EXECUTION COPY
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COPELCO CAPITAL, INC.,
SELLER AND SERVICER
AND
COPELCO CAPITAL FUNDING CORP. X,
PURCHASER
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SALES AND SERVICING AGREEMENT
Dated as of June 1, 1997
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ALL RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT OF COPELCO CAPITAL
FUNDING CORP. X HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN
FAVOR OF MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE, UNDER THE
INDENTURE DATED AS OF JUNE 1, 1997, FOR THE BENEFIT OF THE PERSONS REFERRED TO
THEREIN.
TABLE OF CONTENTS
Page
R E C I T A L S........................................................................................ 1
A G R E E M E N T S.................................................................................... 2
SECTION 1. PURCHASE AND SALE........................................................... 2
1.01 Purchase of Leases................................................................... 2
1.02 Consideration and Payment............................................................ 2
1.03 Capital Contribution................................................................. 2
1.04 Transfer of Leases; Grant of Security
Interest............................................................................. 2
1.05 Servicer to Act as Custodian......................................................... 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF
THE SELLER......................................................... 4
2.01 Corporate Organization and Authority................................................. 4
2.02 Business and Property................................................................ 5
2.03 Financial Statements................................................................. 5
2.04 Equipment and Leases................................................................. 6
2.05 Payments............................................................................. 9
2.06 Full Disclosure...................................................................... 10
2.07 Pending Litigation................................................................... 10
2.08 Title to Properties.................................................................. 10
2.09 Transactions Legal and Authorized.................................................... 11
2.10 Governmental Consent................................................................. 11
2.11 Taxes................................................................................ 11
2.12 Compliance with Law.................................................................. 12
2.13 ERISA................................................................................ 12
2.14 Ability to Perform................................................................... 13
2.15 Ordinary Course; No Insolvency....................................................... 13
2.16 Assets and Liabilities............................................................... 13
2.17 Fair Consideration................................................................... 13
2.18 Ability to Pay Debts................................................................. 13
2.19 Bulk Transfer Provisions............................................................. 14
2.20 Transfer Taxes....................................................................... 14
2.21 Principal Executive Office........................................................... 14
2.22 Servicing Provisions Customary....................................................... 14
2.23 Nonconsolidation..................................................................... 14
2.24 Sale Treatment....................................................................... 15
2.25 Leases are Chattel Paper............................................................. 15
SECTION 3. ADMINISTRATION OF LEASES.................................................... 15
3.01 Servicer to Act...................................................................... 15
3.02 Lease Amendments and Modifications................................................... 18
3.03 Non-Performing Leases................................................................ 19
3.04 Costs of Servicing; Servicing Fee;
Administrative Expenses.............................................................. 20
3.05 Other Transactions................................................................... 21
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Page
SECTION 4. SERVICER ADVANCES AND SELLER'S SUPPORT...................................... 21
4.01 Late Lease Payments.................................................................. 21
4.02 Early Termination Leases............................................................. 22
4.03 Indemnification...................................................................... 22
4.04 Repurchases; Other Payments.......................................................... 23
4.05 Payment Advices...................................................................... 24
SECTION 5. INFORMATION TO BE PROVIDED.................................................. 25
5.01 Monthly Status Reports; Servicing Reports............................................ 25
5.02 Annual Independent Public Accountant's
Report............................................................................... 26
SECTION 6. THE SERVICER................................................................ 27
6.01 Merger or Consolidation of the Servicer.............................................. 27
6.02 Limitation on Liability of the Servicer and
Others............................................................................... 28
6.03 Servicer Not to Resign or Be Removed................................................. 28
6.04 Financial and Business Information................................................... 28
6.05 Officers' Certificates............................................................... 30
6.06 Inspection........................................................................... 30
6.07 Servicer Records..................................................................... 31
SECTION 7. THE SELLER.................................................................. 31
7.01 Merger or Consolidation of the Seller................................................ 31
7.02 Control of Company................................................................... 32
7.03 Financial and Business Information................................................... 32
7.04 Officers' Certificates............................................................... 33
7.05 Inspection........................................................................... 34
7.06 Books and Records.................................................................... 34
7.07 Communications....................................................................... 34
SECTION 8. DEFAULT..................................................................... 34
8.01 Servicer Events of Default........................................................... 34
8.02 Termination.......................................................................... 37
8.03 Trustee to Act; Appointment of Successor............................................. 37
8.04 Servicer to Cooperate................................................................ 38
8.05 Notification to Noteholders.......................................................... 39
8.06 Remedies Not Exclusive............................................................... 39
SECTION 9. SUBSTITUTION AND ADDITION OF LEASES......................................... 39
9.01 Substitution and Addition............................................................ 39
9.02 Procedure............................................................................ 41
9.03 Objection and Repurchase............................................................. 42
9.04 Seller's and Servicer's Subsequent
Obligations.......................................................................... 43
SECTION 10. ASSIGNMENT.................................................................. 43
10.01 Assignment to Trustee....................................................... 43
10.02 Assignment by Seller or Servicer............................................ 43
SECTION 11. NATURE OF SELLER'S OBLIGATIONS
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AND SECURITY THEREFOR...................................... 43
11.01 Seller's Obligations Absolute............................................... 43
11.02 Security for Obligations.................................................... 44
11.03 Further Assurances; Financing
Statements.................................................................. 45
SECTION 12. DEFINITIONS................................................................. 45
SECTION 13. INTER-COMPANY LOANS......................................................... 51
13.01 Inter-Company Loans......................................................... 51
SECTION 14. MISCELLANEOUS............................................................... 52
14.01 Continuing Obligations...................................................... 52
14.02 GOVERNING LAW............................................................... 52
14.03 Successors and Assigns...................................................... 52
14.04 Modification................................................................ 52
14.05 No Proceedings.............................................................. 52
14.06 Notices..................................................................... 52
14.07 Counterparts................................................................ 53
Schedule 1 - Subsidiaries of the Seller
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Inter-Company Loan Note
Exhibit C - Form of Servicing Report
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SALES AND SERVICING AGREEMENT
This SALES AND SERVICING AGREEMENT is made and dated as of
June 1, 1997, by and between COPELCO CAPITAL FUNDING CORP. X, a Delaware
corporation, as purchaser hereunder (the "Company"), and COPELCO CAPITAL, INC.,
a Delaware corporation, as seller (in such capacity, the "Seller") and servicer
(in such capacity, the "Servicer") hereunder.
R E C I T A L S
A. The Seller wishes to sell and assign to the Company, and
the Company wishes to purchase from the Seller, all right, title and interest of
the Seller in, to and under the Leases (such term and all other capitalized
terms used herein having the meanings ascribed thereto in Section 12 hereof
unless otherwise indicated).
B. Contemporaneously with such sale and assignment, the Seller
wishes to contribute to the Company all right, title and interest of the Seller
in and to each item of Equipment subject to each Lease.
C. Pursuant to the Indenture, the Company is issuing one class
of 5.809% Class A-1 Lease-Backed Notes, Series 1997-A in the aggregate principal
amount of $142,197,000 (the "Class A-1 Notes"), one class of 6.05% Class A-2
Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$54,182,000 (the "Class A-2 Notes"), one class of 6.27% Class A-3 Lease-Backed
Notes, Series 1997-A in the aggregate principal amount of $211,495,000 (the
"Class A-3 Notes"), one class of 6.47% Class A-4 Lease-Backed Notes, Series
1997-A in the aggregate principal amount of $126,667,000 (the "Class A-4
Notes"), one class of 6.50% Class B Leased-Backed Notes, Series 1997-A (the
"Class B Notes"), in the aggregate principal amount of $22,746,00 and one class
of 6.78% Class C Lease-Backed Notes, Series 1997-A, in the aggregate principal
amount of $11,373,720 (the "Class C Notes") (the Class A Notes, the Class B
Notes and the Class C Notes are referred to collectively as the "Notes"), the
proceeds of which are being used by the Company to make payment to the Seller
for the Leases.
X. Xxxxxxxx to the Indenture, the Company is granting, inter
alia, to the Trustee, for the benefit of the holders from time to time of the
Notes, a security interest in all right, title and interest of the Company in,
to and under the Leases, the interests in the Equipment and this Sales and
Servicing Agreement.
A G R E E M E N T S
SECTION 1. PURCHASE AND SALE
1.01 Purchase of Leases. By their execution and delivery of
this Sales and Servicing Agreement, the Seller hereby sells and assigns to the
Company, and the Company hereby purchases from the Seller without recourse
(except to the extent of the Seller's repurchase obligations as set forth
herein), all of the Seller's right, title and interest in and to each of the
Leases (including the right to receive all payments due or to become due
thereunder since the Cut-Off Date).
1.02 Consideration and Payment. The purchase price of the
Leases (including the right to receive all payments due or to become due
thereunder since the Cut-Off Date) is $567,317,452.33.
1.03 Capital Contribution. The Seller and the Company each
acknowledge and confirm that contemporaneously with the sale and purchase of the
Leases as hereinabove provided, the Seller, as the sole stockholder of the
Company, is contributing and transferring to the Company, and in connection with
each sale, transfer and assignment of Additional Leases and Substitute Leases
the Seller will contribute and transfer to the Company, without recourse, all
right, title and interest of the Seller in and to each item of Equipment subject
to each Lease, Additional Lease and Substitute Lease. After such contribution
and transfer by the Seller to the Company, all right, title and interest of the
Seller in and to each item of Equipment subject to each Lease shall be vested in
the Company.
1.04 Transfer of Leases; Grant of Security Interest. It is the
intention of the parties hereto that the transfer of Leases, Additional Leases,
Substitute Leases, Lease Payments and all other amounts due or becoming due with
respect thereto and Equipment (or interests therein) being made hereunder shall
constitute a purchase and sale or capital contribution and not a loan. The
Seller shall take no action inconsistent with the Company's ownership of the
Leases, the Lease Receivables and all other amounts due or becoming due with
respect thereto and the interests in the Equipment, the Seller shall indicate in
its records that ownership of each of the Leases, the Lease Receivables and the
interests in the Equipment is held by the Company, and the Seller shall respond
to any inquiries from third parties by indicating that its ownership in the
Leases, Additional Leases, Substitute Leases, the Lease Receivables and all
other amounts due or becoming due with respect thereto and the interests in the
Equipment is held by the Company and pledged to the Trustee. In the event,
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however, that a court of competent jurisdiction were to hold that any
transaction evidenced hereby constitutes a loan and not a purchase and sale or
capital contribution, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law and that
the Seller shall be deemed to have granted to the Company and the Trustee a
first priority security interest in the Leases and all Lease Payments, Casualty
Payments, Termination Payments and other amounts now due or becoming due with
respect thereto since the Cut-Off Date (other than any prepayments of rent
required pursuant to the terms of any Lease at or before the commencement of the
Lease and any payments due before the Cut-Off Date) and all Additional Leases
and Substitute Leases and all Lease Payments, Casualty Payments, Termination
Payments and other amounts due or becoming due with respect thereto since the
effective date of their respective addition or substitution (other than any
prepayments of rent required by the terms of any Lease at or before the
commencement of the Lease and any payments due before the effective date of such
addition or substitution), (b) all rights of the Company to or under any
guarantees of or collateral (including all rights of the Company in any security
deposits) for the Lessee's obligations under any Lease, (c) all interests of the
Company in the Equipment at any time subject to any Lease including any security
interest of the Seller in the Equipment and (d) all proceeds of the conversion,
whether voluntary or involuntary, of any of the foregoing into cash or other
property.
1.05 Servicer to Act as Custodian. (a) The Servicer shall hold
and acknowledges that it is holding the Leases and all other Granted Assets that
it may from time to time receive hereunder as custodian for the Trustee.
(b) The Servicer shall perform its duties under this Section
1.05 in accordance with the standard set forth in Section 3.01 as such standard
applies to servicers acting as custodial agents. The Servicer shall promptly
report to the Trustee any failure by it to hold the complete Leases as herein
provided and shall promptly take appropriate action to remedy any such failure
but only to the extent (i) any such failure is caused by the acts or omissions
of the Servicer and (ii) such remedial action is otherwise within its
capabilities or control. As custodian, the Servicer shall have and perform the
following powers and duties:
(A) hold the Leases on behalf of the
Trustee for the benefit of the Noteholders, maintain accurate records
pertaining to each Lease to enable it to comply with the terms and
conditions of this Sales and Servicing Agreement, and maintain a
current inventory thereof;
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(B) implement policies and procedures in
accordance with the Servicer's normal business practices with respect
to the handling and custody of the Leases so that the integrity and
physical possession of the Leases will be maintained; and
(C) attend to all details in connection
with maintaining custody of the Leases on behalf of the
Trustee on behalf of the Noteholders.
(c) In acting as custodian of the Leases, the Servicer agrees
further that it does not and will not have or assert any beneficial ownership
interest in such Leases. The Servicer on behalf of the Noteholders shall mark
conspicuously each original contractual document with a Xxxxxx, and its master
data processing records evidencing each Lease with a legend, acceptable to the
Trustee, evidencing that all right, title and interest in the Leases has been
granted to the Trustee as provided in the Indenture.
(d) The Servicer agrees to maintain the Leases at either its
office in Mt. Laurel, New Jersey or Mahwah, New Jersey or at such other offices
of the Servicer as shall from time to time be identified by prior written notice
to the Trustee. Subject to the foregoing, the Servicer may temporarily move
individual Leases or any portion thereof without notice as necessary to conduct
collection and other servicing activities.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF
THE SELLER
The Seller hereby represents and warrants as follows:
2.01 Corporate Organization and Authority.
The Seller:
(a) is a corporation duly organized,
validly existing and in good standing
under the laws of its jurisdiction of
incorporation,
(b) has all requisite power and authority
and all necessary licenses and permits
to own and operate its properties and
to carry on its business as now
conducted (except where the failure to
have such licenses and permits would
not have a material adverse effect on
the business or condition (financial
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or otherwise) of the Seller or impair the
enforceability of any Lease) and to enter
into and perform its obligations under
this Sales and Servicing Agreement, and
the transactions contemplated hereby,
including performance of the duties of
the Servicer and the Seller's support
obligations hereunder, and
(c) has duly qualified and is authorized
to do business and is in good standing
as a foreign corporation in each
jurisdiction where the character of
its properties or the nature of its
activities makes such qualification
necessary (except where the failure to
be so qualified or in good standing
would not have a material adverse
effect on the Trust Estate or the
business or condition (financial or
otherwise) of the Seller or impair the
enforceability of any Lease).
2.02 Business and Property. The Prospectus and the Private
Placement Memorandum, accurately describe in all material respects the general
nature of the business of the Seller. The Seller has no subsidiaries other than
those listed on Schedule 1 hereto.
