FORM OF PROSPECTUS SUPPLEMENT
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$____________
COPELCO CAPITAL FUNDING LLC 2000-A, ISSUER
COPELCO CAPITAL, INC., SERVICER
SERIES _____
LEASE-BACKED NOTES
The issuer will issue --
o Eight classes of notes which are to be offered by this prospectus;
o Class E Lease-Backed Notes, which are not offered by this prospectus but
serve as credit support to the notes offered by this prospectus.
The notes --
o Are backed by a pledge of assets of the issuer. The assets of the issuer
securing the notes will include a pool of copier, electronic, manufacturing
and healthcare equipment leases, and all of its interest in the equipment
underlying the leases;
o Receive distributions beginning on ________;
o Represent debt obligations of Copelco Capital Funding LLC 2000-A; and
o Currently have no trading market.
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YOU SHOULD READ THE SECTION
ENTITLED "RISK FACTORS" STARTING ON
PAGE __ OF THIS PROSPECTUS
SUPPLEMENT AND PAGE __ OF THE
PROSPECTUS AND CONSIDER THESE
FACTORS BEFORE MAKING A DECISION TO
INVEST IN THE NOTES.
This prospectus supplement may be used
to offer and sell the notes only if
accompanied by the prospectus.
The notes are only secured by the
assets of the issuer. The notes are
not debt obligations of any other
person.
The notes will not be insured or
guaranteed by any governmental agency
or instrumentality.
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Initial Ratings
Underwriting Interest Initial Public -----------------------------------------
Issuance Amount Discount Rate Offering Price
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Class A-1 Notes $ % % %
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Class A-2 Notes $ % % %
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Class A-3 Notes $ % % %
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Class A-4 Notes $ % % %
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Class A-5 Notes $ % % %
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Class B Notes $ % % %
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Class C Notes $ % % %
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Class D Notes $ % % %
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITER(S)]
The date of this Prospectus Supplement is _______
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further applicable discussions. The following table of contents and table of
contents in the accompanying prospectus provide the pages on which these
captions are located.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus supplement and the accompanying prospectus. If given or made,
the information or representations must not be relied upon. The information in
this document is accurate only as of the date of this document regardless of
when this prospectus supplement and accompanying prospectus are delivered or
when the notes are sold to you.
TABLE OF CONTENTS
Page
----
Important Notice About the Information Presented in This Prospectus
Supplement and the Accompanying Prospectus.....................................3
Summary........................................................................4
Lease-Backed Notes Series _____................................................4
Issuer......................................................................4
Manager.....................................................................4
Servicer....................................................................4
Trustee.....................................................................4
The Pledged Assets..........................................................4
Leases......................................................................4
Cut-off Date................................................................4
Payment Date................................................................5
Determination Date..........................................................5
Record Date.................................................................5
Issuance Date...............................................................5
Denominations...............................................................5
Priority of Distributions...................................................5
Reserve Account.............................................................6
Optional Redemption.........................................................6
Final Scheduled Payment Date................................................6
Federal Income Tax Consequences.............................................6
ERISA Considerations........................................................6
Ratings.....................................................................6
Risk Factors...................................................................7
Use of Proceeds................................................................8
The Series Pool................................................................8
Management's Discussion and Analysis of Financial Condition...................17
Description of the Notes......................................................18
Security for the Notes........................................................33
The Indenture Trustee.........................................................33
Legal Matters Affecting a Lessee's Rights and Obligations....................33
Material Federal Income Tax Consequences......................................34
ERISA Considerations..........................................................35
Underwriting..................................................................36
Experts.......................................................................38
Legal Matters.................................................................38
Rating of the Offered Notes...................................................38
2
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes in two separate
documents that progressively provide more detail: (1) the accompanying
prospectus, which provides general information, some of which may not apply to
your series of notes, and (2) this prospectus supplement, which describes the
specific terms of your series of notes.
This prospectus supplement does not contain complete information about
the offering of the notes. Additional information is contained in the
prospectus. You are urged to read both this prospectus supplement and the
prospectus in full. We cannot sell the notes to you unless you have received
both this prospectus supplement and the prospectus.
IF THE PROSPECTUS CONTEMPLATES MULTIPLE OPTIONS, YOU SHOULD RELY ON
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AS TO THE APPLICABLE OPTION.
The issuer has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 with respect to the
notes offered by this prospectus supplement. This prospectus supplement and the
prospectus, which form a part of the registration statement, omit information
contained in the registration statement in accordance with the rules and
regulations of the Securities and Exchange Commission. You may inspect and copy
the registration statement at the Public Reference Room at the Securities and
Exchange Commission at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, and the
Commission's regional offices at Seven World Trade Center, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, and Northwestern Atrium Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 00000. You can obtain copies of these materials at
prescribed rates from the Public Reference Section of the Commission at 000
Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. 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
xxxx://xxx.xxx.xxx.
3
SUMMARY
o This summary highlights select information from this prospectus
supplement and does not contain all of the information that you need to
consider in making your investment decision. This summary provides
general, simplified descriptions of matters which, in some cases, are
highly technical and complex. To understand all of the terms of the
offering of the notes, carefully read this entire prospectus supplement
and the accompanying prospectus.
o This summary provides an overview of various calculations, cash flows
and other information to aid your understanding. To understand all of
the terms of the offering, carefully read this entire document and, in
particular, the full description of these calculations, cash flows and
other information in this prospectus supplement.
LEASE-BACKED NOTES
SERIES _____
The issuer will issue the notes offered by this prospectus supplement in
book-entry form through the facilities of The Depository Trust Company.
ISSUER
o Copelco Capital Funding LLC 2000-A. The address of the issuer is 000 Xxxx
Xxxx Xxxxx, Xx. Xxxxxx, XX 00000.
o The issuer will be a limited liability company formed under the laws of the
State of Delaware.
MANAGER
The issuer will be managed by Copelco Manager, Inc. The address of the manager
is 000 Xxxx Xxxx Xxxxx, Xx. Xxxxxx, XX 00000.
SERVICER
Copelco Capital, Inc. The address of the servicer is Xxx Xxxxxxxxxxxxx
Xxxxxxxxx, Xxxxxx, XX 00000.
TRUSTEE
Manufacturers and Traders Trust Company. The address of the trustee is Xxx X&X
Xxxxx, Xxxxxxx, XX 00000.
THE PLEDGED ASSETS
The issuer will pledge its property to secure payments on the notes. The pledged
assets will include a pool of leases, cash on deposit in a reserve account and
the collection account and other assets as described in detail elsewhere in this
prospectus supplement.
LEASES
o On or about ______, Copelco Capital, Inc. will contribute to the issuer a
pool of leases and the applicable equipment. Payments on the notes will be made
from payments on these leases.
o The leases will include copier, electronic, manufacturing and healthcare
equipment leases.
o The lessees under the leases are primarily hospitals, non-hospital medical
facilities, physicians, and businesses.
o The leases are triple-net leases, which means that the lessees are required
to pay all taxes, maintenance and insurance associated with the equipment. The
leases are non-cancelable by the lessees. All payments under the leases are
absolute, unconditional obligations of the lessees without right of offset for
any reason.
o We will calculate the principal value of the pool of leases at any time by
discounting their remaining payments (except for minor charges and delinquent
payments) at a rate equal to _____%.
o We will pay the notes from payments on the leases. Noteholders should not
rely on the sale of leased equipment for payments on the notes.
CUT-OFF DATE
The opening of business on _______.
4
PAYMENT DATE
The ____ day of each month if the ________ is a business day. If the _________
is not a business day, the payment date will be the following day that is a
business day. The first payment date will be ______.
DETERMINATION DATE
Five business days before the payment date. The trustee will calculate the
amounts to be paid on the notes on this date.
RECORD DATE
The last business day preceding a payment date unless the notes are no longer
book-entry notes. If the notes are definitive notes, the record date is the last
business day of the month preceding a payment date.
ISSUANCE DATE
On or about _______.
DENOMINATIONS
The issuer will issue the notes in minimum denominations of $1,000 and integral
multiples of $1,000. One note of each class may be issued in another
denomination.
PRIORITY OF DISTRIBUTIONS
Each month, the issuer will distribute the amounts received on the leases and
any other collections available as property of the issuer as follows:
Interest Distributions
On each payment date, the issuer will pay interest at the applicable interest
rate that accrued during the prior interest accrual period.
Principal Distributions
On each payment date, the issuer will pay principal in reduction of the
outstanding principal balance of the notes.
Principal payments will be an amount usually equal to the decrease in the
principal value of the leases between determination dates. The issuer will pay
principal in the following priority:
o to the Class A-1 noteholders only, until the principal amount on the Class
A-1 Notes has been reduced to zero;
o when the Class A-1 Notes have been paid in full:
o to the Class A-2 noteholders, until the principal amount on the Class
A-2 Notes has been reduced to zero, an amount generally equal to
_____% of the decrease in the principal value of the leases;
o when the Class A-2 Notes have been paid in full, to the Class A-3
noteholders, until the principal amount on the Class A-3 Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o when the Class A-3 Notes have been paid in full, to the Class A-4
noteholders, until the principal amount on the Class A-4 Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o when the Class A-4 Notes have been paid in full, to the Class A-5
noteholders, until the principal amount on the Class A-5 Notes has
been reduced to zero, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class B noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class C noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class D noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases;
o to the Class E noteholders, an amount generally equal to _____% of the
decrease in the principal value of the leases.
5
This general description of distributions of principal to the notes is subject
to certain targets and floors. We refer you to "Descriptions of the
Notes--Distributions" in this prospectus supplement for further information
regarding the payment of interest and principal on the notes.
RESERVE ACCOUNT
The trustee will hold the reserve account. The servicer will deposit collections
received from the leases into the reserve account on any payment date after
interest and principal payments on the notes have been made. The servicer will
continue to make those deposits until the balance in the reserve account is at
the lesser of 1% of the principal value of the leases at __________ and the
outstanding principal amount of the notes. We will use funds in the reserve
account to pay shortfalls in amounts due to the noteholders.
OPTIONAL REDEMPTION
The issuer may, on any payment date, redeem the notes when the total lease
principal balance of the performing leases is less than or equal to 10% of the
total principal value of the leases as of ______. If a redemption occurs, we
will pay you a final distribution equaling the entire unpaid principal balance
of the notes plus any accrued and unpaid interest.
FINAL SCHEDULED PAYMENT DATE
If the notes have not already been paid in full, we will pay the outstanding
principal amount of the notes in full on the following payment dates:
Class A-1 ______________
Class A-2 ______________
Class A-3 ______________
Class A-4 ______________
Class A-5 ______________
Class B ______________
Class C ______________
Class D ______________
Final payment on the notes will probably be earlier than the final scheduled
payment date set out above for the applicable class of notes.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
o Xxxxx Xxxxxxxxxx LLP, special tax counsel to the issuer and counsel to the
underwriters, is of the opinion that the notes will be treated as debt and the
issuer will not be treated as an association (or publicly traded partnership)
taxable as a corporation. By your acceptance of a note, you agree to treat the
notes as debt.
o Interest on the notes will be taxable as ordinary income when received by a
holder on the cash method of accounting and when accrued by a holder on the
accrual method of accounting.
o Xxxxx Xxxxxxxxxx LLP has prepared the discussion under "Material Federal
Income Tax Consequences" and is of the opinion that that discussion accurately
states all material federal income tax consequences of the purchase, ownership
and disposition of the offered notes to their original purchaser.
ERISA CONSIDERATIONS
Subject to the important considerations described under "ERISA Considerations"
in this prospectus supplement, pension, profit-sharing and other employee
benefit plans may purchase notes. You should consult with your counsel regarding
the applicability of the provisions of the Employee Retirement Income Security
Act of 1974, as amended, before purchasing a note.
RATINGS
o The issuer will not issue the notes unless they have been assigned the
ratings set out on the cover page of this prospectus supplement.
o You must not assume that the ratings will not be lowered, qualified or
withdrawn by the rating agencies.
6
RISK FACTORS
You should carefully consider, among other things, the following risk factors
before deciding to invest in the notes offered by this prospectus supplement.
GEOGRAPHIC CONCENTRATION OF Adverse economic conditions or other factors
LEASES MAY ADVERSELY particularly affecting any state or region where a
AFFECT THE LEASES high concentration of leases is located could
adversely affect the performance on the leases.
As of _________, approximately ______%, ______%,
______% and ______% of the leases (based on the
statistical discounted present value of the
leases) were located in ________, _______, _______
and ______, respectively. No other state accounts
for more than 5% of the leases. The issuer is
unable to determine and has no basis to predict,
with respect to any state or region, whether those
events have occurred or may occur, or to what
extent those events may affect the leases or the
repayment of amounts due under the notes.
RISKS ASSOCIATED WITH YEAR The servicer is faced with the task of completing
2000 COMPLIANCE its goals for compliance in connection with the
year 2000 issue. The year 2000 issue is the result
of prior computer programs being written using two
digits to define the applicable year. Any computer
programs that have time-sensitive software may
recognize a date using "00" as the year 1900
rather than the year 2000. Any such occurrence
could result in major computer system failure or
miscalculations. Although the servicer reasonably
believes that its servicing system will be year
2000 compliant prior to the year 2000, it is
presently engaged in various procedures to
determine if its computer systems and software,
and those of its material suppliers, customers,
brokers and agents will be year 2000 compliant.
