EXHIBIT 10.19
EXECUTION COPY
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JLA CREDIT CORPORATION,
as Seller and as Servicer,
and
JLA FUNDING CORPORATION III,
as Purchaser
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SALE AND SERVICING AGREEMENT
Dated as of March 30, 1998
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TABLE OF CONTENTS
Page
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ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions...................................................1
ARTICLE II.
PURCHASE AND SALE OF THE CONTRACT ASSETS
SECTION 2.01 Purchases and Sales ..........................................5
SECTION 2.02 Conditions to Obligations of the Purchaser ...................5
SECTION 2.03 Conditions to Obligations of the Seller ......................6
SECTION 2.04 Contract Purchase Dates.......................................7
ARTICLE III.
THE CONTRACTS
SECTION 3.01 Representations and Warranties of the Purchaser ..............7
SECTION 3.02 Representations and Warranties of the Seller .................8
SECTION 3.03 Retransfer of Contracts .....................................11
SECTION 3.04 Custody of Contract Files ...................................12
SECTION 3.05 Duties of Servicer as Custodian .............................12
SECTION 3.06 Instructions; Authority to Act ..............................13
SECTION 3.07 Effective Period and Termination ............................13
SECTION 3.08 Substitution of Contracts ...................................13
SECTION 3.09 Notice of Substitution ......................................14
SECTION 3.10 Subsequent Obligations ......................................15
ARTICLE IV.
ADMINISTRATION AND SERVICING OF CONTRACT
SECTION 4.01 Duties of Servicer, Subservicing Arrangements ...............15
SECTION 4.02 Collection of Contract Payments .............................16
SECTION 4.03 Repossession of Equipment ...................................17
SECTION 4.04 Theft and Physical Damage Insurance .........................17
SECTION 4.05 Covenants of the Servicer ...................................17
SECTION 4.06 Transfer of Contracts upon Breach ...........................18
SECTION 4.07 Servicing Fee ...............................................19
SECTION 4.08 Monthly Servicer Report......................................19
SECTION 4.09 Annual Statement as to Compliance............................19
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SECTION 4.10 Annual Accountants' Statement ...............................20
SECTION 4.11 Access to Certain Information ...............................20
SECTION 4.12 Weekly Servicer Verification ................................20
ARTICLE V.
DISTRIBUTIONS; STATEMENTS
SECTION 5.01 Accounts ....................................................21
SECTION 5.02 Collections, Applications ...................................21
SECTION 5.03 Additional Deposits .........................................21
SECTION 5.04 Distributions ...............................................21
SECTION 5.05 Statements to Noteholders ...................................22
ARTICLE VI.
THE SELLER
SECTION 6.01 Additional Representations of the Seller ....................22
SECTION 6.02 Merger or Consolidation of Seller ...........................23
SECTION 6.03 Limitation on Liability of Seller and Others ................24
SECTION 6.04 Covenants of Seller .........................................24
SECTION 6.05 Other Liens or Interests ....................................25
SECTION 6.06 Costs and Expenses ..........................................25
SECTION 6.07 Indemnification .............................................25
SECTION 6.08 Sale ........................................................26
SECTION 6.09 Accounting Statements .......................................27
ARTICLE VII.
THE SERVICER; REPRESENTATIONS AND INDEMNITIES
SECTION 7.01 Representations of the Servicer .............................27
SECTION 7.02 Liability of Servicer, Indemnities ..........................28
SECTION 7.03 Merger or Consolidation of Servicer .........................29
SECTION 7.04 Limitation on Liability of Servicer and Others ..............29
SECTION 7.05 Servicer Not to Resign ......................................30
SECTION 7.06 Protection of Interest of Trust Property ....................30
ARTICLE VIII.
DEFAULT
SECTION 8.01 Events of Default ...........................................31
SECTION 8.02 Appointment of Successor ....................................33
SECTION 8.03 Notification to Noteholders .................................34
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SECTION 8.04 Waiver of Past Defaults .....................................35
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.01 Amendment ...................................................35
SECTION 9.02 Counterparts ................................................35
SECTION 9.03 Governing Law ...............................................35
SECTION 9.04 Notices .....................................................36
SECTION 9.05 Severability of Provisions ..................................36
SECTION 9.06 Assignment ..................................................36
SECTION 9.07 Submission to Jurisdiction; Venue ...........................36
SECTION 9.08 No Bankruptcy Petition ......................................37
SECTION 9.09 Rule 144A Information .......................................37
SECTION 9.10 Limited Recourse ............................................37
SECTION 9.11 Trustee Rights ..............................................37
Exhibit A Form of Xxxx of Sale
Exhibit B Form of Monthly Servicer Report
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This SALE AND SERVICING AGREEMENT dated as of March 30, 1998
is by and between JLA CREDIT CORPORATION, as Seller (the "Seller") and as
Servicer (the "Servicer"), and JLA FUNDING CORPORATION III, as Purchaser (the
"Purchaser").
RECITALS
The Seller desires to sell to the Purchaser, and the Purchaser
desires to buy from the Seller, from time to time during the Note Issuance
Period (as defined herein), Contracts (and related Contract Assets), and the
Seller and Purchaser desire, in addition, that the Seller act as Servicer of
such Contracts and Contract Assets.
In consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions. Whenever used in this Agreement,
capitalized terms, used and not defined herein have the meanings specified in
the Indenture (as defined herein) and the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
"Agreement" means this Sale and Servicing Agreement, as it may
be amended or supplemented from time to time.
"Xxxx of Sale" means the Xxxx of Sale to be delivered on each
Contract Purchase Date pursuant to which the Seller sells to the Purchaser the
Contracts identified in such Xxxx of Sale on such Contract Purchase Date, a form
of which is attached hereto as Exhibit A.
"Contract" means, for any applicable Contract Purchase Date,
each commercial loan contract or equipment finance lease contract, secured by
commercial and/or industrial equipment, including any amendment or modification
of such contract and any schedules and promissory notes incorporated therein
(including, without limitation, all right to receive Contract Payments) sold and
transferred to the Purchaser on such Contract Purchase Date, as identified in
the related Xxxx of Sale.
"Contract Assets" means the Contracts (exclusive of any
Administrative Fees and all amounts due or becoming due under such Contracts
prior to the applicable Cut-Off Dates), together with (i) a perfected security
interest, if any, in the Equipment; (ii) certain rights, remedies and interests
under the Sale and Servicing Agreement, (iii) amounts representing Security
Deposit Offsets applied to unpaid Contract Payments due after the Cut-Off Date;
(iv) any guaranty, relating to a Contract; (v) each Insurance Policy, if any,
covering Equipment, including all rights to any Insurance Proceeds received on
or after the applicable Cut-Off Date; (vi) the interest of the Seller in any
funds to be deposited in the Collection Account; (vii) all documents contained
in the Contract Files (of which JLA will retain possession only as agent of the
Purchaser); (viii) all payments and proceeds with respect to the Contracts and
the other Contract Assets (including any Recoveries on the Contracts) held by
the Servicer or any subservicer; and (ix) all proceeds of the foregoing.
"Contract Files" means the documents specified in Section
3.04.
"Contract Payment" means, with respect to each Contract, the
scheduled monthly Contract payment for the Equipment leased or otherwise
financed by the Obligor under such Contract, consisting of an Interest Component
and a Principal Component.
"Contract Purchase Date" means each date during the Note
Issuance Period that is designated by the Purchaser to the Seller, upon not less
than five Business Days' prior notice to the Seller and the Trustee, and
approved by the Seller, on which Contracts are to be purchased by the Purchaser
pursuant to this Sale and Servicing Agreement.
"Contract Purchase Price" has the meaning specified in Section
2.01(b).
"Cut-Off Date" means, as to any Contract, the last day of the
calendar month immediately preceding the applicable Contract Purchase Date of
such Contract, as specified in the related Xxxx of Sale delivered on the
applicable Contract Purchase Date.
"Eligibility Criteria" means, as to each Contract, the
requirements for such Contract to be an "Eligible Contract" pursuant to Section
3.02.
"Eligible Contract" has the meaning specified in Section 3.02.
"Eligible Servicer" means an entity which, at the time of its
appointment as Servicer or as a subservicer, (i)(a) is servicing a portfolio of
equipment lease contracts and commercial loan contracts, (b) is legally
qualified and has the capacity to service the Contracts, (c) has demonstrated
the ability to professionally and competently service a portfolio of similar
contracts in accordance with high standards of skill and care, (d) has (if not
the Seller) combined capital and surplus of at least $10,000,000 and (e) is
qualified and entitled to use, and agrees to maintain the confidentiality of,
the software that the Servicer or any subservicer uses in connection with
performing its duties and responsibilities under this Agreement or the related
subservicing agreement or obtains rights to use or develops its own software
which is adequate to perform its duties and responsibilities under this
Agreement or the related subservicing agreement, or (ii) so long as no Event of
Default has occurred and is continuing, is a subsidiary of the Servicer or a
subservicer (which itself is an Eligible Servicer) and which satisfies the
requirements of (i)(b), (i)(c) and (i)(d) above, or (iii) is a successor by
merger or consolidation to the Servicer in accordance with the provisions of
Section 7.03 hereof.
"Equipment" means any new or used equipment, together with all
accessions thereto and replacement parts, accessories and repairs with respect
thereto, which is the subject of a Contract.
"Event of Default" means an event specified in Section 8.01.
"Excluded Equipment" means any of the following: restaurant
equipment, gas supply equipment, gas pumps, gas or chemical tanks, paint booths,
processing, dispensing and disposal equipment for environmental waste, real
estate, pianos, containers, working capital loans, yellow iron (construction and
mining equipment) and sale/leaseback transactions.
"Heidelberg Contracts" means any Contract originated by
Heidelberg USA Inc. containing provisions which grant to the Obligor the right
to prepay the amounts owed by the Obligor subject to the terms and conditions of
such Contract.
