AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1999
Registration No. 333-79903
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 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
(856) 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 DEWEY BALLANTINE LLP
GROUP, INC. 1301 AVENUE OF THE AMERICAS
700 EAST GATE DRIVE NEW YORK, NEW YORK 10019
MOUNT LAUREL, NJ 08054 (212) 259-6730
(856) 231-9600
(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. |_|
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Aggregate Aggregate Amount
Being To Be Price Per Offering Of Registration
Registered Registered Unit(1) Price(1) Fee
- --------------------------------------------------------------------------------
Lease-Backed $1,200,000,000 100% $1,000,000 $ 316, 522
Notes
================================================================================
(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 S-9 OF THIS
PROSPECTUS SUPPLEMENT AND PAGE 8 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>
- --------------------------------------------------------------------------------------------------------------------
Initial Initial Ratings
Public -----------------------------------------
Underwriting Interest Offering
Discount Rate Price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
Class A-2 Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
Class A-3 Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
Class A-4 Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
Class A-5 Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
Class B Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
Class C Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
Class D Notes $ % % %
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITER(S)]
The date of this Prospectus Supplement is _______
S-1
<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 ....................................4
Summary........................................................................5
Lease-Backed Notes Series _____................................................5
Issuer......................................................................5
Manager.....................................................................5
Servicer....................................................................5
Trustee.....................................................................5
The Pledged Assets..........................................................5
Leases......................................................................5
Cut-off Date................................................................6
Payment Date................................................................6
Determination Date..........................................................6
Record Date.................................................................6
Issuance Date...............................................................6
Denominations...............................................................6
Priority of Distributions...................................................6
Reserve Account.............................................................7
Optional Redemption.........................................................7
Final Scheduled Payment Date................................................7
Federal Income Tax Consequences.............................................8
ERISA Considerations........................................................8
Ratings.....................................................................8
Risk Factors...................................................................9
Use of Proceeds...............................................................10
The Series Pool...............................................................10
Copelco Capital, Inc. Financial Information...................................21
Management's Discussion and Analysis of Financial Condition...................21
Description of the Notes......................................................22
Security for the Notes........................................................41
The Indenture Trustee.........................................................41
Legal Matters Affecting a Lessee's Rights and Obligations....................41
Material Federal Income Tax Consequences......................................43
S-2
<PAGE>
ERISA Considerations..........................................................44
Underwriting..................................................................45
Experts.......................................................................47
Legal Matters.................................................................47
Rating of the Offered Notes...................................................47
Glossary......................................................................53
S-3
<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.
S-4
<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., a wholly-owned bankruptcy-remote
subsidiary of Copelco Capital, 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.
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
S-5
<PAGE>
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;
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
S-6
<PAGE>
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:
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.
S-7
<PAGE>
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-8
<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 OF particularly affecting any state or region where a
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 year 2000 issue is the result of prior
YEAR 2000 COMPLIANCE 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. However, the servicer has
represented to us that its computer systems are
year 2000 compliant. In the event that the
servicer, any subservicer or any of their
suppliers, customers, brokers or agents are not
year 2000 compliant, 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-9
<PAGE>
We refer you to the Glossary on page 53 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
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.
S-10
<PAGE>
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.
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 contributed 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. With respect to the tables below, if any
part of a payment is not received as scheduled, the entire payment due for
that period is reflected as delinquent.
