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APPENDIX 1
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STANDARD TERMS AND CONDITIONS OF LEASE ACQUISITION
Dated as of ______________
TABLE OF CONTENTS
Page
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ARTICLE I - DEFINITIONS
1.01 Defined Terms.................................................................... 1
ARTICLE 2 - ACQUISITION OF LEASE ASSETS
2.01 Lease Asset Acquisitions......................................................... 2
2.02 Delivery of Lease Contracts; Filing of Financing Statements ..................... 2
2.03 Servicing of Lease Contracts and Equipment....................................... 3
2.04 Review of Lease Contracts........................................................ 3
2.05 Nature of Transfer............................................................... 3
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company ................................... 4
3.02 Representations and Warranties of the Issuer..................................... 13
3.03 Purchase or Substitution Required Upon Breach of Certain
Representations and Warranties.................................................. 14
3.04 Requirements for Purchasd or Substitution of Lease Contracts and
Acquisition of Funded Lease Contracts........................................... 15
ARTICLE 4 - COVENANTS OF THE ISSUER AND COMPANY
4.01 Company Covenants................................................................ 17
4.02 Issuer Covenants................................................................. 20
4.03 Assignment of Lease Assets....................................................... 21
ARTICLE 5 - CONDITIONS PRECEDENT
5.01 Conditions to the Issuer's Obligations........................................... 22
5.02 Conditions to the Company's Obligations.......................................... 22
ARTICLE 6 - TERM AND TERMINATION
6.01 Term............................................................................. 24
6.02 Default by the Company........................................................... 24
ARTICLE 7 - MISCELLANEOUS
7.01 Amendments....................................................................... 25
7.02 Governing Law.................................................................... 25
7.03 Notices.......................................................................... 25
7.04 Separability Clause.............................................................. 25
7.05 Assignment....................................................................... 25
7.06 Further Assurances............................................................... 25
7.07 No Waivers; Cumulative Remedies.................................................. 25
7.08 Binding Effect; Third Party Beneficiaries........................................ 26
7.09 Set-Off.......................................................................... 26
7.10 MBIA Default..................................................................... 26
APPENDIX X Definitions
EXHIBIT A Form of Company Certificate
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These STANDARD TERMS & CONDITIONS OF LEASE ACQUISITION (the "Standard
Lease Acquisition Terms"), dated as of March 1, 1996 are incorporated by
reference and are intended to form a part of the SPECIFIC TERMS AND CONDITIONS
OF LEASE ACQUISITION dated as of March 1, 1996 (the "Specific Lease
Acquisition Terms")to which these Standard Lease Acquisition Terms are appended
(together, the "Lease Acquisition Agreement").
ARTICLE I - DEFINITIONS
1.01 Defined Terms. Except as otherwise defined herein or in the
Specific Lease Acquisition Terms, or unless the context otherwise requires,
capitalized terms used herein but not otherwise defined herein, shall have the
respective meanings set forth in Appendix X attached to the Specific Lease
Acquisition Terms which is incorporated by reference for all purposes of the
Lease Acquisition Agreement, and the definitions of such terms are equally
applicable both to the singular and plural forms of such terms.
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ARTICLE 2 - ACQUISITION OF LEASE ASSETS
2.01 Lease Asset Acquisitions. Subject to all the terms and conditions
of the Lease Acquisition Agreement and in reliance upon the representations,
warranties and covenants set forth in the Lease Acquisition Agreement, as of the
Initial Acquisition Date the Issuer is acquiring the Lease Assets listed on the
Initial Series Lease Schedule attached to the Company Certificate, dated the
Initial Acquisition Date. The Company, from time to time thereafter on each
Funding Date with respect to each Series of Notes until the Funding Termination
Date with respect to such Series, shall transfer to the Issuer or originate on
behalf of the Issuer, in accordance with the terms of the Lease Acquisition
Agreement, and the Issuer shall acquire from the Company in accordance with the
terms of the Lease Acquisition Agreement on each Funding Date with respect to
each Series of Notes until the Funding Termination Date with respect to such
Series, additional Lease Assets pursuant to a Company Certificate (a) in the
case of Lease Assets being acquired by the Issuer in connection with the
issuance of a new Series of Notes, with the applicable Initial Series Lease
Schedule attached thereto, or (b) in the case of Substitute Lease Contracts and,
with respect to any Funding Date. Funded Lease Contracts, with the applicable
Amended Lease Schedule attached thereto. The Company agrees that all Lease
Assets sold, transferred, conveyed and assigned hereunder shall be Eligible
Lease Contracts as of such date of assignment and shall conform with all of the
requirements of the Lease Acquisition Agreement. The Company hereby acknowledges
that its transfer of Lease Assets to the Issuer is absolute and irrevocable,
without reservation, retention of any interest, or recourse to the Company,
except as provided in Sections 2.04 and 3.03 hereof. All Lease Assets shall
be acquired by the Issuer for the consideration referred to in the applicable
Specific Lease Acquisition Terms.
To the extent that the Company shall retain any files or documentation
pertaining to the Lease Assets, it shall hold such documents in trust for the
benefit of the Issuer as the owner thereof. The possession of any documents or
files pertaining to the Lease Assets by the Company is at the will of the Issuer
for the sole purpose of servicing such Lease Assets, and such retention and
possession by the Company is in a custodial capacity only. The documents and
files retained by the Company relating to the Lease Assets shall be segregated
from the books and records of the Company and shall be marked appropriately to
reflect clearly the sale of the related Lease Assets to the Issuer.
2.02 Delivery of Lease Contracts; Filing of Financing Statements.
(a) In connection with the Issuer's acquisition of the Lease Assets,
the Company, on behalf of the Issuer, shall deliver the original Lease
Contracts to the Indenture Trustee so that the Indenture Trustee may retain
possession thereof as provided in the Transaction Documents. In addition, the
Company agrees to record and file prior to the Closing Date, the related
Delivery Date or Funding Date, as applicable, or within the time period set
forth in the Indenture, at its own expense, financing statements (and thereafter
timely continuation statements with respect to such financing statements)
with respect to the Lease Assets, meeting the requirements of the Transaction
Documents.
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(b) In connection with such acquisition, the Company shall promptly, at
its own expense, cause any Electronic Ledger maintained by it to be marked to
show that the Lease Assets have been acquired by the Issuer in accordance with
the Lease Acquisition Agreement and transferred by the Issuer to the Indenture
Trustee in accordance with the Transaction Documents.
2.03 Servicing of Lease Contracts and Equipment. The Servicer shall
service the Lease Assets for the benefit of the Issuer (and its successors and
assigns) in accordance with the terms and conditions of the Transaction
Documents. Notwithstanding the foregoing, the Company acknowledges and agrees
that its obligations under the Lease Acquisition Agreement are independent of
any obligations it may have as Servicer and that its obligations under the Lease
Acquisition Agreement will continue in full force and effect, whether or not it
is acting as Servicer, until termination of the Lease Acquisition Agreement in
accordance with Section 6.01 hereof.
2.04 Review of Lease Contracts. If the Company or the Indenture Trustee
(who shall thereupon notify the Company) discovers that any Lease Contracts are
missing or defective (that is, mutilated, damaged, defaced, incomplete,
improperly dated, clearly forged or otherwise physically altered) in any
material respect, the Company shall correct or cure such omission, defect or
other irregularity within 30 days from the date the Company discovered, or is
notified by the Indenture Trustee of, such omission or defect. Otherwise, the
Company shall purchase such Lease Contract from the Issuer or replace such Lease
Contract with a Substitute Lease Contract in accordance with Section 3.04(c)
hereof.
