PROSPECTUS SUPPLEMENT
(TO THE PROSPECTUS DATED DECEMBER 22, 1999)
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$883,148,838
COPELCO CAPITAL RECEIVABLES LLC, ISSUER
COPELCO CAPITAL, INC., SERVICER
SERIES 2000-A
LEASE-BACKED NOTES
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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.
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We will issue -
o Seven classes of notes which are to be offered by this prospectus;
o Class A-2b Lease-Backed Notes, which will be sold in a private
placement and are not offered by this prospectus;
o Class E Lease-Backed Notes, which will be sold in a private
placement and are not offered by this prospectus but serve as credit
support to the notes offered by this prospectus;
o Residual Notes which will be sold in a private placement and are not
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 our interest in the
equipment underlying the leases;
o Receive distributions beginning on June 19, 2000;
o Represent our debt obligations; and
o Currently have no trading market.
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<CAPTION>
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Initial Initial Ratings
Public ---------------------------------------
Issuance Underwriting Offering
Amount Discount Interest Rate Price Moodys Fitch S&P
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<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes $ 185,926,071 0.100% 6.50728% 100.00000% P-1 F1+/AAA A-1+
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Class A-2a Notes $ 139,444,553 0.100% 1 month LIBOR 100.00000% P-1 F1+/AAA A-1
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Class A-3 Notes $ 255,648,348 0.175% 7.12% 99.99922% Aaa AAA AAA
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Class A-4 Notes $ 237,055,741 0.220% 7.22% 99.99676% Aaa AAA AAA
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Class B Notes $ 18,592,607 0.250% 7.30% 99.98506% Aa2 AA AA
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Class C Notes $ 18,592,607 0.300% 7.39% 99.99082% A2 A A
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Class D Notes $ 27,888,911 0.400% 7.87% 99.97908% Baa2 BBB BBB
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</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.
FIRST UNION SECURITIES, INC. PRUDENTIAL SECURITIES
(CO-LEAD AND BOOKRUNNER) (CO-LEAD)
BANC OF AMERICA SECURITIES LLC
MELLON FINANCIAL MARKETS, LLC
The date of this Prospectus Supplement is April 14, 2000
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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 the 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
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Important Notice About the Information Presented in This Prospectus
Supplement and the Accompanying Prospectus..................................S-3
Summary......................................................................S-4
Lease-Backed Notes Series 2000-A.............................................S-4
Risk Factors.................................................................S-9
Use of Proceeds.............................................................S-11
The Swap Agreement..........................................................S-11
Variable Funding Capital Corporation........................................S-12
The Series Pool.............................................................S-13
Copelco Capital, Inc. Financial Information.................................S-25
Management's Discussion and Analysis of Financial Condition.................S-25
Description of the Notes....................................................S-26
Security for the Notes......................................................S-49
The Indenture Trustee.......................................................S-49
Legal Matters Affecting a Lessee's Rights and Obligations..................S-49
Material Federal Income Tax Consequences....................................S-51
ERISA Considerations........................................................S-52
Underwriting................................................................S-53
Experts.....................................................................S-55
Legal Matters...............................................................S-55
Ratings of the Offered Notes................................................S-55
Financial Statements of Copelco Capital Receivables LLC.....................S-57
Glossary....................................................................S-61
S-2
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IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
All references to "we," "us," "our," "ourselves," or the "Issuer"
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-3
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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 2000-A
We will issue the notes offered by this prospectus supplement in
book-entry form through the facilities of The Depository Trust Company.
ISSUER
We are 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 (except for any lease payments due or to become
due thereon during April 2000), cash on deposit in a reserve account and the
collection account, rights under the swap agreement described below and other
assets as described in detail elsewhere in this prospectus supplement. The
proceeds of issuance of the Class A-2b Notes will be deposited in a Class A-2
funding account and invested in eligible investments. Proceeds from these
investments will be used to pay the Class A-2a Notes on their stated maturity
date.
LEASES
o On or about April 20, Copelco Capital, Inc. will contribute to us a pool of
leases and its interests in the equipment underlying the leases (except for any
lease payments due or to become due thereon during April 2000). Payments on the
notes will be made from
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payments on these leases (except for any lease payments due or to become due
thereon during April 2000).
o The leases will include copier, electronic, manufacturing and healthcare
equipment leases. As of March 28, 2000, copiers make up approximately 49.20% of
the total original cost of the leased equipment in this pool.
o The lessees under the leases are primarily hospitals, non-hospital medical
facilities, physicians, and businesses.
o The leases are triple-net leases, which means that the lessees are required to
pay all taxes, maintenance and insurance associated with the equipment. The
leases are non-cancelable by the lessees. All payments under the leases are
absolute, unconditional obligations of the lessees without right of offset for
any reason.
o We will calculate the principal value of the pool of leases at any time by
discounting their remaining payments, with the exception of minor charges and
delinquent payments, at a rate equal to 7.987%.
o We will pay the notes from payments on the leases (except for any lease
payments due or to become due thereon during April 2000). Noteholders should not
rely on the sale of leased equipment for payments on the notes.
CUT-OFF DATE
The opening of business on March 28, 2000.
PAYMENT DATE
The 18th day of each month if the 18th is a business day. If the 18th is not a
business day, the payment date will be the following day that is a business day.
The first payment date will be June 19, 2000.
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
For any payment date other than the initial payment date, the record date is the
last business day of the month preceding a payment date. The record date for the
first payment date is issuance date.
ISSUANCE DATE
On or about April 20, 2000.
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.
DISTRIBUTIONS ON THE NOTES
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. The applicable interest rate
for each class of notes offered hereby is set forth on the cover of this
prospectus supplement. The interest rate on the Class A-2b notes will be equal
to the yield on the eligible investments held in the Class A-2 funding account
on or prior to the payment date in March 2001 and thereafter one-month LIBOR
plus 0.20%. In the event that the swap counterparty defaults under the swap
agreement, the Class A-2a notes will receive interest payments at a fixed rate
of 6.75% and, after the payment date in March 2001, the Class A-2b Notes
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will receive interest payments at a fixed rate of 6.95%.
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
as follows:
o to the Class A-1 noteholders on each payment date, until the principal
amount on the Class A-1 Notes has been reduced to zero;
o to the Class A-2a noteholders, from amounts held in the Class A-2 funding
account on the payment date in March 2001;
o when the Class A-1 Notes and the Class A-2a Notes have been paid in full,
to the Class A-2b noteholders, until the principal amount on the Class
A-2b Notes has been reduced to zero, an amount generally equal to 85.0000%
of the decrease in the principal value of the leases;
o when the Class A-2b 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 85.0000% of the decrease in
the principal value of the leases;
o when the Class A-3 Notes have been paid in full, to the Class A-4
noteholders, until the principal amount on the Class A-4 Notes has been
reduced to zero, an amount generally equal to 85.0000% of the decrease in
the principal value of the leases;
o when the Class A-1 Notes have been paid in full:
o to the Class B noteholders, an amount generally equal to 2.5000% of
the decrease in the principal value of the leases;
o to the Class C noteholders, an amount generally equal to 2.5000% of
the decrease in the principal value of the leases;
o to the Class D noteholders, an amount generally equal to 3.7500% of
the decrease in the principal value of the leases;
o to the Class E noteholders, an amount generally equal to 3.4375% of
the decrease in the principal value of the leases.
This general description of distributions on the notes is subject to certain
targets, floors and other qualifications. 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 the cut-off date 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.
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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 March 28, 2000. 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 dates:
Class A-1 May 14, 2001
Class A-2a March 19, 2001
Class A-2b April 18, 2002
Class A-3 August 18, 2003
Class A-4 August 18, 2005
Class B March 20, 2006
Class C May 18, 2006
Class D May 18, 2006
Final payment on the notes (except for the Class A-2a Notes) will probably be
earlier than the final scheduled payment date set out above for the applicable
class of notes.
SWAP AGREEMENT
o We will enter into a swap agreement with a swap counterparty for the benefit
of the noteholders. Under the swap agreement, the swap counterparty's payments
will be calculated at one-month LIBOR and our payments will be calculated at the
assumed fixed rate of 6.75%. The swap agreement will terminate on the stated
maturity of the Class A-2b Notes.
o To the extent that interest on any payment date at one-month LIBOR exceeds
interest calculated at the assumed fixed rate:
o the swap counterparty will be obligated to pay an amount equal to
the excess to us; and
o that payment will constitute a portion of available funds.
o Likewise under the swap agreement, to the extent that interest calculated at
the assumed fixed rate exceeds interest calculated at one-month LIBOR, we will
be obligated to pay an amount equal to the excess to the swap counterparty.
o First Union National Bank, a national banking association, will be the swap
counterparty to us under the swap agreement. The swap counterparty currently has
short term unsecured debt credit ratings of "A-1", "P-1" and F1+" from S&P,
Moody's and Fitch, respectively and has long-term unsecured senior debt credit
ratings of "A+", "Aa3" and "AA-" from S&P, Moody's and Fitch, respectively.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
o Dewey Ballantine LLP, our special tax counsel and counsel to the underwriters,
is of the opinion that the notes will be treated as debt and we will not be
treated as an association, or publicly traded partnership, taxable as a
corporation. By your acceptance of a note, you agree to treat the notes as debt.
o Interest on the notes will be taxable as ordinary income when received by a
holder on the cash method of accounting and when accrued by a holder on the
accrual method of accounting.
o Dewey Ballantine LLP has prepared the discussion under "Material Federal
Income Tax Consequences" and is of the opinion that that discussion accurately
states all material federal income tax consequences of
S-7
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the purchase, ownership and disposition of the offered notes to their original
purchaser.
LEGAL INVESTMENT
The Class A-1 Notes and Class A-2a Notes will be eligible securities for
purchase by money market funds under rule 2a-7 under the Investment Company Act
of 1940, as amended.
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
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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.
<TABLE>
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GEOGRAPHIC CONCENTRATION OF LEASES MAY Adverse economic conditions or other factors particularly affecting any state or region
ADVERSELY AFFECT THE LEASES where a high concentration of leases is located could adversely affect the performance
on the leases. As of March 28, 2000, approximately 17.88%, 13.86% and 8.83% of the
leases, based on the statistical discounted present value of the leases, were located in
California, New York and Texas, respectively. No other state accounts for more than 6%
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.
ANY FAILURE BY THE SWAP COUNTERPARTY TO The notes will be dependent upon payments to be made by the swap counterparty under the
PAY AMOUNTS OWED UNDER THE SWAP AGREEMENT swap agreement for receipt of the full amount of interest on the notes. You will bear
WOULD REDUCE THE FUNDS AVAILABLE TO MAKE the risk of any shortfall in the payment of interest on the notes on any payment date
PAYMENTS ON THE NOTES resulting from the failure of the swap counterparty to make a required payment under the
swap agreement in proportion to the amount of interest payable on each class of notes on
such payment date.
The obligations of the swap counterparty under the swap agreement are unsecured. In the
event that the swap counterparty's short-term unsecured senior debt is reduced below its
current level, the swap counterparty will be obligated, at its option, either to (a)
post collateral or establish other arrangements (including obtaining credit enhancement)
to secure its obligations under the swap agreement or (b) arrange for a substitute swap
counterparty to assume the rights and obligations of the swap counterparty under the
swap agreement, in either case so that the ratings of the notes are maintained or, if
applicable, restored to their level immediately prior to the downgrading or withdrawal
of the swap counterparty's debt. If the swap counterparty fails to take either of these
actions, we will be entitled to terminate the swap agreement and to claim from the swap
counterparty the fair market value of a replacement swap from a swap counterparty
satisfactory to the rating agencies. You will bear the risk of any failure by the swap
counterparty to take the actions required of it and the risk of our inability to obtain
a replacement swap agreement.
</TABLE>
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<TABLE>
<S> <C>
THE OCCURRENCE OF DEFAULTS RELATIVE TO Our ability to pay the full principal amount of the Class A-2a notes on the stated
CERTAIN INVESTMENTS WILL RESULT IN THE maturity date of the Class A-2a notes will be limited if defaults occur on investments
CLASS A-2A NOTES NOT BEING PAID IN FULL in the Class A-2 funding account. In the event of such defaults, it is possible that
ON THEIR STATED MATURITY DATE the full principal amount of the Class A-2a notes will not be paid on the stated
maturity date of the Class A-2a notes. In such event, the interest rate on the Class
A-2a Notes will increase to one-month LIBOR plus .20% and the Class A-2a Notes will be
paid from payments on the leases.
INSOLVENCY OF COPELCO CAPITAL, INC. MAY In some circumstances, a bankruptcy of Copelco Capital, Inc. may reduce payments to
REDUCE PAYMENTS TO NOTEHOLDERS noteholders. Copelco Capital, Inc. believes that each contribution of the leases should
be treated as an absolute and unconditional assignment.
However, in the event of an insolvency of Copelco Capital, Inc., a court or bankruptcy
trustee could attempt to:
o recharacterize the contribution of the related leases by Copelco Capital,
Inc. to the issuer as a loan from the issuer to Copelco Capital, Inc.
secured by a pledge of the leases; or
o consolidate the assets of the issuer with those of Copelco Capital, Inc.
because Copelco Capital, Inc. will indirectly own all of the membership
interests in the issuer; or
If either recharacterization or consolidation were successful, the bankruptcy trustee
could repudiate any leases that are considered to be operating leases for bankruptcy law
purposes and all obligations relating to such operating leases. An attempt to
recharacterize the transactions, even if unsuccessful, could result in delays in
payments to you. If either attempt were successful, the notes would be accelerated, and
the trustee's recovery on your behalf 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 purposes the leases
will be treated as assets of Copelco Capital, Inc. on the tax return of its consolidated
group and for tax purposes, no such assignment will be recognized. This treatment of the
assets might increase the risk of recharacterization of the transfer to the issuer as a
financing.
We refer you to the Glossary on page 61 for the meaning of defined terms used below.
</TABLE>
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USE OF PROCEEDS
The net proceeds from the sale of the Notes (other than the Class
A-2b Notes) will be distributed to our owners. The distribution will occur
immediately 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 (except any lease payments due or
to become due thereon during April 2000) and interests in the applicable
equipment to us. The net proceeds will be utilized to repurchase the leases and
related equipment from other subsidiaries and affiliates of Copelco Capital,
Inc., to repay bank debt and for general corporate purposes. The proceeds from
the sale of the Class A-2b Notes will be deposited in a Class A-2 Funding
Account and invested in Eligible Investments. Proceeds from these investments
will be used to pay the Class A-2a Notes on their stated maturity date.
THE SWAP AGREEMENT
The Issuer will enter into a swap agreement (the "Swap Agreement")
with First Union National Bank ("FUNB "), a national banking association, as
swap counterparty (the "Swap Counterparty") for the benefit of the noteholders.
FUNB is a subsidiary of First Union Corporation, whose principal office is
located in Charlotte, North Carolina. First Union Corporation is the sixth
largest bank holding company in the United States based on approximately $253
billion in total assets as of December 31, 1999.
FUNB is a commercial bank offering a wide range of banking, trust
and other services to its customers. As of December 31, 1999, FUNB had total
assets of approximately $229 billion, total net loans of approximately $138
billion, total deposits of approximately $145 billion and stockholder's equity
of approximately $17 billion.
FUNB currently has short term ratings of "A-1", "P-1" and "F1+" and
long term senior unsecured ratings of "A+", "Aa3" and "AA-" from S&P, Moody's
and Fitch, respectively.
With respect to the Swap Agreement, FUNB shall have the right to
assign its rights and obligations under such Swap Agreement to a replacement
Swap Counterparty subject to the requirement that each rating agency rating the
notes confirms that such assignment will not cause such rating agency to lower
or withdraw its then current rating on the notes.
Under the Swap Agreement, the Swap Counterparty's payments will be
calculated at LIBOR and the Issuer's payments will be calculated at an assumed
fixed rate of 6.75%. To the extent that on any payment date interest calculated
at LIBOR exceeds interest calculated at the assumed fixed rate:
o the Swap Counterparty will be obligated to pay an amount equal
to the excess to the Issuer; and
o the payment will constitute a portion of the Available Funds.
Likewise, under the swap agreement to the extent that interest calculated at the
assumed fixed rate exceeds interest calculated at LIBOR, the Issuer will be
obligated to pay an amount equal to the excess to the Swap Counterparty. The
Swap Agreement will terminate on the stated maturity
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of the Class A-2b Notes. The obligations of the Issuer under the Swap Agreement
will be secured by the same collateral which secures the Notes.
The obligations of the Swap Counterparty under the Swap Agreement
are unsecured. In the event that the Swap Counterparty's short-term unsecured
senior debt ceases to be rated at its current level, the Swap Counterparty will
be obligated, at its option, either to (a) post collateral or establish other
arrangements (including obtaining credit enhancement) to secure its obligations
under the swap agreement or (b) arrange for a substitute Swap Counterparty to
assume the rights and obligations of the Swap Counterparty under the Swap
Agreement, in either case so that the ratings of the notes are maintained or, if
applicable, restored to their level immediately prior to the downgrading or
withdrawal of the Swap Counterparty's debt. If the Swap Counterparty fails to
take either of these actions, the issuer will be entitled to terminate the swap
agreement and to claim from the Swap Counterparty the cost of obtaining a
replacement swap agreement from a Swap Counterparty satisfactory to the rating
agencies. The noteholders will bear the risk of any failure by the Swap
Counterparty to take the actions required of it and the risk of any inability of
the issuer to obtain a replacement swap agreement.