2.03 Financial Statements. (a) The consolidated balance sheet
of the Seller and its consolidated subsidiaries for the fiscal periods ended
December 31, 1996 and December 31, 1995 and the related consolidated statements
of income, retained earnings and cash flow for the respective period and fiscal
years ended on such dates, all accompanied by reports thereon containing
opinions without qualification, except as therein noted, by KPMG Peat Marwick,
independent certified public accountants, and the unaudited interim consolidated
balance sheet of the Seller and its consolidated subsidiaries as of March 31,
1997 and the related consolidated statements of income, retained earnings and
cash flow for the three months ended on such date have been prepared in
accordance with generally accepted accounting principles consistently applied,
and present fairly the financial position of the Seller and its subsidiaries as
of such dates and the results of their operations for such periods.
(b) Except as disclosed in the Prospectus, the Private
Placement Memorandum and the financial statements referred to in the preceding
Section 2.03(a), since December 31, 1996 there has been no change in the
business, condition
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or prospects (financial or otherwise) of the Seller except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse. Neither the Seller nor any of its subsidiaries has any
material liabilities or obligations not incurred in the ordinary course of
business other than those disclosed in the financial statements referred to in
Section 2.03(a) or for which adequate reserves are reflected in such financial
statements and certain contingent obligations of the Seller relating to other
asset securitization transactions involving the Seller.
2.04 Equipment and Leases. (a) Prior to the date of each
transfer of any Leases and contribution of Equipment in accordance with Sections
1.01 and 1.03, respectively, the Seller purchased each item of Equipment from
either (i) the manufacturer or other supplier following receipt of an invoice
from such manufacturer or supplier or (ii) a Lessee following confirmation that
such item of Equipment was on such Lessee's premises. The Seller has paid in
full, to the manufacturer or supplier or Lessee, as the case may be, the
purchase price and any related charges in connection with the acquisition of the
Equipment. The sale to the Company of the Leases and all of the Seller's right,
title and interest in each item of Equipment does not violate the terms or
provisions of any Lease or any other agreement to which the Seller is a party or
by which it is bound.
(b) Upon payment of the consideration described in Section
1.02 hereof, issuance of its common stock as described in Section 1.03 hereof,
and transfer of the Seller's interest in the Equipment, the Company will (i) be
the legal owner of the Leases (including the right to receive all payments due
or to become due thereunder), (ii) have good title to each item of the Equipment
subject to any Lease other than a Nominal Buy-Out Lease, and (iii) have a valid
security interest in each item of Equipment with a purchase price in excess of
$25,000 subject to a Nominal Buy-Out Lease. At such time, the Leases (including
the right to receive all payments due or to become due thereunder) and the
Seller's interest in the Equipment will be free and clear of all Liens other
than the rights of each Lessee under the Lease to which such Lessee is a party
and the Lien created by the Indenture; and there will be no delinquent taxes or
other outstanding charges affecting the Equipment which are or may be Liens
prior to, or equal or coordinate with, the Lien of the Trustee under the
Indenture.
(c) At the time of each transfer of a Lease hereunder, each
such Lease (i) is or will be a triple-net lease and (ii) is or will be a legal,
valid and binding full
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recourse obligation of the Lessee thereunder, enforceable by the Company (and by
the Trustee as assignee of the Company) against such Lessee in accordance with
the terms thereof, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting the
enforcement of creditors' rights and by general equity principles, is
noncancellable by the Lessee and is in full force and effect, and any and all
requirements of any federal, state or local law, including, without limitation,
usury, truth-in-lending and equal credit opportunity laws applicable to each
Lease have been complied with; and the Seller has no knowledge (after due
inquiry) of any challenge, dispute or claim by or against the Lessee under or
affecting any Lease or of the bankruptcy or insolvency of any such Lessee. As of
the initial Determination Date, or the effective date of the transfer of any
Additional Lease or Substitute Lease, each Lessee has paid at least one
installment of rent under its respective Lease.
(d) At the time that any item of Equipment (including the
Seller's security interest in any item not owned by it) is contributed
hereunder, the Seller will have no knowledge that any item of the Equipment has
suffered any loss or damage which has not been repaired.
(e) Each Lease requires the Lessee thereunder to maintain
insurance on the Equipment subject thereto in an amount at least equal to the
fair market value thereof.
(f) In addition to the insurance maintained by the Lessees
with respect to the Equipment, the Seller (or an Affiliate of the Seller)
maintains (i) one or more casualty insurance policies which, in the aggregate,
are in an amount not less than the aggregate Outstanding Principal Amount of the
Notes, (ii) a general liability insurance policy in the aggregate amount of
$1,000,000 and (iii) an excess liability insurance policy in umbrella form in
the aggregate amount of $10,000,000. Each of such policies is in full force and
effect and covers all equipment owned by the Seller and the Company. All
premiums in respect of such policies have been paid. Each of the Trustee and the
Company are named as loss payees and additional insureds, as their interests may
appear, on such casualty and liability policies maintained by the Seller.
(g) At the time of each transfer of a Lease hereunder, no
Lease had outstanding rent which was 63 or more days past due as of the Cut-Off
Date.
(h) Each Lease was entered into or acquired by the Seller in
accordance with the Seller's regular credit approval process described in the
Prospectus, and no
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selection procedures adverse to the credit quality of the Leases were employed
in selecting the Leases for sale under this Sales and Servicing Agreement.
(i) The obligation of each Lessee to pay rent under each of
the Leases throughout the term thereof is and will be unconditional, without any
right of setoff by such Lessee and without regard to any event affecting the
Equipment, the obsolescence of any Equipment, any claim of such Lessee against
the Company, the Seller or the Servicer or any change in circumstance of such
Lessee or any other circumstance whatsoever except to the extent that in the
event of a casualty of any item of Equipment, the Lessee is obligated to pay, in
lieu of the future Lease Payments with respect to such item, an amount which
equals or exceeds the Discounted Present Value of the Lease as of the Payment
Date next succeeding the making of such payment.
(j) In the case of each Lease which consists of a master lease
and one or more exhibits or schedules thereto, the Seller has neither assigned
such master lease in its entirety, nor delivered physical possession of such
master lease, to any Person other than the Company or the Trustee (including the
trustee under another indenture in a transaction substantially similar to the
transaction contemplated hereby, which other indenture provides that the lien
thereof on such master lease extends only to such master lease insofar as it
relates to lease schedules which are not part of the Trust Estate).
(k) As of the time of each transfer of Leases and Equipment
hereunder, there are no facts or circumstances which give rise, or would give
rise at any time in the future, to any right of rescission, setoff, counterclaim
or defense, including the defense of usury, to obligations of any Lessee,
including the obligation of such Lessee to pay all amounts due with respect to
any Lease to which such Lessee is a party, and neither the operation of any of
the terms of any Lease or the exercise of any right thereunder will render such
Lease unenforceable in whole or in part or subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and no such
right of rescission, setoff, counterclaim or defense has been asserted with
respect thereto.
(l) As of the time of each transfer of Leases and Equipment
hereunder, no Lease has been amended, altered or modified in any respect, except
in writing and copies of all such writings are attached to the Lease delivered
to the Trustee.
(m) As of the time of each transfer of Leases and Equipment
hereunder, no Lessee will have been released,
8
in whole or in part, from any of its obligations in respect of any Lease; no
Lease will have been satisfied, cancelled or subordinated, in whole, or in part,
or rescinded, and no Equipment covered by any Lease will have been released from
such Lease, in whole or in part, nor has any instrument been executed that would
effect any such satisfaction, release, cancellation, subordination or
rescission.
(n) As of the time of each transfer of Leases and Equipment
hereunder, each Lease was either (a) originated by the Seller in the ordinary
course of its business or (b) purchased by the Seller for value and taken into
possession prior to the Cut-Off Date in the ordinary course of its business.
(o) No Lease was originated in or is subject to the laws of
any jurisdiction whose laws would make the transfer and sale thereof under this
Sales and Servicing Agreement unlawful.
(p) All parties to each Lease had authority and capacity to
execute such Lease.
(q) None of the Leases is a consumer lease and each Lessee has
accepted the Equipment leased to it.
(r) The Booked Residual Value of the Equipment as of the
Cut-Off Date equals $70,790,509.72.
(s) All parties to each Lease had all requisite authority and
capacity to execute such Lease.
(t) As of the Cut-Off Date, the Final Lease Payment on each
Lease was due and payable on or prior to April 2005.
(u) There is only one original of each Lease for purposes of
the UCC as in effect in New Jersey and in New York and such counterpart will be
delivered to the Trustee (or a custodian on its behalf) on or before the Closing
Date.
2.05 Payments. (a) The aggregate amount of Lease Payments
payable by the Lessees under the Leases during each lease payment period,
including amounts on deposit in the Reserve Account, is sufficient to cover the
Servicing Fee and pay the principal and interest on the Notes, as such payments
become due and payable.
(b) The portfolio detail delivered or to be delivered to the
Trustee on or prior to the Closing Date (i) accurately sets forth, as of the
Cut-Off Date, the amount of each Lease Payment due under each of the Leases
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and the month in which such Lease Payment is to be paid in accordance with the
terms of the Lease under which the same is to be paid, (ii) accurately sets
forth, as of the Cut-Off Date, the information with respect to certain other
characteristics of the Leases and the Equipment described in such portfolio
detail and (iii) is otherwise true and correct in all respects.
2.06 Full Disclosure. The Prospectus and the Private Placement
Memorandum (including, without limitation, the statistical and descriptive
information with respect to the initial Leases, Lessees and Equipment), as of
their respective dates, do not contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. There is
no fact peculiar to the Seller or any Affiliate of the Seller or, to the
knowledge of the Seller, any Lease, Lessee or item of Equipment, which the
Seller has not or will not disclose in the Prospectus or the Private Placement
Memorandum which materially affects adversely nor, so far as the Seller can now
reasonably foresee, will materially affect adversely the ability of the Seller
to perform the transactions contemplated by this Sales and Servicing Agreement.
2.07 Pending Litigation. There are no proceedings or
investigations pending, or to the knowledge (after due inquiry) of the Seller
threatened, against or affecting the Seller or any subsidiary in or before any
court, governmental authority or agency or arbitration board or tribunal,
including, but not limited to, any such proceeding or investigation with respect
to any environmental or other liability resulting from the ownership or use of
any of the Equipment, which, individually or in the aggregate, involve the
possibility of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the Seller and its
subsidiaries, or the ability of the Seller or the Servicer to perform its
obligations under this Sales and Servicing Agreement. The Seller is not in
default with respect to any order of any court, governmental authority or agency
or arbitration board or tribunal.
2.08 Title to Properties. Immediately following the transfer
by the Seller to the Company of the Leases and the Seller's interest in the
Equipment, the Leases (including the right to receive all payments due or to
become due thereunder) and the interest in the Equipment will be free and clear
of all Liens, except the Lien on the Trust Estate in favor of the Trustee
granted pursuant to the Indenture (or the Lien in favor of the Company which is
assigned to the Trustee pursuant to the Indenture).
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2.09 Transactions Legal and Authorized. The transfer by the
Seller of all of its right, title and interest in and to each item of Equipment
and each Lease (including the right to receive all payments due or to become due
thereunder) and compliance by the Seller with all of the provisions of this
Sales and Servicing Agreement:
(a) have been duly authorized by all necessary
corporate action on the part of the Seller, and do
not require any stockholder approval, or approval
or consent of any trustee or holders of any
indebtedness or obligations of the Seller except
such as have been duly obtained;
(b) are within the corporate powers of the
Seller; and
(c) are legal and will not conflict with,
result in any breach in any of the
provisions of, constitute a default under,
or result in the creation of any Lien upon
any property of the Seller under the
provisions of, any agreement, charter
instrument, by-law or other instrument to
which the Seller is a party or by which it
or its property may be bound or result in
the violation of any law, regulation, rule,
order or judgment applicable to the Seller
or its properties, or any order to which
the Seller or its properties is subject, of
or by any government or governmental agency
or authority.
2.10 Governmental Consent. No consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority is necessary or required on the part of the Seller in
connection with the execution and delivery of this Sales and Servicing Agreement
or the sale of the Leases and contribution of the Equipment or the performance
of its obligations as Servicer.
2.11 Taxes. (a) All tax returns required to be filed by the
Seller or any subsidiary in any jurisdiction have in fact been filed, and all
taxes, assessments, fees and other governmental charges upon the Seller or any
subsidiary, or upon any of their respective properties, income or franchises,
shown to be due and payable on such returns have been paid. To the best of the
Seller's knowledge all such tax returns were true and correct and neither the
Seller nor any subsidiary knows of any proposed additional tax assessment
against it in any material amount nor of any basis therefor.
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(b) The provisions for taxes on the books of the Seller and
each of its subsidiaries are in accordance with generally accepted accounting
principles.
2.12 Compliance with Law.
The Seller:
(a) is not in violation of any laws,
ordinances, governmental rules or
regulations to which it is subject;
(b) has not failed to obtain any
licenses, permits, franchises or
other governmental authorizations
necessary to the ownership of its
property or to the conduct of its
business; and
(c) is not in violation in any material
respect of any term of any agreement,
charter instrument, by-law or other
instrument to which it is a party or
by which it may be bound,
which violation or failure to obtain might materially adversely affect the
business or condition (financial or otherwise) of the Seller and its
subsidiaries.
2.13 ERISA. (a) The present value of all benefits vested under
all "employee pension benefit plans," as such term is defined in Section 3 of
ERISA, maintained by or contributed to by the Seller and its Related Persons
(other than multi-employer plans as such term is defined in Section 3 of ERISA),
as from time to time in effect (herein called the "Pension Plans"), does not
exceed the value of the assets of the Pension Plans allocable to such vested
benefits;
(b) No Prohibited Transactions, Accumulated Funding
Deficiencies, Withdrawals or Reportable Events have occurred with respect to any
Pension Plans that, in the aggregate, could subject the Seller to any material
tax, penalty or other liability; and
(c) No notice of intent to terminate a Pension Plan under a
distress termination has been filed, nor has the PBGC instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has
occurred or condition exists which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan.
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2.14 Ability to Perform. At the date hereof, the Seller does
not believe, nor does it have any reasonable cause to believe, that it cannot
perform each and every covenant contained in this Sales and Servicing Agreement
or its ability to perform as Servicer.
2.15 Ordinary Course; No Insolvency. The transactions
contemplated by the Notes, the Indenture and this Sales and Servicing Agreement
are being consummated by the Seller in furtherance of the Seller's ordinary
business purposes and constitute a practical and reasonable course of action by
the Seller designed to improve the financial position of the Seller, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. The Seller will not, either as a result of
the transaction contemplated by this Sales and Servicing Agreement, or
immediately before or after such transaction, be insolvent or have an
unreasonably small capital for the conduct of its business and the payment of
anticipated obligations.