In the event that the servicer, any subservicer or
any of their suppliers, customers, brokers or
agents do not successfully and timely achieve year
2000 compliance, the servicer's performance of its
obligations under the Assignment and Servicing
Agreement could be adversely affected. This could
result in delays in processing payments on the
leases and could cause a delay in distributions to
you.
7
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be distributed to the
owners of Copelco Capital Funding LLC 2000-A (the "Issuer"). The distribution
will occur after the contribution by Copelco Capital, Inc. ("Copelco Capital" or
in its capacity as servicer, the "Servicer") of the pool of copier, electronics,
manufacturing, and healthcare equipment lease contracts (each a "Lease
Contract", collectively the "Lease Contracts"), including payments due
thereunder (together with the Lease Contracts, the "Leases") and interests in
the applicable equipment (the "Equipment") to the Issuer. The net proceeds will
be utilized to repay bank debt and for general corporate purposes.
THE SERIES POOL
THE LEASES. As of the opening of business on ___________ (the "Cut-Off
Date"), the Notes will be secured by a pool of Leases (the "Series Pool"). The
Lessees (as defined below) are primarily hospitals, medical facilities,
physicians and business owners throughout the United States. The Leases were
originated or acquired by the Business Technology Group, the Healthcare Group
and the Commercial & Industrial Group of Copelco Capital (or their predecessors)
(collectively, the "Origination Groups"). See "Security for the Notes" and
"Legal Matters Affecting a Lessee's Rights and Obligations." Unless otherwise
noted, the statistical information included below was computed using the
Statistical Discounted Present Value of the Leases (as defined below) as of the
Cut-Off Date. The actual principal value of the Leases on _______ (the "Issuance
Date") will be calculated using the Discounted Present Value of the Leases (as
defined below). The Statistical Discounted Present Value of the Leases as of the
Cut-Off Date will not vary materially from the Discounted Present Value of the
Leases as of the Cut-Off Date.
The Leases are triple-net leases, which means that the terms of the
Leases require the lessees to pay all taxes, maintenance and insurance
associated with the Equipment, and impose no affirmative obligations on the
lessor, and are non-cancelable by the Lessees (as defined below). Under agreed
upon conditions, however, Copelco Capital may consent to prepayment of the
Leases. Generally, Copelco Capital will consent to a prepayment of a lease where
the Lessee is upgrading the Equipment. All payments under the Leases are
absolute, unconditional obligations of the hospitals, non-hospital medical
facilities, physicians, businesses and individual business owners who lease the
Equipment (each, a "Lessee," and collectively, the "Lessees"). Lessees are
without right of offset for any reason. Those payments will be made by the
Lessees to the Servicer for the account of Copelco Capital Funding LLC 2000-A.
Each Lessee entered into its Lease for specified Equipment which may
be designated in schedules incorporated into the Lease. To the extent not set
forth in the Lease Contract, the schedules, among other things, establish the
periodic payments and the term of the Lease with respect to that Equipment. The
Leases follow one of several different forms of lease agreement, with occasional
modifications which do not materially affect the basic terms of the Leases. The
weighted average remaining term of the Series Pool is _______ months. Copelco
Capital will represent and warrant that, as of the Cut-Off Date, all Leases will
be current or less than 63 days delinquent and, as of the initial Determination
Date (as defined below), all Lessees will have made at least one payment.
Lessees covenant to maintain the Equipment and install it at a place
of business agreed upon with Copelco Capital. Delivery, transportation, repairs
and maintenance are the obligation of the Lessees, and all Lessees are required
to carry, at their respective expense, liability and replacement cost insurance
under terms acceptable to Copelco Capital. Those insurance proceeds will
constitute Casualty Payments (as defined below). Subject to agreed upon
exceptions, if the Lessee does not provide evidence of insurance coverage within
90 days of the commencement of the Lease, Copelco Capital may obtain insurance
and invoice the Lessee for the cost thereof. Any defaults under a Lease (as
such, a "Non-Performing Lease," as defined below) permit a declaration, as
immediately due and payable, of all remaining Lease payments under the Lease and
the immediate return of the Equipment. Generally, any payments received six days
after the scheduled payment date are subject to late charges.
"Non-Performing Leases" are (a) Leases that have become more than 123
days delinquent or (b) Leases that have been accelerated by the Servicer or
Leases that the Servicer has determined to be uncollectible in accordance with
its customary practices. Copelco Capital, Inc. will represent and warrant that,
as of the Cut-Off Date, none of the Leases are Non-Performing Leases.
8
The Servicer's customary practices with respect to Non-Performing
Leases include action as is necessary to cause, or attempt to cause, the Lessee
thereunder to cure the non-performance or to terminate the lease and recover the
outstanding amount owed under the lease and all damages resulting from any
default on the Non-Performing Leases. The Servicer will take action that is
consistent with the customary practices of servicers in the equipment leasing
industry. In addition, the Servicer will use its best efforts to sell or lease
any Equipment that is subject to a Non-Performing Lease in a timely manner and
upon the most favorable terms and conditions available at the time in order to
recoup any amounts still due on the lease.
At the end of the Lease term, the Lessee must return the Equipment
with certification from the manufacturer that the Equipment is in good working
order, normal wear and tear excepted, unless the Lease is renewed or the
Equipment is purchased by the Lessee.
Historically, approximately 90% of the Equipment leased by the
Origination Groups is purchased or re-leased by the original Lessee at the
expiration of the lease term. In accordance with the terms of the Leases, the
Lessee is generally required to advise Copelco Capital 90 to 120 days prior to
the Lease termination of its intent to return the Equipment at the expiration of
the Lease. In most cases, the failure by a Lessee to so advise Copelco Capital
results in an automatic renewal of the Lease for a specified period. For
Equipment which is returned to Copelco Capital by the Lessees, Copelco Capital
participates in an active secondary market for the sale of used Equipment.
THE EQUIPMENT. The Equipment subject to the Leases is purchased by
Copelco Capital under direct specifications and instructions from the Lessees.
As of the Cut-Off Date, the Series Pool had approximately 93 equipment
categories.
INFORMATION WITH RESPECT TO THE LEASES AND THE LESSEES. The following
tables summarize information with respect to the Leases and the Lessees as of
the Cut-Off Date. The Issuer is not aware of any trends or changes relating to
the data in the following tables that would be expected to impact the future
performance of the Leases.
THE PLEDGED ASSETS. The assets pledged to secure the Notes (the
"Pledged Assets") will consist of a pool of copier, electronic, manufacturing,
and healthcare equipment lease contracts, including payments due thereunder and
interests in the applicable leased equipment acquired or originated by Copelco
Capital and transferred to the Issuer. The Pledged Assets will, in addition,
include the funds on deposit in Collection Account (as defined below) and the
Reserve Account (as defined below).
9
DISTRIBUTION OF LEASES BY STATE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
STATE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
------------------------ --------- ------------- ---------------- --------------- -------------- -------------
Alaska $ $
Alabama
Arkansas
Arizona
California
Colorado
Connecticut
District of Columbia
Delaware
Florida
Georgia
Hawaii
Iowa
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Massachusetts
Maryland
Maine
Michigan
Minnesota
Missouri
Mississippi
Montana
North Carolina
North Dakota
Nebraska
New Hampshire
New Jersey
New Mexico
Nevada
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Virginia
Vermont
Washington
Wisconsin
West Virginia
Wyoming
================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
================================================================================================================================
10
DISTRIBUTION OF LEASES BY LEASE BALANCE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
STATISTICAL DISCOUNTED PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
PRESENT VALUE OF NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
THE LEASES LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
$ 0.01 - 5,000.00 $ $
5,000.01 - 10,000.00
10,000.01 - 15,000.00
15,000.01 - 20,000.00
20,000.01 - 25,000.00
25,000.01 - 50,000.00
50,000.01 - 100,000.00
100,000.01 - 500,000.00
500,000.01 - 1,000,000.00
greater than 1,000,000.00
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
REMAINING TERM (MONTHS) LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
0 - 12 $ $
13 - 24
25 - 36
37 - 48
49 - 60
61 - 84
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
ORIGINAL TERM (MONTHS) LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
0 - 12 $ $
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
73 - 96
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
11
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
LEASE TYPE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
Finance Lease $ $
Operating Lease
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
PURCHASE OPTION LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
Fixed Purchase Option $ $
Fair Market Value
Nominal Buyout
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
DISTRIBUTION OF LEASES BY DELINQUENCIES
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
DAYS DELINQUENT LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
0 - 29 $ $
30 - 59
60 - 62
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
12
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
Multiple Product $ $
Anesthesia Equipment
Automated Chemistry Systems
Automated Hematology Systems
Automated Test Equipment
Automobile Shop
C.T. Systems
Carts, Stretchers, Wheel Chairs
Cash Registers
Cobalt and X-Ray Therapy
Equipment
Communication Equipment
Computer Systems-Doctors &
Hospitals
Computer
Construction Equipment
Copiers
Cranes and Derricks
Data Processing
Dental Operatory Equipment
Digital Cameras
Document Imaging Equipment
ECG (EKG) and Defibrillators
EEG
Electronics Production
Equipment
Fabrication Equipment
Facsimiles
Food Processing
Furniture and Fixtures
Gamma Cameras
Heating and Air
Xxxxxx Monitors
Home Healthcare Equipment
Hospital Room Equipment
Hosp Beds; Elec. Stryker FRMS,
Burn Beds
Image Setters
Industrial Production
Jukeboxes/storage
Laminating Devices
Lasers
Laundry, Kitchen, Food Srvc
Eqp., Central Supply
Laundry Equipment Lift Trucks
Leasehold Improvements
Lift Trucks
Linear Accelerators
Lithotripters and Dialysis
Equipment
Machine Tools
Mailing Equipment
Mammography
Materials Handling
Mobile X-Ray Systems
13
PERCENTAGE OF PERCENTAGE OF
STATISTICAL STATISTICAL AGGREGATE
PERCENTAGE OF DISCOUNTED DISCOUNTED AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRESENT VALUE OF PRESENT VALUE ORIGINAL EQUIPMENT
EQUIPMENT TYPE LEASES LEASES LEASES OF LEASES EQUIPMENT COST COST
--------------------------- --------- ------------- ---------------- --------------- -------------- -------------
Medical Equipment
Microfilm Equipment
Micrographics
Misc. Comm. & Indus. Equip.
Misc Lab Eqp
Misc Vet Eqp; Cages, Scales,
Tables
Misc X-Ray Eqp
Miscellaneous
MRI Systems
Office Furniture & Equipment
Operating Microscopes
Opthlmc Diag Eqp (Slit Lamps,
Tonometers)
Opt Eqp; Lens Grinding,
Resurfacing
Packaging Equipment
Patient Monitoring Systems
Patient Room Furnishing &
Fixtures
Phone, TV, Comm Equipment
Photo Equipment
Photocopy Equipment
Physician Misc Medical Eqp &
Exam Tables
Physician Office Furn, Fixtures
and Phones
Podiatry Equipment
Printing Equipment
Processing Equipment
Pulse Oximetry Equipment
Radiographic Fluoroscopic
Systems
Respiratory Therapy Equipment
Restaurant, Motel Equipment
Sales Tax
Scanners
Security Systems
Standard Printers
Standard Test Systems
Standard X-Ray Systems
Surgical Equip. Scopes,
Electrosurgical
Telephone
Telex
Transportation
Ultrasound
Vending Machines
Wide Format Printers
Woodworking
Working Capital
X-Ray Spec Systems;
Angiography
===================================================================================================================================
Total 100.000% $ 100.000% $ 100.000%
===================================================================================================================================
1 The following abbreviations used in this table have the following meanings:
"Eqp." -- Equipment
"Misc." -- Miscellaneous
14
HISTORICAL DELINQUENCY INFORMATION. A Lease is generally evaluated by
Copelco Capital for write-down when they become over 92 days delinquent. General
delinquency information for equipment leases not written down in the Origination
Groups that are owned by Copelco Capital is presented below.
HISTORICAL DELINQUENCY EXPERIENCE
COPELCO CAPITAL COMBINED PORTFOLIO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
Total Receivables
Balance (1) $ $ $ $ $
--------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 Days+
--------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ $ $ $ $
(1) The Total Receivables Balance is equal to the aggregate future rent owing on the Leases.
BUSINESS TECHNOLOGY
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
Total Receivables
Balance (1) $ $ $ $ $
--------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 Days+
--------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ $ $ $ $
(1) The Total Receivables Balance is equal to the aggregate future rent owing on the Leases.
HEALTHCARE AND COMMERCIAL & INDUSTRIAL GROUP
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
Total Receivables
Balance (1) $ $ $ $ $
--------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 days
60-89 days
90 Days+
--------------------------------------------------------------------------------------------------------------------------
Total Delinquencies $ $ $ $ $
(1) The Total Receivables Balance is equal to the aggregate future rent owing on the leases.
15
HISTORICAL DEFAULT EXPERIENCE. All accounts assessed over 92 days past
due automatically become non-accruing accounts. Any subsequent recoveries offset
net losses. General charge-off information for Leases in the Origination Groups
that are owned and serviced by Copelco Capital for the period January 1, 1994 to
December 31, 1998 is set forth below.
