AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 1999
Registration No. 333-79903
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
COPELCO CAPITAL RECEIVABLES LLC
(Exact name of registrant as specified in its charter)
-------------------
DELAWARE PENDING
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
COPELCO CAPITAL RECEIVABLES LLC
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>
<CAPTION>
CALCULATION OF REGISTRATION FEE
======================================================================================================
Amount Proposed Maximum Proposed Maximum
Title of Securities To Be Aggregate Price Per Aggregate Offering Amount
Being Registered Registered 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>
FORM OF PROSPECTUS SUPPLEMENT
- --------------------------------------------------------------------------------
$____________
COPELCO CAPITAL RECEIVABLES LLC, ISSUER
COPELCO CAPITAL, INC., SERVICER
SERIES _____
LEASE-BACKED NOTES
- ----------------------------------------------
YOU SHOULD READ THE SECTION ENTITLED "RISK
FACTORS" STARTING ON PAGE 5 OF THIS
PROSPECTUS SUPPLEMENT AND PAGE 5 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 secured solely by the assets of
Copelco Capital Receivables LLC. The notes
are not debt obligations of any other person.
The notes will not be insured or guaranteed
by any governmental agency or instrumentality.
- ----------------------------------------------
We 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 our assets. Our assets securing the notes
will include a pool of copier, computer, healthcare and commercial and
industrial equipment leases, and all of its interest in the equipment
underlying the leases;
o Receive distributions beginning on ________;
o Represent our debt obligations; and
o Currently have no trading market.
<TABLE>
<CAPTION>
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INITIAL RATINGS
UNDERWRITING INTEREST INITIAL PUBLIC ----------------------------------
DISCOUNT RATE OFFERING PRICE
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<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $ % % %
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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.................................iii
Summary.......................................................................1
Lease-Backed Notes Series _____...............................................1
Issuer.....................................................................1
Manager....................................................................1
Servicer...................................................................1
Trustee....................................................................1
The Pledged Assets.........................................................1
Leases.....................................................................1
Cut-off Date...............................................................2
Payment Date...............................................................2
Determination Date.........................................................2
Record Date................................................................2
Issuance Date..............................................................2
Denominations..............................................................2
Priority of Distributions..................................................2
Reserve Account............................................................3
Optional Redemption........................................................3
Final Scheduled Payment Date...............................................3
Federal Income Tax Consequences............................................4
ERISA Considerations.......................................................4
Ratings....................................................................4
Risk Factors..................................................................5
Use of Proceeds...............................................................6
The Series Pool...............................................................6
COPELCO CAPITAL, INC. FINANCIAL INFORMATION...................................7
Management's Discussion and Analysis of Financial Condition..................18
Description of the Notes.....................................................19
<PAGE>
Security for the Notes.......................................................38
The Indenture Trustee........................................................38
Legal Matters Affecting a Lessee's Rights and Obligations...................38
Material Federal Income Tax Consequences.....................................40
ERISA Considerations.........................................................41
Underwriting.................................................................42
Experts......................................................................44
Legal Matters................................................................44
Rating of the Offered Notes..................................................44
Glossary.....................................................................50
ii
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
All references to "we," "us," "our," or "ourselves" mean Copelco Capital
Receivables LLC.
We provide information to you about the securities in two separate
documents that progressively provide more detail: (1) the prospectus, which
provides general information, some of which may not apply to a particular series
of securities, and (2) this prospectus supplement, which describes the specific
terms of your series of securities.
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.
We have 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.
iii
<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, we
suggest that you 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 _____
We will issue the notes offered by this prospectus supplement in book-entry form
through the facilities of The Depository Trust Company.
ISSUER
We will be a limited liability company formed under the laws of the State of
Delaware. Our address is 700 East Gate Drive, Mt. Laurel, NJ 08054.
MANAGER
We 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
We will pledge our 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 us 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.
<PAGE>
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, with the exception of 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 _______.
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
We 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, we will distribute the amounts received on the leases and any other
collections available as our property as follows:
Interest Distributions
On each payment date, we will pay interest at the applicable interest rate that
accrued during the prior interest accrual period.
Principal Distributions
On each payment date, we 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. We 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;
S-2
<PAGE>
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.
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
We 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:
S-3
<PAGE>
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, our special tax counsel and counsel to the
underwriters, is of the opinion that the notes will be treated as debt and
we 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 We 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.
S-4
<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 Adverse economic conditions or other factors
CONCENTRATION particularly affecting any state or region where a
OF LEASES MAY ADVERSELY high concentration of leases is located could
AFFECT THE LEASES 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. We are unable to
determine and have 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 The servicer is faced with the task of completing
YEAR 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.
S-5
<PAGE>
We refer you to the Glossary on page 49 for the meaning of defined terms used
below.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be distributed to our
owners. The distribution will occur after the contribution by Copelco Capital,
Inc. of the pool of copier, computer, healthcare and commercial and industrial
equipment lease contracts, including payments due thereunder and interests in
the applicable equipment to us. The net proceeds will be utilized to repay bank
debt and for general corporate purposes.
THE SERIES POOL
THE LEASES. As of the cut-off date, which is ___________, the notes of a
particular series will be secured by a pool of leases. The lessees 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, Inc., or their predecessors. 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 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. 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. Under agreed upon conditions, however, Copelco
Capital, Inc. may consent to prepayment of the leases. Generally, Copelco
Capital, Inc. 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.
Lessees are without right of offset for any reason. Those payments will be made
by the lessees to the servicer for our account.
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, Inc. 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, 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, Inc. 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, Inc. Those insurance
S-6
<PAGE>
proceeds will constitute Casualty Payments. 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, Inc. may obtain insurance and
invoice the lessee for the cost thereof. Any defaults under a lease 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.
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, Inc. 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, Inc.
results in an automatic renewal of the lease for a specified period. For
equipment which is returned to Copelco Capital, Inc. by the lessees, Copelco
Capital, Inc. 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, Inc. under direct specifications and instructions from the lessees. As
of the cut-off date, the series pool had approximately 93 equipment categories.
COPELCO CAPITAL, INC. FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Six Months ended
June 30, 1999 1998 1997
- --------------------------------------------------------------------------------
Total Assets $3,222,972 $2,856,553,000 $2,068,307,000
- --------------------------------------------------------------------------------
Total Liabilities $3,015,293,000 $2,664,583,000 $1,912,609,000
- --------------------------------------------------------------------------------
Shareholder Equity $207,679,000 $191,970,000 $155,698,000
- --------------------------------------------------------------------------------
Total Revenue $172,385,000 $312,040,000 $253,787,000
- --------------------------------------------------------------------------------
Net Income $16,212,000 $35,658,000 $32,137,000
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S-7
<PAGE>
THE PLEDGED ASSETS. The assets pledged to secure the notes will consist of
a pool of copier, computer, healthcare and commercial and industrial equipment
lease contracts, including payments due thereunder and interests in the
applicable leased equipment acquired or originated by Copelco Capital, Inc. and
transferred to us. The pledged assets will, in addition, include the funds on
deposit in Collection Account and the Reserve Account.
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. We are 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.
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
PERCENTAGE
OF
STATISTICAL PERCENTAGE OF
STATISTICAL DISCOUNTED AGGREGATE AGGREGATE
PERCENTAGE OF DISCOUNTED PRESENT ORIGINAL ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE VALUE EQUIPMENT EQUIPMENT
STATE LEASES LEASES OF LEASES OF LEASES COST COST
----- --------- ------------- ------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Alabama $ $
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF
STATISTICAL PERCENTAGE OF
STATISTICAL DISCOUNTED AGGREGATE AGGREGATE
PERCENTAGE OF DISCOUNTED PRESENT ORIGINAL ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE VALUE EQUIPMENT EQUIPMENT
STATE LEASES LEASES OF LEASES OF LEASES COST COST
----- --------- ------------- ------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Virginia
Washington
West Virginia
Wisconsin
Wyoming
=======================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
=======================================================================================================================
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY LEASE BALANCE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE AGGREGATE
PERCENTAGE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
STATISTICAL DISCOUNTED NUMBER OF OF NUMBER OF PRESENT VALUE PRESENT VALUE EQUIPMENT EQUIPMENT
PRESENT VALUE OF THE LEASES LEASES LEASES OF LEASES OF LEASES COST COST
- ---------------------------- --------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.01 - 5,000.00
5,000.01 - 10,000.00
10,000.01 - 15,000.00
15,000.01 - 20,000.00
20,000.01 - 25,000.00
25,000.01 - 30,000.00
30,000.01 - 35,000.00
35,000.01 - 40,000.00
40,000.01 - 45,000.00
45,000.01 - 50,000.00
50,000.01 - 60,000.00
60,000.01 - 70,000.00
70,000.01 - 80,000.00
80,000.01 - 90,000.00
90,000.01 - 100,000.00
100,000.01 - 125,000.00
125,000.01 - 150,000.00
150,000.01 - 175,000.00
175,000.01 - 200,000.00
200,000.01 - 300,000.00
300,000.01 - 400,000.00
400,000.01 - 500,000.00
500,000.01 - 600,000.00
600,000.01 - 700,000.00
700,000.01 - 800,000.00
800,000.01 - 900,000.00
900,000.01 - 1,000,000.00
1,000,000.01 - 1,500,000.00
1,500,000.01 - 2,000,000.00
greater than 2,000,000.00
==============================================================================================================================
Total 100.00% $ 100.00% $ 100.00%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
PERCENTAGE
OF
STATISTICAL PERCENTAGE
STATISTICAL DISCOUNTED OF AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRESENT VALUE OF VALUE OF ORIGINAL EQUIPMENT
REMAINING TERM (MONTHS) LEASES OF LEASES LEASES LEASES EQUIPMENT COST COST
- -------------------------- ---------- ----------- ----------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 - 12 % $ % $
13 - 24
25 - 36
37 - 48
49 - 60
61 - 84
===================================================================================================================
