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EXHIBIT 10.9
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COMMITMENT TO ISSUE A
CERTIFICATE GUARANTY INSURANCE POLICY
Application No.: 96-12-0937
Sale Date: February 7, 1997
Program Type: Negotiated D/P
RE: $100,000,000 T&W Funding Company 1, L.L.C., Lease Receivables
Purchase Facility, Centre Square Funding Corporation, Class A Fixed
Rate Certificates (the "Obligations")
This Commitment to Issue a Certificate Guaranty Insurance Policy (the
"Commitment") constitutes an agreement between T&W Funding Company 1, L.L.C.
(the "Applicant"), and T&W Financial Corporation ("T&W"), and MBIA Insurance
Corporation ("MBIA" or the "Certificate Insurer"), a stock insurance company
incorporated under the laws of the State of New York.
Based on an approved application dated January 22, 1997, the Certificate Insurer
agrees, upon satisfaction of the conditions herein, to issue on the earlier of
(i) 120 days of said approval date or (ii) on the date of delivery of and
payment for the Obligations, a Certificate Guaranty Insurance Policy (the
"Policy"), for the Obligations.
The issuance of the Policy shall be subject to the following terms and
conditions:
1. Payment by the Applicant, or the Trustee on behalf of the Applicant, of the
following payments:
(a) An amount equal to $10,808 shall be wired to MBIA's account on the
Closing Date (the "Initial Premium"). This amount is equal to the
product of 0.0875% and the Aggregate Implicit Principal Balance on
the Closing Date. Thereafter, on the 15th day of each month or the
next succeeding business day, beginning on the April 15th, 1997
Payment Date, an amount equal to the product of (a) 0.0292%, and (b)
the Aggregate Implicit Principal Balance as of the close of business
on the immediately preceding Payment Date, after giving effect to
all payments of principal on such immediately preceding Payment Date
(the "Bond Insurer Premium"). The premium payments shall be rounded
to the nearest dollar amount.
The premium is based on a rate of 0.3500% per annum payable monthly.
This rate is based on confirmation from Standard & Poor's that the
triple-A gap in the transaction is 16.5% or less. This premium rate
is also based on notification that the transaction is of investment
grade quality from Standard & Poor's Corporation and Xxxxx'x
Investors Service.
The premium set out in this paragraph shall be the total premium
required to be paid on the Policy issued pursuant to this
Commitment.
(b) Legal fees and expenses of Xxxxx Xxxx, Omaha, Nebraska as counsel to
the Certificate Insurer in an amount not to exceed $25,000 shall be
wired to MBIA's account at closing;
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(c) Costs associated with any due diligence procedures performed by
independent third parties including, but not limited to,
verification of data integrity and underwriting standards, shall be
wired to MBIA's account when billed by such third parties.
T&W hereby agrees to reimburse MBIA for all legal fees and expenses of
Xxxxx Xxxx and all third party due diligence costs in the event that either the
Applicant, T&W, or CoreStates Capital Markets decide not to proceed with the
transaction.
2. There shall have been no material adverse change in the collateral or the
Obligations or official document authorizing the issuance of the Obligations.
3. There shall have been no material adverse change in any information
submitted to the Certificate Insurer.
4. No event shall have occurred which would allow any purchaser not to be
required to purchase the Obligations at closing.
5. Prior to the delivery of and payment for the Obligations, none of the
information or documents submitted by or on behalf of the Applicant or T&W to
the Certificate Insurer shall be determined to contain any untrue or misleading
statement of a material fact or fail to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
not misleading.
6. All transaction documents, legal opinions, resolutions and certificates
shall be acceptable to the Certificate Insurer and its counsel, Xxxxx Xxxx,
Omaha, Nebraska. This shall include, but not be limited to, documents relating
to the collateral, the transaction structure, the flow of funds, all triggers,
events of default, receivable eligibility criteria, and credit support levels.
7. All steps for perfection of the security interests of the Issuer and the
Trustee in the Lease Contracts and the Lease Receivables must be completed to
the satisfaction of the Certificate Insurer and its counsel prior to closing.
8. All "Eligible Investments" must be acceptable to the Certificate Insurer,
Standard & Poor's Corporation, and Xxxxx'x Investors Service. All banks at which
the transaction accounts are to be maintained must be acceptable to the
Certificate Insurer. The providers of any investment agreements or other similar
investment arrangements shall be expressly approved by the Certificate Insurer
in writing.
9. Prior to the issuance of the Policy there shall have been received from
Standard & Poor's Corporation confirmation that the risk to the Certificate
Insurer in insuring the Obligations is of at least investment grade quality and
that the triple-A gap in the transaction is no more than 16.5%. In addition,
confirmation shall have been received from Xxxxx'x Investors Service that the
risk to the Certificate Insurer in insuring the Obligations is of investment
grade quality.