HISTORICAL CHARGE-OFF EXPERIENCE
(DOLLARS IN THOUSANDS)
COPELCO CAPITAL COMBINED PORTFOLIO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
Average Receivables
Outstanding (1) $ $ $ $ $
-----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $
Net Losses as a % of Avg.
Receivables
(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.
BUSINESS TECHNOLOGY
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
Average Receivables
Outstanding (1) $ $ $ $ $
-----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $
Net Losses as a % of Avg.
Receivables
(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.
HEALTHCARE COMMERCIAL & INDUSTRIAL GROUP
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
Average Receivables
Outstanding (1) $ $ $ $ $
-----------------------------------------------------------------------------------------------------------
Net Losses $ $ $ $ $
Net Losses as a % of Avg.
Receivables
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the Leases.
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the Leases in the future.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
As of the date of this Prospectus Supplement, the Issuer has had no
operating history. The net proceeds of the sale of the Notes will be distributed
to the owners of the Issuer. See "Use of Proceeds." The Issuer is prohibited by
its Limited Liability Company Agreement from engaging in business other than (i)
the purchase of equipment leases and lease receivables (including equipment)
from Copelco Capital and its affiliates, (ii) the issuance of notes
collateralized by its assets and (iii) engaging in acts incidental, necessary or
convenient to the foregoing and permitted under Delaware law. The Issuer's
ability to incur, assume or guaranty indebtedness for borrowed money is also
restricted by its Limited Liability Company Agreement to only those activities
that relate to the leases and lease receivables.
DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGER OF THE ISSUER. The
following table sets forth the executive officers and directors of Copelco
Manager, Inc., the manager of the Issuer ("Manager") and their ages and
positions as of May 25, 1999. Because the Issuer is organized as a special
purpose company and will be largely passive, it is expected that the officers
and directors of the Manager will participate in the management of the Issuer to
a limited extent. Most of the actions pertaining to maintaining and servicing
the assets will be performed by the Servicer.
------------------------------------------------------------------------------------------------
Name Age Position
------------------------------------------------------------------------------------------------
Xxx X. Xxxx 55 Chairman of the Board (Principal Executive Officer), Director
Xxxxxx X. Xxxxxxx, Xx. 39 President, Chief Operating Officer
Xxxx Xxxxxxxx 58 Director
Xxxxxxxx Xxxxxxxxxx 50 Vice President of Finance
Xxxxxxx Xxxxxxx 47 Director
Xxxxxxx X. Xxxxxxx 47 Vice President
Xxxxxxx Xxxxxxx 52 Secretary
Xxx X. Xxxx has served as Chairman of the Board (Principal Executive
Officer) and Director of the Manager since being appointed/elected on February
23, 1999. Xx. Xxxx founded Copelco Financial Services Group, Inc. ("Copelco
Financial") in October 1972 and has continuously served as its President and CEO
from inception. Prior to founding Copelco Financial, Xx. Xxxx served as Senior
Vice President and Director of MDC Corporation (an AMEX listed corporation) and
as President and Director of MDC Leasing Corporation from 1967 through 1972. He
is a past Vice President and Director of the Equipment Leasing Association (the
industry trade association) and a founder, past officer and Director of the
Eastern Association of Equipment Lessors.
Xxxxxx X. Xxxxxxx, Xx. has served as President of the Manager since
being appointed/elected on February 23, 1999. Xx. Xxxxxxx was elected President
and Chief Operating Officer of Copelco Capital in January 1997. Prior to this he
served as Vice President of Sales and head of the Document Imaging Sales Group
since joining Copelco Capital in 1987.
Xxxx Xxxxxxxx has served as Director since being elected on February
23, 1999. For the last five years, Xx. Xxxxxxxx has served, initially, as the
chief financial officer for a subsidiary of Itochu International (the Issuer's
ultimate parent company in the United States) and, more recently, as the Vice
President of Finance of Itochu International Enterprise.
Xxxxxxxx Xxxxxxxxxx has served as Vice President - Finance and
Treasurer since being elected on February 23, 1999. Xx. Xxxxxxxxxx joined
Copelco Capital as a Senior Vice President and Chief Financial Officer in
September 1995. He formerly served as the Treasurer of Concord Leasing Company.
Xxxxxxx Xxxxxxx has served as Director since being elected on May 5,
1999. [Background to be provided]
Xxxxxxx X. Xxxxxxx has served as Vice President since being elected on
February 23, 1999. For the last five years, Xx. Xxxxxxx has served as the Vice
President of Finance of Copelco Financial.
17
Xxxxxxx Xxxxxxx has served as Secretary since being elected on
February 23, 1999. For the last five years, Xx. Xxxxxxx has served as the
General Counsel for Copelco Financial.
None of the above-listed directors and officers of the Manager will be
compensated directly by the Issuer or the Manager nor with any funds or assets
of the Issuer or the Manager nor will any of those directors and officers
receive compensation in the capacities in which they act for the Manager of the
Issuer.
DESCRIPTION OF THE NOTES
GENERAL. The ____% Class A-1 Lease-Backed Notes (the "Class A-1
Notes"), _____% Class A-2 Lease-Backed Notes (the "Class A-2 Notes"), _____%
Class A-3 Lease-Backed Notes (the "Class A-3 Notes"), _____% Class A-4
Lease-Backed Notes (the "Class A-4 Notes") and _____% Class A-5 Lease-Backed
Notes (the "Class A-5 Notes, together with the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes, the "Class A Notes"), _____% Class B
Lease-Backed Notes (the "Class B Notes"), _____% Class C Lease-Backed Notes (the
"Class C Notes") and _____% Class D Lease-Backed Notes (the "Class D Notes,"
together with the Class A Notes, the Class B Notes and the Class C Notes, the
"Offered Notes") and the _____% Class E Lease-Backed Notes (the "Class E Notes,"
together with the Offered Notes, the "Notes") will be issued in accordance with
the Indenture (the "Indenture") between the Issuer and the Trustee. The
following statements with respect to the Notes is a summary of all material
terms relating to a description of the Offered Notes. However, investors in the
Offered Notes should review the Indenture, the form of which is filed as an
exhibit to the registration statement of which this Prospectus Supplement forms
a part. Whenever any particular section of the Indenture or any term used in the
Indenture is referred to, the section in the Indenture or the term used should
be reviewed by you in order to fully understand this offering.
The Offered Notes represent secured debt obligations of the Issuer
secured by the Pledged Assets. The privately placed Class E Notes represent
subordinated debt obligations of the Issuer secured by defined assets in the
Pledged Assets as provided in the applicable Indenture. The Class E Notes are
subordinated to the Offered Notes for the purpose of, among other things,
offsetting losses and other shortfalls. Neither represents an interest in or
recourse obligation of Copelco Capital or any of its other affiliates other than
the Issuer. The Issuer is a Delaware limited liability company with limited
assets. Consequently, the holders of the notes must rely solely upon the Leases,
the interests in the Equipment and funds on deposit in the Collection Account
and the Reserve Account, for payment of principal of and interest on the Offered
Notes.
The combined aggregate principal amount of the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes will
comprise the initial principal amount (the "Initial Principal Amount") of the
Notes. The Discounted Present Value of the Leases, at any given time, shall
equal the future remaining scheduled payments from the applicable Leases
(including Non-Performing Leases), discounted at the Discount Rate, as set forth
in the Indenture.
INTEREST RATES. The Notes will bear interest from the Issuance Date at
the applicable interest rate for the respective class as presented below. The
Interest Rate is calculated on the basis of a year of 360 days comprised of
twelve 30-day months, except in the case of the Class A-1 Notes, for which
interest will be calculated on the basis of a year of 360 days and the actual
number of days in the interest accrual period, payable on the fifteenth day of
each month (or if that day is not a business day the next succeeding business
day), to the person in whose name the Note was registered at the close of
business on the preceding Record Date (as defined below). The interest rate for
the Notes is as follows: ____% per annum on the Class A-1 Notes (the "Class A-1
Interest Rate"), _____% per annum on the Class A-2 Notes (the "Class A-2
Interest Rate"), _____% per annum on the Class A-3 Notes (the "Class A-3
Interest Rate"), _____% per annum on the Class A-4 Notes (the "Class A-4
Interest Rate"), _____% per annum on the Class A-5 Notes (the "Class A-5
Interest Rate"), _____% per annum on the Class B Notes (the "Class B Interest
Rate"), _____% per annum on the Class C Notes (the "Class C Interest Rate"),
_____% per annum on the Class D Notes (the "Class D Interest Rate") and _____%
per annum on the Class E Notes (the "Class E Interest Rate"). With respect to
any particular Class, the "Interest Rate" refers to the applicable rate
indicated in the immediately preceding sentence.
Principal will be payable as set out under "Distributions on Notes."
Notes may be presented to the corporate trust office of the Trustee for
registration of transfer or exchange (Section 2.03). Notes may be exchanged
18
without a service charge, but the Issuer may require payment to cover taxes or
other governmental charges (Section 2.03).
INITIAL PRINCIPAL AMOUNT. $___________ for the Class A-1 Notes (the
"Class A-1 Initial Principal Amount"), $___________ for the Class A-2 Notes (the
"Class A-2 Initial Principal Amount"), $___________ for the Class A-3 Notes (the
"Class A-3 Initial Principal Amount"), $___________ for the Class A-4 Notes (the
"Class A-4 Initial Principal Amount"), $___________ for the Class A-5 Notes (the
"Class A-5 Initial Principal Amount," together with the Class A-1 Initial
Principal Amount, the Class A-2 Initial Principal Amount, the Class A-3 Initial
Principal Amount and the Class A-4 Initial Principal Amount, the "Class A
Initial Principal Amount"), $___________ for the Class B Notes (the "Class B
Initial Principal Amount"), $___________ for the Class C Notes (the "Class C
Initial Principal Amount"), $___________ for the Class D Notes (the "Class D
Initial Principal Amount") and $___________ for the Class E Notes (the "Class E
Initial Principal Amount"). See "Description of the Notes."
DISCOUNTED PRESENT VALUE OF THE LEASES. The discounted present value
of the Leases (the "Discounted Present Value of the Leases"), at any given time,
shall equal the future remaining scheduled payments (not including delinquent
amounts, Excess Copy Charges, Maintenance Charges and Fee Per Scan Charges (each
as defined below)) from the Leases (including Non-Performing Leases), discounted
at a rate equal to _____%, (the "Discount Rate") which rate is equal to the sum
of (a) the weighted average interest rate of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class
B Notes, the Class C Notes, the Class D Notes and the Class E Notes, each
weighted by (i) the initial principal amount of the Class A-1 Notes, the initial
principal amount of the Class A-2 Notes, the initial principal amount of the
Class A-3 Notes, the initial principal amount of the Class A-4 Notes, the
initial principal amount of the Class A-5 Notes, the initial principal amount of
the Class B Notes, the initial principal amount of the Class C Notes, the
initial principal amount of the Class D Notes, and the initial principal amount
of the Class E Notes, as applicable, and (ii) the expected weighted average life
(under a zero prepayment and no loss scenario) of each class of Notes, as
applicable, and (b) the servicing fee rate of 0.75% per annum. The discounted
present value of the Performing Leases (the "Discounted Present Value of the
Performing Leases") equals the Discounted Present Value of the Leases, reduced
by all future remaining scheduled payments on the Non-Performing Leases (not
including delinquent amounts, Excess Copy Charges, Maintenance Charges or Fee
Per Scan Charges), discounted at the Discount Rate. See "Description of the
Notes--General." Each of the Indenture and the Assignment and Servicing
Agreement will provide that any calculation of future remaining scheduled
payments made on a Determination Date or with respect to a Payment Date will be
calculated after giving effect to any payments received prior to the date of
calculation to the extent the payments relate to scheduled payments due and
payable by the Lessees with respect to the applicable Due Period (defined below)
and all prior Due Periods. "Statistical Discounted Present Value of the Leases"
means an amount equal to the future remaining scheduled payments (not including
delinquent amounts, Excess Copy Charges, Maintenance Charges and Fee Per Scan
Charges) from the Leases as of the Cut-Off Date, discounted at a rate equal to
_____% (the "Statistical Discount Rate"). The Statistical Discounted Present
Value of the Leases as of the Cut-Off Date is $___________ and will not vary
materially from the Discounted Present Value of the Leases as of the Cut-Off
Date. See "The Series Pool--The Equipment." The aggregate Discounted Present
Value of the Leases as of the Cut-Off Date, calculated at the Discount Rate is
$___________.
"Excess Copy Charges" are amounts charged to those Lessees on a fixed
payment plan who surpass their fixed allotment of copies.
"Maintenance Charges" are those amounts built into a fixed payment
price for copiers which represents the cost charged to maintain the copiers.
"Fee Per Scan Charges" are charges with respect to specific health
care equipment leases where scan usage exceeds the monthly scan allowance.
