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SPECIFIC TERMS AND CONDITIONS OF LEASE ACQUISITION
between
FEDERAL LEASING CORP.
("Company")
and
FLC FINANCIAL CORP. II
("Issuer")
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Dated as of March 1, 1996
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SPECIFIC TERMS AND CONDITIONS OF LEASE ACQUISITION, dated as of March
1, 1996, by and between Federal Leasing Corp., a New Jersey corporation (the
"Company") and its wholly owned subsidiary, FLC Financial Corp. II, a Delaware
corporation (the "Issuer").
PRELIMINARY STATEMENT
This Specific Terms and Conditions of Lease Acquisition (the "Specific
Lease Acquisition Terms") is intended to incorporate by reference all of the
provisions of the Standard Terms and Conditions of Lease Acquisition attached
hereto as Appendix 1 (the "Standard Lease Acquisition Terms") and the
definitions in Appendix X attached thereto. Together the Specific Lease
Acquisition Terms and the Standard Lease Acquisition Terms are intended to form
the Lease Acquisition Agreement entered into in connection with the financing
described below.
The Issuer has entered into an Indenture dated as of March 1, 1996,
(the "Indenture"), with NorwestBank Minnesota, National Association (the
"Indenture Trustee"), Norwest Bank Minnesota, National Association (the "Back-up
Servicer") and Federal Leasing Corp., as servicer (the "Servicer"), pursuant to
which the Issuer intends to issue one or more series of Notes (the "Notes").
In furtherance thereof, the Issuer and Company have entered into the
Lease Acquisition Agreement to provide for, among other things, the acquisition
by the Issuer of all of the right, title and interest in and to certain Lease
Assets which the Issuer is and will be pledging with the Indenture Trustee from
time to time, and in which the Issuer is and will be from time to time granting
to the Indenture Trustee a security interest, as security for the Notes. As a
precondition to the effectiveness of the Lease Acquisition Agreement, the
Issuer, the Indenture Trustee, the Servicer and the Back-up Servicer will enter
into the Servicing Agreement to provide for the servicing of the Lease Assets.
The acquisition of the Lease Assets by the Issuer is initially accomplished
hereunder by the issuance by the Issuer to the Company of the Common Stock in
exchange for the contribution by the Company to the Issuer of the Lease Assets.
In order to further secure the Notes, the Issuer is granting to the
Indenture Trustee a security interest in, among other things, the Issuer's
rights derived under the Lease Acquisition Agreement and the Servicing
Agreement, and the Company agrees that all covenants and agreements made by it
in the Lease Acquisition Agreement with respect to the Lease Assets shall also
be for the benefit and security of the Indenture Trustee, MBIA and all Holders
from time to time of the Notes. In consideration for its contribution and its
representations, warranties, covenants and other agreements under the Lease
Acquisition Agreement, the Company has received all of the Common Stock of the
Issuer and such other consideration as may from time to time be paid hereunder.
Section 1. Specific Definitions
"Common Stock": shall mean all of the issued and outstanding shares of
common stock of the Issuer, which consists of 1,000 shares having a par value of
$.01 per share.
"Company Address": shall mean 0 Xxxxxx Xxxx Xxxx, Xxxx Xxxxxx Xxx X,
Xxxxxxxx, Xxx Xxxxxx 00000.
"Concentration Limits": shall have the meaning specified in Section
3(c) hereof.
"Depositor": shall mean FLC Financial Corp.
"Existing Indebtedness": shall mean any indebtedness of the Company
which relates to preexisting financings of any Lease Contracts that are covered
by a Company Certificate, as set forth in Schedule I thereto.
"Initial Acquisition Date": shall mean March 20, 1996.
"Issuer Address": shall mean 0 Xxxxxx Xxxx Xxxx, Xxxxx X, Xxxxxxxx, Xxx
Xxxxxx 00000.
"Issuer State of Incorporation": shall mean Delaware.