If the Swap Counterparty defaults in its payment obligations under
the Swap Agreement or other specified events of default relating to the Swap
Counterparty under that agreement occur, an early termination date under the
Swap Agreement may be designated. An early termination date under the Swap
Agreement may also be designated by the trustee or by the Swap Counterparty in
other circumstances, including payment defaults by the issuer relative to its
obligations under the Swap Agreement, an Event of Default under the indenture
and failure by the Swap Counterparty to transfer its rights and obligations to a
substitute Swap Counterparty with the required debt ratings and otherwise
reasonably satisfactory to the trustee in the circumstances described above
relating to a downgrading, or loss of credit ratings, of the Swap Counterparty.
If early termination under the Swap Agreement occurs, either the
issuer or the Swap Counterparty may be required to make an early termination
settlement payment. The amount of that payment will be determined with a view to
reflecting the cost of a hypothetical replacement swap agreement. The amount of
any such early termination settlement payment could be substantial and cannot be
determined now, since it will depend on a market valuation of the hypothetical
replacement swap agreement at the time of the early termination.
In the event of early termination of the Swap Agreement, the
interest rate on the Class A-2a notes will convert to a fixed rated of 6.75%
and, after the payment date in March 2001, the interest rate on the Class A-2b
notes interest rate will convert to a fixed rate of 6.95%.
VARIABLE FUNDING CAPITAL CORPORATION
Variable Funding Capital Corporation ("VFCC") is a special-purpose,
bankruptcy-remote Delaware corporation. VFCC, a multiseller asset-backed
commercial paper program originally established in September 1995, is
administered by First Union Securities, Inc. VFCC is currently authorized to
issue up to $20 billion of asset-backed commercial paper.
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As of December 31, 1999, VFCC had $12.3 billion in outstanding
asset-backed commercial paper with purchase limits totaling $18.4 billion. All
transactions under the program are currently credit enhanced by seller-specific
liquidity facilities.
VFCC is currently fully supported by liquidity facilities
administered by First Union National Bank who also acts as the primary liquidity
provider to VFCC. All VFCC liquidity providers must have minimum short term
ratings of "A-1" and "P-1" from S&P and Moody's, respectively. VFCC's
asset-backed commercial paper is currently rated "A-1" and "P-1" by S&P and
Moody's, respectively.
It is intended that amounts in the Class A-2 Funding Account will be
invested in commercial paper of VFCC during such time as VFCC is rated
"A-1"/"P-1". In the event, VFCC is unable to issue such commercial paper for any
reason, amounts in the Class A-2 Funding Account will be invested in other
Eligible Investments.
THE SERIES POOL
THE LEASES. As of the Cut-off Date, which is March 28, 2000, the
Notes will be secured by a pool of leases (except for any lease payments due or
to become due thereon in April 2000). 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 (excluding any lease payments due or
to become due in April 2000). The actual principal value of the leases on the
issuance date will be calculated using the Discounted Present Value of the
Leases (excluding any lease payments due or to become due in April 2000). 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 Statistical Discounted Present Value of the leases was
calculated using a rate (the "Statistical Discount Rate") equal to 8.214%.
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
S-13
<PAGE>
agreement, with occasional modifications which do not materially affect the
basic terms of the leases. The weighted average original and remaining term of
the series pool are 52.76 and 45.82 months, respectively. Copelco Capital, Inc.
will represent and warrant that, as of the Cut-off Date, all leases will be
current or less than or equal to 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. 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 54 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 (except for any
lease payments due or to become due thereunder during April 2000) and interests
in the applicable leased equipment acquired or originated by Copelco Capital,
Inc. and contributed to us. The pledged assets will, in addition,
S-14
<PAGE>
include the funds on deposit in Collection Account, the Reserve Account, the
Class A Principal Payment Account and the Class A-2 Funding Account and rights
under the Swap Agreement.
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.
S-15
<PAGE>
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL PERCENTAGE OF
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL ORIGINAL
STATE LEASES LEASES LEASES OF LEASES EQUIPMENT COST EQUIPMENT COST
----- ------ ------ ------ --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alabama 447 0.82% $ 8,723,554 0.94% $ 9,570,580 0.91%
Alaska 96 0.18 1,092,891 0.12 1,224,024 0.12
Arizona 714 1.31 13,358,357 1.44 15,203,792 1.45
Arkansas 150 0.28 3,038,075 0.33 3,480,342 0.33
California 9,111 16.76 165,551,801 17.88 187,000,897 17.81
Colorado 2,025 3.73 22,602,101 2.44 25,509,545 2.43
Connecticut 1,064 1.96 19,004,177 2.05 22,126,211 2.11
Delaware 107 0.20 1,755,559 0.19 1,984,836 0.19
District of Columbia 273 0.50 5,171,482 0.56 5,956,033 0.57
Florida 3,288 6.05 52,552,889 5.68 59,480,009 5.66
Georgia 1,625 2.99 26,674,467 2.88 29,759,240 2.83
Guam 1 0.00 4,669 0.00 7,603 0.00
Hawaii 60 0.11 794,740 0.09 868,570 0.08
Idaho 171 0.31 2,147,441 0.23 2,468,209 0.24
Illinois 1,882 3.46 30,529,608 3.30 34,912,407 3.33
Indiana 660 1.21 9,695,637 1.05 11,126,418 1.06
Iowa 124 0.23 3,371,999 0.36 3,841,837 0.37
Kansas 156 0.29 2,573,337 0.28 3,163,110 0.30
Kentucky 310 0.57 4,946,741 0.53 5,932,854 0.57
Louisiana 733 1.35 9,456,533 1.02 10,529,134 1.00
Maine 384 0.71 5,138,767 0.56 5,779,588 0.55
Maryland 697 1.28 10,823,890 1.17 12,200,327 1.16
Massachusetts 1,504 2.77 22,938,246 2.48 26,397,886 2.51
Michigan 733 1.35 14,318,639 1.55 16,581,673 1.58
Minnesota 350 0.64 11,799,877 1.27 13,151,689 1.25
Mississippi 285 0.52 3,664,839 0.40 4,125,542 0.39
Missouri 540 0.99 8,232,260 0.89 9,464,348 0.90
Montana 102 0.19 2,242,264 0.24 2,499,000 0.24
Nebraska 170 0.31 2,385,090 0.26 2,592,383 0.25
Nevada 625 1.15 9,913,807 1.07 10,872,965 1.04
New Hampshire 307 0.56 5,256,521 0.57 5,913,518 0.56
New Jersey 2,775 5.11 54,310,799 5.87 60,764,211 5.79
New Mexico 286 0.53 5,416,055 0.59 6,301,651 0.60
New York 7,710 14.19 128,267,517 13.86 149,842,512 14.27
North Carolina 1,028 1.89 13,191,897 1.43 15,448,683 1.47
North Dakota 14 0.03 473,765 0.05 487,861 0.05
Ohio 1,795 3.30 30,046,952 3.25 33,622,244 3.20
Oklahoma 363 0.67 6,861,681 0.74 7,464,105 0.71
Oregon 711 1.31 16,172,725 1.75 18,765,394 1.79
Pennsylvania 1,976 3.64 29,187,690 3.15 32,900,719 3.13
Puerto Rico 27 0.05 915,675 0.10 952,661 0.09
Rhode Island 333 0.61 5,353,872 0.58 6,232,943 0.59
South Carolina 476 0.88 5,925,146 0.64 6,857,656 0.65
South Dakota 23 0.04 360,969 0.04 414,140 0.04
Tennessee 502 0.92 10,820,286 1.17 11,763,074 1.12
Texas 4,169 7.67 81,722,654 8.83 90,441,706 8.61
U.S. Territories 2 0.00 25,903 0.00 30,950 0.00
Utah 287 0.53 7,368,672 0.80 7,740,215 0.74
Vermont 69 0.13 1,175,694 0.13 1,298,084 0.12
Virgin Islands 1 0.00 3,143 0.00 3,272 0.00
Virginia 924 1.70 14,096,986 1.52 16,101,453 1.53
Washington 1,660 3.05 24,981,917 2.70 28,142,546 2.68
West Virginia 181 0.33 3,258,352 0.35 3,460,642 0.33
Wisconsin 307 0.56 5,258,261 0.57 6,243,171 0.59
Wyoming 36 0.07 787,832 0.09 965,576 0.09
==================================================================================================================================
Total 54,349 100.00% $ 925,744,701 100.00% $1,049,970,041 100.00%
==================================================================================================================================
</TABLE>
S-16
<PAGE>
DISTRIBUTION OF LEASES BY PRESENT VALUE OF LEASE PAYMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL PERCENTAGE OF
PERCENTAGE OF STATISTICAL DISCOUNTED AGGREGATE AGGREGATE
STATISTICAL DISCOUNTED PRESENT NUMBER OF NUMBER OF DISCOUNTED PRESENT PRESENT VALUE ORIGINAL ORIGINAL
VALUE OF THE LEASES LEASES LEASES VALUE OF LEASES OF LEASES EQUIPMENT COST EQUIPMENT COST
------------------- ------ ------ --------------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.01 - 5,000.00 18,762 34.52% $ 52,339,685 5.65% $ 64,703,068 6.16%
5,000.01 - 10,000.00 14,261 26.24 103,234,107 11.15 122,096,103 11.63
10,000.01 - 15,000.00 7,298 13.43 89,324,939 9.65 103,971,446 9.90
15,000.01 - 20,000.00 4,121 7.58 71,240,229 7.70 81,361,922 7.75
20,000.01 - 25,000.00 2,492 4.59 55,565,356 6.00 63,169,656 6.02
25,000.01 - 30,000.00 1,499 2.76 40,880,964 4.42 46,259,068 4.41
30,000.01 - 35,000.00 1,059 1.95 34,221,070 3.70 38,965,470 3.71
35,000.01 - 40,000.00 713 1.31 26,595,299 2.87 29,816,748 2.84
40,000.01 - 45,000.00 602 1.11 25,453,934 2.75 28,711,796 2.73
45,000.01 - 50,000.00 462 0.85 21,908,528 2.37 24,705,854 2.35
50,000.01 - 60,000.00 741 1.36 40,520,033 4.38 46,405,487 4.42
60,000.01 - 70,000.00 479 0.88 30,928,193 3.34 34,115,087 3.25
70,000.01 - 80,000.00 322 0.59 24,107,919 2.60 26,852,823 2.56
80,000.01 - 90,000.00 236 0.43 20,031,030 2.16 22,760,817 2.17
90,000.01 - 100,000.00 173 0.32 16,387,558 1.77 18,104,966 1.72
100,000.01 - 125,000.00 321 0.59 35,889,781 3.88 40,246,541 3.83
125,000.01 - 150,000.00 225 0.41 30,865,328 3.33 33,723,142 3.21
150,000.01 - 175,000.00 132 0.24 21,283,459 2.30 23,701,227 2.26
175,000.01 - 1,000,000.00 416 0.77 134,967,311 14.58 150,094,870 14.30
1,000,000.01 - 1,500,000.00 24 0.04 28,134,380 3.04 29,105,551 2.77
1,500,000.01 - 2,000,000.00 6 0.01 9,971,441 1.08 9,573,139 0.91
Greater than 2,000,000.00 5 0.01 11,894,157 1.28 11,525,261 1.10
====================================================================================================================================
Total 54,349 100.00% $ 925,744,701 100.00% $ 1,049,970,041 100.00%
====================================================================================================================================
</TABLE>
S-17
<PAGE>
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL PERCENTAGE OF
PERCENTAGE OF STATISTICAL DISCOUNTED AGGREGATE AGGREGATE
NUMBER OF NUMBER OF DISCOUNTED PRESENT PRESENT VALUE ORIGINAL ORIGINAL
REMAINING TERM (MONTHS) LEASES LEASES VALUE OF LEASES OF LEASES EQUIPMENT COST EQUIPMENT COST
----------------------- ------ ------ --------------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 12 2,058 3.79% $ 18,216,761 1.97% $ 26,589,226 2.53%
13 - 24 5,640 10.38 45,364,411 4.90 64,892,677 6.18
25 - 36 21,764 40.04 231,733,886 25.03 278,722,718 26.55
37 - 48 9,107 16.76 158,168,845 17.09 181,462,647 17.28
49 - 60 15,295 28.14 400,019,861 43.21 428,274,629 40.79
61 - 72 304 0.56 46,925,310 5.07 45,586,941 4.34
73 - 84 181 0.33 25,315,626 2.73 24,441,204 2.33
===================================================================================================================================
Total: 54,349 100.00% $ 925,744,701 100.00% $ 1,049,970,041 100.00%
===================================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL PERCENTAGE OF
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRESENT VALUE PRESENT VALUE ORIGINAL ORIGINAL
ORIGINAL TERM (MONTHS) LEASES LEASES OF LEASES OF LEASES EQUIPMENT COST EQUIPMENT COST
---------------------- ------ ------ --------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 - 12 417 0.77% $ 3,860,725 0.42% $ 4,999,443 0.48%
13 - 24 1,883 3.46 17,145,514 1.85 23,684,588 2.26
25 - 36 5,353 9.85 66,480,052 7.18 84,266,783 8.03
37 - 48 22,625 41.63 226,215,789 24.44 273,673,489 26.06
49 - 60 9,886 18.19 224,174,250 24.22 250,360,064 23.84
61 - 72 13,937 25.64 342,310,674 36.98 368,510,557 35.10
73 - 84 186 0.34 31,839,569 3.44 31,301,028 2.98
85 - 96 62 0.11 13,718,127 1.48 13,174,089 1.25
===================================================================================================================================
Total 54,349 100.00% $ 925,744,701 100.00% $ 1,049,970,041 100.00%
===================================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL PERCENTAGE OF
PERCENTAGE OF STATISTICAL DISCOUNTED AGGREGATE
NUMBER OF NUMBER OF DISCOUNTED PRESENT PRESENT VALUE AGGREGATE ORIGINAL ORIGINAL
LEASE TYPE LEASES LEASES VALUE OF LEASES OF LEASES EQUIPMENT COST EQUIPMENT COST
---------- ------ ------ --------------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Finance Lease 53,651 98.72% $ 901,219,495 97.35% $1,015,491,970 96.72%
Operating Lease 698 1.28 24,525,206 2.65 34,478,071 3.28
===================================================================================================================================
Total 54,349 100.00% $ 925,744,701 100.00% $1,049,970,041 100.00%
===================================================================================================================================
</TABLE>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL PERCENTAGE OF
PERCENTAGE OF STATISTICAL DISCOUNTED AGGREGATE
NUMBER OF NUMBER OF DISCOUNTED PRESENT PRESENT VALUE AGGREGATE ORIGINAL ORIGINAL
PURCHASE OPTION LEASES LEASES VALUE OF LEASES OF LEASES EQUIPMENT COST EQUIPMENT COST
--------------- ------ ------ --------------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Fair Market Value 35,552 65.41% $ 457,422,021 49.41% $ 533,788,046 50.84%
Fixed Purchase Option 4,320 7.95 104,333,819 11.27 118,036,781 11.24
Nominal Buyout 13,779 25.35 339,463,655 36.67 363,667,142 34.64
===================================================================================================================================
Total 53,651 98.72% $ 901,219,495 97.35% $ 1,015,491,970 96.72%
===================================================================================================================================
</TABLE>
S-18
<PAGE>
DISTRIBUTION OF LEASES BY DELINQUENCIES
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL PERCENTAGE OF
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE AGGREGATE
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL ORIGINAL
DAYS DELINQUENT LEASES LEASES LEASES OF LEASES EQUIPMENT COST EQUIPMENT COST
--------------- ------ ------ ------ --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
0 - 29 53,094 97.69% $ 907,133,477 97.99% $ 1,028,155,672 97.92%
30 - 59 1,226 2.26 18,330,662 1.98 21,456,606 2.04
60 - 63 29 0.05 280,562 0.03 357,763 0.03
===================================================================================================================================
Total 54,349 100.00% $ 925,744,701 100.00% $ 1,049,970,041 100.00%
===================================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY ORIGINATING GROUPS
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
STATISTICAL STATISTICAL AGGREGATE OF AGGREGATE
PERCENTAGE DISCOUNTED DISCOUNTED ORIGINAL ORIGINAL
NUMBER OF NUMBER PRESENT VALUE PRESENT VALUE EQUIPMENT EQUIPMENT
ORIGINATING GROUPS OF LEASES OF LEASES OF LEASES OF LEASES COST COST
------------------ --------- --------- --------- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Business Technology 44,580 82.03% $ 554,906,175 59.94% $ 632,829,462 60.65%
Healthcare 7,567 13.92 246,198,122 26.59 264,788,131 25.22
Commercial and Industrial 2,202 4.05 124,640,405 13.46 148,352,449 14.13
==================================================================================================================================
Total 53,349 100.00% $ 925,744,701 100.00% $1,049,970,041 100.00%
==================================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY EQUIPMENT 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
EQUIPMENT TYPE LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
-------------- ------ --------- --------- ------ -------------- ----
<S> <C> <C> <C> <C> <C> <C>
Anesthesia Equipment 16 0.03% $ 702,267 0.08% $ 747,282 0.07%
Automated Chemistry Systems 89 0.16 4,120,684 0.45 4,703,709 0.45
Automated Hematology Systems 206 0.38 3,920,103 0.42 4,238,297 0.40
Automated Test Equipment 3 0.01 272,836 0.03 273,664 0.03
Automobile Shop Equipment 3 0.01 100,983 0.01 86,212 0.01
Carts, Stretchers, Wheel Chairs 246 0.45 4,296,212 0.46 4,939,279 0.47
Cash Registers, Point of Sale 114 0.21 1,827,813 0.20 2,076,286 0.20
Computers 3,725 6.85 60,723,897 6.56 68,024,110 6.48
Computers--100% Software 114 0.21 2,600,804 0.28 2,903,239 0.28
Construction Equipment 19 0.03 795,220 0.09 947,288 0.09
Copier 36,454 67.07 447,161,008 48.30 516,538,683 49.20
Dental Operatory Equipment 977 1.80 21,890,471 2.36 22,507,518 2.14
EEG 67 0.12 745,804 0.08 882,952 0.08
Electronics Production Equipment 302 0.56 51,266,502 5.54 63,825,310 6.08
Facsimile 2,941 5.41 8,928,487 0.96 10,972,721 1.05
Furniture and Fixtures 29 0.05 1,547,107 0.17 1,592,025 0.15
Gamma Cameras 38 0.07 8,236,933 0.89 9,123,925 0.87
Holter Monitors 91 0.17 1,376,595 0.15 1,491,001 0.14
Hosp Beds; Elec. Stryker FRMS, Burn Beds 64 0.12 1,000,983 0.11 1,230,814 0.12
Lasers 31 0.06 1,899,164 0.21 2,400,408 0.23
Lift Trucks 54 0.10 1,122,777 0.12 1,229,364 0.12
Machine Tools 300 0.55 30,629,684 3.31 32,895,432 3.13
Mailing Equipment 217 0.40 2,279,521 0.25 2,475,961 0.24
Mammography 9 0.02 693,831 0.07 938,226 0.09
Materials Handling Equipment 1,489 2.74 38,192,314 4.13 46,318,543 4.41
MBL X-Ray Systems; C-arm; IMG I 2 0.00 168,571 0.02 203,846 0.02
Misc. Commercial & Industrial Equipment 216 0.40 5,082,495 0.55 6,174,991 0.59
Miscellaneous Hospital Equipment 425 0.78 51,424,685 5.55 51,342,951 4.89
Misc. Lab Eqp. (Pthlgy, Gas, Chrmts) 19 0.03 588,673 0.06 593,931 0.06
Misc. Vet Eqp. Cages, Scales, Tables 13 0.02 195,470 0.02 203,427 0.02
Misc. X-Ray Eqp. (Tnks, Driers, Tbl) 8 0.01 327,457 0.04 332,413 0.03
MRI Systems 10 0.02 3,159,008 0.34 3,439,830 0.33
Office Furniture 28 0.05 788,842 0.09 831,788 0.08
Opthlmc Diag Eqp (Slit Lamps, Tonometers) 376 0.69 7,371,223 0.80 8,431,124 0.80
</TABLE>
S-19
<PAGE>
<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
EQUIPMENT TYPE LEASES OF LEASES OF LEASES LEASES EQUIPMENT COST COST
-------------- ------ --------- --------- ------ -------------- ----
<S> <C> <C> <C> <C> <C> <C>
Opt Eqp; Lens Grinding, Resurfacing 120 0.22 1,880,581 0.20 2,355,212 0.22
Packaging Equipment 5 0.01 65,598 0.01 74,419 0.01
Patient Monitoring Systems 104 0.19 2,278,391 0.25 2,481,109 0.24
Patient Room Furnishing and FI 6 0.01 478,263 0.05 518,001 0.05
Phone, TV, Comm Equipment 46 0.08 940,894 0.10 1,051,800 0.10
Photo Equipment 5 0.01 59,144 0.01 68,058 0.01
Phys Misc Medical Eqp & Exam Tables 1,587 2.92 34,475,217 3.72 37,731,850 3.59
Phys Office Furn, Fixtures & Phones 34 0.06 525,989 0.06 554,391 0.05
Plastics Machinery 2 0.00 463,488 0.05 608,982 0.06
Printing Equipment 780 1.44 33,534,769 3.62 35,714,688 3.40
Processing Equipment 20 0.04 898,281 0.10 963,777 0.09
Radiographic Fluoroscopic Systems 7 0.01 191,764 0.02 249,830 0.02
Respiratory Therapy Equipment 950 1.75 22,050,318 2.38 24,421,103 2.33
Standard X-Ray Systems 81 0.15 2,673,572 0.29 3,631,702 0.35
Surgical Eqp; Scopes, Electrosurgical+ 7 0.01 188,948 0.02 180,431 0.02
Telephone 222 0.41 3,120,376 0.34 3,363,838 0.32
Telex 19 0.03 91,909 0.01 101,566 0.01
Ultrasound 120 0.22 7,110,271 0.77 8,184,437 0.78
Working Capital 236 0.43 17,369,400 1.88 17,485,402 1.67
Miscellaneous 1,303 2.40 31,909,106 3.45 35,312,899 3.36
===================================================================================================================================
Total 54,349 100.00% $ 925,744,701 100.00% $ 1,049,970,041 100.00%
===================================================================================================================================
</TABLE>
1 The following abbreviations used in this table have the following meanings:
"Eqp." -- Equipment
"Misc." -- Miscellaneous
S-20
<PAGE>
CASH FLOW OF THE RECEIVABLES. The following shows the scheduled cashflows from
the lease contracts.