2.05 Nature of Transfer. In the event that the transfer of the Lease
Assets from the Company to the Issuer is deemed to be a secured financing, the
Company shall be deemed hereunder to have Granted to the Issuer, and the Company
does hereby Grant to the Issuer, a security interest in all of the Company's
right, title and interest in, to and under the Lease Assets, whether now owned
or hereafter acquired. For purposes of such Grant, the Lease Acquisition
Agreement shall constitute a security agreement under applicable law.
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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company.
(a) Except as otherwise provided in the Specific Lease Acquisition
Terms, the Company hereby makes the following representations and warranties as
to each Lease Contract to the Issuer and for the benefit of MBIA, the Indenture
Trustee and Holders of the Notes, on which the Issuer relies in acquiring the
Lease Assets. Such representations and warranties are as of the related Cut-off
Date with respect to Lease Contracts on the related Initial Series Lease
Schedule, as of the related Funding Date with respect to Pools to be acquired on
such Funding Date, or the date of substitution with respect to Substitute Lease
Contracts, unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Lease Contracts and
related Lease Receivables and Equipment:
(i) The information set forth in the Initial Series Lease
Schedule or Amended Lease Schedule, as applicable, is true and correct
as of the related Cut-off Date.
(ii) The Lease Contract is by its terms an absolute and
unconditional obligation of the Customer, non-cancelable and except
in certain instances involving loss or damage to the Equipment,
non-prepayable prior to the expiration of the initial term of such
Lease Contract (unless otherwise specified in the Specific Lease
Acquisition Terms); no Lease Contract provides for the substitution,
exchange or addition of any other items of Equipment pursuant to such
Lease Contract; and the rights with respect to such Lease Contract are
assignable by the lessor thereunder without the consent of any Person.
Each Lease Contract is net to the lessor of any maintenance, taxes,
insurance or other expenses and contains provisions requiring the
Customer to assume all risk of loss or malfunction of the related
Equipment.
(iii) The Company has heretofore provided to the Indenture
Trustee the sole original counterpart of each of the Lease Contracts
previously in the possession of the Company, as amended, and the terms
of such Lease Contracts have not been amended, waived or modified
subsequent to the above being provided to the Indenture Trustee and if
another original counterpart of such Lease Contracts should
subsequently come into the possession of the Company, it will also be
so provided to the Indenture Trustee.
(iv) There is only one original executed counterpart of the
Lease Contract that constitutes "chattel paper" for purposes of section
9-105(l)(b) and 9-308 of the UCC and the Electronic Ledgers have been
marked as provided in Section 2.02(b) hereof. Such Lease Contract
constitutes the entire agreement between the Company and the related
Customer.
(v) The Lease Contract was not originated in, nor is it
subject to the laws of, any jurisdiction, the laws of which would make
unlawful the sale, transfer or assigrunent of such document under any
of the Transaction Documents, including any repurchase in accordance
with the Transaction Documents.
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(vi) The Lease Contract is, and on the related Acquisition
Date will be, in full force and effect in accordance with its
respective terms and neither the Company nor any Customer has or will
have suspended or reduced any payments or obligations due or to become
due thereunder by reason of a default by the other party to such Lease
Contract; as of the Cut-off Date and there are no proceedings pending,
or to the best of the Company's knowledge, threatened asserting
insolvency of a Customer; there has been no other default, breach or
violation and no event permitting acceleration under the Lease
Contract; there are no proceedings pending, or to the best of the
Company's knowledge, threatened, wherein the Customer or any
governmental agency has alleged that any such Lease Contract is illegal
or unenforceable; and none of the Scheduled Payments are subject to any
set-off or credit of any kind.
(vii) The Lease Contract is the valid, binding and legally
enforceable full recourse obligation of the parties thereto enforceable
in accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of whether
enforcement is sought in a court of law or equity.
(viii) All filings (including Uniform Commercial Code
filings), notices and recordings as required under the Indenture to
perfect the first priority security interest of the Issuer and the
Indenture Trustee in the Lease Contracts, the related Lease Receivables
and the Equipment being acquired hereunder have been accomplished and
are in full force and effect or will be accomplished within the time
period specified in the Transaction Documents.
(ix) Each Lease Contract being acquired by the Issuer is in a
form of a lease contract attached as Exhibit A to the Specific Lease
Acquisition Terms, except for such immaterial modifications or
deviations from the form lease contracts which appear in certain Lease
Contracts or which may appear in the future form Lease Contracts of
the Company; any such modifications or deviations from the form lease
contracts will not have a material adverse effect on the Holders of the
Notes or MBIA and will not reduce the Scheduled Payments or other
payments due under the Lease Contracts.
(x) The Lease Contract was either (A) originated by the
Company on behalf of itself or the Issuer in the ordinary course of
business and meets the Company's origination and underwriting criteria
used in originating the Lease Contracts delivered to the Issuer on
the Initial Delivery Date or (B) purchased from a broker or leasing
company that originated such leases pursuant to agreed upon and
well-articulated underwriting and documentation standards and with whom
the Company has regularly dealt in the past. The origination and
collection practices used by the Company with respect to each Lease
Contract have been in all respects legal, proper, prudent and customary
in the equipment financing and servicing business. None of the Lease
Contracts is a consumer lease.
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(xi) Any payment required to be made by a Customer subject to
a PUT clause does not exceed five times the largest regular rental
payment due under the Lease Contract. In determining whether to lease
Equipment to any particular Customer, the Company considered each
Customer's ability to pay any PUT payments included in the terms of the
Lease Contract.
(xii) The Lease Contract has regular rental payments
(excluding payments required pursuant to a PUT) that do not increase by
more than 200% during the remaining term of the Lease Contract (unless
otherwise specified in the Specific Terms of Lease Acquisition). In
determining whether to lease Equipment to any particular Customer, the
Company considered each Customer's ability to pay any increases in the
rental payments due under the terms of the Lease Contract.
(xiii) The Equipment related to the Lease Contract was
properly delivered to the Customer in good repair, without defects and
in satisfactory order and, to the best knowledge of the Company, is
currently in proper working order. Each Customer has accepted the
Equipment leased to it and, after reasonable opportunity to inspect and
test such Equipment, has not notified the Company of any defects
therein.
(xiv) With the exception of the Loan Contracts the Lease
Contract constitutes a "true lease" for federal income tax purposes.
The Lease Contracts and Loan Contracts satisfy such ratios and other
tax related criteria as maybe set forth in the Specific Lease
Acquisition Terms.
(xv) Each Lease Receivable derives from a Lease Contract that
has an original stated term of at least 12 months and not more than 72
months. Each such Lease Contract is within its original term and has
not had any extensions.
(xvi) Except with respect to any Funded Lease Contract, each
Customer under each Lease Contract will have made at least, two lease
payments with respect to such Lease Contract, including any security
deposit or advance payment made by the lessee upon the execution of the
Lease Contract or the delivery of the Equipment. Each Lease Contract
obligates the related Customer to make all Scheduled Payments
thereunder in full notwithstanding the collection by the lessor of a
security deposit with respect thereto. The calculation of the Implicit
Principal Balance of each Lease Receivable does not include any
security deposits or advance payments collected by or on behalf of the
lessor which are applied to Scheduled Payments.