10. There shall be no pending action or proceeding before any court,
governmental agency or authority, regulator or administrative body or arbitrator
against the Applicant or T&W or involving the Applicant or T&W and, to the best
of its knowledge, there shall be no threatened action or proceeding affecting
the Applicant or T&W, before any court, governmental agency or authority,
regulatory or administrative body or arbitrator which, in the case of any such
pending or threatened action or proceeding, would be reasonably likely to
materially and adversely affect the financial condition or other such day to day
operations of the Applicant or T&W or the
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validity or enforceability of the Lease Contracts or Lease Receivables or any of
the documents. The Applicant or T&W shall deliver to the Certificate insurer
certificates to such effect.
11. There shall be no material event of default on the part of the Applicant
or T&W under any agreement entailing financial obligations, which default would
materially adversely impact the financial condition or operations of the
Applicant or T&W or legal documents associated with the transaction. In
addition, there shall be no material event of default on any outstanding
obligation on the part of the Applicant or T&W which would materially adversely
affect the financial condition or operations of the Applicant and T&W.
Certificates and opinions of counsel confirming these matters, acceptable to the
Certificate Insurer, shall be delivered to the Certificate Insurer.
12. The Certificate Insurer shall have the right to review and approve the
Trustee, the Servicer, the Back-up Servicer, and the Document Custodian. The
Certificate Insurer shall have the right to remove the Trustee, the Servicer and
the Back-up Servicer for cause. Cause shall mean any material breach of any
obligation or covenant under the relevant documentation. T&W Financial
Corporation has been approved as Servicer, and Norwest Bank Minnesota, N.A. has
been approved as Trustee, Back-up Servicer and Document Custodian.
13. The Applicant, the Trustee, T&W, the Back-up Servicer, and the Document
Custodian will be required to enter into an Insurance and Indemnity Agreement
with the Certificate Insurer, wherein any payments made by the Certificate
Insurer under its policy, any unpaid installment premiums, and other amounts to
be set forth in the Insurance and Indemnity Agreement, will become a
Reimbursement Amount, payable from the flow of funds as set forth in the Trust
and Security Agreement. Reimbursement Amounts will bear interest at a rate equal
to the Prime lending rate as set forth in The Wall Street Journal plus 2.00%,
and are to be paid pursuant to the Trust and Security Agreement. The Certificate
Insurer is to be notified of any Policy claims at least three days prior to any
payment date.
14. The relevant transaction documents will provide that neither the
Certificateholders, the Trustee. T&W, the Servicer, the Back-up Servicer, nor
the Document Custodian may institute bankruptcy proceedings against the Issuer
until more than one-year plus one-day after the last day any Class A
Certificates are outstanding.
15. The transaction documents shall be governed by the laws of the State of
New York.
16. The Certificate Guaranty Insurance Policy issued by MBIA shall cover the
payment of(a) current interest due on each Payment Date to the extent that
amounts available for payment of such amounts are insufficient in accordance
with the flow of funds, and; (b) principal at Stated Final Maturity only.
"Stated Final Maturity" shall be defined in the Trust and Security
Agreement as the date occurring six months after the final Scheduled Payment is
due on the Lease Contract with the latest Final Due Date.
17. "Collateralization Percentage" shall be defined in the Trust and Security
Agreement as follows: As of any date of determination prior to the end of the
Funding Period, a percentage equal to the greater of: (A) eight percent (8.0%)
and (B) the product of (i) four and (ii) the concentration percentage based on
the aggregate Implicit Principal Balance of the Lease
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Contracts with respect to the Customer with the largest concentration of Lease
Contracts. On and after such date, the Collateralization Percentage shall be the
Collateralization Percentage determined on the final day of the Funding Period.
18. "Required Collateralization Amount" shall be defined in the Trust and
Security Agreement as follows: As of any date of determination, the greatest of
(A) the Collateralization Percentage multiplied by the Aggregate Implicit
Principal Balance as of the related Calculation Date, and (B) the aggregate
Implicit Principal Balance of all the Lease Contracts under which the three
Customers with the largest aggregate Implicit Principal Balances are obligated,
and (C) an amount equal to the product of (i) one-half of the Collateralization
Percentage, and (ii) the Initial Aggregate Implicit Principal Balance.
"Required Collateralization Percentage" shall be defined in the Trust and
Security Agreement as follows: As of any date of determination, a percentage
equal to the Required Collateralization Amount divided by the Aggregate Implicit
Principal Balance.
"Initial Aggregate Implicit Principal Balance" shall be defined in the
Trust and Security Agreement as follows: The greatest Aggregate Implicit
Principal Balance as calculated on any Calculation Date since the Closing Date.
"Principal Distribution Amount" shall be defined in the Trust and Security
Agreement as follows: With respect to each Payment Date (a) for any Payment Date
prior to Stated Maturity, an amount equal to (i) if, on such Payment Date, the
Available Cash is sufficient to pay the Required Principal Distribution Amount
on such date, the Required Principal Distribution Amount; or (ii) if, on such
Payment Date, the Available Cash is not sufficient to pay the Required Principal
Distribution Amount on such date, the Available Cash; and (b) on the Stated
Maturity, an amount equal to the Outstanding Principal Balance of the
Certificates on such date.
