; and
the amount paid by the depositor to purchase the contracts, as described
under 'Description of the Notes and Indenture -- Optional Purchase of
Contracts.'
So long as no event of termination shall have occurred and be continuing
with respect to the servicer, the servicer may make the remittances to be made
by it to the collection account net of amounts (which amounts may be netted
prior to any such remittance for a collection period) otherwise to be
distributed to it in payment of its servicing fee.
The servicer will be entitled to withdraw from the collection account any
amounts deposited therein in error or required to be repaid to an obligor, based
on the servicer's good-faith determination that such amount was deposited in
error or must be returned to the obligor.
The servicer will pay to the depositor, no later than the second business
day after the date of processing, all proceeds from the disposition of equipment
subject to a true lease, to the extent allocable to the depositor, including
amounts paid by obligors to exercise purchase options under contracts subject to
a true lease and the allocable portion of liquidation proceeds (as described
under 'Description of the Notes and Indenture -- Liquidation Proceeds').
On or before the fifth business day preceding each payment date, the
servicer is required to determine the amount of related collection period
pledged revenues for such payment date, the amount of interest payable on the
Notes on such payment date, the monthly principal amount for such payment date,
the principal deficiency amount, if any, for such payment date, and the amount,
if any, by which such related collection period pledged revenues, when applied
in accordance with the priorities described under 'Description of the Notes and
Indenture -- Distributions,' are insufficient to pay the interest payable on the
Notes on such payment date. If there is an interest shortfall for such payment
date, current collection period pledged revenues will be applied to the payment
of interest on the Notes to the extent necessary to cure such interest
shortfall. The servicer shall further give notice to the indenture trustee of
amounts to be withdrawn from the cash collateral account or other form of credit
enhancement to pay an amount in accordance with the related indenture.
SERVICING
Pursuant to each pooling and servicing agreement, AT&T Capital will be
engaged to act as servicer on behalf of the related owner trust and the
depositor. The servicer is generally obligated under each pooling and servicing
agreement to service the contracts with reasonable care, using that degree of
skill and attention that AT&T Capital exercises with respect to all comparable
contracts and related assets that it services for itself or others in accordance
with its credit and collections policy and applicable law. In performing such
duties, so long as AT&T Capital is the servicer, it shall comply in all material
respects with its credit and collection policies and procedures in effect from
time to time (which credit and collection policies currently in effect are
described under 'The Originators -- Underwriting and Servicing'). The servicer
may delegate certain of its servicing responsibilities with respect to the
contracts to third parties, provided that the servicer will remain obligated to
the related owner trust and the depositor for the proper performance of all such
servicing responsibilities.
The servicer is generally obligated to act in a commercially reasonable
manner with respect to the repossession and disposition of equipment following a
contract default with a view to realizing proceeds at least equal to the fair
market value thereof. The servicer may, in its discretion, choose to dispose of
equipment through a new lease or in some other manner which provides for payment
for the equipment over time. In any such event, the servicer will be required to
pay from its own funds an amount which, in its reasonable judgment, is equal to
the fair market value of such equipment, less any related out-of-pocket
liquidation expenses, and the servicer will be entitled to all payments received
thereafter in respect of such equipment. Any such amounts so paid by the
servicer will be deemed to constitute additional liquidation proceeds with
respect to the related contract and equipment and will be allocated as described
under 'Description of the Notes and Indenture -- Liquidation Proceeds.'
Under each pooling and servicing agreement, the servicer is responsible
for, among other things:
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reviewing and certifying that the contract files are complete;
monitoring and tracking any property and sales taxes to be paid by
obligors;
billing, collection and recording of payments from obligors;
communicating with and providing billing records to obligors;
deposit of funds into the collection account;
receiving payments as the owner trust's agent on the insurance
policies maintained by the obligors and communicating with insurers
with respect thereto;
issuance of reports to the indenture trustee specified in the
indenture and in the pooling and servicing agreement;
repossession and remarketing of equipment following obligor defaults;
and
paying the fees and ordinary expenses of the indenture trustee and
the owner trustee.
The servicer shall, to the extent the proceeds of such liquidation are
sufficient therefor, be entitled to recover all reasonable out-of-pocket
expenses incurred by it in the course of liquidating a contract and disposing of
the related equipment, which amounts may be retained by the servicer from such
proceeds to the extent of such expenses. The servicer is entitled under each
pooling and servicing agreement to retain, from liquidation proceeds, a reserve
for out-of-pocket liquidation expenses in an amount equal to such expenses, in
addition to those previously incurred, as it reasonably estimates will be
incurred. Upon completion of such liquidation, the remainder of any such
reserve, after reimbursement to the servicer of all out-of-pocket liquidation
expenses, shall constitute liquidation proceeds and be deposited in the
collection account. Under each pooling and servicing agreement, the servicer,
subject to certain limitations, is permitted to grant payment extensions on a
contract in accordance with its credit and collection policies and procedures if
the servicer believes in good faith that such extension is necessary to avoid a
termination and liquidation of such contract and will maximize the amount to be
received by the owner trust with respect to such contract. Under each pooling
and servicing agreement, the servicer, subject to certain limitations, is
permitted to grant modifications or amendments to a contract in accordance with
its credit and collection policies and procedures.
Prepayments. The servicer may in its discretion allow a prepayment of any
contract, but only if the amount paid by or on behalf of the obligor (or, in the
case of a partial prepayment, the sum of such amount and the remaining contract
principal balance of such contract after application of such amount) is at least
equal to the required payoff amount of such contract. To the extent any
prepayment exceeds the required payoff amount of a contract subject to a lease,
such excess will be paid to the depositor.
Evidence as to Compliance. On or before March 31 of each year, the servicer
must deliver to the indenture trustee a statement from a nationally recognized
accounting firm to the effect that such firm has (i) audited the financial
statements of the servicer (or, if the servicer is a wholly-owned subsidiary of
another entity, the financial statements of such parent entity) and issued its
report thereon and that such audit was made in accordance with generally
accepted auditing standards as in effect in the jurisdiction of the entity being
audited, which require that such accounting firm plan and perform the audit to
obtain reasonable assurance as to whether the financial statements of the
servicer (or its parent, as applicable) are free of material misstatement, and
(ii) examined management's assertion that the servicer maintained effective
control over the servicing of equipment contracts, installment sales contracts,
promissory notes, loan and security agreements and/or other similar types of
receivables under servicing agreements substantially similar one to another, in
accordance with established or stated criteria, and that such examination was
performed in accordance with standards established by the American Institute of
Certified Public Accountants.