(xvii) None of the Customers is a lessee that is a merchant
with respect to the Equipment leased under any Lease Contract, and none
of the Customers is the United States of America or any state, or
agency, department or instrumentality or political subdivision of the
United States of America or anv state. Each Lease Contract is payable
in U.S. dollars and the obligor thereon is a United States resident.
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(xviii) All requirements of applicable federal, state and
local laws, and regulations thereunder in respect of the Lease
Contract have been complied with in all material respects, including,
without limitation, usury laws, the Federal Truth-in-Lending Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and
any other applicable consumer credit, equal opportunity and disclosure
laws if any, and each Lease Contract complied in all material respects
at the time it was originated or made and now complies in all material
respects with all legal requirements of the jurisdiction in which it
was originated.
(xix) With the sole exception of the Customer's right to quiet
enjoyment, the Lease Contract is not and will not be subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, whether arising out of transactions concerning the
Lease Contract or otherwise, and the operation of any of the terms of
the Lease Contract or the exercise by the Company or the Customer of
any right under the Lease Contract will not render the Lease Contract
unenforceable in whole or in part, and no such right of rescission,
set-off, counterclaim or defense, including a defense arising out of a
breach of the Customer's right of quiet enjoyment of the Equipment, has
been asserted with respect thereto, except that certain rights or
defenses may exist under applicable law which, individually or in the
aggregate, do not make the remedies available to the Company with
respect to such Lease Contract inadequate for the practical realization
of the benefits provided thereby.
(xx) The Company has duly fulfilled all obligations on the
lessor's part to be fulfilled under or in connection with the Lease
Contract, including, without limitation, giving any notices or
consents necessary to effect the acquisition of the Lease Assets by the
Issuer and has done nothing to impair the rights of the Trust Estate
and the Holders of the Notes in the Lease Contract or payments with
respect thereto.
(xxi) The Lease Contract and the Equipment have not been sold,
transferred, assigned or pledged by the Company to any Person other
than the Issuer (except for security interests in the Lease Assets
which shall be terminated on or prior to the related Acquisition Date),
and upon execution and delivery of the Lease Acquisition Agreement by
the Company and the repayment by the Issuer of the Existing
Indebtedness, the Issuer will have all of the right, title and interest
in and to the Lease Contract, the Lease Receivables and the related
Equipment, free and clear of all liens and encumbrances, except for the
interests of the Customer pursuant to the Lease Contract.
(xxii) Each Lease Contract requires that the Customer maintain
the Equipment in good and workable order and that the Customer obtain
and maintain physical damage insurance, or provide self-insurance or
purchase insurance from the Company (which may be self-insured)
covering the Equipment. Insurance coverage required to be maintained by
the Customer under each Lease Contract is of a type customary for the
equipment covered thereby and consistent with industry practice for
monitoring compliance thereof; such insurance coverage is in full force
and effect.
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(xxiii) The Company 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 sale to the Issuer of the Lease Contracts and all of the Company'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 Company is a party or by which it is bound.
(xxiv) The sale, transfer, assignment and conveyance of the
Lease Contracts (including all payments due or to become due
thereunder) and the Equipment by the Company pursuant to the Lease
Acquisition Agreement is not subject to and will not result in any tax,
fee or governmental charge payable by the Company to any federal, state
or local government ("Transfer Taxes") other than Transfer Taxes which
have or will be paid by the Company as due. In the event that the
Issuer receives actual notice of any Transfer Taxes arising out of the
transfer, assignment and conveyance of the Lease Contracts and/or the
Equipment, on written demand by the Issuer, or upon the Company
otherwise being given notice thereof, the Company shall pay, and
otherwise indemnify and hold the Issuer, the Indenture Trustee and MBIA
harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the Holders of the Notes, the
Indenture Trustee and MBIA shall have no obligation to pay such
Transfer Taxes).
(b) The Company hereby makes, as of each Cut-off Date and each date of
substitution of a Substitute Lease Contract, the following representations and
warranties to the Issuer, and for the benefit of MBIA, the Indenture Trustee and
the Holders of the Notes, on which the Issuer relies in acquiring the Lease
Assets and issuing a Series of Notes. Such representations and warranties speak
as of the related Cut-off Date with respect to Lease Contracts on the related
Initial Series Lease Schedule, as of the related Funding Date with respect to
Pools to be acquired on such Funding Date, or the date of substitution with
respect to Substitute Lease Contracts, unless otherwise indicated, but shall
survive any subsequent transfer, assignment, contribution or conveyance of the
Lease Contracts, related Equipment and Lease Receivables.
(i) Each of the Concentration Limits set forth in the Specific
Lease Acquisition Terms are true and correct as to the entire pool of
Lease Assets acquired by the Issuer, after giving effect to the
acquisition by the Issuer of Lease Contracts on the related Acquisition
Date.
(ii) The Company used no selection procedures that identified
the Lease Contracts being acquired on such Acquisition Date as being
less desirable or valuable than other comparable equipment leases owned
by the Company.
(iii) The Computer Tape from which the selection of the Lease
Contracts being acquired on such Acquisition Date was made, was made
available to the Issuer's accountants that are providing any comfort
letter to MBIA, any Noteholders, or the Placement Agent in connection
with any information contained in any Private Placement Memorandum
applicable to such Notes, and such information was complete and
accurate as
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of its date and includes a description of the same Lease Contracts that
are described in the related Series Lease Schedule and the payments due
thereunder as of the related Cut-off Date.
(c) Except as otherwise provided in the Specific Lease Acquisition
Terms, the Company hereby makes the following representations and warranties to
the Issuer and for the benefit of MBIA, the Indenture Trustee and the Holders of
the Notes on which the Issuer relies in acquiring the Lease Assets and issuing a
Series of Notes. Such representations and warranties speak as of the Cut-off
Date relating to each Acquisition Date unless otherwise indicated, but shall
survive any subsequent transfer, assignment, contribution or conveyance of the
Lease Contracts, related Equipment and Lease Receivables:
(i) The Company has been duly organized and is validly
existing and in good standing as a corporation under the laws of its
jurisdiction of incorporation with corporate power and authority to own
its properties and to transact the business in which it is now engaged,
and the Company is duly qualified to do business in and is in good
standing under the laws of each State in which any Equipment or any
Customer is located or is not required under applicable law to effect
such qualification, except where failure to so qualify, would not have
a material adverse effect on the ability of the Company to perform its
obligations under the Transaction Documents or on any of the Lease
Contracts, the Lease Receivables or the Equipment.
(ii) The performance of the obligations of the Company under
the Lease Acquisition Agreement and the other Transaction Documents and
the consummation of the transactions herein and therein contemplated
will not conflict with or result in any breach of any of the terms or
provisions of, or constitute with or without notice, lapse of time or
both, a default under the Certificate of Incorporation or Articles of
Incorporation, as applicable, or By-laws of the Company, or any
material indenture, agreement, mortgage, deed of trust or other
instrument to which the Company is a party or by which it is bound, or
result in the creation or imposition of any lien, charge or encumbrance
(except the lien created by the Transaction Documents) upon any of the
property or assets of the Company pursuant to the terms of such
indenture, mortgage, deed of trust, or other agreement or instrument to
which the Company is a party or by which the Company is bound or to
which any of the Company's property or assets is subject, nor will such
action result in any violation of the provisions of the Company's
Certificate of Incorporation or Articles of Incorporation, as
applicable, or By-laws or any statute or any order, rule or regulation
of any court or any regulatory authority or other govemmental agency or
body having jurisdiction over the Company or any of its properties; and
no consent, approval, authorization order, registration or
qualification of or with or other action of any court, or any such
regulatory authority or other governmental agency or body is required
for consummation of the transactions contemplated by the Lease
Acquisition Agreement and the other Transaction Documents except such
consents, approvals and authorizations which have been obtained or such
registrations or qualifications which have been made.