"Available Cash" shall be defined in the Trust and Security Agreement as
follows: With respect to each Payment Date, the amounts available in the
Collection Account after payment of all amounts necessary to pay the Servicer
Fee and other amounts due the Servicer to be set forth in the Trust and Security
Agreement with the approval of MBIA, the Trustee Fee, the Backup Servicer Fee,
the Bond Insurer Premium, and the Interest Distribution Amount.
"Required Principal Distribution Amount" shall be defined in the Trust and
Security Agreement as follows: With respect to each Payment Date, an amount
equal to the Outstanding Principal Balance of the Certificates as of the
Calculation Date preceding such Payment Date, minus the product of: (A) one
minus the Required Collateralization Percentage and (B) the Aggregate IPB as of
the Calculation Date preceding such Payment Date.
19. The occurrence of any of the following shall constitute a Trigger Event.
Upon the occurrence of a Trigger Event, excess cash flow is used to pay
additional principal on the MBIA-insured Class A Certificates in accordance with
(i) under "Flow of Funds", below:
a) for any three consecutive Due Periods, the average of the Annualized
Default Rates for such consecutive Due Periods shall be equal to or
greater than the Maximum Default Rate;
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b) in any Due Period, the Annualized Default Rate is equal to or
greater than three times the Maximum Default Rate;
c) in any two consecutive Due Periods, the sum of the Annualized
Default Rates for such Due Periods is equal to or greater than three
times the Maximum Default Rate;
d) for any three consecutive Due Periods, the average of the
Delinquency Rates shall be greater than the Maximum Delinquency
Rate;
e) the Tangible Net Worth Requirement is not met;
f) there is a Servicer Event of Default;
g) if both Xxxxxxx Xxxxx and Xxxxxx Xxxxx are no longer officers and
directors of the Servicer or are both incapacitated for a period of
six or more consecutive months;
h) an Event of Default under the Trust and Security Agreement occurs
and is continuing;
i) the voluntary or involuntary bankruptcy or insolvency of T&W;
j) MBIA makes a payment under the policy; or
k) the indebtedness of T&W under any of its other credit facilities has
been accelerated.
"Annualized Default Rate" shall be defined in the Trust and Security Agreement
as follows: For any Due Period, (i) the sum of the Implicit Principal Balance as
of the Calculation Date occurring in such Due Period of all Lease Contracts that
became Defaulted Lease Contracts during such Due Period (including any Lease
Contracts that have been purchased or substituted), (ii) minus the sum of
Recoveries and Residual Proceeds received during such Due Period, (iii) divided
by the Aggregate Implicit Principal Balance at the beginning of the Due Period,
(iv) multiplied by twelve.
"Defaulted Lease Contract" shall be defined in the Trust and Security Agreement
as follows: A Lease Contract shall become a Defaulted Lease Contract at the
earlier of the day (i) when any portion of such Lease Contract is 180 days
delinquent or (ii) the Servicer determines in accordance with its customary
practices that it shall not make a Servicer Advance or that a prior Servicer
Advance is unrecoverable.
"Recoveries" shall be defined in the Trust and Security Agreement as follows:
For any Due Period occurring after the date on which any Lease Contract becomes
a Defaulted Lease Contract and with respect to such Defaulted Lease Contract,
all payments that the Servicer received from or on behalf of a Customer during
such Due Period in respect of such Defaulted Lease Contract or from liquidation
or re-leasing of the related equipment or leased vehicles, including but not
limited to Scheduled Payments, Overdue Payments, Guaranty Amounts and Insurance
Proceeds, as reduced by (i) any unreimbursed Servicer Advances with respect to
such Lease Contract and (ii) any reasonably incurred out-of-pocket expenses
incurred by the Servicer in enforcing such Defaulted Lease Contract.
"Residual Proceeds" shall be defined in the Trust and Security Agreement as
follows: With respect to a Lease Contract that is not a Defaulted Lease Contract
and the related Equipment, the net proceeds (including Insurance Proceeds) of
any sale, re-lease (including any lease renewal) or other disposition of such
Equipment.
"Delinquency Rate" shall be defined in the Trust and Security Agreement as
follows: For any Due Period, the sum of the Implicit Principal Balances of all
Lease Contracts as of the
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Calculation Date occurring in such Due Period with respect to which a Customer
has not made any portion of the Scheduled Payment due in the prior Due Period
(including any such Lease Contracts that have been purchased or substituted),
divided by the Aggregate Implicit Principal Balance on such Calculation Date
(including any such Lease Contracts that have been purchased or substituted).
"Delinquent Lease Contract" shall be defined in the Trust and Security Agreement
as follows: For any Due Period, any Lease Contract (a) with respect to which a
Customer has not made any portion of the Scheduled Payment due in such Due
Period and which remains unpaid as of the Calculation Date at the end of such
Due Period and (b) which is not a Defaulted Lease Contract.
"Maximum Default Rate" shall be defined in the Trust and Security Agreement as:
3.0%.
"Maximum Delinquency Rate" shall be defined in the Trust and Security
Agreement as: 7.0%.