Total 100.00% $ 100.00% $ 100.00%
===================================================================================================================
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
PERCENTAGE
OF PERCENTAGE
STATISTICAL OF
STATISTICAL DISCOUNTED AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
ORIGINAL TERM (MONTHS) LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
----------------------- --------- ---------- ------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 - 12 $ $
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 96
==================================================================================================================
Total 100.00% $ 100.00% $ 100.00%
==================================================================================================================
<CAPTION>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
PERCENTAGE
OF PERCENTAGE
STATISTICAL OF
STATISTICAL DISCOUNTED AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
LEASE TYPE LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
- --------------------------- --------- ---------- ------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Finance Lease $ $
Operating Lease
=====================================================================================================================
Total 100.00% $ 00.00% $ 100.00%
=====================================================================================================================
<CAPTION>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
PERCENTAGE
OF PERCENTAGE
STATISTICAL STATISTICAL OF
DISCOUNTED DISCOUNTED AGGREGATE
PERCENTAGE PRESENT PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER VALUE OF VALUE OF ORIGINAL EQUIPMENT
PURCHASE OPTION LEASES OF LEASES LEASES LEASES EQUIPMENT COST COST
- ------------------------------ --------- ---------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Fair Market Value $ $
Fixed Purchase Option
Nominal Buyout
===================================================================================================================
Total 100.00% $ 100.00% $ 100.00%
====================================================================================================================
<CAPTION>
DISTRIBUTION OF LEASES BY DELINQUENCIES
PERCENTAGE
OF PERCENTAGE
STATISTICAL STATISTICAL OF
DISCOUNTED DISCOUNTED AGGREGATE
PERCENTAGE PRESENT PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER VALUE OF VALUE OF ORIGINAL EQUIPMENT
DAYS DELINQUENT LEASES OF LEASES LEASES LEASES EQUIPMENT COST COST
- ------------------------------ --------- ---------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
0 - 29 $ $
30 - 59
60 - 62
===================================================================================================================
Total 100.00% $ 100.00% $ 100.00%
===================================================================================================================
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
PERCENTAGE
OF PERCENTAGE
STATISTICAL STATISTICAL OF
DISCOUNTED DISCOUNTED AGGREGATE
PERCENTAGE PRESENT PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER VALUE OF VALUE OF ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES OF LEASES LEASES LEASES EQUIPMENT COST COST
- ------------------------------ --------- --------- ------------ ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Anesthesia Equipment
Automated Chemistry Systems
Automated Hematology Systems
Automated Test Equipment
Automobile Shop Equipment
Automobiles
Carts, Stretchers, Wheel Chairs
Cash Registers, Point of Sale
Cobalt and X-Ray Therapy Equipment
Communication Equipment
Computer
Computer Systems--Drs & Hosp
Construction Equipment
Copier
Dental Operatory Equipment
Digital Cameras
Document Imaging Equipment
ECG (EKG) and Defibrillators
EEG
Electrical Generators
Electronics Production Equipment
Environmental Control Equipment
Fabrication Equipment
Facsimile
Fire Protection Equipment
Food Processing Equipment
Food Refrigeration Equipment
Furniture and Fixtures
Gamma Cameras
Heating & Air Conditioning Equipment
Holter Monitors
Hosp Beds; Elec. Stryker FRMS, Burn Beds
Industrial Laboratory Equipment
Industrial Production Equipment
Laminating Devices
Lasers
Laundry Equipment
Lift Trucks
Lithotripters and Dialysis Equipment
Machine Tools
Mailing Equipment
Mammography
Materials Handling Equipment
MBL X-Ray Systems; C-arm; IMG I
Medical Equipment
Misc. Commercial & Industrial Equipment
Miscellaneous Hospital Equipment
Misc. Lab Eqp. (Pthlgy, Gas, Chrmts)
Misc. Vet Eqp. Cages, Scales, Tables
Misc. X-Ray Eqp. (Tnks, Driers, Tbl)
Miscellaneous
MRI Systems
Misc. Eqp.-Golf Carts, Lawn Care
Office Furniture
Operating Microscopes
Opthlmc Diag Eqp (Slit Lamps, Tonometers)
Opt Eqp; Lens Grinding, Resurfacing
Packaging Equipment
Patient Monitoring Systems
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF PERCENTAGE
STATISTICAL STATISTICAL OF
DISCOUNTED DISCOUNTED AGGREGATE
PERCENTAGE PRESENT PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER VALUE OF VALUE OF ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES OF LEASES LEASES LEASES EQUIPMENT COST COST
- ------------------------------ --------- --------- ------------ ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Phone, TV, Comm Equipment
Photo Equipment
Phys Misc Medical Eqp & Exam Tables
Phys Office Furn, Fixtures & Phones
Pollution Control Equipment
Printing Equipment
Processing Equipment
Pulse Oximetry Equipment
Radiographic Fluoroscopic Systems
Respiratory Therapy Equipment
Restaurant, Hotel & Motel Equipment
Scanners
Security Systems
Standard Printers
Standard X-Ray Systems
Surgical Eqp; Scopes, Electrosurgical
Telephone
Telex
Textile Equipment
Trash Compactors and Bailers
Typewriters
Ultrasounds
Vending Machines
Word Processors
Working Capital
X-Ray Spec Systems; Angiography
================================================================================================================
Total
================================================================================================================
</TABLE>
1 The following abbreviations used in this table have the following meanings:
"Eqp." -- Equipment
"Misc." -- Miscellaneous
S-13
<PAGE>
HISTORICAL DELINQUENCY INFORMATION. A lease is generally evaluated by
Copelco Capital, Inc. for charge-off when it becomes over 90 days delinquent. At
the time a lease is classified non-performing an evaluation is made to determine
the estimated realizable amount. The difference between the book receivable net
investment balance and the estimated realizable amount is defined as a
write-down and processed as a charge against the Allowance for Doubtful
Accounts. All Non-Performing Leases are reviewed on a periodic basis for
collectibility and for any deterioration in estimated realizibility. Additional
write-downs are processed as necessary. Any payments received for an account
that has been partially or fully written down are initially applied against any
net investment balance not as yet written off and then to the Allowance for
Doubtful Accounts as a recovery.
General delinquency information for equipment leases not charged-off in the
Origination Groups that are owned by Copelco Capital, Inc. is presented below.
The total receivables balance shown below is equal to the aggregate future rent
owing on the leases. If any portion of a scheduled monthly payment on a lease is
not received as scheduled, the entire amount of the scheduled monthly payment is
reflected as delinquent on the table below. If any part of a payment is not
received as scheduled, the entire payment due for that period is reflected on
the tables below as delinquent.
HISTORICAL DELINQUENCY EXPERIENCE
COPELCO CAPITAL, INC. COMBINED PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- -------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- -------------------------------------------------------------------------------------
Total
Delinquencies $ $ $
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- ----------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- ----------------------------------------------------------------------------------
Total
Delinquencies $ $ $
</TABLE>
S-14
<PAGE>
BUSINESS TECHNOLOGY
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- -------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- -------------------------------------------------------------------------------------
Total
Delinquencies $ $ $
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- ----------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- ----------------------------------------------------------------------------------
Total
Delinquencies $ $ $
</TABLE>
COMMERCIAL & INDUSTRIAL GROUP
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- -------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- -------------------------------------------------------------------------------------
Total
Delinquencies $ $ $
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- ----------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- ----------------------------------------------------------------------------------
Total
Delinquencies $ $ $
</TABLE>
HEALTHCARE GROUP
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- -------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- -------------------------------------------------------------------------------------
Total
Delinquencies $ $ $
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Total
Receivables
Balance (1) $ $ $
- ----------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 days+
- ----------------------------------------------------------------------------------
Total
Delinquencies $ $ $
</TABLE>
S-15
<PAGE>
HISTORICAL DEFAULT EXPERIENCE. All accounts assessed over 90 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, Inc. for the period January 1, 1994
to June 30, 1999 is set forth below. The average receivables outstanding as
shown below 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.
HISTORICAL CHARGE-OFF EXPERIENCE
(DOLLARS IN THOUSANDS)
COPELCO CAPITAL, INC. COMBINED PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
1999 31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1) $ $ $ $ $ $
- ----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $ $
Net Losses as a % of Avg.
Receivables
</TABLE>
BUSINESS TECHNOLOGY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
1999 31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1) $ $ $ $ $ $
- ----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $ $
Net Losses as a % of Avg.
Receivables
</TABLE>
S-16
<PAGE>
COMMERCIAL & INDUSTRIAL GROUP
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
1999 31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1) $ $ $ $ $ $
- ----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $ $
Net Losses as a % of Avg.
Receivables
</TABLE>
HEALTHCARE GROUP
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
1999 31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Average Receivables
Outstanding (1) $ $ $ $ $ $
- ----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $ $
Net Losses as a % of Avg.
Receivables
</TABLE>
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.
S-17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
As of the date of this prospectus supplement, we have had no operating
history. The net proceeds of the sale of the notes will be distributed to our
owners. See "Use of Proceeds." We are prohibited by our limited liability
company agreement from engaging in business other than (1) the purchase of
equipment leases and lease receivables, including equipment, from Copelco
Capital, Inc. and its affiliates, (2) the issuance of notes collateralized by
its assets and (3) engaging in acts incidental, necessary or convenient to the
foregoing and permitted under Delaware law. Our ability to incur, assume or
guaranty indebtedness for borrowed money is also restricted by our limited
liability company agreement to only those activities that relate to the leases
and lease receivables. The leases which secure the notes under the indenture
will be acquired from Copelco Capital, Inc. or another originator named in the
prospectus supplement. Information concerning the general delinquency and loss
experience of Copelco Capital, Inc.'s lease portfolio is described under "The
Series Pool--Historical Delinquency Experience." Copelco Capital, Inc.'s loss
experience is statistically limited in absolute numbers. As such, we are unable
to discern any material trends when evaluating Copelco Capital, Inc.'s loss
experience on the basis of the equipment types associated with the leases.
DIRECTORS AND EXECUTIVE OFFICERS OF OUR MANAGER. The following table sets
forth the executive officers and directors of Copelco Manager, Inc., our
manager, and their ages and positions as of , 1999. Because we are organized as
a special purpose company and will be largely passive, it is expected that the
officers and directors of Copelco Manager, Inc. will participate in our
management to a limited extent. Most of the actions pertaining to maintaining
and servicing the assets will be performed by the servicer.
- --------------------------------------------------------------------------------
Name Age Position
- --------------------------------------------------------------------------------
Robert J. Lemenze, Jr. 39 President, Director
John Hakemian 58 Director
Nicholas Antonaccio 50 Vice President-Finance and Treasurer
Takeshi Okumura 49 Director
Spencer Lempert 52 Secretary
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, Inc. 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, Inc. 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, our ultimate parent
company in the United States, and, more recently, as the Vice President -
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,
Inc. as a Senior
S-18
<PAGE>
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.
For the last six months, Mr. Okumura has served as the Vice President and
General Manager of the Finance Division and Treasurer of Itochu International
and, prior to that, as General Manager of the Project Finance Department of
Itochu International.
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 Services Group, Inc..
None of the above-listed directors and officers of the Manager will be
compensated directly by us nor by the Manager, nor with any of our funds or
assets nor with the funds or assets of the Manager, nor will any such directors
and officers receive compensation in the capacities in which they act as our
Manager.