Certain Matters Regarding the Servicer. The servicer may not resign from
its obligations under a pooling and servicing agreement except upon a
determination that its duties thereunder are no longer permissible under
applicable law. No such resignation will become effective until a successor
servicer has assumed the servicer's obligations and duties under such pooling
and servicing agreement. The servicer can be removed as servicer only upon the
occurrence of an event of termination as discussed below.
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The servicer must keep in place throughout the term of a pooling and
servicing agreement an insurance policy or financial guarantee bond covering
errors and omissions by the servicer. Such policy or bond shall be in such form
and amount as is generally customary among persons that service a portfolio of
equipment leases having an unpaid balance of at least $100 million and which are
generally regarded as servicers acceptable to institutional investors.
Servicing Compensation and Payment of Expenses. Compensation to the
servicer will include a monthly fee, which will be payable to the servicer from
the amount available on each payment date, in an amount equal to the product of
one-twelfth of a percentage per annum specified in the prospectus supplement
multiplied by the contract pool principal balance as of the last day of the
second preceding collection period (or, in the case of the servicing fee with
respect to the collection period commencing on the date of transfer of the
contracts, the contract pool principal balance as of the transfer date), plus
any late fees, late payment interest, documentation fees, insurance
administration charges and other administrative fees and charges and a portion
of any extension fees collected with respect to the contracts during the prior
collection period and any investment earnings on collections prior to deposit
thereof in the collection account. Up to one-fifth of such servicing fee will be
used by the servicer to pay certain expenses relating to the contracts and the
owner trust. The servicer is authorized under each pooling and servicing
agreement, in its discretion, to waive any administrative fees or extension fees
that may be collected in the ordinary course of servicing any contract.
Events of Termination. An event of termination under a pooling and
servicing agreement will occur if:
the servicer fails to make any payment or deposit required under such
pooling and servicing agreement and such failure continues for five
business days (or three business days in the case of a failure by AT&T
Capital to pay the amount necessary to purchase a contract and the related
equipment due to a breach of representations and warranties with respect
thereto) after notice from the indenture trustee or after discovery by the
servicer;
the servicer fails to deliver to the indenture trustee and the owner
trustee the servicer's certificate by the third business day prior to the
related payment date;
the servicer fails to observe or perform in any material respect any other
covenants or agreements of the servicer set forth in the pooling and
servicing agreement (and, if AT&T Capital is the servicer, the sale and
contribution agreement), and such failure (i) materially and adversely
affects the rights of the owner trust or you, and (ii) continues
unremedied for 30 days after written notice thereof has been given to the
servicer by the owner trustee, the indenture trustee or any holder of a
Note;
certain events of bankruptcy or insolvency occur with respect to the
servicer; or
any representation, warranty or statement of the servicer made in the
pooling and servicing agreement or any certificate, report or other
writing delivered pursuant thereto proves to be incorrect in any material
respect, and such incorrectness (i) has a material adverse effect on the
owner trust or holders of the notes, and (ii) continues uncured for 30
days after written notice thereof has been given to the servicer by the
owner trustee, the indenture trustee or any noteholder.
The servicer is required under the pooling and servicing agreement to give the
indenture trustee, the owner trustee and each rating agency notice of an event
of termination promptly after having obtained knowledge of such event.
Federal bankruptcy laws limit the termination of contracts solely by reason
of the fact that the party obligated to provide such performance is subject to
federal bankruptcy proceedings. In such a circumstance, the indenture trustee
may be unable to terminate the servicer unless it could demonstrate that
independent grounds (whether or not arising from the same facts causing the
servicer to be subject to bankruptcy proceedings) exist to declare an event of
termination and the court supervising the bankruptcy proceeding determines that
such grounds warrant termination of the servicer.
Rights upon event of termination. So long as an event of termination
remains unremedied, the indenture trustee may, and at the written direction of
(i) a majority of the noteholders, or (ii) at such
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time as the Notes of such series are no longer outstanding, certificateholders
representing a majority of the aggregate principal balance of the certificates
of such owner trust shall, terminate all of the rights and obligations of the
servicer under the pooling and servicing agreement in and to the contracts,
whereupon a successor servicer (which, unless and until the indenture trustee
appoints a new servicer, will be the indenture trustee) will succeed to all the
responsibilities, duties and liabilities of the servicer under the pooling and
servicing agreement and will be entitled to similar compensation arrangements;
provided, however, that any successor servicer will not assume any obligation of
an originator to repurchase contracts for breaches of representations and
warranties, and any successor servicer will not be liable for any acts or
omissions of the prior servicer occurring prior to a transfer of the servicer's
servicing and related functions or for any breach by such servicer of any of its
obligations contained in the pooling and servicing agreement.
A majority of the noteholders may waive any default by the servicer in the
performance of its obligations under the pooling and servicing agreement and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any event of termination arising therefrom shall be deemed to have
been remedied. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
AMENDMENT
Any pooling and servicing agreement may be amended by the parties thereto
(i) to cure any ambiguity, (ii) to correct or supplement any provision therein
that may be inconsistent with any other provision therein, or (iii) to make any
other provisions with respect to matters or questions arising under the pooling
and servicing agreement that are not inconsistent with the provisions thereof,
provided that such action will not adversely affect in any material respect the
interests of the noteholders or the equity certificateholders. Any pooling and
servicing agreement may also be amended by the parties thereto with the consent
of a majority of the noteholders for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the pooling and
servicing agreement or of modifying in any manner the rights of the noteholders;
provided, however, that no such amendment (a) that reduces in any manner the
amount of, or accelerates or delays the timing of, any payment received on or
with respect to contracts that are required to be distributed on any Note or
that reduces the aforesaid percentage required to consent to any such amendment
or any waiver under the pooling and servicing agreement, may be effective
without the consent of the holder of each such Note, or (b) will be effective
unless each rating agency confirms that such amendment will not result in a
reduction, qualification or withdrawal of the ratings on the Notes.
