AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1999
Registration No. _______________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COPELCO CAPITAL FUNDING LLC 2000-A
(Exact name of registrant as specified in its charter)
-------------------
DELAWARE PENDING
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
COPELCO CAPITAL FUNDING LLC 2000-A
700 EAST GATE DRIVE
MOUNT LAUREL, NEW JERSEY 08054-5404
(609) 231-9600
(Name, address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Copies to:
SPENCER LEMPERT, ESQ. PETER HUMPHREYS, ESQ.
COPELCO CAPITAL FINANCIAL SERVICES GROUP, INC. DEWEY BALLANTINE LLP
700 EAST GATE DRIVE 1301 AVENUE OF THE AMERICAS
MOUNT LAUREL, NJ 08054 NEW YORK, NEW YORK 10019
(609) 231-9600 (212) 259-6730
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
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. [X]
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 number of the earlier effective
registration statement for the same offering. [_]
If this Form is filed as a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, please check the following box and list
the Securities Act registration 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. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
======================= =========== ================== ==================== =======================
Amount Proposed Maximum Proposed Maximum
Title of Securities To Be Aggregate Price Aggregate Offering Amount
Being Registered Registered Per Unit(1) Price(1) Of Registration Fee
----------------------- ----------- ------------------ -------------------- -----------------------
<S> <C> <C> <C> <C>
Lease-Backed Notes $1,000,000 100% $1,000,000 $278
======================= =========== ================== ==================== =======================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS
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$---------------
COPELCO CAPITAL FUNDING LLC 2000-A, ISSUER
COPELCO CAPITAL, INC., SERVICER
LEASE-BACKED NOTES
FROM TIME TO TIME THE ISSUER MAY SELL A SERIES OF ITS NOTES THAT --
o will represent debt obligations solely of the issuer; and
o will consist of one or more classes on terms to be determined at the time of
sale.
THE ASSETS BACKING THE NOTES MAY CONSIST OF ANY COMBINATION OF --
o leases;
o installment sale contracts;
o rental stream obligations;
o monies received relating to the leases, agreements, contracts and
obligations;
o funds on deposit in one or more accounts; and
o one or more forms of credit enhancement.
THE TERMS OF YOUR SERIES OF NOTES ARE DESCRIBED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT.
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YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" STARTING ON PAGE __ OF THIS
PR0OSPECTUS AND CONSIDER THESE FACTORS BEFORE MAKING A DECISION TO INVEST IN THE
NOTES.
The notes of each series will be debt solely of the issuer and will be payable
only from the pledged assets of the issuer and any credit enhancement for such
series.
Retain this prospectus for future reference. This prospectus may not be used to
consummate sales of securities unless accompanied by the prospectus supplement
relating to the offering of such securities.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated ____________, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
IMPORTANT INFORMATION ABOUT THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT................................................................3
PROSPECTUS SUMMARY...........................................................1
Issuer.....................................................................1
Originator.................................................................1
Servicer...................................................................1
Trustee....................................................................1
The Notes..................................................................1
The Series Pools...........................................................2
Payment Date...............................................................2
Due Period.................................................................2
Record Date................................................................2
Registration of Notes......................................................2
Credit Enhancement.........................................................2
Optional or Mandatory Termination..........................................3
Tax Considerations.........................................................3
ERISA Considerations.......................................................3
Ratings....................................................................3
RISK FACTORS.................................................................4
WHERE YOU CAN FIND MORE INFORMATION..........................................8
THE ISSUER...................................................................9
USE OF PROCEEDS..............................................................9
THE SERIES POOLS.............................................................9
COPELCO CAPITAL'S UNDERWRITING AND SERVICING PRACTICES......................12
DESCRIPTION OF THE NOTES....................................................17
PREPAYMENT AND YIELD CONSIDERATIONS.........................................19
BOOK-ENTRY REGISTRATION.....................................................19
DESCRIPTION OF THE TRANSACTION DOCUMENTS....................................22
Indenture.................................................................25
THE INDENTURE TRUSTEE.......................................................27
SECURITY FOR THE NOTES......................................................27
LEGAL MATTERS AFFECTING A LESSEE'S RIGHTS AND OBLIGATIONS..................27
MATERIAL FEDERAL INCOME TAX CONSEQUENCES....................................29
RATINGS.....................................................................33
ERISA CONSIDERATIONS........................................................33
PLAN OF DISTRIBUTION........................................................33
LEGAL OPINIONS..............................................................34
INDEX OF TERMS..............................................................35
<PAGE>
IMPORTANT INFORMATION ABOUT THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
IF THE TERMS OF YOUR SERIES OF NOTES VARY BETWEEN THIS PROSPECTUS AND
THE ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THE PROSPECTUS SUPPLEMENT.
The prospectus supplement for your series of notes will state among
other things:
o the aggregate principal amount, interest rate and authorized
denominations of the notes;
o specific information concerning the characteristics of the lease
receivables;
o the terms of any credit enhancement with respect to the notes;
o information concerning any other assets backing the notes,
including any reserve fund;
o the final scheduled payment date of the notes;
o how and when principal is to be paid on the notes on each payment
date, the timing of the application of principal and the order of
priority of the applications of the principal to the respective
classes of notes;
o the federal income tax characterization of the notes;
o the terms of any subordination pertaining to the notes;
o the terms of any cross-collateralization applying to the notes;
o the terms of any redemptions and the corresponding redemption
prices applicable to the notes;
o servicing terms applicable to the notes;
o the presence of any prefunding feature relating to the notes;
o the length and terms of any revolving period pertaining to the
notes; and
o additional information on the plan of distribution of the notes.
<PAGE>
PROSPECTUS SUMMARY
o This summary highlights select information from this prospectus and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
notes, read carefully this entire prospectus and the accompanying
prospectus supplement.
o This summary provides an overview of calculations, cash flows and other
information to aid your understanding. To understand all of the terms of
the offering, carefully read this entire document and, in particular, the
full description of these calculations, cash flows and other information in
this prospectus.
LEASE-BACKED NOTES
ISSUABLE IN SERIES
ISSUER
Copelco Capital Funding LLC 2000-A, a Delaware limited liability company. The
address is 700 East Gate Drive, Mt. Laurel, New Jersey 08054.
ORIGINATOR
Copelco Capital, Inc., a Delaware corporation and a wholly-owned subsidiary of
Copelco Financial Services Group, Inc. The address of the originator is One
International Boulevard, Mahwah, New Jersey 07430.
SERVICER
The servicer will be Copelco Capital, Inc. unless otherwise specified in the
applicable prospectus supplement. The address of Copelco Capital, Inc. is One
International Boulevard, Mahwah, New Jersey 07430.
TRUSTEE
For any series of notes, the trustee named in the applicable prospectus
supplement.
THE NOTES
o The notes of each series will be secured solely by equipment leases or
contracts and related assets. The assets will be pledged by the issuer to a
trustee under an indenture for the benefit of noteholders of that series.
o The transaction documents associated with each series of notes will
describe the rights of each of those classes of notes to the funds derived from
the applicable asset pool.
o The notes are fixed income securities, having a principal balance and a
specified interest rate.
o Each class of notes may have a different interest rate, which may be a
fixed or floating interest rate. The applicable prospectus supplement will
specify the interest rate for each series or class of notes, or the initial
interest rate and the method for determining subsequent changes to the interest
rate.
o A series may include one or more classes of notes which are:
o stripped of regular interest payments and entitled only to principal
distributions, with disproportionate, nominal or no interest
distributions; or
o stripped of regular principal payments and entitled only to interest
distributions, with disproportionate, nominal or no principal
distributions.
o A series of notes may include two or more classes of notes with different
terms including different interest rates and different timing, sequential order
or priority of payments, amount of principal or interest or both.
o A series may provide that distributions of principal or interest or both on
any class may be made:
o upon the occurrence of specified events;
o in accordance with a schedule or formula; or
<PAGE>
o on the basis of collections from designated portions of the applicable
asset pool.
o Any series may include one or more classes of notes which will not
distribute accrued interest but rather will add the accrued interest to the note
principal balance, or nominal balance, in the manner described in the applicable
prospectus supplement.
o A series may include one or more other classes of notes that are senior to
one or more other classes of notes with regard to distributions of principal and
interest and allocations of losses on the applicable asset pool.
THE SERIES POOLS
o As specified in the applicable prospectus supplement, the pledged pool of
assets securing a series of notes may consist of:
o leases which may include any combination of leases, leases intended as
security agreements, installment sale contracts or rental stream
obligations, together with monies due on these leases and agreements
and affiliated guarantees;
o interests other than ownership interests in the underlying equipment
and related property, together with the proceeds from the disposal of
the equipment, if any;
o amounts held in any collection, reserve, prefunding or other accounts
established in connection with the transaction documents;
o proceeds and recoveries on insurance policies and the disposition of
repossessed equipment;
o credit enhancement for a series pool or any class of notes; and
o interest earned on specific short-term investments.
o If the applicable prospectus supplement specifies, the issuer may acquire
additional leases and equipment during a specified pre-funding period following
the issuance of the notes from monies in a pre-funding account.
o If the applicable prospectus supplement specifies, the notes may have a
revolving period. During a revolving period, the issuer may acquire additional
leases and interests in equipment from the proceeds of payments on existing
lease payments. The notes may not pay principal during this period.
PAYMENT DATE
As described in the applicable prospectus supplement, the notes will pay
principal and/or interest on specified dates. Payment dates will occur monthly,
quarterly, or semi-annually.
DUE PERIOD
The calendar month preceding the month in which a payment date occurs is the due
period. As the applicable prospectus supplement will more fully describe, the
servicer will remit collections received with respect to the due period to the
trustee prior to the applicable payment date. The collections may be used to
fund payments to noteholders on that payment date or to acquire additional lease
receivables.
RECORD DATE
The applicable prospectus supplement will describe a date preceding the payment
date, as of which the issuer or its paying agent will fix the identity of the
holders of the notes. Noteholders whose identities are fixed on this date will
receive payments on the next succeeding payment date.
REGISTRATION OF NOTES
The issuer will initially issue the notes as global notes registered in the name
of Cede & Co., unless otherwise specified, as nominee of The Depository Trust
Company. Noteholders will not receive definitive notes representing their
interests, except in specific limited circumstances described in the applicable
prospectus supplement.
CREDIT ENHANCEMENT
o As described in the applicable prospectus supplement, credit enhancement
for a series pool or any class of notes may include any one or more of the
following:
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<PAGE>
o a policy issued by an insurer specified in the applicable prospectus
supplement;
o overcollateralization;
o subordination of specific classes of notes;
o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support; and
o cash deposits or other similar arrangements.
o The prospectus supplement will describe any limitations and exclusions from
coverage.
OPTIONAL OR MANDATORY TERMINATION
o Under the circumstances described in this prospectus and the applicable
prospectus supplement, the servicer, the issuer or other entities may, at their
respective options, cause the early retirement of a series of notes at the price
or prices indicated in the applicable prospectus supplement.
o The applicable prospectus supplement may describe circumstances under which
the issuer, servicer or other entities will be required to retire early all or
any portion of a series of notes. An indenture may require these parties to
solicit competitive bids for the purchase of the applicable series pool or
otherwise.
TAX CONSIDERATIONS
For federal income tax purposes, Dewey Ballantine LLP, special tax counsel to
the issuer, will render an opinion upon the issuance of a series of notes that
the notes will be treated as debt and the issuer will not be treated as an
association (or publicly traded partnership) taxable as a corporation. You are
urged to consult your tax advisors.
ERISA CONSIDERATIONS
Subject to the considerations and conditions described under "ERISA
Considerations" in this prospectus and the applicable prospectus supplement,
pension, profit-sharing or other employee benefit plans, as well as individual
retirement accounts and specific types of Keogh Plans may purchase the notes.
You should consult with your counsel regarding the applicability of the
provisions of ERISA before purchasing a note.
RATINGS
o The issuer will not issue the notes unless a rating agency rates them in
one of the four highest rating categories.
o You must not assume that the rating agency will not lower, qualify or
withdraw its rating.
3
<PAGE>
RISK FACTORS
You should carefully consider, among other things, the following risk factors
before deciding to invest in the notes offered by this prospectus.
YOU MAY NOT BE ABLE TO SELL If no public market develops, as a
YOUR NOTES noteholder, you may not be able to liquidate
your investment in the notes prior to
maturity. We offer no assurance that one will
develop. The underwriters expect, but are not
obligated, to make a market in the notes.
There is no assurance that a market will be
created or, if created, will continue.
PREPAYMENTS AND ASSOCIATED In the case of notes purchased at a discount,
REINVESTMENT RISK MAY you should consider the risk that slower than
REDUCE YIELD TO anticipated rates of prepayments could result
NOTEHOLDERS in an actual yield that is less than the
anticipated yield. Conversely, you should
consider that in the case of notes purchased
at a premium, the risk that faster than the
anticipated rate of prepayments could result
in an actual yield that is less than the
anticipated yield.
Be aware that you bear the risk of reinvesting
unscheduled distributions resulting from
prepayments of the notes.
The rate of payment of principal is
unpredictable because the rate on the notes
will depend on, among other things, the rate
of payment on the underlying equipment leases.
In addition to the normally scheduled payments
on the leases, payments may come from a number
of different sources. Payments on the leases
will include the following:
o prepayments permitted by the servicer;
o payments as a result of leases which are
defaulted;
o payments as a result of leases accelerated
by the servicer;
o payments due to loss, theft, destruction
or other casualty; and
o payments upon repurchases by Copelco
Capital, Inc. on account of a breach of
representation and warranty.
Copelco Capital, Inc. may elect to reinvest
the proceeds of a lease which was partially
or fully repaid or upgraded in one or more
leases having similar characteristics to that
terminated lease.
The rate of early terminations of leases due
to prepayments and various non-payments may be
influenced by a variety of economic and other
factors. For example, adverse economic
conditions and natural disasters such as
floods, hurricanes, earthquakes and tornadoes
may affect prepayments.
SPECIFIC SECURITY INTERESTS In the event the issuer has insufficient
ARE NOT PERFECTED AND assets available to pay the notes, the issuer
OTHER CREDITORS MAY HAVE may sell the equipment upon a lease default
RIGHTS TO THE EQUIPMENT in order to meet payments on the notes. The
lack of a perfected security interest in
certain equipment may adversely affect the
ability of the issuer to recoup any moneys on
that equipment following a lease default. This
could reduce the funds available to pay the
notes.
4
<PAGE>
Copelco Capital, Inc. files Uniform Commercial
Code financing statements against lessees with
respect to equipment with an original
equipment cost equal to or more than $25,000.
As is more fully described in the applicable
prospectus supplement, this means that
financing statements will not be filed for a
percentage of the leases. In addition, the
indenture and the assignment and servicing
agreement will require certain Uniform
Commercial Code financing statements with
respect to the equipment to be filed in favor
of the issuer against Copelco Capital, Inc.
and in favor of the trustee against the issuer
and Copelco Capital, Inc.
Copelco Capital, Inc. does not perfect its
interest in any equipment where the original
cost of the related equipment is less than
$25,000. As a result, Copelco Capital, Inc.
will not have a perfected security interest in
that equipment. Other creditors of the related
lessees may acquire rights in the equipment
superior to those of the issuer or the
trustee. In those cases, security interests in
the equipment will also not be perfected in
favor of the issuer or the trustee.
Additionally, because the transaction
documents will only require Uniform Commercial
Code financing statements to be filed in
central locations for any given state,
security interests in the equipment will also
not be perfected in favor of the issuer or the
trustee in any state requiring other than
central filings. Therefore, other creditors of
Copelco Capital, Inc., may acquire rights in
the equipment superior to those of the issuer
or the trustee.
STATE LAW AND OTHER FACTORS The application of state law requirements may
MAY IMPEDE RECOVERY limit recoveries on equipment. State laws
EFFORTS AND AFFECT THE impose requirements and restrictions on
ABILITY OF ISSUER TO foreclosure sales and obtaining deficiency
RECOUP THE FULL AMOUNT judgments and may prohibit, limit or delay
DUE ON THE LEASES repossession and sale of equipment to recover
losses on non-performing leases.
Additional factors that may affect the ability
of the issuer to recoup the full amount due on
a lease include:
o the issuer's failure to file financing
statements to perfect its security interest
in the equipment against a lessee;
o depreciation;
o obsolescence;
o damage or loss of any item of equipment;
and
o the application of federal and state
bankruptcy and insolvency laws.
As a result, the noteholders may be subject to
delays in receiving payments and losses.
POSSESSION OF THE LEASES BY Any insolvency by the issuer, the servicer,
AND THE INSOLVENCY OF the originator or the seller, while in
THE ISSUER, ORIGINATOR possession of the leases may result in
OR SERVICER MAY RESULT competing claims to ownership or security
IN REDUCED OR DELAYED interests in the leases which could result in
PAYMENTS TO NOTEHOLDERS delays in payments on the notes, losses to
the noteholders or an acceleration of the
repayment of the notes.
5
<PAGE>
INSOLVENCY OF COPELCO CAPITAL, In some circumstances, a bankruptcy of
INC. MAY REDUCE PAYMENTS Copelco Capital, Inc. may reduce payments to
TO NOTEHOLDERS noteholders. However, Copelco Capital, Inc.
believes that each contribution of the leases
should be treated as an absolute and
unconditional assignment.
Still, in the event of an insolvency of
Copelco Capital, Inc., a court or bankruptcy
trustee could, without limitation, attempt to-
o recharacterize the contribution of the
related leases by Copelco Capital, Inc. to
the issuer as a loan to Copelco Capital,
Inc. from the issuer, secured by a pledge
of those leases; or
o consolidate the assets of the issuer with
those of Copelco Capital, Inc. since
Copelco Capital, Inc. will own all of the
membership interests in the issuer.
If the recharacterization or consolidation
were successful, the bankruptcy trustee could
repudiate the leases that are considered to be
operating leases for bankruptcy law purposes
and all obligations applicable to those
operating leases. Either attempt, even if
unsuccessful, could result in delays in
payments to you. If the attempts were
successful, those notes would be accelerated,
and the trustee's recovery on behalf of you
could be limited to the then current value of
the leases or the underlying equipment.
Consequently, you could lose the right to
future payments and you may not receive your
anticipated principal and interest on the
notes.
Although Copelco Capital, Inc. believes that
the contribution of the leases should be
treated as an absolute and unconditional
assignment, for accounting and tax purposes,
the leases will be treated as assets of
Copelco Capital, Inc. on its consolidated
financial statements and on the tax return for
its consolidated group. This treatment of the
assets might increase the risk of
recharacterization of the transfer to the
issuer as a financing rather than an absolute
assignment.
NO RECOURSE AGAINST THE There is no recourse against any affiliates
AFFILIATES OF ISSUER of the issuer. The notes represent debt of
the issuer secured primarily by the leases. If
the lease payments and other assets pledged to
secure the notes are insufficient to pay the
notes in full, you have no rights to obtain
payment from Copelco Capital, Inc. or any of
its affiliates other than the issuer. The
issuer is a limited liability company with
limited assets.
GEOGRAPHIC CONCENTRATION OF Adverse economic conditions or other factors
LEASES MAY ADVERSELY particularly affecting any state or region
AFFECT THE LEASES where a high concentration of leases is
located could adversely affect the performance
on the leases. The issuer is unable to
determine and has no basis to predict, with
respect to any state or region, whether these
types of events have occurred or may occur, or
to what extent any of these types of events
may affect the leases or the repayment of
amounts due under the notes.
COMMINGLING OF FUNDS WITH Should bankruptcy or reorganization
COPELCO CAPITAL, INC. MAY proceedings be commenced with respect to the
RESULT IN REDUCED OR servicer, any funds held by the servicer and
DELAYED PAYMENTS TO not transferred to the collection account may
NOTEHOLDERS not be available to noteholders. If the
funds are not transferred to the trustee, as
required by the transaction documents,
payments to noteholders could be delayed or
reduced if the servicer becomes bankrupt or
insolvent.
6
<PAGE>
DEFAULT OR INSOLVENCY OF To the extent lessees default on the leases,
LESSEES MAY REDUCE including through insolvency, Lease payments
PAYMENTS TO NOTEHOLDERS will decrease and, accordingly, funds
available for payment to you, as a
noteholder, will be reduced.
TECHNOLOGICAL OBSOLESCENCE OF If technological advances relating to the
EQUIPMENT MAY REDUCE equipment causes the leased equipment to
VALUE OF COLLATERAL become obsolete, the value of the equipment
will decrease. This will reduce the amount of
monies recoverable should the servicer sell
the equipment following a lease default. If
payments on the notes become dependent upon
the proceeds from the sale of these obsolete
equipment, you may not recoup the full amount
due to you.
THE ADDITION AND SUBSTITUTION If a significant number of leases are added
OF LEASES MAY ADVERSELY or replaced, this could affect the rate at
AFFECT CASHFLOW AND MAY which funds are distributed on the notes and
DECREASE THE YIELD ON THE decrease the yield to noteholders. The
NOTES transaction documents may permit Copelco
Capital, Inc., under specific circumstances,
to substitute or add specific qualifying
leases. The addition or substitution of Leases
may include leases that possess different
payment due dates and installment amounts than
its predecessor lease. It may also include
leases with maturity dates that are different
from the maturity dates of its predecessor
lease.
Copelco Capital, Inc. may only add or
substitute leases that meet specific
qualifying characteristics and conditions. The
ability of Copelco Capital, Inc. to acquire
those leases is dependent upon its ability to
originate a sufficient amount of leases that
meet the specified eligibility criteria. This
may be affected by a variety of social and
economic factors, including interest rates,
unemployment levels, the rate of inflation and
public perception of economic conditions
generally. This may increase the geographic
concentration or equipment concentration of
leases. Consequently, any adverse economic or
social factors that particularly affect a
geographic area or a type of equipment may
adversely affect the performance of the
leases.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
The issuer or the servicer will file with the SEC all required annual,
quarterly and special reports, proxy statements and other information about the
notes. You can read and copy these documents at the public reference facility
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, NW, Room 1024,
Washington, DC 20549. You can also copy and inspect those reports, proxy
statements and other information at the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, New York 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. SEC filings are also available to the public on the
SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus. Information that we file later with
the SEC will automatically update the information in this Prospectus. In all
cases, you should rely on the later information over different information
included in this Prospectus or the Prospectus Supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf the issuer until we terminate our offering of the notes.
We filed a registration statement pertaining to the notes with the
SEC. This Prospectus is part of the registration statement but the registration
statement includes additional information. As a recipient of this Prospectus,
you may request a copy of the registration statement and any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at:
Copelco Capital, Inc.
700 East Gate Drive
Mount Laurel, New Jersey 08054-5404
Attn: Stephen W. Shippie
(609) 231-9600
You should rely only on the information incorporated by reference or
provided in this Prospectus or the accompanying Prospectus Supplement. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this Prospectus is accurate as of any date
other than the date on the cover page of this Prospectus or the accompanying
Prospectus Supplement.
You can find a listing of the pages where capitalized terms are
defined under "Index of Terms" beginning on page 35 in this Prospectus.
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THE ISSUER
Copelco Capital Funding LLC 2000-A, (the "Issuer") is a Delaware
limited liability company, all of the membership interests in which will be held
by Copelco Capital, Inc. (the "Originator" or "Copelco Capital" ). The Issuer
was organized for the limited purpose of engaging in the transactions described
below and any activities incidental to and necessary or convenient for the
accomplishment of those purposes and is restricted by its organizational
documents and specific agreements from engaging in other activities. In
addition, its organizational documents and various agreements require it to
operate in a manner so that it should not be consolidated in the bankruptcy
estate of the Originator or its affiliates in the event that one of them becomes
subject to bankruptcy or insolvency proceedings. The Issuer's address is 700
East Gate Drive, Mt. Laurel, New Jersey 08054.
The Issuer will from time to time sell a series of notes (the "Notes")
consisting of one or more classes on terms to be determined at the time of sale
and described in the applicable Prospectus Supplement. The Notes of each series
will be secured solely by the related Series Pool (as defined below). The Issuer
does not have, nor is it expected in the future to have, any significant assets
other than the Series Pools. The servicer of any Series Pool shall be Copelco
Capital, Inc. (the "Servicer") unless otherwise stated in the applicable
Prospectus Supplement.
The Issuer will pledge its interests in a Series Pool to a Trustee (as
defined below) with respect to the related series of Notes in connection with an
indenture between the Issuer and the Trustee.
USE OF PROCEEDS
The net proceeds from the sale of the Notes of each series will be
distributed to the owners of the Issuer. The distribution will occur after the
contribution from the Originator of the related pool of Leases (as defined
below) and interests in the related equipment to the Issuer.
THE SERIES POOLS
The Notes of each series will be secured by a segregated pool of
equipment leases or contracts and related assets (a "Series Pool"). The property
comprising each Series Pool may include (i) a pool of leases, which may include
any combination of leases, leases intended as security agreements, installment
sale contracts or rental stream obligations, (ii) specific monies due under the
Leases on or after a specified date (the "Cut-off Date"), (iii) monies held from
time to time in one or more accounts established and maintained in connection
with the related Transaction Documents (as defined below), (iv) a security
interest in the underlying equipment and related property pertaining to that
pool of Leases (that equipment and related property, the "Equipment"), (v) the
rights of the Issuer under certain transaction documents applicable to the
Series Pool and (vi) investment earnings on certain accounts created under the
related Transaction Documents (as defined below) (collectively, the "Leases").
The Issuer will not have and the Series Pools will not include any
residual interest in any Equipment after the related Lease has been paid in
full.
The Equipment generally will be limited to personal property which is
leased or financed by the Originator to lessees (each a "Lessee" and,
collectively, "Lessees") in connection with Leases which either are "chattel
paper" (as defined in the Uniform Commercial Code ("UCC")) or are Leases that
are not treated materially differently from "chattel paper" for purposes of
title transfer, security interests or remedies on default.
The Lease Receivables will be acquired by the Issuer from the
Originator under an Assignment and Servicing Agreement between the Originator
and the Issuer (the "Assignment and Servicing Agreement"). The Leases included
in a Series Pool will be selected from leases held by the Originator based on
the criteria described under "The Leases--Eligible Leases."
On or prior to the date of issuance of any series of Notes to the
holders of Notes, the Issuer will form a Series Pool by (i) acquiring the Leases
in connection with the applicable Assignment and Servicing Agreement and (ii)
entering into an indenture with the Trustee, pertaining to the issuance of the
Notes (the "Indenture").
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The Leases in each Series Pool will have been originated by the
Originator or acquired by the Originator in accordance with the Originator's
specified underwriting criteria. The material underwriting criteria applicable
to the Leases are described under "Copelco Capital's Underwriting and Servicing
Practices."
THE LEASES. Information with respect to the Leases in each Series Pool
will be described in the applicable Prospectus Supplement, including the
composition of the Leases and the distribution of the Leases by equipment type,
payment frequency and Discounted Present Value of the Leases (as defined below)
as of the applicable Cut-Off Date. As of the date of issuance of the Notes of
any series, no more than 5% of the Leases in the applicable Series Pool (as
measured by Discounted Present Value of the Leases) will deviate from the
characteristics of the Leases described in the applicable Prospectus Supplement.