EXPECTED MATURITY; STATED MATURITY. The expected maturity dates with
respect to the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes and Class A-5 Notes are the Payment Dates on ______________,
______________, ______________, ______________, and ______________,
respectively. The expected maturity date with respect to the Class B Notes,
Class C Notes and Class D Notes are the Payment Dates on ______________,
______________ and ______________, respectively. The stated maturity date with
respect to the Class A-1 Notes is the Payment Date on ______________ (the "Class
A-1 Stated Maturity Date"), the stated
19
maturity date with respect to the Class A-2 Notes is the Payment Date on
______________ (the "Class A-2 Stated Maturity Date"), the stated maturity date
with respect to the Class A-3 Notes is the Payment Date on ______________ (the
"Class A-3 Stated Maturity Date"), the stated maturity date with respect to the
Class A-4 Notes is the Payment Date on ______________ (the "Class A-4 Stated
Maturity Date"), the stated maturity with respect to the Class A-5 Notes is the
Payment Date on ______________ (the "Class A-5 Stated Maturity Date"), the
stated maturity date with respect to the Class B Notes is the Payment Date on
______________ (the "Class B Stated Maturity Date"), the stated maturity date
with respect to the Class C Notes is the Payment Date on ______________ (the
"Class C Stated Maturity Date") and the stated maturity date with respect to the
Class D Notes is the Payment Date on ______________ (the "Class D Stated
Maturity Date"). However, if all payments on the Leases are made as scheduled,
final payment with respect to the Notes would occur prior to stated maturity.
DETERMINATION DATE. The fifth day prior to each Payment Date (or the
preceding business day, if that day is not a business day). On that date (each,
a "Determination Date"), the Servicer will determine the amount of payments
received on the Leases for the immediately preceding calendar month (each of
those periods is a "Due Period") which will be available for distribution on the
Payment Date. See "Description of the Notes--Distributions on Notes."
PAYMENT DATE. Payments on the Notes will be made on the ___________
day of each month (or if that day is not a business day, the next succeeding
business day), commencing on ______________, to holders of record on the last
business day preceding a payment date, or, if the notes are definitive notes,
the last business day of the month preceding a payment date (each, a "Record
Date"). See "Description of the Notes--Distributions on Notes."
INTEREST PAYMENTS. On each Payment Date, the interest due (the
"Interest Payments") with respect to the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class B
Notes, the Class C Notes, the Class D Notes and the Class E Notes since the last
Payment Date will be the interest that has accrued on those Notes since the last
Payment Date (or in the case of the first Payment Date, since the Issuance Date)
(the "Interest Accrual Period") at the applicable Interest Rate applied to the
then unpaid principal amounts (the "Outstanding Principal Amounts") of the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the
Class E Notes, respectively, after giving effect to payments of principal to the
holders of Class A-1 Notes (the "Class A-1 Noteholders"), the holders of Class
A-2 Notes (the "Class A-2 Noteholders"), the holders of Class A-3 Notes (the
"Class A-3 Noteholders"), the holders of Class A-4 Notes (the "Class A-4
Noteholders"), the holders of Class A-5 Notes (the "Class A-5 Noteholders,"
together with the Class A-1 Noteholders, Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders, the "Class A Noteholders"), the holders
of Class B Notes (the "Class B Noteholders"), the holders of Class C Notes (the
"Class C Noteholders"), the holders of Class D Notes (the "Class D Noteholders")
and the holders of Class E Notes (the "Class E Noteholders," together with the
Class A Noteholders, Class B Noteholders, Class C Noteholders and Class D
Noteholders, the "Noteholders"), respectively, on the preceding Payment Date.
See "Description of the Notes--General" and "Distributions on Notes."
PRINCIPAL PAYMENTS. For each Payment Date, each of the Class A
Noteholders, the Class B Noteholders, the Class C Noteholders, the Class D
Noteholders and the Class E Noteholders will be entitled to receive payments of
principal ("Principal Payments"), to the extent funds are available therefor, in
the priorities set forth in the Indenture and described below and under
"Description of the Notes--Distributions on Notes." On each Payment Date, to the
extent funds are available therefor, the Principal Payment will be paid to the
Noteholders in the following priority: (a) (i) to the Class A-1 Noteholders
only, until the Outstanding Principal Amount on the Class A-1 Notes has been
reduced to zero, the Class A Principal Payment, then (ii) to the Class A-2
Noteholders only, until the Outstanding Principal Amount on the Class A-2 Notes
has been reduced to zero, the Class A Principal Payment, then (iii) to the Class
A-3 Noteholders only, until the Outstanding Principal Amount on the Class A-3
Notes has been reduced to zero, the Class A Principal Payment, (iv) to the Class
A-4 Noteholders only, until the Outstanding Principal Amount on the Class A-4
Notes has been reduced to zero, the Class A Principal Payment and (v) to the
Class A-5 Noteholders only, until the Outstanding Principal Amount on the Class
A-5 Notes has been reduced to zero, the Class A Principal Payment, (b) to the
Class B Noteholders, the Class B Principal Payment, (c) to the Class C
Noteholders, the Class C Principal Payment, (d) to the Class D Noteholders, the
Class D Principal Payment, (e) to the Class E Noteholders, the Class E Principal
Payment and (f) to the extent that the Class B Floor exceeds the Class B Target
Investor Principal Amount, the Class C Floor exceeds the Class C Target Investor
20
Principal Amount, the Class D Floor exceeds the Class D Target Investor
Principal Amount and/or the Class E Floor exceeds the Class E Target Investor
Principal Amount, Additional Principal (defined below) shall be distributed,
sequentially, as an additional principal payment on the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes,
the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes as
applicable, until the Outstanding Principal Amount of each Class has been
reduced to zero.
"Additional Principal" with respect to each Payment Date equals (a)
zero if each of the Class Target Investor Principal Amounts for Classes B, C, D
and E exceed their respective Class Floors on that Payment Date and (b) in each
other case, the excess, if any, of (i)(A) the Outstanding Principal Balance of
the Notes plus the Overcollateralization Balance as of the immediately preceding
Payment Date after giving effect to payments on that Payment Date, minus (B) the
Discounted Present Value of the Performing Leases as of the applicable
Determination Date, over (ii) the sum of the Class A Principal Payment, the
Class B Principal Payment, the Class C Principal Payment, the Class D Principal
Payment and the Class E Principal Payment to be paid on that Payment Date.
The "Class A Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, (i) on all Payment Dates prior to the ___________ Payment
Date, the lesser of (1) the amount necessary to reduce the Outstanding Principal
Amount on the Class A-1 Notes to zero and (2) the difference between (A) the
Discounted Present Value of the Performing Leases as of the previous
Determination Date and (B) the Discounted Present Value of the Performing Leases
as of the applicable Determination Date, and (ii) on and after the ___________
Payment Date, the entire Outstanding Principal Amount on the Class A-1 Notes and
(b) after the Class A-1 Notes have been paid in full, the amount necessary to
reduce the aggregate Outstanding Principal Amount on the Class A Notes to the
Class A Target Investor Principal Amount.
The "Class B Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class B Notes to the greater of the Class B
Target Investor Principal Amount and the Class B Floor.
The "Class C Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class C Notes to the greater of the Class C
Target Investor Principal Amount and the Class C Floor.
The "Class D Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class D Notes to the greater of the Class D
Target Investor Principal Amount and the Class D Floor.
The "Class E Principal Payment" shall equal (a) while the Class A-1
Notes are outstanding, zero and (b) after the Outstanding Principal Amount on
the Class A-1 Notes has been reduced to zero, the amount necessary to reduce the
Outstanding Principal Amount of the Class E Notes to the greater of the Class E
Target Investor Principal Amount and the Class E Floor.
The "Class A Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class A Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class B Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class B Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class C Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class C Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
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The "Class D Target Investor Principal Amount" with respect to each
Payment Date is an amount equal to the product of (a) the Class D Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class E Target Investor Principal Amount with respect to each
Payment Date is an amount equal to the product of (a) the Class E Percentage and
(b) the Discounted Present Value of the Performing Leases as of the applicable
Determination Date.
The "Class Floors" means the Class B Floor, the Class C Floor, the
Class D Floor or the Class E Floor.
The "Class Target Investor Principal Amounts" means the Class A Target
Investor Principal Amount or the Class B Target Investor Principal Amounts or
the Class C Target Investor Principal Amount or the Class D Target Investor
Principal Amount or the Class E Target Investor Principal Amounts, respectively.
The "Class A Percentage" will be equal approximately to _____%. The
"Class B Percentage" will be equal approximately to _____%. The "Class C
Percentage" will be equal approximately to _____%. The "Class D Percentage" will
be equal approximately to _____%. The "Class E Percentage" will be equal
approximately to _____%.
The "Class B Floor" with respect to each Payment Date means (a) _____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to that Payment Date, minus (c)
the sum of the Outstanding Principal Amount of the Class C Notes, the
Outstanding Principal Amount of the Class D Notes, the Outstanding Principal
Amount of the Class E Notes, and the Overcollateralization Balance as of the
immediately preceding Payment Date after giving effect to all principal payments
made on that day, minus (d) the amount on deposit in the Reserve Account after
giving effect to withdrawals to be made on that Payment Date.
The "Class C Floor" with respect to each Payment Date means (a) _____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to that Payment Date, minus (c)
the sum of the Outstanding Principal Amount of the Class D Notes, the
Outstanding Principal Amount of the Class E Notes, and the Overcollateralization
Balance as of the immediately preceding Payment Date after giving effect to all
principal payments made on that day, minus (d) the amount on deposit in the
Reserve Account after giving effect to withdrawals to be made on that Payment
Date; provided, however, that if the Outstanding Principal Amount of the Class B
Notes is less than or equal to the Class B Floor on that Payment Date, the Class
C Floor will equal the Outstanding Principal Amount of the Class C Notes
utilized in the calculation of the Class B Floor for that Payment Date.
The "Class D Floor" with respect to each Payment Date means (a) ____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to the Payment Date, minus (c)
the sum of the Outstanding Principal Amount of the Class E Notes, and the
Overcollateralization Balance as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, minus (d) the amount
on deposit in the Reserve Account after giving effect to withdrawals to be made
on that Payment Date; provided, however, that if the Outstanding Principal
Amount of the Class C Notes is less than or equal to the Class C Floor on that
Payment Date, the Class D Floor will equal the Outstanding Principal Amount of
the Class D Notes utilized in the calculation of the Class C Floor for that
Payment Date.
The "Class E Floor" with respect to each Payment Date means (a) _____%
of the initial Discounted Present Value of the Leases as of the Cut-Off Date,
plus (b) the Cumulative Loss Amount with respect to that Payment Date, minus (c)
the Overcollateralization Balance as of the immediately preceding Payment Date
after giving effect to all principal payments made on that day, minus (d) the
amount on deposit in the Reserve Account after giving effect to withdrawals to
be made on that Payment Date; provided, however, that if the Outstanding
Principal Amount of the Class D Notes is less than or equal to the Class D Floor
on that Payment Date, the Class E Floor will equal the Outstanding Principal
Amount of the Class E Notes utilized in the calculation of the Class D Floor for
that Payment Date.
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The "Overcollateralization Balance" with respect to each Payment Date
is an amount equal to the excess, if any, of (a) the Discounted Present Value of
Performing Leases as of the applicable Determination Date over (b) the
Outstanding Principal Amount of the Notes as of that Payment Date after giving
effect to all principal payments made on that day.
The "Cumulative Loss Amount" with respect to each Payment Date is an
amount equal to the excess, if any, of (a) the total of (i) the Outstanding
Principal Amount of the Notes as of the immediately preceding Payment Date after
giving effect to all principal payments made on that day, plus (ii) the
Overcollateralization Balance as of the immediately preceding Payment Date,
minus (iii) the lesser of (A) the Discounted Present Value of the Performing
Leases as of the Determination Date applicable to the immediately preceding
Payment Date minus the Discounted Present Value of the Performing Leases as of
the applicable Determination Date and (B) Available Funds remaining after the
payment of amounts owing the Servicer and in relation to interest on the Notes
on that Payment Date, over (b) the Discounted Present Value of the Performing
Leases as of the applicable Determination Date.
The "Servicing Fee" with respect to each Payment Date is an amount
equal to one-twelfth of 0.75% times the Discounted Present Value of the
Performing Leases, as of the prior Payment Date.
COLLECTION ACCOUNT. The Trustee will establish and maintain an
Eligible Account (the "Collection Account") into which the Servicer will deposit
all Lease Payments, Casualty Payments, Termination Payments, proceeds from
repurchases by Copelco Capital of Leases as a result of breaches of
representations and warranties, and recoveries from Non-Performing Leases to the
extent Copelco Capital has not substituted a Substitute Lease for that
Non-Performing Lease (except to the extent required to reimburse unreimbursed
Servicer Advances) (each as defined below) on or for each Lease included in the
Series Pool within two Business Days of receipt thereof; provided that Residual
Realizations (as defined below) will not be deposited in the Collection Account.
All Lease Payments, Casualty Payments, Termination Payments and other payments
relating to a Lease received and so deposited in the Collection Account shall
constitute property of the Issuer, securing payments on the applicable Notes
(Section 3.02(a)).
An "Eligible Account" means either (a) an account maintained with a
depository institution or trust company acceptable to each of the Rating
Agencies, or (b) a trust account or similar account maintained with a federal or
state chartered depository institution, which may be an account maintained with
the Trustee.