TERMINATION OF THE POOLING AND SERVICING AGREEMENT
The obligations created by any pooling and servicing agreement will
terminate (after distribution of all interest and principal then due to
noteholders and the holders of the certificates) on the earlier of (a) the
payment date next succeeding the later of the final payment or other liquidation
of the last contract or the disposition of all equipment acquired upon
termination of any contract; or (b) the payment date on which the depositor
repurchases the contracts as described under 'Description of the Notes and
Indenture -- Optional Purchase of Contracts.' However, an originator's
representations, warranties and indemnities will survive any termination of the
pooling and servicing agreement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of the material United
States federal income tax consequences of the purchase, ownership and
disposition of the Notes. The discussion that follows, and the opinion described
below of Winston & Strawn, special tax counsel to the trust depositor ('Tax
Counsel'), are based upon current provisions of the Internal Revenue Code of
1986, as amended, existing and proposed Treasury Regulations, current
administrative rulings, judicial decisions and other applicable authorities in
effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect. There are no cases, regulations, or Internal Revenue Service
rulings on comparable
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transactions or instruments to those described in this Prospectus. As a result,
there can be no assurance that the Internal Revenue Service will not challenge
the conclusions reached in this description of Material Federal Income Tax
Consequences, and no ruling from the Internal Revenue Service has been or will
be sought on any of the issues discussed below. Furthermore, legislative,
judicial or administrative changes may occur, perhaps with retroactive effect,
which could affect the accuracy of the statements set forth below.
This summary of Material Federal Income Tax Consequences has been prepared
in compliance with the directive of the Securities and Exchange Commission that
'plain English' be used. As a result, certain of the complex technical rules
which would not be applicable to most investors but may apply to some specific
types of investors (e.g. dealers in securities) have not been included. Also,
the descriptions of the relevant tax rules are intended to explain the general
application of the rules. This summary does not attempt to explain fully every
relevant technical aspect of the applicable tax provisions. BECAUSE THIS SUMMARY
OF MATERIAL FEDERAL INCOME TAX CONSEQUENCES IS INTENDED TO BE GENERAL IN NATURE,
IT IS RECOMMENDED THAT EACH PROSPECTIVE INVESTOR CONSULT WITH THEIR OWN TAX
ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES
TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES.
This summary of material federal income tax matters is divided into two
parts. The first part describes the classification of the Notes as debt and the
treatment of the Trust as a pass-thru entity (i.e., rather than as a corporation
or other entity subject to tax at the entity level). The second part describes
the taxation of an investor in the Notes. Under the caption 'General Tax
Treatment of Noteholders' is a description of the tax consequences for what is
expected to be the typical investment situation. The description of General Tax
Treatment of Noteholders provides a summary of federal income tax consequences
for investors who are citizens or residents of the United States who purchase
U.S. dollar denominated Notes for investment (rather than acting as a dealer in
securities) at a purchase price equal to the principal amount of the Notes (plus
accrued interest, if any). There are a variety of technical tax rules which can
be expected to apply only to certain types of investors or in certain special
circumstances. Those rules are separately described under the caption 'Special
Tax Rules'. Those special rules apply, for example, to investors who are foreign
persons or who purchase a Note at a price which is higher or lower than a Note's
principal amount. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT A TAX
ADVISOR TO DETERMINE WHETHER ANY OF THE SPECIAL TAX RULES ARE APPLICABLE.
CLASSIFICATION OF THE NOTES AND THE TRUST
In connection with the issuance of the Notes, Tax Counsel will deliver its
opinion that, for federal income tax purposes, under existing law (1) the Trust
will not be treated as an association (or publicly traded partnership) taxable
as a corporation and (2) the Notes will be treated as indebtedness. In rendering
these opinions, Tax Counsel has assumed that the terms of the various documents
relating to the issuance of the Notes will be complied with by all of the
parties to the transaction. Those terms include a requirement, which each
investor agrees to by virtue of acquiring ownership of any beneficial interest
in a Note, that the Trust and the investors in the Notes treat the Notes as
indebtedness for federal income tax purposes. The opinion of Tax Counsel does
not foreclose the possibility of a contrary determination by the Internal
Revenue Service or by a court of competent jurisdiction, or of a contrary
position by the Internal Revenue Service or Treasury Department in regulations
or rulings issued in the future.
Although it is the opinion of Tax Counsel that the Trust will not be
treated as an association (or publicly traded partnership) taxable as a
corporation and the Notes will be characterized as indebtedness for federal
income tax purposes, no assurance can be given that such characterization of the
Trust or the Notes will prevail. If, contrary to the opinion of Tax Counsel, the
Internal Revenue Service successfully asserted that one or more of the Notes did
not represent debt for federal income tax purposes, such Notes might be treated
as equity interests in the Trust. As a result, the Trust might be classified as
a publicly traded partnership taxable as a corporation. If the Trust were
classified as a publicly traded partnership taxable as a corporation, the Trust
would be subject to United States federal
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income tax on its net income. An imposition of such corporate-level income tax
could materially reduce the amount of cash that would be available to make
payments of principal and interest on the Notes. Alternatively, if the Trust
were classified as a partnership (other than a publicly traded partnership
taxable as a corporation), the Trust itself would not be subject to United
States federal income tax. Instead, holders of Notes that were determined to be
equity interests in such partnership would be required to take into account
their allocable share of the Trust's income and deductions. Such treatment may
have adverse federal income tax consequences for certain Noteholders. For
example: (1) income to certain tax-exempt entities (including pension funds) may
constitute 'unrelated business taxable income,' (2) income to foreign holders
generally would be subject to U.S. tax and U.S. tax return filing and
withholding requirements, (3) individual holders might be subject to certain
limitations on their ability to deduct their share of Trust expenses, and (4)
income from the Trust's assets would be taxable to Noteholders without regard to
whether cash distributions are actually made by the Trust or any particular
Noteholder's method of tax accounting.
The discussion that follows assumes that the Notes will be treated as
indebtedness for federal income tax purposes.
GENERAL TAX TREATMENT OF NOTEHOLDERS
Payments of Interest. An investor will be taxed on the amount of payments
of interest on a Note as ordinary interest income at the time it accrues or is
received in accordance with the investor's regular method of accounting for
United States federal income tax purposes.