ELIGIBLE LEASES. All Leases have been originated or acquired in the
ordinary course of the Originator's business and comply with the Originator's
then existing credit and collections policies. In addition, the following
eligibility requirements apply or will apply to all Leases on or prior to the
related Cut-Off Date (collectively, the "Eligible Leases"):
(i) The Leases are valid and enforceable, and unconditionally obligate
the Lessee to make periodic Lease Payments (as defined below) (including
taxes);
(ii) The Leases are noncancellable by the Lessee;
(iii) All payments payable under the Leases are absolute,
unconditional obligations of the Lessees and Lessees do not possess any
right of offset for any reason;
(iv) All of the Leases are triple-net leases and require the Lessee or
a third party to maintain the Equipment in good working order, to install
it at a specified place of business, to bear all the costs of operating the
Equipment, including taxes and insurance pertaining to it;
(v) The Leases are materially compliant with all U.S. or state laws;
(vi) The Leases have been transferred to the Issuer free and clear of
any liens and are assignable without prior written the consent of the
Lessee;
(vii) The Leases are U.S. dollar-denominated and the lessor and each
Lessee are located in the United States or Canada;
(viii) No more than three percent (3%) of the Leases in any Series
Pool will consist of Leases with government entities as the obligor;
(ix) The Lease is not subject to any guaranty by the lessor or
Originator but may be subject to the guaranty of others;
(x) No adverse selection was used in selecting the Lease for transfer
to the Issuer;
(xi) The Lessee has represented to the Originator that it has accepted
the Equipment;
(xii) The Lessee is not a subject of an insolvency or bankruptcy
proceeding at the time of the transfer; and
(xiii) The Leases are not Non-Performing Leases (as defined below).
"Non-Performing Leases" are (a) Leases that have become more than 123
days delinquent or (b) Leases that have been accelerated by the Servicer or
Leases that the Servicer has determined to be uncollectible in accordance with
its customary practices. Copelco Capital, Inc. will represent and warrant that,
as of the applicable Cut-Off Date, none of the Leases are Non-Performing Leases.
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The Servicer's customary practices with respect to Non-Performing
Leases include action as is necessary to cause, or attempt to cause, the Lessee
thereunder to cure non-performance or to terminate the Lease and recover the
outstanding amount owed under the Lease and all damages resulting from any
default on the Non-Performing Leases. The Servicer will take action that is
consistent with the customary practices of servicers in the equipment leasing
industry. In addition, the Servicer will use its best efforts to sell or lease
any Equipment that is subject to a Non-Performing Lease in a timely manner and
upon the most favorable terms and conditions available at the time in order to
recoup any amounts still due on the Lease.
At the end of the Lease term, the Lessee must return the Equipment in
good working order, normal wear and tear expected, unless the lease is renewed
or the Equipment is purchased by the Lessee.
DISCOUNTED PRESENT VALUE. The discounted present value of the Leases
(the "Discounted Present Value of the Leases"), at any given time, will equal
the future remaining scheduled payments (not including delinquent amounts,
Excess Copy Charges, Fee Per Scan Charges and Maintenance Charges (each as
defined below)) from the Leases (including Non-Performing Leases), discounted at
the rate specified in the applicable Prospectus Supplement (the "Discount
Rate"). The discounted present value of the Performing Leases (the "Discounted
Present Value of the Performing Leases") equals the Discounted Present Value of
the Leases, reduced by all future remaining scheduled payments on the
Non-Performing (not including delinquent amounts and maintenance charges),
discounted at the Discount Rate. The Discounted Present Value of the Leases with
regard to each Series Pool as of the initial Cut-Off Date, calculated at the
Discount Rate, will be specified in the applicable Prospectus Supplement.
In connection with all calculations required to be made in connection
with the Transaction Documents (as defined below), in order to determine the
Discounted Present Value of the Leases at any given time, it will be assumed
that:
(i) Lease Payments are due on the last day of the period from and
including the first day of each calendar month to and including the last
day of the calendar month immediately preceding the applicable Payment
Date;
(ii) Lease Payments are discounted on a monthly basis using a 30-day
month and a 360-day year; and
(iii) Lease Payments are discounted to the last day of the calendar
month prior to the relevant calculation date.
In addition, each Indenture and Assignment and Servicing Agreement
will provide that any calculation of future remaining scheduled payments made on
or with respect to any date will be calculated after giving effect to any
payments received prior to the date of that calculation to the extent those
payments relate to scheduled payments due and payable with respect to the
applicable Due Period (as defined below) and all prior Due Periods.
DELINQUENCIES AND GROSS LOSSES. Information pertaining to the
Originator's delinquency and gross loss experience with respect to leases it has
originated or acquired will be described in the applicable Prospectus
Supplement. This information may include, among other things, the experience
with respect to all leases in the Originator's portfolio during specified
periods, including leases not included in any Series Pool and leases which may
not meet the criteria for selecting the Leases for a Series Pool. There can be
no assurance that the delinquency, repossession and net loss experience on any
Series Pool will be comparable to the Originator's prior experience.
ACQUISITION OF LEASE RECEIVABLES. The Leases underlying the Notes will
be acquired in connection with an Assignment and Servicing Agreement by the
Issuer from the Originator.
The Issuer expects that each of the Leases so acquired will have been
originated or acquired by the Originator in accordance with the underwriting
criteria specified in this Prospectus and sold to the Seller. See
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"Copelco Capital's Underwriting and Servicing Practices" below. In connection
with the Assignment and Servicing Agreement, the Originator will make specific
representations and warranties to the Issuer regarding the applicable Leases.
The Issuer will assign all of its rights under the Assignment and Servicing
Agreement to the Trustee for the benefit of the holders of Notes (the
"Noteholders") with the result that the Originator will be liable to the Issuer
and the Trustee for defective or missing documents or an uncured breach of the
Originator's representations or warranties.
COPELCO CAPITAL'S UNDERWRITING AND SERVICING PRACTICES
GENERAL. Copelco Capital, a Delaware corporation, was incorporated in
October 1986. Copelco Capital is a wholly-owned subsidiary of Copelco Financial
Services Group, Inc. ("Copelco Financial"). Copelco Capital's primary business
consists of originating and servicing leases to healthcare providers,
businesses, business owners and individuals in the United States and Canada.
Copelco Capital has multiple locations and is headquartered at One International
Boulevard, Mahwah, New Jersey 07430 and its telephone number is (609) 231-9600.
In May 1993, Copelco Financial (which was incorporated in July 1982)
reorganized its two primary operating subsidiaries, Copelco Credit Corporation
("Copelco Credit") and Copelco Leasing Corporation ("Copelco Leasing"), into six
strategic business units (each, an "SBU"). Then, effective July 1994, Copelco
Leasing was merged into Copelco Credit with Copelco Credit as the surviving
legal entity; Copelco Credit then changed its name to Copelco Capital, Inc.,
merging all of Copelco Leasing's and Copelco Capital's leasing operations.
Copelco Capital currently consists of three separate operating groups
(each, a "Group") the Business Technology Group, the Healthcare Group and the
Commercial & Industrial Group.
The Business Technology Group leases small-ticket office equipment,
primarily photocopiers and computers, to businesses and business owners
throughout the United States and Canada through multiple manufacturer, vendor
and dealer programs. The Business Technology Group is the successor Group to
Copelco Capital's Document Imaging, Major Accounts, Computer and Canadian SBUs.
Copelco Capital merged these four units in January 1997 in order to achieve
greater operating and marketing efficiencies.
The Healthcare Group provides a diversified range of leasing services
for the financing of healthcare equipment through multiple manufacturer, vendor
and dealer programs, with particular emphasis upon the acquisition, leasing and
remarketing of high-technology medical equipment to hospitals, other healthcare
facilities, healthcare providers and physicians. The Healthcare Group is the
successor of the Hospital and Healthcare SBU and the Healthcare Vendor SBU which
were consolidated in June 1995 and the Ambulatory Care SBU which was merged into
the Healthcare Group in November 1996. The rationale for the consolidation of
the Healthcare Group was to achieve greater operating efficiencies and eliminate
certain operating and marketing redundancies.
The Commercial & Industrial Group is segmented into three distinct
business units: the Manufacturing Technology Group, the Financial Intermediary
Group and the Material Handling Group. The Manufacturing Technology Group
provides equipment leasing services through multiple manufacturer, vendor and
dealer programs, primarily to mid-sized companies. The equipment financed
through this group includes high technology equipment for the electronics
manufacturing service industry, such as printed circuit board assembly and test
equipment. The Financial Intermediary Group purchases equipment lease
transactions from third parties involved in the electronics and other industrial
equipment industries. The Material Handling Group, established in 1998, provides
retail equipment leasing and financing specifically for vendors and
manufacturers in the material handling industry.
As of December 31, 1998, Copelco Capital had total assets of
$2,856,553,000 compared with $2,068,307,000 as of December 31, 1997, total
liabilities of $2,664,583,000 compared with $1,912,609,000 as of December 31,
1997, shareholder's equity of $191,970,000 compared with $155,698,000 as of
December 31, 1997 and total revenues and net income of $312,040,000 and
$35,658,000, respectively, for the year ended December 31, 1998, compared with
$253,787,000 and $32,137,000, respectively, for the year ended December 31,
1997.
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Since 1986, Copelco Capital and its predecessors have participated in
37 equipment lease term securitizations involving the issuance of in excess of
$4.3 billion in securities. Copelco Capital and its predecessors performed all
servicing functions in each of these prior transactions, 14 of which remain
outstanding.
ORIGINATIONS. The Business Technology Group leases small-ticket office
equipment, primarily photocopiers and computers, to businesses and business
owners throughout the United States and Canada. The Business Technology Group
originates substantially all of its leases through marketing programs which are
directed at major manufacturers and various distributors of copier equipment
(each, a "Vendor") with the balance obtained through new leases with existing
lessees and referrals. The Business Technology Group establishes both formal and
informal relationships with Vendors, several of which provide Copelco Capital
with a right of first refusal on all equipment leases with the Vendor's
customers. This arrangement provides the Business Technology Group with a steady
flow of lease referrals from Vendors which frequently use lease financing as a
marketing tool. In the majority of these vendor programs, Copelco Capital
generally owns the equipment subject to each lease and bills and collects lease
payments in its own name. For some select private label vendor programs, Copelco
Capital will bill and collect in the vendor's name.
The Business Technology Group also offers a cost per copy program
("Cost per Copy"), introduced in late 1990, whereby lessees pay a fixed monthly
payment (the "Fixed Payment") for which they are allowed a specific minimum
monthly copy usage. The monthly Fixed Payment represents equipment financing
(the "Equipment Financing Portion") and a monthly maintenance charge (the
"Maintenance Charge"). Copelco Capital funds the Vendors on the basis of the
Equipment Financing Portion of the Fixed Payment and remits the Maintenance
Charge to the Vendors as it is collected every month. Copelco Capital calculates
usage monthly using automated dialed-in copier meter readings. To the extent
that the usage has exceeded the monthly copy allowance, Copelco Capital bills
the lessee incremental charges for the excess copy usage ("Excess Copy Charge").
This Excess Copy Charge is remitted to the Vendors upon collection by Copelco
Capital. Only the Equipment Financing Portion will be included in the Discounted
Present Value of the Leases.
Vendors may choose to use a Copelco Capital lease form or they may use
their own lease agreement. In either case, the credit approval remains with
Copelco Capital. Lease documents for all leasing programs are either identical
to Copelco Capital's standard lease documents or are reviewed by Copelco Capital
to ensure substantial compliance with its standard terms. Terms of Copelco
Capital's lease documents are standard for virtually all leases, as is
documentation for virtually all private label programs.
The Healthcare Group provides a range of leasing services for the
financing of healthcare equipment with emphasis on the acquisition, leasing and
remarketing of high-technology medical equipment to hospitals, other healthcare
facilities, healthcare providers and physicians. The Healthcare Group originates
leases through five sales groups: National Accounts, Medical Business, Vendor
Services, Home Care, and Ambulatory Care.
The National Accounts sales group solicits contractual arrangements
with major medical equipment manufacturers and distributors throughout the
United States. These contracts usually give Copelco exclusive rights to handle
the financing needs of the manufacturers' customers. Most manufacturers are
publicly-held or subsidiaries of international medical conglomerates.
The Medical Business sales group provides leasing services directly to
hospitals and to physician group practices rather than through vendors or
manufacturers. The Medical Business marketing unit operates Copelco Capital's
Hospital Instant Lease Line ("HILL") program which grants hospitals a
pre-approved leasing line of credit for the leasing of medium-ticket medical
equipment such as computed topography scanners, radiographic and other imaging
equipment, laboratory and patient monitoring systems.
The Vendor Services sales group solicits exclusive contractual
arrangements and informal non-exclusive arrangements with local and regional
vendors. Those vendors sell medical equipment to physician group medical
practices and to individual physicians who finance the acquisition of the
equipment by leasing it from Copelco Capital. The Vendor Services marketing unit
operates Copelco Capital's Physician's Instant Lease Line ("PILL") program,
which grants individual physicians and physician group practices a pre-approved
leasing line of credit for use in leasing small- and medium-ticket medical
equipment. Approximately 25% of all leases originated
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by the Healthcare Group are made to individual physicians. The average size of
those leases are generally less than or equal to $50,000. Copelco Capital
requires individual physicians to meet the same rigorous criteria and credit
scores as a physician group.
The Home Care sales group leases durable medical equipment such as
respiratory care equipment, patient monitoring devices and medication delivery
systems for use by people who are being treated on an out-patient or in-home
basis for either temporary or chronic health problems. Lessees are typically
wholesalers, distributors and service providers that rent the equipment to
patients who are reimbursed for the rental payments by their health care
insurers.
The Ambulatory Care sales group provides equipment leasing to
out-patient sites providing healthcare services such as diagnostic imaging,
surgical procedures and radiation therapy. Customers range from start-up centers
(typically managed by established organizations) to publicly-held companies.
Transactions may involve new equipment or refinancing of existing equipment,
often in conjunction with expansion or upgrading.
In addition to making fixed payments with respect to certain health
care equipment leases, lessees may pay incremental monthly charges to the extent
the scan usage exceeds the monthly scan allowance ("Fee Per Scan Charges"). Fee
Per Scan Charges will not be included in the Discounted Present Value of the
Leases. The Fee Per Scan Charges are remitted to the Vendors upon collection by
Copelco Capital.
The Commercial & Industrial Group: The Manufacturing Technology Group
and the Financial Intermediary Group provide equipment leasing services
primarily to mid-sized companies. Since early 1993, the Group has focused on
marketing through manufacturers and distributors in the electronics
manufacturing service industry. The Material Handling Group originates a
majority of its business through its relationship with distributors of material
handling equipment. The Material Handling Group establishes both formal and
informal relationships with vendors, manufacturers, and distributors of material
handling equipment and provides retail leasing and financing for the end-user
customers.
CREDIT REVIEW. Copelco Capital, in conjunction with Copelco Financial,
provides organizational oversight for investment/risk management policy,
compliance, credit underwriting and due diligence standards, and coordinates
portfolio concentration guidelines and credit personnel training for each of its
Groups. Within the parameters established by Copelco Capital, each Group tailors
its underwriting policies to reflect their unique customers and markets.
Credit requests are evaluated under credit scoring models utilized by
Copelco Capital. All credit requests not subject to automated credit scoring
must be underwritten by a credit officer. Applicants declined by credit scoring
may be reviewed by a credit officer. Each credit officer has a specific assigned
lending limit based upon experience and seniority. Credit approval limits,
applicable to single transaction size and individual lessee exposure, are also
assigned to assistant credit managers, group credit officers, the president of
Copelco Capital, and the chief credit officer of Copelco Capital. In general,
transactions in excess of $3,000,000 must be approved by the senior management
of Copelco Financial.
Business Technology Group: Prior to a lease being approved by the
Business Technology Group, the vendor's sales personnel are required to obtain
from the prospective lessee historical financial data and/or bank and trade
references. New and repeat applicants must either complete a comprehensive
credit application or provide bank and trade references.
Credit data are submitted for credit review in Mahwah, New Jersey, Mt.
Laurel, New Jersey and Moberly, Missouri. Credit review is performed and lease
approvals are given at these locations, utilizing a computer system designed to
handle applications which are telephoned or telecopied from vendors. Using the
computer system, the applicant's credit is investigated and a credit decision is
made.
Lessee evaluation includes an analysis of credit payment history,
business structure, banking history and relationships, and economic conditions
as they relate to the prospective lessee. In the case of a credit request for
equipment having a cost greater than approximately $50,000, the information
collected includes the
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prospect's most recent financial statements. If individual guarantors are
involved, a consumer credit bureau report is generally obtained for the
guarantors. Potential lessees should generally have been in business for at
least two years and a minimum of two trade references are required.
The Business Technology Group has also implemented an automated credit
scoring system. The system, designed by Dun & Bradstreet Information Services
("Dun & Bradstreet") specifically for the Business Technology Group, was in
development over a two-year period and was formally implemented on January 4,
1994. The system utilizes various filters for adapting "approve" and "decline"
threshold scores based upon criteria such as credit exposure, payment history
(by SIC code), vendor and state. The model is consistent with the Business
Technology Group's traditional credit decision-making criteria (i.e., Dun &
Bradstreet data, consumer credit bureau information, and bank and trade
references).
Healthcare Group: For leases originated by the Medical Business sales
group, full financial statements are required for credit review, and a thorough
history of past payment patterns is examined. Other items such as a hospital's
location, utility to its community and ownership (public or private) are also
considered. A number of these transactions are credit scored under HILL credit
scoring parameters. The HILL credit scoring parameters include, without
limitation, the number of beds of the potential lessee, its occupancy rate and
Dun & Bradstreet financial highlight information.
A number of the leases originated by the Vendor Services group are
credit scored under PILL credit scoring parameters. The PILL credit scoring
parameters include, without limitation, the length of time in practice of the
potential lessee, the potential lessee's medical specialty and a consumer
bankruptcy predictor model. The credit review process for physicians is similar
to that of personal lending because the lessees are predominantly individual
physicians (or groups of physicians). Many of the leases to physicians have
personal guarantees associated with them and spousal guarantees as well. Lessees
are not required, however, to give Copelco Capital liens on property. The
predominant reason for delinquencies in those leases is cash flow deficiencies
and, to a lesser extent, death of the lessee, in which case settlement with the
lessee's estate can take several months. Those leases are typically processed
under the PILL program. For inexpensive equipment, credit review of physician
lessees involves analysis of credit bureau reports, bank references, duration of
practice and medical specialty. For more expensive equipment, the credit review
involves analysis of personal income tax returns and financial statements of the
practice in addition to credit bureau reports and bank references. There is also
a focus on the length of time that the physician has maintained his or her
private practice.
The PILL and the HILL programs afford Copelco Capital the ability to
analyze physician, physician group practice and hospital credit quality in
advance of the lease decision, thus providing a means by which physicians in
specific medical specialties and specific hospitals may be pre-approved for a
leasing line of credit. They also provide rapid turnaround of a specific
application when it is submitted.
National Accounts, Home Care and Ambulatory Care generally utilize a
combination of transactional credit analysis and credit scoring. Transactions
not eligible for credit scoring are reviewed by the Healthcare Group's credit
staff under the supervision of a senior credit officer.
Commercial & Industrial Group: In the Manufacturing Technology Group
and Financial Intermediary Group, all credit decisions are made by credit
analysts. Credit scoring is not used. In general, transactions in excess of
$50,000 require financial statement disclosure consisting of at least the three
most recent fiscal year-end financial statements and interim financial
statements. Additionally, Dun & Bradstreet reports, bank and other credit
references, trade references, and other information may be evaluated.
Transactions involving small, privately held companies exhibiting limited
financial resources require the financial disclosure and personal guaranty of
the principals. Consideration will also be given to the value of the equipment
securing the transaction, based upon a review by the Group's Asset Management
department. An approval might contain restrictive conditions, including, but not
limited to, a reduced term, guaranties, security deposits, down payments, or a
letter of credit.
The Material Handling Group utilizes a credit review system similar to
and based upon that of the Business Technology Group. The majority of business
is originated through dealer/vendor networks, with retail and wholesale credit
applications submitted via fax. The assessment of creditworthiness is determined
through both
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automated systems and credit officer analysis with emphasis on the following
factors: time in business, financial strength, payment/credit history,
transaction structure, collateral and industry outlook.
The evaluation of creditworthiness for retail end-user customers will
be accomplished through a modified version of the Business Technology Group's
credit scoring model, in which the filters and scoring thresholds are adapted to
the needs of the Material Handling Group. Retail lease applicants will generally
have been in business for at least two years with evidence of satisfactory bank
and/or comparable secured lender references. Consumer credit bureau reports will
be obtained if individual guarantors or sole proprietors are considered in the
transaction.
The terms of the Leases originated by each of the Groups require the
Lessees to maintain the equipment and install it at a place of business approved
by Copelco Capital. Delivery, transportation, repairs and maintenance are
obligations of Lessees, and Lessees are required to carry, at their own expense,
liability and replacement cost insurance under terms acceptable to Copelco
Capital. Any Lease payment defaults permit Copelco Capital to declare
immediately due and payable all remaining Lease payments. At the end of a Lease
term, Lessees must return the leased equipment to Copelco Capital in good
working order unless the Lease is renewed or the leased equipment is purchased
by the Lessee.
COLLECTIONS. Collection procedures have been instituted by Copelco
Capital and are uniformly utilized throughout Copelco Capital's Groups. A late
charge is generally assessed to Lessees 6 days after the payment due date.
Telephone contact is normally initiated when an account is 15 days past due, but
may be initiated more quickly. All collection activity is entered into the
computerized collection system. Activity notes are input directly into the
collection system in order to facilitate routine collection activity. Collectors
have available at their computer terminals the latest status and collection
history on each account.
Generally, on the day on which a Lease becomes 10 days delinquent,
Copelco Capital's credit and collection review system automatically generates a
computerized late notice which is sent directly to the Lessee. When an account
becomes 30 days past due, a default letter is generally sent out to the Lessee
and to anyone providing personal guarantees on the Leases. An acceleration
letter is sent to the Lessee and any guarantors when a Lease becomes 45 days
past due, as circumstances warrant. Telephone contact will be continued
throughout the delinquency period. Accounts which become over 90 days past due
are subject to repossession of Equipment and action by collection agencies and
attorneys. Prior to being written down (which is generally prior to the Lease
being 123 days delinquent), each Lease is evaluated on the merits of the
individual situation, with equipment value being considered as well as the
current financial strength of the Lessee.
ADDITIONS, SUBSTITUTIONS AND ADJUSTMENTS. Although the Leases will be
non-cancelable by the Lessees, Copelco Capital has, from time to time, permitted
early termination by Lessees ("Early Lease Termination") or other modifications
of the Lease terms in specific circumstances more fully specified in the
Assignment and Servicing Agreement, including, without limitation, in connection
with a full or partial buy-out or equipment upgrade.
In the event of an Early Lease Termination which has been prepaid in
full or in part, the Issuer will have the option to reinvest the proceeds of the
Early Lease Termination in one or more Leases having similar characteristics for
the terminated Lease (each, an "Additional Lease").
In addition, Copelco Capital will have the option (but not the
obligation), subject to limitations described in the Prospectus Supplement, to
substitute one or more Leases having similar characteristics (each, a
"Substitute Lease") for (a) Non-Performing Leases, (b) Leases subject to
repurchase as a result of a breach of representation and warranty (each a
"Warranty Lease") and (c) Leases following a modification or adjustment to the
terms of the Lease (each, an "Adjusted Lease").
The terms of a Lease may be modified or adjusted for administrative
reasons or at the request of the Lessee, vendor or lessor due to a variety of
circumstances, including changes to the delivery date of equipment, the cost of
equipment, the components of leased equipment or to correct information when a
Lease is entered into Copelco Capital's servicing system. Those modifications
may result in adjustments to the Lease commencement date, the monthly payment
date, the amount of the monthly payment or the equipment subject to a Lease.
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Additional Leases and Substitute Leases will be originated using the
same credit criteria as the initial Leases. To the extent material, information
with respect to the Additional or Substitute Leases will be included in periodic
reports filed with the Commission as are required under the Exchange Act.
In no event will the aggregate scheduled payments of the Leases, after
the inclusion of the Substitute Leases and Additional Leases be materially less
than the aggregate scheduled payments of the Leases prior to the substitution or
reinvestment. In addition, after giving effect to those additions and
substitutions, the aggregate amount booked by Copelco Capital as expected to be
realized upon the scheduled termination of a Lease through sale or other
disposition of the related Equipment ("Booked Residual Value of the Leases")
will not be materially less than the aggregate Booked Residual Value of the
Leases immediately prior to such substitutions or additions. In the event that
an Early Lease Termination is allowed by Copelco Capital and an Additional Lease
is not provided, the amount prepaid will be equal to at least the Discounted
Present Value of the terminated Lease, plus any delinquent payments. See "The
Series Pool--The Leases."
DESCRIPTION OF THE NOTES
GENERAL. Each series of the Notes will be issued pursuant to an
Indenture. The following summaries (together with additional summaries under
"Description of the Transaction Documents" below) describe all material terms
and provisions of the Notes. The summaries do not contain all the applicable
terms of the Notes and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the applicable Transaction Documents
pertaining to a series of Notes.
All of the Notes offered by this Prospectus will be rated in one of
the four highest rating categories by one or more nationally recognized
statistical rating organizations (each a "Rating Agency" and, collectively, the
"Rating Agencies").
The Notes will generally be styled as debt instruments, having a
principal balance and a specified floating or fixed interest rate. The Notes of
each series will represent debt secured by a Series Pool comprised primarily of
the Leases described in the applicable Prospectus Supplement.
GENERAL PAYMENT TERMS OF NOTES. As provided in the applicable
Transaction Documents, Noteholders will be entitled to receive payments on their
Notes on the specified Payment Dates or on the next day that is not a Saturday,
Sunday or other day on which commercial banking institutions located in the city
or cities where the Corporate Trust Office of the Trustee and the Servicer (and,
if applicable, any credit enhancement provider) are located are authorized or
obligated by law or executive order to be closed (each a "Business Day").
Neither the Notes nor the underlying Leases will be guaranteed or
insured by any governmental agency or instrumentality or the Issuer, the
Servicer, any Trustee or any of their respective affiliates.