"Indenture" means the Indenture, dated as of the date hereof,
by and among the Purchaser, the Servicer, and LTCB Trust Company, as trustee,
and The Bank of New York, as backup
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trustee, as may be from time to time amended or supplemented pursuant to the
applicable provisions thereof.
"JLACC" means JLA Credit Corporation, a Delaware corporation,
and its successors in interest.
"Lien" means any lien, security interest or encumbrance of any
kind.
"Liquidation Proceeds" has the meaning specified in Section
4.03.
"Lock-Box Account" means the account designated as such,
established and maintained pursuant to the Lock Box Agreement and in accordance
with Section 5.01.
"Lock-Box Agreement" means the master lock-box agreement,
dated as of March 30, 1998, by and between the Purchaser, Bank of America
National Trust and Savings Association, as Lock Box Bank, the Trustee and the
Backup Trustee, pursuant to which the Lock-Box Account is established and
maintained.
"Lock-Box Bank" means, as of any date, the bank or trust
company at which the Lock-Box Account is established and maintained as of such
date.
"Maximum Note Principal Balance" means $200,000,000.
"Monthly Payment Date" means the 16th day of each month (or if
such date is not a Business Day, the next succeeding Business Day), commencing
in the calendar month immediately succeeding the first Note Issuance Date, and
ending with the Scheduled Final Payment Date.
"Monthly Servicer Report" means a report substantially in the
form attached as Exhibit B hereto, completed by and executed on behalf of the
Servicer by a Servicing Officer of the Servicer in accordance with Section 4.08.
"Note Issuance Date" means each Business Day (not more
frequently than one per month) on which any Notes are issued during the Note
Issuance Period.
"Note Issuance Period" means the period commencing on the
Closing Date and ending (unless sooner terminated as described herein) on the
date that is the earlier of (i) January 16, 1999 and (ii) the date (if any) on
which the aggregate outstanding principal amount of the Notes equals the Maximum
Note Principal Balance.
"Note Principal Balance" means (i) as of any date prior to the
first Monthly Payment Date, the outstanding principal balance of the applicable
Class of Notes on the initial Note Issuance Date, and thereafter (ii) as of any
date, the outstanding principal balance of the applicable Class of Notes as of
the preceding Monthly Payment Date; provided that the term "Note Principal
Balance", as of any Monthly Payment Date on which a payment in respect of
principal has been made, means the outstanding principal balance of the
applicable Class of Notes on such date after giving effect to any distributions
of Monthly Principal and overdue Monthly Principal on such date.
"Obligor" means each obligor under a Contract and its
permitted assigns.
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"Pool Balance" means, as of any date, the aggregate Principal
Balance of the Contracts as of such date.
"Predecessor Contract" has the meaning specified in Section
3.08.
"Principal Balance" means, with respect to any Contract on any
day, (i) the unamortized portion of the purchase price paid by JLACC for the
related Equipment and amounts paid by JLACC in respect of taxes and organization
costs and fees as of the related Cut-Off Date, minus (ii) the sum of the
following with respect to such Contract: (a) the Principal Component of all
Contract Payments since the applicable Cut-Off Date received by the Servicer and
deposited in the Collection Account (other than the Principal Component of any
payments received with respect to future Collection Periods, which will be
deposited in the Payahead Account and will constitute Contract Payments in the
Collection Period such payments were scheduled to be received) and (b) the
Principal Component of all proceeds of any Insurance Policies; provided,
however, that for any day following the Monthly Payment Date on which either (x)
the proceeds of a prepayment in full of a Contract or a Retransferred Contract
are payable to Noteholders under the definition of Monthly Principal or (y) a
Defaulted Contract first becomes a Defaulted Contract, the Principal Balance of
any such Contract shall be zero.
"Purchase Option Payment" means, with respect to any Contract,
any payment (received on or after the applicable Cut-Off Date for such Contract)
made by an Obligor to purchase the Equipment subject to the Contract.
"Retransfer Amount" means, with respect to any Contract, the
price equal to the Principal Balance of such Contract (prior to any amendment,
modification or exchange) on the first day of the month following the date on
which the reacquisition or purchase obligation with respect to such Contract
arose pursuant to Section 3.03 or 4.02 hereof, plus accrued interest on the
Principal Balance of such Contract, at a rate equal to 1/12 of the sum of (i)
the weighted average Rate of all outstanding Subordinated Notes and (ii) the
Servicing Fee Rate, from the last date on which such amount was paid to the date
that is the date of payment of the Retransfer Amount, less the amount, if any,
on deposit in the Payahead Account with respect to such Contract.
"Retransferred Contract" means, for any Collection Period, a
Contract which has been transferred to the Seller or the Servicer as of the last
day of such Collection Period pursuant to Section 3.03 or 4.06.
"Retransferred Contract Receivables" means, for any Collection
Period, the Contract receivables under Contracts which have been retransferred
to the Seller or Servicer as of the last day of such Collection Period pursuant
to Section 3.03 or 4.06.
"Schedule of Contracts" means, as of any date, the schedule of
Contracts owned by the Purchaser (and included in the Trust Property) on such
date. As of each Contract Purchase Date, a Schedule of Contracts in respect of
the Contracts purchased on such date shall set forth, as to each such Contract
as of the related Cut-Off Date, among other things, (a) its identifying number
and the name of the related Obligor; (b) its date of origination; (c) the
remaining term of the Contract; (d) the stated date of termination of the
Contract; (e) the original Principal Balance at inception of the Contract; (f)
the Principal Balance as of the applicable Cut-Off Date; (g) the location where
the related Contract File is kept, which shall be 00000 Xxxxxxx Xxxxxxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000, indicated by the symbol "SR", or 000 Xxxx 000xx Xxxxxx,
Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, indicated by a "T", or such other address
in California as shall be specified therein; (h) the Contract Rate; and (i) the
scheduled monthly Contract Payment.
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"Scheduled Final Payment Date" has the meaning specified in
the Indenture.
"Seller" means JLACC in its capacity as Seller of Contracts
under this Agreement, and each successor to JLACC (in the same capacity)
pursuant to Section 6.02.
"Servicer" means JLACC, as the servicer of the Contracts under
this Agreement, and each successor to JLACC (in the same capacity) pursuant to
Section 8.02, and each successor Servicer pursuant to Section 7.03.
"Servicing Fee" means, with regard to any Collection Period,
the fee payable to the Servicer for services rendered during such Collection
Period, determined pursuant to Section 4.07.
"Servicing Fee Rate" means 1% per annum.
"Substitute Contract" means any Contract that is substituted
by the Seller pursuant to Section 3.08 for a Contract previously sold to the
Purchaser hereunder.
ARTICLE II.
PURCHASE AND SALE OF THE CONTRACT ASSETS
SECTION 2.01 Purchases and Sales. On each Contract Purchase
Date, subject to the terms and conditions of this Agreement, the Seller agrees
to sell to the Purchaser, and the Purchaser agrees to purchase from the Seller,
all of the Seller's right, title and interest in, to and under such Contracts as
are offered by the Seller for sale to, and accepted by the Purchaser for
purchase by, the Purchaser (including the rights to any Purchase Option
Payments), together with the property of the Seller constituting the related
Contract Assets and all of Seller's right, title and interest in and to the
related Equipment.
(a) Transfer of Contracts. On each Contract Purchase Date, the
Seller shall sell, transfer, assign and otherwise convey to the Purchaser,
without recourse, all of the Seller's right, title and interest in, to and under
the Contracts and related Contract Assets that the Purchaser has agreed to
purchase on such date. Each Contract to be so purchased shall be identified in a
Xxxx of Sale delivered by the Seller to the Purchaser on such Contract Purchase
Date.
(b) Contract Purchase Price. In consideration for the Contract
Assets being sold on a Contract Purchase Date, the Purchaser shall, on each
Contract Purchase Date, pay to the Seller an amount equal to the aggregate
Principal Balance of the Contracts being sold as the purchase price for such
Contracts and the related Contract Assets (the "Contract Purchase Price"). On
each Contract Purchase Date, the Seller may make a capital contribution to the
Purchaser in an amount that, together with all other amounts available to the
Purchaser for the purchase of Contracts on such date in the Contract Purchase
Account, along with the proceeds of the issuance of Notes on the related Note
Issuance Date, will be applied by the Purchaser as a portion of the amount that
is the Contract Purchase Price of the Contracts to be purchased by the Purchaser
from the Seller on such Contract Purchase Date. The amount so paid and
contributed to the Purchaser will be deposited into the Contract Purchase
Account for application by the Trustee in accordance with the Indenture.
SECTION 2.02 Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to purchase the Contracts and related Contract
Assets and interest of the Seller in the
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related Equipment on each Contract Purchase Date is subject to the satisfaction
of the following conditions as of such Contract Purchase Date:
(a) Representations and Warranties True. The representations
and warranties of each of the Seller and the Servicer hereunder shall be true
and correct on such Contract Purchase Date and with the same effect as if made
on such date.
(b) Compliance with Obligations. The Seller shall have
performed all obligations to be performed by it hereunder on or prior to such
Contract Purchase Date.
(c) No Defaults. No Event of Default hereunder or Indenture
Event of Default shall have occurred or be continuing.
(d) Xxxx of Sale. The Seller shall deliver to the Purchaser a
Xxxx of Sale, duly completed and executed, together with an attached duly
prepared Schedule of Contracts identifying the Contracts transferred pursuant to
such Xxxx of Sale.
(e) Evidence of UCC Filing. On or prior to such Contract
Purchase Date, the Seller shall record and file, at the Seller's expense, UCC
financing statements in each jurisdiction in which required by applicable law,
executed by the Seller, as seller or debtor, and naming the Purchaser, as
purchaser, identifying the Contracts and related Contract Assets as collateral,
meeting the requirements of the laws of each such jurisdiction and in such
manner as is necessary to perfect the sale, transfer, assignment and conveyance
of its interest in such Contract Assets to the Purchaser. The Seller shall
deliver a file-stamped copy, or other evidence satisfactory to the Purchaser, of
each such filing, to the Purchaser on or prior to such Contract Purchase Date.