"Tangible Net Worth Requirement" shall be defined in the Trust and Security
Agreement as: The requirement that with respect to the Reported Company:
(a) the total assets of the Reported Company and its affiliates that would
be shown as assets on a consolidated balance sheet of the Reported Company and
its affiliates as of such time prepared in accordance with generally accepted
accounting principles consistently applied after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus of
the affiliates, minus
(b) the total liabilities of the Reported Company and its affiliates that
would be shown as liabilities on a consolidated balance sheet of the Reported
Company and its affiliates as of such time prepared in accordance with generally
accepted accounting principles consistently applied, minus
(c) the net book value of all assets, after deducting any reserves
applicable thereto, which would be treated as intangible assets under generally
accepted accounting principles consistently applied including, without
limitation, good will, trademarks, trade names, service marks, brand names,
copyrights, patents, and unamortized debt discount and expense, organizational
expenses and the excess of the equity in any affiliate over the cost of the
investment in such affiliate, minus
(d) the amount of any debt obligations to the Reported Company or any of
its affiliates by any shareholder, officer or director of the Servicer or any
such affiliate, is equal to at least $6,000,000 with respect to the occurrence
of a Trigger Event, and $7,500,000 with respect to the occurrence of a Funding
Period Trigger Event.
20. "Funding Period" shall be defined in the Trust and Security
Agreement as follows: The period commencing on the Closing Date through and
including the earliest to occur of: (i) a Funding Period Trigger Event; (ii)
January 31, 2000, unless extended by mutual agreement among the Transferor, the
Certificate Insurer and the Certificateholders; (iii) the date designated by the
Transferor upon a stated number of business days prior written notice to the
Certificateholders and the Bond Insurer; or (iv) the date on which the Liquidity
Facility is terminated.
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21. The occurrence of any of the following events during the Funding Period
shall constitute a Funding Period Trigger Event. Upon the occurrence of a
Funding Period Trigger Event, no additional Lease Contracts shall be purchased
by the Trust:
a) with respect to the Reported Company, the Tangible Net Worth
Requirement is not met; or
b) for any three consecutive Due Periods, the average of the Annualized
Default Rates for such consecutive Due Periods was greater than
2.5%; or
c) for any three consecutive Due Periods, the average of the
Delinquency Rates for such consecutive Due Periods was greater than
6.0%; or
d) a payment has been made to the Trustee by MBIA pursuant to the
Policy; or
e) the occurrence of a Trigger Event; or
f) T&W defaults on any payment obligations under any agreement
evidencing indebtedness or;
g) 18 months after the Closing Date, MBIA shall determine that its
participation in the transactions contemplated hereunder or under
any related document will have an adverse impact on MBIA; or
h) the Aggregate Implicit Principal Balance is less than the sum of the
Outstanding Certificate Balance plus the Required
Overcollateralization Amount for a period of 60 days.
22. The occurrence of any of the following shall constitute a Servicer Event
of Default under the Servicing Agreement when so declared by MBIA, or if MBIA is
in default of its obligations, by the Controlling Holder:
a) any failure by the Servicer to deliver to the Trustee any proceeds
or payments received from a customer which failure continues
unremedied for two business days;
b) any failure to deliver a Monthly Servicer's Report within one
business day following the day on which such report was due to be
received;
c) any failure by the Servicer to make a Servicer Advance in accordance
with the Transaction Documents or to deposit any Purchase Price
received by it that continues unremedied for one business day;
d) any failure by the Servicer to make remittances or deliver notices
and such failure continues unremedied for three business davs;
e) any failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the
Servicer, or any representation or warranty of the Servicer in the
Servicing Agreement proves to be incorrect, which failure or breach
(A) materially and adversely affects the interests or rights of
MBIA, the Trustee, the Backup Servicer or the Certificateholders,
and (B) continues unremedied for a period of 30 days after the date
on which the Servicer becomes aware of such failure or breach or
written notice of such failure, requiring the situation giving rise
to such breach or nonconformity to be remedied, shall have been
given to the Servicer;
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f) any assignment by the Servicer to a delegate of its duties or rights
under the Servicing Agreement, except as specifically permitted
under such agreement, or any attempt to make such an assignment;
g) any involuntary bankruptcy decree or order that is unstayed and in
effect for a period of 60 consecutive days;
h) the commencement by the Servicer of a voluntary bankruptcy case;
i) the occurrence of a Trigger Event if T&W is the Servicer;
23. On the Determination Date prior to each Distribution Date, the Servicer
shall make a Servicer Advance for each Lease Contract that is a Delinquent Lease
Contract on such date by remitting to the Trustee for deposit in the Collection
Account an amount equal to the Scheduled Payments, or portion thereof, which
were due in the prior Due Period but not received and deposited in the
Collection Account on or prior to such Determination Date; provided, however,
that the Servicer shall not be obligated to make any Servicer Advance that the
Servicer determines in good faith and in accordance with its customary servicing
practices is unlikely to be eventually repaid from Scheduled Payments made by or
on behalf of the related Customer; further provided, that the Servicer may make
a Servicer Advance with respect to a Lease Contract once it has become a
Defaulted Lease Contract if it reasonably believes that such Servicer Advance
will increase the Recoveries available to the Issuer.