A "Casualty Payment" is any payment in accordance with a Lease on
account of the loss, theft, condemnation, governmental taking, destruction, or
damage beyond repair (each, a "Casualty") of any item of Equipment subject
thereto which results, in accordance with the terms of the Lease, in a reduction
in the number or amount of any future Lease Payments due thereunder or in the
termination of the Lessee's obligation to make future Lease Payments thereunder.
A "Lease Payment" is each periodic installment of rent payable by a
Lessee under a Lease. Casualty Payments, Termination Payments, prepayments of
rent required in accordance with the terms of a Lease at or before the
commencement of the Lease, payments becoming due before the applicable Cut-Off
Date and supplemental or additional payments required by the terms of a Lease
with respect to taxes, insurance, maintenance (including, without limitation any
Maintenance Charges), or other specific charges (including, without limitation,
any Excess Copy Charges and Fee Per Scan Charges), shall not be Lease Payments
hereunder.
A "Termination Payment" is a payment payable by a Lessee under a Lease
upon the early termination of the Lease (but not on account of a casualty or a
Lease default) which may be agreed upon by the Servicer, acting in the name of
the Issuer, and the Lessee.
The Servicer shall deposit within two Business Days of receipt the
following funds, as received, into the Collection Account (Section 3.03(a)),
including any funds deposited into the Collection Account from the Reserve
Account, ("Available Funds"):
(a) Lease Payments due during the prior Due Period (net of any Excess
Copy Charges, Maintenance Charges and Fee Per Scan Charges);
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(b) recoveries from Non-Performing Leases to the extent Copelco
Capital has not substituted Substitute Leases for those
Non-Performing Leases (except to the extent required to reimburse
unreimbursed Servicer Advances);
(c) late charges received on delinquent Lease payments not advanced
by the Servicer;
(d) proceeds from repurchases by Copelco Capital of Leases as a
result of breaches of representations and warranties to the
extent Copelco Capital has not substituted Substitute Leases for
those Leases other than, with respect to a Warranty Lease, the
Residual Warranty Payments. "Residual Warranty Payments" means
the excess of (a) the repurchase price associated with the
Warranty Lease over (b) the Discounted Present Value of the
remaining Lease Payments associated with the Warranty Lease as of
the beginning of the Due Period relating to that date of
determination (plus any amounts previously due and unpaid);
(e) proceeds from investment of funds in the Collection Account and
the Reserve Account, if any;
(f) Casualty Payments other than residual casualty payments
("Residual Casualty Payments") which are, at any date of
determination with respect to a Lease, the excess of (a) the
Casualty Payment associated with the Lease over (b) the
Discounted Present Value of the remaining Lease Payments
associated with the Lease as of the beginning of the Due Period
relating to that date of determination (plus any amounts
previously unpaid);
(g) Servicer Advances (as defined below);
(h) Termination Payments to the extent the Issuer does not reinvest
those Termination Payments in Additional Leases (as defined
below) other than Residual Prepayments (as defined below); and
(i) proceeds received once the Issuer exercises its right to redeem
the Notes;
(j) to the extent there occurs an Available Funds Shortfall (as
defined below), funds, if any, on deposit in the Reserve Account
to the extent of the Available Funds Shortfall.
Available Funds will not include (a) cash flows realized from the sale
or release of the Equipment following the expiration dates of the Leases, other
than Equipment subject to Non-Performing Leases, (b) Residual Warranty Payments,
(c) Residual Casualty Payments and (d) Residual Prepayments (as defined below)
("Residual Realizations").
"Residual Prepayments" means, at any date of determination with
respect to a terminated Lease, the excess of (a) the payment associated with the
terminated Lease over (b) the Discounted Present Value of the remaining Lease
Payments of the terminated Lease as of the beginning of the Due Period relating
to that date of determination (plus any amounts previously due and unpaid).
RESERVE ACCOUNT. The Trustee will establish and maintain an Eligible
Account (the "Reserve Account"). On the Issuance Date, the Issuer will make an
initial deposit in an amount equal to [___%] of the Discounted Present Value of
the Leases as of the Cut-Off Date into the Reserve Account. In the event that
Available Funds (exclusive of amounts on deposit in the Reserve Account) are
insufficient to pay the amounts owing the Servicer, Interest Payments on the
Notes and the Class A Principal Payment, the Class B Principal Payment, the
Class C Principal Payment, the Class D Principal Payment and the Class E
Principal Payment (those payments, the "Required Payments" and that shortfall,
an "Available Funds Shortfall"), the Trustee will withdraw from the Reserve
Account an amount equal to the lesser of the funds on deposit in the Reserve
Account (the "Available Reserve Amount") and that deficiency. In addition, on
each Payment Date, Available Funds remaining after the payment of the Required
Payments will be deposited into the Reserve Account to the extent that the
Required Reserve Amount exceeds the Available Reserve Amount. The "Required
Reserve Amount" equals the lesser of (a) ____% of the Discounted Present Value
of the Leases as of the Cut-Off Date and (b) the then unpaid
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principal amounts (the "Outstanding Principal Amount") of the Notes. Any amounts
on deposit in the Reserve Account in excess of the Required Reserve Amount will
be released to the Issuer (Section 3.05(c)).
DISTRIBUTIONS ON NOTES. Payments on the Notes will commence on
_________. On each Determination Date, the Servicer will determine the Available
Funds and the Required Payments.
For each Payment Date, the interest due with respect to the Notes will
be the interest that has accrued on those Notes since the last Payment Date (or,
in the case of the first Payment Date, since the Issuance Date), at the
applicable Interest Rates applied to the Outstanding Principal Amount of each
Class, after giving effect to payments of principal to Noteholders on the
preceding Payment Date (or, in the case of the first Payment Date, the Issuance
Date), plus all previously accrued and unpaid interest on the Notes (Section
2.01(c)). Funds in the Collection Account, together with reinvestment earnings
thereon, will be used by the Trustee to make required payments of principal and
interest on the applicable Notes (Section 3.03(b)).
For each Payment Date, Principal Payments due with respect to the
Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the
Class E Notes will be the Class A Principal Payment, the Class B Principal
Payment, the Class C Principal Payment, the Class D Principal Payment and the
Class E Principal Payment, respectively. In addition, to the extent that the
Class B Floor exceeds the Class B Target Investor Principal Amount, the Class C
Floor exceeds the Class C Target Investor Principal Amount, the Class D Floor
exceeds the Class D Target Investor Principal Amount and/or the Class E Floor
exceeds the Class E Target Investor Principal Amount, Additional Principal shall
be distributed, sequentially, as an additional principal payment on the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the
Class E Notes until the Outstanding Principal Amount of each Class has been
reduced to zero (Section 3.03(b)).
Unless an Event of Default (as defined below) and acceleration of the
Notes has occurred, on or before each Payment Date, the Servicer will instruct
the Trustee to apply or cause to be applied the Available Funds to make the
following payments in the following priority (Section 3.03(b)):
(a) to pay the Servicing Fee;
(b) to reimburse unreimbursed Servicer Advances in relation to a
prior Payment Date;
(c) to make Interest Payments, owing on the Class A Notes
concurrently to the Class A-1 Noteholders, Class A-2 Noteholders,
Class A-3 Noteholders, Class A-4 Noteholders and Class A-5
Noteholders;
(d) to make Interest Payments on the Class B Notes;
(e) to make Interest Payments on the Class C Notes;
(f) to make Interest Payments on the Class D Notes;
(g) to make Interest Payments on the Class E Notes;
(h) to make the Class A Principal Payment to (i) the Class A-1
Noteholders only, until the Outstanding Principal Amount on the
Class A-1 Notes is reduced to zero, then (ii) to the Class A-2
Noteholders only, until the Outstanding Principal Amount on the
Class A-2 Notes is reduced to zero, then (iii) to the Class A-3
Noteholders only, until the Outstanding Principal Amount on the
Class A-3 Notes is reduced to zero, then (iv) to the Class A-4
Noteholders only, until the Outstanding Principal Amount on the
Class A-4 Notes is reduced to zero, and finally (v) to the Class
A-5 Noteholders only, until the Outstanding Principal Amount on
the Class A-5 Notes is reduced to zero;
(i) to make the Class B Principal Payment to the Class B Noteholders;
(j) to make the Class C Principal Payment to the Class C Noteholders;
25
(k) to make the Class D Principal Payment to the Class D Noteholders;
(l) to make the Class E Principal Payment to the Class E Noteholders;
(m) to pay the Additional Principal, if any, as an additional
reduction of principal to the Class A Noteholders, as provided in
Clause (h) above, until the Outstanding Principal Amount on all
of the Class A Notes has been reduced to zero, then to Class B
Noteholders until the Outstanding Principal Amount on the Class B
Notes has been reduced to zero, then to the Class C Noteholders
until the Outstanding Principal Amount on the Class C Notes has
been reduced to zero, then to the Class D Noteholders until the
Outstanding Principal Amount on the Class D Notes has been
reduced to zero, and finally to the Class E Noteholders, until
the Outstanding Principal Amounts on the Class E Notes has been
reduced to zero;
(n) to make a deposit to the Reserve Account in an amount equal to
the excess of the Required Reserve Amount over the Available
Reserve Amount; and
(o) to the Issuer, the balance, if any.
ADVANCES BY THE SERVICER. Prior to any Payment Date, the Servicer may,
but will not be required to, advance (each, a "Servicer Advance") to the Trustee
an amount sufficient to cover delinquencies on some or all Leases with respect
to prior Due Periods. The Servicer will be reimbursed for the Servicer Advances
from Available Funds on the following Payment Date. See "Distribution on Notes"
above.
EVENTS OF DEFAULT AND NOTICE THEREOF. The following events will be
defined in the Indenture as "Events of Default" with respect to the Notes:
(a) default in making Interest Payments when they become due and
payable; or
(b) default in making Principal Payments at Stated Maturity; or
(c) insolvency or bankruptcy events relating to the Issuer. (Section
6.01)
The Indenture will provide that the Trustee shall give the Noteholders
notice of all uncured defaults known to it (the term "default" to include the
events specified above without grace periods) (Sections 6.03 and 7.02).
If an Event of Default occurs, the unpaid principal amount of the
applicable Notes shall automatically become due and payable together with all
accrued and unpaid interest thereon. The Trustee may, however, if the Event of
Default involves other than non-payment of principal or interest on the Notes,
not sell the applicable Leases and Equipment unless the sale is for an amount
greater than or equal to the Outstanding Principal Amount of the Notes unless
directed to do so by the holders of 66-2/3% of the then Outstanding Principal
Amount of the Notes (Section 6.03).
Subsequent to an Event of Default and following any acceleration of
the Notes in accordance with the Indenture, any moneys that may then be held or
thereafter received by the Trustee shall be applied in the following order of
priority, at the date or dates fixed by the Trustee and, in case of the
distribution of the entire amount due on account of principal or interest, upon
presentation of the Notes and surrender thereof:
FIRST to the payment of all costs and expenses of collection
incurred by the Trustee and the Noteholders (including the reasonable
fees and expenses of any counsel to the Trustee and the Noteholders);
SECOND if the person then acting as Servicer under the Assignment
and Servicing Agreement is not Copelco Capital or an affiliate of
Copelco Capital, to the payment of all Servicing Fees then due to that
person.
26
THIRD first, to the payment of all accrued and unpaid interest on
the Outstanding Principal Amount of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes and Class A-5 Notes pro rata
to the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of that installment to the date of payment
thereof at the rate per annum equal to the Class A-1 Interest Rate,
Class A-2 Interest Rate, Class A-3 Interest Rate, Class A-4 Interest
Rate and Class A-5 Interest Rate respectively; second, to the payment
of all accrued and unpaid interest on the Outstanding Principal Amount
of the Class B Notes to the date of payment thereof, including (to the
extent permitted by applicable law) interest on any overdue
installment of interest and principal from the maturity of that
installment to the date of payment thereof at the rate per annum equal
to the Class B Interest Rate; third, to the payment of all accrued and
unpaid interest on the Outstanding Principal Amount of the Class C
Notes to the date of payment thereof, including (to the extent
permitted by applicable law) interest on any overdue installment of
interest and principal from the maturity of that installment to the
date of payment thereof at the rate per annum equal to the Class C
Interest Rate; fourth, to the payment of all accrued and unpaid
interest on the Outstanding Principal Amount of the Class D Notes to
the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of that installment to the date of payment
thereof at the rate per annum equal to the Class D Interest Rate;
fifth, to the payment of all accrued and unpaid interest on the
Outstanding Principal Amount of the Class E Notes to the date of
payment thereof, including (to the extent permitted by applicable law)
interest on any overdue installment of interest and principal from the
maturity of that installment to the date of payment thereof at the
rate per annum equal to the Class E Interest Rate; sixth, to the
payment of the Outstanding Principal Amount of the Class A-1 Notes;
seventh, to the payment of the Outstanding Principal Amount of the
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class A-5 Notes
pro rata to the date of payment thereof; eighth, to the payment of the
Outstanding Principal Amount of the Class B Notes to the date of
payment thereof; ninth, to the payment of the Outstanding Principal
Amount of the Class C Notes; tenth, to the payment of the Outstanding
Principal Amount of the Class D Notes; eleventh, to the payment of the
Outstanding Principal Amount of the Class E Notes; provided, that the
Noteholders may allocate that payments for interest, principal and
premium at their own discretion, except that allocation shall not
affect the allocation of those amounts or future payments received by
any other Noteholder;
FOURTH to the payment of amounts due under the $_______ __% Class
R-1 Lease-Residual Backed Notes (the "Class R-1 Notes") and the
$________ __% Class R-2 Lease-Residual Backed Notes (the "Class R-2
Notes");
FIFTH to the payment of amounts then due the Trustee under the
Indenture;
SIXTH if the person then acting as servicer is Copelco Capital or
an affiliate of Copelco Capital, to the payment of all Servicer's Fees
then due to that Person; and
SEVENTH to the payment of the remainder, if any, to the Issuer or
any other person legally entitled thereto (Section 6.06).