(f) Computer Files Marked. The Seller shall, at its own
expense, on or prior to such Contract Purchase Date, indicate in its computer
files that the Contracts to be purchased on such date (together with all other
Contracts sold to the Purchaser by the Seller) have been sold to the Purchaser
pursuant to this Agreement and pledged by the Purchaser to the Trustee and shall
deliver to the Purchaser a cumulative Schedule of Contracts, certified by an
officer of the Seller to be true, correct and complete.
(g) Other Documents. At the Seller's expense, the Seller shall
deliver, or cause to be delivered, such other documents, and take or cause to be
taken such other actions, as the Purchaser may reasonably request or as may be
otherwise necessary to vest in the Purchaser all of Seller's right, title and
interest in and to the Contracts and related Contract Assets.
SECTION 2.03 Conditions to Obligations of the Seller. The
obligation of the Seller to sell the Contracts and the Contract Assets to the
Purchaser on each Contract Purchase Date is subject to the satisfaction of the
following conditions:
(a) Performance of Agreement. The representations and
warranties of the Purchaser hereunder shall be true and correct on such Contract
Purchase Date with the same effect as if then made, and the Purchaser shall have
performed all obligations to be performed by it hereunder on or prior to such
Contract Purchase Date.
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(b) Contract Purchase Price. On each Contract Purchase Date,
the Purchaser will deliver to the Seller the Contract Purchase Price, as
provided in Section 2.01(b).
SECTION 2.04 Contract Purchase Dates. At any time or from time
to time during the Note Issuance Period, not more frequently than once per
calendar month during such Note Issuance Period, the Seller and Purchaser may
establish one or more Contract Purchase Dates. As of the date hereof, the
Contract Purchase Date in each calendar month is expected to be a Business Day
during the first or second week of each calendar month, subject to agreement
otherwise by Seller and Purchaser. A Contract Purchase Date will occur only on a
date on which the Seller has an amount of Eligible Contracts sufficient to be
acceptable for purchase by the Purchaser on such date and the Purchaser has
sufficient available funds in the Contract Purchase Account (from Note
issuances, Seller capital contributions and principal payments on Contracts) to
pay the applicable Contract Purchase Price on such date; provided that no
failure of Contracts to constitute Eligible Contracts shall affect the validity
of any Xxxx of Sale or any purchase that occurs on any Contract Purchase Date.
Each purchase and sale of Contracts on a Contract Purchase Date shall be subject
to the other conditions and provisions set forth in this Article II.
ARTICLE III.
THE CONTRACTS
SECTION 3.01 Representations and Warranties of the Purchaser.
The Purchaser hereby represents and warrants to the Seller, as of the date
hereof, as of the Closing Date and as of each Contract Purchase Date, as
follows:
(a) The Purchaser has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, and has full corporate power and authority to execute and deliver this
Agreement and to perform the terms and provisions hereof.
(b) This Agreement has been duly authorized, executed and
delivered by the Purchaser, and is the legal, valid, binding and enforceable
obligation of the Purchaser, except as the same may be limited by insolvency,
bankruptcy, reorganization or other laws relating to or affecting the
enforcement of creditors' rights or by general equitable principles. The
consummation of the transactions contemplated by this Agreement, and the
fulfillment of the terms hereof, will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Purchaser pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, guarantee or similar agreement or
instrument under which the Purchaser is a debtor or guarantor (other than the
liens created pursuant to this Agreement), nor will such action result in any
violation of the provisions of the certificate of incorporation or the bylaws of
the Purchaser.
(c) No legal or governmental proceedings are pending to which
the Purchaser is a party or of which any property of the Purchaser is the
subject, and no such proceedings are threatened or contemplated by governmental
authorities or threatened by others, other than such proceedings which will not
have a material adverse effect upon the general affairs, financial position, net
worth or results of operations of the Purchaser and will not materially and
adversely affect the performance by the Purchaser of its obligations under, or
the validity and enforceability of, this Agreement.
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SECTION 3.02 Representations and Warranties of the Seller. The
Seller hereby makes the following representations and warranties as to each
Contract on the Contract Purchase Date therefor and each of the Purchaser, and
the Trustee, as pledgee of the Purchaser, shall rely upon such representations
and warranties in accepting each such Contract and the related Contract Assets.
Such representations and warranties shall be deemed to be made for each Contract
as of the related Contract Purchase Date unless otherwise specified, but shall
survive the transfer of such Contracts to the Purchaser (and by the Purchaser to
the Trustee). As to each Contract to be purchased on the applicable Contract
Purchase Date:
(a) The Seller is the legal and beneficial owner of all right,
title and interest in and to the Contracts and the Contract Assets, including
the rights to the Contract Payments and the Insurance Proceeds with respect to
the Contracts, free from any Lien of any Person (except for (i) any Lien which
has been waived or released by any Person prior to the Contract Purchase Date,
(ii) the rights of Obligors to Insurance Proceeds on account of reimbursements
for equipment repairs and (iii) rights of certain Obligors to the residual
value, if any, of the related Equipment).
(b) The Seller is the owner of each item of Equipment that is
subject to any Contract that is not a finance lease and the Seller has a
perfected security interest in, or is the owner of, each item of Equipment that
is the subject of any other Contract, with a Lien or ownership that is prior to
the interest of any other Person, provided, however, that, (i) the Seller's Lien
or ownership may not be prior to a Lien which has been waived or released by any
Person prior to the date hereof or the rights of the Obligors with regard to the
Equipment under the Contracts and any liens arising from action of Obligors and
(ii) the seller will have filed UCC financing statements covering the related
Equipment only in connection with transactions in which the Principal Balance of
the Contract is greater than $25,000.
(c) The Seller (i) has in its possession the original copy of
each Contract that constitutes "chattel paper" under the Uniform Commercial Code
and (ii) has in its possession, with respect to each other Contract, a copy of
the master contract, certified by the seller or other transferor of the Contract
to the Seller, and an original executed copy of the relevant contract schedule
or assignment agreement, and (iii) has provided the Purchaser and the Trustee
with access to original copies of all the Contracts, including any amendments
thereto and any documents related thereto, and those copies will have been true
and complete copies of the Contracts and such amendments and related documents,
and no provision of any Contract will have been amended, modified or waived
other than by documents included in the original copies to which the Purchaser
and the Trustee has been given access.
(d) Neither the Seller nor, insofar as the Seller is aware,
any Obligor, has done or failed to do anything (other than Contract Payment
delinquencies of 60 days or less) which would or might permit any Obligor or the
Seller to terminate any Contract or suspend or reduce any payments or
obligations due or to become due thereunder by reason of default by the other
party to such Contract, except for amounts which are not material to the
business of the Purchaser or to the value of such Contracts to the Noteholders.
Neither the rights and interests of the Seller in any Contract nor the
obligations of the Obligor under any Contract are subject to any defense,
offset, counterclaim, claim or right of rescission, and none of the foregoing
have been asserted or alleged against the Seller as to any Contract.
(e) Each Contract is a legal, valid and binding obligation of
the Obligor under such Contract and of the Seller, enforceable against each of
them in accordance with its terms, except as such enforceability may be affected
by applicable bankruptcy, insolvency, reorganization and other similar laws
affecting the rights of creditors generally and by general principles of equity.
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(f) All filings and other actions required to be made or taken
by the Seller to evidence the Purchaser's rights in respect of the Contracts and
the Contract Assets have been accomplished and are in full force and effect,
except that the Seller will not have notified any insurer with respect to the
transfer of the right to receive Insurance Proceeds.
(g) The Seller has granted the Purchaser full access to its
books and records, which contain a complete and correct statement of the
Contract Payments payable by the Obligor under each Contract and with respect to
the related Equipment, separately setting forth such amounts with respect to
each Contract for each month for the number of months of anticipated Contract
Payments under such Contract.
(h) The Contract complied at the time it was originated or
made, and at the applicable Contract Purchase Date will comply, in all material
respects with all requirements of applicable federal, state and local law and
regulations thereunder, including usury laws, the Federal Truth-in-Lending Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Xxxxxxxx-Xxxx Warranty Act, the Federal
Reserve Board's Regulations B and S and other equal credit opportunity and
disclosure laws, in each case to the extent applicable to nonconsumer
transactions.
(i) As of the Contract Purchase Date, the Contract (i) has not
been terminated, is not a Defaulted Contract and is not more than 60 days past
due as of the related Cut-Off Date as to any amount required to be paid
thereunder, (ii) has a remaining term (subject to the conditions set forth in
paragraphs (w) and (x) of this Section 3.02) to scheduled maturity of not more
than 60 months and not less than 6 months as of the related Cut-Off Date, (iii)
is a direct financing lease, if the Contract is a lease, (iv) relates to an item
of Equipment that is not in repossession by the creditor or subject to
procedures for obtaining repossession by the creditor or possession by any other
Person, (v) has a term ending not later than the last day of the Collection
Period immediately preceding the Scheduled Final Payment Date, (vi) relates to
an Obligor that (A) is an individual residing in the United States or a
corporation, limited liability company or limited liability partnership
organized under the laws of the United States or any state thereof, (B) is not
the United States or a state or any agency or instrumentality thereof and (C)
has not been disapproved by the Seller (based, in the Seller's reasonable
judgment, upon the creditworthiness of such Obligor), (vii) constitutes "chattel
paper" within the meaning of Section 9-105 of the UCC as in effect in the state
of New York and there is only one original executed copy of each Contract,
(viii) is denominated in United States dollars and is payable in the United
States in United States dollars, (ix) relates to an item of Equipment which is
located in the United States and has already been delivered, (x) is not a
"consumer lease" as defined in Section 2A-103(l) of the UCC, (xi) provides for
level monthly payments which, if made as scheduled, fully amortize the amount
financed (other than the Residual Amount, if any) over the original term of the
Contract; (xii) has a pre-tax yield (based on original net investment and timing
of payment amounts) of at least 8.25%, (xiii) has an original equipment cost of
not more than $750,000, (xiv) is not secured by a bus, car, truck, trailer or
any type of motor vehicle which requires motor vehicle titling, and is not
secured primarily by any Excluded Equipment, (xv) was not more than 60 days past
due during the term of the Contract, and (xvi) has been determined by the Seller
to satisfy all applicable approval requirements of the Seller.