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(iii) The Lease Acquisition Agreement, the related Insurance
Agreement and any other Transaction Document to which the Company is a
party have been duly authorized, executed and delivered by the Company
by all necessary corporate action and such agreements are the valid and
legally binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, subject as to
enforcement to applicable bankruptcy, insolvency, reorganization and
other similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a court of law or
equity.
(iv) The Company Address is the chief executive office, chief
place of business and the office where the Company keeps its records
concerning the Lease Contracts, Lease Receivables and the Equipment.
(v) The Company does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and every
covenant contained in the Lease Acquisition Agreement.
(vi) The transactions contemplated by the Transaction
Documents are being consummated by the Company in furtherance of its
ordinary business purposes, with no contemplation of insolvency and
with no intent to hinder, delay or defraud any of its present or future
creditors.
(vii) The consideration received by the Company as set forth
in the Specific Lease Acquisition Terms is fair consideration having
value reasonably equivalent to or in excess of the value of the
performance of the Company's obligations hereunder.
(viii) Neither on the date of the transactions contemplated by
the Transaction Documents or immediately before or after such
transactions, nor as a result of the transactions, will the Company:
(A) be insolvent such that the sum of its debts is greater
than all of its respective property, at a fair valuation;
(B) be engaged in or about to engage in, business or a
transaction for which any property remaining with the Company will be
an unreasonably, small capital or the remaining assets of the Company
will be unreasonably small in relation to its respective business or
the transaction; or
(C) have intended to incur or believed it would incur, debts
that would be beyond its respective ability to pay as such debts mature
or become due. The Company's assets and cash flow enable it to meet its
present obligations in the ordinary course of business as they become
due.
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(ix) Both immediately before and after the transactions
contemplated by the Transaction Documents (a) the present fair salable
value of the Company's assets was or will be in excess of the amount
that will be required to pay its probable liabilities as they then
exist and as they become absolute and matured; and (b) the sum of the
Company's assets was or will be greater than the sum of its debts,
valuing its assets at a fair salable value.
(x) The acquisition of the Lease Contracts, Lease Receivables
and the related Equipment by the Issuer pursuant to the Lease
Acquisition Agreement is not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable jurisdiction.
(xi) There are no proceedings or investigations pending, or to
the knowledge of the Company, threatened, against or affecting the
Company 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 Company, or the
ability of the Company to perform its obligations under the Lease
Acquisition Agreement. The Company is not in default with respect to
any order of any court, governmental authority or agency or
arbitration board or tribunal.
(xii) All tax returns or extensions required to be filed by
the Company in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Company, or
upon any of the respective properties, income or franchises of the
Company, shown to be due and payable on such returns have been, or will
be, paid when due. To the best of the Company's knowledge, all such tax
returns are true and correct and the Company has no knowledge of any
proposed additional tax assessment against it in any material amount
nor of any basis therefor. The provisions for taxes on the books of the
Company are in accordance with generally accepted accounting
principles.
(xiii) The Company (i) is not in violation of any laws,
ordinances governmental rules or regulations to which it is subject,
(ii) 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 (iii) is not in
violation in any material respect of any term of any agreement, charter
instrument, bylaw or 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 Company.
(xiv) The Private Placement Memorandum does not contain any
untrue statement of fact that would have a material effect on such
Lease Contracts or on the ability of the Trust Estate to realize the
benefits thereof.
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(xv) The Company and the Issuer are members of an affiliated
group within the meaning of section 1504 of the Internal Revenue Code,
which will file a consolidated federal income tax return at all times
until termination of the Transaction Documents.
(xvi) It is the intention of the Company that the Lease Assets
be acquired by the Issuer and that the beneficial interest in and title
to the Lease Assets not be part of the Company's estate in the event of
the filing of a bankruptcy petition by or against the Company under any
bankruptcy law.
(xvii) Immediately prior to the acquisition of the Lease
Contracts by the Issuer pursuant to the Lease Acquisition Agreement,
the Company was the sole owner of the Lease Contracts and the related
Equipment (with the exception of Equipment which is the subject of a
Loan Contract, as to which the Company has a valid first perfected
security interest in the related Equipment) and had good and marketable
title thereto, free and clear of all liens, claims and encumbrance
(except for the Existing Indebtedness and security interests in the
Lease Assets which shall be terminated on or prior to the Delivery
Date); and the acquisition of the Lease Assets by the Issuer does not
violate the terms or provisions of any Lease Contract.
(xviii) The Company is the registered owner of all of the
issued and outstanding common stock of the Issuer, all of which
Common Stock is validly issued, fully paid and nonassessable.
(xix) The Company will treat the transfer of the Lease
Contracts and the related Lease Receivables and Equipment on the
Initial Delivery Date as a contribution to the Issuer for Federal,
state and local income tax, reporting and accounting purposes. The
affiliated group of which the Company and the Issuer are a member
within the meaning of section 1504 of the Code shall treat the Lease
Contracts as owned by the Issuer for Federal, state and local income
tax purposes, shall include in the computation of the Issuer's gross
income for such purposes the rental and other income from the Lease
Contracts, shall treat the Notes as debt of the Issuer for such
purposes, and shall cause the Issuer to deduct the interest paid or
accrued with respect to the Notes in accordance with such group's
applicable method of accounting for such purposes.
(xx) 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 the Company, or in which employees of the
Company are entitled to participate, 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 (based on
the value of such assets as of December 31, 1995, the last annual
valuation date). 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
Company to any material tax, penalty or other liability. No notice of
intent to terminate a Pension Plan has been filed, nor has any Pension
Plan been terminated under Section 4041 (f) of ERISA, nor has the
Pension Benefit
12
Guaranty Corporation 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, and Pension Plan.
3.02 Representations and Warranties of the Issuer. The Issuer hereby
represents and warrants to, and agrees with the Company for the benefit of,
MBIA, the Indenture Trustee and Holders of the Notes, which representations and
warranties the Company relies in entering into the Lease Acquisiton Agreement
with the Issuer. Such representations and warranties speak as of each
Acquisition Date unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Lease Contracts and
related Lease Receivables and Equipment:
(a) The Issuer has been duly organized and is validly existing in good
standing as a corporation under the laws of the Issuer State of Incorporation,
with corporate power and authority to own its properties, perform its
obligations under the Transaction Documents and to transact the business in
which it is now engaged or in which it proposes to engage; the Issuer is duly
qualified to do business and is in good standing in each State in which the
nature of its business requires it to be so qualified, except where failure to
so qualify, would not have a material adverse effect on the ability of the
Issuer to perform its obligations under the Transaction Documents.