Sale or Other Disposition of a Note. An investor who disposes of a Note,
whether by sale, exchange for other property, or payment by the Trust, will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale or other disposition (not including any amount attributable
to accrued but unpaid interest) and the investor's adjusted tax basis in the
Note. In general, an investor's adjusted tax basis in a Note will be equal to
the initial purchase price. Any gain or loss recognized upon the sale or other
disposition of a Note will be capital gain or loss. For non-corporate investors,
capital gain recognized on the sale or other disposition of a Note held by the
investor for more than one year will be taxed at a maximum rate of 20%. Capital
gain for a Note held for one year or less is taxed at the rates applicable to
ordinary income (i.e., up to 39.6%). Taxpayers must aggregate capital gains and
losses for each taxable year. In the event a taxpayer realizes a net capital
loss for any year there are limits on the amount of such capital losses which
can be deducted.
Information Reporting and Backup Withholding. The Trust (or an agent acting
on its behalf) will be required to report annually to the Internal Revenue
Service, and to each non-corporate Noteholder, the amount of interest paid on
the Notes for each calendar year. Each non-corporate Noteholder (other than
Noteholders who are not subject to the reporting requirements) will be required
to provide, under penalties of perjury, a certificate (Form W-9) containing the
Noteholder's name, address, correct federal taxpayer identification number and a
statement that the Noteholder is not subject to backup withholding. Should a
non-exempt Noteholder fail to provide the required certification, the Trust will
be required to withhold (or cause to be withheld) 31% of the interest otherwise
payable to the Noteholder and remit the withheld amounts to the Internal Revenue
Service as a credit against the Noteholder's federal income tax liability.
SPECIAL TAX RULES
Special Types of Investors. The reference to United States citizens or
residents in the description of General Tax Treatment of Noteholders set forth
above applies not only to individuals but also to any investor who is: (1) a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, (2) an estate the income
of which is subject to United States federal income taxation regardless of its
source, or (3) a trust if a court within the United States is able to exercise
primary jurisdiction over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust. Any investor which is not a United States citizen or resident should
review the summary below for investment in Notes by foreign persons. Also,
neither the description of General Tax Treatment of Noteholders above nor this
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discussion of Special Tax Rules describes tax consequences to special classes of
investors, including investors who are dealers in securities or currencies,
persons holding Notes as a part of a hedging transaction, certain financial
institutions or insurance companies. Those particular types of investors are
subject to specific federal income tax treatment which is not generally
applicable to other investors. This summary of Material Federal Income Tax
Consequences does not describe tax consequences for those types of investors.
Purchase at a Discount. An investor who purchases a Note as part of the
initial offering by the Trust for an issue price that is less than its 'stated
redemption price at maturity' will generally be considered to have purchased the
Note at an original issue discount for United States federal income tax
purposes. In general, the stated redemption price at maturity for a Note is
equal to the principal amount. If a Note is acquired with original issue
discount the investor will be required to include in income each year, taxable
as ordinary income in the same manner as cash interest payments, a portion of
the original issue discount. For cash basis investors, such as individuals, the
requirement that original issue discount be accrued as income each year means
the investor recognizes taxable income even though the investor does not receive
cash corresponding to that income. The amount of original issue discount accrued
as income each year is based upon a formula which looks at the constant yield on
the Notes and the term to maturity so as to annually allocate a proportionate
share of original issue discount. Under these rules, investors generally will be
required to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
In determining whether a Note has original issue discount, the issue price
of the Note may not necessarily equal the investor's purchase price (although
they generally should be the same). The issue price of a Note will equal the
initial offering price to the public (not including bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters or
wholesalers) at which price a substantial amount of the Notes is sold.
If an investor acquires a Note in a secondary market transaction for a
purchase price which is less than the principal amount or other amount payable
at maturity of the Note, the difference is referred to for tax purposes as
market discount. Similarly to original issue discount, an investor must accrue a
portion of the market discount each year. The amount of market discount which
accrues annually will be calculated on a straight-line basis over the remaining
term to maturity of the Note unless the investor elects to accrue market
discount using the constant yield method (i.e., the original issue discount
method). Unlike original issue discount, however, an investor does not include
accrued market discount in ordinary income each year. Rather, the aggregate
amount of accrued market discount is included in income when an investor sells
or otherwise disposes of the Note. At that time, the portion of the amount
realized by the investor on the sale or other disposition of the Note equal to
accrued market discount is taxed as ordinary income (maximum tax rate of 39.6%)
rather than long term capital gain (maximum tax rate of 20%).
If an investor would prefer to be taxed on the annual accrual of market
discount each year rather than being taxed on the aggregate amount of all
accrued market discount when the Note is sold or otherwise disposed of, the
investor can file an election to do so. Such an election would apply to all of
the investor's debt investments acquired in or after the taxable year in which
the Notes are acquired and not just to the Notes.
Whenever an investor accrues and includes in income an amount of original
issue discount or market discount, the investor's adjusted basis in the
corresponding Note is increased by that same amount. As a result, the investor
would recognize a lower capital gain (or greater capital loss) on the sale or
other disposition of the Note.
In general, if the amount of original issue discount or market discount
would be less than 1/4th of one percent of the Note's principal or other stated
redemption price at maturity, the investor can disregard the original issue
discount or market discount rules.
Purchase at a Premium. If an investor purchases a Note for a price that
exceeds the principal amount or other amount payable at maturity, the investor
will be considered to have an amortizable bond premium. An investor can elect to
accrue a portion of the premium each year as a deduction to offset interest
income on the corresponding Note. The amount of premium which can be amortized
and
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deducted each year is calculated using a constant yield method over the
remaining term to maturity of the Note. The deduction is available only to
offset interest income on the corresponding Note; it cannot be used as a
deduction to the extent it exceeds taxable Note interest. The adjusted tax basis
which an investor has in a Note must be reduced by the amount of premium for
which a deduction is claimed. Because the basis is reduced, the investor would
recognize a larger taxable capital gain (or a smaller capital loss) on the sale
or other disposition of the Note. If an investor elects to amortize and deduct
premium, the election will apply to all of the investor's debt investments and
not just to the Notes.
Non-Standard Interest Rates. The description of General Tax Treatment of
Noteholders assumes that the investor's Notes provide for the payment of
interest at a fixed rate or at a variable rate which is tied to LIBOR, U.S.