(j) The Obligor under the Contract has not been noted in the
electronic ledger of the Servicer as being the subject of a bankruptcy
proceeding.
(k) No facts exist which would give rise to any right of
rescission, setoff, counterclaim or defense, nor have any been asserted, or to
the best of the Seller's knowledge after due inquiry, threatened, with respect
to the Contract.
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(1) The Contract has not been sold, transferred, assigned or
pledged by the Seller to any Person other than the Purchaser. Immediately prior
to the transfer of the Contracts to the Purchaser, the Seller had good and
marketable title to such Contract free and clear of all Liens (except for any
Lien which has been waived or released by any Person prior to the date hereof)
and immediately upon the transfer thereof pursuant to the related Xxxx of Sale,
the Purchaser will acquire good and marketable title to such Contract, free and
clear of all Liens, encumbrances, security interests, and rights of others.
(m) The Contract does not require the prior written consent of
the Obligor for, or contain any other restrictions on, the transfer or
assignment of the Contract.
(n) The Contract does not have an Obligor that is the obligor
on a Contract or Contracts for which the aggregate Principal Balance exceeds
1.5% of the Pool Balance as of the applicable Cut-Off Date for the third
Contract Purchase Date and as of the applicable Cut-Off Date for each Contract
Purchase Date thereafter during the Note Issuance Period (in each case after
giving effect to the purchase of Contracts to occur on such Contract Purchase
Date).
(o) The Contract was selected from contracts in the Seller's
portfolio that had met the applicable conditions specified in this Section 3.02
utilizing no selection procedures adverse to the Purchaser relative to similar
contracts in the Seller's portfolio.
(p) The Contract provides that the Obligor's obligations under
the Contract including, without limitation, the obligation to make Contract
Payments, are absolute and unconditional and shall continue without any claim,
defense, set-off, counterclaim, reduction, or abatement of any kind whatsoever
and regardless of any inability of the Obligor to use the Equipment or any part
thereof because of any reason whatsoever including damage to or destruction
thereof.
(q) The Contract provides that the Obligor shall maintain the
Equipment in good operating condition, repair and appearance, and protect it
from deterioration other than normal wear and tear.
(r) The Contract was not previously transferred to or owned by
the Purchaser.
(s) If the Contract is a lease which was not originated by the
Seller but was acquired by the Seller in a purchase transaction then such
Contract (i) constitutes a "finance lease" under generally accepted accounting
principles, (ii) does not by its terms permit, on or after the applicable
Contract Purchase Date, the creditor (or any transferee) to require the
predecessor owner or other transferor to repurchase such Contract or otherwise
provide credit support for payments due under the Contract.
(t) Neither the Seller nor any entity aggregated now or at any
relevant time with the Seller under Section 4001 of ERISA or Section 414(b) or
(c) of the Code (i) has any material tax, penalty or other liability under ERISA
or the employee benefits provisions of the Code, or (ii) is subject to having
any of its property subject to a lien or other encumbrance thereunder, where
such liability is or could become the liability of the Purchaser or the Trustee
or where the property of the Purchaser could be subject to such a lien or
encumbrance, (iii) no such liability, lien or encumbrance presently is expected
to occur or exist, (iv) no notice of intent to terminate any employee benefit
plan under ERISA (a "Plan") has been filed under Title IV of ERISA by it or any
plan administrator, (v) no
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"prohibited termination" under Section 406(b) of ERISA has been engaged in by it
and (vi) no "accumulated funding deficiency" under ERISA has occurred or exists
with respect to any Plan.
(u) Upon the transfer of each Contract to be transferred to
the Purchaser (and included in the Trust Property pursuant to the Indenture) on
such date, (i) the aggregate Principal Balance of all Contracts with Obligors
having billing addresses with the same postal zip code does not exceed 5% of the
Pool Balance, (ii) the aggregate Principal Balance of all Contracts with
Obligors located (by billing address) in any one state other than California
does not exceed 25% of the Pool Balance, (iii) the aggregate Principal Balance
of all Contracts with Obligors located (by billing address) in California does
not exceed 60% of the Pool Balance, (iv) the aggregate Principal Balance of all
Contracts relating to Equipment that is used Equipment does not exceed 15% of
the Pool Balance.
(v) The aggregate Principal Balance of all Contracts that were
not originated by the Seller but were instead acquired by the Seller in purchase
transactions in which Form UCC-3 filings were not made naming the Obligor as
debtor and the Seller as assignee of the underlying seller secured party does
not exceed 5% of the Pool Balance.
(w) Upon the transfer of Contracts to the Purchaser on each
Contract Purchase Date, Contracts having a remaining term to scheduled maturity
of more than 60 months but not more than 84 months will constitute not more than
11.5% of the Pool Balance.
(x) Upon the transfer of each Contract to be transferred to
the Purchaser, the Contracts owned by the Purchaser (and included in the Trust
Property pursuant to the Indenture) will have a weighted average life to
maturity of not more than 2.3 years commencing from the last day of the Note
Issuance Period.
(y) Upon the transfer of each Contract to be transferred to
the Purchaser on such Contract Purchase Date, (i) the Weighted Average Yield of
all Contracts acquired by the Purchaser on or prior to such date (and included
in the Trust Property pursuant to the Indenture) will be not less than 9.5% per
annum and (ii) the Weighted Average Yield of all Contracts which are not
Heidelberg Contracts and are acquired by the Purchaser on or prior to such date
(and included in the Trust Property pursuant to the Indenture) will be not less
than 9.5% per annum.
(z) Statistical information appearing in the Confidential
Private Placement Memorandum dated February 1998, as amended or supplemented to
the date hereof, is true and accurate in all material respects as of the date
hereof.
A Contract which satisfies all of the above representations
and warranties shall be deemed an "Eligible Contract."
SECTION 3.03 Retransfer of Contracts. The Seller, the
Servicer, the Purchaser or the Trustee, as the case may be, shall inform the
other parties and the Trustee promptly, in writing, upon the discovery of a
breach of any of the Seller's representations and warranties set forth in
Section 3.02, that materially and adversely affects the interest of the
Purchaser and the Trustee in any Contract. Each such notice shall include a
statement that such breach materially and adversely affects the interest of the
Purchaser in such Contract. As of the last day of the month following the month
(or, if the Seller elects, as of the last day of the month) in which the Seller
becomes aware or receives such written notice of such breach, the Seller, unless
it cures the breach, shall reacquire such Contract materially and adversely
affected by the breach. The Seller shall remit the Retransfer Amount of such
Contract as of the date of retransfer in the manner specified in Section 5.03.
Except as provided in Section 7.02, the
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sole remedy of the Purchaser, the Trustee or the Noteholders against the Seller
with respect to a breach of a representation or a warranty set forth in Section
3.02 or any matter set forth in this Section 3.03 shall be to require the Seller
to reacquire Contracts pursuant to this Section 3.03. With respect to all
Contracts repurchased by the Seller pursuant to this Agreement, the Purchaser
shall assign, without recourse, representation or warranty (except as to the
absence of liens, claims, or encumbrances resulting from actions taken, or
failed to be taken, by the Purchaser), to the Seller all the Purchaser's right,
title and interest in and to such Contracts and the related Contract Assets. The
determination of "material and adverse" as to the interest of the Purchaser or
the Trustee in a Contract would be made by the Purchaser, or by the Trustee
(upon a Noteholders' instruction pursuant to the Indenture), in determining
whether notice would be sent, and may be expected to include consideration of
such matters as likelihood of full repayment, enforceability of security for the
loan and other similar matters.
SECTION 3.04 Custody of Contract Files. To assure uniform
quality in servicing the Contracts and to reduce administrative costs, the
Purchaser, upon the execution and delivery of this Agreement, revocably appoints
the Servicer, acting directly or through a subservicer or another agent, and the
Servicer accepts such appointment, to act as the agent of the Trustee as
custodian of the following documents or instruments (the "Contract Files") which
are hereby constructively delivered to the Trustee with respect to each
Contract:
(i) The original copy of each Contract that constitutes
"chattel paper" under the Uniform Commercial Code and, with respect to each
other Contract, a copy of the master lease, certified by the seller or other
transferor of the Contract to the Seller, and an original executed copy of the
relevant lease schedule or assignment agreement,
(ii) Documents, if any, evidencing the existence of theft and
physical damage insurance covering the Equipment or the Obligor;
(iii) Copies of documents that the Servicer shall keep on
file, in accordance with its customary procedures, evidencing the interest of
Seller in the Equipment; and
(iv) Any and all other documents that the Seller or the
Servicer, as the case may be, shall keep on file, in accordance with its
customary procedures, relating to a Contract, the related items of Equipment or
other related Contract Assets or an Obligor.
The Contract Files will not be stamped or otherwise marked to
reflect the transfer of the Contracts from the Seller to the Purchaser or the
pledge of the Purchaser to the Trustee and will not be segregated from the files
of other contracts and installment sale contracts of the Servicer. Prior to
conveyance of the Contracts to the Purchaser, Seller will cause the electronic
ledger and computer systems used by Seller as a master record of the Contracts
to be marked to show that such Contracts have been conveyed by Seller to the
Purchaser and pledged to the Trustee and will file UCC financing statements
reflecting such sales and assignments with appropriate governmental authorities.
The Seller will not alter the electronic ledger designation referenced in this
paragraph with respect to any Contract during the term of this Agreement unless
and until such Contract becomes a Retransferred Contract. The Obligors under the
Contracts will not be notified of the transfer of the Contracts to the
Purchaser.