COLLECTION PERIOD SCHEDULED CASHFLOW
----------------- ------------------
May 2000................................. $25,791,277.90
June 2000................................ 26,204,038.02
July 2000................................ 26,346,979.93
August 2000.............................. 26,309,692.02
September 2000........................... 26,531,438.45
October 2000............................. 26,486,661.84
November 2000............................ 26,606,522.96
December 2000............................ 26,312,744.56
January 2001............................. 26,349,196.03
February 2001............................ 25,926,117.70
March 2001............................... 25,993,481.63
April 2001............................... 25,235,636.11
May 2001................................. 25,060,169.30
June 2001................................ 25,028,303.65
July 2001................................ 24,865,225.58
August 2001.............................. 24,709,722.37
September 2001........................... 24,718,116.72
October 2001............................. 24,546,635.76
November 2001............................ 24,503,996.02
December 2001............................ 24,283,996.03
January 2002............................. 24,397,068.72
February 2002............................ 23,875,000.97
March 2002............................... 23,700,651.42
April 2002............................... 23,079,819.17
May 2002................................. 22,673,842.61
June 2002................................ 22,384,493.38
July 2002................................ 21,971,673.45
August 2002.............................. 21,541,655.32
September 2002........................... 21,191,317.45
October 2002............................. 20,282,665.70
November 2002............................ 19,484,325.09
December 2002............................ 18,499,068.03
January 2003............................. 17,692,097.82
February 2003............................ 16,347,761.14
March 2003............................... 15,542,632.73
April 2003............................... 14,650,523.51
May 2003................................. 14,384,124.05
June 2003................................ 14,082,519.04
July 2003................................ 13,880,289.38
August 2003.............................. 13,641,357.82
September 2003........................... 13,526,524.78
October 2003............................. 13,049,124.77
November 2003............................ 12,762,255.70
December 2003............................ 12,392,303.57
January 2004............................. 12,258,443.24
February 2004............................ 11,409,121.09
March 2004............................... 10,911,811.20
April 2004............................... 10,425,522.57
May 2004................................. 10,115,945.97
June 2004................................ 9,816,545.17
July 2004................................ 9,441,289.16
August 2004.............................. 9,012,375.35
September 2004........................... 8,523,900.29
October 2004............................. 7,545,058.21
November 2004............................ 6,499,103.20
December 2004............................ 5,494,355.77
January 2005............................. 4,560,626.55
February 2005............................ 3,314,963.61
March 2005............................... 2,392,470.32
April 2005............................... 1,624,452.74
May 2005................................. 1,410,871.69
June 2005................................ 1,335,699.20
July 2005................................ 1,109,109.57
August 2005.............................. 1,009,940.05
September 2005........................... 953,153.07
S-21
<PAGE>
October 2005............................. 852,355.24
November 2005............................ 769,951.18
December 2005............................ 747,816.10
January 2006............................. 656,172.23
February 2006............................ 584,368.05
March 2006............................... 510,289.17
April 2006............................... 430,804.85
May 2006................................. 429,672.85
June 2006................................ 428,097.64
July 2006................................ 380,528.28
August 2006.............................. 372,854.94
September 2006........................... 343,919.82
October 2006............................. 289,090.22
November 2006............................ 263,309.80
December 2006............................ 237,891.93
January 2007............................. 179,083.17
February 2007............................ 91,868.59
March 2007............................... 26,778.68
April 2007............................... 4,808.43
May 2007................................. 0.00
S-22
<PAGE>
HISTORICAL DELINQUENCY INFORMATION. All accounts over 92 days past
due are automatically classified as delinquent. At the time a lease is
classified as delinquent 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>
December 31 December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
TOTAL RECEIVABLES
BALANCE (1) $2,809,026,021 $2,110,428,632 $1,732,009,721 $1,503,055,810 $1,238,424,241
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No. of Days Delinquent
30-59 52,399,209 1.87% 47,444,381 2.25% 38,610,259 2.23% 34,481,668 2.29% 26,255,335 2.12%
60-89 17,375,059 0.62 13,152,258 0.62 11,999,057 0.69 8,136,578 0.54 4,976,920 0.40%
90+ 26,563,784 0.95 5,244,005 0.25 10,437,965 0.60 7,587,972 0.50 6,703,063 0.54%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ 96,388,052 3.43% $ 65,840,644 3.12 $ 61,047,281 3.52% $ 50,206,218 3.34% $ 37,935,318 3.06%
</TABLE>
(1) The Total Receivables Balance is equal to the aggregate future rent owing on
the leases.
BUSINESS TECHNOLOGY GROUP
<TABLE>
<CAPTION>
December 31 December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
TOTAL RECEIVABLES
BALANCE (1) $1,679,073,707 $1,213,803,856 $964,765,984 $812,719,952 $669,800,055
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No. of Days Delinquent
30-59 32,872,860 1.96% 25,605,251 2.11% 21,036,692 2.18% 24,072,598 2.96% 18,298,832
60-89 11,009,537 0.66 8,054,059 0.66 5,451,379 0.57 5,249,429 0.65 3,492,843
90+ 18,912,409 1.13 4,157,517 0.34 6,432,173 0.67 4,940,285 0.61 4,867,482
- -----------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ 62,794,806 3.74% $ 37,816,827 3.12% $ 32,920,244 3.41% $ 34,262,311 4.22% $ 26,659,157
</TABLE>
S-23
<PAGE>
Commercial & Industrial and Healthcare Groups
<TABLE>
<CAPTION>
December 31 December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL RECEIVABLES
BALANCE (1) $1,129,952,314 $896,624,776 $767,243,737 $690,335,858 $568,624,186
- --------------------------------------------------------------------------------------------------------------------------------
No. of Delinquent
Days
30-59 days 19,526,349 1.73% 21,839,130 2.44% 17,573,567 2.29% 10,409,069 1.51% 7,956,503
60-89 days 6,365,522 0.56 5,098,199 0.57 6,547,678 0.85 2,887,149 0.42 1,484,077
90 Days+ 7,651,375 0.68 1,086,488 0.12 4,005,792 0.52 2,647,688 0.38 1,835,581
- --------------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ 33,543,246 2.97% $ 28,023,817 3.13% $ 28,127,037 3.67% $15,943,906 2.31% $ 11,276,161
</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, 1995 to December 31, 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
COPELCO CAPITAL, INC. COMBINED PORTFOLIO
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
AVERAGE RECEIVABLES OUTSTANDING $2,459,727 $1,921,219 $1,617,532 $1,370,740 $1,119,456
- -----------------------------------------------------------------------------------------------------------------------------------
NET LOSSES................. $ 30,559 $ 32,477 $ 22,138 $ 15,713 $ 11,457
NET LOSSES AS A %
OF AVG. RECEIVABLES.... 1.24% 1.69% 1.37% 1.15% 1.02%
</TABLE>
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
(2) Annualized
BUSINESS TECHNOLOGY GROUP
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AVERAGE RECEIVABLES OUTSTANDING (1)....... $1,446,439 $1,089,285 $888,742 $741,260 $ 606,499
- ---------------------------------------------------------------------------------------------------------------------------------
NET LOSSES................. $ 21,193 $ 22,789 $ 16,295 $ 13,386 $ 9,969
NET LOSSES AS A %
OF AVG. RECEIVABLES.... 1.47% 2.09% 1.83% 1.81% 1.64%
</TABLE>
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
(2) Annualized
COMMERCIAL & INDUSTRIAL AND HEALTHCARE GROUPS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
AVERAGE RECEIVABLES OUTSTANDING (1) $1,013,288 $ 831,934 $728,790 $629,480 $ 512,958
- --------------------------------------------------------------------------------------------------------------------------------
NET LOSSES. $ 9,366 $ 9,688 $ 5,843 $ 2,327 $ 1,488
NET LOSSES AS A %
OF AVG. RECEIVABLES 0.92% 1.16% 0.80% 0.37% 0.29%
</TABLE>
(1) Annualized
S-24
<PAGE>
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the leases in the future.
COPELCO CAPITAL, INC. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Assets $3,749,960,000 $2,856,553,000 $2,068,307,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,512,379,000 $2,664,583,000 $1,912,609,000
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholder Equity 237,581,000 $191,970,000 $155,698,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 390,499,000 $312,040,000 $253,787,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income 44,813,000 $35,658,000 $32,137,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 interests in the
equipment underlying such leases (except for any lease payments due or to become
due thereon during April 2000), 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, lease receivables and related
equipment. 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 to 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.
Copelco Capital Inc.'s ultimate parent is Itochu Corporation. Itochu
Corporation, located in Tokyo, was established in 1949 and is one of the "Big
Five" general trading firms with operations in metals, minerals, textiles,
machinery, foodstuffs, chemicals, wood, construction materials and commodities
markets. Itochu Corporation may sell some or all of its interest in Copelco
Capital, Inc. in the near future.
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 April 1, 2000. 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-25
<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
Lauren Zinn Abel 45 Secretary
David C. Epper 45 Director
Andrew Pannaccione 45 Director
Robert J. Lemenze, Jr. has served as Chief Executive Officer of the
Manager since being appointed/elected on March 1, 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 March 1,
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 March 1, 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.
Lauren Zinn Abel has served as Secretary since being elected on
January 3, 2000. For the last five years, Ms. Abel has served as the Associate
General Counsel for Copelco Capital, Inc.
David C. Epper has served as a director since March 1, 1999.
Andrew Ponnaccione has served as a director since March 1, 1999.
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 2000-A lease-backed notes will be
offered in accordance with the indenture between ourselves and the trustee. The
table below describes the
S-26
<PAGE>
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 A-2b Notes and the Class E Notes.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CLASS INTEREST RATE INITIAL PRINCIPAL AMOUNT EXPECTED MATURITY DATE(2) STATED MATURITY DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A-1 6.507280% $ 185,926,071 February 20, 2001 May 14, 2001
- ----------------------------------------------------------------------------------------------------------------------------------
A-2a 1 Month LIBOR $ 139,444,553 March 19, 2001 March 19, 2001
- ----------------------------------------------------------------------------------------------------------------------------------
A-2b Variable (1) $ 139,444,553 October 18, 2001 April 18, 2002
- ----------------------------------------------------------------------------------------------------------------------------------
A-3 7.1200% $ 255,648,348 February 18, 2003 August 18, 2003
- ----------------------------------------------------------------------------------------------------------------------------------
A-4 7.2200% $ 237,055,741 May 18, 2004 August 18, 2005
- ----------------------------------------------------------------------------------------------------------------------------------
B 7.3000% $ 18,592,607 May 18, 2004 March 20, 2006
- ----------------------------------------------------------------------------------------------------------------------------------
C 7.3900% $ 18,592,607 May 18, 2004 May 18, 2006
- ----------------------------------------------------------------------------------------------------------------------------------
D 7.8700% $ 27,888,911 May 18, 2004 May 18, 2006
- ----------------------------------------------------------------------------------------------------------------------------------
E 9.8200% $ 25,564,835 May 18, 2004 April 18, 2008
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The interest rate on the Class A-2b Notes is equal to the yield on
Eligible Investments held in the Class A-2 Funding Account prior to the
payment date in March 2001 and thereafter LIBOR plus 0.20%.
(2) Assuming optional redemption was exercised.
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 and the privately placed Class A-2b Notes, Class E
Notes, and the Residual Notes represent our secured debt obligations secured by
the pledged assets. The Class E Notes are subordinated to the Offered Notes for
the purpose of, among other things, offsetting losses and other shortfalls. The
Residual Notes will be paid primarily from Residual Realizations and will have
no direct rights to the Lease Payments. 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 (except
for any lease payments due or to become due thereon during April 2000), funds on
deposit in the Collection Account, the Reserve Account, the Class A Principal
Payment Account and the Class A-2 Funding Account and our rights under the Swap
Agreement, for payment of principal of and interest on the Offered 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, except that if the Class A-2a Notes are not paid in full by the
payment date in March 2001, the Class A-2a Notes shall receive interest on the
outstanding principal amount of the Class A-2a Notes at the rate equal to LIBOR
plus .20%. In the event that the Swap Counterparty defaults under the Swap
Agreement, the Class A-2a Notes will receive interest at a fixed rate of 6.75%
and, after payment
S-27
<PAGE>
in full of the Class A-2a Notes on the Payment Date in March 2001, the Class
A-2b Notes will receive interest payments at a fixed rate of 6.95%. 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, the Class A-2a Notes and the
Class A-2b 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 eighteenth 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 related 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).
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 (or its
swapped rate) of the Class A-1 Notes, the Class A-2a Notes, the Class A-2b
Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C
Notes, the Class D Notes and the Class E Notes, each weighted by (1) their
respective initial principal amount, and (2) the expected weighted average
life-under a zero prepayment and no loss scenario to optional redemption-of each
class of notes (for the Class A-2b Notes, the weighted average life is computed
assuming Class A-2b Notes are funded on the March 2001 Payment Date), as
applicable, and (b) the servicing fee rate of 0.75% per annum. The Discount Rate
is 7.987%. 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
$929,630,356.17.