24. The occurrence of any of the following shall constitute an Event of
Default under the Trust and Security Agreement. Upon the occurrence of an Event
of Default the Trustee at MBIA's direction, or if MBIA is in default of its
obligations, the Trustee at the direction of holders of at least two-thirds of
the certificates, may declare the principal of all of the certificates to be
immediately due and payable.
a) default in the payment of any interest upon any Certificate when the
same becomes due and payable;
b) default in the payment of any principal of any Certificate when the
same becomes due and payable;
c) default in the performance of any covenant of the Applicant, or
breach of any material representation and warranty of the Applicant,
in the Trust and Security Agreement, the Contribution Agreement, the
Insurance Agreement, or the Servicing Agreement, and continuance of
such default or breach for a period of 30 days after the Applicant
has actual knowledge thereof,
d) the involuntary bankruptcy of the Applicant which remains unstayed
for a period of 60 days following commencement of such action,
e) the entry by the Applicant of a voluntary bankruptcy petition;
25. Provided no Event of Default has occurred, funds on deposit in the
Collection Account shall be distributed in the following order of priority:
a) to pay to the Servicer: (A) the Servicer Fee; (B) the Reinvestment
Income (except as previously remitted to the Servicer); (C) the
amounts necessary to reimburse the Servicer for reasonable costs and
expenses incurred in connection with its servicing of the Lease
Contracts; (D) any amounts received from Customers to pay certain
personal property,
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sales or use taxes, as the case may be, to the extent deposited in
the Collection Account; (E) all amounts received in respect of Lease
Receivables as to which the Servicer has made an unrecovered
Servicer Advance, to the extent of such Servicer Advance, and; (F)
the amount necessary to reimburse the Servicer for any
Nonrecoverable Advance;
b) to pay to the Trustee the Trustee Fee (and, following an Event of
Default, any expenses of the Trustee previously approved by the
Certificate Insurer) then due;
c) to pay to the Backup Servicer, the Backup Servicer Fee (and,
following an Event of Default, any expenses of the Backup Servicer
previously approved by the Certificate Insurer) then due;
d) to pay to the Certificate Insurer the insurance premium then due;
e) to pay the amount of interest due on the Class A Certificates, and
any overdue interest that may be due;
f) to pay the amount of principal due on the Class A Certificates;
g) to pay to the Certificate Insurer with interest thereon at the
"Prime Rate" of interest as set forth in the Wall Street Journal
plus 200 basis points: (A) any unpaid insurance premiums, and; (B)
reimbursement for amounts paid by the Certificate Insurer under the
insurance policy;
h) to pay to a successor Servicer after a successor Xxxxxxxx has been
appointed, the amount of the Additional Servicer Fee, if any, and to
pay to such successor Servicer, the Certificate Insurer or the
Trustee, any Transition Costs, in an amount not to exceed $50,000,
incurred by the successor Servicer, the Certificate Insurer or the
Trustee not previously reimbursed;
i) on and after the Distribution Date following a Trigger Event, apply
any remaining funds to the payment of Class A Certificate principal;
j) to pay to the Servicer, any other amounts due the Servicer as
expressly provided in the Trust and Security Agreement or the
Servicing Agreement;
k) to pay to the Servicer, any remaining unreirnbursed Servicer
Advances;
l) to pay to the Trustee and the Backup Servicer any other amounts due
to the Trustee or the Backup Servicer as expressly provided in the
Trust and Security Agreement and the Servicing Agreement;
m) to pay to the Certificate Insurer any other amounts owed to the
Certificate Insurer under the Insurance and Indemnity Agreement,
and;
n) to remit any excess funds to or at the direction of the Applicant.
26. The following representations and warranties shall be made, among others,
with respect to each Lease Contract and the aggregate pool of Lease Contracts:
(A) As to including all Lease Contracts acquired through bulk purchases:
a) The information set forth in the related Lease Schedule is true and
correct as of the related Cut-off Date.
b) Such Lease Contract is pursuant to its terms an absolute and
unconditional obligation of the Customer, non-cancelable and
non-prepayable prior to the expiration of the initial term of such
Lease Contract; it does not provide for the substitution, exchange
or addition of any other items of Equipment or Leased Vehicles
pursuant to such
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Lease Contract; and the rights with respect to such Lease Contract
are assignable by the lessor thereunder without the consent of any
Person. Such Lease Contract is net to the lessor of any maintenance,
taxes, insurance or other expenses and contains provisions requiring
the Customer to assume all risk of loss or malfunction of the
related Equipment or Leased Vehicles.