DESCRIPTION OF THE NOTES
GENERAL. The following series ___ lease-backed notes will be offered in
accordance with the indenture between ourselves and the trustee. The table below
describes the respective interest rate, initial principal amount, expected
maturity date and stated maturity date for each class being offered by this
prospectus supplement and the Class E Notes.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
CLASS INTEREST RATE INITIAL PRINCIPAL AMOUNT EXPECTED MATURITY DATE STATED MATURITY DATE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
A-1
- ------------------------------------------------------------------------------------------------------------------------
A-2
- ------------------------------------------------------------------------------------------------------------------------
A-3
- ------------------------------------------------------------------------------------------------------------------------
A-4
- ------------------------------------------------------------------------------------------------------------------------
A-5
- ------------------------------------------------------------------------------------------------------------------------
B
- ------------------------------------------------------------------------------------------------------------------------
C
- ------------------------------------------------------------------------------------------------------------------------
D
- ------------------------------------------------------------------------------------------------------------------------
E
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The "Description of the Notes" contained in the prospectus and this
prospectus supplement with respect to the notes is a summary of all material
terms relating to the Offered Notes. However, we suggest that 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, we suggest that you should review that section of the
indenture or term used in order to fully understand this offering.
The Offered Notes represent our secured debt obligations secured by the
pledged assets. The privately placed Class E Notes represent our subordinated
debt obligations secured
S-19
<PAGE>
by defined assets in the pledged assets as provided in the 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, Inc. or any of its other
affiliates other than us. We are 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 of the notes.
INTEREST RATES. The notes will bear interest from the issuance date at the
applicable interest rate for the respective class as presented in the table
above. 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 listed on the following chart.
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 without a service
charge, but we may require payment to cover taxes or other governmental charges
(Section 2.03).
DISCOUNTED PRESENT VALUE OF THE LEASES. The Discounted Present Value of the
Leases is calculated using the Discount Rate. The "Discount Rate" is calculated
by taking 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 (1) their respective initial principal amount, and (2)
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. 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 and all prior
Due Periods. 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 $___________.
The Residual Notes will have no rights with respect to Available Funds. On
any Payment Date, Residual Realizations shall be directed by the Trustee to the
holders of the Residual Notes in accordance with the Indenture. Except in the
case of an Event of Default, the Noteholders will not have any right to any
Residual Realizations under any circumstance and neither the Residual Notes nor
the Residual Realizations will provide credit enhancement for the Notes.
S-20
<PAGE>
DETERMINATION DATE. On the fifth day prior to each payment date, or the
preceding business day, the servicer will determine the amount of payments
received on the leases for the immediately preceding calendar month 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 record date,
which is 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.
See "Description of the Notes--Distributions on Notes."
INTEREST PAYMENTS. On each payment date, the interest due on the respective
class of 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, at the applicable interest rate applied to the
then unpaid principal amounts of that class of notes, after giving effect to
payments of principal to the noteholders of that class on the preceding payment
date. See "Description of the Notes--General" and "Distributions on Notes."
PRINCIPAL PAYMENTS. For each payment date, each of the noteholders will be
entitled to receive payments of principal, 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) (1) 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
(2) 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
(3) 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,
(4) 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
(5) 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 Principal Amount, the Class D Floor exceeds the
Class D Target Investor Principal Amount and/or
S-21
<PAGE>
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 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.
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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.
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,
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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.
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 the Collection
Account, an Eligible Account into which the servicer will deposit all Lease
Payments, Casualty Payments, Termination Payments, proceeds from repurchases by
Copelco Capital, Inc. of leases
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as a result of breaches of representations and warranties, and recoveries from
Non-Performing Leases to the extent Copelco Capital, Inc. has not substituted a
Substitute Lease for that Non-Performing Lease, except to the extent required to
reimburse unreimbursed Servicer Advances, on or for each lease included in the
series pool within two Business Days of receipt thereof; provided that Residual
Realizations 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 our
property, securing payments on the applicable notes (Section 3.02(a)).
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 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 our name, 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;
(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, Inc. of leases as a result of
breaches of representations and warranties to the extent Copelco Capital,
Inc. has not substituted Substitute Leases for those leases other than,
with respect to a Warranty Lease, the Residual Warranty Payments.
(e) proceeds from investment of funds in the Collection Account and the Reserve
Account, if any;
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(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 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;
(h) Termination Payments to the extent we do not reinvest those Termination
Payments in Additional Leases other than Residual Prepayments; and
(i) proceeds received once we exercise our right to redeem the notes;
(j) to the extent there occurs an Available Funds Shortfall, funds, if any, on
deposit in the Reserve Account to the extent of the Available Funds
Shortfall.
Available Funds will not include "Residual Realizations," which are (a)
cash flows realized from the sale or release of the equipment following the
expiration dates of the leases, other than equipment subject to Non-Performing
Leases, (b) Residual Warranty Payments, (c) Residual Casualty Payments and (d)
Residual Prepayments.
"Residual 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;
"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 the Reserve
Account. On the Issuance Date, we 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, excluding
amounts on deposit in the Reserve Account, are insufficient to pay the Required
Payments, the trustee will withdraw from the Reserve Account an amount equal to
the lesser of the funds on deposit in the Reserve Account 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 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 us (Section 3.05(c)).
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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 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
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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;
(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 Copelco Capital Receivables LLC, the balance, if any.
ADVANCES BY THE SERVICER. Prior to any payment date, the servicer may, but
will not be required to, 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 Copelco Capital
Receivables LLC (Section 6.01)
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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, Inc. or an affiliate of Copelco
Capital, Inc., to the payment of all Servicing Fees then due to that
person.
Third
o 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;
o 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;
o 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
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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;
o 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;
o 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;
o sixth, to the payment of the outstanding principal amount of
the Class A-1 Notes;
o 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;
o eighth, to the payment of the outstanding principal amount
of the Class B Notes to the date of payment thereof;
o ninth, to the payment of the outstanding principal amount of
the Class C Notes;
o tenth, to the payment of the outstanding principal amount of
the Class D Notes;
o 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 and the $________ __% Class R-2 Lease-Residual
Backed Notes;
Fifth to the payment of amounts then due the trustee under the
indenture;
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Sixth if the person then acting as servicer is Copelco Capital, Inc.
or an affiliate of Copelco Capital, Inc., to the payment of all Servicer's
Fees then due to that person; and
Seventh to the payment of the remainder, if any, to us or any other
person legally entitled thereto (Section 6.06).
We will be required to furnish annually to the trustee, a statement of our
officers to the effect that to the best of their knowledge we are not in default
in the performance and observance of the terms of the indenture or, if we are 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.
MODIFICATION OF THE INDENTURE. With some exceptions, under the indenture,
our rights and obligations and the rights of the Noteholders may be modified by
us 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":
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(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, Inc. is the servicer, failure on the part
of Copelco Capital, Inc. to pay to the trustee on the date when due,
any payment required to be made by Copelco Capital, Inc. in accordance
with the assignment and servicing agreement;
(c) default on the part of either the servicer or, so long as Copelco
Capital, Inc. is the servicer, Copelco Capital, Inc. 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, Inc. 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, Inc., as the case may be, by the
trustee, or to the servicer or Copelco Capital, Inc., as the case may
be, and the trustee by any holder of the notes;
(d) if any representation or warranty of Copelco Capital, Inc. 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, Inc.
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, Inc.
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, Inc. 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 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,
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<PAGE>
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, Inc.'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. We may, at our 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. We 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, Inc. 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 Warranty Lease or
Adjusted Lease, Copelco Capital, Inc. will have the option to substitute for the
terminated lease 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 which has been prepaid in full, Copelco Capital, Inc.
will have the option to transfer an additional lease of similar characteristics.
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
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<PAGE>
those terminated leases. In the event that an Early Lease Termination is allowed
by Copelco Capital, Inc. 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.
The following chart sets forth the percentage of 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 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
we exercise our 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.
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNT AT THE RESPECTIVE CPR SET FORTH BELOW
0% CPR
- -------------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS B CLASS C CLASS D CLASS E
------------ --------- ------------------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ISSUANCE DATE % % % % % % % %
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
August 18, 2003
September 18, 2003
October 18, 2003
November 18, 2003
January 18, 2003
WEIGHTED AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
</TABLE>
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class 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.
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNT AT THE RESPECTIVE CPR SET FORTH BELOW
12% CPR
- --------------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS B CLASS C CLASS D CLASS E
------------ --------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ISSUANCE DATE % % % % % % % %
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
WEIGHTED AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
</TABLE>
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class 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.
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<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 us and Copelco Capital, Inc., (b) a security interest in the applicable
equipment owned by us and an assignment of our security interest in the
equipment subject to Nominal Buy-Out Leases, which security interest was
originally perfected by Copelco Capital, Inc., 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, Inc., 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 we will be obligated to
appoint a successor trustee. We 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, we 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 us, against Copelco Capital, Inc.,
as Transferor or servicer, or against 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,
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<PAGE>
bankruptcy or appointment of a trustee or receiver for the lessee under a lease.
The remedies available to the lessor, and those available to us 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, Inc. will make a capital contribution to
us of the leases and equipment owned by Copelco Capital, Inc. and subject to the
leases, and assign its security interests in the equipment subject to Nominal
Buy-Out Leases. Copelco Capital, Inc. will warrant that each of the contribution
of the leases from Copelco Capital, Inc. to us is an absolute assignment, that
the contributions of its rights in the equipment is a valid transfer of Copelco
Capital, Inc.'s title to the equipment and that for leases with leased equipment
having an original equipment cost in excess of $25,000 Copelco Capital, Inc. is
either the owner of the equipment or has a valid perfected first priority
security interest in the equipment, including equipment subject to Nominal
Buy-Out Leases, and accordingly, Copelco Capital, Inc. 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, Inc. 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, us or the trustee and UCC financing
statements identifying equipment owned by Copelco Capital, Inc., transferred to
us and pledged to the trustee will be filed in favor of us 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 our behalf. 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, Inc., as Transferor or servicer, various provisions of the
Bankruptcy Code of 1978, 11 U.S.C. ss.ss. 101-1330, and applicable laws may
interfere with, delay or eliminate our ability, or that of Copelco Capital,
Inc., to enforce our 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
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<PAGE>
available against Copelco Capital, Inc., except for misrepresentation or breach
of warranty, and the Noteholders could suffer a loss with respect to the notes.