2.16 Assets and Liabilities. (a) Both immediately before and
after any transfer of Leases (including the right to receive all payments due or
to become due thereunder) and the transfer of the interests in the Equipment
contemplated by this Sales and Servicing Agreement, the present fair salable
value of the Seller's assets was or will be in excess of the amount that will be
required to pay the Seller's probable liabilities as they then exist and as they
become absolute and matured; and
(b) Both immediately before and after any transfer of Leases
(including the right to receive all payments due or to become due thereunder)
and the transfer of the interests in the Equipment contemplated by this Sales
and Servicing Agreement, the sum of the Seller's assets was or will be greater
than the sum of the Seller's debts, valuing the Seller's assets at a fair
salable value.
2.17 Fair Consideration. The consideration received by the
Seller, in exchange for the Leases (including the right to receive all payments
due or to become due thereunder) and the transfer of its interests in the
Equipment, is fair consideration having value equivalent to or in excess of the
value of the assets being transferred by the Seller.
2.18 Ability to Pay Debts. Neither as a result of the
transaction contemplated by this Sales and Servicing Agreement nor otherwise
does the Seller believe that it will incur debts beyond its ability to pay or
which would be prohibited by its charter documents or by-laws. The Seller's
assets and cash flow enable it to meet its present
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obligations in the ordinary course of business as they become due.
2.19 Bulk Transfer Provisions. The sale, transfer, assignment
and conveyance of the Leases and its interests in the Equipment by the Seller
pursuant to this Sales and Servicing Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any applicable
jurisdiction.
2.20 Transfer Taxes. The sale, transfer, assignment and
conveyance of the Leases (including all payments due or to become due
thereunder) and its interests in the Equipment by the Seller pursuant to this
Sales and Servicing Agreement is not subject to and will not result in any tax,
fee or governmental charge payable by the Seller to any federal, state or local
government ("Transfer Taxes"). In the event that the Company receives actual
notice of any Transfer Taxes arising out of the transfer, assignment and
conveyance of the Leases and/or its interests in the Equipment, on written
demand by the Company, or upon the Seller otherwise being given notice thereof,
the Seller shall pay, and otherwise indemnify and hold the Company, the Trustee
and the holders of the Notes harmless, on an after-tax basis, from and against
any and all such Transfer Taxes (it being understood that the holders of the
Notes and the Trustee shall have no obligation to pay such Transfer Taxes).
2.21 Principal Executive Office. The principal executive
office of each of the Seller and the Servicer is located at Xxx Xxxxxxxxxxxxx
Xxxxxxxxx, Xxxxxx, Xxx Xxxxxx 00000-0000.
2.22 Servicing Provisions Customary. The servicing
arrangements hereunder, including without limitation the terms and conditions
pursuant to which the Seller will act as Servicer and the Servicing Fee to be
paid to the Seller, are consistent with the arrangements and customary practices
of the Seller when providing comparable services to non-affiliated entities and
of other servicers in the equipment leasing industry.
2.23 Nonconsolidation. The Seller is and at all times since
its incorporation has been operated in such a manner that it would not be
substantively consolidated with the Company, such that the separate existence of
the Seller and the Company would be disregarded in the event of a bankruptcy or
insolvency of the Seller or the Company, and in such regard:
(a) the Seller is not involved in the day-to- day management
of the Company;
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(b) the Seller maintains separate corporate records and books
of account from the Company and otherwise observes corporate formalities and has
a separate business office from the Company;
(c) the financial statements and books and records of the
Seller prepared after the Closing Date will reflect the separate existence of
the Company;
(d) the Seller maintains its assets separately from the assets
of the Company (including through the maintenance of a separate bank account),
the Seller's funds and assets, and records relating thereto, have not been and
are not commingled with those of the Company and the separate creditors of the
Company will be entitled to be satisfied out of the Company's assets prior to
any value in the Company becoming available to the Company's equity-holders or
the Seller's creditors;
(e) all business correspondence of the Seller and other
communications are conducted in the Seller's own name and on its own stationery;
and
(f) the Company does not act as an agent of the Seller in any
capacity and the Seller does not act as agent for the Company, but instead
presents itself to the public as a corporation separate from the Company;
provided that the Seller is the Servicer hereunder and under agreements
substantially the same as this Agreement.
2.24 Sale Treatment. The Seller will treat the transfer to the
Company of the Leases and the Lease Receivables as a sale for reporting and
accounting purposes and the Seller will treat the transfer to the Company of its
interest in the Equipment as a contribution for reporting and accounting
purposes.
2.25 Leases are Chattel Paper. Each Lease agreement is
"chattel paper" within the meaning of the Uniform Commercial Code in the states
of New York and New Jersey.
SECTION 3. ADMINISTRATION OF LEASES
3.01 Servicer to Act. (a) Notwithstanding the transfers and
assignments of the Leases (including the right to receive all payments due or to
become due thereunder) and the related interests in the Equipment contemplated
hereby, the Servicer, for the benefit of the Company, will service and
administer each Lease in accordance with the terms thereof and of this Sales and
Servicing Agreement. The Servicer shall take, or cause to be taken, all such
actions
15
as may be necessary or advisable to service, administer and collect each Lease
from time to time, all in accordance with (i) customary and prudent servicing
procedures for leases of a similar type, (ii) all applicable laws, rules and
regulations, and (iii) without limitation as to its obligations under the
preceding clauses (i) and (ii), no less a standard of care than that which it
applies to Leases it services for its own account. The Servicer shall provide
the Lessees with appropriate invoices and such other notices as may be required
to ensure that all Lease Payments, Casualty Payments and Termination Payments on
or in respect of each Lease are remitted by the Lessees to the address specified
by the Servicer. The Servicer shall deposit such payments to the Collection
Account within two Business Days of the receipt thereof. Any other amount
received by the Servicer from time to time from the Seller, the Company or any
Lessee which is or is intended to be subject to the Lien of the Indenture shall
be held in trust by the Servicer, as agent for the Trustee and promptly turned
over to the Trustee or deposited into the Collection Account for application in
accordance with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and
authority to do, subject only to the specific requirements and prohibitions of
this Sales and Servicing Agreement, any and all things in connection with the
servicing and administration of the Leases and the interests in the Equipment
which are consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Company, the Trustee and the holders of the Notes, subject at all times to the
provisions of the Indenture, without regard to any relationship which the
Servicer or any Affiliate of the Servicer may otherwise have with a Lessee. The
Servicer shall at all times act in accordance with the provisions of each Lease,
and shall observe and comply with all requirements of law applicable to it.
Except as permitted by the terms of any Lease following a default thereunder,
the Servicer shall not take any action which would result in the interference
with the Lessee's right to quiet enjoyment of the Equipment subject to the Lease
during the term thereof. The Servicer shall exercise with respect to each item
of Equipment all rights and remedies it, the Company or the Trustee shall have
against any vendor of the Equipment, subject to the provisions of any Lease, and
shall promptly pay all amounts realized from such actions to the Trustee for
deposit in the Collection Account.
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(c) Without limiting the generality of the foregoing, the
Servicer agrees to (i) invoice each Lessee monthly (except quarterly,
semi-annually or annually in the case of Leases which provide for quarterly,
semi-annual or annual Lease Payments, respectively) for all Lease Payments
required to be paid by such Lessee in such manner and to the same extent as the
Servicer does with respect to leases held for its own account, (ii) maintain
with respect to each Lease and each item of Equipment, and with respect to each
payment by each Lessee and compliance by each Lessee with the provisions of each
Lease, complete and accurate records in the same form and to the same extent as
the Servicer does with respect to leases and equipment held for its own account
(which records shall be at least as complete and accurate as those maintained by
the Servicer as of the date of this Sales and Servicing Agreement), and (iii)
from time to time execute, deliver and file (or cause the same to be done), and
the Servicer is hereby authorized and empowered to execute, deliver, and file on
behalf of the Company and the Trustee, any and all tax returns with respect to
sales, use, personal property and other taxes (other than corporate income tax
returns) and any and all reports or licensing applications required to be filed
in any jurisdiction with respect to any Lease or any item of Equipment and any
and all required Financing Statements and assignments of Financing Statements
and such additional Financing Statements and continuation statements with
respect thereto as may from time to time be necessary because of Lease
substitutions, equipment replacements in accordance with the provisions of any
Lease or otherwise so that the security interest contemplated by the Indenture
in favor of the Trustee in each of the Leases, at all times will be perfected by
such filings with the appropriate Uniform Commercial Code filing offices. The
Seller and the Servicer agree to file Financing Statements on Form UCC-1 to
perfect the security interest of the Trustee in the Leases and the Lease
Payments, and to the extent provided herein, the Equipment.
(d) The Servicer will maintain, or cause to be maintained,
with respect to the Leases and the Equipment casualty and liability insurance in
amounts at least as great as those described in Section 2.04(f). Each such
casualty and liability policy (i) if maintained by the Servicer, shall name the
Company and Trustee as loss payees or additional insureds and (ii) if maintained
by the Lessee, shall name the Servicer or the Trustee as loss payee and
additional insured; provided that the Servicer shall cause all such policies to
name the Trustee and the Company as loss payees and additional insureds if (A)
the Seller is no longer the Servicer, (B) an Event of Default shall have
occurred and be continuing or (C) a Servicer Event of Default shall have
occurred and be continuing.
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(e) On or prior to the Closing Date, the Servicer will file
the Financing Statements and assignments of Financing Statements in accordance
with the Filing Requirements and thereafter will file such additional Financing
Statements and continuation statements and assignments with respect to the
Leases as may be necessary because of equipment replacements in accordance with
the provisions of any Lease, purchases of Additional Leases in accordance with
Section 9 and Lease substitutions pursuant to Section 9 hereof or otherwise so
that (i) the ownership interest contemplated by this Agreement in favor of the
Company and the security interest contemplated by the Indenture in favor of the
Trustee in each of the Leases will be perfected by such filings with the
appropriate Uniform Commercial Code filing offices and (ii) the security
interest contemplated by the Indenture in favor of the Trustee in Equipment
subject to Leases having a Discounted Present Value of at least 75% of the
aggregate Discounted Present Value of the Leases as of June 1 and December 1 of
each year following the Closing Date and Equipment relating to not less than 75%
of the Booked Residual Value of such Equipment as of June 1 and December 1 of
each year following the Closing Date will be perfected by such filings with the
appropriate Uniform Commercial Code filing offices.
(f) The Servicer shall pay the Excess Copy Charges and Fee Per
Scan Charges, if any, owing the related vendor in a timely fashion.
3.02 Lease Amendments and Modifications. In performing its
obligations hereunder, the Servicer may, acting in the name of the Company and
without the necessity of obtaining the prior consent of the Company or the
Trustee, enter into and grant modifications, waivers and amendments to the terms
of any Lease except for modifications, waivers or amendments that (a) are
inconsistent with the servicing standards set forth in Section 3.01 above, (b)
would reduce the amount or extend the time for payment of any Lease Payment,
Casualty Payment or Termination Payment to be made under a Lease (other than to
permit termination of a Lease which does not otherwise provide for termination
by requiring the payment, in lieu of all future Lease Payments with respect to
the Lease or Equipment subject thereto, an amount which equals or exceeds the
Lease Repurchase Amount for such Lease as of such date) or the Lessee's absolute
and unconditional obligation to make payment of the same, (c) would reduce or
adversely affect the Lessee's obligation to maintain, service, insure and care
for the Equipment or would permit the alteration of any item of Equipment in any
way which could adversely affect its present or future value or (d) otherwise
could adversely affect the interests of any of the Company, the Trustee or the
holders of the Notes.
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In addition, following the transfer of any Lease to the
Company in accordance herewith, the Servicer may make adjustments to such Lease
which modify one or more terms of such Lease, such as payment amount or payment
date. Such administrative adjustments may result in a re-booking of such Lease
and the assignment of a new Lease number, but will not be considered to be a
substitution or prepayment of such Lease. Except to the extent the Seller
substitutes a Substitute Lease therefor in accordance with Section 9 hereof, the
Servicer may permit such adjustments so long as the following conditions
precedent have been satisfied:
(i) after giving effect to such adjustments
and any additions and substitutions pursuant to Section 9, the
aggregate Booked Residual Value of such Leases will not be
less than 90% of the aggregate Booked Residual Value of the
Leases adjusted, replaced or substituted since the Issuance
Date.
(ii) after giving effect to such adjustment,
either the final payment on such Lease must be on or prior to
April 2005 or, to the extent the final payment on such Lease
is due subsequent to April 2005, only scheduled payments due
on or prior to such date may be included in the Discounted
Present Value of such Lease for the purpose of making any
calculation under the Indenture.
(iii) after giving effect to such adjustments
and any additions and substitutions pursuant to Section 9 the
aggregate amount of Lease Payments through the term of the
Leases (including the Substitute Leases and the Additional
Leases) will not be materially less than the aggregate
scheduled Lease Payments of the Leases prior to such
adjustment, substitution or addition.
(iv) after giving effect to such adjustments,
additions and substitutions, the Discounted Present Value of
the Performing Leases must not be less than the Discounted
Present Value of the Performing Leases prior to such
adjustment, addition and substitution.
3.03 Non-Performing Leases. (a) Upon receipt of notice from
the Company, the Trustee or any other Person, or if the Servicer otherwise
learns that any Lease is a Non-Performing Lease, the Servicer will take such
action as is appropriate, consistent with the Servicer's administration of
leases in its own portfolio and consistent
19
with the customary practices of servicers in the equipment leasing industry,
including such action as may be necessary to cause, or attempt to cause, the
Lessee thereunder to cure such non-performance (if the same may be cured) or to
terminate or attempt to terminate such Lease and to recover, or attempt to
recover, all damages resulting from such default. The Servicer shall demand, on
behalf of the Company, that the Seller immediately repay any Inter-Company Loan
representing the advance pursuant to Section 13.01 hereof of any security
deposit with respect to any Lease which becomes a Non-Performing Lease, and the
Servicer shall apply such security deposit in accordance with Section 3.03(d)
hereof.
(b) The Servicer will use its best efforts to sell or lease
any Equipment upon the expiration or early termination of a Lease or 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 the event of an early lease
termination, any substitute Lease must have a Discounted Present Value equal to
or greater than that of the terminated Lease and monthly payments at least equal
to those of the terminated Lease through the remaining term of such terminated
Lease.
(c) In the event that the Servicer is required to sell or
lease any item of Equipment pursuant to the provisions of this Section 3.03 at a
time when the Servicer has other similar items of equipment available to it, the
Servicer will not favor any such other item in its remarketing efforts.