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
PERCENTAGE
OF
STATISTICAL PERCENTAGE
STATISTICAL DISCOUNTED OF AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
STATE LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
- -------------------------- ----------- ----------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alaska $ $
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF
STATISTICAL PERCENTAGE
STATISTICAL DISCOUNTED OF AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
STATE LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
- -------------------------- ----------- ----------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
District of Columbia
Delaware
Florida
Georgia
Hawaii
Iowa
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Massachusetts
Maryland
Maine
Michigan
Minnesota
Missouri
Mississippi
Montana
North Carolina
North Dakota
Nebraska
New Hampshire
New Jersey
New Mexico
Nevada
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
Wisconsin
West Virginia
Wyoming
=====================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
=====================================================================================================================
</TABLE>
S-12
<PAGE>
DISTRIBUTION OF LEASES BY LEASE BALANCE
<TABLE>
<CAPTION>
PERCENTAGE
OF
STATISTICAL PERCENTAGE
STATISTICAL DISCOUNTED OF AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
STATISTICAL DISCOUNTED NUMBER OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
PRESENT VALUE OF THE LEASES OF LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
- --------------------------- --------- ----------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.01 - 5,000.00 $ $
5,000.01 - 10,000.00
10,000.01 - 15,000.00
15,000.01 - 20,000.00
20,000.01 - 25,000.00
25,000.01 - 30,000.00
30,000.01 - 35,000.00
35,000.01 - 40,000.00
40,000.01 - 45,000.00
45,000.01 - 50,000.00
50,000.01 - 60,000.00
60,000.01 - 70,000.00
70,000.01 - 80,000.00
80,000.01 - 90,000.00
90,000.01 - 100,000.00
100,000.01 - 125,000.00
125,000.01 - 150,000.00
150,000.01 - 175,000.00
175,000.01 - 200,000.00
200,000.01 - 300,000.00
300,000.01 - 400,000.00
400,000.01 - 500,000.00
500,000.01 - 600,000.00
600,000.01 - 700,000.00
700,000.01 - 800,000.00
800,000.01 - 900,000.00
900,000.01 - 1,000,000.00
1,000,000.01 - 1,500,000.00
1,500,000.01 - 2,000,000.00
2,000,000.01 - 2,500,000.00
=======================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
=======================================================================================================================
</TABLE>
S-13
<PAGE>
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
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: 100.000% $ 100.000% $ 100.000%
=======================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
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>
0 - 12 $ $
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 96
=======================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
=======================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
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
- ---------------------------- ------------- ------------- ---------------- -------------- ---------------- -------------
Finance Lease $ $
Operating Lease
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Total 100.000% $ 100.000% $ 100.000%
=======================================================================================================================
</TABLE>
S-14
<PAGE>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
PERCENTAGE
OF PERCENTAGE
STATISTICAL OF
STATISTICAL DISCOUNTED AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
PURCHASE OPTION LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
- ---------------------------- ------------- ------------- ---------------- -------------- ---------------- -------------
Fixed Purchase Option $ $
Fair Market Value
Nominal Buyout
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Total 100.000% $ 100.000% $ 100.000%
=======================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY DELINQUENCIES
<TABLE>
<CAPTION>
PERCENTAGE
OF PERCENTAGE
STATISTICAL OF
STATISTICAL DISCOUNTED AGGREGATE
PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRESENT VALUE OF VALUE OF ORIGINAL EQUIPMENT
DAYS DELINQUENT LEASES OF LEASES LEASES LEASES EQUIPMENT COST COST
- ------------------------------ ----------- ------------ ------------------ ------------- ---------------- -------------
0 - 29 $ $
30 - 59
60 - 62
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Total 100.000% $ 100.000% $ 100.000%
=======================================================================================================================
</TABLE>
S-15
<PAGE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
PERCENTAGE
OF PERCENTAGE
STATISTICAL OF
STATISTICAL DISCOUNTED AGGREGATE
NUMBER PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
OF OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES OF LEASES OF 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
Phone, TV, Comm Equipment
Photo Equipment
Phys Misc Medical Eqp & Exam Tables
Phys Office Furn, Fixtures & Phones
Pollution Control Equipment
Printing Equipment
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF PERCENTAGE
STATISTICAL OF
STATISTICAL DISCOUNTED AGGREGATE
NUMBER PERCENTAGE DISCOUNTED PRESENT AGGREGATE ORIGINAL
OF OF NUMBER PRESENT VALUE VALUE OF ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
- ------------------------------------------ --------- ----------- --------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
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 100.000% $ 100.000% $ 100.000%
==========================================================================================================================
</TABLE>
1 The following abbreviations used in this table have the following
meanings:
"Eqp." -- Equipment
"Misc." -- Miscellaneous
S-17
<PAGE>
HISTORICAL DELINQUENCY INFORMATION. All accounts over 90 days past
due automatically become non-accruing accounts. 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 charge-off 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 further deterioration in the previously established estimated realizable
value. Additional charge-offs 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 charged 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 "Copelco Capital, Inc. Combined Portfolio" table below sets out the
aggregate delinquency experience of the Business Technology Group, Commercial &
Industrial Group and the HealthCare Group. 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 receivable balance for that lease is reflected as delinquent on the table
below.