(b) The transfer to and receipt by the Issuer of the Lease Contracts
and the related Lease Receivables and the Equipment pursuant to the Lease
Acquisition Agreement and the consummation of the transactions contemplated
herein and in the Transaction Documents will not conflict with or result in
breach of any of the terms or provisions of, or constitute (with or without
notice, lapse of time or both) a default under the Certificate of Incorporation
or By-laws of the Issuer or any material indenture, agreement, mortgage, deed of
trust or other instrument to which the Issuer is a party or by which it is
bound, or result in the creation or imposition of any lien, charge or
encumbrance (except for the lien created by the Indenture) upon any of the
property or assets of the Issuer pursuant to the terms of, such indenture,
mortgage, deed of trust, or other agreement or instrument to which the Issuer is
a party or by which it is bound or to which any of the property or assets of the
Issuer is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-1aws of the Issuer or any
statute or any order, rule or regulation of any court or regulatory authority or
other governmental agency or body having jurisdiction over the Issuer or any of
its properties; and no consent, approval, authorization, order, registration or
qualification of or with or other action of any court or any such regulatory
authority or other governmental agency or body is required for the acquisition
of the Lease Contracts and the related Lease Receivables and the Equipment
hereunder.
(c) The Transaction Documents have been duly authorized, executed and
delivered by the Issuer by all necessary corporate action and constitute valid
and legal1y binding obligations of the Issuer enforceable against the Issuer in
accordance with their terms, subject as to enforcement to bankruptcy,
insolvency, reorganization and other similar laws of general applicabilty,
13
relating to or affecting creditors' rights generally and to general
principles of equity regardless of whether enforcement is sought in a
court of equity or law.
(d) There are no proceedings or investigations to which the Issuer is a
party pending or, to the knowledge of the Issuer, threatened, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality (a) asserting the invalidity of the Lease Acquisition Agreement,
(b) seeking to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by the Lease Acquisition Agreement, or (c) seeking
any determination or ruling that would materially and adversely affect the
performance by the Issuer of its obligations under, or the validity or
enforceability of, the Lease Acquisition Agreement.
(e) All approvals, authorizations, consents, orders or other actions of
any Person or of any court, governmental agency or body or official, required
in connection with the execution and delivery of the Lease Acquisition
Agreement, have been or will be taken or obtained on or prior to the Initial
Delivery Date.
(f) The Issuer Address is the principal place of business and chief
executive office of the Issuer.
3.03 Purchase or Substitution Required Upon Breach of Certain
Representations and Warranties.
If (i) the Company, the Issuer, the Indenture Trustee or MBIA discovers
the breach of any representations or warranties set forth in Sections 3.01 and
3.02 hereof which materially and adversely affects the value of a Lease
Contract, the related Equipment, or the interests of the Holders of the Notes or
MBIA, or a breach of any representations and warranties set forth in Sections
3.01(a)(ii), 3.01(a)(v), 3.01(a)(vii), or 3.01(a)(xxi) or (ii) the Indenture
Trustee shall fail to receive evidence acceptable to MBIA that each application
for re-titling certificates of title has been filed within the time required
pursuant to Section 4.03 (a) of the Standard Indenture Terms, then the party
discovering such breach or condition shall give prompt written notice to the
other party and in the case of clause (1) above, the Company shall, within 30
days from the date the Company was notified of, or otherwise discovers, such
breach, cure such breach. In the case of clause (ii) above, the Company shall
deliver all original certificates of title still in its possession to the
Back-up Servicer, who shall file applications for re-titling the related
certificates of title at the expense of the Company. If in the case of clause
(i) the Company fails to cure such breach in the applicable time period or the
Company or the Back-up Servicer is unable to cure such circumstance or
condition, or in the case of clause (ii), the Indenture Trustee shall fail to
receive evidence acceptable to MBIA within the time period required pursuant to
Section 4.04(b) of the Standard Indenture Terms, the Company shall either (a)
purchase such Lease Contract and the related Equipment from the Issuer at the
Purchase Price or (b) provide a Substitute Lease Contract or if the breach
relates to a representation or warranty regarding the selection criteria of the
Lease Contracts as a whole and is not cured (as the liquidated damages remedy
therefor) by the Company, either (a) purchase such non-conforming Lease
Contracts and the related Equipment from the Issuer or (b) provide Substitute
Lease Contracts
14
as set forth above, so that the representations and warranties with respect to
the selection criteria are correct, as evidenced by a certificate of an officer
of the Company to the Indenture Trustee. The Purchase Price for a purchased
Lease Contract and the related Equipment shall be paid, and any Substitute Lease
Contract shall be delivered, by the Company to the Issuer in accordance with
Section 3.04(c) hereof. It is understood and agreed that the obligation of the
Company to cure or purchase or replace any Lease Contract as to which such a
breach has occurred shall constitute the sole remedy respecting such breach
available to the Issuer, the Holders of Notes or the Indenture Trustee on behalf
of such Holders (except for any indemnities provided under Section 4.01(j)
hereof or under the Indenture) for any losses, claims, damages and liabilities
arising from the Issuer's ownership of such Lease Contract or the inclusion of
such Lease Contract in the Trust Estate.
Section 3.04 Requirements for Purchase or Substitution of Lease
Contracts and Acquisition of Funded Lease Contracts.
(a) If the Company is required to purchase any Lease Contract under
Sections 2.04 or 3.03 hereof, or if the Issuer is required to purchase any
Lease Contract under Sections 3.04 or 4.04(d) of the Standard Indenture Terms,
or is required or elects to purchase any Lease Contract under Section 3.10 of
the Standard Servicing Terms, such Lease Contract shall be purchased by the
Company or the Issuer, as applicable at the Purchase Price. All purchases shall
be accomplished at the times specified in subsection (c) below.
(b) If the Company (1) is required to substitute any Lease Contract
under Section 2.04 or 3.03 hereof, or if the Issuer is required to purchase any
Lease Contract under Sections 3.04 or 4.04(d) of the Standard Indenture Terms or
is required or elects to substitute any Lease Contract under Section 3.10 of the
Standard Servicing Terms, (a "Substitute Lease Contract"), or (2) conveys to the
Issuer or originates on behalf of the Issuer any Funded Lease Contract, each
such Substitute Lease Contract and Funded Lease Contract shall (i) be an
Eligible Lease Contract, (ii) be with respect to types of Equipment represented
in the pool of Lease Contracts delivered on the Initial Acquisition Date, and
types of Customers in the industries represented in the pool of Lease Contracts
delivered on the Initial Acquisition Date; (iii) be with a Customer whose credit
is equal to or better than that of the Customer under any other Lease Contract;
(iv) be written on one of the standard lease forms attached as Exhibit A to the
applicable Specific Lease Acquisition Terms; (v) be accompanied by (A) a Company
Certificate substantially in the form of Exhibit A hereto subjecting such Lease
Contract to the provisions hereof and providing with respect to such Substitute
Lease Contract or Funded Lease Contract, an Amended Lease Schedule and (B)
evidence of the UCC filings required and the filing of the certificates of
title, if applicable, as set forth in the Indenture; and (vi) not have been
selected using procedures that identified the Lease Contracts as being less
desirable or valuable than other comparable equipment leases owned by the
Company.