(d) All amounts realized by the Servicer in the performance of
its duties hereunder with respect to any Lease or Equipment remaining subject to
the Lien of the Indenture (net of the Servicer's actual out-of-pocket expenses
reasonably incurred in such realization) shall be held in trust by the Servicer,
as agent for the Trustee and deposited into the Collection Account for
application in accordance with the provisions of the Indenture; provided that,
to the extent that (i) the Servicer has made any advances pursuant to Section
4.01 hereof with respect to any Lease which thereafter became a Non-Performing
Lease, and (ii) the Servicer has not otherwise been fully reimbursed for such
advances or payments, the Servicer shall reimburse itself for such advances or
payments from any amounts recovered with respect to such Non-Performing Lease
before depositing any such amounts pursuant to this Section 3.03(d).
3.04 Costs of Servicing; Servicing Fee; Administrative
Expenses. (a) All costs of servicing each Lease in the manner required by this
Section 3 shall be
20
borne by the Servicer, but the Servicer shall be entitled to retain, out of any
amounts actually recovered by the Servicer in the performance of its obligations
under Section 3.03 hereof with respect to any Lease or the interests in the
Equipment subject thereto, the Servicer's actual out-of-pocket expenses
reasonably incurred in the course of such performance with respect to such Lease
or the interests in the Equipment. (For all purposes of this Section 3 the
Servicer's "out-of-pocket expenses" means only those expenses incurred to third
parties (e.g., reasonable fees of outside counsel in a collection suit) and not
salaries, operating costs, overtime wages and other such "overhead" costs or
expenses of the Servicer.) In addition, the Servicer shall be entitled to
receive from the Company on each Payment Date following the Closing Date a
servicing fee (the "Servicing Fee") in the amount described in paragraph (b)
below.
(b) The amount of the Servicing Fee which the Servicer shall
be entitled to receive on each Payment Date following the original issuance of
the Notes shall be determined by multiplying the Outstanding Principal Amount of
the Notes at the Determination Date for such Payment Date times one-twelfth of
0.75%.
(c) The Servicer agrees to pay, out of the Servicing Fee, all
Trustee's Fees and expenses in connection with the Notes (including the expenses
relating to the preparation and delivery of reports to Noteholders) and all fees
of accountants in connection with the Notes.
3.05 Other Transactions. Nothing in this Sales and Servicing
Agreement shall preclude the Seller or the Servicer from entering into other
leases or other financial transactions with any Lessee or selling or discounting
any such lease with any Person.
SECTION 4. SERVICER ADVANCES AND SELLER'S
SUPPORT
4.01 Late Lease Payments. On each Determination Date, the
Servicer may, but will not be required to, advance and remit to the Trustee, in
such manner as will ensure that the Trustee will have immediately available
funds on account thereof by 11:00 a.m. New York City time on the second Business
Day prior to the next succeeding Payment Date, an amount (a "Servicer Advance")
equal to any Lease Payment due during the prior Lease Payment Period but unpaid
prior to such Determination Date with respect to any Lease. In consideration of
each Servicer Advance the Servicer will be entitled to retain any late payment
fees recovered from the Lessee with respect to any Lease Payment covered by a
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Servicer Advance. In addition, the Servicer will be reimbursed for Servicer
Advances from funds in the Collection Account in accordance with the Indenture
on the second following Payment Date.
4.02 Early Termination Leases. Following the Determination
Date as of which any Lease first becomes an Early Termination Lease the Seller
may, but shall have no obligation to, either (a) substitute one or more Eligible
Leases and the Equipment subject thereto for such Lease and the Equipment
subject thereto pursuant to Section 9 hereof (if the Seller is then entitled to
substitute Leases and Equipment in accordance with the provisions of Section
9.01 hereof) on or before the second Business Day prior to the next succeeding
Payment Date, (b) repurchase from the Company such Lease and the related
Equipment by remitting to the Trustee an amount equal to the Lease Repurchase
Amount in such manner as will ensure that the Trustee will have immediately
available funds therefor by 11 a.m. New York City time on the second Business
Day prior to the next succeeding Payment Date or (c) offer for sale to the
Company one or more Additional Leases in consideration of the proceeds thereof
in accordance with Section 9 hereof. Any Early Termination Lease and the
Equipment subject thereto which is repurchased, or for which Additional Leases
have been purchased or Substitute Leases transferred, pursuant to this Section
4.02 shall nevertheless remain subject to the Lien of the Indenture until such
time as an Additional Lease or Additional Leases have been purchased or
Substitute Lease or Substitute Leases have been transferred in accordance with
the provisions of Section 9 hereof or the Lease Purchaser Amount has been
deposited into the Collection Account. A Lease will be considered to be an
"Eligible Lease" if on the date such Lease is substituted for or added in
replacement of an Early Termination Lease, such Lease satisfies the
representations and warranties set forth in Section 2.04(a) through (r) and the
requirements of Section 9 hereof.
4.03 Indemnification. The Seller, as Seller and in its
capacity as Servicer, agrees to indemnify and hold harmless the Company, the
Servicer, the Trustee and each holder of the Notes (each an "Indemnified Party")
against any and all liabilities, losses, damages, penalties, costs and expenses
(including costs of defense and legal fees and expenses) which may be incurred
or suffered by such Indemnified Party (except to the extent arising out of the
gross negligence or willful misconduct on the part of the Indemnified Party) as
a result of claims, actions, suits or judgments asserted or imposed against it
and arising out of the transactions contemplated hereby or by the Indenture,
including, without limitation, any claims resulting from any use, operation,
maintenance, repair, storage or
22
transportation of any item of Equipment, whether or not in the Servicer's
possession or under its control pursuant to this Sales and Servicing Agreement,
and any tort claims and any fines or penalties arising from any violation of the
laws or regulations of the United States or any state or local government or
governmental authority; provided that the foregoing indemnity shall in no way be
deemed to impose on the Seller any obligation, other than to the extent
specifically set forth in this Section 4, to make any payment with respect to
principal or interest on the Notes or to reimburse the Company for any payments
on account of the Notes. This Section 4.03 shall bind any successor Servicer
hereunder.
4.04 Repurchases; Other Payments. (a) In the event that (i)
any of the representations or warranties made by the Seller in Sections 2.04 and
2.05 hereof with respect to any of the Leases or the Equipment subject thereto
proves at any time to have been inaccurate in any material respect as of the
Closing Date or related transfer date, as the case may be or (ii) any Lease
shall be terminated in whole or in part by a Lessee, or any amounts due with
respect to any Lease shall be reduced or impaired, as a result of any action or
inaction by the Seller (other than any such action or inaction of the Seller,
when acting as Servicer, in connection with the enforcement of any Lease in a
manner consistent with the provisions of this Sales and Servicing Agreement) or
any claim by any Lessee against the Seller and, in any such case, the event or
condition causing such inaccuracy, termination, reduction, impairment or claim
shall not have been cured or corrected within 30 days after the earlier of the
date on which the Seller is given notice thereof by the Company or the Trustee
or the date on which the Seller otherwise first has notice thereof, the Seller
will repurchase such Lease and the Equipment subject thereto by paying to the
Trustee, not later than the third Business Day after the Determination Date next
following the expiration of such 30-day period with respect to the events
referenced in Section 4.04(a)(i) and (ii), an amount equal to the Lease
Repurchase Amount, and simultaneously with such repurchase, the Seller shall
reimburse the Servicer for all amounts, if any, theretofore advanced by the
Servicer pursuant to Section 4.01 with respect to such Lease. Without limiting
the generality of the foregoing, it is agreed and understood that for purposes
of this Section 4.04, any inaccuracy in any representation or warranty with
respect to (i) the priority of the Lien of the Indenture with respect to any
Lease or (ii) the amount (if less than represented) of the Lease Payments,
Casualty Payments or Termination Payment under any Lease shall be deemed to be
material.
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(b) By the Closing Date, the Seller agrees to obtain and
provide to the Trustee UCC searches against it and the Company from the central
filing offices in New Jersey confirming the absence of any UCC filings against
either the Seller or the Company with respect to the Leases (including the right
to receive all payments due or to become due thereunder) and the Equipment,
other than those naming the Company as the purchaser of the Leases or the
Trustee as secured party. If any searches delivered pursuant to this Section
4.05(b) disclose UCC filings (which are not in the process of being released
pursuant to releases delivered on the Closing Date) against the Company or the
Seller with respect to Leases of Equipment the Discounted Present Value of which
(i) is greater than 2% but less than 5% of all the Leases, then the Seller shall
cause searches to be made in additional states within 30 days following such
disclosure so that the Discounted Present Value of Leases of Equipment in states
where searches have been performed exceeds 75% of the aggregate Discounted
Present Value of all Leases and 75% of the Booked Residual Value of Equipment or
(ii) is greater than 5% of all the Leases then the Seller shall cause searches
to be made in additional states within 30 days following such disclosure so that
the Discounted Present Value of Leases of Equipment in states where such
searches have been performed equals 100% of the aggregate Discounted Present
Value of all Leases. Without limiting the provisions of Section 4.04(a) or this
Section 4.04(b), in the event the Seller fails to provide any such searches
required by the preceding sentences of this Section 4.05(b) within the required
time period or any search reveals the existence of any conflicting Liens (which
are not removed within 30 days of receipt of such search), the Seller shall be
required to repurchase not later than the third Business Day after the
Determination Date following the expiration of the time period during which such
search was to be obtained or such Lien released, as the case may be, any Lease
of Equipment in any such state for which such searches are not provided or with
respect to which conflicting Liens are found to exist at the Lease Repurchase
Amount for such Lease.
(c) The Seller's obligations under this Section 4.04 are the
full recourse obligations of the Seller and shall in no way be limited or
discharged by the application of any funds constituting part of the Trust
Estate.
4.05 Payment Advices. Each payment by the Seller or the
Servicer to the Trustee pursuant to any of the provisions of this Sales and
Servicing Agreement shall be accompanied by written advice containing sufficient
information to identify the Lease and/or Equipment to which such payment
relates, the Section of this Sales and Servicing Agreement pursuant to which
such payment is made,
24
and the proper application pursuant to the provisions of the Indenture of the
amounts being paid.
SECTION 5. INFORMATION TO BE PROVIDED
5.01 Monthly Status Reports; Servicing Reports. (a) Within
five Business Days following each Payment Date, the Servicer will send to the
Trustee (copies of which the Trustee shall send to each Rating Agency and to
each holder of the Notes as provided in the Indenture) a written report, signed
by one of the Servicer's financial officers, (i) identifying each Lease with
respect to which any Lease Payment was 30 or more days overdue as of the end of
the immediately preceding Lease Payment Period, the Discounted Present Value of
such Lease as of such Payment Date, the amount advanced by the Servicer with
respect to such Lease pursuant to Section 4.01 hereof since the Servicer's
previous monthly report (or, in the case of the first such report, since the
Cut-Off Date), (ii) identifying each Lease with respect to which any Lease
Payment was 60 or more days overdue as of the end of the immediately preceding
Lease Payment Period, the Discounted Present Value of such Lease as of such
Payment Date, the amount advanced by the Servicer with respect to such Lease
pursuant to Section 4.01 hereof since the Servicer's previous monthly report
(or, in the case of the first such report, since the Closing Date), (iii)
identifying each Lease with respect to which any Lease Payment was 93 or more
days overdue as of the end of the immediately preceding Lease Payment Period,
the Discounted Present Value of such Lease as of such Payment Date, the amount
advanced by the Servicer with respect to such Lease pursuant to Section 4.01
hereof since the Servicer's previous monthly report (or, in the case of the
first such report, since the Closing Date), (iv) identifying each Lease which
became a Non-Performing Lease as of the preceding Determination Date and
specifying the Discounted Present Value of such Lease as of such Determination
Date (or, in the case of the first such report, subsequent to the Cut-Off Date)
and the aggregate Discounted Present Value of all such Non-Performing Leases,
(v) indicating the aggregate amount recovered by the Servicer subsequent to the
preceding Payment Date (or, in the case of the first Payment Date, subsequent to
the Cut-Off Date) and on or prior to such Payment Date with respect to Lease
Delinquency Payments and Non-Performing Lease Payments previously made by the
Seller and the Servicer (and the specific amounts so recovered with respect to
any Non-Performing Lease) and (vi) indicating the Residual Realizations, the
Available Residual Amount and the Utilized Residual Amount as of the related
Determination Date. Each such report shall also describe generally what action
or actions the Servicer is then taking or proposes to take to recover from the
appropriate Lessees any amounts
25
previously paid by the Servicer to the Trustee pursuant to Section 4.01 hereof.
(b) On the Business Day following the Determination Date, the
Servicer shall deliver to the Trustee a certificate signed by an officer of the
Servicer (a "Servicing Report") stating the date and in the form of Exhibit C
hereto.
(c) The Servicing Report shall include, among other items, the
total amount of all Lease Payments, Casualty Payments, Termination Payments,
Non-Performing Lease Payments, Similar Transaction Payments and Other Lease
Payments received by the Servicer and deposited in the Collection Account prior
to such Determination Date and on or subsequent to the Determination Date
preceding such Determination Date (or, in the case of the first Determination
Date, on or subsequent to the Cut-Off Date). Such report shall indicate the
amount of all Lease Payments received by the Servicer and deposited in the
Collection Account which are for any Lease Payment Period other than the Lease
Payment Period for such Determination Date and shall identify each Lease with
respect to which a Casualty Payment, Termination Payment or Non-Performing Lease
Payment was made during such time period. Such report shall also indicate (i)
the aggregate amount paid by the Servicer on or subsequent to the most recent
Determination Date with respect to Non-Performing Leases pursuant to Section
4.01 hereof, and (ii) the aggregate amount reimbursed to the Servicer prior to
the most recent Determination Date and on or subsequent to the Determination
Date preceding such Determination Date (or, in the case of the first
Determination Date, on or subsequent to the Cut-Off Date) for actual cash
payments made by the Servicer with respect to Non-Performing Leases pursuant to
Section 4.01 hereof. The Servicer hereby represents and warrants that such
calculations will be correct and accurate, and the Servicer shall be fully
responsible for, and shall reimburse and indemnify each Indemnified Party for,
any loss resulting from such Indemnified Party's reliance on any such
calculations which are not correct.
(d) If the Servicer intends to withdraw any funds from the
Collection Account in accordance with Section 3.02(b) of the Indenture after the
Payment Date relating to the Determination Date for which a Servicing Report is
submitted, the Servicer shall submit with such report a certificate (i) setting
forth the amounts to be withdrawn (on an item-by-item basis), (ii) stating that
none of such amounts are all or part of any Lease Payment, Lease Delinquency
Payment, Non-Performing Lease Payment, Casualty Payment or Termination Payment,
and (iii) identifying the lease or leases to which such amounts relate.