HISTORICAL DELINQUENCY EXPERIENCE
COPELCO CAPITAL, INC. COMBINED PORTFOLIO
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
TOTAL
RECEIVABLES
BALANCE $2,590,025,332 $2,110,428,632 $1,732,009,721
- -------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days 56,273,287 2.02% 47,444,381 2.25% 38,610,259 2.23%
60-89 days 17,162,688 0.59 13,152,258 0.62 11,999,057 0.69
90 Days+ 15,869,432 0.52 5,244,005 0.25 10,437,965 0.60
- -------------------------------------------------------------------------------------
Total
Delinquencies $89,305,407 3.13% $65,840,644 3.12% $61,047,281 3.52%
=========== ==== =========== ==== =========== ====
<CAPTION>
December 31, December 31, December 31,
1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
TOTAL
RECEIVABLES
BALANCE $1,503,055,810 $1,238,424,241 $1,000,488,313
- -----------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days 34,481,668 2.29% 26,255,335 2.12% 14,846,559 1.48%
60-89 days 8,136,578 0.54 4,976,920 0.40 3,971,389 0.40
90 Days+ 7,587,972 0.50 6,703,063 0.54 6,748,827 0.67
- -----------------------------------------------------------------------------
Total
Delinquencies $50,206,218 3.34% $37,935,318 3.06% $25,566,775 2.56%
=========== ==== =========== ==== =========== ====
</TABLE>
S-18
<PAGE>
BUSINESS TECHNOLOGY GROUP
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
TOTAL RECEIVABLES
BALANCE (1) $1,550,464,949 % $1,213,803,856 % $964,765,984 %
- ------------------------------------------------------------------------------------------
No. of Delinquent
Days
30-59 days 37,039,016 2.39% 25,605,251 2.11% 21,036,692 2.18%
60-89 days 11,926,383 0.77 8,054,059 0.66 5,451,379 0.57
90 Days+ 12,856,696 0.83 4,157,517 0.34 6,432,173 0.67
- ------------------------------------------------------------------------------------------
Total Delinquencies $61,822,095 3.99% $37,816,827 3.12% $32,920,244 3.41%
=========== ==== =========== ==== =========== ====
<CAPTION>
December 31, December 31, December 31,
1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
TOTAL RECEIVABLES
BALANCE (1) $812,719,952 % $669,800,055 % $543,197,213 %
- ---------------------------------------------------------------------------------------
No. of Delinquent
Days
30-59 days 24,072,598 2.96% 18,298,832 2.73% 8,636,836 1.59%
60-89 days 5,249,429 0.65 3,492,843 0.52 2,281,428 0.42
90 Days+ 4,940,285 0.61 4,867,482 0.73 3,096,224 0.57
- ---------------------------------------------------------------------------------------
Total Delinquencies $34,262,311 4.22% $26,659,157 3.98% $14,014,488 2.58%
=========== ==== =========== ==== =========== ====
</TABLE>
COMMERCIAL & INDUSTRIAL AND HEALTHCARE GROUPS
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
TOTAL
RECEIVABLES
BALANCE (1) $1,039,560,383 % $896,624,776 % $767,243,737 %
- ------------------------------------------------------------------------------------------
No. of
Delinquent Days
30-59 days 19,234,271 1.85% 21,839,130 2.44% 17,573,567 2.29%
60-89 days 5,236,305 0.50 5,098,199 0.57 6,547,678 0.85
90 Days+ 3,012,736 0.29 1,086,488 0.12 4,005,792 0.52
- ------------------------------------------------------------------------------------------
Total Delinquencies $27,483,312 2.64% $28,023,817 3.13% $28,127,037 3.67%
=========== ==== =========== ==== =========== ====
<CAPTION>
December 31, December 31, December 31,
1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
TOTAL
RECEIVABLES
BALANCE (1) $690,335,858 % 568,624,186 % $457,291,099 %
- -------------------------------------------------------------------------------------
No. of
Delinquent Days
30-59 days 10,409,069 1.51% 7,956,503 1.40% 6,209,723 1.36%
60-89 days 2,887,149 0.42 1,484,077 0.26 1,689,961 0.37
90 Days+ 2,647,688 0.38 1,835,581 0.32 3,652,603 0.80
- -------------------------------------------------------------------------------------
Total Delinquencies $15,943,906 2.31% $11,276,161 1.98% $11,552,287 2.53%
=========== ==== =========== ==== =========== ====
</TABLE>
HISTORICAL DEFAULT EXPERIENCE. 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 September 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 leases not charged-off.