Similarly, if we were to become bankrupt and the bankruptcy trustee or
debtor-in-possession elected to reject a lease, the flow of lease payments to us
and to the Noteholders would cease. As noted above, however, we have been
structured so that the filing of a bankruptcy petition on our behalf 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
Residual Notes, will agree not to institute, cooperate with or encourage others
to institute against us 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 Notes, the Residual 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 on which all of the 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 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 us and hold the notes as capital assets.
The discussion that follows, and the opinion set forth below of Dewey
Ballantine LLP, special tax counsel to us are based upon provisions of the
Internal Revenue Code of 1986, as amended 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. Tax
Counsel suggests that potential investors 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.
S-39
<PAGE>
TAX CHARACTERIZATION OF COPELCO CAPITAL RECEIVABLES LLC. Tax Counsel is of
the opinion that we 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 notes may be purchased by ERISA plans as described in the prospectus
under "ERISA Considerations." The notes should be treated as indebtedness
without substantial equity features for purposes of the plan assets regulation.
This determination is based in part on the traditional debt features of the
notes, including the reasonable expectation of purchasers of notes that the
notes will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features. The debt treatment of the notes for
ERISA purposes could change if the we incurred losses. As described in the
prospectus, the acquisition or holding of the notes by or on behalf of an
employee benefit plan could still result in a prohibited transaction if the
acquisition or holding of the notes by or on behalf of the plan were deemed to
be a prohibited loan to a party in interest with respect to the plan.
Accordingly, each purchaser and each transferee using the assets of a plan
subject to ERISA or Section 4975 of the Code to acquire the
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<PAGE>
notes will be deemed to have represented that the acquisition and continued
holding of the notes will be covered by a Department of Labor prohibited
transaction class exemption.
Any plan fiduciary considering the purchase of a note may wish to consult
with its counsel as to the potential applicability of ERISA and the Code to such
investment. Moreover, each plan fiduciary may wish to determine whether, under
the general fiduciary standards of investment prudence and diversification, an
investment in the notes is appropriate for the plan, taking into account the
overall investment policy of the plan and the composition of the plan's
investment portfolio.
The sale of notes to a plan is in no respect a representation by the us or
the underwriters that this investment meets all relevant legal requirements for
investments by plans generally or any particular plan or that this investment is
appropriate for plans generally or any particular 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, we
have agreed to sell and ___________ and _________________ ("____________," and
together with ____________) each severally has agreed to purchase the principal
amount of the Offered Notes described below:
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 $ $ $
We have 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,
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<PAGE>
_____% 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.
We 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.
We have 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 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
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<PAGE>
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
Our balance sheet 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 us, Copelco
Capital, Inc., and the servicer by Spencer N. Lempert, General Counsel and
Senior Vice President of Copelco Capital, Inc., and for us and for 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 each have a
minimum rating as follows:
- --------------------------------------------------------------------------------
Rating
- --------------------------------------------------------------------------------
Class
- --------------------------------------------------------------------------------
A-1
- --------------------------------------------------------------------------------
A-2
- --------------------------------------------------------------------------------
A-3
- --------------------------------------------------------------------------------
A-4
- --------------------------------------------------------------------------------
A-5
- --------------------------------------------------------------------------------
B
- --------------------------------------------------------------------------------
C
- --------------------------------------------------------------------------------
D
- --------------------------------------------------------------------------------
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
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<PAGE>
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.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report..................................................46
Balance Sheet of Copelco Capital Receivables LLC as of ________, 1999.........47
Notes to Balance Sheet........................................................48
S-45
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Copelco Capital Receivables LLC
We have audited the accompanying balance sheet of Copelco Capital Receivables
LLC, a wholly owned subsidiary of Copelco Capital, Inc., as of , 1999. This
financial statement is the responsibility of Copelco Capital Receivables LLC's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Copelco Capital Receivables LLC as
of , 1999, in conformity with generally accepted accountings.
KPMG LLC
_____________, 1999
New York, New York
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<PAGE>
COPELCO CAPITAL RECEIVABLES LLC
a wholly owned subsidiary of Copelco Capital, Inc.
Balance Sheet
____ __, 1999
Assets
Cash $1,000
$1,000
Stockholder's Equity
Stockholder's Equity
Common Stock (authorized $1,000 shares, $100
$1 par value, issued ------
and outstanding 100 shares)
Additional paid-in capital 900
------
$1,000
======
See accompanying notes to balance sheet.
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<PAGE>
COPELCO CAPITAL RECEIVABLES LLC
a wholly owned subsidiary of Copelco Capital, Inc.
Notes to Balance Sheet
____ __, 1999
(1) Organization
Copelco Capital Receivables LLC, a wholly owned subsidiary of Copelco
Capital, Inc. ("Copelco Capital"), was incorporated in the State of
Delaware.
Copelco Capital Receivables LLC was organized to engage exclusively in the
following business and financial activities: to acquire equipment described
in the related equipment lease contracts and to purchase equipment leases
and lease receivables from Copelco Capital and any of its affiliates; to
issue and purchase equipment leases and lease receivables from Copelco
Capital and any of its affiliates; to issue and sell notes collateralized
by any or all of its assets pursuant to one or more indentures between
Copelco Capital Receivables LLC and an indenture trustee; and to engage in
any lawful act or activity and to exercise any power that is incidental and
is necessary or convenient to the foregoing and permitted under Delaware
law.
(2) Capital Contribution
Copelco Capital has made an initial capital contribution of $1,000 to
Copelco Capital Receivables LLC.
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<PAGE>
GLOSSARY
"Additional Lease" is a lease Copelco Capital, Inc. has opted to purchase
with the proceeds of a prepayment of a lease, in full or in part of a lease
prepaid in full or in part. The newly purchased Additional Lease will have
similar characteristics to the terminated lease.
"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.
"Adjusted Lease" is a lease for which the terms of lease were adjusted or
modified.
"Available Funds" is defined on page 26.
"Available Funds Shortfalls" is the deficiency in Available Funds,
excluding funds on deposit in the Reserve Account, needed to make the Required
Payments.
"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.
"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.
"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
_____%.
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<PAGE>
"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.
"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.
"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 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.
"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.
"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.
"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.
"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
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<PAGE>
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.
"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.
"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.
"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.
"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.
"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.
"Class Floors" means the Class B Floor, the Class C Floor, the Class D
Floor or the Class E Floor.
"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.
"Code" is the Internal Revenue Code of 1986, as amended.
"Collection Account" is an account in the name of the trustee on behalf of
the noteholders into which payments made on or with respect to the applicable
leases will be deposited as provided in the applicable Transaction Documents.
"CPR" is the conditional prepayment rate.
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<PAGE>
"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.
"Determination Date" is the fifth day prior to each payment date, or the
preceding business day, if that day is not a business day.
"Discounted Present Value of the Leases".
"Discounted Present Value of the Leases," at any given time, will equal the
future remaining scheduled payments, excluding delinquent amounts, Excess Copy
Charges, Fee Per Scan Charges and Maintenance Charges from the leases, including
Non-Performing Leases, discounted at the discount rate specified in the
applicable prospectus supplement.
"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, excluding delinquent amounts and Maintenance
Charges, discounted at the discount rate.
"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, excluding delinquent amounts, Excess Copy Charges,
Maintenance Charges and Fee Per Scan Charges.
"Discount Rate" is defined on page 20
"Distribution Account" is an eligible account from which funds are
distributed to the noteholders.
"DTC" is the Depositary Trust Company.
"Due Period" is, with regard to a specific payment date, the calendar month
preceding that payment date.
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.
"Excess Copy Charge" is the incremental amount the Business Technology
Group charges a copier user after the user exceeds the monthly copy allowance.
This excess charge is remitted to the vendors upon collecting by Copelco
Capital, Inc.
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<PAGE>
"Fee Per Scan Charge" is the incremental fee charged by the Healthcare
Group to the extent usage exceeds the monthly scan allowance.
"Interest Payments" is the interest due with respect to a class of notes
since the last payment date or, for the first payment date, the issue date.
"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.
"Maintenance Charge" is that fixed portion of the cost per copy program
fixed monthly charge that is attributable to maintenance of the copiers.
"Nominal Buy-Out Leases" means 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.
"Non-Performing Lease" is (a) a lease that has become more than 123 days
delinquent or (b) a lease that has been accelerated by the servicer or a lease
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.
"Offered Notes" are the Class A Notes, Class B Notes, Class C Notes and
Class D Notes.
"Origination Groups" are the Business Technology Group, the Healthcare
Group and the Commercial and Industrial Group of Copelco Capital, Inc.
"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.
"Required Payments" are the amounts owed to the servicer, interest payments
on the notes, 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.
"Reserve Account" is an account which provides reserves to cover shortfalls
in Available Funds.
"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.
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<PAGE>
"Residual Notes" means the Class R-1 and Class R-2 Residual-Backed Notes.
"Residual Prepayments" means, at any date of determination for 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 Realizations" is defined on page 26.
"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.
"Servicer Advance" is an amount the servicer may, but will not be required
to, advance to the trustee in order for the trustee to cover delinquencies on
some or all leases with respect to the prior Due Periods.
"Servicer Event of Default" is defined on pages 31-32.
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.
"Statistical Discounted Present Value of the Leases".
"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.
"Substitute Lease" is a lease substituted for a Non-Performing Lease,
Warranty Lease or Adjusted Lease, having similar characteristics to the lease it
is replacing.
"Tax Counsel" is Dewey Ballantine LLP.
"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 our name, and the
lessee.
"Transaction Documents" are the indenture and the assignment and servicing
agreement pertaining to the related series of notes.
"Warranty Lease" is a lease subject to repurchase as a result of a breach
of a representation and warranty.
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================================================================================
$
Copelco Capital
Receivables LLC
-------------------
P R O S P E C T U S
S U P P L E M E N T
-------------------
[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
================================================================================
<PAGE>
PROSPECTUS
================================================================================
$---------------
COPELCO CAPITAL RECEIVABLES LLC, ISSUER
COPELCO CAPITAL, INC., SERVICER
LEASE-BACKED NOTES
FROM TIME TO TIME WE MAY SELL A SERIES OF ITS NOTES THAT --
o will represent solely our debt obligations; 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, 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.
- --------Side Bar Language-----------------------------------------
WE SUGGEST THAT YOU READ THE SECTION ENTITLED "RISK FACTORS"
STARTING ON PAGE 5 OF THIS PROSPECTUS AND CONSIDER THESE FACTORS
BEFORE MAKING A DECISION TO INVEST IN THE NOTES.
The notes of each series will be debt solely of Copelco Capital
Receivables LLC and will be payable only from our pledged assets
and from 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.