Treasury rates, bank prime rates or similar benchmark rates. Interest payable
pursuant to those types of fixed and variable rates is referred to for certain
federal income tax purposes as qualified stated interest.
If a Note provides for interest other than qualified stated interest, the
tax consequences to an investor may differ from those described previously in
this summary. If the Trust issues Notes which provide for interest other than
qualified stated interest, the tax consequences will be described in the
applicable Pricing Supplement.
Foreign Currency Notes. The description of General Tax Treatment of
Noteholders assumes the Notes are denominated in U.S. dollars. Special rules
apply to Notes which are denominated in or determined by reference to the value
of currency units other than the U.S. dollar.
An interest payment on a foreign currency Note will be includible in income
by the investor based on the U.S. dollar value of the foreign currency payment
determined on the date the payment is received, regardless of whether the
payment is in fact converted to U.S. dollars at that time.
In the case of interest income on a foreign currency Note that is required
to be included in income by the investor prior to receipt of payment (e.g.,
original issue discount accrual) the investor will be required to include in
income the U.S. dollar value of the amount of interest income that has accrued.
Unless the investor makes the election discussed in the next paragraph, the U.S.
dollar value of such accrued income will be determined by translating such
income at the average rate of exchange for the accrual period. Subsequently,
when the investor actually receives cash corresponding to the accrued income,
the investor will recognize, as ordinary gain or loss, foreign currency exchange
gain or loss reflecting fluctuations in currency exchange rates between the last
day of the relevant accrual period and the date of payment.
Under the so-called 'spot rate convention election', an investor may elect
to translate accrued interest income into U.S. dollars at the exchange rate in
effect on the last day of the relevant accrual period. Additionally, if a
payment of such income is actually received within five business days of the
last day of the accrual period or taxable year, an electing investor may instead
translate such income into U.S. dollars at the exchange rate in effect on the
day of actual receipt. Any such election will apply to all debt instruments held
by the investor at the beginning of the first taxable year to which the election
applies or thereafter acquired by the investor.
In order for an investor to calculate the amount of gain or loss recognized
on the sale or other disposition of a Note denominated in (or by reference to) a
foreign currency, the investor must know the adjusted tax basis in U.S. dollars.
In general, if an investor pays for a Note with foreign currency, the investor's
basis in the Note is equal to the U.S. dollar value of the foreign currency on
the purchase date. An investor that purchases a foreign currency Note with
previously owned foreign currency will recognize ordinary income or loss in an
amount equal to the difference, if any, between the investor's tax basis in the
foreign currency and the U.S. dollar market value of the foreign currency Note
on the date of purchase.
For purposes of determining the amount of any gain or loss recognized by
the investor on the sale or other disposition of a foreign currency Note, the
amount realized by the investor from the sale or other disposition generally
will be the U.S. dollar value of the foreign currency received determined on the
date of disposition in the case of an accrual basis investor and on the date
payment is received in the case of a cash basis investor.
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The portion of any gain or loss realized upon the sale or other disposition
of a foreign currency Note that is attributable to fluctuations in currency
exchange rates will be ordinary income or loss. Such portion will equal the
difference between (1) the U.S. dollar value of the foreign currency principal
amount of the Note determined on the date the Note is disposed of and (2) the
U.S. dollar value of the foreign currency principal amount of the Note
determined at the exchange rate on the date the investor acquired such Note.
Such foreign currency gain or loss will be recognized only to the extent of the
total gain or loss realized by an investor on the sale or other disposition of
the foreign currency Note. Any gain or loss recognized in excess of such foreign
currency gain or loss will be capital gain or loss.
Discount and premium calculations with respect to foreign currency Note are
determined in the relevant foreign currency. The amount of discount or premium
that is included in or reduces income currently is determined for any accrual
period in the relevant foreign currency and then translated into U.S. dollars on
the basis of the average exchange rate in effect during such accrual period or
with reference to the spot rate convention election as described above. Exchange
gain or loss realized with respect to such accrued discount or premium is
determined and recognized in accordance with the rules described above.
Foreign Investors. Special tax rules apply to the purchase of Notes by
foreign persons. For U.S. tax purposes, foreign investors include any person who
is not (1) a citizen or resident of the United States, (2) a corporation,
partnership or other entity organized in or under the laws of the United States
or any political subdivision thereof, (3) an estate the income of which is
includible in gross income for U.S. federal income tax purposes, regardless of
its source, or (4) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust.
Interest paid or accrued to a foreign investor that is not effectively
connected with the conduct of a trade or business within the United States by
the investor will generally be considered 'portfolio interest' and generally
will not be subject to United States federal income tax or withholding tax as
long as the foreign investor (1) is not actually or constructively a 10 percent
shareholder of the Trust or a controlled foreign corporation related to the
Trust through stock ownership and (2) provides (or has a financial institution
provide on its behalf) an appropriate statement (Form W-8) to the Trust or
paying agent that is signed under penalties of perjury, certifying that the
beneficial owner of the Note is a foreign person and providing that foreign
person's name and address. If the information provided in this statement
changes, the foreign investor must provide a new Form W-8 within 30 days. The
Form W-8 is generally effective for three years. If the foreign investor fails
to satisfy these requirements so that interest on the investor's Notes was not
portfolio interest, interest payments would be subject to United States federal
income and withholding tax at a rate of 30% unless reduced or eliminated
pursuant to an applicable income tax treaty. To qualify for any reduction as the
result of an income tax treaty, the foreign investor must provide the paying
agent with Form 1001. This form is also effective for three years.
Any capital gain realized on the sale or other taxable disposition of a
Note by a foreign investor will be exempt from United States federal income and
withholding tax, provided that (1) the gain is not effectively connected with
the conduct of a trade or business in the United States by the investor and (2)
in the case of an individual foreign investor, the investor is not present in
the United States for 183 days or more during the taxable year. If an individual
foreign investor is present in the U.S. for 183 days or more during the taxable
year, the gain on the sale or other disposition of the Notes could be subject to
a 30% withholding tax unless reduced by treaty.