HISTORICAL CHARGE-OFF EXPERIENCE
(DOLLARS IN THOUSANDS)
COPELCO CAPITAL, INC. COMBINED PORTFOLIO
<TABLE>
<CAPTION>
September 30, December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AVERAGE RECEIVABLES OUTSTANDING $2,350,227 $1,921,219 $1,617,532 $1,370,740 $1,119,456 $868,431
- ----------------------------------------------------------------------------------------------------------------------
NET LOSSES .................... $25,091 $32,477 $22,138 $15,713 $11,457 $10,328
NET LOSSES AS A %
OF AVG. RECEIVABLES ........... 1.42%(1) 1.69% 1.37% 1.15% 1.02% 1.19%
</TABLE>
(1) Annualized
S-19
<PAGE>
BUSINESS TECHNOLOGY GROUP
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AVERAGE RECEIVABLES
OUTSTANDING (1) ... $1,382,134 $1,089,285 $888,742 $741,260 $606,499 $464,518
- -----------------------------------------------------------------------------------------------------------
NET LOSSES ......... $17,998 $22,789 $16,295 $13,386 $9,969 $7,415
NET LOSSES AS A %
OF AVG. RECEIVABLES 1.74%(1) 2.09% 1.83% 1.81% 1.64% 1.60%
</TABLE>
(1) Annualized
COMMERCIAL & INDUSTRIAL AND HEALTHCARE GROUPS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AVERAGE RECEIVABLES
OUTSTANDING ....... $968,093 $831,934 $728,790 $629,480 $512,958 $403,913
- -----------------------------------------------------------------------------------------------------------
NET LOSSES ......... $7,092 $9,688 $5,843 $2,327 $1,488 $2,913
NET LOSSES AS A %
OF AVG. RECEIVABLES 0.98%(1) 1.16% 0.80% 0.37% 0.29% 0.72%
</TABLE>
(1) Annualized
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the leases in the future.
S-20
<PAGE>
Copelco Capital, Inc. Financial Information
- --------------------------------------------------------------------------------
June 30, 1999 December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------
Total Assets $3,222,972,000 $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
- --------------------------------------------------------------------------------
Six Months ended
June 30, 1999
- --------------------------------------------------------------------------------
Total Revenue $172,385,000 $312,040,000 $253,787,000
- --------------------------------------------------------------------------------
Net Income $16,212,000 $35,658,000 $32,137,000
- --------------------------------------------------------------------------------
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) receiving as a
contribution equipment leases and lease receivables, including equipment, from
Copelco Capital, Inc. and its affiliates, (2) the issuance of notes
collateralized by our 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.
S-21
<PAGE>
- --------------------------------------------------------------------------------
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 Chief Executive Officer 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 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.
S-22
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CLASS INTEREST RATE INITIAL PRINCIPAL EXPECTED MATURITY STATED MATURITY DATE
AMOUNT 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. Although the material terms of the
indenture are contained either in this prospectus supplement or the prospectus,
we suggest that investors in the Offered Notes 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 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.
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).
S-23
<PAGE>
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.
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
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(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, then
(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, then
(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 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.
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The "Class C Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class C Notes to the greater of the Class C
Target Investor Principal Amount and the Class C Floor.
The "Class D Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class D Notes to the greater of the Class D
Target Investor Principal Amount and the Class D Floor.
The "Class E Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class E Notes to the greater of the Class E
Target Investor Principal Amount and the Class E Floor.