COLLECTIONS. The Trustee will establish and maintain an account into
which the Servicer will deposit the following funds within two Business Days of
receipt:
(a) Lease Payments due during the prior Due Period (net of any Excess
Copy Charges, Maintenance Charges and Fee Per Scan Charges);
(b) recoveries from Non-Performing Leases to the extent Copelco
Capital, Inc. has not substituted Substitute Leases for those
Non-Performing Leases (except to the extent required to reimburse
unreimbursed Servicer Advances);
(c) late charges received on delinquent Lease payments not advanced
by the Servicer;
(d) proceeds from repurchases by Copelco Capital of Leases as a
result of breaches of representations and warranties to the
extent Copelco Capital has not substituted Substitute Leases for
those Leases other than, with respect to a Warranty Lease, the
Residual Warranty Payments;
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(e) proceeds from investment of funds in the Collection Account and
the Reserve Account, if any;
(f) Casualty Payments other than residual casualty payments which
are, at any date of determination with respect to a Lease, the
excess of (a) the Casualty Payment relating to the Lease over (b)
the Discounted Present Value of the remaining Lease Payments
relating to the Lease as of the beginning of the Due Period
pertaining to the date of determination (plus any amounts
previously unpaid);
(g) Servicer Advances (as defined below);
(h) Termination Payments to the extent the Issuer does not reinvest
the Termination Payments in Additional Leases (as defined below)
other than Residual Prepayments (as defined below);
(i) proceeds received once the Issuer exercises its right to redeem
the Notes; and
(j) to the extent there occurs an Available Funds Shortfall (as
defined below), funds, if any, on deposit in the Reserve Account
to the extent of the Available Funds Shortfall.
The foregoing funds on deposit in the Collection Account on each
determination date pertaining to a Payment Date, excluding Lease Payments not
due during the preceding calendar month (a "Due Period") or any prior Due
Period, together with any funds deposited into the Collection Account from any
Reserve Account as described below under "Distributions," will constitute
available funds ("Available Funds"). Available Funds do not include cash flows
realized from the sale or release of Equipment following the expiration date of
the applicable Lease other than (a) Equipment subject to Non-Performing Leases,
(b) Residual Warranty Payments, (c) Residual Casualty Payments and (d) Residual
Prepayments (as defined below) ("Residual Realizations").
A "Casualty Payment" is any payment with respect to a Lease on account
of the loss, theft, condemnation, governmental taking, destruction, or damage
beyond repair (each, a "Casualty") of any item of Equipment subject thereto
which results, in accordance with the terms of the Lease, in a reduction in the
number or amount of any future Lease Payments due thereunder or in the
termination of the Lessee's obligation to make future Lease Payments thereunder.
A "Lease Payment" is each periodic installment of rent payable by a
Lessee under a Lease. Casualty Payments, Termination Payments, prepayments of
rent required with respect to the terms of a Lease at or before the commencement
of the Lease, payments becoming due before the applicable Cut-Off Date and
supplemental or additional payments required by the terms of a Lease with
respect to taxes, insurance, maintenance (including, without limitation any
Maintenance Charges), or other specific charges, (including, without limitation,
any Excess Copy Charges and Fee Per Scan Charges), shall not be Lease Payments
hereunder.
A "Residual Casualty Payment" is the excess of (a) the Casualty
Payment related to the Lease over (b) the Discounted Present Value of the
remaining Lease Payments related to the Lease as of the beginning of the Due
Period relating to such date of determination (plus any amounts previously due
and unpaid).
"Residual Prepayments" means, at any date of determination with
respect to a terminated Lease, the excess of (a) the payment associated with the
terminated Lease over (b) the Discounted Present Value of the remaining Lease
Payments of the terminated Lease as of the beginning of the Due Period
pertaining to the date of determination (plus any amounts previously due and
unpaid).
"Residual Warranty Payments" means the excess of (a) the repurchase
price associated with the Warranty Lease over (b) the Discounted Present Value
of the remaining Lease Payments related to the Warranty Lease as of the
beginning of the Due Period relating to the date of determination (plus any
amounts previously due and unpaid).
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A "Termination Payment" is a payment by a Lessee under a Lease upon
the early termination of such Lease (but not on account of a casualty or a Lease
default) which may be agreed upon by the Servicer, acting in the name of the
Issuer, and the Lessee.
ADVANCES BY THE SERVICER. Prior to any Payment Date, the Servicer may,
but will not be required to, advance (each, a "Servicer Advance") to the Trustee
an amount sufficient to cover delinquencies on some or all Leases with respect
to prior Due Periods. The Servicer will be reimbursed for those Servicer
Advances from Available Funds on the following Payment Date.
DISTRIBUTIONS. On each Payment Date, Available Funds will be applied
to make payments of principal and interest due on the Notes, amounts owed to the
Servicer, the Trustee (to the extent not payable by the Servicer) and other
parties, and for other purposes as described and in the priority set forth in
the applicable Prospectus Supplement. If a Reserve Account is established for a
series of Notes, the applicable Prospectus Supplement will describe how much in
that account will be transferred to the Collection Account when there is a
deficiency in Available Funds otherwise available to make any payment due on
each Payment Date. Similarly, the applicable Prospectus Supplement will describe
the extent to which the proceeds of any applicable credit enhancement will be
applied to make up any deficiency.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on those Notes and the yield to maturity of those Notes
are directly related to the rate of payments on the underlying Leases. The
payments on those Leases may be in the form of scheduled payments, prepayments
or liquidations due to default, casualty and other events, which cannot be
specified at present. Any of those payments may result in distributions to
Noteholders of amounts which would otherwise have been distributed over the
remaining term of the Leases. In general, the rate of those payments may be
influenced by a number of other factors, including, general economic conditions.
The rate of principal payments with respect to any Class may also be affected by
any repurchase of the underlying Leases by Copelco Capital pursuant to the
Assignment and Servicing Agreement. In that event, the repurchase price will
decrease the Discounted Present Value of the Performing Leases, causing the
corresponding weighted average life of the Notes to decrease. See "Risk
Factors--Prepayments."
In the event a Lease becomes a Non-Performing Lease, Warranty Lease or
a Adjusted Lease, Copelco Capital will have the option (but not the obligation)
to replace it with a Substitute Lease in an aggregate amount not to exceed 10%
of the Discounted Present Value of the Leases as of the Cut-Off Date with
respect to Non-Performing Leases and in an aggregate amount not to exceed 10% of
the Discounted Present Value of the Leases as of the Cut-Off Date with respect
to Adjusted Leases and Warranty Leases. In addition, in the event of an Early
Lease Termination which has been prepaid in full, Copelco Capital will have the
option to transfer an Additional Lease. The Substitute Leases and Additional
Leases will have a Discounted Present Value of the Leases equal to or greater
than that of the Leases being modified and replaced and the monthly payments on
the Substitute Leases or Additional Leases will be at least equal to those of
the terminated Leases through the term of those terminated Leases. In the event
that an Early Lease Termination is allowed by Copelco Capital and a Substitute
Lease is not provided, the amount prepaid will be equal to at least the
Discounted Present Value of the terminated Lease, plus any delinquent payments.
The effective yield to holders of the Notes will depend upon, among
other things, the amount of and rate at which principal is paid to those
Noteholders. The after-tax yield to Noteholders may be affected by lags between
the time interest income accrues to Noteholders and the time the related
interest income is received by the Noteholders.
BOOK-ENTRY REGISTRATION
Noteholders of a given series may hold their Notes through the
Depository Trust Company ("DTC") (in the United States) or Cedel Bank ("CEDEL")
and Euroclear System ("Euroclear") (in Europe) if they are participants of those
systems, or indirectly through organizations that are participants in those
systems.
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Cede & Co. ("Cede"), as nominee for DTC, will hold the global Notes in
respect of a given series. CEDEL and Euroclear will hold omnibus positions on
behalf of the CEDEL Participants (as defined below) and the Euroclear
Participants (as defined below) (collectively, the "Participants"),
respectively, through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective depositories (collectively, the
"Depositories") which in turn will hold those positions in customers' securities
accounts in the Depositories' names on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of securities. Participants
include brokers and dealers, banks, trust companies and clearing corporations.
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between CEDEL 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 DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depository; however, cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in the 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 Depository to take action
to effect final settlement on its behalf by delivering or receiving Notes in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositories.
Because of time-zone differences, credits of Notes in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent Notes settlement processing, dated the Business Day
following the DTC settlement date, and those credits or any transactions in
those subsequent Notes will be reported to the relevant CEDEL Participant or
Euroclear Participant on that Business Day. Cash received in CEDEL or Euroclear
as a result of sales of Notes by or through a CEDEL Participant or a Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant CEDEL or Euroclear cash
account only as of the Business Day following settlement in DTC.
Noteholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Notes may do so only through Participants and Indirect Participants. In
addition, Noteholders will receive all distributions of principal and interest
through the Participants who in turn will receive them from DTC. Under a
book-entry format, Noteholders may experience some delay in their receipt of
payments, since the payments will be forwarded by the Issuer or note paying
agent to Cede, as nominee for DTC. DTC will forward the payments to its
Participants, which thereafter will forward them to Indirect Participants or the
Noteholders. It is anticipated that the only "Noteholder" in connection with any
series will be Cede, as nominee of DTC. Noteholders will not be recognized as
Noteholders, and the Noteholders will be permitted to exercise the rights of
Noteholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC 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 principal of, and interest on, the Notes.
Participants and Indirect Participants with which the Noteholders have accounts
with respect to the Notes similarly are required to make book-entry transfers
and receive and transmit those payments on behalf of their respective
Noteholders. Accordingly, although those Noteholders will not possess Notes, the
Rules provide a mechanism by which Participants will receive payments and will
be able to transfer their interests.
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Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Noteholder
to pledge Notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to those Notes, may be limited due to
the lack of a physical certificate for those Notes.
DTC will advise the Issuer and/or Trustee with respect to each series
that it will take any action permitted to be taken by a Noteholder only at the
direction of one or more Participants to whose accounts with DTC the Notes are
credited. DTC may take conflicting actions with respect to other undivided
interests to the extent that those actions are taken on behalf of Participants
whose holdings include those undivided interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
trust depository ("Trust Depository"). CEDEL holds notes for its participating
organizations ("CEDEL Participants") and facilitates the clearance and
settlement of notes transactions between CEDEL Participants through electronic
book-entry changes in accounts of CEDEL Participants, thereby eliminating the
need for physical movement of notes. Transactions may be settled in CEDEL in any
of 38 currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities lending and
borrowing. CEDEL interfaces with domestic markets in several countries. As a
professional Trust Depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. CEDEL Participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations. Indirect access
to CEDEL is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold notes for participants of the
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
notes and any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 37 currencies, including United States
dollars. Euroclear includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office, under contract with Euroclear Clearance System,
S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator (as defined below), and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either directly
or indirectly.
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 applicable Operating Procedures of Euroclear and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of notes and cash within Euroclear, withdrawal of securities and cash
from Euroclear, and receipts of payments with respect to Notes in Euroclear. All
Notes in Euroclear are held on a fungible basis without attribution of specific
Notes to specific securities clearance accounts. The Euroclear Operator acts
under the Terms and Conditions only on behalf of Euroclear Participants and has
no record of relationship with persons holding through Euroclear Participants.
According to DTC, the foregoing information with respect to DTC has
been provided to the Industry for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.
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Except as required by law, neither the Issuer nor any paying agent
will have any liability for any aspect of the records pertaining to or payments
made on account of beneficial ownership interests of the applicable Notes held
by Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records pertaining to beneficial ownership interests.
DEFINITIVE NOTES. The Notes of any series will be issued in fully
registered, certificated form ("Definitive Notes") to the Noteholders or their
nominees, rather than to DTC or its nominee, only if (i) the Servicer advises in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Trust Depository with respect to those Notes and the Issuer
is unable to locate a qualified successor, (ii) the Servicer, at its option,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of an "Event of Default" under the applicable Indenture or a default
by the Servicer under the applicable Assignment and Servicing Agreement.
Noteholders representing at least a majority of the outstanding principal amount
of the Notes of that series advise the Issuer through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in those Noteholders' best interest.
Upon the occurrence of any event described in the immediately
preceding paragraph, the Trustee will be required to notify all affected
Noteholders through Participants of the availability of Definitive Notes. Upon
surrender by DTC of its Notes and receipt of instructions for reregistration,
the Issuer will reissue DTC's Notes as Definitive Notes to the Noteholders in
the amounts specified in the reregistration instructions.
Distributions of principal of, and interest on, Definitive Notes will
thereafter be made by the Issuer in accordance with the procedures described in
the applicable Indenture directly to holders of Definitive Notes in whose names
the Definitive Notes were registered at the close of business on the applicable
Record Date. Distributions will be made by check mailed to the address of the
holder as it appears on the register maintained by the Trustee. The final
payment on any Definitive Note, however, will be made only upon presentation and
surrender of the Note at the office or agency specified in the notice of final
distribution to the applicable Noteholders.
Definitive Notes will be transferable and exchangeable at the offices
of the Issuer or Trustee or of a certificate registrar named in a notice
delivered to holders of the Definitive Notes. No service charge will be imposed
for any registration of transfer or exchange, but the Issuer or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary describes the material terms of each transaction
document pursuant to which a Series Pool will be created and a series of Notes
will be issued. For purposes of this Prospectus, the term "Transaction
Documents" as used with respect to a series of Notes means the Indenture and
Assignment and Servicing Agreement pertaining to that series of Notes. Forms of
the Transaction Documents have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part. This description is not a
complete summary of all the provisions of the Transaction Documents.
ASSIGNMENT AND SERVICING AGREEMENT
ACQUISITION OF THE LEASES. On the Issuance Date, the Issuer will
acquire the applicable Leases from the Originator in connection with an
Assignment and Servicing Agreement in which the Originator will make
representations and warranties concerning the Lease Receivables. The rights and
benefits of the Originator will, in turn, be pledged to the Trustee for the
benefit of the Noteholders under an Indenture.
ADDITIONS, SUBSTITUTIONS AND ADJUSTMENTS. The Originator will be
obligated to purchase from the Issuer its interest in any Lease in the Series
Pool that has become a Warranty Lease unless an Eligible Lease is substituted
therefor in accordance with the applicable Assignment and Servicing Agreement.
In connection with an Assignment and Servicing Agreement, the
Originator will have the option to substitute Eligible Leases for Non-Performing
Leases, Adjusted Leases and Warranty Leases and to add Additional Leases. The
percentage of Leases in any Series Pool that can be substituted for
Non-Performing Leases, Adjusted
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Leases and Warranty Leases will be limited, as described in the applicable
Prospectus Supplement, to a percentage of the aggregate Discounted Present Value
of the Leases in the Series Pool as of the applicable Cut-Off Date. See
"Description of the Notes - Prepayment and Yield Considerations."
SERVICING. The Servicer will service the Leases in a Series Pool in
connection with an Assignment and Servicing Agreement. The Servicer may delegate
its servicing responsibilities to one or more sub-servicers, but will not be
relieved of its liabilities with respect thereto.
The Servicer will make representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
Assignment and Servicing Agreement. Unless otherwise specified in an applicable
Prospectus Supplement, an uncured breach of a representation or warranty that in
any respect materially and adversely affects the interests of the Noteholders
will constitute a Servicer Event of Default by the Servicer.
The Assignment and Servicing Agreement will provide that the Servicer
will take or cause to be taken all actions as are necessary or advisable to
service, administer and collect on each Lease in accordance with customary and
prudent servicing procedures for leases of a similar type, and in accordance
with applicable laws, rules and regulations and, in any event, according to a
standard of care not less than that which it applies to leases it services for
its own account.
ADVANCES BY THE SERVICER. Prior to any Payment Date, with respect to
any series, the Servicer may, but will not be required to, advance (each, a
"Servicer Advance") to the Trustee an amount sufficient to cover delinquencies
on Leases with respect to the prior Due Period. The Servicer will be entitled to
reimbursement for Servicer Advances.
SERVICING COMPENSATION. The Servicer will be entitled to receive a
servicing fee for each Due Period (the "Servicing Fee") in an amount equal to a
specified percentage per annum of the Discounted Present Value of the Performing
Leases or the outstanding principal amount of the notes, as of the first day of
the Due Period. The applicable Indenture will specify the priority of the
Servicing Fee in relation to payments to Noteholders and other persons. The
Servicing Fee may be paid prior to any distribution to the Noteholders.
If so provided in the related Transaction Documents, the Servicer will
be entitled to reimbursement of out-of-pocket expenses reasonably incurred in
the course of performance of its duties as Servicer and to collect and retain
any late fees, the penalty portion of interest paid on past due amounts and
other administrative fees or similar charges allowed by applicable law with
respect to the Lease Receivables and any prepayment premiums or other payments
in excess of the present value of all outstanding amounts owed under a Lease by
a Lessee as a result of the early termination thereof, and will be entitled to
reimbursement from the Issuer for specific liabilities. Payments by or on behalf
of Lessees will be allocated to scheduled payments and late fees and other
charges in accordance with the Servicer's normal practices and procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third-party servicer of similar types of Leases as an agent for
their beneficial owner. The Servicing Fee also will compensate the Servicer for
administering the Leases, accounting for collections and furnishing statements
to the Issuer and the Trustee with respect to distributions. The Servicing Fee
also will reimburse the Servicer for specific taxes, accounting fees, outside
auditor fees, trustees fees, data processing costs and other costs incurred in
connection with administering the Lease Receivables.
STATEMENTS TO TRUSTEES AND ISSUER. Prior to each Payment Date for a
series of Notes, the Servicer will provide to the Trustee as of the close of
business on the last day of the preceding applicable Due Period, a statement
setting forth substantially the same information as is required to be provided
in the periodic reports provided to Noteholders described under "Description of
the Notes-Reports to Noteholders."
EVIDENCE AS TO COMPLIANCE. The Assignment and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the Issuer
and the Trustee, annually, a statement as to compliance by the Servicer during
the preceding twelve months (or, in the case of the first such certificate, the
period from the applicable Issuance Date) with certain standards pertaining to
the servicing of the Leases.
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The Assignment and Servicing Agreement will also provide for the
annual delivery to the Issuer and/or the Trustee of a certificate signed by an
officer of the Servicer stating that the Servicer either has fulfilled its
obligations under the Assignment and Servicing Agreement in all material
respects throughout the preceding 12 months (or, in the case of the first
certificate, the period from the applicable Issuance Date) or, if there has been
a default in the fulfillment of any obligation in any material respect,
describing each default. The Servicer also will agree to give the Trustee notice
of Servicer Events of Defaults (as defined below) under the applicable
Assignment and Servicing Agreement.
Unless otherwise specified in the applicable Prospectus Supplement,
copies of those statements and certificates may be obtained by Noteholders
owning at least 25% of the outstanding principal amount of the Notes of the
relevant series upon request in writing addressed to the Trustee or the
Servicer.
CERTAIN MATTERS REGARDING THE SERVICER. The Assignment and Servicing
Agreement will provide that the Servicer may not resign from its obligations and
duties as Servicer thereunder, except upon determination that the performance by
the Servicer of those duties is no longer permissible under applicable law. No
resignation by the Servicer will become effective until the Trustee or a
successor servicer has assumed the Servicer's servicing obligations and duties
under the Assignment and Servicing Agreement.
The Assignment and Servicing Agreement will further provide that
neither the Servicer nor any of its directors, officers, employees, or agents
will be under any liability to the Issuer or the Noteholders for taking any
action or for refraining from taking any action in connection with the
Assignment and Servicing Agreement; provided, however, that the Servicer will
not be protected against any liability that would otherwise be imposed based on
any breach of the warranties, representations or warranties made by the Servicer
in the Assignment and Servicing Agreement or by reason of willful misfeasance,
bad faith or negligence in the performance or non-performance of duties.
Under the circumstances specified in the Assignment and Servicing
Agreement, any entity into which the Servicer may be merged or consolidated, or
any entity resulting from any merger or consolidation to which the Servicer is a
party, or any entity succeeding to the business of the Servicer or, with respect
to its obligations as Servicer, which corporation or other entity in each of the
foregoing cases assumes the obligations of the Servicer, will be the successor
to the Servicer under the Assignment and Servicing Agreement.
SERVICER EVENTS OF DEFAULT. Unless otherwise specified in the
applicable Prospectus Supplement, the following events and conditions will be
defined in the Assignment and Servicing Agreement as "Servicer Events of
Default":
(a) failure on the part of the Servicer to remit to the Trustee
within three Business Days following the receipt thereof any
monies received by the Servicer required to be remitted to the
Trustee under the Assignment and Servicing Agreement;
(b) failure on the part of the Servicer to pay to the Trustee on the
date when due, any payment required to be made by the Servicer in
connection with the Assignment and Servicing Agreement;
(c) default on the part of either the Servicer or (so long as Copelco
Capital is the Servicer) Copelco Capital in its observance or
performance in any material respect of specific covenants or
agreements in the Assignment and Servicing Agreement which
failure continues unremedied for a period of 30 days after the
earlier of (i) the date it first becomes known to any officer of
Copelco Capital or the Servicer, as the case may be, and (ii) the
date on which written notice thereof requiring the same to be
remedied shall have been given to the Servicer or Copelco
Capital, as the case may be, by the Trustee, or to the Servicer
or Copelco Capital, as the case may be, and the Trustee by any
Noteholder;
(d) if any representation or warranty of Copelco Capital made in the
Assignment and Servicing Agreement proves to be incorrect in any
material respect as of the time made;
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provided, however, that the breach of any representation or
warranty made by Copelco Capital in that Assignment and Servicing
Agreement will be deemed to be "material" only if it affects the
Noteholders or the enforceability of the applicable Indenture or
of the applicable Notes; and provided, further, that a material
breach of any representation or warranty made by Copelco Capital
in an Assignment and Servicing Agreement with respect to any of
the Leases subject thereto will not constitute a Servicer Event
of Default if Copelco Capital purchases that Lease in accordance
with the Assignment and Servicing Agreement;
(e) certain insolvency or bankruptcy events relating to the Servicer;
(f) the failure of the Servicer to make one or more payments due with
respect to aggregate recourse debt or other obligations exceeding
$5,000,000, or the occurrence of any event or the existence of
any condition, the effect of which event or condition is to cause
(or permit one or more persons to cause) more than $5,000,000 of
aggregate recourse debt or other obligations of the Servicer to
become due before its (or their) stated maturity or before its
(or their) regularly scheduled dates of payment so long as that
failure, event or condition shall be continuing and not waived by
the person or persons entitled to performance; or
(g) a final judgment or judgments (or decrees or orders) for the
payment of money aggregating in excess of $5,000,000 and any one
of those judgments (or decrees or orders) has remained
unsatisfied and in effect for any period of 60 consecutive days
without a stay of execution.
RIGHTS UPON SERVICER EVENTS OF DEFAULT. As long as a Servicer Event of
Default under the Assignment and Servicing Agreement is continuing, the Trustee,
upon the instruction of holders of Notes evidencing not less than 66-2/3% in
principal amount of the Notes of the relevant series or, if and to the extent
described in the applicable Prospectus Supplement, any credit enhancement
provider, shall, terminate, by notice in writing, all the rights and obligations
of the Servicer, if any, under the applicable Assignment and Servicing
Agreement, whereupon a successor servicer appointed by the Trustee will succeed
to all the responsibilities, duties and liabilities of the Servicer under the
Assignment and Servicing Agreement. Upon the receipt by the Servicer of such
written notice, all authority and power of the Servicer under the Assignment and
Servicing Agreement to take any action with respect to any Lease or Equipment
will cease and the same will pass to and be vested in the Trustee in connection
with and under the applicable Assignment and Servicing Agreement and the
applicable Indenture.
INDENTURE
ACCOUNTS. The Trustee will establish and maintain one or more accounts
in the name of the Trustee on behalf of the Noteholders into which payments made
on or with respect to the applicable Leases shall be deposited as provided in
the applicable Transaction Documents (the "Collection Account"). In addition,
the Trustee may establish one or more other separate accounts in the name of the
Trustee for the benefit of the Noteholders, (i) for the deposit of funds for
distribution to the Noteholders (a "Distribution Account"), (ii) to provide
reserves to cover shortfalls in Available Funds (a "Reserve Account"), (iii) to
provide funds for the purchase of additional Leases during any applicable
pre-funding period (a "Pre-Funding Account"), or (iv) for any other purpose (an
"Additional Account").
Funds in the Collection Account and any Distribution Account, Reserve
Account, Pre-Funding Account or Additional Account (collectively, the
"Transaction Accounts") will be invested as provided in the applicable Indenture
in Eligible Investments (as defined below). "Eligible Investments" are generally
limited to investments acceptable to the Rating Agencies as being consistent
with the rating of the Notes.
The Transaction Accounts will be maintained as Eligible Accounts.
"Eligible Account" means either (a) an account maintained with a depository
institution or trust company acceptable to each of the Rating
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Agencies and any credit enhancement provider, or (b) a trust account or similar
account maintained with a federal or state chartered depository institution,
which may be an account maintained with the Trustee.
DISTRIBUTIONS. Beginning on the first Payment Date, distributions of
principal and interest (or, where applicable, of principal only or interest
only) on each Class of Notes entitled thereto will be made to the Noteholders.
The timing, calculation, allocation, order, source, priorities of, distribution
of, and requirements for each Class of Notes will be described in the applicable
Prospectus Supplement.
CREDIT ENHANCEMENTS. The amounts and types of credit enhancement
arrangements, if any, and the provider thereof, if applicable, with respect to
each Class of Notes of a given series will be described in the applicable
Prospectus Supplement. If and to the extent provided in the applicable
Prospectus Supplement, credit enhancement may be in the form of an insurance
policy, subordination of one or more classes of Notes, reserve accounts,
overcollateralization, letters of credit, credit or liquidity facilities, third
party payments or other support, surety bonds, guaranteed cash deposits or other
arrangements as may be described in the applicable Prospectus Supplement or any
combination of two or more of the foregoing. If specified in the applicable
Prospectus Supplement, credit enhancement for a Class of Notes may cover one or
more other classes of Notes of the same series, and credit enhancement for a
series of Notes may cover one or more other series of Notes.
The presence of credit enhancement for the benefit of any Class or
series of Notes is intended to enhance the likelihood of receipt by the
Noteholders of the Class or series of the full amount of principal and interest
due thereon and to decrease the likelihood that those Noteholders will
experience losses. As more specifically provided in the applicable Prospectus
Supplement, the credit enhancement for a Class or series of Notes will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any credit enhancement or which are not covered by any
credit enhancement, Noteholders of any Class or series will bear their allocable
share of deficiencies, as described in the applicable Prospectus Supplement. In
addition, if a form of credit enhancement covers more than one Class of Notes or
more than one series of Notes, Noteholders of any applicable Class or series
will be subject to the risk that the credit enhancement will be exhausted by the
claims of Noteholders of other series.
If the protection provided to the Noteholders of a given Class of
Notes by any applicable credit enhancement or by the subordination of another
Class of Notes is insufficient, the Issuer must rely solely on the Series Pool.