c) Either the Company or one of the Contributors has provided to the
Trustee the sole original counterpart of such Lease Contract
previously in its possession, as amended, and the terms of such
Lease Contract have not been amended, waived or modified subsequent
to the above being provided to the Trustee, and, if another original
counterpart of such Lease Contract should subsequently come into the
possession of such party hereto, it will also be so provided to the
Trustee. On or prior to the Closing Date and each Funding Date, the
Company shall have provided to the Trustee the Application for
Certificate of Title with respect to each Leased Vehicle. Within 120
days of the Closing Date or the related Funding Date, the Company
shall have provided to the Trustee the original Certificate of Title
with respect to each Leased Vehicle.
d) There is only one original executed counterpart of such Lease
Contract that constitutes "chattel paper" for purposes of Section
9-105(l)(b) and 9-308 of the UCC, and the Electronic Ledgers have
been marked as provided in the Trust and Security Agreement.
e) Such Lease Contract was not originated in, nor is it subject to the
laws of, any jurisdiction, the laws of which would make unlawful the
sale, transfer or assignment of such document under any of the
Transaction Documents, including any repurchase in accordance with
the Transaction Documents.
f) Such Lease Contract is, and on the related Delivery Date will be, in
full force and effect in accordance with its respective terms, and
neither the Company, any of the Contributors nor any Customer has or
will have suspended or reduced any payments or obligations due or to
become due thereunder by reason of a default by the other party to
such Lease Contract; as of the related Cut-Off Date, the Customer
has not been delinquent in making payments due under such Customer's
Lease Contract for a period in excess of 30 days (without regard to
advances, if any, made by the Servicer), and there are no
proceedings pending, or to the best of the knowledge of the parties
hereto, threatened asserting insolvency of such Customer; there has
been no other default, breach or violation and no event permitting
acceleration under such Lease Contract; there are no proceedings
pending, or to the best of the knowledge of the parties hereto,
threatened, wherein such Customer or any governmental agency has
alleged that such Lease Contract is illegal or unenforceable; and
none of the Scheduled Payments are subject to any set-off or credit
of any kind.
g) Such Lease Contract is the valid, binding and legally enforceable
obligation of the parties thereto enforceable in accordance with its
terms, subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally
and to general principles of equity regardless of whether
enforcement is sought in a court of law or equity.
h) All filings (including Uniform Commercial Code filings) and
recordings as may be necessary to perfect the interest of the
Trustee in such Lease Contract and the related Lease Receivable have
been accomplished and are in full force and effect. All filings
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and recordings required to perfect the interest of the issuer and
the Trustee in the Equipment underlying such Lease Contract have
been or will be, within 30 days of the related Delivery Date,
accomplished in accordance with the Transaction Documents and are or
will be in full force and effect. All vehicles to be included in the
initial lease pool delivered on the Closing Date shall be re-titled
in the name of the Trust Estate within 120 days of the Closing Date.
Thereafter, all vehicles shall be re-titled prior to being funded
through the program.
i) Except for Lease Contracts acquired through bulk purchases, such
Lease Contract is identical to one of the form lease contracts to be
attached as an exhibit to the Trust and Security Agreement, except
for such immaterial modifications or deviations from such form Lease
Contracts which appear in certain Lease Contracts or which may
appear in the future form Lease Contracts of the Company or any of
the Contributors; any such modifications or deviations from the form
Lease Contracts will not have a material adverse effect on the
Holders of the Certificates or MBIA and will not reduce the
Scheduled Payments or other payments due under such Lease Contract.
d) Such Lease Contract was originated by the Company on behalf of one
of the Contributors in the ordinary course of business and meets the
Company's rating system. The origination and collection practices
used by the Company with respect to such Lease Contract have been in
all respects legal, proper, prudent and customary in the equipment
financing and servicing business; and comply in all material
respects to T&W's underwriting criteria; and no Customer has been
involved as a debtor in any bankruptcy or insolvency proceeding
during the term of the Lease Contract.
k) Any payment required to be made by a Customer subject to a PUT
("Purchase Upon Termination") clause does not exceed five times the
largest regular rental payment due under such Lease Contract. In
determining whether to lease Equipment or a Leased Vehicle to any
particular Customer, the Company considered each Customer's ability
to pay any PUT payments included in the terms of such Lease
Contract.
l) The related Lease Receivable is under a Lease Contract that has an
original stated term of at least 6 months and not more than 84
months. Such Lease Contract is within its original term and has not
had any extensions or modifications. Such Lease Contract has a
remaining term of not more than 83 months.
m) The Equipment or Leased Vehicle related to such Lease Contract was
properly delivered to the Customer in good repair, without defects
and in satisfactory order and is in proper working order as of the
related Cut-off Date. The Customer has accepted such Equipment or
Leased Vehicle leased to it and, after reasonable opportunity to
inspect and test such Equipment or Leased Vehicle, has not notified
the Company or any of the Contributors of any defects therein.
n) With the exception of the Loan Contracts, such Lease Contract
constitutes a "true lease" for federal income tax purposes. Such
Lease Contract or Loan Contract satisfies such other ratios and tax
related criteria as may be set forth herein.