- ------------------------------------------------------------------
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 ....................................... II
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 ............................................................. 3
Registration of Notes ................................................... 3
Credit Enhancement ...................................................... 3
Optional or Mandatory Termination ....................................... 3
Tax Considerations ...................................................... 3
ERISA Considerations .................................................... 3
Ratings ................................................................. 4
RISK FACTORS ............................................................... 5
WHERE YOU CAN FIND MORE INFORMATION ........................................ 10
THE ISSUER ................................................................. 11
USE OF PROCEEDS ............................................................ 11
THE SERIES POOLS ........................................................... 11
COPELCO CAPITAL, INC.'S UNDERWRITING AND SERVICING PRACTICES ............... 15
DESCRIPTION OF THE NOTES ................................................... 22
PREPAYMENT AND YIELD CONSIDERATIONS ........................................ 25
DESCRIPTION OF THE TRANSACTION DOCUMENTS ................................... 31
THE INDENTURE TRUSTEE ...................................................... 37
SECURITY FOR THE NOTES ..................................................... 38
LEGAL MATTERS AFFECTING A LESSEE'S RIGHTS AND OBLIGATIONS ................. 38
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ................................... 40
RATINGS .................................................................... 46
ERISA CONSIDERATIONS ....................................................... 46
PLAN OF DISTRIBUTION ....................................................... 48
LEGAL OPINIONS ............................................................. 48
GLOSSARY ................................................................... 49
<PAGE>
IMPORTANT INFORMATION ABOUT THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
All references to "we," "us," "our", or "ourselves" mean Copelco Capital
Receivables LLC.
We provide information to you about the securities in two separate
documents that progressively provide more detail: (1) this prospectus, which
provides general information, some of which may not apply to a particular series
of securities, and (2) the prospectus supplement, which describes the specific
terms of your series of securities.
This prospectus by itself does not contain complete information about the
offering of your securities; the balance of that information is contained in the
prospectus supplement. We suggest that you read both this prospectus and the
prospectus supplement in full. We cannot sell the securities to you unless you
have received both this prospectus and 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 leases;
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.
ii
<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 Receivables LLC. We are a Delaware limited liability company.
Our 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. or an entity named in the related
Prospectus Supplement.
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 us 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 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.
<PAGE>
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
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 intended as
security agreements, installment sale contracts or rental stream
obligations, together with monies due on these leases and agreements
and affiliated guarantees;
o security interests in the underlying equipment;
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 The notes may have a revolving period. During a revolving period, we 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
leases.
2
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RECORD DATE
The applicable prospectus supplement will describe a date preceding the payment
date, as of which we or our 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
We 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 Credit enhancement for a series pool or any class of notes may include any
one or more of the following:
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, we or the servicer or other entities may, at our
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
we, the 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, our special tax counsel,
is of the opinion that the notes will be treated as debt and that we will not be
treated as an association, or a publicly traded partnership, taxable as a
corporation. By acceptance of a note, you agree to treat the notes as debt.
ERISA CONSIDERATIONS
Subject to the considerations and conditions described under "ERISA
Considerations" in this prospectus and the applicable prospectus supplement,
pension, profit-sharing and other employee benefit plans may purchase the notes.
We suggest that you consult with your counsel regarding the applicability of the
provisions of ERISA before purchasing a note.
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RATINGS
o We will not issue the notes unless a rating agency rates them in one of the
four highest rating categories.
o You should not assume that the rating agency will not lower, qualify or
withdraw its rating.
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RISK FACTORS
We suggest that you 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 YOUR NOTES If no public market develops, as a
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 REINVESTMENT
RISK MAY REDUCE YIELD TO NOTEHOLDERS In the case of notes purchased at a
discount, you should consider the
risk that slower than anticipated
rates of prepayments could result 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.
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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 ARE NOT
PERFECTED AND OTHER CREDITORS MAY
HAVE RIGHTS TO THE EQUIPMENT In the event we have insufficient
assets available to pay the notes,
we may sell the equipment upon a
lease default in order to meet
payments on the notes. The lack of a
perfected security interest in
certain equipment may adversely
affect our ability to recoup any
moneys on that equipment following a
lease default. This could reduce the
funds available to pay the notes.
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 our
favor against Copelco Capital, Inc.
and in favor of the trustee against
us and against 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 our own
or to those of the trustee. In those
cases, security interests in the
equipment will also not be perfected
in our favor nor in favor of 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 our favor nor in favor of 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 our own or to
those of the trustee.
STATE LAW AND OTHER FACTORS MAY
IMPEDE RECOVERY EFFORTS AND AFFECT
THE ABILITY OF ISSUER TO RECOUP THE
FULL AMOUNT DUE ON THE LEASES The application of state law
requirements may limit recoveries on
equipment. State laws impose
requirements and restrictions on
foreclosure sales and obtaining
deficiency judgments and may
prohibit, limit or delay
repossession and sale of equipment
to recover losses on non-performing
leases.
Additional factors that may affect
our ability to recoup the full
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amount due on a lease include:
o Our failure to file
financing statements to
perfect our 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 AND THE
INSOLVENCY OF COPELCO CAPITAL
RECEIVABLES LLC, ORIGINATOR OR
SERVICER MAY RESULT IN REDUCED OR
DELAYED PAYMENTS TO NOTEHOLDERS Any insolvency by us, or by the
servicer, the originator or the
seller, while in possession of the
leases may result in competing
claims to ownership or security
interests in the leases which could
result in delays in payments on the
notes, losses to the noteholders or
an acceleration of the repayment of
the notes.
INSOLVENCY OF COPELCO CAPITAL, INC.
MAY REDUCE PAYMENTS TO NOTEHOLDERS In some circumstances, a bankruptcy
of Copelco Capital, Inc. may reduce
payments to 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 us as a
loan to Copelco Capital,
Inc. from us, secured by
a pledge of those leases;
or
o consolidate our assets
with those of Copelco
Capital, Inc. since
Copelco Capital, Inc.
will own all of our
membership interests.
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
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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 us as a financing rather than an
absolute assignment.
NO RECOURSE AGAINST THE AFFILIATES
OF ISSUER There is no recourse against any of
our affiliates. The notes represent
our debt 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 us. We are a limited liability
company with limited assets.
GEOGRAPHIC CONCENTRATION OF LEASES MAY
ADVERSELY AFFECT THE LEASES Adverse economic conditions or other
factors particularly affecting any
state or region where a high
concentration of leases is located
could adversely affect the
performance on the leases. We are
unable to determine and have 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 COPELCO
CAPITAL, INC. MAY RESULT IN REDUCED
OR DELAYED PAYMENTS TO NOTEHOLDERS Should bankruptcy or reorganization
proceedings be commenced with
respect to the servicer, any funds
held by the servicer and not
transferred to the collection
account may 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.
DEFAULT OR INSOLVENCY OF LESSEES MAY
REDUCE PAYMENTS TO NOTEHOLDERS To the extent lessees default on the
leases, including through
insolvency, lease payments will
decrease and, accordingly, funds
available for payment to you, as a
noteholder, will be reduced.
TECHNOLOGICAL OBSOLESCENCE OF
EQUIPMENT MAY REDUCE VALUE OF
COLLATERAL If technological advances relating
to the equipment causes the leased
equipment to become obsolete, the
value of the equipment
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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 OF
LEASES MAY ADVERSELY AFFECT CASHFLOW
AND MAY DECREASE THE YIELD ON THE
NOTES If a significant number of leases
are added or replaced, this could
affect the rate at which funds are
distributed on the notes and
decrease the yield to noteholders.
The 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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WHERE YOU CAN FIND MORE INFORMATION
We, or the servicer on our behalf, 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,
New York, New York 10048 Suite 1400
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 other 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 us or on our behalf 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
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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.
THE ISSUER
We refer you to the glossary on page 49 for the meaning of defined terms
used in this prospectus.
We are a Delaware limited liability company, all of the membership
interests in which will be held by Copelco Capital, Inc. We were 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. Our address is 700 East Gate Drive, Mt. Laurel, New
Jersey 08054.
We will from time to time sell a series of 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. We do not have, nor are we 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., unless otherwise stated in
the applicable prospectus supplement.
We will pledge our interests in a series pool to a trustee for a related
series of notes in connection with an indenture between the trustee and us.
USE OF PROCEEDS
The net proceeds from the sale of the notes of each series will be
distributed to our owners. The distribution will occur after the contribution
from the originator of the related pool of leases and interests in the related
equipment to us.
THE SERIES POOLS
The notes of each series will be secured by a segregated pool of equipment
leases or contracts and related assets. The property comprising each series pool
will include a pool of leases, which may include any combination of leases,
leases intended as security agreements, installment sale contracts or rental
stream obligations. In addition, the series pool may contain related assets,
including:
o specific monies due under the leases on or after a specified cut-off
date,
o monies held from time to time in one or more accounts established and
maintained in connection with the related Transaction Documents,
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o a security interest in the underlying equipment and related property
pertaining to that pool of leases,
o our rights under certain Transaction Documents applicable to the
series pool and
o investment earnings on certain accounts created under the related
Transaction Documents.
We 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 in connection with leases which
either are "chattel paper" as defined in the 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 leases will be acquired by us from the originator under an assignment
and servicing agreement between the originator and us. The leases included in a
series pool will be selected from leases held by the originator based on the
criteria described below under "The Series Pool--Eligible Leases."
On or prior to the date of issuance of any series of notes, we will form a
series pool by (1) acquiring the leases in connection with the applicable
assignment and servicing agreement and (2) entering into an indenture with the
trustee, pertaining to the issuance of the notes.
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, Inc.'s Underwriting and Servicing
Practices."
THE LEASES. Information concerning 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 of the applicable
cut-off date. As of the date of issuance of the notes of any series, no more
than 5% of the Discounted Present Value of the Leases of the applicable series
pool 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. The leases will be originated by
Copelco Capital, Inc. or another entity described in the Prospectus Settlement.
In addition, the following eligibility requirements apply or will apply to all
leases on or prior to the related cut-off date:
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(1) The leases are valid and enforceable, and unconditionally obligate
the lessee to make periodic lease payments, including taxes;
(2) The leases are noncancellable by the lessee;
(3) 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;
(4) 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;
(5) The leases are materially compliant with all U.S. or state laws;
(6) The leases have been transferred to us free and clear of any liens
and are assignable without prior written the consent of the lessee;
(7) The leases are U.S. dollar-denominated and the lessor and each
lessee are located in the United States;
(8) No more than three percent of the leases in any series pool will
consist of leases with government entities as the obligor;
(9) The lease is not subject to any guaranty by the lessor or
originator but may be subject to the guaranty of others;
(10) No adverse selection was used in selecting the lease for transfer
to us;
(11) The lessee has represented to the originator that it has accepted
the equipment;
(12) The lessee is not a subject of an insolvency or bankruptcy
proceeding at the time of the transfer; and
(13) The leases are not Non-Performing Leases.