The Issuer will be required to furnish annually to the Trustee, a
statement of officers of the Issuer to the effect that to the best of their
knowledge the Issuer is not in default in the performance and observance of the
terms of the Indenture or, if the Issuer is in default, specifying that default
(Section 8.09).
The Indenture will provide that the holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding will have the right to waive
agreed upon defaults and, subject to agreed upon limitations, to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust power conferred on the Trustee (Sections
6.12). The Indenture will provide that in case an Event of Default shall occur
(which shall not have been cured or waived), the Trustee will be required to
exercise its rights and powers under that Indenture and to use the degree of
care and skill in their exercise that a prudent man would exercise or use in the
conduct of his own affairs (Section 7.01(b)). Subject to those provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under that Indenture at the request of any of the Noteholders unless they shall
have offered to the Trustee reasonable security or indemnity (Section 6.12).
Upon request of a Noteholder, the Trustee will provide information as to the
outstanding principal amount of each Class of Notes.
27
MODIFICATION OF THE INDENTURE. With some exceptions, under the
Indenture, the rights and obligations of the Issuer and the rights of the
Noteholders may be modified by the Issuer with the consent of the holders of not
less than 66-2/3% in aggregate principal amount of the Notes then outstanding
under the Indenture; but no modification may be made if it would result in the
reduction or withdrawal of the then current ratings of the outstanding Notes and
no modification may be made without the consent of the holder of each
outstanding note affected thereby if it would (a) change the fixed maturity of
any Note, or the principal amount or interest amount payable thereof, or change
the priority of payment thereof or reduce the interest rate or the principal
thereon or change the place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the right to institute
the suit for the enforcement of that payment on or after the maturity thereof;
or (b) reduce the above-stated percentage of Notes, without the consent of the
holders of all Notes then outstanding under that Indenture or (c) modify any of
Section 9.02 of the Indenture except to increase any percentage or fraction set
out in the Indenture or to provide that other provisions of the Indenture cannot
be modified or waived without the consent of the holder of each outstanding note
affected thereby; or (d) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" in the Indenture; or (e) permit the
creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any part of the Pledged Assets or, except as provided
in the Indenture, terminate the lien of the Indenture on any property at any
time subject to the Indenture or deprive any Noteholder of the Security afforded
by the lien of the Indenture. (Section 9.02).
SERVICER EVENTS OF DEFAULT. The following events and conditions shall
be defined in the Assignment and Servicing Agreement as "Servicer Events of
Default":
(a) failure on the part of the Servicer to remit to the Trustee
within three Business Days following the receipt thereof any
monies received by the Servicer required to be remitted to the
Trustee under the Assignment and Servicing Agreement;
(b) so long as Copelco Capital is the Servicer, failure on the part
of Copelco Capital to pay to the Trustee on the date when due,
any payment required to be made by Copelco Capital in accordance
with the Assignment and Servicing Agreement;
(c) default on the part of either the Servicer or (so long as Copelco
Capital is the Servicer) Copelco Capital in its observance or
performance in any material respect of covenants or agreements in
the Assignment and Servicing Agreement which failure continues
unremedied for a period of 30 days after the earlier of (i) the
date it first becomes known to any officer of Copelco Capital or
the Servicer, as the case may be, and (ii) the date on which
written notice thereof requiring the same to be remedied shall
have been given to the Servicer or Copelco Capital, as the case
may be, by the Trustee, or to the Servicer or Copelco Capital, as
the case may be, and the Trustee by any holder of the Notes;
(d) if any representation or warranty of Copelco Capital made in the
Assignment and Servicing Agreement shall prove to be incorrect in
any material respect as of the time made; provided, however, that
the breach of any representation or warranty made by Copelco
Capital in the Assignment and Servicing Agreement will be deemed
to be "material" only if it affects the Noteholders, the
enforceability of the Indenture or of the Notes; and provided,
further, that a material breach of any representation or warranty
made by Copelco Capital in the Assignment and Servicing Agreement
with respect to any of the Leases or the Equipment subject
thereto will not constitute a Servicer Event of Default if
Copelco Capital repurchases that lease and Equipment in
accordance with the Assignment and Servicing Agreement to the
extent provided within that agreement;
(e) insolvency or bankruptcy events relating to the Servicer;
(f) the failure of the Servicer to make one or more payments due with
respect to aggregate recourse debt or other obligations exceeding
$5,000,000, or the occurrence of any event or the existence of
any condition, the effect of which event or condition is to cause
(or permit one or more persons to cause) more than $5,000,000 of
aggregate recourse debt or other obligations of the Servicer to
become due before its (or their) stated maturity or before its
(or
28
their) regularly scheduled dates of payment so long as the
failure, event or condition shall be continuing and shall not
have been waived by the person or persons entitled to
performance;
(g) a final judgment or judgments (or decrees or orders) for the
payment of money aggregating in excess of $5,000,000 and any one
of those judgments (or decrees or orders) has remained
unsatisfied and in effect for any period of 60 consecutive days
without a stay of execution.
SERVICER TERMINATION. So long as a Servicer Event of Default under the
Assignment and Servicing Agreement is continuing, the Trustee shall, upon the
instructions of the holders of 66 2/3% in principal amount of the Notes, by
notice in writing to the Servicer terminate all of the rights and obligations of
the Servicer (but not Copelco Capital's obligations which shall survive that
termination) under the Assignment and Servicing Agreement (Section 5.01). Upon
the receipt by the Servicer of the written notice, all authority and power of
the Servicer under the Assignment and Servicing Agreement to take any action
with respect to any Lease or Equipment will cease and the same will pass to and
be vested in the Trustee in accordance with and under the Assignment and
Servicing Agreement and the Indenture.
REDEMPTION. The Issuer may, at its option, redeem the Notes, as a
whole, at their principal amount, without premium, together with interest
accrued to the date fixed for redemption if on any payment date the Discounted
Present Value of the Leases is less than or equal to 10% of the Discounted
Present Value of the Leases in the applicable Series Pool as of the original
Cut-Off Date. The Issuer will give notice of redemption to each Noteholder and
the Trustee at least 30 days before the Payment Date fixed for prepayment. Upon
deposit of funds necessary to effect redemption, the Trustee shall pay the
remaining unpaid principal amount on the Notes and all accrued and unpaid
interest as of the Payment Date fixed for redemption.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate amount of
each interest payment on the Notes and the yield to maturity of the Notes are
directly related to the rate of payments on the underlying Leases. The payments
on those Leases may be in the form of scheduled payments, prepayments or
liquidations due to default, casualty and other events, which cannot be
specified at present. Those payments may result in distributions to Noteholders
of amounts which would otherwise have been distributed over the remaining term
of the Leases. In general, the rate of those payments may be influenced by a
number of other factors, including general economic conditions. The rate of
Principal Payments with respect to any Class may also be affected by any
repurchase of the underlying Leases by Copelco Capital in accordance with the
Assignment and Servicing Agreement. In that event, the repurchase price will
decrease the Discounted Present Value of the Performing Leases, causing the
corresponding weighted average life of the Notes to decrease. See "Risk
Factors--Prepayments."
In the event a Lease becomes a Non-Performing Lease, a Lease subject
to repurchase as a result of a breach of representation and warranty (a
"Warranty Lease") or a Lease following a modification or adjustment to the terms
of that Lease (an "Adjusted Lease"), Copelco Capital will have the option to
substitute for the terminated Lease another Lease of similar characteristics (a
"Substitute Lease") in an aggregate amount not to exceed 10% of the Discounted
Present Value of the Leases as of the Cut-Off Date with respect to
Non-Performing Leases and in an aggregate amount not to exceed 10% of the
Discounted Present Value of the Leases as of the Cut-Off Date with respect to
Adjusted Leases and Warranty Leases. In addition, in the event of an early
termination by a Lessee ("Early Lease Termination") which has been prepaid in
full, Copelco Capital will have the option to transfer an additional Lease of
similar characteristics (an "Additional Lease"). The Substitute Leases and
Additional Leases will have a Discounted Present Value of the Leases equal to or
greater than that of the Leases being modified and replaced and the monthly
payments on the Substitute Leases or Additional Leases will be at least equal to
those of the terminated Leases through the term of those terminated Leases. In
the event that an Early Lease Termination is allowed by Copelco Capital and a
Substitute Lease is not provided, the amount prepaid will be equal to at least
the Discounted Present Value of the terminated Lease, plus any delinquent
payments.
The effective yield to holders of the Notes will depend upon, among
other things, the amount of and rate at which principal is paid to those
Noteholders. The after-tax yield to Noteholders may be affected by lags between
the time interest income accrues to Noteholders and the time the applicable
interest income is received by the Noteholders.
29
The following chart sets forth the percentage of the Initial
Statistical Principal Amount (as defined below) of the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes, Class B Notes,
Class C Notes, Class D Notes and Class E Notes which would be outstanding on the
Payment Dates presented below assuming a Conditional Prepayment Rate ("CPR") of
0% and 12%, respectively, and were calculated using the Statistical Discount
Rate. The "Initial Statistical Principal Amount" of the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes, Class B Notes,
Class C Notes, Class D Notes and Class E Notes is $______________,
$______________, $______________, $______________, $______________,
$______________, $______________, $______________ and $______________,
respectively. The "Statistical Class Percentage" for the Class A Notes, Class B
Notes, Class C Notes, Class D Notes and Class E Notes is equal to ____%, ____%,
____%, ____% and ____%, respectively. This information is hypothetical and is
presented for illustrative purposes only. The CPR assumes that a fraction of the
outstanding Series Pool is prepaid on each Payment Date, which implies that each
Lease in the Series Pool is equally likely to prepay. This fraction, expressed
as a percentage, is annualized to arrive at the CPR for the Series Pool. The CPR
measures prepayments based on the outstanding Statistical Discounted Present
Value of the Leases, after the payment of all scheduled payments on the Leases
during that Due Period. The CPR further assumes that all Leases are the same
size and amortize at the same rate and that each Lease will be either paid as
scheduled or prepaid in full. The amounts described below are based upon the
timely receipt of scheduled monthly Lease payments as of the Cut-Off Date,
assume that the Issuer exercises its option to redeem the Notes and assume the
Issuance Date is ___________ and the first Payment Date is _________. The
following charts were created using the Statistical Class Percentage associated
with the Statistical Initial Principal Amounts of the respective class.
30
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET FORTH BELOW
=====================================================================================================================
0% CPR
-------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS B CLASS C CLASS D CLASS E
------------------ --------- --------- --------- --------- --------- ------- ------- ------- -------
ISSUANCE DATE
-------------
% % % % % % % % %
July 18, 1999
August 18, 1999
September 18, 1999
October 18, 1999
November 18, 1999
December 18, 1999
January 18, 2000
February 18, 2000
March 18, 2000
April 18, 2000
May 18, 2000
June 18, 2000
July 18, 2000
August 18, 2000
September 18, 2000
October 18, 2000
November 18, 2000
December 18, 2000
January 18, 2001
February 18, 2001
March 18, 2001
April 18, 2001
May 18, 2001
June 18, 2001
July 18, 2001
August 18, 2001
September 18, 2001
October 18, 2001
November 18, 2001
December 18, 2001
January 18, 2002
February 18, 2002
March 18, 2002
April 18, 2002
May 18, 2002
June 18, 2002
July 18, 2002
August 18, 2002
September 18, 2002
October 18, 2002
November 18, 2002
December 18, 2002
January 18, 2003
February 18, 2003
March 18, 2003
April 18, 2003
May 18, 2003
June 18, 2003
July 18, 2003
WEIGHTED AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class A-5 Note, Class B Note, Class C Note, Class D
Note, and Class E Note is determined by (a) multiplying the amount of cash
distributions in reduction of the Outstanding Principal Amount of the
respective Offered Note by the number of years from the Issuance Date to
the Payment Date, (b) adding the results, and (c) dividing the sum by the
respective Initial Principal Amount.