In addition to the above criteria, the following shall apply in
connection with any Substitute Lease Contract: (1) any Substitute Lease
Contracts assigned by the Company on any date in substitution for Lease
Contracts on any Series Lease Schedule shall have an aggregate Implicit
Principal Balance at least equal to the aggregate Implicit Principal Balance of
the Lease Contracts on such Series Lease Schedule being withdrawn, computed as
to both the Substitute Lease Contracts
15
and the withdrawn Lease Contracts using the Discount Rate applicable to the
Series of Notes and the related tranche to which such withdrawn Lease Contracts
relate; (2) a Substitute Lease Contract may have Scheduled Payments that are due
after the last day of the month preceding the Stated Maturity of the related
Notes, but such payments shall not be counted in any Implicit Principal Balance
computation; and (3) the weighted average remaining term of Substitute Lease
Contracts substituted by the Company on any date (such average being determined
based upon the Implicit Principal Balance of the Lease Contracts being
substituted) may not be more than 30% longer than the weighted average
remaining term of the Lease Contracts being withdrawn in connection with such
substitution (such average being determined based upon the Implicit Principal
Balance of the Lease Contracts being withdrawn).
Upon the substitution of any Substitute Lease Contract pursuant to the
provisions of this Section 3.04(b), the Company hereby agrees that such
Substitute Lease Contract will be subject to all the terms and provisions of the
Lease Acquisition Agreement, any Servicing Agreement and the Indenture as if
such Substitute Lease Contract had been one of the original Lease Contracts
acquired on the related Delivery Date. Upon the substitution of a Substitute
Lease Contract pursuant to this Section 3.04(b), the Issuer and the Company
shall also comply with the provisions and limitations set forth in the
Indenture. All substitutions shall be accomplished at the time specified in
subsection (c) below.
(c) Any purchase or substitution of a Lease Contract by the Company in
accordance with Sections 2.04 or 3.03 hereof or this Section 3.04 shall be
made either by remittance of the Purchase Price to the Servicer for deposit
into the Collection Account in accordance with Section 3.O3(a) of the
Servicing Agreement or by substitution of a Substitute Lease Contract, as
applicable, on or prior to the Determination Date next following the expiration
of the cure period set forth in Sections 2.04 or 3.03 hereof, as applicable.
(d) Any voluntany purchase or substitution of a Lease Contract by the
Company pursuant to the terms of the Servicing Agreement or the Indenture in
the event of a default, delinquency or modification with respect to such Lease
Contract shall satisfy the same requirements for a purchase or substitution, as
the case may be, as are set forth in this Section 3.04.
16
ARTICLE 4 -- COVENANTS OF THE ISSUER AND COMPANY
4.01 Company Covenants. The Company hereby covenants and agrees with
the Issuer as follows:
(a) Except as hereinafter provided, the Company will keep in full
effect its existence, rights and franchises as a corporation, and will obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of the Lease Acquisition Agreement or any of the
Lease Contracts and to perform its duties hereunder. Any person into which the
Company may be merged or consolidated, or to whom the Company has sold
substantially all of its assets, or any corporation resulting from any merger,
conversion or consolidation to which the Company shall be a party, or any
Person succeeding to the business of the Company shall be the successor of the
Company hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that (v) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Section 3.01(c)
shall have been breached, (w) such successor executes an agreement or
assumption, in form reasonably satisfactory the Indenture Trustee and MBIA, to
perform every obligation under the Lease Acquisition Agreement, (x) such
successor has a net worth that is sufficient to perform in accordance with the
Transaction Documents, (y) the Company shall have delivered to the Issuer a
certificate of an officer of the Company and an Opinion of Counsel each stating
that such consolidation, merger, or succession and such agreement of assumption
complies with this Section 4.01 and that all conditions precedent, if any,
provided for in the Lease Acquisition Agreement relating to such transaction
have been complied with, and (z) the Company shall have delivered to the Issuer,
MBIA and the Indenture Trustee an Opinion of Counsel either (1) stating that, in
the opinion of such counsel, all financing statements, continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Issuer in the Lease Contracts and
reciting the details of such filings, or (2) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interest.
(b) Neither the Company nor any of the directors, officers, employees
or agents of the Company shall be under any liability to the Issuer, the
Indenture Trustee or the Holders of Notes for any action taken or for refraining
from the taking of any action in good faith pursuant to the Lease Acquisition
Agreement, or for errors in judgement not involving recklessness or gross
negligence; provided, however, that this provision shall not protect the Company
against any breach of warranties or representations made herein, or failure to
perform its obligations in strict compliance with the Lease Acquisition
Agreement, or any liability which would otherwise be imposed by reason of any
breach of the terms and conditions of the Lease Acquisition Agreement. The
Company. and any director, officer, employee or agent of the Company, may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Company
shall not be under any obligation to appear in, prosecute, or defend any legal
action that is not incidental to its obligations as the contributor of the Lease
Assets under the Lease Acquisition Agreement and that in its opinion may involve
it in any expense or liability.
17
(c) At the close of each calendar quarter, the Company shall file such
financing statements as set forth in Section 4.04(e) of the Standard Indenture
Terms. The Company, from time to time, at its own expense, shall execute and
file such additional financing statements (including continuation statements) as
may be necessary to preserve the security interests and liens described in
Section 3.01 (a)(viii) hereof as may be reasonably requested by the Issuer. MBIA
or the Indenture Trustee and are reasonably satisfactory in form and substance
to the Issuer and MBIA; provided, however, that financing statements with
respect to the Equipment shall be filed only with respect to the Equipment
initially located in the Enumerated States and the Company will not be required
to file any financing statements with any Customer as debtor.
(d) The Company will not change its name, identity or corporate
structure in any manner that would, could, or might make any financing statement
or continuation statement misleading within the meaning of section 9-402 (7) of
the UCC, unless it shall have given the Issuer, MBIA and the Indenture Trustee
at least 10 days' prior written notice thereof.
(e) The Company will give the Issuer, MBIA and the Indenture Trustee at
least 30 days prior written notice of any relocation of its principal executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement.
(f) The Company will duly fulfill all obligations on its part to be
fulfilled under or in connection with each Lease Contract, will not change or
modify the terms of the Lease Contracts except as expressly permitted by the
terms of the Transaction Documents and will do nothing to impair the rights of
the Issuer, MBIA or the Indenture Trustee in the Lease Contract or the
Equipment. In the event that the rights of the Company under any Lease Contract,
any guaranty of the related Customer's obligations under any Lease Contract, or
any Insurance Policy are not assignable to the Issuer or to the Indenture
Trustee, the Company will enforce such rights on behalf of the Indenture
Trustee.
(g) The Company will comply, in all material respects, with all acts,
rules, regulations, orders, decrees and directions of any Governmental authority
applicable to the Lease Assets or any part thereof, provided, however, that the
Company may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not materially and adversely affect the rights of
the Issuer, MBIA or the Indenture Trustee in the Lease Assets.
(h) The Company will advise the Issuer, MBIA and the Indenture Trustee
promptly, in reasonable detail, of the occurrence of any breach by the Company
following discovery by the Company of such breach of any of its representations,
warranties and covenants contained herein.
(i) The Company will execute or endorse, acknowledge, and deliver to
the Issuer and the Indenture Trustee from time to time such schedules,
confirmatory assignments, conveyances, and other reassurances or instruments and
take such further similar actions relating to the Lease Contracts, the related
Lease Receivables and Equipment, and the rights covered by the Transaction
18
Documents, as the Issuer or the Indenture Trustee may reasonably request to
preserve and maintain title to the Lease Assets and the rights of the Indenture
Trustee, MBIA and the Holders of Notes therein against the claims of all persons
and parties.