26
5.02 Annual Independent Public Accountant's Report. The
Servicer shall cause a firm of independent public accountants (who may also
render other services to the Servicer or to the Seller) to deliver to the
Trustee, with a copy to each Rating Agency, within 135 days following the end of
each fiscal year of the Servicer, beginning with the Servicer's fiscal year
ending December 31, 1997, a written statement to the effect that such firm has
(a) obtained from the Servicer a copy of the monthly status report pursuant to
Section 5.01 for a single month during the previous calendar year; (b) compared
the information contained in such monthly status report and in the monthly
summaries prepared by the Servicer in support of such monthly status report to
the computer printouts and accounts prepared by the Servicer and supporting such
reports; and (c) selected, at random, at least twenty-five Leases included in
the Trust Estate and compared the activity in the files maintained by the
Servicer for such Leases to the activity as reported for those Leases to the
monthly summaries prepared by the Servicer and supporting the monthly status
report, and that, on the basis of such examination and comparison, such firm is
of the opinion that the Servicer has prepared such monthly status report and
summaries in agreement with the computer printouts, accounts and individual
Lease files, except in each case for (x) such exceptions as such firm shall
believe to be immaterial and (y) such other exceptions as shall be set forth in
such statement.
SECTION 6. THE SERVICER
6.01 Merger or Consolidation of the Servicer. The Servicer
will keep in full force and effect its existence, rights and franchise as a
corporation under the laws of its jurisdiction of incorporation and will
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is necessary to protect the validity
and enforceability of any of the Leases or to permit performance of the
Servicer's duties under this Sales and Servicing Agreement.
The Servicer shall not merge or consolidate with any other
Person unless (i) the entity surviving such merger or consolidation is a
corporation organized under the laws of the United States or any jurisdiction
thereof and (ii) the surviving entity, if not the Servicer, shall execute and
deliver to the Company, the Servicer and the Trustee, in form and substance
satisfactory to each of them, (a) an instrument expressly assuming all of the
obligations of the Servicer hereunder and (b) an opinion of counsel to the
effect that such Person is a corporation of the type
27
described in the preceding clause (i) and has effectively assumed the
obligations of the Servicer hereunder.
6.02 Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer shall incur any liability to the Company, the Trustee or the
holders of the Notes for any action taken or not taken in good faith pursuant to
the terms of this Sales and Servicing Agreement with respect to any Lease
(including any Non-Performing Lease) or the Equipment subject thereto; provided,
however, that this provision shall not protect the Servicer or any such person
against any breach of warranties, representations or covenants made by it herein
or in any certificate delivered in conjunction with the purchase of the Notes or
for any liability which would otherwise be imposed for any action or inaction
resulting from willful misconduct or bad faith or for negligence in the
performance or nonperformance of its duties hereunder.
6.03 Servicer Not to Resign or Be Removed. The Servicer
shall not resign from the servicing obligations and duties hereby imposed on it
except upon determination that such duties hereunder are no longer permissible
under applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced by an opinion of independent counsel to the
Servicer, in form and substance satisfactory to the holders of the Notes, to
such effect delivered to the Trustee.
Except as provided in Section 8.02 hereof, the Servicer shall
not be removed or be replaced as Servicer with respect to any Lease or any of
the Equipment.
No resignation or removal of the Servicer shall in any event
(i) become effective until the Trustee or a successor servicer shall have
assumed the Servicer's servicing responsibilities and obligations in accordance
with Section 8.02 hereof, or (ii) affect the Seller's obligations pursuant to
Section 4 hereof.
6.04 Financial and Business Information. The Servicer will
deliver to the Company and the Trustee upon receipt thereof shall deliver to
each Rating Agency and upon request, to any holder of outstanding Notes
evidencing not less than 25% of the Outstanding Principal Amount of the
Notes (and, upon the request of any holder of outstanding Notes, to any
prospective transferee of any Notes) and, in the case of subsection (c) below:
(a) Quarterly Statements - within 45 days after the end of
each of the first three quarterly fiscal periods in each fiscal year of the
Servicer, a copy of:
28
(1) a consolidated balance sheet of the Servicer (or its
parent) and its consolidated subsidiaries at the end of such quarter,
and
(2) consolidated statements of income, retained earnings and
cash flow of the Servicer (or its parent) and its consolidated
subsidiaries for that quarter and for the portion of the fiscal year
ending with such quarter,
accompanied by a certificate signed by a principal financial officer of the
Servicer stating that such financial statements present fairly the financial
condition of the Servicer and its consolidated subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Annual Statements - within 135 days after the end of each
fiscal year of the Servicer, a copy of:
(1) a consolidated balance sheet of the Servicer (or its
parent) and its consolidated subsidiaries, at the end of that year,
and
(2) consolidated statements of income, retained earnings and
cash flow of the Servicer (or its parent) and its consolidated
subsidiaries for that year, setting forth in each case in comparative
form the figures for the previous fiscal year,
all in reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants of recognized national standing stating that such
financial statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and footnote), and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(c) Notice of Servicer Event of Default - immediately upon
becoming aware of the existence of any condition or event which constitutes a
Servicer Event of Default, a written notice, by certified mail return receipt
requested, hand delivery or overnight courier, describing its nature and period
of existence and what action the Servicer is taking or proposes to take with
respect thereto;
29
(d) SEC and Other Reports - promptly upon their becoming
available, one copy of each report (including the Servicer's annual report to
shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy statement,
registration statement, prospectus and notice filed with or delivered to any
securities exchange, the Securities and Exchange Commission or any successor
agencies; and
(e) Report on Proceedings - promptly upon the Servicer's
becoming aware of
(1) any proposed or pending investigation of it by any
governmental authority or agency, or
(2) any court or administrative proceeding which involves or
may involve the possibility of materially and adversely affecting the
properties, business, prospects, profits or conditions (financial or
otherwise) of the Servicer, a written notice specifying the nature of
such investigation or proceeding and what action the Servicer is taking
or proposes to take with respect thereto and evaluating its merits; and
(f) Requested Information - with respect to the Class C Notes,
with reasonable promptness, any other data and information which may be
reasonably requested from time to time, including, without limitation, any
information required to be made available at any time to any prospective
transferee of any Notes in order to satisfy the requirements of Rule 144A under
the Securities Act of 1933, as amended.
6.05 Officers' Certificates. With each set of financial
statements delivered pursuant to Section 6.04, the Servicer will deliver an
Officers' Certificate stating (i) that the officers signing such Officers'
Certificate have reviewed the relevant terms of this Sales and Servicing
Agreement and have made, or caused to be made under such officers' supervision,
a review of the activities of the Servicer during the period covered by the
statements then being furnished, (ii) that the review has not disclosed the
existence of any Servicer Event of Default or, if a Servicer Event of Default
exists, describing its nature and what action the Servicer has taken and is
taking with respect thereto, and (iii) that on the basis of such review the
officers signing such certificate are of the opinion that during such period the
Servicer has serviced the Leases in compliance with the procedures hereof except
as described in such certificate.
6.06 Inspection. The Servicer will permit, on reasonable
prior notice, the representatives of the Company and the Trustee and the holder
of any Notes evidencing not
30
less than 25% of the Outstanding Principal Amount of any class of Notes to
examine all of the books of account, records, reports and other papers of the
Servicer, to make copies and extracts therefrom, and to discuss the Servicer's
affairs, finances and accounts with its officers, employees and independent
public accountants (and by this provision the Servicer authorizes said
accountants to discuss the finances and affairs of the Servicer) all at such
reasonable times and as often as may be reasonably requested for the purpose of
reviewing or evaluating the financial condition or affairs of the Servicer or
the Servicer's performance of its duties and obligations hereunder. Any expense
incident to the exercise by the Company, the Trustee, or any holder of the Notes
during the continuance of any Servicer Event of Default, or any event or
condition which with the giving of notice or the lapse of time or both would
become a Servicer Event of Default, of any right under this Section 6.06 shall
be borne by the Servicer.
6.07 Servicer Records. The Servicer will indicate in its
records that it is servicing and administering each Lease in its capacity as
Servicer hereunder, and to the extent it is in possession of any original Lease
agreement, will hold such Lease, subject to the provisions of the Indenture as
Custodian for the Trustee.
SECTION 7. THE SELLER
7.01 Merger or Consolidation of the Seller. The Seller will
keep in full force and effect its existence, rights and franchise as a
corporation under the laws of its jurisdiction of incorporation and will
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is necessary to protect the validity
and enforceability of any of the Leases or to permit performance of the Seller's
duties under this Sales and Servicing Agreement.
The Seller shall not merge or consolidate with any other
Person unless (i) the entity surviving such merger or consolidation is a
corporation organized under the laws of the United States or any jurisdiction
thereof and (ii) the surviving entity, if not the Seller, shall execute and
deliver to the Company, the Servicer and the Trustee, in form and substance
satisfactory to each of them, (a) an instrument expressly assuming all of the
obligations of the Seller hereunder and (b) an opinion of counsel to the effect
that such Person is a corporation of the type described in the preceding clause
(i) and has effectively assumed the obligations of the Seller hereunder.
31
7.02 Control of Company. So long as any of the Notes or the
other obligations secured by the Indenture remain outstanding, the Seller will
not (i) sell, pledge or otherwise transfer any of the capital stock in the
Company held by the Seller or (ii) vote such stock in favor of any amendment to
or alteration of the certificate of incorporation of the Company. In furtherance
of the Seller's negative covenant pursuant to clause (i) of the preceding
sentence, the Seller will deliver to the Trustee on the Closing Date each
certificate representing any share of the capital stock of the Company held by
the Seller, and the Seller will promptly deliver to the Trustee upon receipt by
the Seller each certificate representing any additional shares of the capital
stock of the Company at anytime thereafter received by the Seller.
7.03 Financial and Business Information. The Seller will
deliver to the Company and the Trustee and upon receipt thereof the Trustee
shall deliver to each Rating Agency and upon request, to any holder of
outstanding Notes evidencing not less than 25% of the Outstanding Principal
Amount Notes (and, upon the request of any holder of outstanding Notes, to any
prospective transferee of any Notes):
(a) Notice of Servicer Event of Default - immediately upon
becoming aware of the existence of any condition or event which
constitutes a Servicer Event of Default, a written notice (with a copy
to each Rating Agency) describing its nature and period of existence
and what action the Seller is taking or proposes to take with respect
thereto;
(b) SEC and Other Reports - promptly upon their becoming
available, one copy of each report (including the Seller's annual
report to shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy
statement, registration statement, prospectus and notice filed with or
delivered to any securities exchange, the Securities and Exchange
Commission or any successor agencies;
(c) Report on Proceedings - promptly upon the Seller's
becoming aware of
(1) any proposed or pending investigation of it by any
governmental authority or agency, or
(2) any court or administrative proceeding,
which involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects,
32
profits or condition (financial or otherwise) of the Seller, a written notice
specifying the nature of such investigation or proceeding and what action the
Seller is taking or proposes to take with respect thereto and evaluating its
merits;
(d) XXXXX - (i) promptly and in any event within ten days
after the Seller knows or has reason, to know of the occurrence of a
Reportable Event with respect to a Pension Plan with regard to which
notice must be provided to the PBGC, a copy of such materials required
to be filed with the PBGC with respect to such Reportable Event and in
each such case a statement of the chief financial officer of the Seller
setting forth details as to such Reportable Event and the action which
the Seller proposes to take with respect thereto; (ii) at least ten
days prior to the filing by any plan administrator of a Pension Plan of
a notice of intent to terminate such Pension Plan, a copy of such
notice; (iii) upon request of the Company and the Trustee, and in no
event more than ten days after such request, copies of each annual
report which is filed on Form 5500, together with certified financial
statements for the Pension Plan (if any) as of the end of such year and
actuarial statements on Schedule B to such Form 5500; (iv) promptly and
in any event within ten days after it knows or has reason to know of
any event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Pension Plan, a statement of the chief financial
officer of the Seller describing such event or condition; (v) promptly
and in no event more than ten days after receipt thereof by the Seller
or any Related Person, each notice received by the Seller or any
Related Person concerning the imposition of any withdrawal liability
under Section 4202 of ERISA; and (vi) promptly after receipt thereof a
copy of any notice the Seller or any Related Person may receive from
the PBGC or the Internal Revenue Service with respect to any Pension
Plan; provided, however, that this subsection (vi) shall not apply to
notices of general application promulgated by the PBGC or the Internal
Revenue Service or notices which would not require any material payment
by the Seller or any Related Person; and
(e) Requested Information - with reasonable promptness, any
other data and information which may be reasonably requested from time
to time.
7.04 Officers' Certificates. With each set of financial
statements delivered pursuant to Section 7.03, the Seller will deliver an
Officers' Certificate stating that
33
the officers signing such Certificate have reviewed the relevant terms of this
Sales and Servicing Agreement and have made, or caused to be made under such
officers' supervision, a review of the activities of the Seller during the
period covered by the income statements then being furnished and, so long as the
Seller is Servicer hereunder, that the review has not disclosed the existence of
any Servicer Event of Default or, if a Servicer Event of Default exists,
describing its nature and what action the Seller has taken and is taking with
respect thereto.
7.05 Inspection. The Seller will permit, on reasonable prior
notice, the representatives of the Company, the Servicer, the Trustee, or any
holder of the Notes evidencing not less than 25% of the Outstanding Principal
Amount of any class of Notes to examine all of the books of account, records,
reports and other papers of the Seller, to make copies and extracts therefrom,
and to discuss the Seller's affairs, finances and accounts with its officers,
employees and independent public accountants (and by this provision the Seller
authorizes said accountants to discuss the finances and affairs of the Seller)
all at such reasonable times and as often as may be reasonably requested for the
purpose of reviewing or evaluating the financial condition or affairs of the
Seller or the Seller's performance of its duties and obligations hereunder. Any
expense incident to the exercise by the Company, the Trustee or any holder of
the Notes during the continuance of any default by the Seller in any of its
obligations hereunder of any right under this Section 7.05 shall be borne by the
Seller.
7.06 Books and Records. The Seller will clearly mark its books
and records to reflect each sale of a Lease and contribution of the Equipment
subject thereto to the Company.
7.07 Communications. The Seller will reply to all inquiries by
third parties with respect to the transactions contemplated by this Agreement by
indicating that it has sold to the Company the Leases and contributed to the
Company its right, title and interest in the related Equipment.