MODIFICATION OF AN INDENTURE. With specific exceptions, under an
Indenture, the rights and obligations of the Issuer and the rights of the
Noteholders may be modified by the Issuer with the consent of the holders of not
less than 66-2/3% in aggregate principal amount of the Notes then outstanding
under the applicable Indenture and, if and to the extent described in the
applicable Prospectus Supplement, the consent of any credit enhancement
provider; but no modification of that type may be made if it would result in the
reduction or withdrawal of the then current ratings of the outstanding
applicable Notes and no modification of that type may be made without the
consent of the holder of each outstanding note affected thereby if it would: (a)
change the fixed maturity of any Note, or the principal amount or interest
amount payable thereof, or change the priority of payment thereof or reduce the
interest rate or the principal thereon or change the place of payment where, or
the coin or currency in which, any Note or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any payment on or
after the maturity thereof; or (b) reduce the above-stated percentage of Notes,
without the consent of the holders of all Notes then outstanding under that
Indenture or (c) modify the provisions of the Indenture restricting
modifications or waivers of the provisions of the Indenture except to increase
any percentage or fraction set forth in the Indenture or to provide that other
specific provisions of the Indenture cannot be modified or waived without the
consent of the holder of each outstanding note affected thereby; or (d) modify
or alter the provisions of the Indenture treating Notes held by the Issuer or
any affiliate of the Issuer as not being "Outstanding" for specific purposes
under the Indenture; or (e) permit the creation of any lien ranking prior to or
on a parity with the lien of the Indenture with respect to any part of any
Series Pool or, except as provided in the Indenture, terminate the lien of the
Indenture on any part of a Series Pool at any time subject to the Indenture or
deprive any Noteholder of the security afforded by the lien of the Indenture.
EVENTS OF DEFAULT. "Events of Default" under an Indenture will
include, in addition to any other events or conditions described in the
applicable Prospectus Supplement: (i) a default for payment of any interest on
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any Note issued under that Indenture; (ii) a default in the payment of the
principal of or any installment of the principal of any Note at the stated
maturity; or (iii) insolvency or bankruptcy events relating to the Issuer.
Subsequent to an Event of Default and following any acceleration of
the Notes in connection with an Indenture, any monies that may then be held or
thereafter received by the Trustee will be applied in the order of priority
described in the applicable Prospectus Supplement at the date or dates fixed by
the Trustee and, in case of the distribution of the entire amount due on account
of principal or interest, upon presentation and surrender of the Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes (the "Trustee") will be
identified in the applicable Prospectus Supplement. The Originator and its
affiliates may from time to time enter into normal banking and trustee
relationships with the applicable Trustee and its affiliates. The applicable
Trustee, the Servicer and any of their respective affiliates may hold Notes in
their own names. In addition, for purposes of meeting the legal requirements of
specific local jurisdictions, the Trustee shall have the power to appoint a
co-trustee or a separate Trustee under the applicable Indenture. In the event of
an appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Indenture will be conferred or imposed upon the Trustee
and the separate Trustee or co-Trustee jointly, or in any jurisdiction in which
the Trustee shall be incompetent or unqualified to perform specific acts, singly
upon the separate trustee or co-trustee, who shall exercise and perform the
rights, powers, duties and obligations solely at the direction of the Trustee.
No resignation or removal of the Trustee and no appointment of a
successor Trustee will become effective until the acceptance of appointment by
the successor Trustee. The Trustee may resign at any time by giving written
notice thereof to the Issuer and the Servicer and by mailing notice of
resignation by first-class mail, postage prepaid, to the applicable Noteholders
of the series at their addresses appearing on the security register. Unless
otherwise specified in the applicable Prospectus Supplement, the Trustee may be
removed at any time by act of the holders of Notes evidencing not less than
66-2/3% of the voting rights thereof, delivered to the Trustee and the Issuer.
If the Trustee resigns, is removed, or becomes incapable of acting, or if a
vacancy shall occur in the office of the Trustee for any cause, the Issuer must
promptly appoint a successor Trustee. If no successor Trustee shall have been so
appointed by the Issuer or the Noteholders, or if no successor Trustee shall
have accepted appointment within 30 days after the resignation or removal,
existence of incapability, or occurrence of the vacancy, the Trustee or any
Noteholder may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
SECURITY FOR THE NOTES
Repayment of the Notes will be secured by (a) a first priority
security interest in the underlying Leases perfected by filing UCC financing
statements against the Issuer and Copelco Capital, (b) a security interest in
the related Equipment owned by the Issuer and an assignment of the Issuer's
security interest in such Equipment subject to Nominal Buy-Out Leases, which
security interest was originally perfected by Copelco Capital (for Equipment
with an original cost in excess of $25,000 which assignment will be recorded in
the manner described below) and (c) all funds in the Collection Account and the
Reserve Account.
LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
GENERAL. The Leases are triple-net leases, requiring the Lessees to
pay all taxes, maintenance and insurance associated with the Equipment, and are
primarily non-cancelable by the Lessees.
The Leases are "hell or high water" leases, under which the
obligations of the Lessee is absolute and unconditional, regardless of any
defense, setoff or abatement which the Lessee may have against Copelco Capital,
as Transferor or Servicer, the Issuer, or any other person or entity whatsoever.
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Defaults under the Leases are generally the result of failure to pay
amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the Lessee under a Lease. The remedies of the lessor (and the
Issuer as assignee) following a notice and cure period are generally to seek to
enforce the performance by the Lessee of the terms and covenants of the Lease
(including the Lessee's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the Lessee under the Lease.
Although the Leases permit the lessor to repossess and dispose of the related
Equipment in the event of a Lease default, and to credit the proceeds against
the Lessee's liabilities thereunder, those remedies may be limited where the
Lessee thereunder is subject to bankruptcy, or other insolvency proceedings.
UCC AND BANKRUPTCY CONSIDERATIONS. In connection with the Assignment
and Servicing Agreement, Copelco Capital will make a capital contribution to the
Issuer of the Leases and Equipment owned by Copelco Capital and subject to the
Leases and assign its security interests in the Equipment subject to Nominal
Buy-Out Leases. Copelco Capital will warrant that each of the contribution of
the Leases from Copelco Capital to the Issuer is an absolute assignment, that
the contributions of its rights in the Equipment is a valid transfer of Copelco
Capital's title to the Equipment and that Copelco Capital is either the owner of
the Equipment or has a valid perfected first priority security interest in the
Equipment (for Leases with leased Equipment having an original equipment cost in
excess of $25,000), including Equipment subject to Nominal Buy-Out Leases, and
accordingly, Copelco Capital has filed UCC financing statements in its favor
against Lessees regarding all Equipment in the Series Pool with an original
Equipment cost in excess of $25,000. No action will be taken to perfect the
interest of Copelco Capital in any Equipment in the Series Pool with an original
Equipment cost of less than $25,000. In addition, UCC financing statements
identifying security interests in the Equipment as transferred to, or obtained
by, the Issuer or the Trustee and UCC financing statements identifying equipment
owned by Copelco Capital, transferred to the Issuer and pledged to the Trustee
will be filed in favor of the Issuer or the Trustee in the central filing
location for any given state. In the event of the repossession and resale of
Equipment subject to a superior lien, the senior lienholder would be entitled to
be paid the full amount of the indebtedness owed to it out of the sale proceeds
before the proceeds could be applied to the payment of claims by the Servicer on
behalf of the Issuer. Specific statutory provisions, including federal and state
bankruptcy and insolvency laws, may limit the ability of the Servicer to
repossess and resell collateral or obtain a deficiency judgment in the event of
a Lessee default. In the event of the bankruptcy or reorganization of a Lessee,
or Copelco Capital, as Transferor or Servicer, various provisions of the
Bankruptcy Code of 1978, as amended, 11 U.S.C. ss.ss. 101-1330 (the "Bankruptcy
Code"), and related laws may interfere with, delay or eliminate the ability of
Copelco Capital or the Issuer to enforce its rights under the Leases.
In the case of operating leases, the Bankruptcy Code grants to the
bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of that lease or
contract constitutes a breach of the lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described
herein. Upon the bankruptcy of a Lessee, if the bankruptcy trustee or
debtor-in-possession elected to reject a Lease, the flow of scheduled payments
to Noteholders would cease. In the event that, as a result of the bankruptcy of
a Lessee, the Servicer is prevented from collecting scheduled payments with
respect to Leases and those Leases become Non-Performing Leases, no recourse
would be available against Copelco Capital (except for misrepresentation or
breach of warranty) and the Noteholders could suffer a loss with respect to the
Notes. Similarly, upon the bankruptcy of the Issuer, if the bankruptcy trustee
or debtor-in-possession elected to reject a Lease, the flow of Lease payments to
the Issuer and the Noteholders would cease. As noted above, however, the Issuer
has been structured so that the filing of a bankruptcy petition with respect to
it is unlikely. See "The Issuer."
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of Equipment, may limit the amount
realized on the sale of Equipment to less than the amount due on the applicable
Lease.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following discussion describes the material federal
income tax consequences to the original purchasers of the Notes of the purchase,
ownership and disposition of the Notes. The opinion of Dewey Ballantine LLP,
special tax counsel to the Issuer ("Tax Counsel"), does not purport to deal with
all federal tax considerations applicable to all categories of investors. The
tax consequences to holders subject to special rules, including insurance
companies, tax-exempt organizations, financial institutions or broker dealers,
taxpayers subject to the alternative minimum tax, and holders that will hold the
Notes as other than capital assets, are not discussed below. In particular, this
discussion applies only to investors that purchase Notes directly from the
Issuer and hold the Notes as capital assets.
The discussion that follows, and the opinion set forth below of Tax
Counsel are based upon provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and treasury regulations promulgated thereunder as in
effect on the date hereof and on existing judicial and administrative
interpretations thereof. These authorities are subject to change and to
differing interpretations, which could apply retroactively. The opinion of Tax
Counsel is not binding on the courts or the Internal Revenue Service (the
"IRS"). Potential investors are urged to consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Notes.
The following discussion addresses lease-backed notes such as the
Notes that are intended to be treated for federal income tax purposes as
indebtedness secured by the underlying Leases. Tax Counsel has prepared the
following discussion and is of the opinion that it is correct in all material
respects.
TAX CHARACTERIZATION OF THE ISSUER. Tax counsel is of the opinion that
the Issuer will not be treated as an association (or a publicly traded
partnership) taxable as a corporation for federal income tax purposes.
TAX CHARACTERIZATION OF THE NOTES. In the opinion of Tax Counsel,
although no transaction closely comparable to that contemplated within this
Prospectus has been the subject of any Treasury Regulation, Revenue Ruling or
judicial decision, based on the application of existing law to the facts as
presented in the applicable agreements, the Notes will be treated as
indebtedness for federal income tax purposes. If characterized as indebtedness,
interest on the Notes will be taxable as ordinary income for federal income tax
purposes when received by Noteholders using the cash method of accounting and
when accrued by Noteholders using the accrual method of accounting. Noteholders
using the accrual method of accounting may be required to report income for tax
purposes in advance of receiving a corresponding cash distribution with which to
pay the applicable tax. Interest received on the Notes also may constitute
"investment income" for purposes of limitations in the Code concerning the
deductibility of investment interest expense.
Although it is the opinion of Tax Counsel that the Notes are properly
characterized as indebtedness for federal income tax purposes, no assurance can
be given that this debt characterization of the Notes will prevail. If the Notes
were treated as an ownership interest in the Leases, all income on the Leases
would be income to the holders of the Notes, and related fees and expenses would
generally be deductible, subject to the limitations on the deductibility of
miscellaneous itemized deductions by individuals, and the market discount and
premium provisions of the Code might apply to a purchase of the Notes.
If, alternatively, the Notes were treated as an equity interest in the
Issuer, the Issuer might be classified as a partnership or as an association
taxable as a corporation or a publicly traded partnership taxable as a
corporation. If the Notes were treated as interests in a partnership, each item
of income, gain, loss, deduction and credit generated through the ownership of
the Equipment and the Leases by the partnership would be passed through to the
Noteholders, as partners in a partnership according to their respective
interests. The timing, amount and character of the income or expenses reportable
by the Noteholders as partners in a partnership could differ from the income or
expenses reportable by the Noteholders as holders of debt. If the Noteholders
were treated as partners, a cash basis Noteholder might be required to report
income when it accrues to the partnership rather than when it is received by the
Noteholder. Moreover, if Notes were treated as interests in a partnership, an
individual Noteholder's share of expenses of the partnership (e.g., Servicing
Fees) would be miscellaneous itemized deductions that in the aggregate are
allowed only to the extent they exceed two percent of the individual
Noteholder's adjusted gross
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income, meaning that the individual Noteholder might be taxed on a greater
amount of income than the stated interest on his or her Notes. Finally, if a
Note were treated as a partnership interest, any taxable income allocated to a
Noteholder that is a pension, profit sharing or employee benefit plan or other
tax-exempt, could constitute "unrelated business taxable income."
If the Notes were treated as interests in an association taxable as a
corporation or a publicly traded partnership taxable as a corporation, the
resulting entity would be subject to federal income tax at corporate tax rates
on its taxable income generated by ownership of the Leases. Moreover,
distributions by the entity on the Notes probably would not be deductible in
computing the entity's taxable income and all or part of any distributions to
Noteholders would probably be treated as dividends. The imposition of an
entity-level tax could result in a reduced amount of cash available for
distributions to Noteholders.
Since the Issuer will treat the Notes as indebtedness for federal
income tax purposes, the Trustee (and Participants and Indirect Participants)
will not attempt to satisfy the tax reporting requirements that would apply
under these alternative characterizations of the Notes. Further, if the IRS were
to contend successfully that the Notes are interests in a publicly traded
partnership taxable as a corporation, additional tax consequences would apply to
foreign Noteholders. Investors are urged to consult their own tax advisors with
regard to the potential application of those provisions.
DISCOUNT AND PREMIUM. A Note purchased for an amount other than its
outstanding principal amount will be subject to the rules governing original
issue discount, market discount or premium. In very general terms, (i) original
issue discount is treated as a form of interest and must be included in a
beneficial owner's income as it accrues, regardless of the beneficial owner's
regular method of accounting, using a constant yield method; (ii) market
discount is treated as ordinary income and must be included in a beneficial
owner's income as principal payments are made on the Note, or upon a sale of a
Note; and (iii) if a beneficial owner so elects, premium may be amortized over
the life of the Note and offset against inclusions of interest income. These tax
consequences are discussed in greater detail below. Beneficial owners who are
required to include the interest income as it accrues may be required to report
income for tax purposes in advance of receiving a corresponding cash
contribution with which to pay the applicable tax.
ORIGINAL ISSUE DISCOUNT. In general, a Note will be considered to be
issued with original issue discount equal to the excess, if any, of its "stated
redemption price at maturity" over its "issue price." The issue price of a Note
is the initial offering price to the public (excluding bond houses and brokers)
at which a substantial amount of the Notes is sold. The issue price also
includes any accrued interest attributable to the period between the beginning
of the Due Period and the closing date relating to the series of Notes (the
"Issuance Date"). The stated redemption price at maturity of a Note that has a
notional principal amount or receives principal only or that is or may provide
for accruals of interest is equal to the sum of all distributions to be made
under that Note. The stated redemption price at maturity of any other Note is
its stated principal amount, plus an amount equal to the excess (if any) of the
interest payable on the first Payment Date over the interest that accrues for
the period from the Issuance Date to the first Payment Date. The Trustee will
supply, at the time and in the manner required by the IRS, to beneficial owners,
brokers and middlemen information with respect to the original issue discount
accruing on the Notes.
Notwithstanding the general definition, original issue discount will
be treated as zero if the discount is less than 0.25 percent of the stated
redemption price at maturity of the Note multiplied by its weighted average
life. The weighted average life of a Note is apparently computed for this
purpose as the sum, for all distributions included in the stated redemption
price at maturity, of the amounts determined by multiplying (i) the number of
complete years (rounding down for partial years) from the Issuance Date until
the date on which each of those distributions is expected to be made by (ii) a
fraction, the numerator of which is the amount of the distribution and the
denominator of which is the Note's stated redemption price at maturity. Even if
original issue discount is treated as zero under this rule, the actual amount of
original issue discount must be allocated to the principal distributions on the
Note and, when each principal distribution is received, gain equal to the
discount allocated to the distribution will be recognized.
The adjusted issue price of a Note at any time will equal the issue
price of the Note, increased by the aggregate amount of previously accrued
original issue discount with respect to that Note, and reduced by the
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amount of any distributions made on that Note as of that time of amounts
included in the stated redemption price at maturity. The original issue discount
accruing during any accrual period will then be allocated ratably to each day
during the period to determine the daily portion of original issue discount.
A subsequent purchaser of a Note that purchases it at a cost less than
its remaining stated redemption price at maturity also will be required to
include in gross income for each day on which it holds the Note, the daily
portion of original issue discount with respect to the Note (but reduced, if the
cost of the Note to the purchaser exceeds its adjusted issue price, by an amount
equal to the product of (i) that daily portion and (ii) a constant fraction, the
numerator of which is that excess and the denominator of which is the sum of the
daily portions of original issue discount on the Note for all days on or after
the day of purchase).
MARKET DISCOUNT. A beneficial owner that purchases a Note at a market
discount, that is, at a purchase price less than the remaining stated redemption
price at maturity of the Note (or, in the case of a Note with original issue
discount, its adjusted issue price), will be required to allocate each principal
distribution first to accrued market discount on the Note, and recognize
ordinary income to the extent the distribution does not exceed the aggregate
amount of accrued market discount on the Note not previously included in income.
With respect to Notes that have unaccrued original issue discount, any market
discount must be included in income in addition to any original issue discount.
A beneficial owner that incurs or continues indebtedness to acquire a Note at a
market discount may also be required to defer the deduction of all or a portion
of the interest on that indebtedness until the corresponding amount of market
discount is included in income. In general terms, market discount on a Note may
be treated as accruing either (i) under a constant yield method or (ii) in
proportion to remaining accruals of original issue discount, if any, or if none,
in proportion to remaining distributions of interest on the Note. The Trustee
will make available, as required by the IRS, to beneficial owners of Notes
information necessary to compute the accrual of market discount.
Notwithstanding the above rules, market discount on a Note will be
considered to be zero if the discount is less than 0.25 percent of the remaining
stated redemption price at maturity of the Note multiplied by its weighted
average remaining life. Weighted average remaining life presumably would be
calculated in a manner similar to weighted average life, taking into account
payments (including prepayments) prior to the date of acquisition of the Note by
the subsequent purchaser. If market discount on a Note is treated as zero under
this rule, the actual amount of market discount must be allocated to the
remaining principal distributions on the Note and, when each principal
distribution is received, gain equal to the discount allocated to the
distribution will be recognized.
PREMIUM. A purchaser of a Note that purchases it at a cost greater
than its remaining stated redemption price at maturity will be considered to
have purchased the Note (a "Premium Note") at a premium. A purchaser of a
Premium Note need not include in income any remaining original issue discount
and may elect, under section 171(c)(2) of the Code, to treat that premium as
"amortizable bond premium." If a beneficial owner makes this election, the
amount of any interest payment that must be included in the beneficial owner's
income for each period ending on a Payment Date will be reduced by the portion
of the premium allocable to that period based on the Premium Note's yield to
maturity. The amortization of premium should be made using constant yield
principles. If a premium amortization election is made by the beneficial owner,
the election will also apply to all bonds the interest on which is not
excludible from gross income ("fully taxable bonds") held by the beneficial
owner at the beginning of the first taxable year to which the election applies
and to all fully taxable bonds thereafter acquired by it, and is irrevocable
without the consent of the IRS. If a premium amortization election is not made,
(i) a beneficial owner must include the full amount of each interest payment in
income as it accrues, and (ii) the premium must be allocated to the principal
distributions on the Premium Note and when each principal distribution is
received, a loss equal to the premium allocated to the principal distribution
will be recognized. Any tax benefit from the premium not previously recognized
will be taken into account in computing gain or loss upon the sale or
disposition of the Premium Note.
SPECIAL ELECTION. A beneficial owner may elect to include in gross
income all "interest" that accrues on a Note by using a constant yield method.
For purposes of the election, the term "interest" includes stated interest,
acquisition discount, original issue discount, de minimis original issue
discount, market discount, de minimis market discount and unstated interest as
adjusted by any amortizable bond premium or acquisition
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premium. A beneficial owner should consult its own tax advisor regarding the
time and manner of making and the scope of the election and the implementation
of the constant yield method.
SALE OR EXCHANGE OF NOTES. If a Note is sold or exchanged, the seller
of the Note will recognize gain or loss equal to the difference between the
amount realized on the sale or exchange and the adjusted basis of the Note. The
adjusted basis of a Note will generally equal its cost, increased by any OID or
market discount includible in income with respect to the Note through the date
of sale and reduced by any principal payments previously received with respect
to the Note, any payments allocable to previously accrued OID or market discount
and any amortized market premium. Subject to the market discount rules, gain or
loss will generally be capital gain or loss if the Note was held as a capital
asset. Capital losses generally may be used only to offset capital gains.
BACKUP WITHHOLDING. Distributions of interest and principal, as well
as distributions of proceeds from the sale of Notes, may be subject to the
"backup withholding tax" under section 3406 of the Code at a rate of 31 percent
if recipients of those distributions fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from that tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against the
recipient's federal income tax. Furthermore, penalties may be imposed by the IRS
on a recipient of distributions that is required to supply information but that
does not do so in the proper manner.
The IRS has issued regulations (the "Withholding Regulations"), which
change some of the rules relating to some of the presumptions currently
available relating to information reporting and backup withholding. The
Withholding Regulations provide alternative methods of satisfying the beneficial
ownership certification requirement. The Withholding Regulations are effective
for distributions made after December 31, 2000, although valid withholding
certificates that are held on that date remain valid until the earlier of
December 31, 2001 or the date of expiration of the certificate under the rules
as currently in effect.
FOREIGN INVESTORS. Distributions made on a Note to, or on behalf of, a
beneficial owner that is not a U.S. Person generally will be exempt from U.S.
federal income and withholding taxes. The term "U.S. Person " means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate that is subject to U.S. federal income tax
regardless of the source of its income, or a trust if a court within the United
States can exercise primary supervision over its administration and at least one
United States person has the authority to control all substantial decisions of
the trust. This exemption is applicable provided (a) the beneficial owner is not
subject to U.S. tax as a result of a connection to the United States other than
ownership of the Note, (b) the beneficial owner signs a statement under
penalties of perjury that certifies that the beneficial owner is not a U.S.
Person, and provides the name and address of the beneficial owner, and (c) the
last U.S. Person in the chain of payment to the beneficial owner receives this
statement from the beneficial owner or a financial institution holding on its
behalf and does not have actual knowledge that this statement is false.
Beneficial owners should be aware that the IRS might take the position that this
exemption does not apply to a beneficial owner that is a "controlled foreign
corporation" described in Section 881(c)(3)(C) of the Code.
If income or gain with respect to a Note is effectively connected with
a U.S. trade or business carried on by a Noteholder who or which is not a U.S.
person, the 30 percent withholding tax will not apply but the Noteholder will be
subject to U.S. federal income tax at graduated rates applicable to U.S.
persons.
The Withholding Regulations would require, in the case of Notes held
by a foreign partnership, that (x) the certification described above be provided
by the partners rather than by the foreign partnership and (y) the partnership
provide certain information, including a United States taxpayer identification
number. See "Backup Withholding" above. A look-through rule would apply in the
case of tiered partnerships. Non-U.S. Persons should consult their own tax
advisors regarding the application to them of the Withholding Regulations.
STATE AND LOCAL TAX CONSEQUENCES. Investors should consult their own
tax advisors regarding whether the purchase of the Notes, either alone or in
conjunction with an investor's other activities, may subject an investor to any
state or local taxes based on an assertion that the investor is either "doing
business" in, or deriving income from a source located in, any state or local
jurisdiction. Additionally, potential investors should consider the state, local
and other tax consequences of purchasing, owning or disposing of a Note. State
and local tax laws may
32
<PAGE>
differ substantially from the corresponding federal tax law, and the foregoing
discussion does not purport to describe any aspect of the tax laws of any state
or other jurisdiction. Accordingly, potential investors should consult their own
tax advisors with regard to an investment in the Notes.
The federal and state income tax discussions described above are
included for general information only and may not be applicable depending upon a
Noteholder's particular tax situation. Prospective purchasers should consult
their tax advisors with respect to the tax consequences to them of the purchase,
ownership and disposition of the notes, including the tax consequences under
state, local, foreign and other tax laws and the possible effects of changes in
federal or other tax laws or in the interpretations thereof.
RATINGS
Each Class of Notes offered by this Prospectus and the applicable
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more Rating Agencies. These ratings will address, in the opinion of
the Rating Agencies, the likelihood that the Issuer will be able to make timely
payment of all amounts due on the applicable Notes in accordance with the terms
thereof. These ratings will neither address any prepayment or yield
considerations applicable to any Notes nor constitute a recommendation to buy,
sell or hold any Notes.
ERISA CONSIDERATIONS
The Prospectus Supplement for each series of Notes will summarize
considerations under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") relevant to the purchase of Notes of that series by employee
benefit plans and individual retirement accounts.
PLAN OF DISTRIBUTION
The Notes will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices to
be determined at the time of sale or at the time of commitment therefor.
In connection with the sale of the Notes, underwriters may receive
compensation from the Issuer or from purchasers of the Notes in the form of
discounts, concessions or commissions. The underwriters and dealers
participating in the distribution of the Notes may be deemed to be underwriters
in connection with the Notes, and any discounts or commissions received by them
from the Issuer and any profit on the resale of Notes by them may be deemed to
be underwriting discounts and commissions under the Securities Act.
In connection with this offering, the underwriters may over-allot or
effect transactions which stabilize or maintain the market prices of the offered
notes at levels above those which might otherwise prevail in the open market.
Any stabilizing, if commenced, may be discontinued at any time.
The underwriting agreement pertaining to the sale of the Notes will
provide that the obligations of the underwriters will be subject to certain
conditions precedent, that the underwriters will be obligated to purchase all
the Notes subject to that agreement if any are purchased and that, in limited
circumstances, the Issuer will indemnify the underwriters and the underwriters
will indemnify the Issuer against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments required to
be made in respect thereof.
Purchasers of Notes, including dealers, may, depending on the facts
and circumstances of their purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Notes. Noteholders should consult with their legal advisors in this regard prior
to any reoffer or sale.
33
<PAGE>
LEGAL OPINIONS
Certain legal matters will be passed upon in relation to the issuance
of the Notes for the Issuer and Copelco Capital by Spencer Lempert, the General
Counsel and Senior Vice President of Copelco Financial and, in relation to other
matters for Copelco Capital, the Issuer and the underwriters by Dewey Ballantine
LLP, New York, New York.
34
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
and the pages on which the definitions of the terms may be found above.