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 holders of the Offered Notes 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 Offered 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 eighteenth
day of each month, or if that day is not a business day, the next succeeding
business day, commencing on June 19, 2000, 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
S-28
<PAGE>
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."
CALCULATION OF THE LIBOR RATE. With respect to each Payment Date,
LIBOR for the Class A-2a Notes (and after the Payment Date in March 2001, the
Class A-2b Notes) shall be established by the trustee and as to any Interest
Accrual Period, LIBOR will equal the London interbank offered rate for
Eurodollar deposits for one month which appears on the Telerate Screen page 3750
as of 11:00 A.M., London time, on the second LIBOR Business Day prior to the
first day of such Interest Accrual Period. "Telerate Screen Page 3750" means the
display designated as page 3750 on the Telerate Service (or such other page as
may replace page 3750 on that service for the purpose of displaying London
interbank offered rates of major banks). If such rate does not appear on such
page (or such other page as may replace that page on that service, or if such
service is no longer offered, such other service for displaying LIBOR or
comparable rates as may be selected by the trustee), the rate will be the
Reference Bank Rate. The "Reference Bank Rate" will be determined on the basis
of the rates at which deposits in U.S. Dollars are offered by the reference
banks (which shall be three major banks that are engaged in transactions in the
London interbank market, selected by the trustee) as of 11:00 A.M., London time,
on the day that is two LIBOR Business Days prior to the immediately preceding
Payment Date to prime banks in the London interbank market for a period of one
month in amounts approximately equal to the principal amount of the Class A-2a
Notes (and after the Payment Date in March 2001, the Class A-2b Notes) then
outstanding. The trustee will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the quotations.
If on such date fewer than two quotations are provided as requested, the rate
will be the arithmetic mean of the rates quoted by one or more major banks in
New York City, selected by the Trustee, as of 11:00 A.M., New York City time, on
such date for loans in U.S. Dollars to leading European banks for a period of
one month in amounts approximately equal to the principal amount of the Class
A-2a Notes (and after the Payment Date in March 2001, the Class A-2b Notes) then
outstanding. If no such quotations can be obtained, the rate will be LIBOR for
the prior Payment Date. "LIBOR Business Day" means any day other than (i) a
Saturday or a Sunday or (ii) a day on which banking institutions in the State of
New York or in the city of London, England are required or authorized by law to
be closed.
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) to the Class A Noteholders, the Class A Principal Payment as
follows:
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<PAGE>
i) prior to the Payment Date in March 2001, (A) to the
Class A-1 Noteholders only, until the outstanding principal
amount on the Class A-1 Notes is reduced to zero, and then (B)
the balance, if any, to the Class A Principal Payment Account;
ii) on the Payment Date in March 2001 and thereafter,
(A) to the Class A-1 Noteholders only, until the outstanding
principal amount on the Class A-1 Notes is reduced to zero,
(B) to the Class A-2a Noteholders only, after taking into
account any Principal Payment from the Class A-2 Funding
Account, until the outstanding principal amount on the Class
A-2a Notes is reduced to zero, then (C) to the Class A-2b
Noteholders only, until the outstanding principal amount of
the Class A-2b Notes is reduced to zero, then (D) to the Class
A-3 Noteholders only, until the outstanding principal amount
on the Class A-3 Notes is reduced to zero, and finally (E) to
the Class A-4 Noteholders only, until the outstanding
principal amount on the Class A-4 Notes is reduced to zero;
provided that the Class A-2b Noteholders will have no rights
to such payments to the extent that amounts in the Class A-2
Funding Account are insufficient to fully pay principal on the
Class A-2a Notes;
(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, until the outstanding principal amount of each Class has been
reduced to zero.
On the Payment Date in March 2001 (and thereafter if
necessary), amounts held in the Class A-2 Funding Account will be used to
pay principal on the Class A-2a Notes until the outstanding principal
amount is reduced to zero.
In the event amounts in the Class A-2 Funding Account are
insufficient to pay principal on the Class A-2a Notes, amounts in the
Collection Account will be used to pay such principal. In such event, the
principal balance of the Class A-2b Notes will be written-down by an
amount equal to such shortfall on the Payment Date in March 2001 and the
Class A-2b Notes will only be paid such written-down amount to the extent
there are recoveries on investments in the Class A-2 Funding Account.
"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
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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, 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 (b) after the
Class A-1 Notes have been paid in full, (i) prior to the March 2001 Payment
Date, the amount necessary to reduce the aggregate outstanding principal amount
on the Class A Notes (excluding Class A-2b Notes) to the Class A Target Investor
Principal Amount less amounts, if any, on deposit in the Class A Principal
Payment Account and (ii) on or after the March 2001 Payment Date, the amount
necessary to reduce the aggregate outstanding principal amount on the Class A
Notes (after giving effect to any principal writedowns related to the Class A-2b
Notes) to the Class A Target Investor Principal Amount.
The "Class B Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor.
The "Class C Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class C Notes to the greater of the Class C
Target Investor Principal Amount and the Class C Floor.
The "Class D Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class D Notes to the greater of the Class D
Target Investor Principal Amount and the Class D Floor.
The "Class E Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class E Notes to the greater of the Class E
Target Investor Principal Amount and the Class E Floor.
The "Class A Target Investor Principal Amount" with respect to each
payment date is an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class B Target Investor Principal Amount" with respect to each
payment date is an amount equal to the product of (a) the Class B Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
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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 to approximately 85.0000%.
The "Class B Percentage" will be equal to approximately 2.5000%. The "Class C
Percentage" will be equal to approximately 2.500%. The "Class D Percentage" will
be equal to approximately 3.7500%. The "Class E Percentage" will be equal to
approximately 3.4375%.
The "Class B Floor" with respect to each payment date means (a)
3.25% of the initial Discounted Present Value of the Leases as of the Cut-off
Date, plus (b) the Cumulative Loss Amount with respect to that payment date,
minus (c) the sum of the outstanding principal amount of the Class C Notes, the
outstanding principal amount of the Class D Notes, the outstanding principal
amount of the Class E Notes, and the Overcollateralization Balance as of the
immediately preceding payment date after giving effect to all principal payments
made on that day, minus (d) the amount on deposit in the Reserve Account after
giving effect to withdrawals to be made on that payment date.
The "Class C Floor" with respect to each payment date means (a)
2.20% 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)
1.80% 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
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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)
1.20% of the initial Discounted Present Value of the Leases as of the Cut-off
Date, plus (b) the Cumulative Loss Amount with respect to that payment date,
minus (c) the Overcollateralization Balance as of the immediately preceding
payment date after giving effect to all principal payments made on that day,
minus (d) the amount on deposit in the Reserve Account after giving effect to
withdrawals to be made on that payment date; provided, however, that if the
outstanding principal amount of the Class D Notes is less than or equal to the
Class D Floor on that payment date, the Class E Floor will equal the outstanding
principal amount of the Class E Notes utilized in the calculation of the Class D
Floor for that payment date.
The "Overcollateralization Balance" with respect to each payment
date is an amount equal to the excess, if any, of (a) the Discounted Present
Value of Performing Leases as of the applicable Determination Date over (b) the
outstanding principal amount of the notes as of that payment date after giving
effect to all principal payments made on that day.
The "Cumulative Loss Amount" with respect to each payment date is an
amount equal to the excess, if any, of (a) the total of (i) the outstanding
principal amount of the notes as of the immediately preceding payment date after
giving effect to all principal payments made on that day, plus (ii) the
Overcollateralization Balance as of the immediately preceding payment date,
minus (iii) the lesser of (A) the Discounted Present Value of the Performing
Leases as of the Determination Date applicable to the immediately preceding
payment date minus the Discounted Present Value of the Performing Leases as of
the applicable Determination Date and (B) Available Funds remaining after the
payment of amounts owing the servicer and in relation to interest on the notes
on that payment date, over (b) the Discounted Present Value of the Performing
Leases as of the applicable Determination Date.
The "Servicing Fee" with respect to each payment date is an amount
equal to one-twelfth of 0.75% times the Discounted Present Value of the
Performing Leases, as of the prior payment date.
COLLECTION ACCOUNT. The trustee will establish and maintain the
Collection Account, which will be 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)). An amount equal to
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interest due on the notes from the closing date to May 18, 2000 shall be
deposited in the Collection Account at closing.
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.
CLASS A PRINCIPAL PAYMENT ACCOUNT. The trustee will establish and
maintain the Class A Principal Payment Account which will be an Eligible Account
for the benefit of the Class A-2 Noteholders. Prior to the payment date in March
2001 and when the Class A-1 Notes have been paid in full, the servicer will
transfer to the trustee for deposit into the Class A Principal Payment Account
the balance of the Class A Principal Payment payable to the Class A Noteholders
after making all payments required by the Indenture (Section 3.03(b). On the
Payment Date in March 2001, all amounts on deposit in the Class A Principal
Payment Account will be transferred by the trustee to the Collection Account to
be distributed in accordance with the priorities set forth in the Indenture
(Section 3.07).
CLASS A-2 FUNDING ACCOUNT. The trustee will establish and maintain
the Class A-2 Funding Account, which will be an Eligible Account for the benefit
of the Class A-2a Noteholders and the Class A-2b Noteholders. On the closing
date, the proceeds from the issuance of the Class A-2b notes will be deposited
by the trustee in the Class A-2 Funding Account and invested in Eligible
Investments which will mature no later than one Business Day prior to the
Payment Date in March 2001. On the Payment Date in March 2001, all amounts on
deposit in the Class A-2 Funding Account will be applied by the Trustee to the
extent necessary to make a principal payment on the Class A-2a Notes. (Section
3.08)
DEPOSIT OF FUNDS. 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
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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 and the Class A Principal Payment
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) any amounts paid by the Swap Counterparty to the Issuer under
to the Swap Agreement;
(i) Termination Payments to the extent we do not reinvest those
Termination Payments in Additional Leases other than Residual
Prepayments;
(j) proceeds received once we exercise our right to redeem the
notes; and
(k) 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.
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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 1.0% 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) 1.0% 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)).
If on any Payment Date, the aggregate amount on deposit in the
Collection Account and the Reserve Account are greater than or equal to the sum
of (i) the aggregate outstanding principal balance of the Class A Notes, Class B
Notes, Class C Notes, Class D Notes and Class E Notes, (ii) the accrued and
unpaid Interest Payments, (iii) the accrued and unpaid Servicing Fee and (iv)
the unreimbursed Servicer Advances, the amount on deposit in the Reserve Account
will be deposited in the Collection Account and applied to pay in full the Class
A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes. (Section
3.05(e))
DISTRIBUTIONS ON NOTES. Payments on the notes will commence on June
18, 2000. On each Determination Date, the servicer will determine the Available
Funds and the Required Payments.
For each payment date, the interest due with respect to the notes
will be the interest that has accrued on those notes since the last payment date
or, in the case of the first payment date, since the issuance date, at the
applicable interest rates applied to the outstanding principal amount of each
class, after giving effect to payments of principal to Noteholders on the
preceding payment date or, in the case of the first payment date, the Issuance
Date, plus all previously accrued and unpaid interest on the notes (Section
2.01(c)). Funds in the Collection Account, together with reinvestment earnings
thereon, will be used by the trustee to make required payments of principal and
interest on the applicable notes (Section 3.03(b)).
For each payment date, principal payments due with respect to the
Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the
Class E Notes will be the Class A Principal Payment, the Class B Principal
Payment, the Class C Principal Payment, the Class D Principal Payment and the
Class E Principal Payment, respectively. In addition, to the extent that the
Class B Floor exceeds the Class B Target Investor Principal Amount, the Class C
Floor exceeds the Class C Target Investor Principal Amount, the Class D Floor
exceeds the Class D Target Investor Principal Amount and/or the Class E Floor
exceeds the Class E Target Investor Principal Amount, Additional Principal shall
be distributed 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)):
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(a) to pay the Swap Counterparty any amount due pursuant to the
Swap Agreement;
(b) to pay the Servicing Fee;
(c) to reimburse unreimbursed Servicer Advances in relation to a
prior payment date;
(d) to make interest payments, owing on the Class A Notes
concurrently to the Class A-1 Noteholders, Class A-2a
Noteholders, Class A-2b Noteholders (beginning with the April
2001 Payment Date), Class A-3 Noteholders and Class A-4
Noteholders;
(e) to make interest payments on the Class B Notes;
(f) to make interest payments on the Class C Notes;
(g) to make interest payments on the Class D Notes;
(h) to make interest payments on the Class E Notes;
(i) to make the Class A Principal Payment as follows:
(i) prior to the Payment Date in March 2001, (A) to the Class
A-1 Noteholders only, until the outstanding principal amount
on the Class A-1 Notes is reduced to zero, and then (B) the
balance, if any, to the Class A Principal Payment Account;
(ii) on the Payment Date in March 2001 and thereafter, (A) to
the Class A-1 Noteholders only, until the outstanding
principal amount on the Class A-1 Notes is reduced to zero,
then (B) to the Class A-2a Noteholders only, after taking into
account any Principal Payment from the Class A-2 Funding
Account, until the outstanding principal amount on the Class
A-2a Notes is reduced to zero, then (C) to the Class A-2b
Noteholders only, until the outstanding principal amount of
the Class A-2b Notes is reduced to zero, then (D) to the Class
A-3 Noteholders only, until the outstanding principal amount
on the Class A-3 Notes is reduced to zero, and finally (E) to
the Class A-4 Noteholders only, until the outstanding
principal amount on the Class A-4 Notes is reduced to zero;
provided that, the Class A-2b Noteholders will have no rights
to such payments to the extent that amounts in the Class A-2
Funding Account are insufficient to fully pay principal on the
Class A-2a Notes;
(j) to make the Class B Principal Payment to the Class B
Noteholders;
(k) to make the Class C Principal Payment to the Class C
Noteholders;
(l) to make the Class D Principal Payment to the Class D
Noteholders;
(m) to make the Class E Principal Payment to the Class E
Noteholders;
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(n) to pay the Additional Principal, if any, as an additional
reduction of principal to the Class A Noteholders, as provided
in Clause (i) 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;
(o) 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
(p) to Copelco Capital Receivables LLC, the balance, if any.
On the Payment Date in March 2001 (and thereafter if necessary),
amounts held in the Class A-2 Funding Account will be used to pay principal on
the Class A-2a Notes until the outstanding principal amount of the Class A-2a
Notes is reduced to zero.
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 (i) with respect to all
Classes except for the A-2a Notes, at the Stated Maturity of
such Class or (ii) with respect to the Class A-2a Notes, at
the Stated Maturity of the Class A-2b Notes; 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
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directed to do so by the holders of 66-2/3% of the then outstanding principal
amount of the notes (Section 6.03).
Subsequent to an event of default and following any acceleration of
the notes in accordance with the indenture, any moneys that may then be held or
thereafter received by the trustee shall be applied in the following order of
priority, at the date or dates fixed by the trustee and, in case of the
distribution of the entire amount due on account of principal or interest, upon
presentation of the notes and surrender thereof:
First to the payment of all costs and expenses of collection
incurred by the trustee and the Noteholders, including the reasonable fees
and expenses of any counsel to the trustee and the Noteholders;
Second to pay the Swap Counterparty, any amounts due under the
Swap Agreement.
Third 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.
Fourth
o first, to the payment of all accrued and unpaid interest
on the outstanding principal amount of the Class A-1
Notes, Class A-2a Notes, Class A-2b Notes, Class A-3
Notes and Class A-4 Notes pro rata to the date of
payment thereof, including -- to the extent permitted by
applicable law -- interest on any overdue installment of
interest and principal from the maturity of that
installment to the date of payment thereof at the rate
per annum equal to the Class A-1 Interest Rate, Class
A-2a Interest Rate, Class A-2b Interest Rate, Class A-3
Interest Rate and Class A-4 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
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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
D Interest Rate;
o fifth, to the payment of all accrued and unpaid interest
on the outstanding principal amount of the Class E Notes
to the date of payment thereof, including, to the extent
permitted by applicable law, interest on any overdue
installment of interest and principal from the maturity
of that installment to the date of payment thereof at
the rate per annum equal to the Class E Interest Rate;
o sixth, to the payment of the outstanding principal
amount of the Class A-1 Notes and the Class A-2a Notes
pro rata to the date of payment thereof;
o seventh, to the payment of the outstanding principal
amount of the Class A-2b Notes, Class A-3 Notes and
Class A-4 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;
Fifth to the payment of amounts due under the $71,459,924
7.565% Class R-1 Lease-Residual Backed Notes and the $24,564,349 8.438%
Class R-2 Lease-Residual Backed Notes;
Sixth to the payment of amounts then due the trustee under the
indenture;
Seventh 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
Eighth 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
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<PAGE>
proceeding for any remedy available to the trustee or exercising any trust power
conferred on the trustee (Sections 6.12). The indenture will provide that in
case an Event of Default shall occur, which shall not have been cured or waived,
the trustee will be required to exercise its rights and powers under that
indenture and to use the degree of care and skill in their exercise that a
prudent man would exercise or use in the conduct of his own affairs (Section
7.01(b)). Subject to those provisions, the trustee will be under no obligation
to exercise any of its rights or powers under that indenture at the request of
any of the Noteholders unless they shall have offered to the trustee reasonable
security or indemnity (Section 6.12). Upon request of a Noteholder, the trustee
will provide information as to the outstanding principal amount of each Class of
Notes.