If the interest, gain or income on a Note held by a foreign investor is
effectively connected with the conduct of a trade or business in the United
States by the investor, the Noteholder (although exempt from the withholding tax
previously discussed if an appropriate statement (Form 4224) is furnished to the
paying agent) generally will be subject to United States federal income tax on
the interest, gain or income at regular federal income tax rates. Form 4224 is
effective for only one calendar year. In addition, if the foreign investor is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its 'effectively connected earnings and profits' for the taxable year, as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
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Treasury Regulations which will become effective for Note payments made
after December 31, 1999 (regardless of when a foreign investor acquired a Note)
may change reporting requirements for certain withholding agents.
If a foreign investor fails to provide necessary documentation to the Trust
or its paying agent regarding the investor's taxpayer identification number or
certification of exempt status, a 31% backup withholding tax may be applied to
Note payments to that investor. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against the foreign
investor's U.S. federal income tax liability provided the required information
is furnished to the Internal Revenue Service.
STATE AND LOCAL TAX CONSEQUENCES
Because of the differences in state and local tax laws and their
applicability to different investors, it is not possible to summarize the
potential state and local tax consequences of purchasing, holding or disposing
of the Notes and no opinions of counsel have been obtained regarding state tax
matters. ACCORDINGLY, IT IS RECOMMENDED THAT EACH PROSPECTIVE INVESTOR CONSULT
THEIR OWN TAX ADVISORS REGARDING THE STATE AND LOCAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act, as amended
('ERISA'), and/or Section 4975 of the Internal Revenue Code of 1986, as amended
(the 'Code') prohibits a pension, profit-sharing or other employee benefit plan,
as well as individual retirement accounts and certain types of Keogh Plans (each
a 'Benefit Plan') from engaging in certain transactions with persons that are
'parties in interest' under ERISA or 'disqualified persons' under the Code with
respect to such Benefit Plan. A violation of these 'prohibited transaction'
rules may result in an excise tax or other penalties and liabilities under ERISA
and the Code for such persons. Title I of ERISA also requires that fiduciaries
of a Benefit Plan subject to ERISA make investments that are prudent,
diversified (except if prudent not to do so) and in accordance with governing
plan documents.
Certain transactions involving the purchase, holding or transfer of the
Notes might be deemed to constitute prohibited transactions under ERISA and the
Code if assets of the owner trust were deemed to be assets of a Benefit Plan.
Under a regulation issued by the United States Department of Labor (the 'Plan
Assets Regulation'), the assets of the owner trust 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 owner trust and none of the
exceptions contained in the Plan Assets Regulation is applicable. An equity
interest is defined under the Plan Assets Regulation as an interest in an entity
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The Plan Assets Regulation
also provides that a beneficial interest in a trust is an equity interest.
Although there can be no assurances in this regard, it appears that the Notes
should be treated as debt without substantial equity features for purposes of
the Plan Assets Regulation and that the Notes do not constitute beneficial
interests in the owner trust for purposes of the Plan Assets Regulation.
However, without regard to whether the Notes are treated as an equity interest
for such purposes, the acquisition or holding of Notes by or on behalf of a
Benefit Plan could be considered to give rise to a prohibited transaction if the
owner trust, the owner trustee or the indenture trustee, or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. In such case, 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') 96-23, regarding transactions effected by 'in-house asset managers';
PTCE 90-1, regarding investments by insurance company pooled separate accounts;
PTCE 95-60, regarding transactions effected by 'insurance company general
accounts'; PTCE 91-38, regarding investments by bank collective investment
funds; and PTCE 84-14, regarding transactions effected by 'qualified
professional asset managers.'
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Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A PLAN FIDUCIARY CONSIDERING THE PURCHASE OF ANY OF THE NOTES SHOULD
CONSULT ITS TAX AND/OR LEGAL ADVISORS REGARDING WHETHER THE ASSETS OF THE OWNER
TRUST WOULD BE CONSIDERED PLAN ASSETS, THE POSSIBILITY OF EXEMPTIVE RELIEF FROM
THE PROHIBITED TRANSACTION RULES AND OTHER ISSUES AND THEIR POTENTIAL
CONSEQUENCES.
RATINGS OF THE NOTES
It will be a condition of issuance that one or more nationally recognized
rating agencies rate the Notes in a rating category that signifies investment
grade. There is no assurance that any such rating will not be lowered or
withdrawn by the assigning rating agency if, in its judgment, circumstances so
warrant. In the event that a rating or ratings with respect to the Notes is
qualified, reduced or withdrawn, no person or entity will be obligated to
provide any additional credit enhancement with respect to the Notes so
qualified, reduced or withdrawn.
The rating of the Notes should be evaluated independently from similar
ratings on other types of securities. A rating is not a recommendation to buy,
sell or hold the Notes, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The ratings of the Notes do not
address the likelihood of payment of principal on any class of Notes prior to
the stated maturity date thereof, or the possibility of the imposition of United
States withholding tax with respect to non-United States Persons.
USE OF PROCEEDS
The proceeds from the offering and sale of the Notes of each series, after
funding a portion of the cash collateral account or other form of credit
enhancement for such series and paying the expenses of the depositor, will be
used by the depositor to pay down certain warehousing facilities, and any
remaining funds may be distributed to the originators.
PLAN OF DISTRIBUTION
The Company may sell Notes of each series to or through underwriters by a
negotiated firm commitment underwriting and public reoffering by the
underwriters, and also may sell and place Notes directly to other purchasers or
through agents. We intend that Notes will be offered through such various
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular series of
Notes may be made through a combination of such methods.
The originators, the depositor and certain of its affiliates may agree to
indemnify the underwriters and agents who participate in the distribution of the
Notes against certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
Funds in cash collateral accounts and the trust accounts may, from time to
time, be invested in certain investments acquired from the underwriters.
LEGAL MATTERS
Certain legal matters with respect to the Notes of each series will be
passed upon for the originators and the depositor by Winston & Strawn. Unless
otherwise specified in the prospectus supplement, the indenture, the pooling and
servicing agreement, the sale and contribution agreement and the Notes of each
series will be governed by the laws of the State of New York and the trust
agreement will be governed by the laws of the State of Delaware.