Additional Account..........................................................25
Additional Lease............................................................16
Adjusted Lease..............................................................16
Assignment and Servicing Agreement...........................................9
Available Funds.............................................................18
Bankruptcy Code.............................................................28
Booked Residual Value of the Leases.........................................17
Business Day................................................................17
Casualty Payment............................................................18
Cede........................................................................20
CEDEL.......................................................................19
CEDEL Participants..........................................................21
Code........................................................................29
Collection Account..........................................................25
Cooperative.................................................................21
Copelco Capital..............................................................9
Copelco Credit..............................................................12
Copelco Financial...........................................................12
Copelco Leasing.............................................................12
Cost per Copy...............................................................13
Cut-off Date.................................................................9
Definitive Notes............................................................22
Depositories................................................................20
Discount Rate...............................................................11
Discounted Present Value of the Leases......................................11
Discounted Present Value of the Performing Leases...........................11
Distribution Account........................................................25
DTC.........................................................................19
Due Period..................................................................18
Dun & Bradstreet............................................................15
Early LeaseTermination......................................................16
Eligible Account............................................................25
Eligible Investments........................................................25
Eligible Leases.............................................................10
Equipment....................................................................9
Equipment Financing Portion.................................................13
ERISA.......................................................................33
Euroclear...................................................................19
Euroclear Operator..........................................................21
Euroclear Participants......................................................21
Events of Default...........................................................26
Excess Copy Charge..........................................................13
Fee Per Scan Charges........................................................14
Fixed Payment...............................................................13
Group.......................................................................12
HILL........................................................................13
Indenture....................................................................9
Indirect Participants.......................................................20
IRS.........................................................................29
Issuer.......................................................................9
Lease Payment...............................................................18
35
<PAGE>
Leases.......................................................................9
Lessee.......................................................................9
Lessees......................................................................9
Maintenance Charge..........................................................13
Non-Performing Leases.......................................................10
Noteholders.................................................................12
Notes........................................................................9
Originator...................................................................9
Participants................................................................20
PILL........................................................................13
Pre-Funding Account.........................................................25
Premium Note................................................................31
Rating Agencies.............................................................17
Rating Agency...............................................................17
Reserve Account.............................................................25
Residual Realizations.......................................................18
Residual Warranty Payments..................................................18
SBU.........................................................................12
Series Pool..................................................................9
Servicer.....................................................................9
Servicer Advance............................................................23
Servicer Events of Default..................................................24
Servicing Fee...............................................................23
Substitute Lease............................................................16
Tax Counsel.................................................................29
Termination Payment.........................................................19
Terms and Conditions........................................................21
Transaction Accounts........................................................25
Transaction Documents.......................................................22
Trust Depository............................................................21
U.S. Person.................................................................32
Vendor......................................................................13
Warranty Lease..............................................................16
Withholding Regulations.....................................................32
36
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses
(other than underwriting discounts and commissions) to be incurred in connection
with the issuance and distribution of the securities being registered.
SEC Filing Fee................................................ $ *
Indenture Trustee's Fees and Expenses......................... *
Legal Fees and Expenses....................................... *
Accounting Fees and Expenses.................................. *
Printing and Engraving Expenses............................... *
Blue Sky Qualification and Legal Investment Fees and
Expenses ................................................... *
Rating Agency Fees............................................ *
Miscellaneous................................................. *
-------------------------------------------------------------- ------
TOTAL $
* To be completed by Amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Limited Liability Company Act (Section 18-108) gives
Delaware limited liability companies broad powers to indemnify and hold harmless
any member or manager or other person from and against any and all claims and
demands whatsoever. The Company shall, to the fullest extent permitted by the
Act, indemnify and hold harmless, and advance expenses to, each member or
manager against any losses, claims, damages or liabilities to which the
indemnified party may become subject in connection with any matter arising from,
related to, or in connection with, the Company's business or affairs.
Copelco Financial Services Group, Inc. has also purchased liability
policies which indemnify the Registrant's manager(s) against loss arising from
claims by reason of their legal liability for acts as officers and directors,
subject to limitations and conditions as set forth in the policies.
Pursuant to agreements which the Registrant may enter into with
underwriters or agents (forms of which will be included as exhibits to this
Registration Statement), officers and directors of the Registrant, and
affiliates thereof, may be entitled to indemnification by such underwriters or
agents against certain liabilities, including liabilities under the Securities
Act of 1933, arising from information which has been or will be furnished to the
Registrant by such underwriters or agents that appears in the Registration
Statement or any Prospectus.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibits
<S> <C> <C> <C>
1.1 * -- Form of Underwriting Agreement for the Offered Notes.
4.1 * -- Form of Indenture, including forms of the Notes and certain other
related agreements as Exhibits thereto.
5.1 * -- Opinion of Dewey Ballantine LLP regarding legality.
8.1 * -- Opinion of Dewey Ballantine LLP regarding tax matters.
10.1 * -- Form of Assignment and Servicing Agreement.
23.1 * -- Consent of Dewey Ballantine LLP is included in the opinion filed
as Exhibit 5.1 hereto.
23.2 * -- Consent of Independent Auditor.
24.1 * -- Power of Attorney (Included on Page II-4 hereof).
25.1 * -- Statement of Eligibility and Qualification of Trustee (Form T-1).
99.1 -- Form of Prospectus Supplement - Notes.
</TABLE>
*To Be Filed by Amendment
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) (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 is
registered) and any deviation from the low or high end 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
a 20% 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;
(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.
(4) If the Registrant is a foreign private issuer, to file a
post-effective amendment to the Registration Statement to include any Financial
Statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial Statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus by means of
a post-effective amendment, Financial Statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all their
information in the prospectus is at least as current as the date of those
Financial Statements. Notwithstanding the foregoing, with respect to
Registration Statements on form F-3 a post-effective amendment need not be filed
to include Financial Statements and information required by Section 10(a)(3) of
the Act or Rule 3-19 of this chapter of such Financial Statements and
information also contained in periodic reports filed with or furnished to the
Commission by the Registrant, pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
II-2
<PAGE>
(b) 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 Section 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 this Registration Statement 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 15 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(d) 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 a 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 purposes 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.
(e) 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 rule and regulations prescribed by
the Commission under Section 305(b)(2) of the Trust Indenture Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 New York, State of New York on the 3rd day of June,
1999.
COPELCO CAPITAL FUNDING LLC 2000-A,
Registrant
By: COPELCO MANAGER, INC.
as Manager of the Registrant
By /s/ Ian J. Berg
----------------------------------------------------
Name: Ian J. Berg
Title: Chief Executive Officer and Acting Chief
Financial Officer
Each person whose signature appears below constitutes and appoints
Stephen W. Shippie as his/her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him/her in his/her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Form S-3 and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
such attorney-in-fact and agent or his substitute may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities indicated on the dates indicated below.
Signature Title Date
--------- ----- ----
/s/ Ian J. Berg Chairman of the Board June 3, 1999
------------------------- Director
Ian J. Berg
/s/ John Hakemian Director June 3, 1999
-------------------------
John Hakemian
/s/ Tadayuki Seki Director June 3, 1999
-------------------------
Tadayuki Seki
II-4
FORM OF PROSPECTUS SUPPLEMENT
================================================================================
$____________
COPELCO CAPITAL FUNDING LLC 2000-A, ISSUER
COPELCO CAPITAL, INC., SERVICER
SERIES _____
LEASE-BACKED NOTES
The issuer will issue --
o Eight classes of notes which are to be offered by this prospectus;
o Class E Lease-Backed Notes, which are not offered by this prospectus but
serve as credit support to the notes offered by this prospectus.
The notes --
o Are backed by a pledge of assets of the issuer. The assets of the issuer
securing the notes will include a pool of copier, electronic, manufacturing
and healthcare equipment leases, and all of its interest in the equipment
underlying the leases;
o Receive distributions beginning on ________;
o Represent debt obligations of Copelco Capital Funding LLC 2000-A; and
o Currently have no trading market.
- ------------------------------------
YOU SHOULD READ THE SECTION
ENTITLED "RISK FACTORS" STARTING ON
PAGE __ OF THIS PROSPECTUS
SUPPLEMENT AND PAGE __ OF THE
PROSPECTUS AND CONSIDER THESE
FACTORS BEFORE MAKING A DECISION TO
INVEST IN THE NOTES.
This prospectus supplement may be used
to offer and sell the notes only if
accompanied by the prospectus.
The notes are only secured by the
assets of the issuer. The notes are
not debt obligations of any other
person.
The notes will not be insured or
guaranteed by any governmental agency
or instrumentality.
- ------------------------------------
<TABLE>
<CAPTION>
- -------------------- --------------- ------------ -------- -------------- -----------------------------------------
Initial Ratings
Underwriting Interest Initial Public -----------------------------------------
Issuance Amount Discount Rate Offering Price
- -------------------- --------------- ------------ -------- -------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ % % %
- -------------------- --------------- ------------ -------- -------------- ------------- -------------- ------------
Class D Notes $ % % %
- -------------------- --------------- ------------ -------- -------------- ------------- -------------- ------------
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITER(S)]
The date of this Prospectus Supplement is _______
<PAGE>
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further applicable discussions. The following table of contents and table of
contents in the accompanying prospectus provide the pages on which these
captions are located.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus supplement and the accompanying prospectus. If given or made,
the information or representations must not be relied upon. 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.
TABLE OF CONTENTS
Page
----
Important Notice About the Information Presented in This Prospectus
Supplement and the Accompanying Prospectus.....................................3
Summary........................................................................4
Lease-Backed Notes Series _____................................................4
Issuer......................................................................4
Manager.....................................................................4
Servicer....................................................................4
Trustee.....................................................................4
The Pledged Assets..........................................................4
Leases......................................................................4
Cut-off Date................................................................4
Payment Date................................................................5
Determination Date..........................................................5
Record Date.................................................................5
Issuance Date...............................................................5
Denominations...............................................................5
Priority of Distributions...................................................5
Reserve Account.............................................................6
Optional Redemption.........................................................6
Final Scheduled Payment Date................................................6
Federal Income Tax Consequences.............................................6
ERISA Considerations........................................................6
Ratings.....................................................................6
Risk Factors...................................................................7
Use of Proceeds................................................................8
The Series Pool................................................................8
Management's Discussion and Analysis of Financial Condition...................17
Description of the Notes......................................................18
Security for the Notes........................................................33
The Indenture Trustee.........................................................33
Legal Matters Affecting a Lessee's Rights and Obligations....................33
Material Federal Income Tax Consequences......................................34
ERISA Considerations..........................................................35
Underwriting..................................................................36
Experts.......................................................................38
Legal Matters.................................................................38
Rating of the Offered Notes...................................................38
2
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes in two separate
documents that progressively provide more detail: (1) the accompanying
prospectus, which provides general information, some of which may not apply to
your series of notes, and (2) this prospectus supplement, which describes the
specific terms of your series of notes.
This prospectus supplement does not contain complete information about
the offering of the notes. Additional information is contained in the
prospectus. You are urged to read both this prospectus supplement and the
prospectus in full. We cannot sell the notes to you unless you have received
both this prospectus supplement and the prospectus.
IF THE PROSPECTUS CONTEMPLATES MULTIPLE OPTIONS, YOU SHOULD RELY ON
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AS TO THE APPLICABLE OPTION.
The issuer has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 with respect to the
notes offered by this prospectus supplement. This prospectus supplement and the
prospectus, which form a part of the registration statement, omit information
contained in the registration statement in accordance with the rules and
regulations of the Securities and Exchange Commission. You may inspect and copy
the registration statement at the Public Reference Room at the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can obtain copies of these materials at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, the Securities and
Exchange Commission maintains a site on the World Wide Web containing reports,
proxy materials, information statements and other items. The address is
http://www.sec.gov.
3
<PAGE>
SUMMARY
o This summary highlights select information from this prospectus
supplement and does not contain all of the information that you need to
consider in making your investment decision. This summary provides
general, simplified descriptions of matters which, in some cases, are
highly technical and complex. To understand all of the terms of the
offering of the notes, carefully read this entire prospectus supplement
and the accompanying prospectus.
o This summary provides an overview of various calculations, cash flows
and other information to aid your understanding. To understand all of
the terms of the offering, carefully read this entire document and, in
particular, the full description of these calculations, cash flows and
other information in this prospectus supplement.
LEASE-BACKED NOTES
SERIES _____
The issuer will issue the notes offered by this prospectus supplement in
book-entry form through the facilities of The Depository Trust Company.
ISSUER
o Copelco Capital Funding LLC 2000-A. The address of the issuer is 700 East
Gate Drive, Mt. Laurel, NJ 08054.
o The issuer will be a limited liability company formed under the laws of the
State of Delaware.
MANAGER
The issuer will be managed by Copelco Manager, Inc. The address of the manager
is 700 East Gate Drive, Mt. Laurel, NJ 08054.
SERVICER
Copelco Capital, Inc. The address of the servicer is One International
Boulevard, Mahwah, NJ 07430.
TRUSTEE
Manufacturers and Traders Trust Company. The address of the trustee is One M&T
Plaza, Buffalo, NY 14248.
THE PLEDGED ASSETS
The issuer will pledge its property to secure payments on the notes. The pledged
assets will include a pool of leases, cash on deposit in a reserve account and
the collection account and other assets as described in detail elsewhere in this
prospectus supplement.
LEASES
o On or about ______, Copelco Capital, Inc. will contribute to the issuer a
pool of leases and the applicable equipment. Payments on the notes will be made
from payments on these leases.
o The leases will include copier, electronic, manufacturing and healthcare
equipment leases.
o The lessees under the leases are primarily hospitals, non-hospital medical
facilities, physicians, and businesses.
o The leases are triple-net leases, which means that the lessees are required
to pay all taxes, maintenance and insurance associated with the equipment. The
leases are non-cancelable by the lessees. All payments under the leases are
absolute, unconditional obligations of the lessees without right of offset for
any reason.
o We will calculate the principal value of the pool of leases at any time by
discounting their remaining payments (except for minor charges and delinquent
payments) at a rate equal to _____%.
o We will pay the notes from payments on the leases. Noteholders should not
rely on the sale of leased equipment for payments on the notes.
CUT-OFF DATE
The opening of business on _______.
4
<PAGE>
PAYMENT DATE
The ____ day of each month if the ________ is a business day. If the _________
is not a business day, the payment date will be the following day that is a
business day. The first payment date will be ______.
DETERMINATION DATE
Five business days before the payment date. The trustee will calculate the
amounts to be paid on the notes on this date.
RECORD DATE
The last business day preceding a payment date unless the notes are no longer
book-entry notes. If the notes are definitive notes, the record date is the last
business day of the month preceding a payment date.
ISSUANCE DATE
On or about _______.
DENOMINATIONS
The issuer will issue the notes in minimum denominations of $1,000 and integral
multiples of $1,000. One note of each class may be issued in another
denomination.
PRIORITY OF DISTRIBUTIONS
Each month, the issuer will distribute the amounts received on the leases and
any other collections available as property of the issuer as follows:
Interest Distributions
On each payment date, the issuer will pay interest at the applicable interest
rate that accrued during the prior interest accrual period.
Principal Distributions
On each payment date, the issuer will pay principal in reduction of the
outstanding principal balance of the notes.
Principal payments will be an amount usually equal to the decrease in the
principal value of the leases between determination dates. The issuer will pay
principal in the following priority:
o to the Class A-1 noteholders only, until the principal amount on the Class
A-1 Notes has been reduced to zero;
o when the Class A-1 Notes have been paid in full:
o to the Class A-2 noteholders, until the principal amount on the Class
A-2 Notes has been reduced to zero, an amount generally equal to
_____% of the decrease in the principal value of the leases;
o when the Class A-2 Notes have been paid in full, to the Class A-3
noteholders, until the principal amount on the Class A-3 Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o when the Class A-3 Notes have been paid in full, to the Class A-4
noteholders, until the principal amount on the Class A-4 Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o when the Class A-4 Notes have been paid in full, to the Class A-5
noteholders, until the principal amount on the Class A-5 Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class B noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class C noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class D noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class E noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases.
5
<PAGE>
This general description of distributions of principal to the notes is subject
to certain targets and floors. We refer you to "Descriptions of the
Notes--Distributions" in this prospectus supplement for further information
regarding the payment of interest and principal on the notes.
RESERVE ACCOUNT
The trustee will hold the reserve account. The servicer will deposit collections
received from the leases into the reserve account on any payment date after
interest and principal payments on the notes have been made. The servicer will
continue to make those deposits until the balance in the reserve account is at
the lesser of 1% of the principal value of the leases at __________ and the
outstanding principal amount of the notes. We will use funds in the reserve
account to pay shortfalls in amounts due to the noteholders.
OPTIONAL REDEMPTION
The issuer may, on any payment date, redeem the notes when the total lease
principal balance of the performing leases is less than or equal to 10% of the
total principal value of the leases as of ______. If a redemption occurs, we
will pay you a final distribution equaling the entire unpaid principal balance
of the notes plus any accrued and unpaid interest.
FINAL SCHEDULED PAYMENT DATE
If the notes have not already been paid in full, we will pay the outstanding
principal amount of the notes in full on the following payment dates:
Class A-1 ______________
Class A-2 ______________
Class A-3 ______________
Class A-4 ______________
Class A-5 ______________
Class B ______________
Class C ______________
Class D ______________
Final payment on the notes will probably be earlier than the final scheduled
payment date set out above for the applicable class of notes.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
o Dewey Ballantine LLP, special tax counsel to the issuer and counsel to the
underwriters, is of the opinion that the notes will be treated as debt and the
issuer will not be treated as an association (or publicly traded partnership)
taxable as a corporation. By your acceptance of a note, you agree to treat the
notes as debt.
o Interest on the notes will be taxable as ordinary income when received by a
holder on the cash method of accounting and when accrued by a holder on the
accrual method of accounting.
o Dewey Ballantine LLP has prepared the discussion under "Material Federal
Income Tax Consequences" and is of the opinion that that discussion accurately
states all material federal income tax consequences of the purchase, ownership
and disposition of the offered notes to their original purchaser.
ERISA CONSIDERATIONS
Subject to the important considerations described under "ERISA Considerations"
in this prospectus supplement, pension, profit-sharing and other employee
benefit plans may purchase notes. You should consult with your counsel regarding
the applicability of the provisions of the Employee Retirement Income Security
Act of 1974, as amended, before purchasing a note.
RATINGS
o The issuer will not issue the notes unless they have been assigned the
ratings set out on the cover page of this prospectus supplement.
o You must not assume that the ratings will not be lowered, qualified or
withdrawn by the rating agencies.
6
<PAGE>
RISK FACTORS
You should carefully consider, among other things, the following risk factors
before deciding to invest in the notes offered by this prospectus supplement.
GEOGRAPHIC CONCENTRATION OF Adverse economic conditions or other factors
LEASES MAY ADVERSELY particularly affecting any state or region where a
AFFECT THE LEASES high concentration of leases is located could
adversely affect the performance on the leases.
As of _________, approximately ______%, ______%,
______% and ______% of the leases (based on the
statistical discounted present value of the
leases) were located in ________, _______, _______
and ______, respectively. No other state accounts
for more than 5% of the leases. The issuer is
unable to determine and has no basis to predict,
with respect to any state or region, whether those
events have occurred or may occur, or to what
extent those events may affect the leases or the
repayment of amounts due under the notes.
RISKS ASSOCIATED WITH YEAR The servicer is faced with the task of completing
2000 COMPLIANCE its goals for compliance in connection with the
year 2000 issue. The year 2000 issue is the result
of prior computer programs being written using two
digits to define the applicable year. Any computer
programs that have time-sensitive software may
recognize a date using "00" as the year 1900
rather than the year 2000. Any such occurrence
could result in major computer system failure or
miscalculations. Although the servicer reasonably
believes that its servicing system will be year
2000 compliant prior to the year 2000, it is
presently engaged in various procedures to
determine if its computer systems and software,
and those of its material suppliers, customers,
brokers and agents will be year 2000 compliant.
In the event that the servicer, any subservicer or
any of their suppliers, customers, brokers or
agents do not successfully and timely achieve year
2000 compliance, the servicer's performance of its
obligations under the Assignment and Servicing
Agreement could be adversely affected. This could
result in delays in processing payments on the
leases and could cause a delay in distributions to
you.
7
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be distributed to the
owners of Copelco Capital Funding LLC 2000-A (the "Issuer"). The distribution
will occur after the contribution by Copelco Capital, Inc. ("Copelco Capital" or
in its capacity as servicer, the "Servicer") of the pool of copier, electronics,
manufacturing, and healthcare equipment lease contracts (each a "Lease
Contract", collectively the "Lease Contracts"), including payments due
thereunder (together with the Lease Contracts, the "Leases") and interests in
the applicable equipment (the "Equipment") to the Issuer. The net proceeds will
be utilized to repay bank debt and for general corporate purposes.
THE SERIES POOL
THE LEASES. As of the opening of business on ___________ (the "Cut-Off
Date"), the Notes will be secured by a pool of Leases (the "Series Pool"). The
Lessees (as defined below) are primarily hospitals, medical facilities,
physicians and business owners throughout the United States. The Leases were
originated or acquired by the Business Technology Group, the Healthcare Group
and the Commercial & Industrial Group of Copelco Capital (or their predecessors)
(collectively, the "Origination Groups"). See "Security for the Notes" and
"Legal Matters Affecting a Lessee's Rights and Obligations." Unless otherwise
noted, the statistical information included below was computed using the
Statistical Discounted Present Value of the Leases (as defined below) as of the
Cut-Off Date. The actual principal value of the Leases on _______ (the "Issuance
Date") will be calculated using the Discounted Present Value of the Leases (as
defined below). The Statistical Discounted Present Value of the Leases as of the
Cut-Off Date will not vary materially from the Discounted Present Value of the
Leases as of the Cut-Off Date.
The Leases are triple-net leases, which means that the terms of the
Leases require the lessees to pay all taxes, maintenance and insurance
associated with the Equipment, and impose no affirmative obligations on the
lessor, and are non-cancelable by the Lessees (as defined below). Under agreed
upon conditions, however, Copelco Capital may consent to prepayment of the
Leases. Generally, Copelco Capital will consent to a prepayment of a lease where
the Lessee is upgrading the Equipment. All payments under the Leases are
absolute, unconditional obligations of the hospitals, non-hospital medical
facilities, physicians, businesses and individual business owners who lease the
Equipment (each, a "Lessee," and collectively, the "Lessees"). Lessees are
without right of offset for any reason. Those payments will be made by the
Lessees to the Servicer for the account of Copelco Capital Funding LLC 2000-A.
Each Lessee entered into its Lease for specified Equipment which may
be designated in schedules incorporated into the Lease. To the extent not set
forth in the Lease Contract, the schedules, among other things, establish the
periodic payments and the term of the Lease with respect to that Equipment. The
Leases follow one of several different forms of lease agreement, with occasional
modifications which do not materially affect the basic terms of the Leases. The
weighted average remaining term of the Series Pool is _______ months. Copelco
Capital will represent and warrant that, as of the Cut-Off Date, all Leases will
be current or less than 63 days delinquent and, as of the initial Determination
Date (as defined below), all Lessees will have made at least one payment.
Lessees covenant to maintain the Equipment and install it at a place
of business agreed upon with Copelco Capital. Delivery, transportation, repairs
and maintenance are the obligation of the Lessees, and all Lessees are required
to carry, at their respective expense, liability and replacement cost insurance
under terms acceptable to Copelco Capital. Those insurance proceeds will
constitute Casualty Payments (as defined below). Subject to agreed upon
exceptions, if the Lessee does not provide evidence of insurance coverage within
90 days of the commencement of the Lease, Copelco Capital may obtain insurance
and invoice the Lessee for the cost thereof. Any defaults under a Lease (as
such, a "Non-Performing Lease," as defined below) permit a declaration, as
immediately due and payable, of all remaining Lease payments under the Lease and
the immediate return of the Equipment. Generally, any payments received six days
after the scheduled payment date are subject to late charges.
"Non-Performing Leases" are (a) Leases that have become more than 123
days delinquent or (b) Leases that have been accelerated by the Servicer or
Leases that the Servicer has determined to be uncollectible in accordance with
its customary practices. Copelco Capital, Inc. will represent and warrant that,
as of the Cut-Off Date, none of the Leases are Non-Performing Leases.
8
<PAGE>
The Servicer's customary practices with respect to Non-Performing
Leases include action as is necessary to cause, or attempt to cause, the Lessee
thereunder to cure the non-performance or to terminate the lease and recover the
outstanding amount owed under the lease and all damages resulting from any
default on the Non-Performing Leases. The Servicer will take action that is
consistent with the customary practices of servicers in the equipment leasing
industry. In addition, the Servicer will use its best efforts to sell or lease
any Equipment that is subject to a Non-Performing Lease in a timely manner and
upon the most favorable terms and conditions available at the time in order to
recoup any amounts still due on the lease.
At the end of the Lease term, the Lessee must return the Equipment
with certification from the manufacturer that the Equipment is in good working
order, normal wear and tear excepted, unless the Lease is renewed or the
Equipment is purchased by the Lessee.
Historically, approximately 90% of the Equipment leased by the
Origination Groups is purchased or re-leased by the original Lessee at the
expiration of the lease term. In accordance with the terms of the Leases, the
Lessee is generally required to advise Copelco Capital 90 to 120 days prior to
the Lease termination of its intent to return the Equipment at the expiration of
the Lease. In most cases, the failure by a Lessee to so advise Copelco Capital
results in an automatic renewal of the Lease for a specified period. For
Equipment which is returned to Copelco Capital by the Lessees, Copelco Capital
participates in an active secondary market for the sale of used Equipment.
THE EQUIPMENT. The Equipment subject to the Leases is purchased by
Copelco Capital under direct specifications and instructions from the Lessees.
As of the Cut-Off Date, the Series Pool had approximately 93 equipment
categories.
INFORMATION WITH RESPECT TO THE LEASES AND THE LESSEES. The following
tables summarize information with respect to the Leases and the Lessees as of
the Cut-Off Date. The Issuer is not aware of any trends or changes relating to
the data in the following tables that would be expected to impact the future
performance of the Leases.
THE PLEDGED ASSETS. The assets pledged to secure the Notes (the
"Pledged Assets") will consist of a pool of copier, electronic, manufacturing,
and healthcare equipment lease contracts, including payments due thereunder and
interests in the applicable leased equipment acquired or originated by Copelco
Capital and transferred to the Issuer. The Pledged Assets will, in addition,
include the funds on deposit in Collection Account (as defined below) and the
Reserve Account (as defined below).