The "Class A Target Investor Principal Amount" with respect to each
payment date is an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class B Target Investor Principal Amount" with respect to each
payment date is an amount equal to the product of (a) the Class B Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class C Target Investor Principal Amount" with respect to each
payment date is an amount equal to the product of (a) the Class C Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
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
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the immediately preceding payment date after giving effect to all principal
payments made on that day, minus (d) the amount on deposit in the Reserve
Account after giving effect to withdrawals to be made on that payment date.
The "Class C Floor" with respect to each payment date means (a)
_____% of the initial Discounted Present Value of the Leases as of the cut-off
date, plus (b) the Cumulative Loss Amount with respect to that payment date,
minus (c) the sum of the outstanding principal amount of the Class D Notes, the
outstanding principal amount of the Class E Notes, and the Overcollateralization
Balance as of the immediately preceding payment date after giving effect to all
principal payments made on that day, minus (d) the amount on deposit in the
Reserve Account after giving effect to withdrawals to be made on that payment
date; provided, however, that if the outstanding principal amount of the Class B
Notes is less than or equal to the Class B Floor on that payment date, the Class
C Floor will equal the outstanding principal amount of the Class C Notes
utilized in the calculation of the Class B Floor for that payment date.
The "Class D Floor" with respect to each payment date means (a)
____% of the initial Discounted Present Value of the Leases as of the cut-off
date, plus (b) the Cumulative Loss Amount with respect to the payment date,
minus (c) the sum of the outstanding principal amount of the Class E Notes, and
the Overcollateralization Balance as of the immediately preceding payment date
after giving effect to all principal payments made on that day, minus (d) the
amount on deposit in the Reserve Account after giving effect to withdrawals to
be made on that payment date; provided, however, that if the outstanding
principal amount of the Class C Notes is less than or equal to the Class C Floor
on that payment date, the Class D Floor will equal the outstanding principal
amount of the Class D Notes utilized in the calculation of the Class C Floor for
that payment date.
The "Class E Floor" with respect to each payment date means (a)
_____% of the initial Discounted Present Value of the Leases as of the cut-off
date, plus (b) the Cumulative Loss Amount with respect to that payment date,
minus (c) the Overcollateralization Balance as of the immediately preceding
payment date after giving effect to all principal payments made on that day,
minus (d) the amount on deposit in the Reserve Account after giving effect to
withdrawals to be made on that payment date; provided, however, that if the
outstanding principal amount of the Class D Notes is less than or equal to the
Class D Floor on that payment date, the Class E Floor will equal the outstanding
principal amount of the Class E Notes utilized in the calculation of the Class D
Floor for that payment date.
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.
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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 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.
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(e) proceeds from investment of funds in the Collection Account
and the Reserve Account, if any;
(f) Casualty Payments other than Residual Casualty Payments which
are, at any date of determination with respect to a lease, the
excess of (a) the Casualty Payment 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)).
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.
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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 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;
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(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)
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).
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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 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
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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;
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
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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":
(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
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<PAGE>
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, 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,
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<PAGE>
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 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
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<PAGE>
the Statistical Class Percentage associated with the Statistical Initial
Principal Amounts of the respective class.
S-37
<PAGE>
<TABLE>
<CAPTION>
Percentage Of The Initial Principal Amounts At the Respective CPR Set Forth Below
==========================================================================================================================
0% CPR
----------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class B Class C Class D Class E
- ------------ --------- --------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date
- -------------
% % % % % % % % %
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 Amounts At the Respective CPR Set Forth Below
==========================================================================================================================
12% CPR
----------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class A-5 Class B Class C Class D Class E
- ------------ --------- --------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date
- -------------
% % % % % % % % %
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, 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
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<PAGE>
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. 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 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. 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 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."
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<PAGE>
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.
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
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<PAGE>
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 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.
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<PAGE>
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 Principal
Amount Amount Totals
------------- ------------- ------------- -------------
Class A-1 $ $ $
Class A-2 $ $ $
Class A-3 $ $ $
Class A-4 $ $ $
Class A-5 $ $ $
Class B $ $ $
Class C $ $ $
Class D $ $ $
------------- ------------- -------------
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, _____% 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
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<PAGE>
(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 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 in 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.