SECTION 3.05 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer, in its capacity as agent of the
Purchaser and the Trustee and as custodian pursuant to Section 3.04 above, shall
hold (or have a subservicer or other agent hold on behalf of the Servicer) the
Contract Files on behalf of the Trustee for the benefit of all
12
present and future Noteholders and maintain such accurate and complete accounts,
records and computer systems pertaining to the Contracts as shall enable the
Trustee to comply with its obligations pursuant to the Indenture. In performing
its duties as custodian, the Servicer shall act with reasonable care (and shall
cause each subservicer or agent to act with reasonable care), using that degree
of skill and attention that the Servicer (or subservicer or agent) exercises
with respect to the files of comparable equipment leases that the Servicer
services for itself or others. The Servicer shall promptly report to the Trustee
any failure on its part (or on the part of a subservicer or agent) to hold the
Contract Files and maintain its accounts, records and computer systems as herein
provided, and shall promptly take appropriate action to remedy any such failure.
The Trustee has not reviewed (and is not obligated to review) the Contract Files
and has no knowledge of their contents.
(b) Maintenance of and Access to Records. The Servicer shall
maintain each Contract File at its office specified in Section 9.04 hereof or at
its office at 000 Xxxx 000xx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, as
(in each case) specified in the applicable Schedule of Contracts. The Servicer
shall make available (and shall cause each subservicer or agent to make
available) to the Purchaser and/or Trustee or its duly authorized
representatives, attorneys or auditors the Contract Files and the related
accounts, records and computer systems maintained by the Servicer or subservicer
or agent at such times during normal operating hours as the Purchaser and/or
Trustee shall reasonably instruct which do not unreasonably interfere with the
Servicer's or subservicer's or agent's normal operations or customer or employee
relations.
SECTION 3.06 Instructions; Authority to Act. The Servicer
shall be deemed to have received proper instructions from the Trustee with
respect to the Contract Files upon its receipt of written instructions signed by
a Responsible Officer.
SECTION 3.07 Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as to the Contracts being sold
on a Contract Purchase Date as of the applicable Cut-Off Date for such Contract
Purchase Date and shall continue in full force and effect until terminated
pursuant to this Section 3.07 or until this Agreement and Indenture shall be
terminated and all of the Notes and other amounts due and owing under the
Indenture are paid in full. The Servicer may perform its duties as custodian
through one or more agents, which agents may maintain physical possession of
Contract Files as agent for the Servicer acting as custodian. If the Servicer
shall resign as Servicer under Section 7.05 or if all of the rights and
obligations of the Servicer shall have been terminated under Section 8.01, the
appointment of the Servicer as custodian may be terminated by the Trustee,
acting at the direction of Noteholders of Notes evidencing not less than a
majority of the Note Principal Balance, in the same manner as the Trustee or
such Noteholders may terminate the rights and obligations of the Servicer under
Section 8.01. The Purchaser or the Trustee, acting at the direction of
Noteholders of Notes evidencing not less than a majority of the Note Principal
Balance, may terminate the Servicer's appointment as custodian at any time upon
written notification to the Servicer. As soon as practicable after any
termination of such appointment, the Servicer shall deliver the Contract Files
to the Trustee or to a person designated by the Trustee at such place or places
as the Trustee may reasonably designate. The Servicer shall cooperate with the
Trustee in making the transfer and shall bear all of its costs and expenses with
respect to such transfer. Notwithstanding the termination of the Servicer as
custodian, the Trustee agrees that upon any such termination, the Trustee shall
provide, or cause a Person designated by the Trustee to provide, access to the
Contract Files to the Servicer and each subservicer for the purpose of carrying
out the Servicer's duties and responsibilities with respect to the servicing of
the Contracts hereunder.
SECTION 3.08 Substitution of Contracts. (a) The Seller will
have the right (but not the obligation) at any time to substitute one or more
Eligible Contracts (each a "Substitute Contract") and
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the Equipment subject thereto (or, with respect to equipment notes, finance
contracts and conditional sales agreements, a security interest therein) for a
Contract (each a "Predecessor Contract") and the Equipment subject thereto (or a
security interest therein) if:
(i) the Predecessor Contract is then subject to repurchase by
the Seller pursuant to Section 3.03;
(ii) the Predecessor Contract has been a Defaulted Contract
since the last day of the most recent Collection Period; or
(iii) the Predecessor Contract has been a Delinquent Contract
since the last day of the most recent Collection Period;
provided, however, that (A) on the date of such substitution (and after giving
effect thereto) (x) the cumulative Principal Balance of all Contracts
substituted pursuant to clauses (i), (ii) and (iii) of this Section 3.08(a)
shall not exceed 10% of the Pool Balance of the Contracts, determined as of the
date of such substitution, and (y) the cumulative Principal Balance of all
Contracts substituted pursuant to clause (ii) and (iii) of this Section 3.08(a)
shall not exceed 3% of the Pool Balance of the Contracts as of the date of such
substitution, (B) the final maturity of each Substitute Contract is not later
than the final maturity of the Predecessor Contract for which it is being
substituted, (C) the Contract Rate of each Substitute Contract is equivalent to
or greater than the Contract Rate of the Predecessor Contract for which it is
being substituted, and (D) the related Equipment to which each Substitute
Contract relates is comparable to the related Equipment of the Predecessor
Contract for which it is being substituted; provided, further, that the Seller's
right to substitute Contracts shall be limited or precluded to the extent, if
any, that Class B Notes are owned by the Seller and its Affiliates. If such
Substitute Contract has a Principal Balance less than the Principal Balance of
the Predecessor Contract, the Seller shall, on the date of substitution, deposit
funds in an amount equal to such difference into the Collection Account for
application as provided in the Indenture.
(b) Any substitution pursuant to this Section 3.08 shall
become effective upon (i) delivery to the Trustee and the Purchaser of an
instrument or instruments effectively transferring to the Purchaser all right,
title and interest of the Seller in and to the Eligible Contract being
substituted and the Equipment subject thereto, and granting the Trustee a valid
and first priority security interest in such Substitute Contracts and the
related Equipment (ii) the taking of such other action as is necessary or as the
Trustee may reasonably request in order to subject such Eligible Contract and
the Equipment subject thereto to the lien of the Indenture, and (iii) delivery
to the Seller by the Purchaser of an instrument or instruments transferring to
the Seller, without representation or warranty, all of the Purchaser's right,
title and interest in and to the Contract and the Equipment for which the
substitution is being made.
SECTION 3.09 Notice of Substitution. In the Monthly Servicer
Report to be delivered on each Determination Date, the Seller shall give written
notice to the Trustee, the Servicer and the Rating Agency of each substitution
of Contracts pursuant to Section 3.08 hereof and of any related repurchase
pursuant to Section 3.03 hereof during the preceding Collection Period. Such
notice shall (i) specify the amount of each periodic Contract Payment under the
Predecessor Contract and the amount of each periodic Contract Payment under each
Eligible Contract being substituted (and the portion of such Contract Payment,
if any, constituting the excess of such Contract Payment over the relevant
Contract Payment under the Predecessor Contract), (ii) specify the Principal
Balance of the Predecessor Contract and of the Substitute Contract and any
shortfall to be deposited in the Collection Account, and (iii) be accompanied by
an Officer's Certificate certifying as to each of the facts or conditions
specified in the
14
definition of "Eligible Contract" set forth in Section 3.02 hereof and that each
such Substitute Contract is an Eligible Contract and complies with the
requirements of Section 3.08.
SECTION 3.10 Subsequent Obligations. Upon any substitution of
Contracts in accordance with the provisions of Sections 3.08 and 3.09, such
Substitute Contract shall become a "Contract" for all purposes of this Agreement
and the Indenture, the Seller's and the Servicer's obligations hereunder with
respect to the Predecessor Contract shall cease but the Seller and the Servicer
shall each thereafter have the same obligations with respect to the Substitute
Contract substituted as it has with respect to all other Contracts subject to
the terms hereof.
ARTICLE IV.
ADMINISTRATION AND SERVICING OF CONTRACTS
SECTION 4.01 Duties of Servicer, Subservicing Arrangements.
The Servicer, as agent for the Purchaser, shall manage, service, administer and
make collections on the Contracts with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to comparable
equipment leases that it services for itself or others. The Servicer may enter
into subservicing agreements with one or more subservicers for the servicing and
administration of certain of the Contracts; provided, however, that any such
subservicer shall be, and shall remain, for so long as it is acting as
subservicer, an Eligible Servicer. References in this Agreement to actions
taken, to be taken, permitted to be taken, or restrictions on actions permitted
to be taken, by the Servicer in servicing the Contracts shall include actions
taken, to be taken, permitted to be taken, or restrictions on actions permitted
to be taken, by a subservicer on behalf of the Servicer, and references to
amounts collected by the Servicer shall be deemed to include amounts collected
by the subservicer on behalf of the Servicer. Each subservicing agreement will
be upon such terms and conditions as are not inconsistent with this Agreement
and the standard of care set forth herein and as the Servicer and the
subservicer have agreed. All compensation payable to a subservicer under a
subservicing agreement shall be payable by the Servicer from its servicing
compensation or otherwise from its own funds, and none of the Purchaser, the
Trustee or the Noteholders will have any liability to the subservicer with
respect thereto.
Notwithstanding any subservicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer or a subservicer or any reference to actions taken through such Persons
or otherwise, the Servicer shall remain obligated and liable to the Purchaser,
the Trustee and Noteholders for the servicing and administering of the Contracts
and the other Trust Property in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue of such
subservicing agreements.
Any subservicing agreement that may be entered into and any
other transactions or servicing arrangements relating to the Contracts and the
other Trust Property involving a subservicer in its capacity as such shall be
deemed to be between the subservicer and the Servicer alone, and the Purchaser,
the Trustee and the Noteholders shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to the
subservicer except as set forth in the next succeeding paragraph.