9
<PAGE>
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
STATE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- ------------------------ --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alaska $ $
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
District of Columbia
Delaware
Florida
Georgia
Hawaii
Iowa
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Massachusetts
Maryland
Maine
Michigan
Minnesota
Missouri
Mississippi
Montana
North Carolina
North Dakota
Nebraska
New Hampshire
New Jersey
New Mexico
Nevada
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Vermont
Washington
Wisconsin
West Virginia
Wyoming
================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
================================================================================================================================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY LEASE BALANCE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
STATISTICAL DISCOUNTED PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
PRESENT VALUE OF NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
THE LEASES LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.01 - 5,000.00 $ $
5,000.01 - 10,000.00
10,000.01 - 15,000.00
15,000.01 - 20,000.00
20,000.01 - 25,000.00
25,000.01 - 50,000.00
50,000.01 - 100,000.00
100,000.01 - 500,000.00
500,000.01 - 1,000,000.00
greater than 1,000,000.00
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
REMAINING TERM (MONTHS) LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 - 12 $ $
13 - 24
25 - 36
37 - 48
49 - 60
61 - 84
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
ORIGINAL TERM (MONTHS) LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 - 12 $ $
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 96
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
LEASE TYPE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Finance Lease $ $
Operating Lease
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
PURCHASE OPTION LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Purchase Option $ $
Fair Market Value
Nominal Buyout
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY DELINQUENCIES
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
DAYS DELINQUENT LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 - 29 $ $
30 - 59
60 - 62
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Multiple Product $ $
Anesthesia Equipment
Automated Chemistry Systems
Automated Hematology Systems
Automated Test Equipment
Automobile Shop
C.T. Systems
Carts, Stretchers, Wheel Chairs
Cash Registers
Cobalt and X-Ray Therapy
Equipment
Communication Equipment
Computer Systems-Doctors &
Hospitals
Computer
Construction Equipment
Copiers
Cranes and Derricks
Data Processing
Dental Operatory Equipment
Digital Cameras
Document Imaging Equipment
ECG (EKG) and Defibrillators
EEG
Electronics Production
Equipment
Fabrication Equipment
Facsimiles
Food Processing
Furniture and Fixtures
Gamma Cameras
Heating and Air
Holter Monitors
Home Healthcare Equipment
Hospital Room Equipment
Hosp Beds; Elec. Stryker FRMS,
Burn Beds
Image Setters
Industrial Production
Jukeboxes/storage
Laminating Devices
Lasers
Laundry, Kitchen, Food Srvc
Eqp., Central Supply
Laundry Equipment Lift Trucks
Leasehold Improvements
Lift Trucks
Linear Accelerators
Lithotripters and Dialysis
Equipment
Machine Tools
Mailing Equipment
Mammography
Materials Handling
Mobile X-Ray Systems
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
- --------------------------- --------- ------------- ---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Medical Equipment
Microfilm Equipment
Micrographics
Misc. Comm. & Indus. Equip.
Misc Lab Eqp
Misc Vet Eqp; Cages, Scales,
Tables
Misc X-Ray Eqp
Miscellaneous
MRI Systems
Office Furniture & Equipment
Operating Microscopes
Opthlmc Diag Eqp (Slit Lamps,
Tonometers)
Opt Eqp; Lens Grinding,
Resurfacing
Packaging Equipment
Patient Monitoring Systems
Patient Room Furnishing &
Fixtures
Phone, TV, Comm Equipment
Photo Equipment
Photocopy Equipment
Physician Misc Medical Eqp &
Exam Tables
Physician Office Furn, Fixtures
and Phones
Podiatry Equipment
Printing Equipment
Processing Equipment
Pulse Oximetry Equipment
Radiographic Fluoroscopic
Systems
Respiratory Therapy Equipment
Restaurant, Motel Equipment
Sales Tax
Scanners
Security Systems
Standard Printers
Standard Test Systems
Standard X-Ray Systems
Surgical Equip. Scopes,
Electrosurgical
Telephone
Telex
Transportation
Ultrasound
Vending Machines
Wide Format Printers
Woodworking
Working Capital
X-Ray Spec Systems;
Angiography
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
</TABLE>
1 The following abbreviations used in this table have the following meanings:
"Eqp." -- Equipment
"Misc." -- Miscellaneous
14
<PAGE>
HISTORICAL DELINQUENCY INFORMATION. A Lease is generally evaluated by
Copelco Capital for write-down when they become over 92 days delinquent. General
delinquency information for equipment leases not written down in the Origination
Groups that are owned by Copelco Capital is presented below.
<TABLE>
<CAPTION>
HISTORICAL DELINQUENCY EXPERIENCE
COPELCO CAPITAL COMBINED PORTFOLIO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Total Receivables
Balance (1) $ $ $ $ $
--------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 Days+
--------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ $ $ $ $
(1) The Total Receivables Balance is equal to the aggregate future rent owing on the Leases.
</TABLE>
<TABLE>
<CAPTION>
BUSINESS TECHNOLOGY
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Total Receivables
Balance (1) $ $ $ $ $
--------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 Days+
--------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ $ $ $ $
(1) The Total Receivables Balance is equal to the aggregate future rent owing on the Leases.
</TABLE>
<TABLE>
<CAPTION>
HEALTHCARE AND COMMERCIAL & INDUSTRIAL GROUP
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Total Receivables
Balance (1) $ $ $ $ $
--------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 Days+
--------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ $ $ $ $
(1) The Total Receivables Balance is equal to the aggregate future rent owing on the leases.
</TABLE>
15
<PAGE>
HISTORICAL DEFAULT EXPERIENCE. All accounts assessed over 92 days past
due automatically become non-accruing accounts. Any subsequent recoveries offset
net losses. General charge-off information for Leases in the Origination Groups
that are owned and serviced by Copelco Capital for the period January 1, 1994 to
December 31, 1998 is set forth below.
<TABLE>
<CAPTION>
HISTORICAL CHARGE-OFF EXPERIENCE
(DOLLARS IN THOUSANDS)
COPELCO CAPITAL COMBINED PORTFOLIO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1) $ $ $ $ $
-----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $
Net Losses as a % of Avg.
Receivables
</TABLE>
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the Leases.
<TABLE>
<CAPTION>
BUSINESS TECHNOLOGY
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1) $ $ $ $ $
-----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $
Net Losses as a % of Avg.
Receivables
</TABLE>
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the Leases.
<TABLE>
<CAPTION>
HEALTHCARE COMMERCIAL & INDUSTRIAL GROUP
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1) $ $ $ $ $
-----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $
Net Losses as a % of Avg.
Receivables
</TABLE>
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the Leases.
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the Leases in the future.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
As of the date of this Prospectus Supplement, the Issuer has had no
operating history. The net proceeds of the sale of the Notes will be distributed
to the owners of the Issuer. See "Use of Proceeds." The Issuer is prohibited by
its Limited Liability Company Agreement from engaging in business other than (i)
the purchase of equipment leases and lease receivables (including equipment)
from Copelco Capital and its affiliates, (ii) the issuance of notes
collateralized by its assets and (iii) engaging in acts incidental, necessary or
convenient to the foregoing and permitted under Delaware law. The Issuer's
ability to incur, assume or guaranty indebtedness for borrowed money is also
restricted by its Limited Liability Company Agreement to only those activities
that relate to the leases and lease receivables.
DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGER OF THE ISSUER. The
following table sets forth the executive officers and directors of Copelco
Manager, Inc., the manager of the Issuer ("Manager") and their ages and
positions as of May 25, 1999. Because the Issuer is organized as a special
purpose company and will be largely passive, it is expected that the officers
and directors of the Manager will participate in the management of the Issuer to
a limited extent. Most of the actions pertaining to maintaining and servicing
the assets will be performed by the Servicer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Name Age Position
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Ian J. Berg 55 Chairman of the Board (Principal Executive Officer), Director
Robert J. Lemenze, Jr. 39 President, Chief Operating Officer
John Hakemian 58 Director
Nicholas Antonaccio 50 Vice President of Finance
Takeshi Okumura 47 Director
Stephen W. Shippie 47 Vice President
Spencer Lempert 52 Secretary
</TABLE>
Ian J. Berg has served as Chairman of the Board (Principal Executive
Officer) and Director of the Manager since being appointed/elected on February
23, 1999. Mr. Berg founded Copelco Financial Services Group, Inc. ("Copelco
Financial") in October 1972 and has continuously served as its President and CEO
from inception. Prior to founding Copelco Financial, Mr. Berg served as Senior
Vice President and Director of MDC Corporation (an AMEX listed corporation) and
as President and Director of MDC Leasing Corporation from 1967 through 1972. He
is a past Vice President and Director of the Equipment Leasing Association (the
industry trade association) and a founder, past officer and Director of the
Eastern Association of Equipment Lessors.
Robert J. Lemenze, Jr. has served as President of the Manager since
being appointed/elected on February 23, 1999. Mr. Lemenze was elected President
and Chief Operating Officer of Copelco Capital in January 1997. Prior to this he
served as Vice President of Sales and head of the Document Imaging Sales Group
since joining Copelco Capital in 1987.
John Hakemian has served as Director since being elected on February
23, 1999. For the last five years, Mr. Hakemian has served, initially, as the
chief financial officer for a subsidiary of Itochu International (the Issuer's
ultimate parent company in the United States) and, more recently, as the Vice
President of Finance of Itochu International Enterprise.
Nicholas Antonaccio has served as Vice President - Finance and
Treasurer since being elected on February 23, 1999. Mr. Antonaccio joined
Copelco Capital as a Senior Vice President and Chief Financial Officer in
September 1995. He formerly served as the Treasurer of Concord Leasing Company.
Takeshi Okumura has served as Director since being elected on May 5,
1999. [Background to be provided]
Stephen W. Shippie has served as Vice President since being elected on
February 23, 1999. For the last five years, Mr. Shippie has served as the Vice
President of Finance of Copelco Financial.
17
<PAGE>
Spencer Lempert has served as Secretary since being elected on
February 23, 1999. For the last five years, Mr. Lempert has served as the
General Counsel for Copelco Financial.
None of the above-listed directors and officers of the Manager will be
compensated directly by the Issuer or the Manager nor with any funds or assets
of the Issuer or the Manager nor will any of those directors and officers
receive compensation in the capacities in which they act for the Manager of the
Issuer.
DESCRIPTION OF THE NOTES
GENERAL. The ____% Class A-1 Lease-Backed Notes (the "Class A-1
Notes"), _____% Class A-2 Lease-Backed Notes (the "Class A-2 Notes"), _____%
Class A-3 Lease-Backed Notes (the "Class A-3 Notes"), _____% Class A-4
Lease-Backed Notes (the "Class A-4 Notes") and _____% Class A-5 Lease-Backed
Notes (the "Class A-5 Notes, together with the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes, the "Class A Notes"), _____% Class B
Lease-Backed Notes (the "Class B Notes"), _____% Class C Lease-Backed Notes (the
"Class C Notes") and _____% Class D Lease-Backed Notes (the "Class D Notes,"
together with the Class A Notes, the Class B Notes and the Class C Notes, the
"Offered Notes") and the _____% Class E Lease-Backed Notes (the "Class E Notes,"
together with the Offered Notes, the "Notes") will be issued in accordance with
the Indenture (the "Indenture") between the Issuer and the Trustee. The
following statements with respect to the Notes is a summary of all material
terms relating to a description of the Offered Notes. However, investors in the
Offered Notes should review the Indenture, the form of which is filed as an
exhibit to the registration statement of which this Prospectus Supplement forms
a part. Whenever any particular section of the Indenture or any term used in the
Indenture is referred to, the section in the Indenture or the term used should
be reviewed by you in order to fully understand this offering.
The Offered Notes represent secured debt obligations of the Issuer
secured by the Pledged Assets. The privately placed Class E Notes represent
subordinated debt obligations of the Issuer secured by defined assets in the
Pledged Assets as provided in the applicable Indenture. The Class E Notes are
subordinated to the Offered Notes for the purpose of, among other things,
offsetting losses and other shortfalls. Neither represents an interest in or
recourse obligation of Copelco Capital or any of its other affiliates other than
the Issuer. The Issuer is a Delaware limited liability company with limited
assets. Consequently, the holders of the notes must rely solely upon the Leases,
the interests in the Equipment and funds on deposit in the Collection Account
and the Reserve Account, for payment of principal of and interest on the Offered
Notes.
The combined aggregate principal amount of the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes will
comprise the initial principal amount (the "Initial Principal Amount") of the
Notes. The Discounted Present Value of the Leases, at any given time, shall
equal the future remaining scheduled payments from the applicable Leases
(including Non-Performing Leases), discounted at the Discount Rate, as set forth
in the Indenture.
INTEREST RATES. The Notes will bear interest from the Issuance Date at
the applicable interest rate for the respective class as presented below. The
Interest Rate is calculated on the basis of a year of 360 days comprised of
twelve 30-day months, except in the case of the Class A-1 Notes, for which
interest will be calculated on the basis of a year of 360 days and the actual
number of days in the interest accrual period, payable on the fifteenth day of
each month (or if that day is not a business day the next succeeding business
day), to the person in whose name the Note was registered at the close of
business on the preceding Record Date (as defined below). The interest rate for
the Notes is as follows: ____% per annum on the Class A-1 Notes (the "Class A-1
Interest Rate"), _____% per annum on the Class A-2 Notes (the "Class A-2
Interest Rate"), _____% per annum on the Class A-3 Notes (the "Class A-3
Interest Rate"), _____% per annum on the Class A-4 Notes (the "Class A-4
Interest Rate"), _____% per annum on the Class A-5 Notes (the "Class A-5
Interest Rate"), _____% per annum on the Class B Notes (the "Class B Interest
Rate"), _____% per annum on the Class C Notes (the "Class C Interest Rate"),
_____% per annum on the Class D Notes (the "Class D Interest Rate") and _____%
per annum on the Class E Notes (the "Class E Interest Rate"). With respect to
any particular Class, the "Interest Rate" refers to the applicable rate
indicated in the immediately preceding sentence.
Principal will be payable as set out under "Distributions on Notes."
Notes may be presented to the corporate trust office of the Trustee for
registration of transfer or exchange (Section 2.03). Notes may be exchanged
18
<PAGE>
without a service charge, but the Issuer may require payment to cover taxes or
other governmental charges (Section 2.03).
INITIAL PRINCIPAL AMOUNT. $___________ for the Class A-1 Notes (the
"Class A-1 Initial Principal Amount"), $___________ for the Class A-2 Notes (the
"Class A-2 Initial Principal Amount"), $___________ for the Class A-3 Notes (the
"Class A-3 Initial Principal Amount"), $___________ for the Class A-4 Notes (the
"Class A-4 Initial Principal Amount"), $___________ for the Class A-5 Notes (the
"Class A-5 Initial Principal Amount," together with the Class A-1 Initial
Principal Amount, the Class A-2 Initial Principal Amount, the Class A-3 Initial
Principal Amount and the Class A-4 Initial Principal Amount, the "Class A
Initial Principal Amount"), $___________ for the Class B Notes (the "Class B
Initial Principal Amount"), $___________ for the Class C Notes (the "Class C
Initial Principal Amount"), $___________ for the Class D Notes (the "Class D
Initial Principal Amount") and $___________ for the Class E Notes (the "Class E
Initial Principal Amount"). See "Description of the Notes."
DISCOUNTED PRESENT VALUE OF THE LEASES. The discounted present value
of the Leases (the "Discounted Present Value of the Leases"), at any given time,
shall equal the future remaining scheduled payments (not including delinquent
amounts, Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges (each
as defined below)) from the Leases (including Non-Performing Leases), discounted
at a rate equal to _____%, (the "Discount Rate") which rate is equal to the sum
of (a) the weighted average interest rate of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class
B Notes, the Class C Notes, the Class D Notes and the Class E Notes, each
weighted by (i) the initial principal amount of the Class A-1 Notes, the initial
principal amount of the Class A-2 Notes, the initial principal amount of the
Class A-3 Notes, the initial principal amount of the Class A-4 Notes, the
initial principal amount of the Class A-5 Notes, the initial principal amount of
the Class B Notes, the initial principal amount of the Class C Notes, the
initial principal amount of the Class D Notes, and the initial principal amount
of the Class E Notes, as applicable, and (ii) the expected weighted average life
(under a zero prepayment and no loss scenario) of each class of Notes, as
applicable, and (b) the servicing fee rate of 0.75% per annum. The discounted
present value of the Performing Leases (the "Discounted Present Value of the
Performing Leases") equals the Discounted Present Value of the Leases, reduced
by all future remaining scheduled payments on the Non-Performing Leases (not
including delinquent amounts, Excess Copy Charges, Maintenance Charges or Fee
Per Scan Charges), discounted at the Discount Rate. See "Description of the
Notes--General." Each of the Indenture and the Assignment and Servicing
Agreement will provide that any calculation of future remaining scheduled
payments made on a Determination Date or with respect to a Payment Date will be
calculated after giving effect to any payments received prior to the date of
calculation to the extent the payments relate to scheduled payments due and
payable by the Lessees with respect to the applicable Due Period (defined below)
and all prior Due Periods. "Statistical Discounted Present Value of the Leases"
means an amount equal to the future remaining scheduled payments (not including
delinquent amounts, Excess Copy Charges, Maintenance Charges and Fee Per Scan
Charges) from the Leases as of the Cut-Off Date, discounted at a rate equal to
_____% (the "Statistical Discount Rate"). The Statistical Discounted Present
Value of the Leases as of the Cut-Off Date is $___________ and will not vary
materially from the Discounted Present Value of the Leases as of the Cut-Off
Date. See "The Series Pool--The Equipment." The aggregate Discounted Present
Value of the Leases as of the Cut-Off Date, calculated at the Discount Rate is
$___________.
"Excess Copy Charges" are amounts charged to those Lessees on a fixed
payment plan who surpass their fixed allotment of copies.
"Maintenance Charges" are those amounts built into a fixed payment
price for copiers which represents the cost charged to maintain the copiers.
"Fee Per Scan Charges" are charges with respect to specific health
care equipment leases where scan usage exceeds the monthly scan allowance.
EXPECTED MATURITY; STATED MATURITY. The expected maturity dates with
respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes and Class A-5 Notes are the Payment Dates on ______________,
______________, ______________, ______________, and ______________,
respectively. The expected maturity date with respect to the Class B Notes,
Class C Notes and Class D Notes are the Payment Dates on ______________,
______________ and ______________, respectively. The stated maturity date with
respect to the Class A-1 Notes is the Payment Date on ______________ (the "Class
A-1 Stated Maturity Date"), the stated
19
<PAGE>
maturity date with respect to the Class A-2 Notes is the Payment Date on
______________ (the "Class A-2 Stated Maturity Date"), the stated maturity date
with respect to the Class A-3 Notes is the Payment Date on ______________ (the
"Class A-3 Stated Maturity Date"), the stated maturity date with respect to the
Class A-4 Notes is the Payment Date on ______________ (the "Class A-4 Stated
Maturity Date"), the stated maturity with respect to the Class A-5 Notes is the
Payment Date on ______________ (the "Class A-5 Stated Maturity Date"), the
stated maturity date with respect to the Class B Notes is the Payment Date on
______________ (the "Class B Stated Maturity Date"), the stated maturity date
with respect to the Class C Notes is the Payment Date on ______________ (the
"Class C Stated Maturity Date") and the stated maturity date with respect to the
Class D Notes is the Payment Date on ______________ (the "Class D Stated
Maturity Date"). However, if all payments on the Leases are made as scheduled,
final payment with respect to the Notes would occur prior to stated maturity.
DETERMINATION DATE. The fifth day prior to each Payment Date (or the
preceding business day, if that day is not a business day). On that date (each,
a "Determination Date"), the Servicer will determine the amount of payments
received on the Leases for the immediately preceding calendar month (each of
those periods is a "Due Period") which will be available for distribution on the
Payment Date. See "Description of the Notes--Distributions on Notes."
PAYMENT DATE. Payments on the Notes will be made on the ___________
day of each month (or if that day is not a business day, the next succeeding
business day), commencing on ______________, to holders of record on the last
business day preceding a payment date, or, if the notes are definitive notes,
the last business day of the month preceding a payment date (each, a "Record
Date"). See "Description of the Notes--Distributions on Notes."
INTEREST PAYMENTS. On each Payment Date, the interest due (the
"Interest Payments") with respect to the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class B
Notes, the Class C Notes, the Class D Notes and the Class E Notes since the last
Payment Date will be the interest that has accrued on those Notes since the last
Payment Date (or in the case of the first Payment Date, since the Issuance Date)
(the "Interest Accrual Period") at the applicable Interest Rate applied to the
then unpaid principal amounts (the "Outstanding Principal Amounts") of the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the
Class E Notes, respectively, after giving effect to payments of principal to the
holders of Class A-1 Notes (the "Class A-1 Noteholders"), the holders of Class
A-2 Notes (the "Class A-2 Noteholders"), the holders of Class A-3 Notes (the
"Class A-3 Noteholders"), the holders of Class A-4 Notes (the "Class A-4
Noteholders"), the holders of Class A-5 Notes (the "Class A-5 Noteholders,"
together with the Class A-1 Noteholders, Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders, the "Class A Noteholders"), the holders
of Class B Notes (the "Class B Noteholders"), the holders of Class C Notes (the
"Class C Noteholders"), the holders of Class D Notes (the "Class D Noteholders")
and the holders of Class E Notes (the "Class E Noteholders," together with the
Class A Noteholders, Class B Noteholders, Class C Noteholders and Class D
Noteholders, the "Noteholders"), respectively, on the preceding Payment Date.
See "Description of the Notes--General" and "Distributions on Notes."
PRINCIPAL PAYMENTS. For each Payment Date, each of the Class A
Noteholders, the Class B Noteholders, the Class C Noteholders, the Class D
Noteholders and the Class E Noteholders will be entitled to receive payments of
principal ("Principal Payments"), to the extent funds are available therefor, in
the priorities set forth in the Indenture and described below and under
"Description of the Notes--Distributions on Notes." On each Payment Date, to the
extent funds are available therefor, the Principal Payment will be paid to the
Noteholders in the following priority: (a) (i) to the Class A-1 Noteholders
only, until the Outstanding Principal Amount on the Class A-1 Notes has been
reduced to zero, the Class A Principal Payment, then (ii) to the Class A-2
Noteholders only, until the Outstanding Principal Amount on the Class A-2 Notes
has been reduced to zero, the Class A Principal Payment, then (iii) to the Class
A-3 Noteholders only, until the Outstanding Principal Amount on the Class A-3
Notes has been reduced to zero, the Class A Principal Payment, (iv) to the Class
A-4 Noteholders only, until the Outstanding Principal Amount on the Class A-4
Notes has been reduced to zero, the Class A Principal Payment and (v) to the
Class A-5 Noteholders only, until the Outstanding Principal Amount on the Class
A-5 Notes has been reduced to zero, the Class A Principal Payment, (b) to the
Class B Noteholders, the Class B Principal Payment, (c) to the Class C
Noteholders, the Class C Principal Payment, (d) to the Class D Noteholders, the
Class D Principal Payment, (e) to the Class E Noteholders, the Class E Principal
Payment and (f) to the extent that the Class B Floor exceeds the Class B Target
Investor Principal Amount, the Class C Floor exceeds the Class C Target Investor
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<PAGE>
Principal Amount, the Class D Floor exceeds the Class D Target Investor
Principal Amount and/or the Class E Floor exceeds the Class E Target Investor
Principal Amount, Additional Principal (defined below) shall be distributed,
sequentially, as an additional principal payment on the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes,
the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes as
applicable, until the Outstanding Principal Amount of each Class has been
reduced to zero.
"Additional Principal" with respect to each Payment Date equals (a)
zero if each of the Class Target Investor Principal Amounts for Classes B, C, D
and E exceed their respective Class Floors on that Payment Date and (b) in each
other case, the excess, if any, of (i)(A) the Outstanding Principal Balance of
the Notes plus the Overcollateralization Balance as of the immediately preceding
Payment Date after giving effect to payments on that Payment Date, minus (B) the
Discounted Present Value of the Performing Leases as of the applicable
Determination Date, over (ii) the sum of the Class A Principal Payment, the
Class B Principal Payment, the Class C Principal Payment, the Class D Principal
Payment and the Class E Principal Payment to be paid on that Payment Date.
The "Class A Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, (i) on all Payment Dates prior to the ___________ Payment
Date, the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the previous
Determination Date and (B) the Discounted Present Value of the Performing Leases
as of the applicable Determination Date, and (ii) on and after the ___________
Payment Date, the entire Outstanding Principal Amount on the Class A-1 Notes and
(b) after the Class A-1 Notes have been paid in full, the amount necessary to
reduce the aggregate Outstanding Principal Amount on the Class A Notes to the
Class A Target Investor Principal Amount.
The "Class B Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor.
The "Class C Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class C Notes to the greater of the Class C
Target Investor Principal Amount and the Class C Floor.
The "Class D Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class D Notes to the greater of the Class D
Target Investor Principal Amount and the Class D Floor.
The "Class E Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class E Notes to the greater of the Class E
Target Investor Principal Amount and the Class E Floor.
The "Class A Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class B Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class B Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class C Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class C Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
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<PAGE>
The "Class D Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class D Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class E Target Investor Principal Amount with respect to each
Payment Date is an amount equal to the product of (a) the Class E Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class Floors" means the Class B Floor, the Class C Floor, the
Class D Floor or the Class E Floor.
The "Class Target Investor Principal Amounts" means the Class A Target
Investor Principal Amount or the Class B Target Investor Principal Amounts or
the Class C Target Investor Principal Amount or the Class D Target Investor
Principal Amount or the Class E Target Investor Principal Amounts, respectively.
The "Class A Percentage" will be equal approximately to _____%. The
"Class B Percentage" will be equal approximately to _____%. The "Class C
Percentage" will be equal approximately to _____%. The "Class D Percentage" will
be equal approximately to _____%. The "Class E Percentage" will be equal
approximately to _____%.
The "Class B Floor" with respect to each Payment Date means (a) _____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to that Payment Date, minus (c)
the sum of the Outstanding Principal Amount of the Class C Notes, the
Outstanding Principal Amount of the Class D Notes, the Outstanding Principal
Amount of the Class E Notes, and the Overcollateralization Balance as of the
immediately preceding Payment Date after giving effect to all principal payments
made on that day, minus (d) the amount on deposit in the Reserve Account after
giving effect to withdrawals to be made on that Payment Date.
The "Class C Floor" with respect to each Payment Date means (a) _____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to that Payment Date, minus (c)
the sum of the Outstanding Principal Amount of the Class D Notes, the
Outstanding Principal Amount of the Class E Notes, and the Overcollateralization
Balance as of the immediately preceding Payment Date after giving effect to all
principal payments made on that day, minus (d) the amount on deposit in the
Reserve Account after giving effect to withdrawals to be made on that Payment
Date; provided, however, that if the Outstanding Principal Amount of the Class B
Notes is less than or equal to the Class B Floor on that Payment Date, the Class
C Floor will equal the Outstanding Principal Amount of the Class C Notes
utilized in the calculation of the Class B Floor for that Payment Date.
The "Class D Floor" with respect to each Payment Date means (a) ____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to the Payment Date, minus (c)
the sum of the Outstanding Principal Amount of the Class E Notes, and the
Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, minus (d) the amount
on deposit in the Reserve Account after giving effect to withdrawals to be made
on that Payment Date; provided, however, that if the Outstanding Principal
Amount of the Class C Notes is less than or equal to the Class C Floor on that
Payment Date, the Class D Floor will equal the Outstanding Principal Amount of
the Class D Notes utilized in the calculation of the Class C Floor for that
Payment Date.