(j) The Company agrees to indemnify, defend and hold the Issuer
harmless from and against any and all loss, liability, damage, judgment, claim,
deficiency or expense (including interest, penalties, reasonable attorney's fees
and amounts paid in settlement) that is caused by (i) a breach at any time by
the Company of its representations, warranties and covenants contained in
Section 3.01 hereof or this Section 4.01 or (ii) any material information
furnished by the Company which is set forth in any schedule delivered hereunder,
being untrue in any respect when any such representation was made or schedule
delivered, provided that the Company shall not have any liability with respect
to a representation or warranty as to any specific Lease Contract, Lease
Receivable or Equipment other than to purchase such Lease Contract or substitute
for such Lease Contract in accordance with Section 3.03 hereof unless such
breach of representation or warranty is the result of the Company's fraud, gross
negligence, bad faith or willful misconduct. The Company shall also indemnify
the Indenture Trustee, the Servicer and MBIA for any cost or expenses incurred
by them in the enforcement of the Lease Acquisition Agreement. The obligations
of the Company under this Section 4.01 (j) shall be considered to have been
relied upon by the Issuer and shall survive the execution, delivery and
performance of the Lease Acquisition Agreement, regardless of any investigation
made by or on behalf of the Issuer, until termination of the Indenture. If the
Company has made any indemnity payments pursuant to this Section 4.01(j) and
thereafter the recipient collects any of such amounts from others, such party
will promptly repay the amount collected to the Company, without interest.
(k) The Company will do nothing to disturb or impair the acquisition
hereunder by the Issuer of the Lease Contracts and the related Lease Receivables
and Equipment.
(1) The Company (i) will (A) maintain its books and records separate
from the books and records of the Issuer and (B) maintain bank accounts separate
from those of the Issuer and (C) do its best to maintain two Independent
directors on the Issuer's board of directors, so long as the Company is a
shareholder of the Issuer and (ii) will not (X) take any action that would cause
the dissolution or liquidation of the Issuer, (Y) guarantee (directly or
indirectly), endorse or otherwise become contingently liable (directly or
indirectly) for the obligations of the Issuer, or (Z) institute against the
Issuer, or join any other person in instituting against the Issuer, any case,
proceeding or other action under any existing or future bankruptcy, insolvency
or similar laws. This subsection (1) shall survive termination of the Lease
Acquisition Agreement.
(m) The Company shall notify the Issuer and the Indenture Trustee
promptly after becoming aware of any Lien on any Lease Asset.
(n) On each date as of which the Company substitutes a Substitute Lease
Contract in accordance with Sections 2.04 or 3.04(b) hereof, or otherwise
assigns Lease Contracts to the Issuer, the Company shall provide to the Issuer a
Company Certificate substantially the form of
19
Exhibit A hereto subjecting such Lease Contract to the provisions hereof and
providing with respect to such Lease Contracts the information required in the
Amended Lease Schedule.
(o) The annual financial statements of the Company will disclose the
effects of the transactions contemplated by the Transaction Documents in
accordance with generally accepted accounting principles. The financial
statements of the Company and the Issuer will also disclose that the assets of
the Issuer are not available to pay creditors of the Company. The resolutions,
agreements and other instruments underlying the Transaction Documents will be
continuously maintained by the Company as official records.
(p) The affiliated group of which the Company and the Issuer are
members within the meaning of section 1504 of the Code shall treat the Lease
Contracts and the related Equipment as owned by the Issuer for Federal, state
and local income tax purposes, shall include in the computation of the Issuer's
gross income for such purposes the rental and other income from the Lease
Contracts and the related Equipment, shall treat the Notes as debt of the Issuer
for such purposes, and shall cause the Issuer to deduct the interest paid or
accrued with respect to the Notes in accordance with such group's applicable
method of accounting for such purposes.
(q) The Company will, at its own cost and expense, (i) retain the
Electronic Ledger as a master record of the Lease Contracts and Equipment and
copies of all documents relating to each Lease Contract (other than the original
executed Lease Contracts) as custodian for the Issuer, the Indenture Trustee and
other Persons, if any, with interests in the Lease Contracts and Equipment and
(ii) xxxx the Lease Contracts and the Electronic Ledger to the effect that the
Lease Contracts and Equipment have been acquired by the Issuer and that they
have been transferred and assigned to the Indenture Trustee pursuant to the
Indenture.
(r) The Company will not pledge the stock of the Issuer without the
prior written consent of MBIA.
4.02 Issuer Covenants. The Issuer hereby covenants and agrees with the
Company as follows:
(a) The Issuer hereby acknowledges and agrees that its rights in the
Equipment are expressly subject to the rights of the related Customers in such
Equipment pursuant to the applicable Lease Contract. The Issuer covenants and
agrees that, so long as a Customer shall not be in default of any of the
provisions of the applicable Lease Contract, neither the Issuer nor any assignee
of the Issuer will disturb the Customer's quiet and peaceful possession of the
related Equipment and the Customer's unrestricted use thereof for its intended
purpose.
(b) If in any enforcement suit or legal proceeding it is held that the
Company may not enforce a Lease Contract on the ground that it is not a real
party in interest or holder entitled to enforce the Lease Contract, the Issuer
shall, at the Issuer's expense, take such steps as the Issuer deems necessary to
enforce the Contract, including bringing suit in the Issuer's name.
20
(c) The Issuer warrants that it will own and possess the Equipment
subsequent to its acquisition thereof and that it will warrant and defend its
title to such Equipment against all Persons, claims and demands whatsoever. The
Issuer shall not assign, sell, pledge, or exchange, or in any way encumber or
otherwise dispose of the Equipment, except as permitted under the Indenture.
(d) The Issuer shall treat the Lease Contracts as owned by it for
Federal, state and local income tax purposes, shall include in the computation
of its gross income for such purposes the rental and other income from the Lease
Contracts, shall treat the Notes as its debt for such purposes and shall deduct
the interest paid or accrued with respect to the Notes in accordance with its
applicable method of accounting for such purposes.
4.03 Assi-nment of Lease Assets. The Company understands that the
Issuer will assign to and grant to the Indenture Trustee a security interest in
all its right, title and interest to the Lease Acquisition Agreement and the
Lease Assets. The Company consents to such assigment and grants and further
agrees that all representations, warranties, covenants and agreements the
Company made herein shall also be for the benefit of and inure to the Indenture
Trustee, the Trustee, MIBIA and all Holders from time to time of the Notes.
21
ARTICLE 5 -- CONDITIONS PRECEDENT
5.01 Conditions to the Issuer's Obligations. The obligations of the
Issuer to provide the Company with the consideration provided for in the
Specific Lease Acquisition Terms shall be subject to the satisfaction of the
following conditions:
(a) All representations and warranties of the Company contained in
Section 3.01 (a) and (b) of the Lease Acquisition Agreement and all
information provided in any Series Lease Schedule or Amended Lease Schedule, as
applicable, shall be true and correct on the related Acquisition Date, all
representations and warranties in Section 3.01 (c) hereof, shall be true and
correct as of the Cut-off Date relating to any applicable Acquisition Date, and
the Company shall have delivered to the Issuer, the Indenture Trustee, MBIA and
each original purchaser of the Notes an officer's certificate to such effect;
(b) The Company shall have delivered all other information theretofore
required or reasonably requested by the Issuer to be delivered by the Company
hereunder, duly certified by an officer of the Company, and the Company shall
have substantially performed all other obligations required to be performed by
the provisions of the Lease Acquisition Agreement;
(c) On or prior to the applicable Acquisition Date, the Company shall
have delivered the Lease Contracts to the Indenture Trustee and there shall have
been made all filings, recordings and/or registrations, and there shall have
been given, or taken, any notice or any other similar action, as may be
necessary in the opinion of the Issuer, in order to establish and preserve the
right, title and interest of the Issuer in the Lease Assets;
(d) On or before the Initial Delivery Date, the Issuer, the Servicer,
the Back-Up Servicer and the Indenture Trustee shall have entered into the
Servicing Agreement;
(e) All of the Notes shall be issued and sold on the applicable
Delivery Date and the Issuer shall receive the full consideration due it upon
the issuance of such Notes and the Issuer shall have applied such consideration,
to the extent necessary, to pay the Existing Indebtedness.