"1995-B Indenture": shall mean the Amended and Restated Standard Terms
and Conditions of Indenture, dated as of March 1, 1995, the Specific Terms and
Conditions of Indenture, dated as of March 1, 1995, and the Supplement to the
Indenture, Warehouse Notes, Series 1995-B, each among the Depositor, the
Company, as Servicer, and Norwest Bank Minnesota, National Association, as
Indenture Trustee and Back-up Servicer.
"1995-B Warehouse Note": shall mean the Depositor's Warehouse Note,
Series 1995-B issued pursuant to the 1995-B Indenture.
Section 2. Issuance of Common Stock and Contribution and Sale of Lease
Assets
2.01 Authorization and Issuance of Common Stock by the Issuer. 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
hereby issues to the Company the Common Stock. Such Common Stock shall be issued
in the name of, and delivered directly to, the Company and the Company hereby
agrees to obtain directly from the Issuer such Common Stock, all in accordance
with the terms of the Lease Acquisition Agreement.
2.02 Lease Acquisition. On the Initial Acquisition Date, in return for
the Common Stock, and on each subsequent Acquisition Date, in return for the
payment of purchase price in the amount of the net proceeds from the related
Funding or the issuance of a new Series of Notes, the Company hereby transfers,
assigns, sells, grants and contributes to the Issuer, without recourse except as
provided in Section 3.03 of the Standard Lease Acquisition Terms, all of the
Company's right, title
and interest in and to all of the Lease Assets related to the Lease Contracts
now or hereafter listed on each Series Lease Schedule, whether now existing or
hereafter arising. The Company hereby acknowledges that its transfer of the
Lease Assets to the Issuer is absolute and irrevocable, without reservation or
retention of any interest whatsoever by the Company.
2.03 Assumption of Indebtedness by the Issuer. By the execution of an
Issuer Certificate, 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, on the Initial
Acquisition Date and on any related subsequent Acquisition Date the Issuer
hereby agrees to assume the related Existing Indebtedness and the Issuer agrees
to repay the Existing Indebtedness with the proceeds of the sale of any Notes on
the related Acquisition Date simultaneously with the issuance of such Notes.
2.04 Contribution to the Depositor. On the Closing Date, the Company
agrees to use the net proceeds that it receives from the Issuer in connection
with the Issuer's issuance of its Lease Backed Notes, Series 1996-A, to purchase
the Depositor's Lease Contracts which, prior to the Closing Date, are pledged by
the Depositor to secure the 1995-B Warehouse Note pursuant to the provisions
of the 1995 B Indenture, at the "Purchase Price", as such term is defined in the
1995 B Indenture for purposes of this Section 2.04, for each such Lease
Contract.
Section 3. Representations and Warranties of the Company.
(a) The following shall modify the indicated representations and
warranties set forth in Section 3.01 (a) of the Standard Lease Acquisition
Terms:
(xii) Except as indicated in the Concentration Limits set forth in
Section 3 )(c) hereof, 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.
(b) The Company makes the additional representation and warranty which
shall be added to Section 3.01 (a):
(xxv) The Company represents and warrants that none of the Equipment is
titled equipment.
(c) The following items shall constitute the "Concentration Limits"
with respect to all Lease Assets acquired by the Issuer:
Type of Limit Description of Limit
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State No more than 40% of the Aggregate IPB consists of
Lease Contracts to Customers located in New Jersey.
State No more than 20% of the Aggregate IPB consists of
Lease Contracts to Customers located in California.
State No more than 20% of the Aggregate IPB consists of
Lease Contracts to Customers located in Florida.
State No more than 20% of the Aggregate IPB consists of
Lease Contracts to Customers located in New York.
State No more than 10% of the Aggregate IPB consists of
Lease Contracts to Customers located in any state
other than California, Florida, New Jersey or New
York.
Zip Code No more than 2.5% of the Aggregate IPB relates to
Lease Contracts of Customers located in any one zip
code.