SECTION 8. DEFAULT
8.01 Servicer Events of Default. The following events and
conditions shall constitute Servicer Events of Default hereunder:
(i) failure on the part of the Servicer
to deposit to the Collection Account or other
34
applicable account within three Business Days following the
receipt thereof any monies received by the Servicer
(including, without limitation, any Lease Payments and any
Non-Performing Lease Payments) and required to be deposited
hereunder;
(ii) so long as the Seller is the Servicer
hereunder, failure on the part of the Seller to pay to the
Trustee on the date when due in accordance with the terms
hereof, any payment required to be made by the Seller pursuant
to Section 4 hereof;
(iii) failure on the part of either the Servicer
or (so long as the Seller is the Servicer) the Seller to
observe or perform in any material respect any other of their
respective covenants or agreements in this Sales and Servicing
Agreement which failure continues unremedied for a period of
30 days after the earlier of (A) the date it first becomes
known to any officer of the Seller or the Servicer, as the
case may be, and (B) the date on which written notice thereof
requiring the same to be remedied shall have been given to the
Seller or the Servicer, as the case may be, by the Trustee, or
to the Seller or the Servicer, as the case may be, and the
Trustee by any holder of the Notes;
(iv) if any representation or warranty made by
the Seller in this Sales and Servicing Agreement or in any
certificate or other writing delivered pursuant hereto or made
by any successor Servicer in connection with such successor
Servicer's assumption of the duties of the Servicer shall
prove to be incorrect in any material respect as of the time
when the same shall have been made; provided, however, that
the breach of any representation or warranty made by the
Seller or Servicer in this Sales 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 the Seller in this Sales
and Servicing Agreement with respect to any of the Leases or
the Equipment subject thereto will not constitute a Servicer
Event of Default if the Seller repurchases such Lease and
Equipment in accordance with this Sales and Servicing
Agreement.
35
(v) the entry by a court having jurisdiction
in the premises of (A) a decree or order for relief in respect
of the Servicer in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (B) a decree or order
adjudging the Servicer bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of or in respect of the Servicer
under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of the Servicer or of
any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any
such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive
days;
(vi) the commencement by the Servicer of a
voluntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization, or other similar
law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Servicer in an
involuntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization, or other similar
law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, or the consent by
it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator, or similar official of the
Servicer or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or
the failure by the Servicer to pay its debts generally as they
become due, or the taking of corporate action by the Servicer
in furtherance of any such action;
(vii) the failure of the Servicer to make one or
more payments due with respect to aggregate recourse debt or
other obligations exceeding $1,000,000, 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
36
more persons to cause) more than $1,000,000 of aggregate
recourse debt or other obligations of the Servicer to become
due before its (or their) stated maturity or before its (or
their) regularly scheduled dates of payment so long as such
failure, event or condition shall be continuing and shall not
have been waived by the Person or Persons entitled to
performance; or
(viii) a final judgment or judgments (or decrees
or orders) for the payment of money aggregating in excess of
$1,000,000 and any one of such judgments (or decrees or
orders) has remained unsatisfied and in effect for any period
of 60 consecutive days without a stay of execution.
8.02 Termination. So long as a Servicer Event of Default shall
be continuing, the Trustee shall, upon the instructions of the holders of
66-2/3% in Outstanding Principal Amount of the Notes, by notice in writing to
the Servicer terminate all of the rights and obligations of the Servicer (but
not the Seller's obligations which shall survive any such termination) under
this Sales and Servicing Agreement. On the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Sales and
Servicing Agreement to take any action with respect to any Lease or Equipment
shall cease and the same shall pass to and be vested in the Trustee pursuant to
and under this Section and the Indenture; and, without limitation, the Trustee
is hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and assignment of any Lease and the related
Equipment, or otherwise.
8.03 Trustee to Act; Appointment of Successor. (a) On and
after the time the Servicer receives a notice of termination pursuant to Section
8.02 hereof, the Trustee, subject to the terms of Section 5.02 of the Indenture,
shall be the successor in all respects to the Servicer in its capacity as
servicer of the Leases under this Sales and Servicing Agreement and, to such
extent, shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof (but
not the obligations of the Seller contained in Section 4 hereof which shall
survive any such termination as above provided) and shall be entitled to receive
from the Company the Servicing Fee provided for in Section 3.04 hereof; provided
that the Trustee shall in no way be responsible or liable for any action or
actions of the
37
Servicer before the time the Servicer receives such a notice of termination.
(b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act, give notice of such
fact to each holder of the Notes and (i) appoint an established institution
satisfactory to the holders of 66-2/3% in Outstanding Principal Amount of the
Notes as the successor to the Servicer hereunder to assume all of the rights and
obligations of the Servicer hereunder, including, without limitation, the
Servicer's right hereunder to receive the Servicing Fee (but not the obligations
of the Seller contained in Section 4 hereof) or, (ii) if no such institution
satisfactory to the holders of 66-2/3% in Outstanding Principal Amount of the
Notes is so appointed within 60 days following the giving of such notice,
appoint a bank or other established institution, which has experience in
servicing lease contracts and equipment similar to the Leases and Equipment and
as to which each of S&P and DCR has indicated in writing that the appointment of
such Person, as the successor to the Servicer hereunder will not result in the
reduction or withdrawal of such Rating Agency's then-current rating of the Notes
or, (iii) if no such institution is so appointed, petition a court of competent
jurisdiction to appoint an institution meeting such criteria as the Servicer
hereunder. Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee shall cause such successor to the
Servicer to enter into a servicing agreement substantially in the form of this
Sales and Servicing Agreement except that such agreement shall not include any
of the Seller's representations, warranties or obligations and the Trustee may
make arrangements for the compensation of such successor out of payments on
Leases as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that provided for a successor to the Servicer
in Section 3.04 hereof. The Trustee shall provide Moody's with prior written
notice of the appointment of any successor to the Servicer.
8.04 Servicer to Cooperate. The Servicer hereby agrees to
cooperate with the Trustee or any successor to the Servicer appointed in
accordance with Section 8.03 hereof, as applicable, in effecting the termination
and transfer of the responsibilities and rights of the Servicer hereunder to the
Trustee or any successor to the Servicer, including, without limitation, the
execution and delivery of assignments of Financing Statements, and the transfer
to the Trustee or the successor to the Servicer for administration by it of all
cash amounts which shall at the time be held by
38
the Servicer or thereafter received with respect to the Leases. The Servicer
hereby agrees to transfer to any successor to the Servicer its electronic
records and all other records, correspondence and documents relating to the
Leases and Equipment in the manner and at such times as the successor to the
Servicer shall reasonably request. The Servicer hereby designates the Trustee
and any successor to the Servicer its agent and attorney-in-fact to execute
transfers of Financing Statements (including any and all Financing Statements
naming an individual Lessee as debtor and the Servicer as secured party) and any
other filings or instruments which may be necessary or advisable to effect such
transfer of the Servicer's responsibilities and rights hereunder.
8.05 Notification to Noteholders. Upon any such termination or
appointment of a successor to the Servicer, the Company shall cause the Trustee
to give prompt written notice thereof to each Rating Agency and to each holder
of the Notes in the manner provided in the Indenture.
8.06 Remedies Not Exclusive. Nothing in the preceding
provisions of this Section 8 shall be interpreted as limiting or restricting any
rights or remedies which the Company, the Trustee or any other Person would
otherwise have at law or in equity on account of the breach or violation of any
provision of this Sales and Servicing Agreement by the Servicer, including,
without limitation, the right to recover full and complete damages on account
thereof to the extent not inconsistent with Section 6.02 hereof.
SECTION 9. SUBSTITUTION AND ADDITION OF LEASES
9.01 Substitution and Addition. (a) Subject to the
satisfaction of the requirements set forth in Section 9.01(b) hereof, the Seller
will have the right (but not the obligation) at any time to substitute one or
more Eligible Leases and the Equipment subject thereto (each, a "Substitute
Lease") for a Lease (for purposes of this Section 9 referred to as a
"Predecessor Lease") and the Equipment subject thereto if:
(i) the Predecessor Lease became (A) a
Non-Performing Lease, (B) a Warranty Lease or (C) an Adjusted
Lease during the immediately preceding Due Period;
(ii) the aggregate Discounted Present Value of
the Non-Performing Leases that are Predecessor Leases shall
not in the aggregate
39
exceed 10% of the Discounted Present Value of the Leases on
the Cut-Off Date; and
(iii) the aggregate Discounted Present Value of
the Adjusted Leases and Warranty Leases that are Predecessor
Leases shall not exceed 10% of the Discounted Present Value of
the Leases on the Cut-off Date.
Subject to the satisfaction of the requirements
set forth in Section 4 and Section 9.01(b) hereof, in the event of an Early
Lease Termination which has been prepaid in full, the Company will have the
option to reinvest the proceeds of such Early Termination Lease in one or more
Additional Leases. The purchase price of such Additional Lease or Leases will be
an amount equal to the proceeds of such Early Termination Lease.
(b) Each transfer of Substitute Leases and addition of
Additional Leases will be subject to the satisfaction of the following
conditions precedent:
(i) after giving effect to such additions and
substitutions and any adjustments pursuant to Section 3.02
thereof, the aggregate Booked Residual Value of such Leases
must be not less than 90% of the Booked Residual Value of the
Leases added, substituted or adjusted since the Issuance Date.
(ii) either the final payment on such Substitute
Lease or Additional Lease must be on or prior to April 2004
or, to the extent the final payment on such Lease is due
subsequent to April 2004, only scheduled payments due on or
prior to such date may be included in the Discounted Present
Value of such Lease for the purpose of making any calculation
under the Indenture.
(iii) after giving effect to such additions and
substitutions and any adjustments pursuant to Section 3.02
thereof the aggregate amount of Lease Payments through the
term of the Leases (including the Substitute Leases and the
Additional Leases) and the Discounted Present Value of the
Performing Leases will not be materially less than the
aggregate scheduled Lease Payments of the Leases and the
Discounted Present Value of the Leases, respectively prior to
such substitution or addition or adjustment; and
40
(iv) after giving effect to such adjustments,
additions and substitutions, the Discounted Present Value of
the Performing Leases must not be less than the Discounted
Present Value of the Performing Leases prior to such
adjustment, substitution or addition.
(v) such Additional Lease or Substitute Lease was
originated in the Healthcare Division, the Manufacturing
Technology Division and the Business Technology Division or
its predecessors or successors.
(c) Each addition and substitution pursuant to this Section
9.01 shall include the right to receive all amounts due or to become due under
each Substitute Lease being substituted or Additional Leases being purchased and
any security deposits paid by the related Lessee to the Seller in connection
therewith (other than any prepayments of rent required pursuant to the terms
thereof at or before the commencement of such Lease and any payments due before
the Lease Payment Period during which such substitution or addition is made). At
the time of each such substitution and addition, the Seller shall transfer to
the Trustee all Lease Payments actually received by the Seller which became due
during the current Lease Payment Period.
9.02 Procedure. (a) By 11:00 a.m. on the third
Business Day following each Determination Date, the Seller shall give written
notice to the Servicer of any substitution of Substitute Leases for Predecessor
Leases or addition of Additional Leases for Early Termination Leases which have
been prepaid in full pursuant to Section 9.01 during the preceding Lease Payment
Period. By 11:00 a.m. on the fourth Business Day following each Payment Date,
the Seller shall deliver to the Servicer and the Trustee and, to the extent not
included in the Monthly Servicer Report, the Trustee shall promptly deliver to
each Rating Agency (i) a supplement to Exhibit A hereto setting forth the
information shown thereon for each such Substitute Lease and Additional Lease,
(ii) an Officer's Certificate (A) certifying that each such Substitute Lease and
Additional Lease is an "Eligible Lease", (B) specifying each Predecessor Lease
for which a substitution has been made and each Early Termination Lease which is
being replaced by an Additional Lease and the amount of each periodic Lease
Payment and the Booked Residual Value under each such Predecessor Lease and the
amount of each periodic Lease Payment and the Booked Residual Value under each
Additional Lease and Substitute Lease being transferred thereby and (C) that all
conditions precedent to such addition or substitution have been satisfied and
(iii) such additional information concerning such Additional Leases, Substitute
Leases, Early Termination
41
Leases or Predecessor Leases as may be needed for the Servicer to prepare its
monthly reports pursuant to Section 5.01 hereof and to otherwise carry out its
duties as servicer hereunder.
(b) Subject to the provisions of Section 9.03, the delivery of
any Officer's Certificate and supplement to Exhibit A pursuant to Section
9.02(a) shall be conclusive evidence, without further act or deed, that during
the immediately preceding Lease Payment Period (i) the Seller assigned to the
Company pursuant to Section 9.01 hereof all of the Seller's right, title and
interest in and to the Substitute Leases and Additional Leases identified in
such supplement and the related rights described in Section 9.01 hereof, (ii)
the Seller transferred to the Company, as a contribution to capital, all of the
Seller's right, title and interest in and to the Equipment subject to such
Substitute Leases (to the extent of the Seller's interest in such Equipment,
including the Seller's security interest in any Equipment which is not owned by
the Seller), and (iii) the Company assigned and transferred to the Seller,
without representation or warranty, all of the Company's right, title and
interest in and to the Predecessor Leases and Early Termination Leases
identified in such Officer's Certificate and the Equipment subject thereto (to
the extent of the Company's interest in such Equipment, including the Company's
security interest in any Equipment which is not owned by the Company). The
Seller shall promptly deliver to the Trustee (or a custodian on its behalf) the
original executed counterpart of each Substitute Lease and Early Termination
Lease assigned to the Company pursuant to Section 9.01 hereof and the Company
shall promptly request the Trustee to deliver to the Seller the original
executed counterpart of each Predecessor Lease for which substitution has been
made pursuant to Section 9.01 hereof.
9.03 Objection and Repurchase. If any holder of the Notes
objects to any substitution of Leases within ten days of receipt of the
Servicer's monthly report providing notice thereof pursuant to Section 5.01
above, on the grounds either that any Substitute Lease or Additional Lease is
not an Eligible Lease within the meaning of the definition thereof or that such
substitution or addition is otherwise not permitted under the provisions of
Section 9.01 hereof, the Seller shall be entitled to present such additional
information as it deems appropriate in an effort to demonstrate that such Lease
is an Eligible Lease and that such substitution is permitted under the
provisions of Section 6.01 hereof. Following such presentation, the substitution
shall remain effective if each person originally objecting to the substitution
withdraws his objection. If the conditions specified in the preceding sentence
are not satisfied, or if at any time it is
42
established that any lease was not, at the time of substitution, an Eligible
Lease, then the Seller shall be required to repurchase such Lease in accordance
with the provisions of Section 4.05 hereof.
9.04 Seller's and Servicer's Subsequent Obligations. Upon any
substitution of Leases in accordance with the provisions of this Section 9, the
Seller's and the Servicer's obligations hereunder with respect to the
Predecessor Lease shall cease but the Seller and the Servicer shall each
thereafter have the same obligations with respect to the Substitute Lease
substituted as it has with respect to all other Leases subject to the terms
hereof.