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.
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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 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, in order to determine the Discounted Present Value of the
Leases at any given time, it will be assumed that:
(1) 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;
(2) lease payments are discounted on a monthly basis using a 30-day
month and a 360-day year; and
(3) 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 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 LEASES. The leases underlying the notes will be acquired in
connection with an assignment and servicing agreement by us from the originator.
We expect 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 "Copelco Capital,
Inc.'s Underwriting and Servicing Practices" below. In connection with the
assignment and servicing agreement, the originator will make specific
representations and warranties to us regarding the applicable leases. We will
assign all of our rights under the assignment and servicing agreement to the
trustee for the benefit of the holders of notes with the result that the
originator will be liable to us and to the trustee for defective or missing
documents or an uncured breach of the originator's representations or
warranties.
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COPELCO CAPITAL, INC.'S UNDERWRITING AND SERVICING PRACTICES
GENERAL. Copelco Capital, Inc., a Delaware corporation, was incorporated in
October 1986. It is a wholly-owned subsidiary of Copelco Financial Services
Group, Inc. Copelco Capital, Inc.'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, Inc. has multiple
locations and is headquartered at One International Boulevard, Mahwah, New
Jersey 07430 and its telephone number is (856) 231-9600.
In May 1993, Copelco Financial Services Group, Inc., which was incorporated
in July 1982, reorganized its two primary operating subsidiaries, Copelco Credit
Corporation and Copelco Leasing Corporation, into six strategic business units.
Then, effective July 1994, Copelco Leasing Corporation was merged into Copelco
Credit Corporation with Copelco Credit Corporation as the surviving legal
entity; Copelco Credit Corporation then changed its name to Copelco Capital,
Inc., merging all of Copelco Leasing Corporation's and Copelco Capital, Inc.'s
leasing operations.
Copelco Capital, Inc. currently consists of three separate operating
Groups: 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, Inc.'s Document Imaging, Major Accounts, Computer and Canadian
strategic business units. Copelco Capital, Inc. 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 strategic business unit and the
Healthcare Vendor strategic business unit which were consolidated in June 1995
and the Ambulatory Care strategic business unit which was merged into the
Healthcare Group in November 1996. The Healthcare Group was created in an effort
to achieve greater operating efficiencies and eliminate certain operating and
marketing redundancies.
The Commercial & Industrial Group is segmented into two distinct business
units: the Manufacturing Technology 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
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test equipment. The Material Handling Group, established in 1998, provides
retail equipment leasing and financing specifically for vendors and
manufacturers in the material handling industry. The Material Handling Group,
established in 1998, provides equipment leasing and financing tailored to meet
the specific needs of the material handling industry. Headquartered in Portland,
Oregon, the group has strategically located material handling finance experts
throughout the United States who understand the needs of both distributors and
end-users. These experts work closely with customers to provided tailored
leasing and financing programs for forklifts, aerial work platforms, cranes and
allied equipment.
Since 1986, Copelco Capital, Inc. and its predecessors have participated in
36 equipment lease term securitizations involving the issuance of in excess of
$4.0 billion in securities. Copelco Capital, Inc. and its predecessors performed
all servicing functions in each of these prior transactions, 10 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 vendors consisting of major manufacturers and various distributors
of copier equipment, with the balance of the originations 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, Inc. 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, Inc. 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, Inc. will bill and
collect in the vendor's name.
The Business Technology Group also offers a cost per copy program,
introduced in late 1990, whereby lessees pay a fixed monthly payment for which
they are allowed a specific minimum monthly copy usage. The monthly fixed
payment represents equipment financing and a monthly Maintenance Charge. Copelco
Capital, Inc. funds the vendors on the basis of the equipment financing portion
of the fixed payments and remits the Maintenance Charge to the vendors as it is
collected every month. Copelco Capital, Inc. calculates usage monthly using
automated dialed-in copier meter readings. To the extent that the usage has
exceeded the monthly copy allowance, Copelco Capital, Inc. bills the lessee an
Excess Copy Charge. This excess copy charge is remitted to the vendors upon
collection by Copelco Capital, Inc. Only the equipment financing portion of the
fixed payment will be included in the Discounted Present Value of the Leases.
Vendors may choose to use a Copelco Capital, Inc. lease form or they may
use their own lease agreement. In either case, the credit approval remains with
Copelco Capital, Inc. Lease documents for all leasing programs are either
identical to Copelco Capital, Inc.'s
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lease documents or are reviewed by Copelco Capital, Inc. to ensure substantial
compliance with its standard terms. Terms of Copelco Capital, Inc.'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 sales group operates Copelco Capital, Inc.'s
Hospital Instant Lease 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, Inc. The Vendor Services sales group operates Copelco
Capital, Inc.'s Physician's Instant Lease Line 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 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, Inc. 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
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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 Fee Per Scan Charges to the extent
the scan usage exceeds the monthly scan allowance. 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, Inc.
The Commercial & Industrial Group: The Manufacturing Technology Group
provides 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, Inc. 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, Inc., 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, Inc. 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, Inc., and the chief credit officer of Copelco
Capital, Inc. In general, transactions in excess of $3,000,000 must be approved
by Itocho International, Inc.
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.
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Lessee evaluation includes an analysis of credit payment history, business
structure, banking history and relationships, and economic conditions as they
relate to the prospective lessee. In the case of a credit request for equipment
having a cost greater than approximately $50,000, the information collected
includes the prospect's most recent financial statements. If individual
guarantors are involved, a consumer credit bureau report is generally obtained
for the guarantors. Potential lessees should generally have been in business for
at least two years and a minimum of two trade references are required.
The Business Technology Group has also implemented an automated credit
scoring system. The system, designed by Dun & Bradstreet Information Services
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, such as Dun & Bradstreet
Information Services 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 Hospital
Instant Lease Line credit scoring parameters. The Hospital Instant Lease Line
credit scoring parameters include, without limitation, the number of beds of the
potential lessee, its occupancy rate and Dun & Bradstreet Information Services
financial highlight information.
A number of the leases originated by the Vendor Services group are credit
scored under Physician's Instant Lease Line credit scoring parameters. The
Physician's Instant Lease Line 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, Inc. 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 Physician's
Instant Lease Line 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.
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The Physician's Instant Lease Line and the Hospital Instant Lease Line
programs afford Copelco Capital, Inc. 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, 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 Information Services 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 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, Inc. 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, Inc. Any lease payment defaults permit Copelco Capital, Inc. to declare
immediately due and payable all
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remaining lease payments. At the end of a lease term, lessees must return the
leased equipment to Copelco Capital, Inc. 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,
Inc. and are uniformly utilized throughout Copelco Capital, Inc.'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, Inc.'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, Inc. has, from time to time,
permitted early lease terminations by lessees 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, we will have the option to reinvest the proceeds of the early lease
termination in one or more Additional Leases.
In addition, Copelco Capital, Inc. will have the option, but not the
obligation, subject to limitations described in the prospectus supplement, to
add Substitute Leases for the following:
o Non-Performing Leases;
o Warranty Leases; and
o Adjusted Leases.
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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, Inc.'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.
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 SEC as are required under the Securities Exchange Act of
1934.
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, Inc. as expected
to be realized upon the scheduled termination of a lease through sale or other
disposition of the related equipment 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, Inc. 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 material terms and provisions of
the 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 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.
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Neither the notes nor the underlying leases will be guaranteed or insured
by any governmental agency or instrumentality or by us, 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, Inc. of leases as a
result of breaches of representations and warranties to the extent
Copelco Capital, Inc. has not substituted Substitute Leases for those
leases other than, with respect to a Warranty Lease, the Residual
Warranty Payments;
(e) proceeds from investment of funds in the Collection Account and the
Reserve Account, if any;
(f) Casualty Payments other than Residual Casualty Payments which are, at
any date of determination with respect to a lease, the excess of (1)
the Casualty Payment relating to the lease over (2) 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;
(h) Termination Payments to the extent we do not reinvest the Termination
Payments in Additional Leases other than Residual Prepayments;
(i) proceeds received once we exercise our right to redeem the notes; and
(j) to the extent there occurs an Available Funds Shortfall, funds, if
any, on deposit in the Reserve Account to the extent of the Available
Funds Shortfall.
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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 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 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.
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 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.
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 our name, and the
lessee.
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ADVANCES BY THE SERVICER. Prior to any payment date, the servicer may, but
will not be required to, make a Servicer Advance to the trustee of 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, Inc. 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, Inc. 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, Inc.
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, Inc.
and a Substitute Lease
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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. The securities are sometimes referred to in this
prospectus as book-entry securities. No person acquiring an interest in the
book-entry securities will be entitled to receive a definitive note representing
an obligation of the trust, except under the limited circumstances described in
the prospectus. Beneficial owners may elect to hold their interests through the
Depository Trust Company in the United States, or Cedelbank or the Euroclear
System, in Europe. Transfers within DTC, Cedelbank or Euroclear, as the case may
be, will be in accordance with the usual rules and operating procedures of that
system. So long as the securities are book-entry securities, they will be
evidenced by one or more securities registered in the name of Cede & Co., which
will be the holder of those securities, as the nominee of DTC or one of the
relevant depositaries. Cross-market transfers between persons holding directly
or indirectly through DTC, on the one hand, and counterparties holding directly
or indirectly through Cedelbank or Euroclear, on the other, will be effected in
DTC through The Chase Manhattan Bank, the relevant depositories of Cedelbank or
Euroclear, respectively, and each participating member of DTC. The securities
will initially be registered in the name of Cede & Co. The interests of the
holders of those securities will be represented by book-entries on the records
of DTC and participating members thereof. All references in this prospectus to
any securities reflect the rights of beneficial owners only as those rights may
be exercised through DTC and its participating organizations for so long as
those securities are held by DTC.