In the event the Servicer shall for any reason no longer be
acting as such, the successor Servicer may, but shall not be required to, in its
discretion, thereupon assume all of the rights and obligations of the outgoing
Servicer under a subservicing agreement. In such event, the successor Servicer
shall be deemed to have assumed all of the outgoing Servicer's interest therein
and to have
15
replaced the outgoing Servicer as a party to each such subservicing agreement to
the same extent as if such subservicing agreement had been assigned to the
successor Servicer, except that the outgoing Servicer shall not thereby be
relieved of any liability or obligations on the part of the outgoing Servicer to
the subservicer under such subservicing agreement. The outgoing Servicer shall,
upon request of the Purchaser, but at the expense of the outgoing Servicer,
deliver to the successor Servicer all documents and records relating to each
such subservicing agreement and the Contracts and other Trust Property then
being serviced thereunder and an accounting of amounts collected and held by it
and otherwise use its best efforts to effect the orderly and efficient transfer
of any subservicing agreement to the successor Servicer. In the event that the
successor Servicer elects not to assume a subservicing agreement, the outgoing
Servicer, at its expense, shall cause the subservicer to deliver to the
successor Servicer all documents and records relating to the Contracts and the
other Trust Property being serviced thereunder and all amounts held (or
thereafter received by such subservicer (together with an accounting of such
amounts) and shall otherwise use its best efforts to effect the orderly and
efficient transfer of servicing of the Contracts and the other Trust Property
being serviced by such subservicer to the successor Servicer.
The Servicer's duties shall include collection and posting of
all payments, responding to inquiries by Obligors or by federal, state or local
governmental authorities with respect to the Contracts, investigating
delinquencies, administering and enforcing the Insurance Policies (if any) in
accordance with its customary procedures, accounting for collections, furnishing
monthly and annual statements to the Purchaser and the Trustee with respect to
distributions, deposits and withdrawals, and preparing applicable federal, state
or local tax information returns and furnishing applicable forms or statements,
if any, to the Purchaser. The Servicer shall follow its customary standards,
policies, and procedures for equipment leases and commercial loans in performing
its duties as Servicer. Without limiting the generality of the foregoing, the
Servicer shall, subject to the terms of the Indenture, be authorized and
empowered by the Purchaser and the Trustee to execute and deliver, on behalf of
itself, the Trustee and the Purchaser, or any of them, any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Contracts or the
Equipment. If the Servicer shall commence a legal proceeding to enforce a
Contract or any Insurance Policies in respect thereof, the Purchaser shall
thereupon be deemed to have automatically assigned such Contract and the related
Trust Property to the Servicer, solely for the purpose of collection and, upon
its receipt of notice in writing from the Servicer, the Trustee shall be deemed
to have released its Lien thereon. Upon written request of the Servicer and
receipt by the Purchaser and the Trustee of an Officer's Certificate setting
forth the facts underlying such request, the Purchaser shall furnish the
Servicer with any limited powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder and the Purchaser and the Trustee shall not be held liable for
such actions of the Servicer thereunder.
SECTION 4.02 Collection of Contract Payments. The Servicer
shall make reasonable efforts to collect all payments called for under the terms
and provisions of the Contracts as and when the same shall become due, and in
connection therewith shall follow such collection procedures as it follows with
respect to comparable new or used equipment leases that it services for itself
or others; provided, however, that, within two Business Days after each Contract
Purchase Date, the Servicer shall notify each Obligor, if any, not already
required to make payments directly to the Lock Box Account to make all payments
with respect to its respective Contracts on and after the Cut-Off Date directly
to the Lock-Box Account. The Servicer may, in accordance with its customary
standards, policies and procedures, in its discretion waive any Administrative
Fees that may be collected in the ordinary course of servicing a Contract.
16
SECTION 4.03 Repossession of Eguipment. On behalf of the
Purchaser, the Servicer shall use its best efforts, consistent with its
customary servicing procedures, to repossess or otherwise take possession of the
Equipment relating to any Contract which the Servicer shall have determined to
be a Defaulted Contract (and shall specify such Contract to the Purchaser and
the Trustee no later than the Determination Date following the Collection Period
in which the Servicer shall have made such determination). The Servicer shall
follow such customary and usual practices and procedures as it shall deem
necessary or advisable in its servicing of equipment leases. The Servicer shall
be entitled to recover all reasonable expenses incurred by it in the course of
recovery and repossession of such Equipment solely from the proceeds of
liquidation. All proceeds of liquidation ("Liquidation Proceeds") realized in
connection with any such action with respect to a Contract which has not been
retransferred under Section 3.03 shall be deposited by the Servicer in the
Collection Account in the manner specified in Section 5.02 and shall be applied
to reduce (or to satisfy, as the case may be) unpaid Contract Payments on such
Contract. The foregoing shall be subject to the provision that, in any case in
which the Equipment shall have suffered damage, the Servicer shall not expend
funds in connection with the repair or the repossession of such Equipment unless
it shall determine in its sole discretion that such repair and/or repossession
will increase the Liquidation Proceeds of the related Contract by an amount
equal to or greater than the amount of such expenses which, in any event, shall
not be unreasonable.
SECTION 4.04 Theft and Physical Damage Insurance. The Servicer
shall require that each Obligor shall have obtained and shall maintain theft and
physical damage insurance covering the related Equipment. The Servicer shall
enforce its rights under the Contracts to require the Obligors to maintain theft
and physical damage insurance to the extent consistent with the Servicer's
customary practices and procedures with respect to comparable equipment leases
that it services for itself or others (but shall not, in any event, be required
to monitor the maintenance of or obtain such insurance). The Servicer may xxx to
enforce or collect upon the Insurance Policies, in its own name, if possible, or
as agent for the Trustee. If the Servicer elects to commence a legal proceeding
to enforce an Insurance Policy, the act of commencement shall, upon the
Trustee's receipt of notice in writing from the Servicer, be deemed to be an
automatic assignment of the rights of the Trustee under such Insurance Policy to
the Servicer for purposes of collection only. If, however, in any enforcement
suit or legal proceeding it is held that the Servicer may not enforce an
Insurance Policy on the grounds that it is not a real party in interest or a
Noteholder entitled to enforce the Insurance Policy, the Trustee, at the
Servicer's expense, or the Purchaser at the Purchaser's expense, shall take such
steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the names of the Noteholders.
SECTION 4.05 Covenants of the Servicer. The Servicer makes the
following covenants on which the Purchaser relies and on which the Trustee will
rely in accepting the Contracts and executing and authenticating the Notes:
(a) The Servicer will keep copies of the originals of all
documents and related records and books evidencing all Contracts and Contract
Proceeds at, and only at, its offices in 000 Xxxx 000xx Xxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxxxx 00000 and 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx 00000.
(b) Unless a default has occurred under a Contract, the
Servicer will: (i) continue to make the Equipment which is the subject of each
Contract available to the Obligor thereunder, (ii) do nothing to impair such
Obligor's possession of such Equipment and (iii) promptly transfer the Equipment
to the Obligor upon such Obligor's payment of the applicable Purchase Option
Payment.
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(c) The Servicer will pay or cause to be paid all taxes, fees
or other costs in respect of the Equipment.
(d) Unless otherwise prohibited by law or court order, the
Servicer shall apply any security deposit held by it under a Contract which the
Servicer elects to terminate following a default by the Obligor thereunder
against defaulted Contract Payments under such Contract before any other
application thereof.
(e) The Servicer will deliver to the Trustee, from time to
time at the Trustee's request but in each case not more than once in any
calendar month, (i) schedules of all Contract Payments due under the Contracts
and (ii) a revised Schedule of Contracts, modified to reflect reacquisitions by
the Servicer of Contracts, the exercise by Obligors of expiration purchase
options under the Contracts and any other occurrence that has had or will have
the effect of altering the amount or composition of the aggregate Contract
Payments.
(f) The Servicer will not cancel, extend or terminate any
Contract except that the Servicer may (i) extend the term of any Contract to a
date not later than three months from the original expiration date of such
Contract on the date of the acquisition thereof by the Purchaser (except that
the Servicer may extend a Contract to a later date to the extent, if any, that
after giving effect thereto the aggregate Principal Balance of Contracts owned
by the Purchaser subject to such longer extensions does not exceed 1% of the
aggregate Principal Balance of all Contracts owned by the Purchaser); provided,
however, that in no event may the term of any Contract be extended to a date
that is later than the Scheduled Final Payment Date, and (ii) permit early
termination of any Contract with the payment by the Obligor of an amount at
least equal to the Retransfer Amount of such Contract (together with any
Purchase Option Payment or Residual Amount due to the Seller).
(g) Until the expiration of each Contract, the Servicer shall
defend the Contracts, the Contract Proceeds, each Insurance Policy and the
Insurance Proceeds against all claims and demands of all persons at any time
claiming the same or any interest therein adverse to that of the Seller, the
Purchaser, the Trustee or the Noteholders (other than claims by Obligors to
Insurance Proceeds on account of reimbursements for equipment repairs). So long
as any Equipment remains subject to a Contract, the Servicer shall defend each
such item of Equipment against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to that of the Obligors, the
Seller, the Purchaser or the Trustee.
(h) The interests in the Equipment granted hereunder shall not
be transferred in whole or in part except as contemplated herein.
(i) The Servicer shall not (nor will it permit any subservicer
to) impair the rights of the Purchaser or the Trustee in the Trust Property or
take any action inconsistent with the Trustee's ownership of the Trust Property,
except as expressly provided herein with respect to the servicing of the
Contracts and Contract Assets.