S-45
<PAGE>
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 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.
S-46
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report..................................................46
Balance Sheet of Copelco Capital Receivables LLC as of
November 29, 1999............................................................47
Notes to Balance Sheet........................................................48
S-47
<PAGE>
INDEPENDENT AUDITORS' REPORT
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 November 29,
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 that 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 November 29, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
November 30, 1999
New York, New York
S-48
<PAGE>
COPELCO CAPITAL RECEIVABLES LLC
(a wholly owned subsidiary of Copelco Capital, Inc.)
Balance Sheet
November 29, 1999
Assets
------
Cash $1,000
------
$1,000
======
Stockholder's Equity
Stockholder's Equity
Common Stock (authorized 1,000
shares, $1 par value, $100
issued and outstanding 100 shares)
Additional paid-in capital
900
------
$1,000
======
See accompanying notes to balance sheet.
S-49
<PAGE>
COPELCO CAPITAL RECEIVABLES LLC
(a wholly owned subsidiary of Copelco Capital, Inc.)
Notes to Balance Sheet
November 29, 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 receive as capital
contributions from Copelco Capital, Inc. and any of its affiliates pools
of leases and the related equipment and lease receivables; to issue and
sell notes collateralized by any or all of such 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.
S-50
<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 S-28.
"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 _____%.
"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
S-51
<PAGE>
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 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.
S-52
<PAGE>
"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.
"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.
S-53
<PAGE>
"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 S-24
"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.
"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.
S-54
<PAGE>
"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.
"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 S-29.
"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 page S-34.
S-55
<PAGE>
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.
S-56
<PAGE>
================================================================================
$
COPELCO CAPITAL
RECEIVABLES LLC
--------------------
PROSPECTUS
SUPPLEMENT
--------------------
[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
- --------------------------------------------------------------------------------
$1,200,000,000
COPELCO CAPITAL RECEIVABLES LLC, ISSUER
COPELCO CAPITAL, INC., SERVICER
LEASE-BACKED NOTES
- ---------------------------------
WE SUGGEST THAT YOU READ THE FROM TIME TO TIME WE MAY SELL A SERIES OF ITS
SECTION ENTITLED "RISK FACTORS" NOTES THAT --
STARTING ON PAGE 8 OF THIS
PROSPECTUS AND CONSIDER THESE o will represent solely our debt
FACTORS BEFORE MAKING A obligations; and
DECISION TO INVEST IN THE NOTES.
o will consist of one or more classes on
The notes of each series will be terms to be determined at the time of
debt solely of Copelco Capital sale.
Receivables LLC and will be
payable only from our pledged THE ASSETS BACKING THE NOTES MAY CONSIST OF
assets and from any credit ANY COMBINATION OF --
enhancement for such series.
o leases;
Retain this prospectus for future
reference. This prospectus may o installment sale contracts;
not be used to consummate
sales of securities unless o rental stream obligations;
accompanied by the prospectus
supplement relating to the o monies received relating to the leases,
offering of such securities. 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.
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 December 9, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
IMPORTANT INFORMATION ABOUT THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT ....................................................................3
PROSPECTUS SUMMARY.............................................................4
Issuer.......................................................................4
Originator...................................................................4
Servicer.....................................................................4
Trustee......................................................................4
The Notes....................................................................4
The Series Pools.............................................................5
Payment Date.................................................................5
Due Period...................................................................5
Record Date..................................................................6
Registration of Notes........................................................6
Credit Enhancement...........................................................6
Optional or Mandatory Termination............................................6
Tax Considerations...........................................................6
ERISA Considerations.........................................................6
Ratings......................................................................7
RISK FACTORS...................................................................8
WHERE YOU CAN FIND MORE INFORMATION...........................................13
THE ISSUER....................................................................14
USE OF PROCEEDS...............................................................14
THE SERIES POOLS..............................................................14
COPELCO CAPITAL, INC.'S UNDERWRITING AND SERVICING PRACTICES..................17
DESCRIPTION OF THE NOTES......................................................24
PREPAYMENT AND YIELD CONSIDERATIONS...........................................27
DESCRIPTION OF THE TRANSACTION DOCUMENTS......................................32
THE INDENTURE TRUSTEE.........................................................39
SECURITY FOR THE NOTES........................................................39
LEGAL MATTERS AFFECTING A LESSEE'S RIGHTS AND OBLIGATIONS....................39
MATERIAL FEDERAL INCOME TAX CONSEQUENCES......................................41
RATINGS.......................................................................47
ERISA CONSIDERATIONS..........................................................47
PLAN OF DISTRIBUTION..........................................................48
LEGAL OPINIONS................................................................49
GLOSSARY......................................................................50
2
<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.