MODIFICATION OF THE INDENTURE. With some exceptions, under the
indenture, our rights and obligations and the rights of the Noteholders may be
modified by us with the consent of the holders of not less than 66-2/3% in
aggregate principal amount of the notes then outstanding under the indenture;
but no modification may be made if it would result in the reduction or
withdrawal of the then current ratings of the outstanding notes and no
modification may be made without the consent of the holder of each outstanding
note affected thereby if it would (a) change the fixed maturity of any Note, or
the principal amount or interest amount payable thereof, or change the priority
of payment thereof or reduce the interest rate or the principal thereon or
change the place of payment where, or the coin or currency in which, any Note or
the interest thereon is payable, or impair the right to institute the suit for
the enforcement of that payment on or after the maturity thereof; or (b) reduce
the above-stated percentage of notes, without the consent of the holders of all
notes then outstanding under that indenture or (c) modify any of Section 9.02 of
the indenture except to increase any percentage or fraction set out in the
indenture or to provide that other provisions of the indenture cannot be
modified or waived without the consent of the holder of each outstanding note
affected thereby; or (d) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" in the indenture; or (e) permit the
creation of any lien ranking prior to or on a parity with the lien of the
indenture with respect to any part of the pledged assets or, except as provided
in the indenture, terminate the lien of the indenture on any property at any
time subject to the indenture or deprive any Noteholder of the security afforded
by the lien of the indenture. No modification of the Indenture which materially
affects the interests of the Swap Counterparty may be made without the consent
of the Swap Counterparty. (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
S-41
<PAGE>
material respect of covenants or agreements in the assignment
and servicing agreement which failure continues unremedied for
a period of 30 days after the earlier of (i) the date it first
becomes known to any officer of Copelco Capital, Inc. or the
servicer, as the case may be, and (ii) the date on which
written notice thereof requiring the same to be remedied shall
have been given to the servicer or Copelco Capital, Inc., as
the case may be, by the trustee, or to the servicer or Copelco
Capital, Inc., as the case may be, and the trustee by any
holder of the notes;
(d) if any representation or warranty of Copelco Capital, Inc.
made in the assignment and servicing agreement shall prove to
be incorrect in any material respect as of the time made;
provided, however, that the breach of any representation or
warranty made by Copelco Capital, Inc. in the assignment and
servicing agreement will be deemed to be "material" only if it
affects the Noteholders, the enforceability of the indenture
or of the notes; and provided, further, that a material breach
of any representation or warranty made by Copelco Capital,
Inc. in the assignment and servicing agreement with respect to
any of the leases or the equipment subject thereto will not
constitute a Servicer Event of Default if Copelco Capital,
Inc. repurchases that lease and equipment in accordance with
the assignment and servicing agreement to the extent provided
within that agreement;
(e) insolvency or bankruptcy events relating to the servicer;
(f) the failure of the servicer to make one or more payments due
with respect to aggregate recourse debt or other obligations
exceeding $5,000,000, or the occurrence of any event or the
existence of any condition, the effect of which event or
condition is to cause, or permit one or more persons to cause,
more than $5,000,000 of aggregate recourse debt or other
obligations of the servicer to become due before its, or
their, stated maturity or before its, or their, regularly
scheduled dates of payment so long as the failure, event or
condition shall be continuing and shall not have been waived
by the person or persons entitled to performance;
(g) a final judgment or judgments, or decrees or orders, for the
payment of money aggregating in excess of $5,000,000 and any
one of those judgments, 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.
S-42
<PAGE>
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 as of the Cut-off Date. We will give notice of redemption to each
Noteholder and the trustee at least 30 days before the payment date fixed for
prepayment. Upon deposit of funds necessary to effect redemption, the trustee
shall pay the remaining unpaid principal amount on the notes and all accrued and
unpaid interest as of the payment date fixed for redemption.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the notes, the aggregate amount of
each interest payment on the notes and the yield to maturity of the notes are
directly related to the rate of payments on the underlying leases. The payments
on those leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Those payments may result in distributions to Noteholders
of amounts which would otherwise have been distributed over the remaining term
of the leases. In general, the rate of those payments may be influenced by a
number of other factors, including general economic conditions. The rate of
Principal Payments with respect to any class may also be affected by any
repurchase of the underlying leases by Copelco Capital, Inc. in accordance with
the assignment and servicing agreement. In that event, the repurchase price will
decrease the Discounted Present Value of the Performing Leases, causing the
corresponding weighted average life of the notes to decrease. See "Risk
Factors--Prepayments."
In the event a lease becomes a Non-Performing Lease, a Warranty
Lease or Adjusted Lease, Copelco Capital, Inc. will have the option to
substitute for the terminated lease a Substitute Lease in an aggregate amount
not to exceed 10% of the Discounted Present Value of the Leases as of the
Cut-off Date with respect to Non-Performing Leases and in an aggregate amount
not to exceed 10% of the Discounted Present Value of the Leases as of the
Cut-off Date with respect to Adjusted Leases and Warranty Leases. In addition,
in the event of an early termination by a lessee which has been prepaid in full,
Copelco Capital, Inc. will have the option to transfer an additional lease of
similar characteristics. The Substitute Leases and Additional Leases will have a
Discounted Present Value of the Leases equal to or greater than that of the
leases being modified and replaced and the monthly payments on the Substitute
Leases or Additional Leases will be at least equal to those of the terminated
leases through the term of 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
principal amount of the Class A-1 Notes, Class A-2a Notes, Class A-2b Notes,
Class A-3 Notes, Class A-4 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%, 6%,
S-43
<PAGE>
12% and 18%, respectively, and were calculated using the Discount Rate. 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 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 April 20, 2000 and the first payment date is June
19, 2000.
S-44
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNT AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
0% CPR
- -----------------------------------------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2A CLASS A-2B CLASS A-3 CLASS A-4 CLASS B CLASS C CLASS D CLASS E
------------ --------- ---------- ---------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
June 18, 2000 89.46 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
July 18, 2000 78.62 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
August 18, 2000 67.64 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September 18, 2000 56.60 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 18, 2000 45.37 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 18, 2000 34.08 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December 18, 2000 22.66 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 18, 2001 11.32 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February 18, 2001 0.00 100.00 100.00 100.00 100.00 99.97 99.97 99.97 99.97
March 18, 2001 0.00 0.00 87.09 100.00 100.00 97.15 97.15 97.15 97.15
April 18, 2001 0.00 0.00 74.18 100.00 100.00 94.30 94.30 94.30 94.30
May 18, 2001 0.00 0.00 61.64 100.00 100.00 91.54 91.54 91.54 91.54
June 18, 2001 0.00 0.00 49.12 100.00 100.00 88.78 88.78 88.78 88.78
July 18, 2001 0.00 0.00 36.55 100.00 100.00 86.00 86.00 86.00 86.00
August 18, 2001 0.00 0.00 23.98 100.00 100.00 83.23 83.23 83.23 83.23
September 18, 2001 0.00 0.00 11.43 100.00 100.00 80.46 80.46 80.46 80.46
October 18, 2001 0.00 0.00 0.00 99.34 100.00 77.68 77.68 77.68 77.68
November 18, 2001 0.00 0.00 0.00 92.46 100.00 74.89 74.89 74.89 74.89
December 18, 2001 0.00 0.00 0.00 85.54 100.00 72.10 72.10 72.10 72.10
January 18, 2002 0.00 0.00 0.00 78.66 100.00 69.31 69.31 69.31 69.31
February 18, 2002 0.00 0.00 0.00 71.69 100.00 66.49 66.49 66.49 66.49
March 18, 2002 0.00 0.00 0.00 64.84 100.00 63.72 63.72 63.72 63.72
April 18, 2002 0.00 0.00 0.00 58.01 100.00 60.96 60.96 60.96 60.96
May 18, 2002 0.00 0.00 0.00 51.34 100.00 58.26 58.26 58.26 58.26
June 18, 2002 0.00 0.00 0.00 44.76 100.00 55.60 55.60 55.60 55.60
July 18, 2002 0.00 0.00 0.00 38.23 100.00 52.96 52.96 52.96 52.96
August 18, 2002 0.00 0.00 0.00 31.80 100.00 50.36 50.36 50.36 50.36
September 18, 2002 0.00 0.00 0.00 25.47 100.00 47.80 47.80 47.80 47.80
October 18, 2002 0.00 0.00 0.00 19.21 100.00 45.27 45.27 45.27 45.27
November 18, 2002 0.00 0.00 0.00 13.21 100.00 42.84 42.84 42.84 42.84
December 18, 2002 0.00 0.00 0.00 7.43 100.00 40.51 40.51 40.51 40.51
January 18, 2003 0.00 0.00 0.00 1.95 100.00 38.29 38.29 38.29 38.29
February 18, 2003 0.00 0.00 0.00 0.00 96.44 36.16 36.16 36.16 36.16
March 18, 2003 0.00 0.00 0.00 0.00 91.22 34.21 34.21 34.21 34.21
April 18, 2003 0.00 0.00 0.00 0.00 86.25 32.35 32.35 32.35 32.35
May 18, 2003 0.00 0.00 0.00 0.00 81.57 30.59 30.59 30.59 30.59
June 18, 2003 0.00 0.00 0.00 0.00 76.96 28.86 28.86 28.86 28.86
July 18, 2003 0.00 0.00 0.00 0.00 72.42 27.16 27.16 27.16 27.16
August 18, 2003 0.00 0.00 0.00 0.00 67.93 25.47 25.47 25.47 25.47
September 18, 2003 0.00 0.00 0.00 0.00 63.49 23.81 23.81 23.81 23.81
October 18, 2003 0.00 0.00 0.00 0.00 59.06 22.15 22.15 22.15 22.15
November 18, 2003 0.00 0.00 0.00 0.00 54.78 20.54 20.54 20.54 20.54
December 18, 2003 0.00 0.00 0.00 0.00 50.56 18.96 18.96 18.96 18.96
January 18, 2004 0.00 0.00 0.00 0.00 45.83 17.69 18.96 18.96 18.96
February 18, 2004 0.00 0.00 0.00 0.00 41.02 17.69 18.96 18.96 18.96
March 18, 2004 0.00 0.00 0.00 0.00 36.54 17.69 18.96 18.96 18.96
April 18, 2004 0.00 0.00 0.00 0.00 32.24 17.69 18.96 18.96 18.96
May 18, 2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WEIGHTED AVERAGE LIFE
(1)(YEARS)
To Call: 0.50 0.91 NA 2.15 3.63 2.51 2.51 2.51 2.51
To Maturity 0.50 0.91 NA 2.15 3.73 2.65 2.68 2.70 2.70
</TABLE>
S-45
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNT AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
6% CPR
- -----------------------------------------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2A CLASS A-2B CLASS A-3 CLASS A-4 CLASS B CLASS C CLASS D CLASS E
------------ --------- ---------- ---------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
June 18, 2000 86.94 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
July 18, 2000 73.71 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
August 18, 2000 60.46 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September 18, 2000 47.28 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 18, 2000 34.03 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 18, 2000 20.86 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December 18, 2000 7.68 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 18, 2001 0.00 100.00 100.00 100.00 100.00 98.68 98.68 98.68 98.68
February 18, 2001 0.00 100.00 100.00 100.00 100.00 95.44 95.44 95.44 95.44
March 18, 2001 0.00 0.00 64.95 100.00 100.00 92.27 92.27 92.27 92.27
April 18, 2001 0.00 0.00 50.60 100.00 100.00 89.10 89.10 89.10 89.10
May 18, 2001 0.00 0.00 36.74 100.00 100.00 86.05 86.05 86.05 86.05
June 18, 2001 0.00 0.00 23.03 100.00 100.00 83.02 83.02 83.02 83.02
July 18, 2001 0.00 0.00 9.39 100.00 100.00 80.01 80.01 80.01 80.01
August 18, 2001 0.00 0.00 0.00 97.76 100.00 77.04 77.04 77.04 77.04
September 18, 2001 0.00 0.00 0.00 90.48 100.00 74.09 74.09 74.09 74.09
October 18, 2001 0.00 0.00 0.00 83.22 100.00 71.16 71.16 71.16 71.16
November 18, 2001 0.00 0.00 0.00 76.05 100.00 68.25 68.25 68.25 68.25
December 18, 2001 0.00 0.00 0.00 68.91 100.00 65.37 65.37 65.37 65.37
January 18, 2002 0.00 0.00 0.00 61.86 100.00 62.52 62.52 62.52 62.52
February 18, 2002 0.00 0.00 0.00 54.81 100.00 59.67 59.67 59.67 59.67
March 18, 2002 0.00 0.00 0.00 47.94 100.00 56.89 56.89 56.89 56.89
April 18, 2002 0.00 0.00 0.00 41.15 100.00 54.14 54.14 54.14 54.14
May 18, 2002 0.00 0.00 0.00 34.57 100.00 51.48 51.48 51.48 51.48
June 18, 2002 0.00 0.00 0.00 28.13 100.00 48.88 48.88 48.88 48.88
July 18, 2002 0.00 0.00 0.00 21.80 100.00 46.32 46.32 46.32 46.32
August 18, 2002 0.00 0.00 0.00 15.62 100.00 43.82 43.82 43.82 43.82
September 18, 2002 0.00 0.00 0.00 9.58 100.00 41.37 41.37 41.37 41.37
October 18, 2002 0.00 0.00 0.00 3.66 100.00 38.98 38.98 38.98 38.98
November 18, 2002 0.00 0.00 0.00 0.00 97.87 36.70 36.70 36.70 36.70
December 18, 2002 0.00 0.00 0.00 0.00 92.06 34.52 34.52 34.52 34.52
January 18, 2003 0.00 0.00 0.00 0.00 86.57 32.46 32.46 32.46 32.46
February 18, 2003 0.00 0.00 0.00 0.00 81.35 30.51 30.51 30.51 30.51
March 18, 2003 0.00 0.00 0.00 0.00 76.55 28.71 28.71 28.71 28.71
April 18, 2003 0.00 0.00 0.00 0.00 72.01 27.00 27.00 27.00 27.00
May 18, 2003 0.00 0.00 0.00 0.00 67.75 25.41 25.41 25.41 25.41
June 18, 2003 0.00 0.00 0.00 0.00 63.59 23.85 23.85 23.85 23.85
July 18, 2003 0.00 0.00 0.00 0.00 59.54 22.33 22.33 22.33 22.33
August 18, 2003 0.00 0.00 0.00 0.00 55.55 20.83 20.83 20.83 20.83
September 18, 2003 0.00 0.00 0.00 0.00 51.66 19.37 19.37 19.37 19.37
October 18, 2003 0.00 0.00 0.00 0.00 47.81 17.93 17.93 17.93 17.93
November 18, 2003 0.00 0.00 0.00 0.00 43.46 17.93 17.93 17.93 17.93
December 18, 2003 0.00 0.00 0.00 0.00 39.22 17.93 17.93 17.93 17.93
January 18, 2004 0.00 0.00 0.00 0.00 35.12 17.93 17.93 17.93 17.93
February 18, 2004 0.00 0.00 0.00 0.00 31.09 17.93 17.93 17.93 17.93
March 18, 2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WEIGHTED AVERAGE LIFE
(1)(YEARS)
To Call: 0.44 0.91 NA 1.94 3.41 2.31 2.31 2.31 2.31
To Maturity 0.44 0.91 NA 1.94 3.52 2.47 2.48 2.49 2.49
</TABLE>
S-46
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNT AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
12% CPR
- -----------------------------------------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2A CLASS A-2B CLASS A-3 CLASS A-4 CLASS B CLASS C CLASS D CLASS E
------------ --------- ---------- ---------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
June 18, 2000 84.27 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
July 18, 2000 68.53 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
August 18, 2000 52.93 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September 18, 2000 37.55 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 18, 2000 22.26 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 18, 2000 7.21 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December 18, 2000 0.00 100.00 100.00 100.00 100.00 98.07 98.07 98.07 98.07
January 18, 2001 0.00 100.00 100.00 100.00 100.00 94.43 94.43 94.43 94.43
February 18, 2001 0.00 100.00 100.00 100.00 100.00 90.83 90.83 90.83 90.83
March 18, 2001 0.00 0.00 42.58 100.00 100.00 87.33 87.33 87.33 87.33
April 18, 2001 0.00 0.00 26.90 100.00 100.00 83.88 83.88 83.88 83.88
May 18, 2001 0.00 0.00 11.84 100.00 100.00 80.55 80.55 80.55 80.55
June 18, 2001 0.00 0.00 0.00 98.41 100.00 77.30 77.30 77.30 77.30
July 18, 2001 0.00 0.00 0.00 90.47 100.00 74.09 74.09 74.09 74.09
August 18, 2001 0.00 0.00 0.00 82.69 100.00 70.94 70.94 70.94 70.94
September 18, 2001 0.00 0.00 0.00 75.06 100.00 67.85 67.85 67.85 67.85
October 18, 2001 0.00 0.00 0.00 67.53 100.00 64.81 64.81 64.81 64.81
November 18, 2001 0.00 0.00 0.00 60.15 100.00 61.82 61.82 61.82 61.82
December 18, 2001 0.00 0.00 0.00 52.88 100.00 58.88 58.88 58.88 58.88
January 18, 2002 0.00 0.00 0.00 45.77 100.00 56.01 56.01 56.01 56.01
February 18, 2002 0.00 0.00 0.00 38.73 100.00 53.16 53.16 53.16 53.16
March 18, 2002 0.00 0.00 0.00 31.92 100.00 50.41 50.41 50.41 50.41
April 18, 2002 0.00 0.00 0.00 25.25 100.00 47.71 47.71 47.71 47.71
May 18, 2002 0.00 0.00 0.00 18.84 100.00 45.12 45.12 45.12 45.12
June 18, 2002 0.00 0.00 0.00 12.62 100.00 42.60 42.60 42.60 42.60
July 18, 2002 0.00 0.00 0.00 6.55 100.00 40.15 40.15 40.15 40.15
August 18, 2002 0.00 0.00 0.00 0.67 100.00 37.77 37.77 37.77 37.77
September 18, 2002 0.00 0.00 0.00 0.00 94.59 35.47 35.47 35.47 35.47
October 18, 2002 0.00 0.00 0.00 0.00 88.63 33.24 33.24 33.24 33.24
November 18, 2002 0.00 0.00 0.00 0.00 82.99 31.12 31.12 31.12 31.12
December 18, 2002 0.00 0.00 0.00 0.00 77.64 29.11 29.11 29.11 29.11
January 18, 2003 0.00 0.00 0.00 0.00 72.61 27.23 27.23 27.23 27.23
February 18, 2003 0.00 0.00 0.00 0.00 67.86 25.45 25.45 25.45 25.45
March 18, 2003 0.00 0.00 0.00 0.00 63.50 23.81 23.81 23.81 23.81
April 18, 2003 0.00 0.00 0.00 0.00 59.41 22.28 22.28 22.28 22.28
May 18, 2003 0.00 0.00 0.00 0.00 55.59 20.85 20.85 20.85 20.85
June 18, 2003 0.00 0.00 0.00 0.00 51.89 19.46 19.46 19.46 19.46
July 18, 2003 0.00 0.00 0.00 0.00 48.31 18.12 18.12 18.12 18.12
August 18, 2003 0.00 0.00 0.00 0.00 44.22 18.12 18.12 18.12 18.12
September 18, 2003 0.00 0.00 0.00 0.00 40.25 18.12 18.12 18.12 18.12