31
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET FORTH BELOW
=====================================================================================================================
0% CPR
-------------------------------------------------------------------------------------------------
PAYMENT DATE CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS B CLASS C CLASS D CLASS E
------------------ --------- --------- --------- --------- --------- ------- ------- ------- -------
July 18, 1999
August 18, 1999
September 18, 1999
October 18, 1999
November 18, 1999
December 18, 1999
January 18, 2000
February 18, 2000
March 18, 2000
April 18, 2000
May 18, 2000
June 18, 2000
July 18, 2000
August 18, 2000
September 18, 2000
October 18, 2000
November 18, 2000
December 18, 2000
January 18, 2001
February 18, 2001
March 18, 2001
April 18, 2001
May 18, 2001
June 18, 2001
July 18, 2001
August 18, 2001
September 18, 2001
October 18, 2001
November 18, 2001
December 18, 2001
January 18, 2002
February 18, 2002
March 18, 2002
April 18, 2002
May 18, 2002
June 18, 2002
July 18, 2002
August 18, 2002
September 18, 2002
October 18, 2002
November 18, 2002
December 18, 2002
January 18, 2003
February 18, 2003
March 18, 2003
April 18, 2003
May 18, 2003
June 18, 2003
July 18, 2003
WEIGHTED AVERAGE
LIFE(1)(YEARS)
To Call:
To Maturity:
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class A-5 Note, Class B Note, Class C Note, Class D
Note, and Class E Note is determined by (a) multiplying the amount of cash
distributions in reduction of the Outstanding Principal Amount of the
respective Offered Note by the number of years from the Issuance Date to
the Payment Date, (b) adding the results, and (c) dividing the sum by the
respective Initial Principal Amount.
32
SECURITY FOR THE NOTES
Repayment of the Notes will be secured by (a) a first priority
security interest in the underlying Leases perfected by filing UCC financing
statements against the Issuer and Copelco Capital, (b) a security interest in
the applicable Equipment owned by the Issuer and an assignment of the Issuer's
security interest in the Equipment subject to Leases which contain a nominal
purchase option upon expiration or other terms which may be deemed effectively
to vest ownership of the Equipment in the Lessee ("Nominal Buy-Out Leases"),
which security interest was originally perfected by Copelco Capital (for
Equipment with an original cost in excess of $25,000 which assignment will be
recorded in the manner described below) and (c) all funds in the Collection
Account and the Reserve Account.
THE INDENTURE TRUSTEE
Manufacturers and Traders Trust Company will be the Trustee under the
Indenture. Copelco Capital, as Transferor or Servicer, and its affiliates may
from time to time enter into normal banking and Trustee relationships with the
Trustee and its affiliates. The Trustee, the Servicer and any of their
respective affiliates may hold Notes in their own names. In addition, for
purposes of meeting the legal requirements of local jurisdictions, the Trustee
shall have the power to appoint a co-Trustee or a separate Trustee under the
Indenture. In the event of that appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Indenture will be
conferred or imposed upon the Trustee and the separate Trustee or co-Trustee
jointly, or in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform acts, singly upon the separate Trustee or co-Trustee, who
shall exercise and perform those rights, powers, duties and obligations solely
at the direction of the Trustee.
The Trustee may resign at any time, in which event the Issuer will be
obligated to appoint a successor Trustee. The Issuer may also remove each
Trustee if the Trustee ceases to be eligible to continue as the Trustee under
the Indenture, fails to perform in any material respect its obligations under
the Indenture, or becomes insolvent. In those circumstances, the Issuer will be
obligated to appoint a successor Trustee. Any resignation or removal of a
Trustee and appointment of a successor Trustee will not become effective until
acceptance of the appointment by the successor Trustee.
LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
GENERAL. The Leases are triple-net leases, requiring the Lessees to
pay all taxes, maintenance and insurance associated with the Equipment, and are
primarily non-cancelable by the Lessees.
The Leases are "hell or high water" leases, under which the
obligations of the Lessee is absolute and unconditional, regardless of any
defense, setoff or abatement which the Lessee may have against Copelco Capital,
as Transferor or Servicer, the Issuer, or any other person or entity whatsoever.
Defaults under the Leases are generally the result of failure to pay
amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the Lessee under a Lease. The remedies of the lessor (and the
Issuer as assignee) following a notice and cure period are generally to seek to
enforce the performance by the Lessee of the terms and covenants of the Lease
(including the Lessee's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the Lessee under the Lease.
Although the Leases permit the lessor to repossess and dispose of the applicable
Equipment in the event of a Lease default, and to credit those proceeds against
the Lessee's liabilities thereunder, those remedies may be limited where the
Lessee thereunder is subject to bankruptcy, or other insolvency proceedings.
UCC AND BANKRUPTCY CONSIDERATIONS. In accordance with the Assignment
and Servicing Agreement, Copelco Capital will make a capital contribution to the
Issuer of the Leases and Equipment owned by Copelco Capital and subject to the
Leases, and assign its security interests in the Equipment subject to Nominal
33
Buy-Out Leases. Copelco Capital will warrant that each of the contribution of
the Leases from Copelco Capital to the Issuer is an absolute assignment, that
the contributions of its rights in the Equipment is a valid transfer of Copelco
Capital's title to the Equipment and that Copelco Capital is either the owner of
the Equipment or has a valid perfected first priority security interest in the
Equipment (for Leases with leased Equipment having an original equipment cost in
excess of $25,000), including Equipment subject to Nominal Buy-Out Leases, and
accordingly, Copelco Capital has filed UCC financing statements in its favor
against Lessees in relation to all Equipment in the Series Pool with an original
Equipment cost in excess of $25,000. No action will be taken to perfect the
interest of Copelco Capital in any Equipment in the Series Pool with an original
Equipment cost of less than $25,000. In addition, UCC financing statements
identifying security interests in the Equipment as transferred to, or obtained
by, the Issuer or the Trustee and UCC financing statements identifying equipment
owned by Copelco Capital, transferred to the Issuer and pledged to the Trustee
will be filed in favor of the Issuer or the Trustee in the central filing
location for any given state. In the event of the repossession and resale of
Equipment subject to a superior lien, the senior lienholder would be entitled to
be paid the full amount of the indebtedness owed to it out of the sale proceeds
before the proceeds could be applied to the payment of claims by the Servicer on
behalf of the Issuer. Statutory provisions, including federal and state
bankruptcy and insolvency laws, may limit the ability of the Servicer to
repossess and resell collateral or obtain a deficiency judgment in the event of
a Lessee default. In the event of the bankruptcy or reorganization of a Lessee,
or Copelco Capital, as Transferor or Servicer, various provisions of the
Bankruptcy Code of 1978, 11 U.S.C xx.xx. 101-1330 (the "Bankruptcy Code"), and
applicable laws may interfere with, delay or eliminate the ability of Copelco
Capital or the Issuer to enforce its rights under the Leases.
In the case of operating leases, the Bankruptcy Code grants to the
bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of an operating
lease or contract constitutes a breach of that lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described by
this Prospectus Supplement. Upon the bankruptcy of a Lessee, if the bankruptcy
trustee or debtor-in-possession elected to reject a lease, the flow of scheduled
payments to Noteholders would cease. In the event that, as a result of the
bankruptcy of a Lessee, the Servicer is prevented from collecting scheduled
payments with respect to Leases and those Leases become Non-Performing Leases,
no recourse would be available against Copelco Capital (except for
misrepresentation or breach of warranty) and the Noteholders could suffer a loss
with respect to the Notes. Similarly, upon the bankruptcy of the Issuer, if the
bankruptcy trustee or debtor-in-possession elected to reject a lease, the flow
of lease payments to the Issuer and the Noteholders would cease. As noted above,
however, the Issuer has been structured so that the filing of a bankruptcy
petition with respect to it is unlikely. See "The Issuer."
These UCC and bankruptcy provisions, in addition to the possible
decrease in value of a repossessed item of Equipment, may limit the amount
realized on the sale of Equipment to less than the amount due on the applicable
lease.
NON-PETITION. Pursuant to the Indenture, the Trustee and the holders
of the Offered Notes, and the holders of the Class E Notes with a stated
maturity date of ______, the holders of the Class R-1 Notes with a stated
maturity date of _________ and the Class R-2 Notes with a stated maturity date
of ______ (the "Class R-2 Notes," together with the Class E Notes and the Class
R-1 Notes, the "Private Notes") will agree not to institute, cooperate with or
encourage others to institute against the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
the Bankruptcy Code or any state bankruptcy or similar law in connection with
any obligations relating to the Offered Notes and the Private Notes or the
Indenture until the expiration of one year and one day (or if a preference
period of the applicable jurisdiction is longer, the applicable preference
period under that bankruptcy or similar law) from the date all of the Offered
Notes and the Private Notes are paid in full.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following paragraphs together with the description of
federal income tax consequences detailed in the Prospectus under the heading
"Material Federal Income Tax Consequences" present the material federal income
tax consequences to the original purchasers of the Notes of the purchase,
ownership and
34
disposition of the Notes. Tax Counsel's opinion does not purport to deal with
all federal income tax considerations applicable to all categories of investors.
The tax consequences to holders subject to special rules, including insurance
companies, tax exempt organizations, financial institutions or broker deals,
taxpayers subject to the alternative minimum tax, and holders that will hold the
Notes as other than capital assets, are not discussed below or in the
Prospectus. In particular, this discussion applies only to investors that
purchase Notes directly from the Issuer and hold the Notes as capital assets.
The discussion that follows, and the opinion set forth below of Xxxxx
Xxxxxxxxxx LLP, special tax counsel ("Tax Counsel") to the Issuer are based upon
provisions of the Internal Revenue Code of 1986, as amended (the "Code") and
treasury regulations promulgated thereunder as in effect on the date hereof and
on existing judicial and administrative interpretations thereof. These
authorities are subject to change and to differing interpretations, which could
apply retroactively. The opinion of Tax Counsel is not binding on the courts or
the Internal Revenue Service (the "IRS"). Potential investors are urged to
consult their own tax advisors in determining the federal, state, local and any
other tax consequences to them of the purchase, ownership and disposition of the
Notes.
The following discussion addresses lease-backed notes such as the
Notes that are intended to be treated for federal income tax purposes as
indebtedness secured by the underlying Leases. Tax counsel has prepared the
following discussion and is of the opinion that it is correct in all material
respects.
TAX CHARACTERIZATION OF THE ISSUER. Tax Counsel is of the opinion that
the Issuer will not be treated as an association (or a publicly traded
partnership) taxable as a corporation for federal income tax purposes.
TAX CHARACTERIZATION OF THE NOTES. In the opinion of Tax Counsel,
although no transaction closely comparable to that contemplated in this
Prospectus has been the subject of any treasury regulation, revenue ruling or
judicial decision, based on the application of existing law to the facts as set
forth in the applicable agreement, the Notes will be treated as indebtedness for
federal income tax purposes. Although it is the opinion of Tax Counsel that the
Notes are properly characterized as indebtedness for federal income tax
purposes, no assurance can be given that this debt characterization of the Notes
will prevail. The IRS could recharacterize the Notes under several alternative
theories. See "Material Federal Income Tax Consequences--Tax Characterization of
the Notes" in the Prospectus.
DISCOUNT AND PREMIUM. It is not anticipated that the Notes will be
issued with any original issue discount. See "Material Federal Income Tax
Consequences--Discount and Premium--Original Issue Discount" in the Prospectus.
In addition, a subsequent purchaser who buys a Note for less than its principal
amount may be subject to the "market discount" rules of the Code. See "Material
Federal Income Tax Consequences--Discount and Premium--Market Discount" in the
Prospectus. A subsequent purchaser who buys a Note for more than its principal
amount may be subject to the "market premium" rules of the Code. See "Material
Federal Income Tax Consequences--Discount and Premium--Premium" in the
Prospectus.
SALE OR EXCHANGE OF THE NOTES. If a Note is sold or exchanged, the
seller will recognize gain or loss equal to the difference between the amount
realized on the sale and its adjusted basis in the Note. See "Material Federal
Income Tax Consequences--Sale or Exchange" in the Prospectus.
OTHER MATTERS. For a discussion of backup withholding and taxation of
foreign investors in the Notes, see "Material Federal Income Tax
Consequences--Backup Withholding" and "--Foreign Investors" in the Prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements and restrictions on those pension,
profit-sharing and other employee benefits plans to which it applies and on
those persons who are fiduciaries with respect to those plans. In accordance
with ERISA's fiduciary standards, before purchasing the Offered Notes, a
fiduciary should determine whether an investment is permitted under the
documents and instruments governing the plan and is appropriate for the plan in
view of its overall investment policy and the composition of its portfolio.
35
Section 406 of ERISA and Section 4975 of the Code prohibit
transactions involving the assets of plans subject thereto (each, a "Benefit
Plan") and persons who are "parties in interest," within the meaning of ERISA,
or "disqualified persons," within the meaning of the Code. Transactions
involving the purchase, holding or transfer of the Offered Notes might be deemed
to constitute prohibited transactions under ERISA and the Code if assets of the
Issuer were deemed to be assets of a Benefit Plan. Under regulations issued by
the United States Department of Labor set out in 29 C.F.R. ss. 2510.3101 (the
"Plan Asset Regulations"), the assets of the Issuer would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquired an "equity interest" in the Issuer and none of the
exceptions contained in the Plan Asset Regulations is applicable. An equity
interest is defined under the Plan Asset Regulations as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. It is anticipated that the Offered
Notes should be treated as indebtedness without substantial equity features for
purposes of the Plan Asset Regulations. However, even if the Offered Notes are
treated as indebtedness for those purposes, the acquisition or holding of
Offered Notes by or on behalf of a Benefit Plan could be considered to give rise
to a prohibited transaction if the Issuer or any of its affiliates is or becomes
a party in interest or disqualified person with respect to the applicable
Benefit Plan. In this event, exemptions from the prohibited transaction rules
could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to acquire a Note. Included among these exemptions
are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments
by insurance company pooled separate accounts; PTCE 91-38 regarding investments
by bank collective investment funds; PTCE 84-14, regarding transactions effected
by "qualified professional asset managers;" PTCE 95-60, regarding investments by
insurance company general accounts; and PTCE 96-23 regarding transactions
effected by "in-house asset managers." Each investor using assets of a Benefit
Plan which acquires the Offered Notes, or to whom the Offered Notes are
transferred, will be deemed to have represented that the acquisition and
continued holding of the Offered Notes will be covered by one of the exemptions
listed above or another Department of Labor class exemption.