SECTION 4.06 Transfer of Contracts upon Breach. The Seller,
the Servicer or the Purchaser, as the case may be, shall inform the other
parties and the Trustee promptly, in writing, upon the discovery of a breach of
any of the Servicer's covenants set forth in Section 4.05. If such breach
materially and adversely affects the interest of the Trustee in a Contract,
unless the breach shall have been cured by the last day of the month following
the month (or, if the Trustee elects, (upon a Noteholders' instruction pursuant
to the Indenture), as of the last day of the month) in which the Servicer
18
becomes aware or receives such written notice of such breach, the Servicer shall
acquire any Contract materially and adversely affected by such breach; provided,
however, that in the case of a breach of the covenant contained in the last
sentence of Section 4.05(f), the Servicer shall be obligated to acquire the
affected Contract or Contracts on the Deposit Date immediately succeeding the
Collection Period during which the Servicer becomes aware of, or receives
written notice of, such breach. The Servicer shall remit the Retransfer Amount
of such Contract as of the date of retransfer in the manner specified in Section
5.03. Except as provided in Section 7.02, the sole remedy of the Purchaser, the
Trustee or the Noteholders against the Servicer with respect to a breach of
Section 4.05 shall be to require the Servicer to acquire Contracts pursuant to
this Section 4.06. With respect to all Contracts purchased by the Servicer
pursuant to this Agreement, the Purchaser shall assign, without recourse,
representation or warranty (except as to the absence of liens, claims, or
encumbrances resulting from actions taken, or failed to be taken, by the
Purchaser), to the Servicer all the Purchaser's right, title and interest in and
to such Contracts and the related Contract Assets. The determination of
"material and adverse" as to the interest of the Purchaser or the Trustee in a
Contract would be made by the Purchaser or the Trustee (upon a Noteholders'
instruction pursuant to the Indenture) in determining whether notice would be
sent, and may be expected to include consideration of such matters as likelihood
of full repayment, enforceability of security for the loan and other similar
matters.
SECTION 4.07 Servicing Fee. The Servicing Fee for a Collection
Period shall be equal to the sum of (a) one-twelfth of the product of the
Servicing Fee Rate and the Pool Balance on the first day of the related
Collection Period (or in the case of the first Monthly Payment Date, the initial
Cut-Off Date) (except that in the case of a successor Servicer, the Servicing
Fee shall equal such amount as is arranged in accordance with Section 8.02) and
(b) net investment earnings on amounts on deposit in the Collection Account
during such Collection Period. In addition, the Servicer shall be entitled to
collect and retain any Administrative Fees with respect to the Contracts. The
Servicer shall be required to pay for its own account all expenses incurred by
it in connection with its activities hereunder (including fees and disbursements
of any subservicer or agent, the Trustee, Trustee's counsel and independent
accountants, taxes imposed on the Servicer, and expenses incurred in connection
with distributions and reports to Noteholders) except expenses in connection
with realizing upon Contracts under Section 4.03.
SECTION 4.08 Monthly Servicer Report. On or before 3:00 p.m.
(New York time) on the third Business Day preceding each Monthly Payment Date,
the Servicer shall deliver to the Purchaser, the Trustee, the Paying Agent and
the Rating Agency a Monthly Servicer Report substantially in the form of Exhibit
B hereto, for the Collection Period preceding such Determination Date,
containing all information necessary to make the deposits, withdrawals and
distributions pursuant to Section 5.04, and all information necessary for the
Trustee to send statements to Noteholders pursuant to Section 7.14 of the
Indenture. The Servicer shall also specify (i) each Contract which is
retransferred to the Seller or the Servicer, as the case may be, as of the last
day of such Collection Period, (ii) each Contract which the Servicer shall have
determined to be a Defaulted Contract during such Collection Period, (iii) each
Contract which has been prepaid in full during such Collection Period, (iv) the
aggregate Payahead Amounts with respect to the Contracts during such Collection
Period and all other information that the Trustee may require in order to make
determinations and calculations pursuant to the Indenture. The Trustee may rely
upon all information so furnished.
SECTION 4.09 Annual Statement as to Compliance.
(a) The Servicer shall deliver to the Purchaser, the Trustee
and the Rating Agency, within 45 days following the end of the Note Issuance
Period and within 90 days following December 31, 1999 and the end of each
calendar year thereafter during which any Note or other amount under the
Indenture is outstanding, an Officer's Certificate of the Servicer, stating that
(a) a review of
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the activities of the Servicer during the preceding calendar year (or shorter
period, in the case of the first such Officer's Certificate) of its performance
under this Agreement has been made under such officer's supervision and (b) to
the best of such officer's knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout such preceding
calendar year (or shorter period, in the case of the first such Officer's
Certificate), or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.
(b) The Servicer or Seller, as applicable, shall deliver to
the Trustee, promptly after such party has obtained knowledge thereof, but in no
event later than five Business Days thereafter, an Officer's Certificate
specifying any event which with the giving of notice or lapse of time, or both,
would become an Event of Default under Section 8.01.
SECTION 4.10 Annual Accountants' Statement. The Servicer
shall cause an independent firm of qualified certified public accountants to
deliver to the Purchaser, the Rating Agency and the Trustee, within 120 days
following the Note Issuance Period and 120 days following December 31, 1998 and
the end of each calendar year thereafter during which any Note or other amount
under the Indenture is outstanding, a report addressed to the Board of Directors
of the Servicer, the Board of Directors of the Seller and to the Purchaser and
the Trustee, to the effect that such independent accountants have performed
certain agreed upon procedures with respect to information contained in the
Monthly Servicer Reports in the relevant period and with respect to the
information contained in the accounts and records relating to the servicing of
the Contracts, for such period, and report on any exceptions identified in their
work. The procedures shall be agreed upon with the Trustee, the Servicer and the
Purchaser and be consistent with professional auditing standards. The letter of
the independent certified public accountants shall also indicate that such
accounting firm is independent of the Servicer, the Seller and the Purchaser
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.
SECTION 4.11 Access to Certain Information. The Servicer shall
provide (and shall cause each subservicer or agent to provide) access to the
Contract Files to the Purchaser and the Trustee when required by applicable
statutes or regulations to have access to such documentation. Access shall be
afforded without charge, but only upon reasonable request and during normal
business hours which does not unreasonably interfere with the Servicer's,
subservicer's or agent's, as applicable, normal operations or customer or
employee relations. Nothing in this Section 4.11 shall affect the obligation of
the Servicer and each subservicer or agent to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure of
the Servicer or any subservicer or agent to provide access to information as a
result of such obligation shall not constitute a breach of this Section 4.11.
SECTION 4.12 Weekly Servicer Verification. Not later than 3:00
p.m. (New York time) on the first Business Day of each week, commencing in the
week following the initial Contract Purchase Date, the Servicer will deliver to
the Purchaser and the Trustee a written statement verifying the amount delivered
by the Servicer from the Lock Box Account to the Trustee for deposit into the
Collection Account on each Business Day during the preceding week.
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ARTICLE V.
DISTRIBUTIONS; STATEMENTS
SECTION 5.01 Accounts. The Servicer shall maintain the Lock-Box Account
in accordance with the Lock Box Agreement and shall perform and comply with all
of the Servicer's obligations thereunder. The Lock-Box Account shall be an
account maintained with Bank of America or such other Lock-Box Bank as the
Servicer may select; provided, however, that the Servicer shall give the Trustee
prior written notice of any change in the location of the Lock-Box Account and
the Servicer shall give at least 10 days prior written notice of the new
location to each Obligor.
SECTION 5.02 Collections; Applications.
(a) The Servicer shall remit, or cause the Lock-Box Bank to
remit, to the Collection Account all payments by the Obligors on the Contracts
(including any Purchase Option Payment, any prepayments in full of a Contract
and any applicable Payahead Amounts related to such Collection Period) other
than Servicing Fees (to the extent that sufficient funds are allocated and
available for that purpose as provided in Section 5.04) and Administrative Fees
(which may be retained by the Servicer), and all Liquidation Proceeds and
Insurance Proceeds and Hedge Proceeds, as collected during the Collection
Period, as soon as practicable, but in no event later than the close of business
on the second Business Day after receipt thereof (except as may be otherwise
permitted in limited circumstances pursuant to Section 3.02(a) of the
Indenture).
(b) Notwithstanding the provisions of subsection (a) hereof,
the Servicer may retain, or will be entitled to be reimbursed from, amounts
otherwise payable into, or on deposit in, the Collection Account with respect to
a Collection Period, amounts previously deposited in the Collection Account but
later determined to have resulted from mistaken deposits or payments due before
the applicable Cut-Off Date or postings or checks returned for insufficient
funds (provided that the Servicer accounts for such amounts in the Monthly
Servicer Report for the related Collection Period). The amount to be retained or
reimbursed hereunder shall not be included in funds available for distribution
with respect to the related Monthly Payment Date.
(c) In those cases where a subservicer is servicing a Contract
pursuant to a subservicing agreement and where required by the Rating Agency to
maintain the rating on the Notes, the Servicer shall cause the subservicer to
remit to the Collection Account as soon as practicable, but in no event later
than the close of business on the second Business Day after receipt thereof by
the subservicer (but subject to the provisions of paragraph (b)), the amounts
referred to in Section 5.02(a) in respect of a Contract being serviced by the
subservicer.
(d) Pending their deposit into the Collection Account, all
collections, insurance Proceeds and Liquidation Proceeds shall be segregated by
book-entry or similar form of identification on the Servicer's books and records
and identified as the property of the Trustee.
SECTION 5.03 Additional Deposits. The Seller shall deposit, or
cause to be deposited, into the Collection Account the aggregate Retransfer
Amount pursuant to Section 3.03. All remittances shall be made to the Collection
Account in Automated Clearinghouse Corporation next-day funds or immediately
available funds, no later than 3:00 p.m., New York time, on the related Deposit
Date.
SECTION 5.04 Distributions. The Servicer shall direct and
instruct the Trustee to make the deposits, withdrawals and distributions to and
from the Collection Account as provided for in the Indenture.
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SECTION 5.05 Statements to Noteholders. At least three
Business Days prior to each Monthly Payment Date, the Servicer shall prepare and
deliver to the Trustee and the Rating Agency for distribution by the Trustee to
each Noteholder, a statement setting forth for the related Collection Period the
information specified to be furnished pursuant to Section 7.14 of the Indenture
on each Monthly Payment Date. Within a reasonable period of time after the end
of each calendar year, but not later than the latest date permitted by law or
otherwise necessary to permit the Trustee to act under the last paragraph of
Section 7.14 of the Indenture, the Servicer shall furnish to the Trustee a
statement prepared by the Servicer and delivered to the Trustee containing the
sum of the amounts determined in clauses (ii) and (iii) of Section 7.14 of the
Indenture for such calendar year. The Servicer shall also furnish any such other
information as the Trustee may be required to deliver pursuant to Section 7.14
of the Indenture.