The beneficial owners of securities may elect to hold their securities
through DTC in the United States, or Cedelbank or Euroclear if they are
participants in these systems, or indirectly through organizations which are
participants in these systems. The book-entry securities will be issued in one
or more securities per class of securities which in the aggregate equal the
outstanding principal balance of the related class of securities and will
initially be registered in the name of Cede & Co., the nominee of DTC. Cedelbank
and Euroclear will hold omnibus positions on behalf of their participants
through customers' securities accounts in Cedelbank's and Euroclear's names on
the books of their respective depositaries which in turn will hold such
positions in customers' securities accounts in the depositaries' names on the
books of DTC. Chase will act as depositary for Cedelbank and Morgan Guaranty
Trust Company of New York will act as depositary for Euroclear. Investors may
hold beneficial interests in the book-entry securities in minimum denominations
representing principal amounts of $1,000. Except as described below, no
beneficial owner will be entitled to receive a physical or definitive security
representing that security. Unless and until definitive securities are issued,
it is anticipated that the only holder of these securities will be Cede & Co.,
as nominee of DTC. Beneficial owners will not be "holders", "noteholders" or
"certificateholders", as the case may be, as those terms are used in the trust
documents.
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Beneficial owners are only permitted to exercise their rights indirectly through
participants and DTC.
The beneficial owner's ownership of a book-entry security will be recorded
on the records of the brokerage firm, bank, thrift institution or other
financial intermediary that maintains the beneficial owner's account for that
purpose. In turn, the financial intermediary's ownership of such book-entry
security will be recorded on the records of DTC or on the records of a
participating firm that acts as agent for the financial intermediary, whose
interest will in turn be recorded on the records of DTC, if the beneficial
owner's financial intermediary is not a DTC participant and on the records of
Cedelbank or Euroclear, as appropriate.
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 securities brokers and dealers, including the underwriter, 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.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of book-entry
securities, such as the securities, among participants on whose behalf it acts
with respect to the book-entry securities and to receive and transmit
distributions of principal of and interest on the book-entry securities.
Participants and indirect participants with which beneficial owners have
accounts with respect to the book-entry securities similarly are required to
make book-entry transfers and receive and transmit payments on behalf of their
respective beneficial owners.
Beneficial owners that are not participants or indirect participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, book-entry securities may do so only through participants and indirect
participants. In addition, beneficial owners will receive all distributions of
principal and interest from the trustee, or a paying agent on behalf of the
trustee, through DTC participants. DTC will forward these distributions to its
participants, which thereafter will forward them to indirect participants or
beneficial owners. Beneficial owners will not be recognized by the trustee, the
servicer or any paying agent as holders of the securities, and beneficial owners
will be permitted to exercise the rights of the holders of the securities only
indirectly through DTC and its participants.
Because of time zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a participant will be
made during subsequent securities settlement processing and dated the business
day following the
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DTC settlement date. Credits or any transactions in these securities settled
during that processing will be reported to the relevant Euroclear or Cedelbank
participants on that business day. Cash received in Cedelbank or Euroclear as a
result of sales of securities by or through a Cedelbank participant or Euroclear
participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Cedelbank or Euroclear
cash account only as of the business day following settlement in DTC.
Transfers between participants will conform with DTC rules. Transfers
between Cedelbank participants and Euroclear participants will conform with
their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedelbank
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 the relevant depositary; however, these cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines. The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to the relevant depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same day funds settlement applicable to DTC. Cedelbank
participants and Euroclear participants may not deliver instructions directly to
the European depositaries.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its participant organizations and
facilitates the clearance and settlement of securities transactions between
Cedelbank participants through electronic book-entry changes in accounts of
Cedelbank participants, thereby eliminating the need for physical movement of
securities. Transactions may be settled in Cedelbank in any of 38 currencies,
including United States dollars. Cedelbank provides to its Cedelbank
participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedelbank interfaces with domestic markets in several
countries. As a professional depository, Cedelbank is subject to regulation by
the Luxembourg Monetary Institute. Cedelbank participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to Cedelbank is also available to others,
including banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Cedelbank participant, either directly
or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating both the need for physical movement of securities and any risk from
lack of simultaneous
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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 the
Brussels, Belgium office of Morgan Guaranty Trust Company of New York, under
contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation. All operations are conducted by the Euroclear operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear operator, not Euroclear Clearance. Euroclear Clearance
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. 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
related Operating Procedures of the Euroclear System and applicable Belgian law.
The Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific securities to
specific securities clearance accounts. The Euroclear operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
Distributions on the book-entry securities will be made on each
distribution date by the trustee to Cede & Co., as nominee of DTC. DTC will be
responsible for crediting the amount of those payments to the accounts of the
applicable DTC participants in accordance with DTC's normal procedures. Each DTC
participant will be responsible for disbursing payments to the beneficial owners
of the book-entry securities that it represents and to each financial
intermediary for which it acts as agent. Each financial intermediary will be
responsible for disbursing funds to the beneficial owners of the book-entry
securities that it represents.
Under a book-entry format, beneficial owners of the book-entry securities
may experience some delay in their receipt of payments, since those payments
will be forwarded by the trustee to Cede & Co., as nominee of DTC. Distributions
with respect to securities held through Cedelbank or Euroclear will be credited
to the cash accounts of Cedelbank participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by the relevant depositary. These distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Because DTC can only act on behalf of financial intermediaries,
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the ability of a beneficial owner to pledge book-entry securities to persons or
entities that do not participate in the DTC system, or otherwise take actions on
those book-entry securities, may be limited due to the lack of physical
securities for such book-entry securities. In addition, issuance of the
book-entry securities in book-entry form may reduce the liquidity of such
securities in the secondary market since certain potential investors may be
unwilling to purchase securities for which they cannot obtain physical
securities.
Monthly and annual reports on the trust provided by the trustee to Cede &
Co., as nominee of DTC, may be made available to beneficial owners upon request,
in accordance with the rules, regulations and procedures creating and affecting
DTC, and to the financial intermediaries to whose DTC accounts the book-entry
securities of the beneficial owners are credited.
DTC has advised the seller and the servicer that it will take any action
permitted to be taken by a holder of the securities under the trust documents
only at the direction of one or more participants to whose accounts with DTC the
book-entry securities are credited. Additionally, DTC has advised the seller
that it will take such actions with respect to specified percentages of voting
rights only at the direction of and on behalf of participants whose holdings of
book-entry securities evidence such specified percentages of voting rights. DTC
may take conflicting actions with respect to percentages of voting rights to the
extent that participants whose holdings of book-entry securities evidence such
percentages of voting rights authorize divergent action.
None of the trust, the seller, the servicer, the insurer or the trustee
will have any responsibility for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the book-entry
securities held by Cede & Co., as nominee for DTC, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of securities among participants of
DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform these procedures and these procedures may be discontinued at
any time.
DEFINITIVE SECURITIES. The securities, which will be issued initially as
book-entry securities, will be converted to definitive securities and reissued
to beneficial owners or their nominees, rather than to DTC or its nominee, only
if (a) DTC or the servicer advises the trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository with
respect to the book-entry securities and DTC or the servicer is unable to locate
a qualified successor or (b) the trustee, at its option, elects to terminate the
book-entry system through DTC.
If any event described in the preceding paragraph occurs, DTC will be
required to notify all participants of the availability through DTC of
definitive securities. Upon delivery of definitive securities, the trustee will
reissue the book-entry securities as definitive securities to beneficial owners.
Distributions of principal of, and interest on,
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the book-entry securities will thereafter be made by the trustee, or a paying
agent on behalf of the trustee, directly to holders of definitive securities in
accordance with the procedures set forth in the trust documents.
Definitive securities will be transferable and exchangeable at the offices
of the trustee or the registrar. No service charge will be imposed for any
registration of transfer or exchange, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
DESCRIPTION OF THE TRANSACTION DOCUMENTS
The following summary describes the material terms of the Transaction
Documents pursuant to which a series pool will be created and a series of notes
will be issued. 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, we 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 leases. 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 us 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 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,
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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.
SERVICING COMPENSATION. The servicer will be entitled to receive a
servicing fee for each Due Period 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 may 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 leases 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 us 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 us and to 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 leases.
STATEMENTS TO TRUSTEE 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."
EVIDENCE AS TO COMPLIANCE. The assignment and servicing agreement will
provide that a firm of independent public accountants will furnish to us and to
the trustee, annually, a statement as to compliance by the servicer 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 us 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 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 a Servicer Events of Default 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 us 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
representations and 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 a "Servicer Event 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;
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(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, Inc. is the servicer, Copelco Capital, Inc. 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 (1)
the date it first becomes known to any officer of Copelco Capital,
Inc. or the servicer, as the case may be, and (2) the date on which
written notice thereof requiring the same to be remedied shall have
been given to the servicer or Copelco Capital, Inc., as the case may
be, by the trustee, or to the servicer or Copelco Capital, Inc., as
the case may be, and the trustee by any noteholder;
(d) if any representation or warranty of Copelco Capital, Inc. made in the
assignment and servicing agreement proves 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, Inc.
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, Inc. 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, Inc. 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, decree or order 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
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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 Collection
Accounts in the name of the trustee on behalf of the noteholders. In addition,
the trustee may establish one or more of the following accounts in the name of
the trustee for the benefit of the noteholders:
o a Distribution Account;
o a Reserve Account;
o an account for any other purpose.
Funds in the Collection Account and any Distribution Account, Reserve
Account, or an applicable account for any other purpose will generally be
invested as provided in the applicable indenture in investments acceptable to
the rating agencies as being consistent with the rating of the notes.
The above accounts will be maintained as either (a) an account maintained
with a depository institution or trust company acceptable to each of the rating
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.
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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. 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. 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, we must rely solely on the series pool.
MODIFICATION OF AN INDENTURE. With certain exceptions, under an indenture,
our rights and obligations and the rights of the noteholders may be modified by
us 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. However, 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
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(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
us or any of our affiliates 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:
(1) a default for payment of any interest on any note issued under that
indenture;
(2) a default in the payment of the principal of or any installment of the
principal of any note at the stated maturity; or
(3) insolvency or bankruptcy events relating to us.
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 trustee for a series of notes 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
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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 us 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 us and to the trustee. 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, we must promptly appoint a successor
trustee. If no successor trustee shall have been so appointed by us 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 (1) a first priority security
interest in the underlying leases perfected both by filing UCC financing
statements against us and Copelco Capital, Inc. and by taking possession of the
respective lease documents, (2) a security interest in the related equipment
owned by us and an assignment of our security interest in such equipment subject
to Nominal Buy-Out leases which security interest was originally perfected by
Copelco Capital, Inc., except in certain circumstances and (3) 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, us, against Copelco Capital, Inc.,
as transferor or servicer, or against 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 our
remedies 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,
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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, the originator will make a capital contribution to us of
the leases and equipment owned by the originator and subject to the leases and
assign its security interests in the equipment subject to Nominal Buy-Out
leases. The originator will warrant that each contribution of the leases from
the originator to us is an absolute assignment, that the contributions of its
rights in the equipment is a valid transfer of the originator's title to the
equipment and that the originator is either the owner of the equipment or, for
leases with leased equipment having an original equipment cost in excess of
$25,000, has a valid perfected first priority security interest in the
equipment, including equipment subject to Nominal Buy-Out Leases and
accordingly, the originator 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 the originator 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 us or by the trustee and UCC financing statements identifying equipment owned
by the originator, transferred to us and pledged to the trustee will be filed in
favor of us or in favor of 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 our
behalf. 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 the
originator, as transferor or servicer, various provisions of the Bankruptcy Code
of 1978, as amended, and related laws may interfere with, delay or eliminate our
ability to enforce our rights, or the ability of the originator to enforce its
rights under the leases.