SECTION 10. ASSIGNMENT
10.01 Assignment to Trustee. It is understood that this Sales
and Servicing Agreement and all rights of the Company hereunder will be assigned
by the Company to the Trustee pursuant to the Indenture, for the benefit of the
Trustee, the holders from time to time of the Notes as provided in the
Indenture, and may be subsequently assigned by the Trustee to any successor
Trustee or as otherwise provided in the Indenture. Each of the Seller and the
Servicer hereby expressly agrees to each such assignment and agrees that all of
its duties, obligations, representations and warranties hereunder shall be for
the benefit of, and may be enforced by, the Trustee, the holders from time to
time of the Notes, and any successor to or assignee of any thereof.
10.02 Assignment by Seller or Servicer. None of the
respective rights or obligations of the Seller and the Servicer hereunder may be
assigned without the prior written consent of the Company, the Trustee (acting
upon the instructions of the holders of 66-2/3% of the then aggregate unpaid
Outstanding Principal Amount of the Notes); provided, that nothing herein shall
preclude the Servicer from performing its duties hereunder through the use of
agents to the extent that such use is consistent with the Servicer's business
practices in dealing with leases and equipment for its own account.
SECTION 11. NATURE OF SELLER'S OBLIGATIONS
AND SECURITY THEREFOR
11.01 Seller's Obligations Absolute. The obligations of the
Seller hereunder, and the rights of the Trustee, as assignee of the Company, in
and to all amounts payable by the Seller hereunder, shall be absolute and
43
unconditional and shall not be subject to any abatement, reduction, setoff,
defense, counterclaim or recoupment whatsoever, including, without limitation,
abatements, reductions, setoffs, defenses, counterclaims or recoupments due or
alleged to be due to, or by reason of, any past, present or future claims which
the Seller may have against the Servicer, the Company, the Trustee, and any
holder of the Notes or any other Person for any reason whatsoever; nor, except
as otherwise expressly provided herein, shall this Sales and Servicing Agreement
terminate, or the respective obligations of the Company, the Seller or the
Servicer be otherwise affected, by reason of any defect in any Lease or in any
unit of Equipment or in the respective rights and interests of the Company, the
Seller and the Trustee therein, or by reason of any Liens, encumbrances,
security interests or rights of others with respect to any Lease or any unit of
Equipment, or any failure by the Company or the Servicer to perform any of its
obligations herein contained, or by reason of any other indebtedness or
liability, howsoever and whenever arising, of the Company, the Servicer, the
Trustee, or any holder of the Notes to the Seller or any other Person or by
reason of any insolvency, bankruptcy, or similar proceedings by or against the
Seller, the Servicer, the Company, the Trustee or any other Person or for any
other cause whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding, it being the intention of the
parties hereto that all obligations of the Seller hereunder and all amounts
payable by the Seller hereunder shall continue to be due and payable in all
events and in the manner and at the times herein provided unless and until the
obligation to perform or pay the same shall be terminated or limited pursuant to
the express provisions of this Sales and Servicing Agreement.
11.02 Security for Obligations. As security for the full and
timely performance by the Seller and the Servicer of each of its obligations
hereunder, and by the Company of each of its obligations hereunder and under the
Notes and the Indenture, the Seller hereby pledges and grants to the Trustee (as
a precaution in the event that, contrary to the intent of the parties to the
transactions contemplated hereby, it is contended that the Seller has any
continuing interest in any Lease or item of Equipment subject to the Indenture)
a first priority Lien on and security interest in all right, title and interest
of the Seller now or hereafter acquired in and to each Lease (including the
right to receive all payments due or to become due thereunder) and each item of
Equipment at any time subject to the Indenture. The foregoing security interest
is granted upon and is subject to the same terms and provisions as are set forth
in the Indenture and shall continue in full force and effect until the same is
44
discharged in accordance with the terms therein, notwithstanding any waiver or
modification of any of the terms hereof or thereof or of any of the Notes,
whether with or without the consent of the Seller.
11.03 Further Assurances; Financing Statements. Each of the
Seller and the Servicer severally agrees that at any time and from time to time,
at its expense, it shall promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable
or that the Company or the Trustee may request to perfect and protect the
assignments and security interests granted or purported to be granted herein
with respect to the Leases and the Lease Payments or to enable the Company or
the Trustee to exercise and enforce its rights and remedies under this Agreement
with respect to any Leases and the Lease Payments. Without limiting the
generality of the foregoing, the Seller shall execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices as may be necessary or desirable or that the Company or the Trustee may
request to protect and preserve the assignments and security interests granted
by this Agreement with respect to the Leases.
SECTION 12. DEFINITIONS
As used in this Sales and Servicing Agreement, the following
terms have the respective meanings set forth below or set forth in the Section
hereof or in any other agreement indicated:
Accumulated Funding Deficiency - a funding deficiency
described in Section 302 of ERISA.
Additional Lease - each separate lease agreement and each
lease schedule or supplement (and each master lease agreement insofar as the
same relates to any such schedule or supplement) acquired by the Company from
the Seller with all or a portion of the proceeds of an Early Termination Lease
that has been prepaid in full pursuant to Section 9 hereof.
Adjusted Lease - a Lease which has had one or more non-credit
related terms adjusted or modified by the Servicer.
Affiliate - Section 1.01 of the Indenture.
Available Residual Amount - Section 1.01 of the Indenture.
45
Booked Residual Value - the estimated residual value of the
Equipment recorded on the books of the Seller.
Business Day - any day that is not a Saturday, Sunday or other
day on which commercial banking institutions in the city in which the Corporate
Trust Office or the Servicer is located are authorized or obligated by law or
executive order to remain closed.
Casualty Payment - any payment pursuant to a Lease on account
of the loss, theft, condemnation, governmental taking, destruction, or damage
beyond repair of any item of Equipment subject thereto which results, in
accordance with the terms of the Lease, in a reduction in the number or amount
of any future Lease Payments due thereunder or in the termination of the
Lessee's obligation to make future Lease Payments thereunder.
Class A Notes - the Company's Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class A-4 Notes.
Class A-1 Notes - the Company's 5.809% Class A-1 Lease-Backed
Notes, Series 1997-A.
Class A-2 Notes - the Company's 6.05% Class A-2 Lease-Backed
Notes, Series 1997-A.
Class A-3 Notes - the Company's 6.27% Class A-3 Lease-Backed
Notes, Series 1997-A.
Class A-4 Notes - the Company's 6.47% Class A-4 Lease-Backed
Notes, Series 1997-A.
Class B Notes - the Company's 6.50% Class B Lease-Backed
Notes, Series 1997-A.
Class C Notes - the Company's 6.78% Class C Lease-Backed
Notes, Series 1997-A.
Closing Date - June 19, 1997, the date on which the Notes are
originally issued pursuant to the Prospectus and the Private Placement
Memorandum.
Code - the Internal Revenue Code of 1986, as amended.
Collection Account - Section 1.01 of the Indenture.
Company - the corporation so identified in the first paragraph
of this Sales and Servicing Agreement and any successor corporation.
46
Corporate Trust Office - Section 1.01 of the Indenture.
Cut-Off Date - close of business on May 31, 1997.
Delinquent Lease - Section 1.01 of the Indenture.
Determination Date - Section 1.01 of the Indenture.
Discounted Present Value of the Leases - Section 1.01 of the
Indenture.
Early Termination Lease - a lease which has been terminated.
Eligible Lease - Section 4.02 hereof.
Equipment - all units or items of equipment from time to time
subject to any Lease and all such units or items of equipment (to the extent of
the Company's interest therein) remaining subject to the Lien of the Indenture
following the expiration or termination of the Lease to which the same was
previously subject.
ERISA - the Employee Retirement Income Security Act of 1974,
as amended.
Event of Default - Section 1.01 of the Indenture.
Excess Copy Charges - Section 1.01 of the Indenture.
Fee Per Scan Charges - Section 1.01 of the Indenture.
Filing Requirements - Financing Statements necessary to
perfect the ownership interest of the Company and the perfected security
interest of the Trustee in the Leases and as of the Closing Date and as of June
1 and December 1 of every year following the Closing Date, in Equipment (i)
subject to Leases having a Discounted Present Value of at least 75% of the
aggregate Discounted Present Value of the Leases and (ii) relating to not less
than 75% of the Booked Residual Value of such Equipment.
Financing Statement - a statement filed pursuant to the UCC
which evidences a perfected security interest in an asset.
Governmental Authority: Any court or federal or state
regulatory body, administrative agency or other tribunal or other governmental
instrumentality.
47
Granted Assets - The assets of the Granting Clause of the
Indenture.
Indemnified Party - Section 4.03 hereof.
Indenture - the Indenture dated as of the date hereof, between
the Company and the Trustee, as the same may be supplemented, modified or
amended from time to time in accordance with the terms thereof.
Inter-Company Loans - Section 13.01 hereof.
Issuance Date - June 19, 1997.
Lease - each separate lease agreement and each lease schedule
or supplement (and each master lease agreement insofar as the same relates to
any such schedule or supplement) described on Exhibit A hereto, as the same may
be amended or modified from time to time in accordance with the provisions
hereof and thereof.
Lease Delinquency Payment - Section 1.01 of the Indenture.
Lease Payment - Section 1.01 of the Indenture.
Lease Payment Period - with respect to any Payment Date and
the Determination Date with respect thereto, the calendar month prior to the
month in which such Payment Date and Determination Date occur.
Lease Receivables - with respect to any Lease, all amounts
owing by the Lessee thereunder.
Lease Repurchase Amount - at any date with respect to any
Lease, an amount equal to the Discounted Present Value of the Lease as of the
next following Payment Date plus any amounts previously due and unpaid.
Lessee - each lessee under a Lease.
Lien - means a security interest, lien, charge, pledge,
equity, or encumbrance of any kind other than tax liens, mechanics liens, and
any liens that attach to a Lease by operation of law.
Nominal Buy-Out Lease - each Lease identified on Exhibit A
hereto as having an estimated residual value of $0 or $1 in the column under
the-heading "RESIDUAL".
Non-Performing Lease - Section 1.01 of the Indenture.
48
Nonrecoverable Advance - any advance made or to be made by the
Servicer pursuant to Section 4.01 hereof which, in the good faith judgment of
the Servicer, will ultimately not be recoverable by the Servicer under the terms
of this Sales and Servicing Agreement and the Indenture.
Noteholder - at any time, any Person in whose name a note is
registered in the Note Register (as defined in the Indenture)
Notes - the Class A Notes, Class B Notes and Class C Notes
issued pursuant to the Indenture and all notes issued in exchange therefor
pursuant to the Indenture.
Officers' Certificate - with respect to the Seller or
Servicer, a certificate delivered to the Trustee and signed by the Chairman, the
President, or a Vice President, and by another Vice President, the Treasurer, an
Assistant Treasurer, the Secretary, or an Assistant Secretary of the Seller or
Servicer, as the case may be, who is not the same person as the other officer
signing such certificate.
Original Principal Amount of the Notes - the principal amount
of the Notes originally issued on the Closing Date.
Other Lease Payments - Section 1.01 of the Indenture.
Outstanding Principal Amount - Section 1.01 of the Indenture.
PBGC - the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
Payment Date - the 20th day of each calendar month.
Predecessor Lease - Section 9.01 hereof.
Pension Plan - Section 2.13 hereof.
Person - an individual, partnership, corporation, joint
venture, association, limited liability company, trust (including any
beneficiary thereof) or unincorporated organization, or a government or agency
or political subdivision thereof.
Prime Rate - the Manufacturers and Traders Trust Company prime
lending rate.
Private Placement Memorandum - the final Private Placement
Memorandum used in connection with the private offering of the Class C Notes.
49
Prohibited Transaction - any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA or the
transitional rules set forth in Section 414(c) of ERISA and any transaction
described in Section 4975(c) of the Code which is not exempt by reason of
Section 4975(c)(2) or Section 4975(d) of the Code, or the transitional rules of
Section 2003(c) of ERISA.
Prospectus - the form of final prospectus to be used in
connection with the public offering of the Class A Notes and the Class B Notes
as filed with the Securities and Exchange Commission pursuant to Rule 424(b).
Rating Agency - Standard & Poor's Ratings Services, a Division
of the XxXxxx-Xxxx Companies, Xxxxx'x Investors Services, Inc., Fitch Investors
Service, L.P. or Duff & Xxxxxx Credit Rating Co.
Registration Statement - the registration statement (File No.
333-23679) filed with the Securities and Exchange Commission for the
registration of the Class A Notes and the Class B Notes.
Related Person - any Person (whether or not incorporated)
which is under common control with the Seller within the meaning of Section
414(c) of the Internal Revenue Code of 1986, as amended, or of Section 4001(b)
of ERISA.
Reportable Event - any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, a withdrawal from a Pension Plan
described in Section 4063 of ERISA, or a cessation of operations described in
Section 4062(e) of ERISA.
Reserve Account - Section 1.01 of the Indenture.
Residual Account - Section 1.01 of the Indenture.
Residual Realization - Section 1.01 of the Indenture.
Seller - Copelco Capital, Inc., a Delaware corporation, and
any successor.
Servicer - the corporation so identified in the first
paragraph of this Sales and Servicing Agreement and any successor thereto in
accordance with the provisions hereof.
Servicer Event of Default - Section 8.01 hereof.
Servicing Fee - Section 3.04(a) hereof.
50
Servicing Report - Section 5.01(b) hereof.
Similar Transaction Amount - Section 1.01 of the Indenture.
Similar Transaction Payments - Section 1.01 of the Indenture.
Substitute Lease - Section 9.01(a) hereof.
Stated Maturity of the Notes - The July 1998 Payment Date for
the Class A-1 Notes; the April 2005 Payment Date for the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes.
Termination Payment - Section 1.01 of the Indenture.
Transaction Payment Amount - Section 1.01 of the Indenture.
Trust Estate - Section 1.01 of the Indenture.
Trustee - Manufacturers and Traders Trust Company, and any
successor thereto, as trustee under the Indenture.
Underwriting Agreement - the Underwriting Agreement dated June
13, 1997 among the Company, Xxxxxx Brothers Inc. and First Union Capital Markets
Corp. and, with respect to the Class A Notes, Xxxxxx Xxxxxxx & Co. Incorporated
for the purchase and sale of the Class A Notes and the Class B Notes.
Uniform Commercial Code or UCC - with respect to a particular
jurisdiction, the Uniform Commercial Code, as in effect from time to time in
such jurisdiction, or any successor statute thereto.
Utilized Residual Amount - Section 1.01 of the Indenture.