Lessee No more than 2.5% of the Aggregate IPB consists of
Lease Contracts to any one Customer for the period
ending June 30, 1996, 2.25% for the period
ending September 20, 1996, and 2.0% thereafter.
Lessee No more than 10% of the Initial Pool Balance
consists of Lease Contracts to any Customer that
has made less than two Scheduled Payments.
Lessee No more than 8.0% of the Aggregate IPB consists of
Lease Contracts to the top five Customers (measured
by IPB of related Lease Contracts).
Term No more than 6.0% of the Aggregate IPB relates to
Lease Contracts with original terms exceeding 60
months.
Step Payments No more than 10% of the Aggregate IPB relates to
Lease Contracts that contain Scheduled Payments
that vary in amount.
Step Payments No more than 5.0% of the Aggregate IPB relates to
Lease Contracts that have unlimited increases in
rental payments. provided that such increases occur
no later than the 25th rental payment (such rental
payments do not include PUT
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payments), and then remains constant for the
remainder of the term of the Lease Contract; and no
more than an additional 5.0% of the Aggregate IPB
relates to Lease Contracts that have rental
payments (excluding PUT payments) that do not
increase by more than 300% during the remaining
term of the Lease Contract.
Payment Frequency No more than 15% of the Aggregate IPB relates to
Lease Contracts that contain Scheduled Payments
less frequently than monthly.
Equipment No more than 60% of the Aggregate IPB relates to
Lease Contracts on medical equipment.
Equipment No more than 25% of the Aggregate IPB relates to
Lease Contracts on food processing equipment.
Equipment No more than 10% of the Aggregate IPB relates to
Lease Contracts on automotive equipment.
PUT Payments
No more than 10% of the Aggregate IPB relates to
Lease Contracts that contain PUT Payments.
Loss & Damage Waivers No more than 2.0% of the Aggregate IPB relates to
Lease Contracts that contain loss and damage waiver
provisions or other performance obligations by the
Issuer or the Company.
Modifications No Lease Contract will be modified and, except for
less than 5% of Lease Contract comprising the
Initial Pool Balance, no Lease Contract will have
had their original term to maturity extended.
(d) Exceptions to the Concentration Limits above are set forth on
Exhibit C hereto.
(e) Notwithstanding anything herein to the contrary, the inclusion of
Substitute Lease Contracts or Funded Lease Contracts in the Trust Estate shall
not cause any Lease Contract to violate the restrictions enumerated in (a)
through (c) above, or cause the Aggregate IPB of the Lease Contracts to exceed
the applicable percentages enumerated in (a) through (c) above.
Section 4. Lease Acquisition Agreement Comprised of Specific Lease
Acquisition Terms and Standard Lease Acquisition Terms.
This Specific Lease Acquisition Terms incorporates by reference all of
the provisions of the Standard Lease Acquisition Terms attached hereto as
Appendix 1 and Appendix X, which together form the Lease Acquisition Agreement.
Notwithstanding the foregoing, if any provision
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of the Standard Lease Acquisition Terms conflicts with the provisions of this
Specific Lease Acquisition Terms, the provisions of this Specific Lease
Acquisition Terms shall control.
Section 5. Counterparts
The Lease Acquisition Agreement may be executed in one or more
counterparts all of which together shall constitute one original document.
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IN WITNESS WHEREOF, the Company and the Issuer have caused the Lease
Acquisition Agreement to be duly executed by their respective officers thereunto
duly authorized as of the date and year first above written.
FEDERAL LEASING CORP.,
Company
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
Title: Chairman
FLC FINANCIAL CORP. II
Issuer
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
Title: President
EXHIBIT A
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FORM OF LEASE CONTRACT
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The following Lease Contracts are samples of the form lease contracts
used by Federal Leasing Corp. Some Lease Contracts may vary from the following
form lease contracts; any variations in such nonconforming lease contracts are,
in the opinion of the Issuer, immaterial variations.