October 18, 2003 0.00 0.00 0.00 0.00 36.37 18.12 18.12 18.12 18.12
November 18, 2003 0.00 0.00 0.00 0.00 32.67 18.12 18.12 18.12 18.12
December 18, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WEIGHTED AVERAGE LIFE
(1)(YEARS)
To Call: 0.39 0.91 NA 1.75 3.18 2.12 2.12 2.12 2.12
To Maturity 0.39 0.91 NA 1.75 3.31 2.30 2.31 2.33 2.33
</TABLE>
S-47
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNT AT THE RESPECTIVE CPR SET FORTH BELOW
<TABLE>
<CAPTION>
18% CPR
- -----------------------------------------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2A CLASS A-2B CLASS A-3 CLASS A-4 CLASS B CLASS C CLASS D CLASS E
------------ --------- ---------- ---------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
June 18, 2000 81.43 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
July 18, 2000 63.05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
August 18, 2000 45.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
September 18, 2000 27.37 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 18, 2000 10.02 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 18, 2000 0.00 100.00 100.00 100.00 100.00 98.27 98.27 98.27 98.27
December 18, 2000 0.00 100.00 100.00 100.00 100.00 94.12 94.12 94.12 94.12
January 18, 2001 0.00 100.00 100.00 100.00 100.00 90.09 90.09 90.09 90.09
February 18, 2001 0.00 100.00 100.00 100.00 100.00 86.15 86.15 86.15 86.15
March 18, 2001 0.00 0.00 19.96 100.00 100.00 82.34 82.34 82.34 82.34
April 18, 2001 0.00 0.00 3.07 100.00 100.00 78.62 78.62 78.62 78.62
May 18, 2001 0.00 0.00 0.00 92.88 100.00 75.06 75.06 75.06 75.06
June 18, 2001 0.00 0.00 0.00 84.33 100.00 71.60 71.60 71.60 71.60
July 18, 2001 0.00 0.00 0.00 75.98 100.00 68.23 68.23 68.23 68.23
August 18, 2001 0.00 0.00 0.00 67.87 100.00 64.95 64.95 64.95 64.95
September 18, 2001 0.00 0.00 0.00 59.98 100.00 61.76 61.76 61.76 61.76
October 18, 2001 0.00 0.00 0.00 52.27 100.00 58.64 58.64 58.64 58.64
November 18, 2001 0.00 0.00 0.00 44.78 100.00 55.61 55.61 55.61 55.61
December 18, 2001 0.00 0.00 0.00 37.48 100.00 52.66 52.66 52.66 52.66
January 18, 2002 0.00 0.00 0.00 30.39 100.00 49.79 49.79 49.79 49.79
February 18, 2002 0.00 0.00 0.00 23.45 100.00 46.98 46.98 46.98 46.98
March 18, 2002 0.00 0.00 0.00 16.79 100.00 44.29 44.29 44.29 44.29
April 18, 2002 0.00 0.00 0.00 10.32 100.00 41.67 41.67 41.67 41.67
May 18, 2002 0.00 0.00 0.00 4.14 100.00 39.18 39.18 39.18 39.18
June 18, 2002 0.00 0.00 0.00 0.00 98.06 36.77 36.77 36.77 36.77
July 18, 2002 0.00 0.00 0.00 0.00 91.87 34.45 34.45 34.45 34.45
August 18, 2002 0.00 0.00 0.00 0.00 85.93 32.22 32.22 32.22 32.22
September 18, 2002 0.00 0.00 0.00 0.00 80.22 30.08 30.08 30.08 30.08
October 18, 2002 0.00 0.00 0.00 0.00 74.73 28.02 28.02 28.02 28.02
November 18, 2002 0.00 0.00 0.00 0.00 69.56 26.09 26.09 26.09 26.09
December 18, 2002 0.00 0.00 0.00 0.00 64.69 24.26 24.26 24.26 24.26
January 18, 2003 0.00 0.00 0.00 0.00 60.15 22.56 22.56 22.56 22.56
February 18, 2003 0.00 0.00 0.00 0.00 55.88 20.95 20.95 20.95 20.95
March 18, 2003 0.00 0.00 0.00 0.00 51.99 19.50 19.50 19.50 19.50
April 18, 2003 0.00 0.00 0.00 0.00 48.35 18.13 18.13 18.13 18.13
May 18, 2003 0.00 0.00 0.00 0.00 44.38 18.13 18.13 18.13 18.13
June 18, 2003 0.00 0.00 0.00 0.00 40.57 18.13 18.13 18.13 18.13
July 18, 2003 0.00 0.00 0.00 0.00 36.92 18.13 18.13 18.13 18.13
August 18, 2003 0.00 0.00 0.00 0.00 33.40 18.13 18.13 18.13 18.13
September 18, 2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
WEIGHTED AVERAGE LIFE
(1)(YEARS)
To Call: 0.35 0.91 NA 1.58 2.94 1.94 1.94 1.94 1.94
To Maturity 0.35 0.91 NA 1.58 3.09 2.14 2.15 2.16 2.16
</TABLE>
S-48
<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, (c) all funds in the Collection Account, the Reserve Account,
the Class A Principal Payment Account and the Class A-2 Funding Account and (d)
a security interest in our rights to receive payments under the Swap Agreement
and our related interests in that agreement. Our obligations to the Swap
Counterparty under the Swap Agreement will be secured by the same collateral.
THE INDENTURE TRUSTEE
Manufacturers and Traders Trust Company will be the trustee under
the indenture. Copelco Capital, Inc., as Transferor or servicer, the swap
counterparty and their respective affiliates may from time to time enter into
normal banking and trustee relationships with the trustee and its affiliates.
The trustee, the servicer, the swap counterparty 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.
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<PAGE>
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 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.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
S-50
<PAGE>
available against Copelco Capital, Inc., except for misrepresentation or breach
of warranty, and the Noteholders could suffer a loss with respect to the notes.
Similarly, if we were to become bankrupt and the bankruptcy trustee or
debtor-in-possession elected to reject a lease, the flow of lease payments to us
and to the Noteholders would cease. As noted above, however, we have been
structured so that the filing of a bankruptcy petition on our behalf is
unlikely. See "The Issuer."
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of equipment, may limit the amount
realized on the sale of equipment to less than the amount due on the applicable
lease.
NON-PETITION. Pursuant to the Indenture, the trustee and the holders
of the Residual Notes, will agree not to institute, cooperate with or encourage
others to institute against us any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under the Bankruptcy
Code or any state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Residual Notes or the Indenture until the expiration
of one year and one day, or if a preference period of the applicable
jurisdiction is longer, the applicable preference period under that bankruptcy
or similar law, from the date on which all of the Notes are paid in full.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following paragraphs together with the description of
federal income tax consequences detailed in the prospectus under the heading
"Material Federal Income Tax Consequences" present the material federal income
tax consequences to the original purchasers of the notes of the purchase,
ownership and disposition of the notes. Tax Counsel's opinion does not purport
to deal with all federal income tax considerations applicable to all categories
of investors. The tax consequences to holders subject to special rules,
including insurance companies, tax exempt organizations, financial institutions
or broker deals, taxpayers subject to the alternative minimum tax, and holders
that will hold the notes as other than capital assets, are not discussed below
or in the Prospectus. In particular, this discussion applies only to investors
that purchase notes directly from us and hold the notes as capital assets.
The discussion that follows, and the opinion set forth below of
Dewey Ballantine LLP, special tax counsel to us are based upon provisions of the
Internal Revenue Code of 1986, as amended, and treasury regulations promulgated
thereunder as in effect on the date hereof and on existing judicial and
administrative interpretations thereof. These authorities are subject to change
and to differing interpretations, which could apply retroactively. The opinion
of Tax Counsel is not binding on the courts or the Internal Revenue Service. Tax
Counsel suggests that potential investors consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the notes.
The following discussion addresses lease-backed notes, such as the
notes, that are intended to be treated for federal income tax purposes as
indebtedness secured by the underlying leases. Tax counsel has prepared the
following discussion and is of the opinion that it is correct in all material
respects.
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.
S-51
<PAGE>
TAX CHARACTERIZATION OF THE NOTES. In the opinion of Tax Counsel,
although no transaction closely comparable to that contemplated in this
Prospectus has been the subject of any treasury regulation, revenue ruling or
judicial decision, based on the application of existing law to the facts as set
forth in the applicable agreement, the notes will be treated as indebtedness for
federal income tax purposes. Although it is the opinion of Tax Counsel that the
notes are properly characterized as indebtedness for federal income tax
purposes, no assurance can be given that this debt characterization of the notes
will prevail. The IRS could recharacterize the notes under several alternative
theories. See "Material Federal Income Tax Consequences--Tax Characterization of
the Notes" in the Prospectus.
DISCOUNT AND PREMIUM. It is not anticipated that the notes will be
issued with any original issue discount. See "Material Federal Income Tax
Consequences--Discount and Premium--Original Issue Discount" in the Prospectus.
In addition, a subsequent purchaser who buys a Note for less than its principal
amount may be subject to the "market discount" rules of the Code. See "Material
Federal Income Tax Consequences--Discount and Premium--Market Discount" in the
Prospectus. A subsequent purchaser who buys a Note for more than its principal
amount may be subject to the "market premium" rules of the Code. See "Material
Federal Income Tax Consequences--Discount and Premium--Premium" in the
Prospectus.
SALE OR EXCHANGE OF THE NOTES. If a Note is sold or exchanged, the
seller will recognize gain or loss equal to the difference between the amount
realized on the sale and its adjusted basis in the Note. See "Material Federal
Income Tax Consequences--Sale or Exchange" in the Prospectus.
OTHER MATTERS. For a discussion of backup withholding and taxation
of foreign investors in the Notes, see "Material Federal Income Tax
Consequences--Backup Withholding" and "--Foreign Investors" in the Prospectus.
ERISA CONSIDERATIONS
The notes may be purchased by ERISA plans as described in the prospectus
under "ERISA Considerations." The notes should be treated as indebtedness
without substantial equity features for purposes of the plan assets regulation.
This determination is based in part on the traditional debt features of the
notes, including the reasonable expectation of purchasers of notes that the
notes will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features. The debt treatment of the notes for
ERISA purposes could change if the we incurred losses. As described in the
prospectus, the acquisition or holding of the notes by or on behalf of an
employee benefit plan could still result in a prohibited transaction if the
acquisition or holding of the notes by or on behalf of the plan were deemed to
be a prohibited loan to a party in interest with respect to the plan.
Accordingly, each purchaser and each transferee using the assets of a plan
subject to ERISA or Section 4975 of the Code to acquire the 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,
S-52
<PAGE>
taking into account the overall investment policy of the plan and the
composition of the plan's investment portfolio.
The sale of notes to a plan is in no respect a representation by the us or
the underwriters that this investment meets all relevant legal requirements for
investments by plans generally or any particular plan or that this investment is
appropriate for plans generally or any particular plan.
UNDERWRITING
Under the terms and subject to the conditions described in the
underwriting agreement (the "Underwriting Agreement") between us and First Union
Securities, Inc. ("First Union"), on behalf of the underwriters for the sale of
the Offered Notes, we have agreed to sell and First Union, Prudential Securities
Incorporated ("Prudential Securities"), Banc of America Securities LLC ("Banc of
America") and Mellon Financial Markets, LLC ("Mellon Financial" and, together
with First Union, Prudential Securities and Banc of America, the "Underwriters")
each severally has agreed to purchase the principal amount of the Offered Notes
described below:
<TABLE>
<CAPTION>
PRUDENTIAL
FIRST UNION SECURITIES BANC OF AMERICA MELLON FINANCIAL TOTALS
- ---------- ----------- ---------- --------------- ---------------- ------
<S> <C> <C> <C> <C> <C>
Class A-1 $ 92,963,035.50 $ 55,777,821.30 $ 27,888,910.65 $ 9,296,303.55 $185,926,071.00
Class A-2a 139,444,553.00 - - - 139,444,553.00
Class A-3 127,824,174.00 76,694,504.40 38,347,252.20 12,782,417.40 255,648,348.00
Class A-4 118,527,870.50 71,116,722.30 35,558,361.15 11,852,787.05 237,055,741.00
Class B 9,296,303.50 9,296,303.50 - - 18,592,607.00
Class C 9,296,303.50 9,296,303.50 - - 18,592,607.00
Class D 13,944,455.50 13,944,455.50 - - 27,888,911.00
--------------- --------------- --------------- -------------- ---------------
Totals $511,296,695.50 $236,126,110.50 $101,794,524.00 $33,931,508.00 $883,148,838.00
</TABLE>
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 0.060% per Class A-1 Note,
0.060% per Class A-2 a Note, 0.105% per Class A-3 Note, 0.132% per Class A-4
Note, 0.150% per Class B Note, 0.180% per Class C Note and 0.240% per Class D
Note. The underwriters may allow and the dealers may reallow to other dealers, a
discount not in excess of 0.030% per Class A-1 Note, 0.030% per Class A-2a Note,
0.0525% per Class A-3 Note, 0.0660% per Class A-4 Note, 0.0750% per Class B
Note, 0.0900% per Class C Note and 0.1200% 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
S-53
<PAGE>
have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995;
(b) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 with respect to anything
done by it in relation to the Offered Notes in, from or
otherwise involving the United Kingdom; and
(c) it has only issued or passed on and will only issue or pass on
in the United Kingdom any document received by it in
connection with the issue of the Offered Notes to a person who
is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or persons to whom the document may otherwise
lawfully be issued, distributed or passed on.
We and Copelco Capital, Inc. have agreed to jointly and severally
indemnify the underwriters against specified liabilities, including liabilities
under the Securities Act of 1933, as amended.
We have been advised by the underwriters that the underwriters
presently intend to make a market in the Offered Notes, as permitted by
applicable laws and regulations. The underwriters are not obligated, however, to
make a market in the Offered Notes and any market making may be discontinued at
any time at the sole discretion of the underwriters. Accordingly, no assurance
can be given as to the liquidity of, or trading markets for, the Offered Notes.
The underwriters may engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids with
respect to the Offered Notes in accordance with Regulation M under the
Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment
transactions involve syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the Offered Notes so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transaction involve purchase of the
Offered Notes in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the underwriters
to reclaim a selling concession from a syndicate member when the Offered Notes
originally sold by a syndicate member are purchased in a syndicate covering
transaction. Over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Offered Notes
to be higher than they would otherwise be in the absence of those transactions.
The Seller and the underwriters do not represent that the underwriters will
engage in those transactions. Those transactions, once commenced, may be
discontinued without notice at any time.
First Union and Prudential Securities are serving as the placement
agents for the private notes. FUNB, an affiliate of First Union, is the Swap
Counterparty under the Swap Agreement. Amounts in the Class A-2 Funding Account
will be invested in the commercial paper of VFCC. Various forms of liquidity and
dealer support are provided to VFCC by FUNB and First Union.
S-54
<PAGE>
EXPERTS
Our balance sheet as of December 31, 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 Dilworth Paxson LLP, Philadelphia,
Pennsylvania and Lauren Zinn Abel, Associate General Counsel of Copelco Capital,
Inc., and for the underwriters by Dewey Ballantine LLP, New York, New York.
RATINGS 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 Moody's Fitch S&P
-----
--------------------------------------------------------------------
A-1 P-1 F1+/AAA A-1+
--------------------------------------------------------------------
A-2a P-1 F1+/AAA A-1
--------------------------------------------------------------------
A-3 Aaa AAA AAA
--------------------------------------------------------------------
A-4 Aaa AAA AAA
--------------------------------------------------------------------
B Aa2 AA AA
--------------------------------------------------------------------
C A2 A A
--------------------------------------------------------------------
D Baa2 BBB BBB
--------------------------------------------------------------------
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,
S-55
<PAGE>
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-56
<PAGE>
FINANCIAL STATEMENTS OF COPELCO CAPITAL RECEIVABLES LLC
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report..................................................50
Balance Sheet of Copelco Capital Receivables LLC as of December 31, 1999......51
Notes to Balance Sheet........................................................52
S-57
<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 December 31,
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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit 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 December 31, 1999 in conformity with generally accepted accounting
principles.