The "Class E Floor" with respect to each Payment Date means (a) _____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to that Payment Date, minus (c)
the Overcollateralization Balance as of the immediately preceding Payment Date
after giving effect to all principal payments made on that day, minus (d) the
amount on deposit in the Reserve Account after giving effect to withdrawals to
be made on that Payment Date; provided, however, that if the Outstanding
Principal Amount of the Class D Notes is less than or equal to the Class D Floor
on that Payment Date, the Class E Floor will equal the Outstanding Principal
Amount of the Class E Notes utilized in the calculation of the Class D Floor for
that Payment Date.
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The "Overcollateralization Balance" with respect to each Payment Date
is an amount equal to the excess, if any, of (a) the Discounted Present Value of
Performing Leases as of the applicable Determination Date over (b) the
Outstanding Principal Amount of the Notes as of that Payment Date after giving
effect to all principal payments made on that day.
The "Cumulative Loss Amount" with respect to each Payment Date is an
amount equal to the excess, if any, of (a) the total of (i) the Outstanding
Principal Amount of the Notes as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, plus (ii) the
Overcollateralization Balance as of the immediately preceding Payment Date,
minus (iii) the lesser of (A) the Discounted Present Value of the Performing
Leases as of the Determination Date applicable to the immediately preceding
Payment Date minus the Discounted Present Value of the Performing Leases as of
the applicable Determination Date and (B) Available Funds remaining after the
payment of amounts owing the Servicer and in relation to interest on the Notes
on that Payment Date, over (b) the Discounted Present Value of the Performing
Leases as of the applicable Determination Date.
The "Servicing Fee" with respect to each Payment Date is an amount
equal to one-twelfth of 0.75% times the Discounted Present Value of the
Performing Leases, as of the prior Payment Date.
COLLECTION ACCOUNT. The Trustee will establish and maintain an
Eligible Account (the "Collection Account") into which the Servicer will deposit
all Lease Payments, Casualty Payments, Termination Payments, proceeds from
repurchases by Copelco Capital of Leases as a result of breaches of
representations and warranties, and recoveries from Non-Performing Leases to the
extent Copelco Capital has not substituted a Substitute Lease for that
Non-Performing Lease (except to the extent required to reimburse unreimbursed
Servicer Advances) (each as defined below) on or for each Lease included in the
Series Pool within two Business Days of receipt thereof; provided that Residual
Realizations (as defined below) will not be deposited in the Collection Account.
All Lease Payments, Casualty Payments, Termination Payments and other payments
relating to a Lease received and so deposited in the Collection Account shall
constitute property of the Issuer, securing payments on the applicable Notes
(Section 3.02(a)).
An "Eligible Account" means either (a) an account maintained with a
depository institution or trust company acceptable to each of the Rating
Agencies, or (b) a trust account or similar account maintained with a federal or
state chartered depository institution, which may be an account maintained with
the Trustee.
A "Casualty Payment" is any payment in accordance with a Lease on
account of the loss, theft, condemnation, governmental taking, destruction, or
damage beyond repair (each, a "Casualty") of any item of Equipment subject
thereto which results, in accordance with the terms of the Lease, in a reduction
in the number or amount of any future Lease Payments due thereunder or in the
termination of the Lessee's obligation to make future Lease Payments thereunder.
A "Lease Payment" is each periodic installment of rent payable by a
Lessee under a Lease. Casualty Payments, Termination Payments, prepayments of
rent required in accordance with the terms of a Lease at or before the
commencement of the Lease, payments becoming due before the applicable Cut-Off
Date and supplemental or additional payments required by the terms of a Lease
with respect to taxes, insurance, maintenance (including, without limitation any
Maintenance Charges), or other specific charges (including, without limitation,
any Excess Copy Charges and Fee Per Scan Charges), shall not be Lease Payments
hereunder.
A "Termination Payment" is a payment payable by a Lessee under a Lease
upon the early termination of the Lease (but not on account of a casualty or a
Lease default) which may be agreed upon by the Servicer, acting in the name of
the Issuer, and the Lessee.
The Servicer shall deposit within two Business Days of receipt the
following funds, as received, into the Collection Account (Section 3.03(a)),
including any funds deposited into the Collection Account from the Reserve
Account, ("Available Funds"):
(a) Lease Payments due during the prior Due Period (net of any Excess
Copy Charges, Maintenance Charges and Fee Per Scan Charges);
23
<PAGE>
(b) recoveries from Non-Performing Leases to the extent Copelco
Capital has not substituted Substitute Leases for those
Non-Performing Leases (except to the extent required to reimburse
unreimbursed Servicer Advances);
(c) late charges received on delinquent Lease payments not advanced
by the Servicer;
(d) proceeds from repurchases by Copelco Capital of Leases as a
result of breaches of representations and warranties to the
extent Copelco Capital has not substituted Substitute Leases for
those Leases other than, with respect to a Warranty Lease, the
Residual Warranty Payments. "Residual Warranty Payments" means
the excess of (a) the repurchase price associated with the
Warranty Lease over (b) the Discounted Present Value of the
remaining Lease Payments associated with the Warranty Lease as of
the beginning of the Due Period relating to that date of
determination (plus any amounts previously due and unpaid);
(e) proceeds from investment of funds in the Collection Account and
the Reserve Account, if any;
(f) Casualty Payments other than residual casualty payments
("Residual Casualty Payments") which are, at any date of
determination with respect to a Lease, the excess of (a) the
Casualty Payment associated with the Lease over (b) the
Discounted Present Value of the remaining Lease Payments
associated with the Lease as of the beginning of the Due Period
relating to that date of determination (plus any amounts
previously unpaid);
(g) Servicer Advances (as defined below);
(h) Termination Payments to the extent the Issuer does not reinvest
those Termination Payments in Additional Leases (as defined
below) other than Residual Prepayments (as defined below); and
(i) proceeds received once the Issuer exercises its right to redeem
the Notes;
(j) to the extent there occurs an Available Funds Shortfall (as
defined below), funds, if any, on deposit in the Reserve Account
to the extent of the Available Funds Shortfall.
Available Funds will not include (a) cash flows realized from the sale
or release of the Equipment following the expiration dates of the Leases, other
than Equipment subject to Non-Performing Leases, (b) Residual Warranty Payments,
(c) Residual Casualty Payments and (d) Residual Prepayments (as defined below)
("Residual Realizations").
"Residual Prepayments" means, at any date of determination with
respect to a terminated Lease, the excess of (a) the payment associated with the
terminated Lease over (b) the Discounted Present Value of the remaining Lease
Payments of the terminated Lease as of the beginning of the Due Period relating
to that date of determination (plus any amounts previously due and unpaid).
RESERVE ACCOUNT. The Trustee will establish and maintain an Eligible
Account (the "Reserve Account"). On the Issuance Date, the Issuer will make an
initial deposit in an amount equal to [___%] of the Discounted Present Value of
the Leases as of the Cut-Off Date into the Reserve Account. In the event that
Available Funds (exclusive of amounts on deposit in the Reserve Account) are
insufficient to pay the amounts owing the Servicer, Interest Payments on the
Notes and the Class A Principal Payment, the Class B Principal Payment, the
Class C Principal Payment, the Class D Principal Payment and the Class E
Principal Payment (those payments, the "Required Payments" and that shortfall,
an "Available Funds Shortfall"), the Trustee will withdraw from the Reserve
Account an amount equal to the lesser of the funds on deposit in the Reserve
Account (the "Available Reserve Amount") and that deficiency. In addition, on
each Payment Date, Available Funds remaining after the payment of the Required
Payments will be deposited into the Reserve Account to the extent that the
Required Reserve Amount exceeds the Available Reserve Amount. The "Required
Reserve Amount" equals the lesser of (a) ____% of the Discounted Present Value
of the Leases as of the Cut-Off Date and (b) the then unpaid
24
<PAGE>
principal amounts (the "Outstanding Principal Amount") of the Notes. Any amounts
on deposit in the Reserve Account in excess of the Required Reserve Amount will
be released to the Issuer (Section 3.05(c)).
DISTRIBUTIONS ON NOTES. Payments on the Notes will commence on
_________. On each Determination Date, the Servicer will determine the Available
Funds and the Required Payments.
For each Payment Date, the interest due with respect to the Notes will
be the interest that has accrued on those Notes since the last Payment Date (or,
in the case of the first Payment Date, since the Issuance Date), at the
applicable Interest Rates applied to the Outstanding Principal Amount of each
Class, after giving effect to payments of principal to Noteholders on the
preceding Payment Date (or, in the case of the first Payment Date, the Issuance
Date), plus all previously accrued and unpaid interest on the Notes (Section
2.01(c)). Funds in the Collection Account, together with reinvestment earnings
thereon, will be used by the Trustee to make required payments of principal and
interest on the applicable Notes (Section 3.03(b)).
For each Payment Date, Principal Payments due with respect to the
Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the
Class E Notes will be the Class A Principal Payment, the Class B Principal
Payment, the Class C Principal Payment, the Class D Principal Payment and the
Class E Principal Payment, respectively. In addition, to the extent that the
Class B Floor exceeds the Class B Target Investor Principal Amount, the Class C
Floor exceeds the Class C Target Investor Principal Amount, the Class D Floor
exceeds the Class D Target Investor Principal Amount and/or the Class E Floor
exceeds the Class E Target Investor Principal Amount, Additional Principal shall
be distributed, sequentially, as an additional principal payment on the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the
Class E Notes until the Outstanding Principal Amount of each Class has been
reduced to zero (Section 3.03(b)).
Unless an Event of Default (as defined below) and acceleration of the
Notes has occurred, on or before each Payment Date, the Servicer will instruct
the Trustee to apply or cause to be applied the Available Funds to make the
following payments in the following priority (Section 3.03(b)):
(a) to pay the Servicing Fee;
(b) to reimburse unreimbursed Servicer Advances in relation to a
prior Payment Date;
(c) to make Interest Payments, owing on the Class A Notes
concurrently to the Class A-1 Noteholders, Class A-2 Noteholders,
Class A-3 Noteholders, Class A-4 Noteholders and Class A-5
Noteholders;
(d) to make Interest Payments on the Class B Notes;
(e) to make Interest Payments on the Class C Notes;
(f) to make Interest Payments on the Class D Notes;
(g) to make Interest Payments on the Class E Notes;
(h) to make the Class A Principal Payment to (i) the Class A-1
Noteholders only, until the Outstanding Principal Amount on the
Class A-1 Notes is reduced to zero, then (ii) to the Class A-2
Noteholders only, until the Outstanding Principal Amount on the
Class A-2 Notes is reduced to zero, then (iii) to the Class A-3
Noteholders only, until the Outstanding Principal Amount on the
Class A-3 Notes is reduced to zero, then (iv) to the Class A-4
Noteholders only, until the Outstanding Principal Amount on the
Class A-4 Notes is reduced to zero, and finally (v) to the Class
A-5 Noteholders only, until the Outstanding Principal Amount on
the Class A-5 Notes is reduced to zero;
(i) to make the Class B Principal Payment to the Class B Noteholders;
(j) to make the Class C Principal Payment to the Class C Noteholders;
25
<PAGE>
(k) to make the Class D Principal Payment to the Class D Noteholders;
(l) to make the Class E Principal Payment to the Class E Noteholders;
(m) to pay the Additional Principal, if any, as an additional
reduction of principal to the Class A Noteholders, as provided in
Clause (h) above, until the Outstanding Principal Amount on all
of the Class A Notes has been reduced to zero, then to Class B
Noteholders until the Outstanding Principal Amount on the Class B
Notes has been reduced to zero, then to the Class C Noteholders
until the Outstanding Principal Amount on the Class C Notes has
been reduced to zero, then to the Class D Noteholders until the
Outstanding Principal Amount on the Class D Notes has been
reduced to zero, and finally to the Class E Noteholders, until
the Outstanding Principal Amounts on the Class E Notes has been
reduced to zero;
(n) to make a deposit to the Reserve Account in an amount equal to
the excess of the Required Reserve Amount over the Available
Reserve Amount; and
(o) to the Issuer, the balance, if any.
ADVANCES BY THE SERVICER. Prior to any Payment Date, the Servicer may,
but will not be required to, advance (each, a "Servicer Advance") to the Trustee
an amount sufficient to cover delinquencies on some or all Leases with respect
to prior Due Periods. The Servicer will be reimbursed for the Servicer Advances
from Available Funds on the following Payment Date. See "Distribution on Notes"
above.
EVENTS OF DEFAULT AND NOTICE THEREOF. The following events will be
defined in the Indenture as "Events of Default" with respect to the Notes:
(a) default in making Interest Payments when they become due and
payable; or
(b) default in making Principal Payments at Stated Maturity; or
(c) insolvency or bankruptcy events relating to the Issuer. (Section
6.01)
The Indenture will provide that the Trustee shall give the Noteholders
notice of all uncured defaults known to it (the term "default" to include the
events specified above without grace periods) (Sections 6.03 and 7.02).
If an Event of Default occurs, the unpaid principal amount of the
applicable Notes shall automatically become due and payable together with all
accrued and unpaid interest thereon. The Trustee may, however, if the Event of
Default involves other than non-payment of principal or interest on the Notes,
not sell the applicable Leases and Equipment unless the sale is for an amount
greater than or equal to the Outstanding Principal Amount of the Notes unless
directed to do so by the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (Section 6.03).
Subsequent to an Event of Default and following any acceleration of
the Notes in accordance with the Indenture, any moneys that may then be held or
thereafter received by the Trustee shall be applied in the following order of
priority, at the date or dates fixed by the Trustee and, in case of the
distribution of the entire amount due on account of principal or interest, upon
presentation of the Notes and surrender thereof:
FIRST to the payment of all costs and expenses of collection
incurred by the Trustee and the Noteholders (including the reasonable
fees and expenses of any counsel to the Trustee and the Noteholders);
SECOND if the person then acting as Servicer under the Assignment
and Servicing Agreement is not Copelco Capital or an affiliate of
Copelco Capital, to the payment of all Servicing Fees then due to that
person.
26
<PAGE>
THIRD first, to the payment of all accrued and unpaid interest on
the Outstanding Principal Amount of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes and Class A-5 Notes pro rata
to the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of that installment to the date of payment
thereof at the rate per annum equal to the Class A-1 Interest Rate,
Class A-2 Interest Rate, Class A-3 Interest Rate, Class A-4 Interest
Rate and Class A-5 Interest Rate respectively; second, to the payment
of all accrued and unpaid interest on the Outstanding Principal Amount
of the Class B Notes to the date of payment thereof, including (to the
extent permitted by applicable law) interest on any overdue
installment of interest and principal from the maturity of that
installment to the date of payment thereof at the rate per annum equal
to the Class B Interest Rate; third, to the payment of all accrued and
unpaid interest on the Outstanding Principal Amount of the Class C
Notes to the date of payment thereof, including (to the extent
permitted by applicable law) interest on any overdue installment of
interest and principal from the maturity of that installment to the
date of payment thereof at the rate per annum equal to the Class C
Interest Rate; fourth, to the payment of all accrued and unpaid
interest on the Outstanding Principal Amount of the Class D Notes to
the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of that installment to the date of payment
thereof at the rate per annum equal to the Class D Interest Rate;
fifth, to the payment of all accrued and unpaid interest on the
Outstanding Principal Amount of the Class E Notes to the date of
payment thereof, including (to the extent permitted by applicable law)
interest on any overdue installment of interest and principal from the
maturity of that installment to the date of payment thereof at the
rate per annum equal to the Class E Interest Rate; sixth, to the
payment of the Outstanding Principal Amount of the Class A-1 Notes;
seventh, to the payment of the Outstanding Principal Amount of the
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class A-5 Notes
pro rata to the date of payment thereof; eighth, to the payment of the
Outstanding Principal Amount of the Class B Notes to the date of
payment thereof; ninth, to the payment of the Outstanding Principal
Amount of the Class C Notes; tenth, to the payment of the Outstanding
Principal Amount of the Class D Notes; eleventh, to the payment of the
Outstanding Principal Amount of the Class E Notes; provided, that the
Noteholders may allocate that payments for interest, principal and
premium at their own discretion, except that allocation shall not
affect the allocation of those amounts or future payments received by
any other Noteholder;
FOURTH to the payment of amounts due under the $_______ __% Class
R-1 Lease-Residual Backed Notes (the "Class R-1 Notes") and the
$________ __% Class R-2 Lease-Residual Backed Notes (the "Class R-2
Notes");
FIFTH to the payment of amounts then due the Trustee under the
Indenture;
SIXTH if the person then acting as servicer is Copelco Capital or
an affiliate of Copelco Capital, to the payment of all Servicer's Fees
then due to that Person; and
SEVENTH to the payment of the remainder, if any, to the Issuer or
any other person legally entitled thereto (Section 6.06).
The Issuer will be required to furnish annually to the Trustee, a
statement of officers of the Issuer to the effect that to the best of their
knowledge the Issuer is not in default in the performance and observance of the
terms of the Indenture or, if the Issuer is in default, specifying that default
(Section 8.09).
The Indenture will provide that the holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding will have the right to waive
agreed upon defaults and, subject to agreed upon limitations, to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust power conferred on the Trustee (Sections
6.12). The Indenture will provide that in case an Event of Default shall occur
(which shall not have been cured or waived), the Trustee will be required to
exercise its rights and powers under that Indenture and to use the degree of
care and skill in their exercise that a prudent man would exercise or use in the
conduct of his own affairs (Section 7.01(b)). Subject to those provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under that Indenture at the request of any of the Noteholders unless they shall
have offered to the Trustee reasonable security or indemnity (Section 6.12).
Upon request of a Noteholder, the Trustee will provide information as to the
outstanding principal amount of each Class of Notes.
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<PAGE>
MODIFICATION OF THE INDENTURE. With some exceptions, under the
Indenture, the rights and obligations of the Issuer and the rights of the
Noteholders may be modified by the Issuer with the consent of the holders of not
less than 66-2/3% in aggregate principal amount of the Notes then outstanding
under the Indenture; but no modification may be made if it would result in the
reduction or withdrawal of the then current ratings of the outstanding Notes and
no modification may be made without the consent of the holder of each
outstanding note affected thereby if it would (a) change the fixed maturity of
any Note, or the principal amount or interest amount payable thereof, or change
the priority of payment thereof or reduce the interest rate or the principal
thereon or change the place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the right to institute
the suit for the enforcement of that payment on or after the maturity thereof;
or (b) reduce the above-stated percentage of Notes, without the consent of the
holders of all Notes then outstanding under that Indenture or (c) modify any of
Section 9.02 of the Indenture except to increase any percentage or fraction set
out in the Indenture or to provide that other provisions of the Indenture cannot
be modified or waived without the consent of the holder of each outstanding note
affected thereby; or (d) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" in the Indenture; or (e) permit the
creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any part of the Pledged Assets or, except as provided
in the Indenture, terminate the lien of the Indenture on any property at any
time subject to the Indenture or deprive any Noteholder of the Security afforded
by the lien of the Indenture. (Section 9.02).
SERVICER EVENTS OF DEFAULT. The following events and conditions shall
be defined in the Assignment and Servicing Agreement as "Servicer Events of
Default":
(a) failure on the part of the Servicer to remit to the Trustee
within three Business Days following the receipt thereof any
monies received by the Servicer required to be remitted to the
Trustee under the Assignment and Servicing Agreement;
(b) so long as Copelco Capital is the Servicer, failure on the part
of Copelco Capital to pay to the Trustee on the date when due,
any payment required to be made by Copelco Capital in accordance
with the Assignment and Servicing Agreement;
(c) default on the part of either the Servicer or (so long as Copelco
Capital is the Servicer) Copelco Capital in its observance or
performance in any material respect of covenants or agreements in
the Assignment and Servicing Agreement which failure continues
unremedied for a period of 30 days after the earlier of (i) the
date it first becomes known to any officer of Copelco Capital or
the Servicer, as the case may be, and (ii) the date on which
written notice thereof requiring the same to be remedied shall
have been given to the Servicer or Copelco Capital, as the case
may be, by the Trustee, or to the Servicer or Copelco Capital, as
the case may be, and the Trustee by any holder of the Notes;
(d) if any representation or warranty of Copelco Capital made in the
Assignment and Servicing Agreement shall prove to be incorrect in
any material respect as of the time made; provided, however, that
the breach of any representation or warranty made by Copelco
Capital in the Assignment and Servicing Agreement will be deemed
to be "material" only if it affects the Noteholders, the
enforceability of the Indenture or of the Notes; and provided,
further, that a material breach of any representation or warranty
made by Copelco Capital in the Assignment and Servicing Agreement
with respect to any of the Leases or the Equipment subject
thereto will not constitute a Servicer Event of Default if
Copelco Capital repurchases that lease and Equipment in
accordance with the Assignment and Servicing Agreement to the
extent provided within that agreement;
(e) insolvency or bankruptcy events relating to the Servicer;
(f) the failure of the Servicer to make one or more payments due with
respect to aggregate recourse debt or other obligations exceeding
$5,000,000, or the occurrence of any event or the existence of
any condition, the effect of which event or condition is to cause
(or permit one or more persons to cause) more than $5,000,000 of
aggregate recourse debt or other obligations of the Servicer to
become due before its (or their) stated maturity or before its
(or
28
<PAGE>
their) regularly scheduled dates of payment so long as the
failure, event or condition shall be continuing and shall not
have been waived by the person or persons entitled to
performance;
(g) a final judgment or judgments (or decrees or orders) for the
payment of money aggregating in excess of $5,000,000 and any one
of those judgments (or decrees or orders) has remained
unsatisfied and in effect for any period of 60 consecutive days
without a stay of execution.
SERVICER TERMINATION. So long as a Servicer Event of Default under the
Assignment and Servicing Agreement is continuing, the Trustee shall, upon the
instructions of the holders of 66 2/3% in principal amount of the Notes, by
notice in writing to the Servicer terminate all of the rights and obligations of
the Servicer (but not Copelco Capital's obligations which shall survive that
termination) under the Assignment and Servicing Agreement (Section 5.01). Upon
the receipt by the Servicer of the written notice, all authority and power of
the Servicer under the Assignment and Servicing Agreement to take any action
with respect to any Lease or Equipment will cease and the same will pass to and
be vested in the Trustee in accordance with and under the Assignment and
Servicing Agreement and the Indenture.
REDEMPTION. The Issuer may, at its option, redeem the Notes, as a
whole, at their principal amount, without premium, together with interest
accrued to the date fixed for redemption if on any payment date the Discounted
Present Value of the Leases is less than or equal to 10% of the Discounted
Present Value of the Leases in the applicable Series Pool as of the original
Cut-Off Date. The Issuer will give notice of redemption to each Noteholder and
the Trustee at least 30 days before the Payment Date fixed for prepayment. Upon
deposit of funds necessary to effect redemption, the Trustee shall pay the
remaining unpaid principal amount on the Notes and all accrued and unpaid
interest as of the Payment Date fixed for redemption.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Leases. The payments
on those Leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Those payments may result in distributions to Noteholders
of amounts which would otherwise have been distributed over the remaining term
of the Leases. In general, the rate of those payments may be influenced by a
number of other factors, including general economic conditions. The rate of
Principal Payments with respect to any Class may also be affected by any
repurchase of the underlying Leases by Copelco Capital in accordance with the
Assignment and Servicing Agreement. In that event, the repurchase price will
decrease the Discounted Present Value of the Performing Leases, causing the
corresponding weighted average life of the Notes to decrease. See "Risk
Factors--Prepayments."
In the event a Lease becomes a Non-Performing Lease, a Lease subject
to repurchase as a result of a breach of representation and warranty (a
"Warranty Lease") or a Lease following a modification or adjustment to the terms
of that Lease (an "Adjusted Lease"), Copelco Capital will have the option to
substitute for the terminated Lease another Lease of similar characteristics (a
"Substitute Lease") in an aggregate amount not to exceed 10% of the Discounted
Present Value of the Leases as of the Cut-Off Date with respect to
Non-Performing Leases and in an aggregate amount not to exceed 10% of the
Discounted Present Value of the Leases as of the Cut-Off Date with respect to
Adjusted Leases and Warranty Leases. In addition, in the event of an early
termination by a Lessee ("Early Lease Termination") which has been prepaid in
full, Copelco Capital will have the option to transfer an additional Lease of
similar characteristics (an "Additional Lease"). The Substitute Leases and
Additional Leases will have a Discounted Present Value of the Leases equal to or
greater than that of the Leases being modified and replaced and the monthly
payments on the Substitute Leases or Additional Leases will be at least equal to
those of the terminated Leases through the term of those terminated Leases. In
the event that an Early Lease Termination is allowed by Copelco Capital and a
Substitute Lease is not provided, the amount prepaid will be equal to at least
the Discounted Present Value of the terminated Lease, plus any delinquent
payments.
The effective yield to holders of the Notes will depend upon, among
other things, the amount of and rate at which principal is paid to those
Noteholders. The after-tax yield to Noteholders may be affected by lags between
the time interest income accrues to Noteholders and the time the applicable
interest income is received by the Noteholders.
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<PAGE>
The following chart sets forth the percentage of the Initial
Statistical Principal Amount (as defined below) of the 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, Class D Notes and Class E Notes which would be outstanding on the
Payment Dates presented below assuming a Conditional Prepayment Rate ("CPR") of
0% and 12%, respectively, and were calculated using the Statistical Discount
Rate. The "Initial Statistical Principal Amount" of the 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, Class D Notes and Class E Notes is $______________,
$______________, $______________, $______________, $______________,
$______________, $______________, $______________ and $______________,
respectively. The "Statistical Class Percentage" for the Class A Notes, Class B
Notes, Class C Notes, Class D Notes and Class E Notes is equal to ____%, ____%,
____%, ____% and ____%, respectively. This information is hypothetical and is
presented for illustrative purposes only. The CPR assumes that a fraction of the
outstanding Series Pool is prepaid on each Payment Date, which implies that each
Lease in the Series Pool is equally likely to prepay. This fraction, expressed
as a percentage, is annualized to arrive at the CPR for the Series Pool. The CPR
measures prepayments based on the outstanding Statistical Discounted Present
Value of the Leases, after the payment of all scheduled payments on the Leases
during that Due Period. The CPR further assumes that all Leases are the same
size and amortize at the same rate and that each Lease will be either paid as
scheduled or prepaid in full. The amounts described below are based upon the
timely receipt of scheduled monthly Lease payments as of the Cut-Off Date,
assume that the Issuer exercises its option to redeem the Notes and assume the
Issuance Date is ___________ and the first Payment Date is _________. The
following charts were created using the Statistical Class Percentage associated
with the Statistical Initial Principal Amounts of the respective class.