Insurance companies considering the purchase of the Offered Notes
should also consult their own counsel as to the application of the decision by
the United States Supreme Court in Xxxx Xxxxxxx Mutual Life Insurance Co. x.
Xxxxxx Trust and Savings Bank (510 U.S. 86). Under that decision, assets held in
an insurance company's general account may be deemed assets of ERISA plans under
certain circumstances.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements; however, governmental plans may be
subject to comparable federal, state or local law restrictions.
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that a
fiduciary investing assets of an ERISA plan consult with counsel regarding the
consequences under ERISA of the acquisition and holding of Offered Notes,
including the availability of any administrative exemptions from the prohibited
transaction rules.
The sale of Notes to a Benefit Plan is in no respect a representation
by the Issuer or the Underwriters that this investment meets all relevant legal
requirements with respect to investments by Benefit Plans generally or by a
particular Benefit Plan, or that this investment is appropriate for Benefit
Plans generally or any particular Benefit Plan.
UNDERWRITING
Under the terms and subject to the conditions described in the
underwriting agreement (the "Underwriting Agreement") for the sale of the
Offered Notes, the Issuer has agreed to sell and ___________ ("___________") and
_________________ ("____________," and together with ____________ the
"Underwriters") each severally has agreed to purchase the principal amount of
the Offered Notes described below:
36
---------------- ----------------
PRINCIPAL AMOUNT PRINCIPAL AMOUNT TOTALS
-------------------- -------------------- -------------------- ----------
Class A-1 Notes $ $ $
Class A-2 Notes $ $ $
Class A-3 Notes $ $ $
Class A-4 Notes $ $ $
Class A-5 Notes $ $ $
Class B Notes $ $ $
Class C Notes $ $ $
Class D Notes $ $ $
------------------- ------------------- ---------
Totals $ $ $
The Issuer has been advised by Underwriters that the several
Underwriters propose initially to offer the Notes to the public at the
respective prices set out on the cover page of this Prospectus Supplement, and
to dealers at that price, less a selling concession not in excess of ____% per
Class A-1 Note, ____% per Class A-2 Note, _____% per Class A-3 Note, _____% per
Class A-4 Note, _____% per Class A-5 Note, _____% per Class B Note, _____% per
Class C Note and _____% per Class D Note. The Underwriters may allow and the
dealers may reallow to other dealers, a discount not in excess of _____% per
Class A-1 Note, _____% per Class A-2 Note, _____% per Class A-3 Note, _____% per
Class A-4 Note, _____% per Class A-5 Note, _____% per Class B Note, _____% per
Class C Note and _____% per Class D Note. After the public offering, the public
offering price and those concessions may be changed.
The Underwriters will each represent and agree that:
(a) it has not offered or sold, and, prior to the expiration of six
months from the Issuance Date, will not offer or sell, any
Offered Notes to persons in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for
purposes of their business, or otherwise in circumstances which
have not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
(b) it has complied and will comply with all applicable provisions of
the Financial Services Xxx 0000 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 Xxx 0000
(Investment Advertisements) (Exemptions) Order 1995 or persons to
whom the document may otherwise lawfully be issued, distributed
or passed on.
The Issuer and Copelco Capital, Inc. have agreed to jointly and
severally indemnify the Underwriters against specified liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Issuer has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Offered Notes, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however, to
make a market in the Offered Notes and any market making may be discontinued at
any time at the sole discretion of the Underwriters. Accordingly, no assurance
can be given as to the liquidity of, or trading markets for, the Offered Notes.
The Underwriters may engage in over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids with
respect to the Offered Notes in accordance with Regulation M under the
Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). Over-allotment
transactions involve syndicate sales in
37
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the Offered Notes so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transaction involve purchase of the Offered Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the Offered Notes originally sold by a syndicate member
are purchased in a syndicate covering transaction. Over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Offered Notes to be higher than they would otherwise be
in the absence of those transactions. The Seller and the Underwriters do not
represent that the Underwriters will engage in those transactions. Those
transactions, once commenced, may be discontinued without notice at any time.
__________ is serving as the placement agent for the Private Notes.
EXPERTS
The balance sheet of Copelco Capital Funding LLC 2000-A as of
__________, 1999, has been included along with this Prospectus Supplement and in
the Registration Statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere, and upon the authority of
said firm as experts in auditing and accounting.
LEGAL MATTERS
Legal matters relating to the Notes will be passed upon for Copelco
Capital, Inc., the Servicer and the Issuer by Xxxxxxx X. Xxxxxxx, General
Counsel and Senior Vice President of Copelco Financial, and for Copelco Capital,
the Issuer and the Underwriters by Xxxxx Xxxxxxxxxx LLP, New York, New York.
RATING OF THE OFFERED NOTES
It is a condition to the issuance of the Offered Notes that the Class
A-1 Notes be rated at least " ", " " and " ", that the Class X-0, X-0, X-0 and
A-5 Notes be rated at least " ", " " and " ", that the Class B Notes be rated at
least " ", " " and " ", that the Class C Notes be rated at least " ", " " and
" " and that the Class D Notes be rated at least " ", " " and " " by
__________________ ("________"), ______________("_______") and
___________________ ("__________"), respectively (each a "Rating Agency").
The rating will reflect only the views of the Rating Agencies and will
be based primarily on the amount of subordination, the availability of funds on
deposit in the Reserve Account and the value of the Leases and Equipment. The
ratings are not a recommendation to purchase, hold or sell the applicable
Offered Notes, inasmuch as the ratings do not comment as to market price or
suitability for a particular investor. There is no assurance that any particular
rating will continue for any period of time or that it will not be lowered or
withdrawn entirely by the Rating Agencies if, in its judgment, circumstances so
warrant. A revision or withdrawal of the rating may have an adverse affect on
the market price of the Offered Notes. The rating of the Offered Notes addresses
the likelihood of the timely payment of interest and the ultimate payment of
principal on the Offered Notes by the stated maturity date of the applicable
class. The rating does not address the rate of prepayments that may be
experienced on the Leases and, therefore, does not address the effect of the
rate of Lease Prepayments on the return of principal to the holders of the
Offered Notes.
38
INDEX OF TERMS
TERM PAGE(S)
Additional Lease............................................................29
Additional Principal........................................................21
Adjusted Lease..............................................................29
Available Funds.............................................................23
Available Funds Shortfall...................................................24
Available Reserve Amount....................................................24
Bankruptcy Code.............................................................34
Benefit Plan................................................................36
Casualty....................................................................23
Casualty Payment............................................................23
Class A Initial Principal Amount............................................19
Class A Noteholders.........................................................20
Class A Notes...............................................................18
Class A Percentage..........................................................22
Class A Principal Payment...................................................21
Class A Target Investor Principal Amount....................................21
Class A-1 Initial Principal Amount..........................................19
Class A-1 Interest Rate.....................................................18
Class A-1 Noteholders.......................................................20
Class A-1 Notes.............................................................18
Class A-1 Stated Maturity Date..............................................19
Class A-2 Initial Principal Amount..........................................19
Class A-2 Interest Rate.....................................................18
Class A-2 Noteholders.......................................................20
Class A-2 Notes.............................................................18
Class A-2 Stated Maturity Date..............................................20
Class A-3 Initial Principal Amount..........................................19
Class A-3 Interest Rate.....................................................18
Class A-3 Noteholders.......................................................20
Class A-3 Notes.............................................................18
Class A-3 Stated Maturity Date..............................................20
Class A-4 Initial Principal Amount..........................................19
Class A-4 Interest Rate.....................................................18
Class A-4 Noteholders.......................................................20
Class A-4 Notes.............................................................18
Class A-4 Stated Maturity Date..............................................20
Class A-5 Initial Principal Amount..........................................19
Class A-5 Interest Rate.....................................................18
Class A-5 Noteholders.......................................................20
Class A-5 Notes.............................................................18
Class A-5 Stated Maturity Date..............................................20
Class B Floor...............................................................22
Class B Initial Principal Amount............................................19
Class B Interest Rate.......................................................18
Class B Noteholders.........................................................20
Class B Notes...............................................................18
Class B Percentage..........................................................22
Class B Principal Payment...................................................21
Class B Stated Maturity Date................................................20
Class B Target Investor Principal Amount....................................21
Class C Floor...............................................................22
Class C Initial Principal Amount............................................19
39
Class C Interest Rate.......................................................18
Class C Noteholders.........................................................20
Class C Notes...............................................................18
Class C Percentage..........................................................22
Class C Principal Payment...................................................21
Class C Stated Maturity Date................................................20
Class C Target Investor Principal Amount....................................21
Class D Floor...............................................................22
Class D Initial Principal Amount............................................19
Class D Interest Rate.......................................................18
Class D Noteholders.........................................................20
Class D Notes...............................................................18
Class D Percentage..........................................................22
Class D Principal Payment...................................................21
Class D Stated Maturity Date................................................20
Class D Target Investor Principal Amount....................................22
Class E Floor...............................................................22
Class E Initial Principal Amount............................................19
Class E Interest Rate.......................................................18
Class E Noteholders.........................................................20
Class E Notes...............................................................18
Class E Percentage..........................................................22
Class E Principal Payment...................................................21
Class Floors................................................................22
Class R-1 Notes.............................................................27
Class R-2 Notes.............................................................27
Code........................................................................35
Collection Account..........................................................23
Copelco Capital..............................................................8
Copelco Financial...........................................................17
CPR.........................................................................30
Cumulative Loss Amount......................................................23
Cut-Off Date.................................................................8
Determination Date..........................................................20
Discount Rate...............................................................19
Discounted Present Value of the Leases......................................19
Discounted Present Value of the Performing Leases...........................19
Due Period..................................................................20
Eligible Account............................................................23
Equipment....................................................................8
ERISA.......................................................................35
Events of Default...........................................................26
Excess copy charges.........................................................19
Fee Per Scan Charges........................................................19
Indenture...................................................................18
Initial Principal Amount....................................................18
Initial Statistical Principal Amount........................................30
Interest Accrual Period.....................................................20
Interest Payments...........................................................20
Interest Rate...............................................................18
IRS.........................................................................35
Issuance Date................................................................8
Issuer.......................................................................8
Lease Contract...............................................................8
Lease Payment...............................................................23
Leases.......................................................................8
40
Lessee.......................................................................8
Lessees......................................................................8
Maintenance Charges.........................................................19
Manager.....................................................................17
Nominal Buy-Out Leases......................................................33
Non-Performing Leases........................................................8
Noteholders.................................................................20
Notes.......................................................................18
Offered Notes...............................................................18
Origination Groups...........................................................8
Outstanding Principal Amount................................................25
Outstanding Principal Amounts...............................................20
Overcollateralization Balance...............................................23
Plan Asset Regulations......................................................36
Pledged Assets...............................................................9
Principal Payments..........................................................20
Private Notes...............................................................34
PTCE........................................................................36
Rating Agency...............................................................38
Record Date.................................................................20
Required Payments...........................................................24
Required Reserve Amount.....................................................24
Reserve Account.............................................................24
Residual Casualty Payments..................................................24
Residual Prepayments........................................................24
Residual Realizations.......................................................24
Residual Warranty Payments..................................................24
Series Pool..................................................................8
Servicer.....................................................................8
Servicer Advance............................................................26
Servicer Events of Default..................................................28
Servicing Fee...............................................................23
Statistical Class Percentage................................................30
Statistical Discount Rate...................................................19
Statistical Discounted Present Value of the Leases..........................19
Substitute Lease............................................................29
Tax Counsel.................................................................35
Termination Payment.........................................................23
Underwriters................................................................36
Underwriting Agreement......................................................36
Warranty Lease..............................................................29
41
================================================================================
$
Copelco Capital
Funding LLC 2000-A
-------------------------------------------------
P R O S P E C T U S
-------------------------------------------------
[UNDERWRITER(S)]
Dated __________
Until 90 days after the date of this Prospectus Supplement, all dealers that
effect transactions in the Offered Notes, whether or not participating in this
offering, may be required to deliver a Prospectus Supplement and an accompanying
Prospectus. This is in addition to the dealers' obligation to deliver a
Prospectus Supplement and an accompanying Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
================================================================================
================================================================================
$__________ _____% Class A-1
Lease-Backed Notes
$__________ _____% Class A-2
Lease-Backed Notes
$__________ _____% Class A-3
Lease-Backed Notes
$__________ _____% Class A-4
Lease-Backed Notes
$__________ _____% Class A-5
Lease-Backed Notes
$__________ _____% Class B
Lease-Backed Notes
$__________ _____% Class C
Lease-Backed Notes
$__________ _____% Class D
Lease-Backed Notes
================================================================================
42