KPMG LLP
April 7, 2000
New York, New York
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COPELCO CAPITAL RECEIVABLES LLC
(a wholly owned subsidiary of Copelco Capital, Inc.)
Balance Sheet
December 31, 1999
Assets
Cash $1,000
------
$1,000
======
Member's Equity
Membership Interests
$100
Membership Interests (authorized 1,000
shares, $1 par value, issued and outstanding
100 shares)
Additional paid-in capital 900
------
$1,000
======
See accompanying notes to balance sheet.
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COPELCO CAPITAL RECEIVABLES LLC
(a wholly owned subsidiary of Copelco Capital, Inc.)
Notes to Balance Sheet
December 31, 1999
(1) Organization
Copelco Capital Receivables LLC, a wholly owned subsidiary of Copelco
Capital, Inc. ("Copelco Capital"), was formed 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.
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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" 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.
"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 Percentage" will be equal approximately to 85.0000%.
"Class A Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, 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 (b) after the
Class A-1 Notes have been paid in full, (i) prior to the March 2001 Payment
Date, the amount necessary to reduce the aggregate outstanding principal amount
on the Class A Notes (excluding Class A-2b Notes) to the Class A Target Investor
Principal Amount less amounts, if any, on deposit in the Class A Principal
Payment Account and (ii) on or after March 2001 Payment Date, the amount
necessary to reduce the aggregate outstanding principal amount on the Class A
Notes (after giving effect to any principal writedowns related to the Class A-2b
Notes) to the Class A Target Investor Principal Amount.
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"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) 3.25% of
the initial Discounted Present Value of the Leases as of the Cut-off Date, plus
(b) the Cumulative Loss Amount with respect to that payment date, minus (c) the
sum of the outstanding principal amount of the Class C Notes, the outstanding
principal amount of the Class D Notes, the outstanding principal amount of the
Class E Notes, and the Overcollateralization Balance as of the immediately
preceding payment date after giving effect to all principal payments made on
that day, minus (d) the amount on deposit in the Reserve Account after giving
effect to withdrawals to be made on that payment date.
"Class B Percentage" will be equal approximately to 2.5000%.
"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) 2.20% 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 Percentage" will be equal approximately to 2.5000%.
"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) 1.80% 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
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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 Percentage" will be equal approximately to 3.7500%.
"Class D Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the outstanding principal amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
outstanding principal amount of the Class D Notes to the greater of the Class D
Target Investor Principal Amount and the Class D Floor.
"Class D Target Investor Principal Amount" with respect to each
payment date is an amount equal to the product of (a) the Class D Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
"Class E Floor" with respect to each payment date means (a) 1.20% 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 Percentage" will be equal approximately to 3.4375%.
"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" means the Internal Revenue Code of 1986, as amended.
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"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.
"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.
"Discount Rate" means an amount calculated by taking the sum of (a)
the weighted average interest rate (or its swapped rate) of the Class A-1 Notes,
the Class A-2a Notes, the Class A-2b Notes, the Class A-3 Notes, the Class A-4
Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E
Notes, each weighted by (1) their respective initial principal amount, and (2)
the expected weighted average life-under a zero prepayment and no loss scenario
to optional redemption-of each class of notes (for the Class A-2b Notes, the
weighted average life is computed assuming the Class A-2b Notes are funded on
March 2001 Payment Date), as applicable, and (b) the servicing fee rate of 0.75%
per annum.
"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.
"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
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similar account maintained with a federal or state chartered depository
institution, which may be an account maintained with the trustee.
"Eligible Investments": any one or more of the following obligations
or securities:
(a) direct non-callable obligations of, and non-callable obligations
fully guaranteed by, the United States of America, or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America;
(b) demand and time deposits in, certificates of deposits of, and
bankers' acceptances issued by, any depository institution or company
(including the Trustee acting in its commercial capacity) incorporated
under the laws of the United States of America or any state thereof,
having a combined capital and surplus of at least $100,000,000, and
subject to supervision and examination by federal and/or state banking
authorities, so long as at the time of such investment or contractual
commitment providing for such investment the commercial paper or other
short-term debt obligations of such depository institution or company (or,
in the case of a depository institution that is the principal subsidiary
of a holding company, the commercial paper or other short-term debt
obligations of such holding company) have the highest short-term credit
ratings available from Moody's and S&P;
(c) repurchase obligations with respect to and collateralized by (i)
any security described in clause (a) above or (ii) any other security
issued or guaranteed by an agency or instrumentality of the United States
of America, in each case entered into with a depository institution or
company (acting as principal) of the type described in clause (b) above;
provided that the Trustee has taken delivery of such security;
(d) commercial paper (including both non-interest bearing discount
obligations and interest-bearing obligations) payable on demand or on a
specified date not more than one year after the date of issuance thereof
having the highest short-term credit ratings from Moody's and S&P at the
time of such investment, provided that, with respect to the Class A-2
Funding Account, commercial paper of VFCC shall constitute an Eligible
Investment so long as VFCC is rated "P-1" by Moody's and "A-1" by S&P;
(e) money market funds that redeem their shares on demand, invest
only in other Eligible Investments, and are rated "D-1+" by Moody's and
"AAAm" or "AAA-G" by S&P;
(f) demand notes payable on demand issued by an institution rated
"P-1" by Moody's, and "A-1+" by S&P;
(g) funding agreements or guaranteed investment contracts provided
by issuers rated "P-1" by Moody's and "A-1+" by S&P which provide, by
their terms, for receipt by the trustee on or prior to the next Payment
Date of a predetermined fixed dollar amount which cannot vary or change;
and
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(h) such other investments as may be approved by S&P and Moody's.
"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.
"Fitch" means Fitch IBCA, Inc. and its successors.
"Indenture" means that certain indenture dated as of April 1, 2000
between the Issuer and Manufacturers and Traders Trust Company, as trustee.
"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.
"LIBOR" the London interbank offered rate for one-month Eurodollar
deposits appearing on the Telerate Screen Page 3750.
"LIBOR Business Day" any day other then (i) a Saturday or a Sunday
or (ii) a day on which banking institutions in the State of New York or in the
city of London, England are required or authorized to be closed.
"Maintenance Charge" is that fixed portion of the cost per copy
program fixed monthly charge that is attributable to maintenance of the copiers.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"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 Cut-off Date, none of the leases are Non-Performing Leases.
"Notes" means the Offered Notes together with the privately placed
Class A-2b Notes, Class E Notes and Residual Notes.
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"Offered Notes" are the Class A-1 Notes, Class A-2a Notes, Class A-3
Notes, Class A-4 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.
"Principal Payments " means payments of principal on any Payment
Date in accordance with the Indenture.
"Rating Agencies" means Moody's, Fitch and S&P.
"Record Date" means , with respect to any payment date other than
the initial payment date, the last business day of the calendar month preceding
a payment date, except for the first payment date in which case the record date
is the issuance date.
"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" means (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 related to the Warranty Lease as of the
beginning of the Due Period relating to the date of determination, plus any
amounts previously due and unpaid.
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"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 Events of Default" means any of the following:
(a) failure on the part of the servicer to remit to the trustee
within three Business Days following the receipt thereof any
monies received by the servicer required to be remitted to the
trustee under the assignment and servicing agreement;
(b) so long as Copelco Capital, Inc. is the servicer, failure on
the part of Copelco Capital, Inc. to pay to the trustee on the
date when due, any payment required to be made by Copelco
Capital, Inc. in accordance with the assignment and servicing
agreement;
(c) default on the part of either the servicer or, so long as
Copelco Capital, Inc. is the servicer, Copelco Capital, Inc.
in its observance or performance in any material respect of
covenants or agreements in the assignment and servicing
agreement which failure continues unremedied for a period of
30 days after the earlier of (i) the date it first becomes
known to any officer of Copelco Capital, Inc. or the servicer,
as the case may be, and (ii) the date on which written notice
thereof requiring the same to be remedied shall have been
given to the servicer or Copelco Capital, Inc., as the case
may be, by the trustee, or to the servicer or Copelco Capital,
Inc., as the case may be, and the trustee by any holder of the
notes;
(d) if any representation or warranty of Copelco Capital, Inc.
made in the assignment and servicing agreement shall prove to
be incorrect in any material respect as of the time made;
provided, however, that the breach of any representation or
warranty made by Copelco Capital, Inc. in the assignment and
servicing agreement will be deemed to be "material" only if it
affects the Noteholders, the enforceability of the indenture
or of the notes; and provided, further, that a material breach
of any representation or warranty made by Copelco Capital,
Inc. in the assignment and servicing agreement with respect to
any of the leases or the equipment subject thereto will not
constitute a Servicer Event of Default if Copelco Capital,
Inc. repurchases that lease and equipment in accordance with
the assignment and servicing agreement to the extent provided
within that agreement;
(e) insolvency or bankruptcy events relating to the servicer;
(f) the failure of the servicer to make one or more payments due
with respect to aggregate recourse debt or other obligations
exceeding $5,000,000, or the occurrence of any event or the
existence of any condition, the effect of which event or
condition is to cause, or permit one or more persons to cause,
more than $5,000,000 of aggregate recourse debt or other
obligations of the servicer to become due before its, or
their, stated maturity or before its, or
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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.
"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.
"S&P" means Standard and Poor's Investors Service, Inc., a division
of the McGraw Hill Companies, Inc., and its successors.
"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 8.214% (the
"Statistical Discount Rate"). The Statistical Discounted Present Value of the
Leases as of the Cut-off Date is $925,744,701 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.
"Telerate Screen Page 3750" means the display designated as page
3750 on the Telerate Service (or such other page as may replace page 3750 on
that service for the purpose of displaying London interbank offered rates of
major banks).
"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 Notes.
"VFCC" means Variable Funding Capital Corporation.
"Warranty Lease" is a lease subject to repurchase as a result of a
breach of a representation and warranty.
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PROSPECTUS
================================================================================
$1,200,000,000
COPELCO CAPITAL RECEIVABLES LLC, ISSUER
COPELCO CAPITAL, INC., SERVICER
LEASE-BACKED NOTES
- --------------------------------------------------------------------------------
We suggest that you read the section entitled "Risk Factors" starting on page 8
of this prospectus and consider these factors before making a decision to invest
in the notes.
The notes of each series will be debt solely of Copelco Capital Receivables LLC
and will be payable only from our pledged assets and from any credit enhancement
for such series.
Retain this prospectus for future reference. This prospectus may not be used to
consummate sales of securities unless accompanied by the prospectus supplement
relating to the offering of such securities.
- --------------------------------------------------------------------------------
FROM TIME TO TIME WE MAY SELL A SERIES OF ITS NOTES
THAT --
o will represent solely our debt obligations; and
o will consist of one or more classes on terms to be determined at the time
of sale.
THE ASSETS BACKING THE NOTES MAY CONSIST OF ANY COMBINATION OF --
o leases;
o installment sale contracts;
o rental stream obligations;
o monies received relating to the leases, contracts and obligations;
o funds on deposit in one or more accounts; and
o one or more forms of credit enhancement.
THE TERMS OF YOUR SERIES OF NOTES ARE DESCRIBED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT.
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 22, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
Important Information about this Prospectus and the Accompanying
Prospectus Supplement........................................................3
Prospectus Summary.............................................................4
Risk Factors...................................................................7
Where You Can Find More Information...........................................12
The Issuer....................................................................13
Use of Proceeds...............................................................13
The Series Pools..............................................................13
Copelco Capital, Inc.'s Underwriting and Servicing Practices..................16
Description of the Notes......................................................23
Prepayment and Yield Considerations...........................................25
Description of the Transaction Documents......................................30
The Indenture Trustee.........................................................36
Security for the Notes........................................................36
Legal Matters Affecting a Lessee's Rights and Obligations....................37
Material Federal Income Tax Consequences......................................38
Ratings.......................................................................43
ERISA Considerations..........................................................44
Plan of Distribution..........................................................45
Legal Opinions................................................................46
Glossary......................................................................47
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.
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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.
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;
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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.
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.,
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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.
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.
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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 In the case of notes purchased at a discount, you should consider the risk that slower
RISK MAY REDUCE YIELD TO NOTEHOLDERS 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.
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.
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SPECIFIC SECURITY INTERESTS ARE NOT In the event we have insufficient assets available to pay the notes, we may sell the
PERFECTED AND OTHER CREDITORS MAY equipment upon a lease default in order to meet payments on the notes. The lack of a
HAVE RIGHTS TO THE EQUIPMENT 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 The application of state law requirements may limit recoveries on equipment. State laws
RECOVERY EFFORTS AND AFFECT THE impose requirements and restrictions on foreclosure sales and obtaining deficiency
ABILITY OF ISSUER TO RECOUP THE FULL judgments and may prohibit, limit or delay repossession and sale of equipment to recover
AMOUNT DUE ON THE LEASES 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 Any insolvency by us, or by the servicer, the originator or the seller, while in
INSOLVENCY OF COPELCO CAPITAL possession of the leases may result in competing claims to ownership or security
RECEIVABLES LLC, ORIGINATOR OR interests in the leases which could result in delays in payments on the notes, losses to
SERVICER MAY RESULT IN REDUCED OR the noteholders or an acceleration of the repayment of the notes.
DELAYED PAYMENTS TO NOTEHOLDERS
INSOLVENCY OF COPELCO CAPITAL, INC. MAY In some circumstances, a bankruptcy of Copelco Capital, Inc. may reduce payments to
REDUCE PAYMENTS TO NOTEHOLDERS noteholders. However, Copelco Capital, Inc. believes that each contribution of the
leases should be treated as an absolute and unconditional assignment.
Still, in the event of an insolvency of Copelco Capital, Inc., a court or bankruptcy
trustee could, without limitation, attempt to -
o recharacterize the contribution of the related leases by Copelco Capital, Inc. to
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 There is no recourse against any of our affiliates. The notes represent our debt
ISSUER secured primarily by the leases. If the lease payments and other assets pledged to
secure the notes are insufficient to pay the notes in full, you have no rights to obtain
payment from Copelco Capital, Inc. or any of its affiliates other than us. We are a
limited liability company with limited assets.
GEOGRAPHIC CONCENTRATION OF LEASES MAY Adverse economic conditions or other factors particularly affecting any state or region
ADVERSELY AFFECT THE LEASES where a high concentration of leases is located could adversely affect the performance
on the leases. We are unable to determine and have no basis to predict, with respect to
any state or region, whether these types of events have occurred or may occur, or to
what extent any of these types of events may affect the leases or the repayment of
amounts due under the notes.
COMMINGLING OF FUNDS WITH COPELCO Should bankruptcy or reorganization proceedings be commenced with respect to the
CAPITAL, INC. MAY RESULT IN REDUCED servicer, any funds held by the servicer and not transferred to the collection account
OR DELAYED PAYMENTS TO NOTEHOLDERS 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.
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DEFAULT OR INSOLVENCY OF LESSEES MAY To the extent lessees default on the leases, including through insolvency, lease
REDUCE PAYMENTS TO NOTEHOLDERS payments will decrease and, accordingly, funds available for payment to you, as a
noteholder, will be reduced.
TECHNOLOGICAL OBSOLESCENCE OF EQUIPMENT If technological advances relating to the equipment causes the leased equipment to
MAY REDUCE VALUE OF COLLATERAL become obsolete, the value of the equipment will decrease. This will reduce the amount
of monies recoverable should the servicer sell the equipment following a lease default.
If payments on the notes become dependent upon the proceeds from the sale of these
obsolete equipment, you may not recoup the full amount due to you.
THE ADDITION AND SUBSTITUTION OF LEASES If a significant number of leases are added or replaced, this could affect the rate at
MAY ADVERSELY AFFECT CASHFLOW AND MAY which funds are distributed on the notes and decrease the yield to noteholders. The
DECREASE THE YIELD ON THE NOTES transaction documents may permit Copelco Capital, Inc., under specific circumstances, to
substitute or add specific qualifying leases. The addition or substitution of leases may
include leases that possess different payment due dates and installment amounts than its
predecessor lease. It may also include leases with maturity dates that are different
from the maturity dates of its predecessor lease.
Copelco Capital, Inc. may only add or substitute leases that meet specific qualifying
characteristics and conditions. The ability of Copelco Capital, Inc. to acquire those
leases is dependent upon its ability to originate a sufficient amount of leases that
meet the specified eligibility criteria. This may be affected by a variety of social and
economic factors, including interest rates, unemployment levels, the rate of inflation
and public perception of economic conditions generally. This may increase the geographic
concentration or equipment concentration of leases. Consequently, any adverse economic
or social factors that particularly affect a geographic area or a type of equipment may
adversely affect the performance of the leases.
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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, which may include any combination of
leases, leases intended as security agreements, installment sale contracts or
rental stream obligations. Leases accounting for more than 98% of the discounted
present value of the leases as of the cut-off date will be originated and
located in the United States. As detailed in the related prospectus supplement,
leases accounting for less than 2% of the discounted present value of the leases
as of the cut-off date may be originated and located in Mexico and/or Canada.
Such foreign leases will not have a material effect on the noteholders' return
or the overall performance of the pool. 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,
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o a security interest in the underlying equipment and related
property pertaining to that pool of leases,
o our rights under certain Transaction Documents applicable to the
series pool and
o investment earnings on certain accounts created under the related
Transaction Documents.
We will not have and the series pools will not include any residual
interest in any equipment after the related lease has been paid in full.