30
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET FORTH BELOW
=====================================================================================================================
0% CPR
-------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS B CLASS C CLASS D CLASS E
- ------------------ --------- --------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ISSUANCE DATE
- -------------
% % % % % % % % %
July 18, 1999
August 18, 1999
September 18, 1999
October 18, 1999
November 18, 1999
December 18, 1999
January 18, 2000
February 18, 2000
March 18, 2000
April 18, 2000
May 18, 2000
June 18, 2000
July 18, 2000
August 18, 2000
September 18, 2000
October 18, 2000
November 18, 2000
December 18, 2000
January 18, 2001
February 18, 2001
March 18, 2001
April 18, 2001
May 18, 2001
June 18, 2001
July 18, 2001
August 18, 2001
September 18, 2001
October 18, 2001
November 18, 2001
December 18, 2001
January 18, 2002
February 18, 2002
March 18, 2002
April 18, 2002
May 18, 2002
June 18, 2002
July 18, 2002
August 18, 2002
September 18, 2002
October 18, 2002
November 18, 2002
December 18, 2002
January 18, 2003
February 18, 2003
March 18, 2003
April 18, 2003
May 18, 2003
June 18, 2003
July 18, 2003
</TABLE>
WEIGHTED AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class A-5 Note, Class B Note, Class C Note, Class D
Note, and Class E Note is determined by (a) multiplying the amount of cash
distributions in reduction of the Outstanding Principal Amount of the
respective Offered Note by the number of years from the Issuance Date to
the Payment Date, (b) adding the results, and (c) dividing the sum by the
respective Initial Principal Amount.
31
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET FORTH BELOW
=====================================================================================================================
0% CPR
-------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS B CLASS C CLASS D CLASS E
- ------------------ --------- --------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
July 18, 1999
August 18, 1999
September 18, 1999
October 18, 1999
November 18, 1999
December 18, 1999
January 18, 2000
February 18, 2000
March 18, 2000
April 18, 2000
May 18, 2000
June 18, 2000
July 18, 2000
August 18, 2000
September 18, 2000
October 18, 2000
November 18, 2000
December 18, 2000
January 18, 2001
February 18, 2001
March 18, 2001
April 18, 2001
May 18, 2001
June 18, 2001
July 18, 2001
August 18, 2001
September 18, 2001
October 18, 2001
November 18, 2001
December 18, 2001
January 18, 2002
February 18, 2002
March 18, 2002
April 18, 2002
May 18, 2002
June 18, 2002
July 18, 2002
August 18, 2002
September 18, 2002
October 18, 2002
November 18, 2002
December 18, 2002
January 18, 2003
February 18, 2003
March 18, 2003
April 18, 2003
May 18, 2003
June 18, 2003
July 18, 2003
</TABLE>
WEIGHTED AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class A-5 Note, Class B Note, Class C Note, Class D
Note, and Class E Note is determined by (a) multiplying the amount of cash
distributions in reduction of the Outstanding Principal Amount of the
respective Offered Note by the number of years from the Issuance Date to
the Payment Date, (b) adding the results, and (c) dividing the sum by the
respective Initial Principal Amount.
32
<PAGE>
SECURITY FOR THE NOTES
Repayment of the Notes will be secured by (a) a first priority
security interest in the underlying Leases perfected by filing UCC financing
statements against the Issuer and Copelco Capital, (b) a security interest in
the applicable Equipment owned by the Issuer and an assignment of the Issuer's
security interest in the Equipment subject to Leases which contain a nominal
purchase option upon expiration or other terms which may be deemed effectively
to vest ownership of the Equipment in the Lessee ("Nominal Buy-Out Leases"),
which security interest was originally perfected by Copelco Capital (for
Equipment with an original cost in excess of $25,000 which assignment will be
recorded in the manner described below) and (c) all funds in the Collection
Account and the Reserve Account.
THE INDENTURE TRUSTEE
Manufacturers and Traders Trust Company will be the Trustee under the
Indenture. Copelco Capital, as Transferor or Servicer, and its affiliates may
from time to time enter into normal banking and Trustee relationships with the
Trustee and its affiliates. The Trustee, the Servicer and any of their
respective affiliates may hold Notes in their own names. In addition, for
purposes of meeting the legal requirements of local jurisdictions, the Trustee
shall have the power to appoint a co-Trustee or a separate Trustee under the
Indenture. In the event of that appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Indenture will be
conferred or imposed upon the Trustee and the separate Trustee or co-Trustee
jointly, or in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform acts, singly upon the separate Trustee or co-Trustee, who
shall exercise and perform those rights, powers, duties and obligations solely
at the direction of the Trustee.
The Trustee may resign at any time, in which event the Issuer will be
obligated to appoint a successor Trustee. The Issuer may also remove each
Trustee if the Trustee ceases to be eligible to continue as the Trustee under
the Indenture, fails to perform in any material respect its obligations under
the Indenture, or becomes insolvent. In those circumstances, the Issuer will be
obligated to appoint a successor Trustee. Any resignation or removal of a
Trustee and appointment of a successor Trustee will not become effective until
acceptance of the appointment by the successor Trustee.
LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
GENERAL. The Leases are triple-net leases, requiring the Lessees to
pay all taxes, maintenance and insurance associated with the Equipment, and are
primarily non-cancelable by the Lessees.
The Leases are "hell or high water" leases, under which the
obligations of the Lessee is absolute and unconditional, regardless of any
defense, setoff or abatement which the Lessee may have against Copelco Capital,
as Transferor or Servicer, the Issuer, or any other person or entity whatsoever.
Defaults under the Leases are generally the result of failure to pay
amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the Lessee under a Lease. The remedies of the lessor (and the
Issuer as assignee) following a notice and cure period are generally to seek to
enforce the performance by the Lessee of the terms and covenants of the Lease
(including the Lessee's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the Lessee under the Lease.
Although the Leases permit the lessor to repossess and dispose of the applicable
Equipment in the event of a Lease default, and to credit those proceeds against
the Lessee's liabilities thereunder, those remedies may be limited where the
Lessee thereunder is subject to bankruptcy, or other insolvency proceedings.
UCC AND BANKRUPTCY CONSIDERATIONS. In accordance with the Assignment
and Servicing Agreement, Copelco Capital will make a capital contribution to the
Issuer of the Leases and Equipment owned by Copelco Capital and subject to the
Leases, and assign its security interests in the Equipment subject to Nominal
33
<PAGE>
Buy-Out Leases. Copelco Capital will warrant that each of the contribution of
the Leases from Copelco Capital to the Issuer is an absolute assignment, that
the contributions of its rights in the Equipment is a valid transfer of Copelco
Capital's title to the Equipment and that Copelco Capital is either the owner of
the Equipment or has a valid perfected first priority security interest in the
Equipment (for Leases with leased Equipment having an original equipment cost in
excess of $25,000), including Equipment subject to Nominal Buy-Out Leases, and
accordingly, Copelco Capital has filed UCC financing statements in its favor
against Lessees in relation to all Equipment in the Series Pool with an original
Equipment cost in excess of $25,000. No action will be taken to perfect the
interest of Copelco Capital in any Equipment in the Series Pool with an original
Equipment cost of less than $25,000. In addition, UCC financing statements
identifying security interests in the Equipment as transferred to, or obtained
by, the Issuer or the Trustee and UCC financing statements identifying equipment
owned by Copelco Capital, transferred to the Issuer and pledged to the Trustee
will be filed in favor of the Issuer or the Trustee in the central filing
location for any given state. In the event of the repossession and resale of
Equipment subject to a superior lien, the senior lienholder would be entitled to
be paid the full amount of the indebtedness owed to it out of the sale proceeds
before the proceeds could be applied to the payment of claims by the Servicer on
behalf of the Issuer. Statutory provisions, including federal and state
bankruptcy and insolvency laws, may limit the ability of the Servicer to
repossess and resell collateral or obtain a deficiency judgment in the event of
a Lessee default. In the event of the bankruptcy or reorganization of a Lessee,
or Copelco Capital, as Transferor or Servicer, various provisions of the
Bankruptcy Code of 1978, 11 U.S.C ss.ss. 101-1330 (the "Bankruptcy Code"), and
applicable laws may interfere with, delay or eliminate the ability of Copelco
Capital or the Issuer to enforce its rights under the Leases.
In the case of operating leases, the Bankruptcy Code grants to the
bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of an operating
lease or contract constitutes a breach of that lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described by
this Prospectus Supplement. Upon the bankruptcy of a Lessee, if the bankruptcy
trustee or debtor-in-possession elected to reject a lease, the flow of scheduled
payments to Noteholders would cease. In the event that, as a result of the
bankruptcy of a Lessee, the Servicer is prevented from collecting scheduled
payments with respect to Leases and those Leases become Non-Performing Leases,
no recourse would be available against Copelco Capital (except for
misrepresentation or breach of warranty) and the Noteholders could suffer a loss
with respect to the Notes. Similarly, upon the bankruptcy of the Issuer, if the
bankruptcy trustee or debtor-in-possession elected to reject a lease, the flow
of lease payments to the Issuer and the Noteholders would cease. As noted above,
however, the Issuer has been structured so that the filing of a bankruptcy
petition with respect to it is unlikely. See "The Issuer."
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of Equipment, may limit the amount
realized on the sale of Equipment to less than the amount due on the applicable
lease.
NON-PETITION. Pursuant to the Indenture, the Trustee and the holders
of the Offered Notes, and the holders of the Class E Notes with a stated
maturity date of ______, the holders of the Class R-1 Notes with a stated
maturity date of _________ and the Class R-2 Notes with a stated maturity date
of ______ (the "Class R-2 Notes," together with the Class E Notes and the Class
R-1 Notes, the "Private Notes") will agree not to institute, cooperate with or
encourage others to institute against the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
the Bankruptcy Code or any state bankruptcy or similar law in connection with
any obligations relating to the Offered Notes and the Private Notes or the
Indenture until the expiration of one year and one day (or if a preference
period of the applicable jurisdiction is longer, the applicable preference
period under that bankruptcy or similar law) from the date all of the Offered
Notes and the Private Notes are paid in full.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following paragraphs together with the description of
federal income tax consequences detailed in the Prospectus under the heading
"Material Federal Income Tax Consequences" present the material federal income
tax consequences to the original purchasers of the Notes of the purchase,
ownership and
34
<PAGE>
disposition of the Notes. Tax Counsel's opinion does not purport to deal with
all federal income tax considerations applicable to all categories of investors.
The tax consequences to holders subject to special rules, including insurance
companies, tax exempt organizations, financial institutions or broker deals,
taxpayers subject to the alternative minimum tax, and holders that will hold the
Notes as other than capital assets, are not discussed below or in the
Prospectus. In particular, this discussion applies only to investors that
purchase Notes directly from the Issuer and hold the Notes as capital assets.
The discussion that follows, and the opinion set forth below of Dewey
Ballantine LLP, special tax counsel ("Tax Counsel") to the Issuer are based upon
provisions of the Internal Revenue Code of 1986, as amended (the "Code") and
treasury regulations promulgated thereunder as in effect on the date hereof and
on existing judicial and administrative interpretations thereof. These
authorities are subject to change and to differing interpretations, which could
apply retroactively. The opinion of Tax Counsel is not binding on the courts or
the Internal Revenue Service (the "IRS"). Potential investors are urged to
consult their own tax advisors in determining the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition of the
Notes.
The following discussion addresses lease-backed notes such as the
Notes that are intended to be treated for federal income tax purposes as
indebtedness secured by the underlying Leases. Tax counsel has prepared the
following discussion and is of the opinion that it is correct in all material
respects.
TAX CHARACTERIZATION OF THE ISSUER. Tax Counsel is of the opinion that
the Issuer will not be treated as an association (or a publicly traded
partnership) taxable as a corporation for federal income tax purposes.
TAX CHARACTERIZATION OF THE NOTES. In the opinion of Tax Counsel,
although no transaction closely comparable to that contemplated in this
Prospectus has been the subject of any treasury regulation, revenue ruling or
judicial decision, based on the application of existing law to the facts as set
forth in the applicable agreement, the Notes will be treated as indebtedness for
federal income tax purposes. Although it is the opinion of Tax Counsel that the
Notes are properly characterized as indebtedness for federal income tax
purposes, no assurance can be given that this debt characterization of the Notes
will prevail. The IRS could recharacterize the Notes under several alternative
theories. See "Material Federal Income Tax Consequences--Tax Characterization of
the Notes" in the Prospectus.
DISCOUNT AND PREMIUM. It is not anticipated that the Notes will be
issued with any original issue discount. See "Material Federal Income Tax
Consequences--Discount and Premium--Original Issue Discount" in the Prospectus.
In addition, a subsequent purchaser who buys a Note for less than its principal
amount may be subject to the "market discount" rules of the Code. See "Material
Federal Income Tax Consequences--Discount and Premium--Market Discount" in the
Prospectus. A subsequent purchaser who buys a Note for more than its principal
amount may be subject to the "market premium" rules of the Code. See "Material
Federal Income Tax Consequences--Discount and Premium--Premium" in the
Prospectus.
SALE OR EXCHANGE OF THE NOTES. If a Note is sold or exchanged, the
seller will recognize gain or loss equal to the difference between the amount
realized on the sale and its adjusted basis in the Note. See "Material Federal
Income Tax Consequences--Sale or Exchange" in the Prospectus.
OTHER MATTERS. For a discussion of backup withholding and taxation of
foreign investors in the Notes, see "Material Federal Income Tax
Consequences--Backup Withholding" and "--Foreign Investors" in the Prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements and restrictions on those pension,
profit-sharing and other employee benefits plans to which it applies and on
those persons who are fiduciaries with respect to those plans. In accordance
with ERISA's fiduciary standards, before purchasing the Offered Notes, a
fiduciary should determine whether an investment is permitted under the
documents and instruments governing the plan and is appropriate for the plan in
view of its overall investment policy and the composition of its portfolio.
35
<PAGE>
Section 406 of ERISA and Section 4975 of the Code prohibit
transactions involving the assets of plans subject thereto (each, a "Benefit
Plan") and persons who are "parties in interest," within the meaning of ERISA,
or "disqualified persons," within the meaning of the Code. Transactions
involving the purchase, holding or transfer of the Offered Notes might be deemed
to constitute prohibited transactions under ERISA and the Code if assets of the
Issuer were deemed to be assets of a Benefit Plan. Under regulations issued by
the United States Department of Labor set out in 29 C.F.R. ss. 2510.3101 (the
"Plan Asset Regulations"), the assets of the Issuer would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquired an "equity interest" in the Issuer and none of the
exceptions contained in the Plan Asset Regulations is applicable. An equity
interest is defined under the Plan Asset Regulations as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. It is anticipated that the Offered
Notes should be treated as indebtedness without substantial equity features for
purposes of the Plan Asset Regulations. However, even if the Offered Notes are
treated as indebtedness for those purposes, the acquisition or holding of
Offered Notes by or on behalf of a Benefit Plan could be considered to give rise
to a prohibited transaction if the Issuer or any of its affiliates is or becomes
a party in interest or disqualified person with respect to the applicable
Benefit Plan. In this event, exemptions from the prohibited transaction rules
could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to acquire a Note. Included among these exemptions
are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments
by insurance company pooled separate accounts; PTCE 91-38 regarding investments
by bank collective investment funds; PTCE 84-14, regarding transactions effected
by "qualified professional asset managers;" PTCE 95-60, regarding investments by
insurance company general accounts; and PTCE 96-23 regarding transactions
effected by "in-house asset managers." Each investor using assets of a Benefit
Plan which acquires the Offered Notes, or to whom the Offered Notes are
transferred, will be deemed to have represented that the acquisition and
continued holding of the Offered Notes will be covered by one of the exemptions
listed above or another Department of Labor class exemption.
Insurance companies considering the purchase of the Offered Notes
should also consult their own counsel as to the application of the decision by
the United States Supreme Court in John Hancock Mutual Life Insurance Co. v.
Harris Trust and Savings Bank (510 U.S. 86). Under that decision, assets held in
an insurance company's general account may be deemed assets of ERISA plans under
certain circumstances.
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; however, governmental plans may be
subject to comparable federal, state or local law restrictions.
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that a
fiduciary investing assets of an ERISA plan consult with counsel regarding the
consequences under ERISA of the acquisition and holding of Offered Notes,
including the availability of any administrative exemptions from the prohibited
transaction rules.
The sale of Notes to a Benefit Plan is in no respect a representation
by the Issuer or the Underwriters that this investment meets all relevant legal
requirements with respect to investments by Benefit Plans generally or by a
particular Benefit Plan, or that this investment is appropriate for Benefit
Plans generally or any particular Benefit Plan.
UNDERWRITING
Under the terms and subject to the conditions described in the
underwriting agreement (the "Underwriting Agreement") for the sale of the
Offered Notes, the Issuer has agreed to sell and ___________ ("___________") and
_________________ ("____________," and together with ____________ the
"Underwriters") each severally has agreed to purchase the principal amount of
the Offered Notes described below:
36
<PAGE>
---------------- ----------------
PRINCIPAL AMOUNT PRINCIPAL AMOUNT TOTALS
- -------------------- -------------------- -------------------- ----------
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 $ $ $
Class D Notes $ $ $
------------------- ------------------- ---------
Totals $ $ $
The Issuer has been advised by Underwriters that the several
Underwriters propose initially to offer the Notes to the public at the
respective prices set out on the cover page of this Prospectus Supplement, and
to dealers at that price, less a selling 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 the
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 public offering, the public
offering price and those concessions may be changed.
The Underwriters will each represent and agree that:
(a) it has not offered or sold, and, prior to the expiration of six
months from the Issuance Date, will not offer or sell, any
Offered Notes to persons in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for
purposes of their business, or otherwise in circumstances which
have not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
(b) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by
it in relation to the Offered Notes in, from or otherwise
involving the United Kingdom; and
(c) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with
the issue of the Offered Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or persons to
whom the document may otherwise lawfully be issued, distributed
or passed on.
The Issuer and Copelco Capital, Inc. have agreed to jointly and
severally indemnify the Underwriters against specified liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Issuer has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Offered Notes, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however, to
make a market in the Offered Notes and any market making may be discontinued at
any time at the sole discretion of the Underwriters. Accordingly, no assurance
can be given as to the liquidity of, or trading markets for, the Offered Notes.
The Underwriters may engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids with
respect to the Offered Notes in accordance with Regulation M under the
Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment
transactions involve syndicate sales in
37
<PAGE>
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the Offered Notes so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transaction involve purchase of the Offered Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the Offered Notes originally sold by a syndicate member
are purchased in a syndicate covering transaction. Over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Offered Notes to be higher than they would otherwise be
in the absence of those transactions. The Seller and the Underwriters do not
represent that the Underwriters will engage in those transactions. Those
transactions, once commenced, may be discontinued without notice at any time.
__________ is serving as the placement agent for the Private Notes.
EXPERTS
The balance sheet of Copelco Capital Funding LLC 2000-A as of
__________, 1999, has been included along with this Prospectus Supplement and in
the Registration Statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere, and upon the authority of
said firm as experts in auditing and accounting.
LEGAL MATTERS
Legal matters relating to the Notes will be passed upon for Copelco
Capital, Inc., the Servicer and the Issuer by Spencer N. Lempert, General
Counsel and Senior Vice President of Copelco Financial, and for Copelco Capital,
the Issuer and the Underwriters by Dewey Ballantine LLP, New York, New York.
RATING OF THE OFFERED NOTES
It is a condition to the issuance of the Offered Notes that the Class
A-1 Notes be rated at least " ", " " and " ", that the Class A-2, A-3, A-4 and
A-5 Notes be rated at least " ", " " and " ", that the Class B Notes be rated at
least " ", " " and " ", that the Class C Notes be rated at least " ", " " and
" " and that the Class D Notes be rated at least " ", " " and " " by
__________________ ("________"), ______________("_______") and
___________________ ("__________"), respectively (each a "Rating Agency").
The rating will reflect only the views of the Rating Agencies and will
be based primarily on the amount of subordination, the availability of funds on
deposit in the Reserve Account and the value of the Leases and Equipment. The
ratings are not a recommendation to purchase, hold or sell the applicable
Offered Notes, inasmuch as the ratings do not comment as to market price or
suitability for a particular investor. There is no assurance that any particular
rating will continue for any period of time or that it will not be lowered or
withdrawn entirely by the Rating Agencies if, in its judgment, circumstances so
warrant. A revision or withdrawal of the rating may have an adverse affect on
the market price of the Offered Notes. The rating of the Offered Notes addresses
the likelihood of the timely payment of interest and the ultimate payment of
principal on the Offered Notes by the stated maturity date of the applicable
class. The rating does not address the rate of prepayments that may be
experienced on the Leases and, therefore, does not address the effect of the
rate of Lease Prepayments on the return of principal to the holders of the
Offered Notes.
38
<PAGE>
INDEX OF TERMS
TERM PAGE(S)
Additional Lease............................................................29
Additional Principal........................................................21
Adjusted Lease..............................................................29
Available Funds.............................................................23
Available Funds Shortfall...................................................24
Available Reserve Amount....................................................24
Bankruptcy Code.............................................................34
Benefit Plan................................................................36
Casualty....................................................................23
Casualty Payment............................................................23
Class A Initial Principal Amount............................................19
Class A Noteholders.........................................................20
Class A Notes...............................................................18
Class A Percentage..........................................................22
Class A Principal Payment...................................................21
Class A Target Investor Principal Amount....................................21
Class A-1 Initial Principal Amount..........................................19
Class A-1 Interest Rate.....................................................18
Class A-1 Noteholders.......................................................20
Class A-1 Notes.............................................................18
Class A-1 Stated Maturity Date..............................................19
Class A-2 Initial Principal Amount..........................................19
Class A-2 Interest Rate.....................................................18
Class A-2 Noteholders.......................................................20
Class A-2 Notes.............................................................18
Class A-2 Stated Maturity Date..............................................20
Class A-3 Initial Principal Amount..........................................19
Class A-3 Interest Rate.....................................................18
Class A-3 Noteholders.......................................................20
Class A-3 Notes.............................................................18
Class A-3 Stated Maturity Date..............................................20
Class A-4 Initial Principal Amount..........................................19
Class A-4 Interest Rate.....................................................18
Class A-4 Noteholders.......................................................20
Class A-4 Notes.............................................................18
Class A-4 Stated Maturity Date..............................................20
Class A-5 Initial Principal Amount..........................................19
Class A-5 Interest Rate.....................................................18
Class A-5 Noteholders.......................................................20
Class A-5 Notes.............................................................18
Class A-5 Stated Maturity Date..............................................20
Class B Floor...............................................................22
Class B Initial Principal Amount............................................19
Class B Interest Rate.......................................................18
Class B Noteholders.........................................................20
Class B Notes...............................................................18
Class B Percentage..........................................................22
Class B Principal Payment...................................................21
Class B Stated Maturity Date................................................20
Class B Target Investor Principal Amount....................................21
Class C Floor...............................................................22
Class C Initial Principal Amount............................................19
39
<PAGE>
Class C Interest Rate.......................................................18
Class C Noteholders.........................................................20
Class C Notes...............................................................18
Class C Percentage..........................................................22
Class C Principal Payment...................................................21
Class C Stated Maturity Date................................................20
Class C Target Investor Principal Amount....................................21
Class D Floor...............................................................22
Class D Initial Principal Amount............................................19
Class D Interest Rate.......................................................18
Class D Noteholders.........................................................20
Class D Notes...............................................................18
Class D Percentage..........................................................22
Class D Principal Payment...................................................21
Class D Stated Maturity Date................................................20
Class D Target Investor Principal Amount....................................22
Class E Floor...............................................................22
Class E Initial Principal Amount............................................19
Class E Interest Rate.......................................................18
Class E Noteholders.........................................................20
Class E Notes...............................................................18
Class E Percentage..........................................................22
Class E Principal Payment...................................................21
Class Floors................................................................22
Class R-1 Notes.............................................................27
Class R-2 Notes.............................................................27
Code........................................................................35
Collection Account..........................................................23
Copelco Capital..............................................................8
Copelco Financial...........................................................17
CPR.........................................................................30
Cumulative Loss Amount......................................................23
Cut-Off Date.................................................................8
Determination Date..........................................................20
Discount Rate...............................................................19
Discounted Present Value of the Leases......................................19
Discounted Present Value of the Performing Leases...........................19
Due Period..................................................................20
Eligible Account............................................................23
Equipment....................................................................8
ERISA.......................................................................35
Events of Default...........................................................26
Excess copy charges.........................................................19
Fee Per Scan Charges........................................................19
Indenture...................................................................18
Initial Principal Amount....................................................18
Initial Statistical Principal Amount........................................30
Interest Accrual Period.....................................................20
Interest Payments...........................................................20
Interest Rate...............................................................18
IRS.........................................................................35
Issuance Date................................................................8
Issuer.......................................................................8
Lease Contract...............................................................8
Lease Payment...............................................................23
Leases.......................................................................8
40
<PAGE>
Lessee.......................................................................8
Lessees......................................................................8
Maintenance Charges.........................................................19
Manager.....................................................................17
Nominal Buy-Out Leases......................................................33
Non-Performing Leases........................................................8
Noteholders.................................................................20
Notes.......................................................................18
Offered Notes...............................................................18
Origination Groups...........................................................8
Outstanding Principal Amount................................................25
Outstanding Principal Amounts...............................................20
Overcollateralization Balance...............................................23
Plan Asset Regulations......................................................36
Pledged Assets...............................................................9
Principal Payments..........................................................20
Private Notes...............................................................34
PTCE........................................................................36
Rating Agency...............................................................38
Record Date.................................................................20
Required Payments...........................................................24
Required Reserve Amount.....................................................24
Reserve Account.............................................................24
Residual Casualty Payments..................................................24
Residual Prepayments........................................................24
Residual Realizations.......................................................24
Residual Warranty Payments..................................................24
Series Pool..................................................................8
Servicer.....................................................................8
Servicer Advance............................................................26
Servicer Events of Default..................................................28
Servicing Fee...............................................................23
Statistical Class Percentage................................................30
Statistical Discount Rate...................................................19
Statistical Discounted Present Value of the Leases..........................19
Substitute Lease............................................................29
Tax Counsel.................................................................35
Termination Payment.........................................................23
Underwriters................................................................36
Underwriting Agreement......................................................36
Warranty Lease..............................................................29
41
<PAGE>
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$
Copelco Capital
Funding LLC 2000-A
-------------------------------------------------
P R O S P E C T U S
-------------------------------------------------
[UNDERWRITER(S)]
Dated __________
Until 90 days after the date of this Prospectus Supplement, all dealers that
effect transactions in the Offered Notes, whether or not participating in this
offering, may be required to deliver a Prospectus Supplement and an accompanying
Prospectus. This is in addition to the dealers' obligation to deliver a
Prospectus Supplement and an accompanying Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
================================================================================
================================================================================
$__________ _____% Class A-1
Lease-Backed Notes
$__________ _____% Class A-2
Lease-Backed Notes
$__________ _____% Class A-3
Lease-Backed Notes
$__________ _____% Class A-4
Lease-Backed Notes
$__________ _____% Class A-5
Lease-Backed Notes
$__________ _____% Class B
Lease-Backed Notes
$__________ _____% Class C
Lease-Backed Notes
$__________ _____% Class D
Lease-Backed Notes
================================================================================
42