Warranty Lease - Section 1.01 of the Indenture.
SECTION 13. INTER-COMPANY LOANS
13.01 Inter-Company Loans. With the purchase of the Leases,
the Company has acquired the right to hold and apply in accordance with the
provisions of certain of the Leases, security deposits. The Company may from
time to time, to the extent permitted by law, lend such security deposits and
any amounts disbursed to the Company pursuant to Sections 3.03(b) or 6.06 of the
Indenture to the Seller
51
(each such advance, an "Inter-Company Loan"). Each Inter-Company Loan shall be
on a demand basis, shall bear interest at an annual rate equal to the Prime Rate
plus one percent, shall be in the form attached hereto as Exhibit B and shall
otherwise be on such arm's-length terms and conditions as the Company and the
Seller may agree.
SECTION 14. MISCELLANEOUS
14.01 Continuing Obligations. This Sales and Servicing
Agreement shall continue in full force and effect until each of the Notes and
any other amounts due to any holder of the Notes have been paid in full and all
other obligations, if any, secured by the Lien of the Indenture have been fully
satisfied.
14.02 GOVERNING LAW. THIS SALES AND SERVICING AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES
SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK. IF ANY PROVISION OF
THIS SALES AND SERVICING AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE
BALANCE OF THIS SALES AND SERVICING AGREEMENT.
14.03 Successors and Assigns. This Sales and Servicing
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Company, the Seller, the Servicer and the Trustee and shall inure
to the benefit of the successors and assigns of the holders, from time to time,
of the Notes.
14.04 Modification. The terms of this Sales and Servicing
Agreement shall not be waived, modified or amended without the written consent
of the party against whom such waiver, modification or amendment is claimed and,
in any case, the Trustee (acting upon the instructions of the holders of 66-2/3%
of the then aggregate unpaid Outstanding Principal Amount of the Notes).
14.05 No Proceedings. The Seller and the Servicer, each hereby
agree that it will not, directly or indirectly, institute, or cause to be
instituted, against the Company any proceeding of the type referred to in
Section 6.01(e) or (f) of the Indenture so long as there shall not have elapsed
one year plus one day since the latest maturing Notes have been paid in full in
cash.
14.06 Notices. All notices and other communications given in
connection with this Sales and Servicing Agreement shall be sufficient for every
Person hereunder (unless otherwise herein expressly provided) if in writing and
mailed, first-class postage prepaid or certified
52
mail return receipt requested, or sent by private courier or confirmed telecopy,
in case of the Seller, to East Gate Center, 000 Xxxx Xxxx Xxxxx, Xxxxx Xxxxxx,
Xxx Xxxxxx 00000- 0000, Attention: Xxxxxxx Xxxxxx (telecopy: 609-273-9288) and
in the case of the Company, the Servicer and the Trustee and the holders of the
Notes, to such addresses as are provided pursuant to Sections 1.05 and 1.06 of
the Indenture or to such other address as either party may specify to the other
from time to time in accordance with this Section 14.06.
14.07 Counterparts. This Sales and Servicing Agreement may be
executed in any number of counterparts, each counterpart constituting an
original, but all together constituting only one Agreement.
14.08 Nonpetition Covenant. Seller shall not petition or
otherwise invoke the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Company under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Company or any substantial part of its respective property, or ordering the
winding up or liquidation of the affairs of the Company.
53
IN WITNESS WHEREOF, the parties hereto have executed this
Sales and Servicing Agreement as of the date and year first written above.
COPELCO CAPITAL, INC., as
Seller and Servicer
By: /s/ XXXXXXX X. XXXXXX
------------------------------
Name: XXXXXXX X. XXXXXX
Title: SR. VICE PRESIDENT
COPELCO CAPITAL FUNDING CORP. X
By: /s/ XXXXXXX X. XXXXXXX
------------------------------
Name: XXXXXXX X. XXXXXXX
Title: VICE PRESIDENT
Address:
The undersigned hereby acknowledges
receipt of a copy of the foregoing Sales
and Servicing Agreement and agrees to,
and to be bound by, each of the
provisions thereof applicable to the
undersigned.
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee
By: /s/ XXXXXXX X. XXXXXXX
-------------------------------
Name: XXXXXXX X. XXXXXXX
Title: ASSISTANT VICE PRESIDENT
Schedule 1
SUBSIDIARIES OF COPELCO CAPITAL, INC.
1. Copelco Lease Funding Corp. IV, a New Jersey corporation.
2. Copelco Lease Funding Corp. V, a New Jersey corporation.
3. Copelco Lease Funding Corp. VI, a New Jersey corporation.
4. Copelco Capital Funding Corp. I, a Delaware corporation.
5. Copelco Capital Funding Corp. II, a Delaware corporation.
6. Copelco Capital Funding Corp. III, a Delaware corporation.
7. Copelco Capital Funding Corp. IV, a Delaware corporation.
8. Copelco Capital Funding Corp. V, a Delaware corporation.
9. Copelco Capital Funding Corp. VI, a Delaware corporation.
10. Copelco Capital Funding Corp. VIII, a Delaware corporation.
11. Copelco Capital Funding Corp. IX, a Delaware corporation.
12. Copelco Capital Funding Corp. X, a Delaware corporation.
13. Copelco Credit Funding Corp. VII, a New Jersey corporation.
14. Copelco Credit Funding Corp. VIII, a New Jersey corporation.
15. Copelco Credit Funding Corp. IX, a New Jersey corporation.
16. National Equipment Rental Program, Inc., a Delaware
corporation.
17. CDRI, Inc., a Delaware corporation.
18. Copelco Equipment Leasing Co., a Delaware corporation.
19. Copelco Specialized Finance Corp., a Delaware corporation.
EXHIBIT A
SCHEDULE OF LEASES AND EQUIPMENT
ON FILE AT XXXXX XXXXXXXXXX
A-1
EXHIBIT B
[FORM OF INTER-COMPANY LOAN NOTE]
ALL RIGHT, TITLE AND INTEREST IN AND TO THIS PROMISSORY NOTE ON THE PART OF
COPELCO CAPITAL FUNDING CORP. X HAS BEEN ASSIGNED TO AND IS SUBJECT TO A
SECURITY INTEREST IN FAVOR OF MANUFACTURERS AND TRADERS TRUST COMPANY, AS
TRUSTEE, UNDER AN INDENTURE DATED AS OF JUNE 1, 1997, FOR THE BENEFIT OF THE
PERSONS REFERRED TO THEREIN.
$__________ [Date]
COPELCO CAPITAL, INC., a Delaware corporation (the
"Maker"), with its principal office at _______________________________
_________, FOR VALUE RECEIVED, hereby promises to pay to the order of
Copelco Capital Funding Corp. X, a corporation with its offices located at or
its assignee (the "Payee"), for its account, at __________________, the
principal sum of _______________ Dollars ($____________) (or such lesser amount
as shall equal the aggregate unpaid principal amount of the Loans made by the
Payee to the Maker under the Sale Agreement (as defined below)), together with
interest per annum on the unpaid principal amount hereof at the Prime Rate plus
one per cent, in lawful money of the United States of America and in immediately
available funds immediately on the demand of the Payee.
The date, amount and interest rate, of each Loan made by the
Payee to the Maker, and each payment made on account of the principal thereof,
shall be recorded by the Payee on its books and, prior to any transfer of this
Note, endorsed by the Payee on the schedule attached hereto or any continuation
thereof.
This Note evidences certain Inter-Company Loans from Payee to
Maker pursuant to Section 13.01 of that certain Sales and Servicing Agreement
dated as of June 1, 1997, between the Maker and the Payee (the "Sale
Agreement"). Capitalized terms used in this Note have the respective meanings
assigned to them in the Sale Agreement.
B-1
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
COPELCO CAPITAL, INC.
By_________________________
B-2
EXHIBIT C
Form of Servicing Report
Line
1 Transaction Cash Flow - see computer detail
1/1 Beginning Net Present Value
1/2 Less: Lease Receivables - current month
1/3 Add: Actual Interest Payment (Weighted Avg A, B & C notes)
1/4 Add: 0.75% Servicing Component
1/5 Less: Current month Nonperforming
1/5a Less: Warranty Leases
1/6 Less: Amounts on Early Terminations
1/7 Add: Amounts due to Substitutions
1/8 Add: Amounts due to Additional leases (Prepaid leases)
1/9 Ending Net Present Value
2 Overdue Lease Payments - see computer detail
2/1 Beginning Balance
2/2 (Memo) Overdue Payments Received
2/3 Less: Reimbursed Per This Report
2/4 Less: Past Dues on Disqualified Leases - Early Terminations
2/5 Less: Past Dues on Disqualified Leases - Nonperforming and
Warranty
2/6 Add: Last Month's Current Payments that became Past due
2/7 Add: Received on Replacements Leases
2/8 (MEMO) Net New Advances
2/9 Ending Balance
3 Residual
3/1 Beginning Availability
3/2 Less: Amount Used
3/3 Ending Maximum Availability
3/4 (Memo) Amount Realized
3/5 LTD Residuals of Nonperforming, Warranty, and Prepaid leases
substituted
3/6 LTD Residuals of Substitutions
4 Collection account-Advance Lease Payments
4/1 Beginning Balance
4/2 Less: Applied to Current from Prepaid
4/3 Less: Advance on Disqualified Leases
4/4 Add: Received This Month
4/5 Add: Received on Replacement Leases
4/6 Ending Balance
C-1
5 Residual Event Calculation
5/1 Delinquency condition exist (payments over 62 days performing
leases only)
5/2 Overdue payments and PV on leases over 62 but less than 122 days
5/3 PV of performing leases
5/4 Delinquency Rate Current Month
5/5 Second Preceding Month
5/6 Third Preceding Month
5/7 Average
5/8 Residual Realization > 100% (Yes/No)
5/9 Copelco Capital as Servicer (Yes/No)
6 Cash Reserve Account
6/1 Beginning Balance
6/2 Less: New Obligations: Total Shortfall (B9)
6/3 Plus: Interest earned on Cash Reserve Acct.
6/4 Ending Balance
6/5 ___% of Outstanding Note Value
6/6 Lesser of __% of $__________ and Outstanding Note Value
6/7 Target Cash Reserve (Greater of 6/5 & 6/6)
6/8 Cash Reserve Release (6/4-6/7)
6/9 Ending Balance Cash Reserve Account
7 Residual Account
7/1 Beginning Balance
7/2 Plus Current Month Addition
7/3 Less Disbursements
7/4 Ending Balance
8 Nonperforming Leases
8/1 Beginning Balance of Nonperforming Leases
8/2 Plus Current Month Additions
8/3 Plus Past Due Payments on Nonperforming Leases
8/4 Less Current Month Recoveries
8/5 Ending Balance
Cash Receipts
Line
A/1 Regular monthly payments
A/2 Overdue payments
A/3 Overdue Payments due on Early Termination and Termed Out
Leases (From Seller)
A/4 Advance Payments of monthly rentals
A/5 Residual Values
A/6 Recoveries on Defaulted Leases
A/7 Proceeds from investment of Collection Accounts funds
A/8 Draws upon Residual Account
C-2
A/9 Casualty and Termination Payments
A/10 Servicer Advances
A/11 Total Receipts
Disbursement Requirements
Line
B/1 Past Due Payments Collected, Due Servicer (COLLECTION ACCT)
B/2 Overdue Payments Advanced, on Disqualified Leases
(COLLECTION ACCT)
B/3 Servicing Fee (COLLECTION ACCT)
B/4 Advanced Payments on Disqualified Leases (COLLECTION ACCT)
B/5 Total to Servicer
B/6 Collection Account - Advanced Rents (Monthly-Increase/(Decrease))
B/7 Net cash receipts
B/8 Shortfall (1/1-1/9+C/1+C/2+C/3-B7)
B/9 Draw on Cash Reserve
B/10 Draw on Residual Account
B/11 Total Available Funds
C Noteholders
C/1 Class A-1 Interest Paid ____%
C/2 Class A-2 Interest Paid ____%
C/3 Class A-3 Interest Paid ____%
C/4 Class A-4 Interest Paid ____%
C/5 Class B Interest Paid ____%
C/6 Class C Interest Paid ____%
C/7 Beginning Class A-1 Note Balance
C/8 Class A-1 Note Value Target (___% of 1/9)
C/9 Class A-1 Principal Paid (min((C/4-C/5),B11-C/1-C/2-C/3)
C/10 Beginning Class A-2 Note Balance
C/11 Class A-2 Note Value
C/12 Ending Class A-2 Note Balance
C/13 Class A-2 Principal Paid
C/14 Beginning Class A-3 Note Balance
C/15 Class A-3 Note Value
C/16 Ending Class A-3 Note Balance
C/17 Class A-3 Principal Paid
C/18 Beginning Class A-4 Note Balance
C/19 Class A-4 Note Value
C/20 Class A-4 Principal Paid
C/21 Ending Class A-4 Note Balance
C/22 Beginning Class B Note Balance
C/23a Class B Note Value Target (__% of 1/9)
C/23b Class B Note Value Floor (__% of $__________ + Cum.
Losses-C/12-6/4)
C/24 Class B Principal Paid
((min((C/8-max(C/9a,C/9b)),B11-C/1-C/2-C/3-C/6))
C-3
C/25 Ending Class B Note Balance
C/26 Beginning Class C Note Balance
C/27a Class C Note Value Target (__% of 1/9)
C/27b Class B Note Value Floor (__% of $__________ + Cum. Losses-6/4)
C/28 Class C Principal Paid
(min((C/12-max(C/13a,C/13b)),B/11-C/1-C/2-C/3-C/6-C/10))
C/29 Ending Class C Note Balance
C/30 Balance Available for Distribution to Copelco
D Miscellaneous Tracking Items
D/1 % of Total Nonperforming and Warranty substituted as per
Initial Outs, Note Value
D/2 (MEMO) Cumulative amounts on Early Lease Terminations due to
modification of leases
D/3 (MEMO) Cumulative amounts of additional leases purchased
D/4 (MEMO) Avg. residual realization greater than booked residual by
Document Imaging and Major Accounts division for last three
months (Yes/No)
D/5 % of Total Variance of Residuals substituted for Nonperforming &
Prepaid leases and residuals of Substituted leases to Initial
pool booked residuals
C-4
SCHEDULE OF LOANS
This Note evidences demand Loans made under the
within-described Sale Agreement to the Maker, on the date, at
the interest rate, and in the principal amounts set forth below, subject to the
payments and prepayments of principal set forth below:
------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Unpaid
Amount of Interest Paid or Principal Notation
Date Loan Rate Prepaid Amount Made By
------------------------------------------------------------------------------------------------------------------------------------
C-5