The equipment generally will be limited to personal property which
is leased or financed by the originator to lessees in connection with leases
which either are "chattel paper" as defined in the UCC or are leases that are
not treated materially differently from "chattel paper" for purposes of title
transfer, security interests or remedies on default.
The leases will be acquired by us from the originator under an
assignment and servicing agreement between the originator and us. The leases
included in a series pool will be selected from leases held by the originator
based on the criteria described below under "The Series Pool--Eligible Leases."
On or prior to the date of issuance of any series of notes, we will
form a series pool by (1) acquiring the leases in connection with the applicable
assignment and servicing agreement and (2) entering into an indenture with the
trustee, pertaining to the issuance of the notes.
The leases in each series pool will have been originated by the
originator or acquired by the originator in accordance with the originator's
specified underwriting criteria. The material underwriting criteria applicable
to the leases are described under "Copelco Capital, Inc.'s Underwriting and
Servicing Practices."
THE LEASES. Information concerning the leases in each series pool
will be described in the applicable prospectus supplement, including the
composition of the leases and the distribution of the leases by equipment type,
payment frequency and Discounted Present Value of the Leases as of the 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 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:
(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;
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(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. 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.
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.
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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.
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
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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 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
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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 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.
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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 lessee, its occupancy rate and Dun & Bradstreet
Information Services financial highlight information.
A number of the leases originated by the Vendor Services group are
credit scored under Physician's Instant Lease Line credit scoring parameters.
The Physician's Instant Lease Line credit scoring parameters include, without
limitation, the length of time in practice of the potential lessee, the
potential lessee's medical specialty and a consumer bankruptcy predictor model.
The credit review process for physicians is similar to that of personal lending
because the lessees are predominantly individual physicians or groups of
physicians. Many of the leases to physicians have personal guarantees associated
with them and spousal guarantees as well. Lessees are not required, however, to
give Copelco Capital, Inc. liens on property. The predominant reason for
delinquencies in those leases is cash flow deficiencies and, to a lesser extent,
death of the lessee, in which case settlement with the lessee's estate can take
several months. Those leases are typically processed under the Physician's
Instant Lease Line program. For inexpensive equipment, credit review of
physician lessees involves analysis of credit bureau reports, bank references,
duration of practice and medical specialty. For more expensive equipment, the
credit review involves analysis of personal income tax returns and financial
statements of the practice in addition to credit bureau reports and bank
references. There is also a focus on the length of time that the physician has
maintained his or her private practice.
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The Physician's Instant Lease Line and the Hospital Instant Lease
Line programs afford Copelco Capital, Inc. the ability to analyze physician,
physician group practice and hospital credit quality in advance of the lease
decision, thus providing a means by which physicians in specific medical
specialties and specific hospitals may be pre-approved for a leasing line of
credit. They also provide rapid turnaround of a specific application when it is
submitted.
National Accounts, Home Care and Ambulatory Care generally utilize a
combination of transactional credit analysis and credit scoring. Transactions
not eligible for credit scoring are reviewed by the Healthcare Group's credit
staff under the supervision of a senior credit officer.
Commercial & Industrial Group: In the Manufacturing Technology
Group, all credit decisions are made by credit analysts. Credit scoring is not
used. In general, transactions in excess of $50,000 require financial statement
disclosure consisting of at least the three most recent fiscal year-end
financial statements and interim financial statements. Additionally, Dun &
Bradstreet Information Services reports, bank and other credit references, trade
references, and other information may be evaluated. Transactions involving
small, privately held companies exhibiting limited financial resources require
the financial disclosure and personal guaranty of the principals. Consideration
will also be given to the value of the equipment securing the transaction, based
upon a review by the Group's asset management department. An approval might
contain restrictive conditions, including, but not limited to, a reduced term,
guaranties, security deposits, down payments, or a letter of credit.
The Material Handling Group utilizes a credit review system similar
to and based upon that of the Business Technology Group. The majority of
business is originated through dealer/vendor networks, with retail and wholesale
credit applications submitted via fax. The assessment of creditworthiness is
determined through both automated systems and credit officer analysis with
emphasis on the following factors: time in business, financial strength,
payment/credit history, transaction structure, collateral and industry outlook.
The evaluation of creditworthiness for retail end-user customers
will be accomplished through a modified version of the Business Technology
Group's credit scoring model, in which the filters and scoring thresholds are
adapted to the needs of the Material Handling Group. Retail lease applicants
will generally have been in business for at least two years with evidence of
satisfactory bank and/or comparable secured lender references. Consumer credit
bureau reports will be obtained if individual guarantors or sole proprietors are
considered in the transaction.
The terms of the leases originated by each of the Groups require the
lessees to maintain the equipment and install it at a place of business approved
by Copelco Capital, Inc. Delivery, transportation, repairs and maintenance are
obligations of lessees, and lessees are required to carry, at their own expense,
liability and replacement cost insurance under terms acceptable to Copelco
Capital, Inc. Any lease payment defaults permit Copelco Capital, Inc. to declare
immediately due and payable all 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
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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. During the period between 90 days
and 123 days, the servicer takes steps to collect on the delinquent account,
including repossessing the equipment and employing the services of 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.
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
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scheduled payments of the leases prior to the substitution or reinvestment. In
addition, after giving effect to those additions and substitutions, the
aggregate amount booked by Copelco Capital, Inc. as expected to be realized upon
the scheduled termination of a lease through sale or other disposition of the
related equipment will not be materially less than the aggregate booked residual
value of the leases immediately prior to such substitutions or additions. In the
event that an early lease termination is allowed by Copelco Capital, Inc. and an
Additional Lease is not provided, the amount prepaid will be equal to at least
the Discounted Present Value of the terminated lease, plus any delinquent
payments. See "The Series Pool--The Leases."
DESCRIPTION OF THE NOTES
GENERAL. Each series of the notes will be issued pursuant to an
indenture. The following summaries, together with additional summaries under
"Description of the Transaction Documents" below, describe material terms and
provisions of the notes.
All of the notes offered by this prospectus will be rated in one of
the four highest rating categories by one or more nationally recognized
statistical rating agencies.
The notes will generally be styled as debt instruments, having a
principal balance and a specified floating or fixed interest rate. The notes of
each series will represent debt secured by a series pool comprised primarily of
the leases described in the applicable prospectus supplement.
GENERAL PAYMENT TERMS OF NOTES. As provided in the applicable
Transaction Documents, noteholders will be entitled to receive payments on their
notes on the specified payment dates or on the next day that is not a Saturday,
Sunday or other day on which commercial banking institutions located in the city
or cities where the Corporate Trust Office of the trustee and the servicer and,
if applicable, any credit enhancement provider are located are authorized or
obligated by law or executive order to be closed.
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,
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Inc. has not substituted Substitute Leases for those leases
other than, with respect to a Warranty Lease, the Residual
Warranty Payments;
(e) proceeds from investment of funds in the Collection Account
and the Reserve Account, if any;
(f) Casualty Payments other than Residual Casualty Payments which
are, at any date of determination with respect to a lease, the
excess of (1) the Casualty Payment relating to the lease over
(2) the Discounted Present Value of the remaining Lease
Payments relating to the lease as of the beginning of the Due
Period pertaining to the date of determination, plus any
amounts previously unpaid;
(g) Servicer Advances;
(h) Termination Payments to the extent we do not reinvest the
Termination Payments in Additional Leases other than Residual
Prepayments;
(i) proceeds received once we exercise our right to redeem the
notes; and
(j) to the extent there occurs an Available Funds Shortfall,
funds, if any, on deposit in the Reserve Account to the extent
of the Available Funds Shortfall.
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.
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"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.
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
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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 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
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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 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.
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Transfers between participants will conform with DTC rules.
Transfers between Cedelbank participants and Euroclear participants will conform
with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly through
Cedelbank participants or Euroclear participants, on the other, will be effected
in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by the relevant depositary; however, these
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines.
The relevant European international clearing system will, if the transaction
meets its settlement requirements, deliver instructions to the relevant
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same day funds settlement applicable to DTC.
Cedelbank participants and Euroclear participants may not deliver instructions
directly to the European depositaries.
Cedelbank is incorporated under the laws of Luxembourg as a
professional depository. Cedelbank holds securities for its participant
organizations and facilitates the clearance and settlement of securities
transactions between Cedelbank participants through electronic book-entry
changes in accounts of Cedelbank participants, thereby eliminating the need for
physical movement of securities. Transactions may be settled in Cedelbank in any
of 38 currencies, including United States dollars. Cedelbank provides to its
Cedelbank participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedelbank interfaces with domestic markets
in several countries. As a professional depository, Cedelbank is subject to
regulation by the Luxembourg Monetary Institute. Cedelbank participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to Cedelbank is also available
to others, including banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedelbank participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating both the need for physical movement of securities and any risk from
lack of simultaneous 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. 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
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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 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.
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.
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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
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
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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 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":
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(a) failure on the part of the servicer to remit to the trustee
within three business days following the receipt thereof any
monies received by the servicer required to be remitted to the
trustee under the assignment and servicing agreement;
(b) failure on the part of the servicer to pay to the trustee on
the date when due, any payment required to be made by the
servicer in connection with the assignment and servicing
agreement;
(c) default on the part of either the servicer or, so long as
Copelco Capital, Inc. is the servicer, Copelco Capital, Inc.
in its observance or performance in any material respect of
specific covenants or agreements in the assignment and
servicing agreement which failure continues unremedied for a
period of 30 days after the earlier of (1) the date it first
becomes known to any officer of Copelco Capital, Inc. or the
servicer, as the case may be, and (2) the date on which
written notice thereof requiring the same to be remedied shall
have been given to the servicer or Copelco Capital, Inc., as
the case may be, by the trustee, or to the servicer or Copelco
Capital, Inc., as the case may be, and the trustee by any
noteholder;
(d) if any representation or warranty of Copelco Capital, Inc.
made in the assignment and servicing agreement proves to be
incorrect in any material respect as of the time made;
provided, however, that the breach of any representation or
warranty made by Copelco Capital, Inc. in that assignment and
servicing agreement will be deemed to be "material" only if it
affects the noteholders or the enforceability of the
applicable indenture or of the applicable notes; and provided,
further, that a material breach of any representation or
warranty made by Copelco Capital, Inc. in an assignment and
servicing agreement with respect to any of the leases subject
thereto will not constitute a Servicer Event of Default if
Copelco Capital, Inc. purchases that lease in accordance with
the assignment and servicing agreement;
(e) certain insolvency or bankruptcy events relating to the
servicer;
(f) the failure of the servicer to make one or more payments due
with respect to aggregate recourse debt or other obligations
exceeding $5,000,000, or the occurrence of any event or the
existence of any condition, the effect of which event or
condition is to cause--or permit one or more persons to
cause-- more than $5,000,000 of aggregate recourse debt or
other obligations of the servicer to become due before its, or
their, stated maturity or before its, or their, regularly
scheduled dates of payment so long as that failure, event or
condition shall be continuing and not waived by the person or
persons entitled to performance; or
(g) a final judgment, decree or order for the payment of money
aggregating in excess of $5,000,000 and any one of those
judgments, or decrees or orders, has remained unsatisfied and
in effect for any period of 60 consecutive days without a stay
of execution.
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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; and
o an account for any other purpose.
Funds in the Collection Account and any Distribution Account,
Reserve Account, or an applicable account for any other purpose will generally
be invested as provided in the applicable indenture in investments acceptable to
the rating agencies as being consistent with the rating of the notes.
The above accounts will be maintained as either (a) an account
maintained with a depository institution or trust company acceptable to each of
the rating agencies and any credit enhancement provider, or (b) a trust account
or similar account maintained with a federal or state chartered depository
institution, which may be an account maintained with the trustee.
DISTRIBUTIONS. Beginning on the first payment date, distributions of
principal and interest, or, where applicable, of principal only or interest only
on each class of notes entitled thereto will be made to the noteholders. The
timing, calculation, allocation, order, source, priorities of, distribution of,
and requirements for each class of notes will be described in the applicable
prospectus supplement.
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.
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The presence of credit enhancement for the benefit of any class or
series of notes is intended to enhance the likelihood of receipt by the
noteholders of the class or series of the full amount of principal and interest
due thereon and to decrease the likelihood that those noteholders will
experience losses. As more specifically provided in the applicable prospectus
supplement, the credit enhancement for a class or series of notes will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any credit enhancement or which are not covered by any
credit enhancement, noteholders of any class or series will bear their allocable
share of deficiencies, as described in the applicable prospectus supplement. In
addition, if a form of credit enhancement covers more than one class of notes or
more than one series of notes, noteholders of any applicable class or series
will be subject to the risk that the credit enhancement will be exhausted by the
claims of noteholders of other series.
If the protection provided to the noteholders of a given class of
notes by any applicable credit enhancement or by the subordination of another
class of notes is insufficient, we must rely solely on the series pool.
MODIFICATION OF AN INDENTURE. With certain exceptions, under an
indenture, our rights and obligations and the rights of the noteholders may be
modified by us with the consent of the holders of not less than 66-2/3% in
aggregate principal amount of the notes then outstanding under the applicable
indenture and, if and to the extent described in the applicable prospectus
supplement, the consent of any credit enhancement provider. However, no
modification of that type may be made if it would result in the reduction or
withdrawal of the then current ratings of the outstanding applicable notes and
no modification of that type may be made without the consent of the holder of
each outstanding note affected thereby if it would:
(a) change the fixed maturity of any note, or the principal amount
or interest amount payable thereof, or change the priority of payment thereof or
reduce the interest rate or the principal thereon or change the place of payment
where, or the coin or currency in which, any note or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
payment on or after the maturity thereof; or
(b) reduce the above-stated percentage of notes, without the consent
of the holders of all notes then outstanding under that indenture; or
(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:
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(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.
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
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the related equipment owned by us and an assignment of our security interest in
such equipment subject to Nominal Buy-Out leases which security interest was
originally perfected by Copelco Capital, Inc., except in certain circumstances
and (3) all funds in the Collection Account and the Reserve Account.
LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
GENERAL. The leases are triple-net leases, requiring the lessees to
pay all taxes, maintenance and insurance associated with the equipment, and are
primarily non-cancelable by the lessees.
The leases are "hell or high water" leases, under which the
obligations of the lessee is absolute and unconditional, regardless of any
defense, setoff or abatement which the lessee may have against, us, against
Copelco Capital, Inc., as transferor or servicer, or against any other person or
entity whatsoever.
Defaults under the leases are generally the result of failure to pay
amounts when due, failure to observe other covenants in the lease,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the lessee under a lease. The remedies of the lessor and our
remedies as assignee following a notice and cure period are generally to seek to
enforce the performance by the lessee of the terms and covenants of the lease,
including the lessee's obligation to make scheduled payments, 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
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to repossess and resell collateral or obtain a deficiency judgment in the event
of a lessee default. In the event of the bankruptcy or reorganization of a
lessee, or the originator, as transferor or servicer, various provisions of the
Bankruptcy Code of 1978, as amended, and related laws may interfere with, delay
or eliminate our ability to enforce our rights, or the ability of the originator
to enforce its rights under the leases.
In the case of operating leases, the Bankruptcy Code of 1978, as
amended, grants to the bankruptcy trustee or the debtor-in-possession a right to
elect to assume or reject any executory contract or unexpired lease. Any
rejection of that lease or contract constitutes a breach of the lease or
contract, entitling the nonbreaching party to a claim for damages for breach of
contract. The net proceeds from any resulting judgment would be deposited by the
servicer into the Collection Account and allocated to the noteholders as more
fully described herein. Upon the bankruptcy of a lessee, if the bankruptcy
trustee or debtor-in-possession elected to reject a lease, the flow of scheduled
payments to noteholders would cease. In the event that, as a result of the
bankruptcy of a lessee, the servicer is prevented from collecting scheduled
payments with respect to leases and those leases become Non-Performing Leases,
no recourse would be available against the 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.
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TAX CHARACTERIZATION OF COPELCO CAPITAL RECEIVABLES LLC. Tax counsel
is of the opinion that we will not be treated as an association or a publicly
traded partnership taxable as a corporation for federal income tax purposes.
TAX CHARACTERIZATION OF THE NOTES. In the opinion of Tax Counsel,
although no transaction closely comparable to that contemplated within this
prospectus has been the subject of any Treasury Regulation, Revenue Ruling or
judicial decision, based on the application of existing law to the facts as
presented in the applicable agreements, the notes will be treated as
indebtedness for federal income tax purposes. If 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
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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 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 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
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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 Withholding
Regulations immediately. We suggest that prospective investors 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)
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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.
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.
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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:
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
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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 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.
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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.
"Fee Per Scan Charge" is the incremental fee charged by the
Healthcare Group to the extent usage exceeds the monthly scan allowance.
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"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.
"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.
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"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.
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$883,148,838
Copelco Capital
Receivables LLC
---------------------
P R O S P E C T U S
S U P P L E M E N T
---------------------
FIRST UNION SECURITIES, INC.
PRUDENTIAL SECURITIES
BANC OF AMERICA SECURITIES LLC
MELLON FINANCIAL MARKETS, LLC
Dated April 14, 2000
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.
$185,926,071 6.50728% Class A-1
Lease-Backed Notes
$139,444,553 1 month LIBOR Class A-2a
Lease-Backed Notes
$255,648,348 7.12% Class A-3
Lease-Backed Notes
$237,055,741 7.22% Class A-4
Lease-Backed Notes
$18,592,607 7.30% Class B
Lease-Backed Notes
$18,592,607 7.39% Class C
Lease-Backed Notes
$27,888,911 7.87% Class D
Lease-Backed Notes
================================================================================