3
<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.
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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.
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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.
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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 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
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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 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.
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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 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 atwhich 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
(856) 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.
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THE ISSUER
We refer you to the glossary on page 50 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 originated and ultimately located in
the United States, 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 the following related assets:
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,
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
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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:
(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;
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(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.
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:
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(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 such a way that there are no
material deviations from the underwriting criteria specified in this prospectus.
After the originator underwrites or acquires the leases, they will be sold to
us. 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.
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.
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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 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.
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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 standard 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
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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 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
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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.
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
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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.
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
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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 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 generally occurs when
the lease is 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.
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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.
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
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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.
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;
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(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.
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 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
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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. 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
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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 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.
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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 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.
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The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York 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, 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.
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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, 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.
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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, 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
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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.
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
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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;
(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
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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 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
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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.
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
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modification of that type may be made if it would result in the reduction or
withdrawal of the then current ratings of the outstanding applicable notes and
no modification of that type may be made without the consent of the holder of
each outstanding note affected thereby if it would:
(a) change the fixed maturity of any note, or the principal amount
or interest amount payable thereof, or change the priority of payment thereof or
reduce the interest rate or the principal thereon or change the place of payment
where, or the coin or currency in which, any note or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
payment on or after the maturity thereof; or
(b) reduce the above-stated percentage of notes, without the consent
of the holders of all notes then outstanding under that indenture; or
(c) modify the provisions of the indenture restricting modifications
or waivers of the provisions of the indenture except to increase any percentage
or fraction set forth in the indenture or to provide that other specific
provisions of the indenture cannot be modified or waived without the consent of
the holder of each outstanding note affected thereby; or
(d) modify or alter the provisions of the indenture treating notes
held by 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.
REDEMPTION. In the event a redemption of the notes is effected upon
terms described in the prospectus supplement, in all circumstances the
repurchase price will at least equal the entire unpaid principal plus accrued
and unpaid interest.
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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 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
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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, 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
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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 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. However, the discussion does not address
all of 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
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existing law to the facts as presented in the applicable agreements, the notes
will be treated as indebtedness for federal income tax purposes. If
characterized as indebtedness, interest on the notes will be taxable as ordinary
income for federal income tax purposes when received by noteholders using the
cash method of accounting and when accrued by noteholders using the accrual
method of accounting. Noteholders using the accrual method of accounting may be
required to report income for tax purposes in advance of receiving a
corresponding cash distribution with which to pay the applicable tax. Interest
received on the notes also may constitute "investment income" for purposes of
limitations in the Code concerning the deductibility of investment interest
expense.
Although it is the opinion of Tax Counsel that the notes are
properly characterized as indebtedness for federal income tax purposes, no
assurance can be given that this debt characterization of the notes will
prevail. If the notes were treated as an ownership interest in the leases, all
income on the leases would be income to the holders of the notes, and related
fees and expenses would generally be deductible, subject to the limitations on
the deductibility of miscellaneous itemized deductions by individuals, and the
market discount and premium provisions of the Code might apply to a purchase of
the notes.
If, alternatively, the notes were treated as an equity interest in
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.
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
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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 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.
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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 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
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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.
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 (the "Withholding
Regulations"), which make certain modifications to withholding, backup
withholding and information reporting rules. The Withholding Regulations attempt
to unify certification requirements and modify certain reliance standards. The
Withholding Regulations will generally be effective for payments made after
December 31, 2000, although taxpayers may begin compliance with the
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Withholding Regulations immediately. Prospective investors are urged to consult
their own tax advisors regarding the Withholding Regulations.
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. 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.
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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 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:
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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 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
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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 26.