o) The related Customer will have made at least one lease payment with
respect to such Lease Contract, including any security deposit or
advance payment made by the lessee upon the execution of such Lease
Contract or the delivery of the Equipment or Leased Vehicle. Such
Lease Contract obligates the related Customer to make all
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Scheduled Payments thereunder in full notwithstanding the collection
by the lessor of a security deposit with respect thereto. The
calculation of the Implicit Principal Balance of the related Lease
Receivable does not include any security deposits or advance
payments collected by or on behalf of the lessor which are applied
to Scheduled Payments.
p) The related Customer is not a lessee that is a merchant with respect
to the Equipment or Leased Vehicle leased under such Lease Contract.
q) All requirements of applicable federal, State and local laws, and
regulations thereunder, including, without limitation, usury laws,
if any, in respect of such Lease Contract have been complied with in
all material respects, and such Lease Contract complied in all
material respects at the time it was originated or made and now
complies in all material respects with all legal requirements of the
jurisdiction in which it was originated.
r) With the sole exception of the related Customer's right to quiet
enjoyment, such Lease Contract is not and will not be subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, whether arising out of transactions concerning
such Lease Contract or otherwise, and the operation of any of the
terms of such Lease Contract or the exercise by the Issuer or such
Customer of any right under such Lease Contract will not render such
Lease Contract unenforceable in whole or in part, and no such right
of rescission, set-off, counterclaim or defense, including a defense
arising out of a breach of such Customer's right of quiet enjoyment
of the related Equipment or Leased Vehicle, has been asserted with
respect thereto, except that certain rights or defenses may exist
under applicable law which, individually or in the aggregate, do not
make the remedies available to the Company, the Contributor or the
Issuer with respect to such Lease Contract inadequate for the
practical realization of the benefits provided thereby.
s) The Company or one of the Contributors has duly fulfilled all
obligations on the lessor's part to be fulfilled under or in
connection with such Lease Contract, including, without limitation,
giving any notices or consents necessary to effect the acquisition
of the Lease Assets by the Issuer and has done nothing to impair the
rights of the Trust and the Certificateholders in the Lease Contract
or payments with respect thereto.
t) The Lease Contract and the Equipment or Leased Vehicle have not been
sold, transferred, assigned or pledged by the Company or any of the
Contributors to any person other than the Issuer (except for
security interests in the Lease Assets which shall be terminated on
or prior to the Delivery Date), and the Issuer has all of the right,
title and interest in and to the Lease Contract, the Lease
Receivables and the related Equipment or Leased Vehicle, free and
clear of all liens and encumbrances, except for the interests of the
Customer pursuant to the Lease Contract.
u) Each Lease Contract requires that the Customer maintain the
Equipment or Leased Vehicle in good and workable order and that the
Customer obtain and maintain physical damage insurance, or provide
self-insurance or purchase insurance from the Issuer (which may be
self-insured) covering the Equipment or Leased Vehicle, Insurance
coverage required to be maintained by the Customer under each Lease
Contract is of a type customary for the equipment or vehicle covered
thereby and
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consistent with industry practice for monitoring compliance thereof;
such insurance coverage is in full force and effect.
v) The related Equipment is not subject to any titling requirements
unless such Equipment is a Leased Vehicle.
(B) As to the: pool of Lease Contracts, include all Lease Contracts acquired
through bulk purchases as of each cut-off date:
a) Customers located in any single State are obligated with respect to
Lease Contracts accounting for no more than 10% of the Aggregate
Implicit Principal Balance of the Lease Contracts except for three
States; Customers located in Washington shall not exceed 45% of the
Aggregate Implicit Principal Balance of the Lease Contracts,
California shall not exceed 20% of the Aggregate Implicit Principal
Balance of the Lease Contracts, and New York shall not exceed 20% of
the Aggregate Implicit Principal Balance of the Lease Contracts. Up
to 5% of the Aggregate Implicit Principal Balance of Lease Contracts
may be with Customers located in Canada, so long as such Customers
are obligated to pay any withholding taxes over and above net rental
payments.
b) Lease Contracts with Customers located in a particular zip code do
not account for more than 3% of the Aggregate Implicit Principal
Balance.
c) No single Customer accounts for more than 2.5% of the Aggregate
Implicit Principal Balance, and the top ten customers do not account
for more than 15% of the Aggregate Implicit Principal Balance.
d) Lease Contracts with rental payments that are not fixed for the
remaining term do not exceed 15% of the Aggregate Implicit Principal
Balance.
e) The Computer Tape, from which the selection of the Lease Contracts
was made, was made available to the Issuer's accountants who are
providing a comfort letter to MBIA and the initial holders of the
Certificates with respect to certain information and such
information was complete and accurate as of its date and includes a
description of the same Lease Contracts that are described in the
Lease Schedule and the payments due thereunder as of the related
Cut-Off Date.
f) The Company used no selection procedures that identified the Lease
Contracts as being less desirable or valuable than other comparable
equipment leases owned by the Company.
g) No more than 1% of the Aggregate Implicit Principal Balance are
Lease Contracts made to a lessee who is an individual and who takes
under the lease primarily for a personal, family, or household
purpose.
h) Lease Contracts containing a PUT clause account for no more than 10%
of the Aggregate Implicit Principal Balance.
i) The aggregate Implicit Principal Balance of the Loan Contracts do
not exceed 20% of the aggregate Implicit Principal Balance of the
Lease Contracts.
j) Lease Contracts with a remaining term exceeding 60 months do not
account for more than 10% of the Aggregate Implicit Principal
Balance, provided, however, that the maximum term of any lease shall
be 84 months, and the weighted average remaining term of the lease
pool shall not exceed 48 months.