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INDEX OF TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Act......................................................................................................... 60
Article 2A.................................................................................................. 1
Benefit Plan................................................................................................ 50
Code........................................................................................................ 50
Collection Account.......................................................................................... 34
Contract Pool Principle Balance............................................................................. 2
Definitive Notes............................................................................................ 35
ERISA....................................................................................................... 50
Events of Default........................................................................................... 39
Global Notes................................................................................................ 54
Guaranteed Residual Investment.............................................................................. 27
Newcourt USA................................................................................................ 17
Note Distribution Account................................................................................... 34
Plan Assets Regulation...................................................................................... 50
Principal................................................................................................... 3
PTCE........................................................................................................ 51
Segregated Trust Account.................................................................................... 34
Servicer Advance............................................................................................ 1
Tax Counsel................................................................................................. 46
True Leases................................................................................................. 11
Trust Account............................................................................................... 34
Underwriting................................................................................................ iii
</TABLE>
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APPENDIX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Notes will be available only
in book-entry form (the 'Global Notes'). Investors in the Global Notes may hold
such Global Notes through DTC or, if applicable, Cedel Bank or Euroclear. The
Global Notes will be tradeable as home-market instruments in both the European
and United States domestic markets. Initial settlement and all secondary trades
will settle in same-day funds.
Secondary market trading between investors holding Global Notes through
Cedel Bank and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice.
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedures applicable to United
States corporate debt obligations.
Secondary cross-market trading between Cedel Bank or Euroclear participants
and DTC participants holding Notes will be effected on a
delivery-against-payment basis through the respective depositaries of Cedel Bank
and Euroclear and as participants in DTC.
Non-United States holders of Global Notes will be exempt from United States
withholding taxes, provided that such holders meet certain requirements and
deliver appropriate United States tax documents to the securities clearing
organizations or their participants. See 'United States Taxation' in the
Prospectus.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, Cedel Bank and Euroclear will hold
positions on behalf of their participants through their respective depositaries,
which in turn will hold such positions in accounts as participants of DTC.
Investors electing to hold their Global Notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through Cedel Bank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no 'lock-up' or restricted period. Global Notes will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and the seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to United States
corporate debt issues in same-day funds.
Trading between Cedel Bank and/or Euroclear participants. Secondary market
trading between Cedel Bank participants and/or Euroclear participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
Trading between DTC seller and Cedel Bank or Euroclear purchaser. When
Global Notes are to be transferred from the account of a DTC participant to the
account of a Cedel Bank participant or a Euroclear participant, the purchaser
will send instructions to Cedel Bank or Euroclear through a participant at least
one business day prior to settlement. Cedel Bank or Euroclear will instruct the
respective depositary to receive the Global Notes against payment. Payment will
include interest accrued on the Global Notes from and including the last coupon
payment date to and excluding the settlement date. Payment will then be made by
the respective depositary to the DTC participant's
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account against delivery of the Global Notes. After settlement has been
completed, the Global Notes will be credited to the respective clearing system
and by the clearing system, in accordance with its usual procedures, to the
Cedel Bank participant's or Euroclear participant's account. The Global Notes
credit will appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the Global Notes will accrue from, the value
date (which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Cedel Bank or Euroclear cash debit will be valued instead as of the actual
settlement date.
Cedel Bank participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedel Bank or Euroclear. Under
this approach, they may take on credit exposure to Cedel Bank or Euroclear until
the Global Notes are credited to their accounts one day later.
As an alternative, if Cedel Bank or Euroclear has extended a line of credit
to them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, Cedel Bank
participants or Euroclear participants purchasing Global Notes would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Global Notes were credited to their accounts. However, interest on the Global
Notes would accrue from the value date. Therefore, in many cases the investment
income on the Global Notes earned during the one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result will
depend on each participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending Global Notes to the
respective depositary for the benefit of Cedel Bank participants or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
Trading between Cedel Bank or Euroclear seller and DTC purchaser. Due to
time-zone differences in their favor, Cedel Bank participants and Euroclear
participants may employ their customary procedures for transactions in which
Global Notes are to be transferred by the respective clearing system, through
the respective depositary, to a DTC participant. The seller will send
instructions to Cedel Bank or Euroclear through a participant at least one
business day prior to settlement. In this case, Cedel Bank or Euroclear will
instruct the respective depositary to deliver the Notes to the DTC participant's
account against payment. Payment will include interest accrued on the Global
Notes from and including the last coupon payment date to and excluding the
settlement date. The payment will then be reflected in the account of the Cedel
Bank participant or Euroclear participant the following day, and receipt of the
cash proceeds in the Cedel Bank participant's or Euroclear participant's account
would be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the Cedel Bank participant or Euroclear
participant have a line of credit with its respective clearing system and elect
to be in debit in anticipation of receipt of the sale proceeds in its account,
the back-valuation will extinguish any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date (i.e.,
the trade fails), receipt of the cash proceeds in the Cedel Bank or Euroclear
participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel Bank or Euroclear and that purchase
Global Notes from DTC participants for delivery to Cedel Bank participants or
Euroclear participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
1. borrowing through Cedel Bank or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel Bank or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
2. borrowing the Global Notes in the United States from a DTC
participant no later than one day prior to settlement, which would give the
Global Notes sufficient time to be reflected in their Cedel Bank or
Euroclear account in order to settle the sale side of the trade; or
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3. staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the Cedel Bank
participant or Euroclear participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A holder of Global Notes holding securities through Cedel Bank or Euroclear
(or through DTC if the holder has an address outside the United States) will be
subject to 30% United States withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
United States Persons, 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
United States entity required to withhold tax complies with applicable
certification requirements and (ii) such holder takes one of the following steps
to obtain an exemption or reduced tax rate:
Exemption for non-United States Person (Form W-8). Non-United States
Persons that are beneficial owners can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate 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-United States Persons with effectively connected
income (Form 4224). A non-United States Person, including a non-United
States corporation or bank with a United States 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-United States Persons resident in
treaty countries (Form 1001). Non-United States Persons that are beneficial
owners residing in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate (depending on the terms of the
treaty) by filing Form 1001 (Ownership, Exemption or Reduced Rate
Certificate). 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 the beneficial owner or his agent.
Exemption for United States Persons (Form W-9). United States 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. A holder of Global Notes
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 which he 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. See
'United States Taxation' in the Prospectus.
The term 'United States Person' means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States or any political subdivision thereof or (iii) an estate the
income of which is includable in gross income for United States federal income
tax purposes, regardless of its source, or (iv) a trust with respect to which a
court within the United States is able to exercise primary supervision over its
administration, and one or more United States fiduciaries have the authority to
control all of its substantial decisions.