In the case of operating leases, the Bankruptcy Code of 1978, as amended,
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 the
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originator, except for misrepresentation or breach of warranty, and the
noteholders could suffer a loss with respect to the notes. Similarly, if we were
to become bankrupt, and if the bankruptcy trustee or debtor-in-possession
elected to reject a lease, the flow of lease payments to us and to the
Noteholders would cease. As noted above, however, we have been structured so
that the filing of a bankruptcy petition on our behalf 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.
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 discussion does not purport to deal with all
federal tax consequences that may vary with, or are contingent on, individual
circumstances. In particular, it does not discuss the tax consequences that
might be relevant to holders subject to special treatment under United States
federal income tax law, 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.
The discussion that follows, and the opinion set forth below of Dewey
Ballantine LLP, our special tax counsel, are based upon provisions of the
Internal Revenue Code of 1986, as amended, 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 IRS. Accordingly, we suggest
that you consult your 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 COPELCO CAPITAL RECEIVABLES LLC. Tax counsel is of
the opinion that we 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
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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 us, we
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, such as 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
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 entity, 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.
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Since we will treat the notes as indebtedness for federal income tax
purposes, the trustee, 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 may wish 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, (a) 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; (b) 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
(c) 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
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 (x) 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 (y) 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
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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 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 (x) that daily portion and (y) 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, or in other words, 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 (1) under a constant yield method or (2)
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, which includes 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
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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 at a premium. A purchaser of a note at a premium 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 such 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,
commonly called "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, (1) a
beneficial owner must include the full amount of each interest payment in income
as it accrues, and (2) the premium must be allocated to the principal
distributions on the 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
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 premium. Tax Counsel
suggests that 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.
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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 "Withholding Regulations," which change some of the
rules relating to some of the presumptions currently available regarding 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. 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. Potential investors should consider the
state, local and other tax consequences of purchasing, owning or disposing of a
note.
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State and local tax laws may differ substantially from the corresponding
federal tax law, and the foregoing discussion does not purport to describe any
aspect of the tax laws of any state or other jurisdiction. Accordingly,
potential investors may wish to 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.
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 may wish to
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 applicable rating agencies, the likelihood that we 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
ERISA and the Code prohibit pension, profit sharing and other employee
benefit plans, as well as certain individual retirement arrangements, from
engaging in transactions involving plan assets with persons that are parties in
interest under ERISA or disqualified persons under the Code with respect to such
plans. However, if a statutory or administrative exemption applies to the
transaction, plans may engage in these transactions. ERISA and the Code also
generally prohibit transactions involving conflicts of interest by fiduciaries
of such plans. Persons who violate these prohibited transaction rules may incur
excise tax and other liabilities under ERISA and the Code. In addition,
investments by plans are subject to ERISA's general fiduciary requirements,
including the requirements of investment prudence and diversification and the
requirement that a plan make its investments in accordance with its governing
documents. Employee benefit plans that are governmental plans and church plans
under ERISA are not subject to ERISA requirements. Accordingly, these plans may
invest in notes without regard to the ERISA considerations discussed below. Any
such plan that is qualified and exempt from taxation under section 401(a) and
501(a) of the Code, however, is subject to the prohibited transaction rules
detailed in section 503 of the Code.
Certain transactions involving Copelco Capital Receivables might be deemed
to constitute prohibited transactions under ERISA and the Code with respect to a
plan that
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purchased notes if our assets were deemed to be plan assets of such
plan. Under the plan assets regulation issued by the Department of Labor, if a
plan acquired an equity interest in Copelco Capital Receivables, the plan's
assets would generally include both the equity interest and an undivided
interest in each of our underlying assets. An equity interest is an interest
other than an instrument that:
o is treated as indebtedness under applicable local law, and
o has no substantial equity features.
It is anticipated that the notes should treated as indebtedness without
substantial equity features for purposes of the plan assets regulation. In such
case, the acquisition or holding of the notes by or on behalf of a plan could
still result in a prohibited transaction if such acquisition or holding were
deemed to be a prohibited loan to a party in interest with respect to the plan.
Exemptions from the prohibited transaction rules could apply to a plan's
purchase and holding of notes, depending on the type and circumstances of the
plan fiduciary making the decision to acquire the securities. Included among
these exemptions are:
o PTCE 84-14, regarding transactions effected by qualified professional
asset managers;
o PTCE 90-1, regarding transactions entered into by insurance company
pooled separate accounts;
o PTCE 91-38, regarding transactions entered into by bank collective
investment funds;
o PTCE 95-60, regarding transactions entered into by insurance company
general accounts; and
o PTCE 96-23, regarding transactions effected by in-house asset
managers.
The prospectus supplement will provide further information that plans
should consider before purchasing the notes. A plan fiduciary considering the
purchase of notes may wish to consult its tax or legal advisors regarding:
o whether our assets would be considered plan assets,
o the possibility of exemptive relief from the prohibited transaction
rule, and o other ERISA issues and their potential consequences.
In addition, each plan fiduciary should determine whether, under the
general fiduciary standards of investment prudence and diversification, an
investment in notes is appropriate for the plan, taking into account the plan's
overall investment policy and the composition of the plan's investment
portfolio. The sale of notes to a plan is in no respect a representation by us
or by the underwriters that this investment meets all relevant
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requirements regarding investments by plans generally, by any particular plan or
that this investment is appropriate for plans generally or any particular plan.
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 us 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 us 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, we will indemnify the underwriters and the underwriters will
indemnify us 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.
LEGAL OPINIONS
Certain legal matters will be passed upon in relation to the issuance of
the notes for us and for Copelco Capital, Inc. by Spencer Lempert, the General
Counsel and Senior Vice President of Copelco Capital, Inc. and, in relation to
other matters, Dewey Ballantine LLP, New York, New York will issue an opinion
for us, for Copelco Capital, Inc. and for the underwriters.
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GLOSSARY
"Additional Lease" is a lease originator has opted to purchase with the
proceeds of a prepayment of a lease, in full or in part of a lease prepaid in
full or in part. The newly purchased Additional Lease will have similar
characteristics to the terminated lease.
"Adjusted Lease" is a lease for which the terms of lease were adjusted or
modified.
"Available Funds" is defined on page 24.
"Available Funds Shortfall" is the deficiency in Available Funds, excluding
funds on deposit in the Reserve Account needed to make the Required Payments.
A "Casualty Payment" is any payment made on a Lease on account of the loss,
theft, condemnation, governmental taking, destruction, or damage beyond repair
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 on the Lease or in the termination of the lessee's obligation to
make future Lease Payments thereunder.
"Code" is the Internal Revenue Code of 1986, as amended.
"Collection Account" is an account in the name of the trustee on behalf of
the noteholders into which payments made on or with respect to the applicable
leases will be deposited as provided in the applicable Transaction Documents.
"Discounted Present Value of the Leases," at any given time, will equal the
future remaining scheduled payments, excluding delinquent amounts, Excess Copy
Charges, Fee Per Scan Charges and Maintenance Charges from the leases, including
Non-Performing Leases, discounted at the discount rate specified in the
applicable prospectus supplement.
"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, excluding delinquent amounts and Maintenance
Charges, discounted at the discount rate.
"Distribution Account" is an eligible account from which funds are
distributed to the noteholders.
"DTC" is the Depositary Trust Company.
"Due Period" is, with regard to a specific payment date, the calendar month
preceding that payment date.
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"Excess Copy Charge" is the incremental amount the Business Technology
Group charges a copier user after the user exceeds the monthly copy allowance.
This excess charge is remitted to the vendors upon collecting by Copelco
Capital, Inc.
"Fee Per Scan Charge" is the incremental fee charged by the Healthcare
Group to the extent usage exceeds the monthly scan allowance.
"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.
"Maintenance Charge" is that fixed portion of the cost per copy program
fixed monthly charge that is attributable to maintenance of the copiers.
"Non-Performing Lease" is (a) a lease that has become more than 123 days
delinquent or (b) a lease that has been accelerated by the servicer or a lease
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.
"Reserve Account" is an account which provides reserves to cover shortfalls
in Available Funds.
"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 Prepayment" means, at any date of determination for 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 Payment" 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.
"Servicer Advance" is an amount the servicer may, but will not be required
to, advance to the trustee in order for the trustee to cover delinquencies on
some or all leases with respect to the prior Due Periods.
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"Servicer Event of Default" is defined on page 33.
"Substitute Lease" is a lease substituted for a Non-Performing Lease,
Warranty Lease or Adjusted Lease, having similar characteristics to the lease
its replacing.
"Tax Counsel" is Dewey Ballantine LLP.
"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 our name, and the
lessee.
"Transaction Documents" are the indenture and the assignment and servicing
agreement pertaining to the related series of notes.
"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.
"Warranty Lease" is a lease subject to repurchase as a result of a breach
of a representation and warranty.
51
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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.
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<PAGE>
ITEM 16. EXHIBITS
Exhibits
- --------
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).
- ----------
*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.
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<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.
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<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 __ day of October,
1999.
COPELCO CAPITAL RECEIVABLES LLC,
Registrant
By: COPELCO MANAGER, INC.
as Manager of the Registrant
By: /s/ ROBERT J. LEMENZE, JR.
----------------------------------
Name: Robert J. Lemenze, Jr.
Title: President, Director
Each person whose signature appears below constitutes and appoints Nicholas
Antonaccio 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.
The Registrant reasonably believes that the security ratings to be assigned
to the securities registered hereunder will make the securities "investment
grade securities" pursuant to Transaction Requirement B.2 of Form S-3, prior to
the sale of such securities.
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/ Robert J. Lemenze Jr. President and Director October 19, 1999
- ---------------------------
Robert J. Lemenze Jr.
/s/ Nicholas Antonaccio Vice President-Finance, October 19, 1999
- --------------------------- Treasurer
Nicholas Antonaccio
/s/ Al Damiani Director October 19, 1999
- ----------------------------
Al Damiani
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