5.02 Conditions to the Company's Obligations. The obligations of the
Company to enter into the Lease Acquisition Agreement on the Initial
Delivery Date and to deliver any Company Certificate on a subsequent Acquisition
Date shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Issuer contained in the
Lease Acquisition Agreement shall be true and correct with the same effect as
though such representations and warranties had been made on such Acquisition
Date;
(b) The consideration set forth in the Specific Lease Acquisition Terms
shall have been paid or delivered to the Company simultaneously with the
execution of the Lease Acquisition Agreement or delivery of a Company
Certificate, as applicable, and
22
(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by the Lease Acquisition Agreement
shall be satisfactory in form and substance to the Company, and the Company
shall have received from the Issuer copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Company may reasonably have requested.
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ARTICLE 6 - TERM AND TERMINATION
6.01 Term. The Lease Acquisition Agreement shall commence as of the
date of execution and delivery hereof and, shall continue in full force and
effect until final the later of (i) payment with respect to the last Lease Asset
or (ii) termination of the Indenture.
6.02 Default by the Company. If the Company shall be in default under
the Lease Acquisition Agreement and such default shall not have been cured for a
period of 60 days, or if the Company shall become insolvent or make an
assignment for the benefit of its creditors or have a receiver appointed for all
or substantially all of its properties, or if any proceedings are commenced, or
consented to, by the Company are not stayed or dismissed within 90 days after
being commenced against the Company under any bankruptcy, insolvency or other
law for the relief of debtors, the Issuer shall have the right, in addition to
any other rights it may have under any applicable law, to terminate the Lease
Acquisition Agreement upon 30 days prior written notice to the Company; provided
that any termination of the Lease Acquisition Agreement shall not release the
Company from any obligation under the Lease Acquisition Agreement.
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ARTICLE 7 - MISCELLANEOUS
7.01 Amendments. The Lease Acquisition Agreement and the rights and
obligations of the parties hereunder may not be changed orally but only by an
instrument in writing signed by the party against which enforcement is sought.
The Lease Acquisition Agreement may be amended by the Issuer and the Company
only with the prior written consent of the Indenture Trustee and MBIA.
7.02 Governing Law. The Lease Acquisition Agreement shall be construed
in accordance with the internal laws of the State of New York, without regard to
choice of law principles.
7.03 Notices. All demands, notices and communications hereunder shall
be in writing and shall be delivered or mailed by registered or certified United
States mail, postage prepaid, and addressed, in the case of the Company, to the
Company Address, and in the case of the Issuer, to the Issuer Address. All
notices and demands shall be deemed to have been given either at the time of the
delivery thereof to any officer of the Person entitled to receive such notices
and demands at the address of such Person for notices hereunder, or on the third
day after the malling thereof to such address, as the case may be. Any Person
may change the address for notices hereunder by giving notice of such chance to
the other Person.
7.04 Separability Clause. Any provisions of the Lease Acquisition
Agreement which are prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceabilitv in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7.05 Assignment. Except as provided in Section 4.01(a), the Lease
Acquisition Agreement may not be assigned or delegated by the Company without
the prior written consent of the Issuer, MBIA and the Indenture Trustee and may
not be assigned or delegated by the Issuer without the prior written consent of
the Company, MBIA and Indenture Trustee.
7.06 Further Assurances. Each of the Company and the Issuer agrees to
do such further acts and things and to execute and deliver to the Indenture
Trustee and MBIA such additional assignments, agreements, powers and
instruments as are required by the Indenture Trustee to carry into effect the
purposes of the Lease Acquisition Agreement or to better assure and confirm unto
the Indenture Trustee, MBIA or the Holders of the Notes their rights, powers or
remedies hereunder. If any Customer shall be in default under any Lease
Contract, upon reasonable request from the Servicer, the Company will take all
reasonable steps to assist in enforcing such Lease Contract and preserving and
maintaining title to the Lease Assets and the rights of the Indenture Trustee,
MBIA and the Holders of the Notes therein against the claims of all persons and
parties to the extent the Company is capable of performing such requested steps
and the Servicer reasonably determines that the assistance of the Company is
necessary to effect the intent and purposes hereof.
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7.07 No Waivers; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Issuer or the Company, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise of any right, remedy, or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privilege provided by law.
7.08 Binding Effect; Third Party Beneficiaries. This Lease Acquisition
Agreement will inure to the benefit of and be binding upon the parties hereto,
the Indenture Trustee, MBIA, the Holders of Notes, and their respective
successors and permitted assigns.
7.09 Set-Off.
(a) The Company hereby irrevocably and unconditionally waives all right
of set-off that it may have under contract (including the Lease Acquisition
Agreement), applicable law or otherwise with respect to any funds or monies of
the Issuer at any time held by or in the possession of the Company.
(b) The Issuer shall have the right to set-off against the Company any
amounts to which the Company may be entitled and to apply such amounts to any
claims the Issuer may have against the Company from time to time under the
Lease Acquisition Agreement. Upon any such set-off the Issuer shall give notice
of the amount thereof and the reasons therefor.
7.10 MBIA Default. If an MBIA Default occurs, MBIA's right to consent
hereunder and to direct the Indenture Trustee shall be void and, in such event,
in all provisions of the Lease Acquisition Agreement wherein MBIA's consent or
direction is required or permitted, the consent or direction of the Holders of
not less than a majority in Outstanding Principal Amount of all Notes shall be
required or permitted.
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Definitions: Appendix X
Please see Appendix X attached to Standard Terms and Conditions
of Indenture
EXHIBIT A
FORM OF COMPANY CERTIFICATE
_______________________, 19 ___
Pursuant to Section 3-04(b) of the Standard Terms and Conditions of Lease
Acquisition dated as of March 1, 1996 (the "Standard Lease Acquisition Terms,"
which together with the Specific Terms and Conditions of Lease Acquisition dated
as of March 1, 1996 (the "Specific Lease Acquisition Terms") constitute the
Lease Acquisition Agreement), between [Name of Company] (the "Company") and
[Name of Issuer] (the "Issuer"), attached hereto is an amendment to Schedule II
of Exhibit B of the Specific Lease Acquisition Terms, which includes information
regarding Lease Assets that are hereby sold, assigned, transferred and delivered
by the Company to the Issuer in accordance with the Lease Acquisition Agreement.
[NAME OF COMPANY].
By:_________________________________
Name:
Title:
[NAME OF ISSUER]
By:_________________________________
Name:
Title:
A-1