THIS SUMMARY DOES NOT DEAL WITH ALL ASPECTS OF UNITED STATES FEDERAL INCOME
TAX WITHHOLDING THAT MAY BE RELEVANT TO FOREIGN HOLDERS OF THE GLOBAL NOTES.
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR SPECIFIC TAX ADVICE
CONCERNING THEIR HOLDING AND DISPOSING OF THE GLOBAL NOTES.
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NEWCOURT EQUIPMENT TRUST SECURITIES 1999-1
RECEIVABLE-BACKED NOTES
NCT FUNDING COMPANY, L.L.C.
DEPOSITOR
AT&T CAPITAL CORPORATION
SERVICER
[LOGO] [LOGO]
SERVICER
A MEMBER OF THE NEWCOURT GROUP OF COMPANIES
Until [ ], all dealers effecting transaction in the
Notes, whether or not participating in this distribution, may be required to
deliver this prospectus supplement and the accompanying prospectus. Dealers
acting as underwriters also have an obligation to deliver a prospectus
supplement and prospectus with respect to their unsold allotments or
subscriptions.
<PAGE>
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Expenses in connection with the offering of the Securities being registered
herein are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................................... $
Legal fees and expenses................................................................... $
Accounting fees and expenses.............................................................. $
Blue sky fees and expenses................................................................ $
Rating agency fees........................................................................ $
Trustee's fees and expenses............................................................... $
Printing.................................................................................. $
Miscellaneous............................................................................. $
----------
Total................................................................................ $
----------
----------
</TABLE>
- ------------
* All amounts except the Securities and Exchange Commission Registration Fee
are estimates of expenses incurred or to be incurred in connection with the
issuance and distribution of a Series of Securities in an aggregate principal
amount assumed for these purposes to be equal to $ of Securities
registered hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the related trust agreement, the Depositor will agree to indemnify
the Owner Trustee for, from and against, any and all liabilities, obligations,
losses, damages, taxes, claims, actions and suits, and any and all reasonable
costs, expenses and disbursements (including reasonable legal fees and expenses)
of any kind and nature whatsoever incurred without willful misconduct or
negligence on the part of the Owner Trustee, which may at any time be imposed
on, incurred by or asserted against the Owner Trustee in any way relating to or
arising out of the trust agreement, the pooling and servicing agreement, the
indenture and related documents, the Trust's assets, the administration of the
Trust's assets or the action or inaction of the Owner Trustee under the trust
agreement; provided, however, the liability of the Depositor described herein
shall be limited to the assets of the Depositor and any indemnity payments to be
made pursuant to this Section shall not be made from the Trust's assets and such
indemnity payments, if unpaid, do not constitute a general recourse claim
against the Trust.
The Depositor's Limited Liability Company Agreement provides for indemnity
of its directors and officers to the fullest extent permitted by Delaware law.
Pursuant to agreements which the Trusts and the Depositor may enter into
with underwriters (the form of which is included as Exhibit 1.1 to this
Registration Statement), officers and directors of the Depositor may be entitled
to indemnification by such underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, arising from information which has
been or will be furnished to the Depositor by such underwriters that appear in
the Registration Statement or any related prospectus.
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ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Certificate of Formation of the Depositor*
3.2 -- Limited Liability Company Agreement of the Depositor*
4.1 -- Form of Trust Agreement (including form of Certificates)*
4.2 -- Form of Pooling and Servicing Agreement (including form of Certificates)*
4.3 -- Form of Indenture (including form of Notes)*
5.1 -- Opinion of Winston & Strawn with respect to legality*
8.1 -- Opinion of Winston & Strawn with respect to tax matters*
23.1 -- Consent of Winston & Strawn (included in Exhibit 5.1)*
24.1 -- Power of Attorney (included on signature page)
25.1 -- Statement of Eligibility and Qualification of Indenture Trustee*
99.1 -- Form of Administration Agreement*
</TABLE>
- ------------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that (a)(1)(i) and (a)(1)(ii) will not apply if the
information required to be included in a post-effective amendment thereby is
contained in periodic reports filed pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration
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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.
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.
The undersigned registrant hereby undertakes that:
(1) 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
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) 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.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of , the State of on
, 1999.
NEWCOURT EQUIPMENT TRUST SECURITIES
1999-1
By: NCT FUNDING COMPANY, L.L.C.,
as Depositor of the Trusts
By /s/ DANIEL A. JAUERNIG
..................................
NAME: DANIEL A. JAUERNIG
TITLE: PRESIDENT
POWER OF ATTORNEY
The undersigned directors and officers of NCT Funding Company, L.L.C. do
hereby constitute and appoint Eric Mandelbaum and Scott Moore, and each of them,
with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all instruments for
us and in our names in the capacities indicated below which such person may deem
necessary or advisable to enable NCT Funding Company, L.L.C. and the Trusts to
comply with the Securities Act of 1933 (the 'Act'), as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for us, or any of us, in the capacities
indicated below and any and all amendments (including pre-effective and
post-effective amendments or any other registration statement filed pursuant to
the provisions of Rule 462(b) under the Act) hereto; and we do hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ DANIEL A. JAUERNIG President (Principal Executive Officer) March 22, 1999
.........................................
/s/ GLENN A. VOTEK Treasurer (Principal Financial and March 22, 1999
......................................... Accounting Officer)
/s/ PETER H. SORENSON Director/Member March 22, 1999
.........................................
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Certificate of Formation of the Depositor*
3.2 -- Limited Liability Company Agreement of the Depositor*
4.1 -- Form of Trust Agreement (including form of Certificates)*
4.2 -- Form of Pooling and Servicing Agreement (including form of Certificates)*
4.3 -- Form of Indenture (including form of Notes)*
5.1 -- Opinion of Winston & Strawn with respect to legality*
8.1 -- Opinion of Winston & Strawn with respect to tax matters*
23.1 -- Consent of Winston & Strawn (included in Exhibit 5.1)*
24.1 -- Power of Attorney (included on signature page)
25.1 -- Statement of Eligibility and Qualification of Indenture Trustee*
99.1 -- Form of Administration Agreement*
</TABLE>
- ------------
* To be filed by amendment