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k) At least 85% of the Aggregate Implicit Principal Balance is
attributable to Lease Contracts that provide that payment of the
Scheduled Payments due thereon are to be made monthly.
1) All Lease Contracts are denominated in U.S. dollars.
m) Lease Contracts with a remaining term exceeding 60 months account
for no more than 10% of the Aggregate IPB. The weighted average
remaining term of the Lease Contracts does not exceed 48 months.
n) Unless otherwise approved in writing by MBIA, no more than 10% of
the Lease Contracts shall be acquired by T&W in bulk purchases,
provided, however, that no more than 5% of the Implicit Principal
Balance shall relate to bulk purchases by T&W from any single
entity.
o) All bulk purchases are subject to the criteria set forth in No. 27,
below.
p) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the restaurant business
(as defined by SIC code) shall not exceed 25%; provided, however,
that the Aggregate Implicit Balance of all Lease Contracts for which
the related Equipment relates to Customers in the restaurant
business (as defined by SIC code) shall not exceed 26.81%;
q) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the grocery store business
(as defined by SIC code) shall not exceed 20%;
r) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the refuse system business
(as defined by SIC code) shall not exceed 15%;
s) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in the funeral home and
crematory business (as defined by SIC code) shall not exceed 20%;
t) Unless otherwise approved by the Certificate Insurer, the Aggregate
Implicit Principal Balance of all Lease Contracts for which the
related Equipment relates to Customers in any other industry (as
defined by SIC code) shall not exceed 10%;
27. The following provisions shall be included in the Contribution Agreement
with respect to the acquisition of Lease Contracts through bulk purchases:
a) Prior to making any bulk purchase, T&W shall deliver to MBIA for
review and approval a description of T&W's policies and procedures
with respect to bulk purchases including, but not limited to, (i) a
description of all due diligence performed on the party from whom
the Lease Contracts are purchased; (ii) a description of any
re-underwriting procedures performed by T&W, and; (iii) any Lease
Contract File and legal document review procedures performed by T&W.
b) T&W shall provide all of the same representations, warranties and
covenants for the leases acquired through bulk purchases as for
leases originated by T&W itself. In
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addition, T&W shall represent and warrant that the underwriting
criteria of the originator of the leases to be acquired through bulk
acquisitions comply in all material respects with T&W's underwriting
criteria.
c) With respect to each bulk purchase, T&W shall fully re-underwrite
all Customers that comprise 1% or more of the Aggregate Implicit
Principal Balance, and a third party acceptable to MBIA will be
permitted to re-underwrite a sample of Lease Contracts acquired
through bulk purchases. This review shall be made at T&W's expense.
d) T&W shall provide to MBIA additional information with respect to the
performance of Lease Contracts acquired through bulk purchases. This
information shall be reported in the same format as that used for
the aggregate portfolio (including both leases originated and
acquired by T&W).
e) The inclusion of the Lease Contracts acquired through bulk purchases
shall not adversely affect the risk assigned by either Rating Agency
in connection with MBIA's insurance of the transaction.
f) On each Funding Date, T&W shall cause to be delivered to the Trustee
and MBIA an opinion of counsel with respect to the treatment of the
transfer from each originator of Lease Assets acquired through bulk
purchase to T&W or the Contributors, as the case may be, as a "true
sale" and the perfected first priority security interest of the
Trustee in such Lease Assets.
28. An operational review of the Servicer prepared by a third party acceptable
to the Certificate Insurer shall be delivered to the Certificate Insurer on an
annual basis. The first such review shall occur before the end of the 1997
calendar year, and such review may be in conjunction with a similar review
undertaken by other parties, provided the scope of such review is acceptable to
the Certificate Insurer. This review shall complement the reporting described in
Section IV of the Servicing Agreement dated as of July 1, 1995 related to the
MBIA-insured T&W Funding Company IV, L.L.C. transaction.
29. On a quarterly basis, MBIA may require a third party to re-underwrite a
sample of the leases sold into the Trust since the last re-underwriting review.
Such review may be in conjunction with a similar review undertaken by other
parties. provided the scope of such review is acceptable to the Certificate
Insurer,
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30. This Commitment may be signed in counterpart by the parties hereto.
Dated this 5th day of February, 1997.
MBIA Insurance Corporation
By: /s/ [SIG]
-------------------------------------
Title: Assistant Secretary
By: /s/ [SIG]
-------------------------------------
Title: PRESIDINT
T&W Funding Company 1, L.L.C.
By: /s/ [SIG]
-------------------------------------
Title: VICE PRESIDENT
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