"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.
"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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"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.
"Servicer Event of Default" is defined on page 35.
"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.
51
<PAGE>
"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.
52
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred in connection with
the issuance and distribution of the securities being registered.
SEC Filing Fee ............................................ $ 316,522.00
Indenture Trustee's Fees and Expenses ..................... $ 60,000.00
Legal Fees and Expenses ................................... $ 30,000.00
Accounting Fees and Expenses .............................. $ 175,000.00
Printing and Engraving Expenses ........................... $ 15,000.00
Blue Sky Qualification and Legal
Investment Fees and Expenses ........................... $ 35,000.00
Rating Agency Fees ........................................ $ 230,000.00
Miscellaneous ............................................. $ 30,000.00
- ----------------------------------------------------------- ---------------
TOTAL ..................................................... $ 891,522.00
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 Capital, Inc. has also purchased liability policies which
indemnify officers and directors of the Registrant's manager against loss
arising from claims by reason of their legal liability for acts as officers and
directors, subject to limitations and conditions as set forth in the policies.
Pursuant to agreements which the Registrant may enter into with
underwriters or agents (forms of which will be included as exhibits to this
Registration Statement), officers and directors of the Registrant, and
affiliates thereof, may be entitled to indemnification by such underwriters or
agents against certain liabilities, including liabilities under the Securities
Act of 1933, arising from information which has been or will be furnished to the
Registrant by such underwriters or agents that appears in the Registration
Statement or any Prospectus.
II-1
<PAGE>
ITEM 16. EXHIBITS
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.
II-2
<PAGE>
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 15 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and reasonably believes that by the time of
sale of the securities registered hereunder, said securities will be rated
"investment grade" as required for asset-backed securities offered on Form S-3.
The Registrant 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 9th day of December, 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert J. Lemenze Jr. President
- ------------------------------------ Director December 9, 1999
Robert J. Lemenze Jr.
/s/ Nicholas Antonaccio Vice President-Finance,
- ----------------------------------- Treasurer December 9, 1999
Nicholas Antonaccio
/s/ John Hakemian Director December 9, 1999
- -----------------------------------
John Hakemian
</TABLE>
II-4
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK 10019-6092
TELEPHONE 212 259-8000 FACSIMILE 212 259-6333
December 9, 1999
Copelco Capital Receivables LLC
700 East Gate Drive
Mount Laurel, New Jersey 08054-5400
Re: Copelco Capital Receivables LLC
Registration Statement on Form S-3
(File No. 333-79903)
Ladies and Gentlemen:
We have acted as special counsel for Copelco Capital Receivables
LLC, a Delaware limited liability company (the "Issuer"), in connection with the
preparation of the above-referenced Registration Statement on Form S-3 (the
"Registration Statement"), filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), in respect of
equipment lease asset-backed notes (the "Offered Notes"), each series to be
issued under a separate Indenture, in substantially the form filed as an exhibit
to the Registration Statement, among the Issuer, Copelco Capital, Inc. and the
trustee to be named in the related prospectus supplement.
In that regard, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion.
The opinions expressed below are subject to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
We are admitted to the Bar of the State of New York and we express
no opinion as to the laws of any other jurisdiction except as to matters that
are governed by Federal law or the laws of the State of New York. All opinions
expressed herein are based on laws, regulations and policy guidelines currently
in force and may be affected by future regulations.
Based upon the foregoing, we are of the opinion that when, in
respect of a series of Offered Notes, an Indenture has been duly authorized by
all necessary action
<PAGE>
and duly executed and delivered by all necessary parties for such series and
when the Offered Notes have been duly executed and authenticated in accordance
with the provisions of the Indenture, and issued and sold as contemplated in the
Registration Statement, as amended or supplemented, delivered pursuant to
Section 5 of the Act in connection therewith, such Offered Notes will be a
binding obligation of the registrant, legally and validly issued and the holders
of such Offered Notes will be entitled to the benefits of such Indenture.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this opinion, we do not concede that we are
experts within the meaning of the Act or the rules and regulations therewith, or
that this consent is required by Section 7 of the Act.
Very truly yours,
DEWEY BALLANTINE LLP
2