ARTICLE VI.
THE SELLER
SECTION 6.01 Additional Representations of the Seller. The
Seller hereby makes the following representations as to itself on which the
Purchaser and the Trustee shall rely. The representations shall speak as of the
execution and delivery of this Agreement and as of each Contract Purchase Date,
and shall survive each transfer of the Trust Property to the Purchaser.
(i) Organization and Good Standing; Authorization. The Seller
has been duly incorporated and is validly existing in good standing under the
laws of its jurisdiction of incorporation, with power and authority to own its
assets and to transact the business in which it is currently engaged, and had at
all relevant times, and has, power, authority, and legal right to acquire, own,
assign and sell the Contracts and the other Trust Property.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in each jurisdiction in which the failure to
obtain such qualification, licenses or approvals would have a material adverse
effect on the Trust Property or on the Seller's ability to perform its
obligations hereunder.
(iii) Power and Authority; Binding Obligations. The Seller has
the corporate power and authority to make execute, deliver and perform its
obligations under this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement. When
executed and delivered, this Agreement will constitute the legal, valid and
binding obligation of the Seller enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally, and by
the availability of equitable remedies.
(iv) No Violation. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation, bylaws or other
constitutive documents of the Seller, or conflict with or breach any of the
terms or provisions of, or constitute (with or without notice or lapse of time)
a default under, any indenture, agreement or other instrument to which the
Seller is a party or by which it is bound or to which its
22
properties are subject; nor result in the creation or imposition of any lien,
security interest, charge or encumbrance (except in favor of the Trustee for the
benefit of the Noteholders) upon any of the property or assets of the Seller or
any subsidiary thereof pursuant to the terms of any such indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument (other than this
Agreement) to which the Seller or any subsidiary thereof is a party or by which
the Seller or any subsidiary thereof is bound or to which any of the property or
assets of any of them is subject; nor violate any law or, to the best of the
Seller's knowledge, any order, rule or regulation applicable to the Seller of
any court or of any federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the Seller or its
properties.
(v) No Proceedings. No litigation or administrative proceeding
of or before any court, tribunal or governmental body is currently pending or,
to the knowledge of the Seller, threatened against the Seller or any of its
properties or with respect to this Agreement or the Notes which, in the opinion
of the Seller, has a reasonable likelihood of resulting in a material adverse
effect on the Notes or the transactions contemplated by this Agreement.
(vi) No Consent Required. The Seller is not required to obtain
the consent of any other Person or any consent, license, approval or
authorization of, or make any registration or declaration with, any governmental
authority or agency in connection with the execution, delivery and performance
of this Agreement (except as have been obtained), other than as may be required
under the blue sky laws of any state.
(vii) Sale. This Agreement and each Xxxx of Sale will effect,
on each Contract Purchase Date, a valid sale, transfer, and assignment of the
Seller's interest in the Contracts and the related Contract Assets covered by
such Xxxx of Sale, enforceable against creditors of and purchasers from the
Seller.
(viii) Insolvency. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby were not
made in contemplation of the insolvency of the Seller or after the commission of
any act of insolvency by the Seller.
SECTION 6.02 Merger or Consolidation of Seller. Any entity (i)
into which the Seller may be merged or consolidated, (ii) which may result from
any merger, conversion or consolidation to which the Seller shall be a party, or
(iii) which may succeed to all or substantially all of the business of the
Seller, shall be the successor to the Seller hereunder without the execution or
filing of any document or any further act by any of the parties to this
Agreement. The Seller may not enter into any merger, conversion, sale of all or
substantially all of its assets or consolidation transactions unless (v) the
surviving entity shall execute an agreement of assumption to perform every
obligation of the Seller hereunder; (w) the Seller provides the Rating Agency
with notice of such foregoing event and the name of such surviving entity and
delivers to the Trustee a letter from the Rating Agency that such merger,
conversion or consolidation will not result in a reduction of the ratings for
the Notes; (x) immediately before and after giving effect to any such
transaction, no representation or warranty made pursuant to Section 3.02 or 6.01
shall have been breached (for purposes hereof, such representations and
warranties in Section 6.01 shall speak as of the date of consummation of such
transaction) and no event that, after notice or lapse of time, or both, would
become an Event of Default shall have occurred and be continuing; (y) the Seller
shall have delivered to the Trustee an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger, or succession and such
agreement or assumption complies with this Section 6.02 and that all conditions
precedent, if any, provided for in the agreement relating to such transaction
have been complied with; and (z) the Seller shall have delivered to the Trustee
23
an Opinion of Counsel, either (A) stating that, in the opinion of such counsel,
all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary fully to preserve and protect
the interest of the Trustee in the Trust Property as required herein, and
reciting the details of such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interest.
SECTION 6.03 Limitation on Liability of Seller and Others. The
Seller and any director, officer, employee or agent of the Seller may rely in
good faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Seller shall not be under any obligation under this Agreement to
appear in, prosecute, or defend any legal action that shall be unrelated to its
obligations under this Agreement.
SECTION 6.04 Covenants of Seller.
(a) The Seller shall execute and file such UCC financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain, and protect the respective interests of the Purchaser and the Trustee
in the Contracts, the Equipment, the other Contract Assets and the other Trust
Property and in the proceeds thereof. The Seller shall deliver (or cause to be
delivered) to the Purchaser and the Trustee, upon request, file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing. In the event that the Seller fails to perform
its obligations under this subsection, the Purchaser or the Trustee may do so,
on the Seller's behalf, at the expense of the Seller. The Seller hereby grants
the Purchaser and the Trustee a power of attorney to effectuate the provisions
of the preceding sentence.
(b) The Seller shall not change its name, identity, or
corporate structure in any manner that would, could, or might make any UCC
financing statement or continuation statement filed by the Seller in accordance
with paragraph (a) above seriously misleading within the meaning of ss. 9-402(7)
of the UCC, unless it shall have given the Purchaser and the Trustee at least 60
days' prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed UCC financing statements or continuation
statements as requested by the Purchaser or the Trustee.
(c) The Seller shall give the Purchaser at least 60 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 UCC financing or
continuation statement or of any new UCC financing statement and shall promptly
file any such amendment as requested by the Purchaser or the Trustee. The Seller
shall at all times maintain each office from which it shall service Contracts,
and its principal executive office, within the United States of America. The
Seller shall pay all filing fees or taxes payable in respect of any UCC
financing or continuation statements required to be filed pursuant to this
Section 6.05.
(d) The Seller shall maintain accounts and records as to each
Contract accurately and in sufficient detail to permit the reader thereof to
know at any time the status of such Contract, including payments and recoveries
made and payments owing (and the nature of each).
(e) The Seller shall maintain its computer systems so that,
from and after the time of sale hereunder of the Contracts to the Purchaser, the
Seller's master computer records (including archives) that refer to a Contract
shall indicate clearly the interest of the Purchaser in such Contract and that
such Contract has been sold to the Purchaser and pledged by the Purchaser to the
Trustee. Indication of the Purchaser's ownership of a Contract (and the
Trustee's lien on the Contract) shall be deleted from
24
or modified on the Seller's computer systems when, and only when, the Contract
shall have been paid in full or repurchased and the Retransfer Amount has been
paid.
(f) If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in other equipment
leases or installment sale contracts to any prospective purchaser, lender, or
other transferee, the Seller shall give to such prospective purchaser, lender,
or other transferee computer tapes, records, or print-outs (including any
restored from archives) that, if they shall refer in any manner whatsoever to
any Contract, shall indicate clearly that such Contract has been sold to the
Purchaser and pledged by the Purchaser to the Trustee.
(g) The Seller shall permit the Purchaser and the Trustee and
their respective agents upon reasonable notice at any time during normal
business hours which does not unreasonably interfere with its normal operations
or customer or employee relations, to confer with the Seller's officers and
relevant other personnel, to confer with the Seller's independent auditors and
to inspect, audit, and make copies of and abstracts from its records regarding
any Contract.
(h) Upon request by the Purchaser or the Trustee, the Seller
shall furnish to the Purchaser or the Trustee (as the case may be), within five
Business Days, a current composite Schedule of Contracts held by the Purchaser
as of the end of the most recent Collection Period.
(i) The Seller shall deliver to the Purchaser and the
Trustee, promptly after the execution and delivery of this Agreement and of
each amendment hereto, an Opinion of Counsel either (a) stating that, in the
opinion of such counsel, all UCC financing statements and continuation
statements necessary to preserve and protect fully the interest of the Purchaser
and the Trustee in the Contract Assets have been filed, or (b) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interest and (c) stating that such amendment is in compliance with
the terms of this Agreement and the Indenture.
SECTION 6.05 Other Liens or Interests. Except for the
conveyances hereunder, the Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
the Contracts or any other Contract Assets or any interest therein, and the
Seller shall defend the right, title, and interest of the Purchaser and the
Trustee in, to and under the Contract and the other Contract Assets against all
claims of third parties claiming through or under the Seller; provided, however,
that the Seller's obligations to the Trustee under this Section 6.05 shall
terminate upon the termination of the Indenture pursuant to Section 11.01
thereof.
SECTION 6.06 Costs and Expenses. The Seller agrees to pay all
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and under the Indenture.
SECTION 6.07 Indemnification.
(a) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee, and the Noteholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from any breach of any of the Seller's representations and warranties contained
herein or in any manner relating to or arising out of the transactions
contemplated by this Agreement.
(b) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee, and the Noteholders from and against any and all costs,
expenses, losses, damages, claims, and
25
liabilities, arising out of or resulting from the use, ownership, operation or
sale by the Seller or any Affiliate thereof of any item of Equipment.
(c) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee, and the Noteholders from and against any taxes that may
at any time be asserted against such persons with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, general corporation, tangible or intangible personal property,
privilege, or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the transfer and assignment of the Trust Property to
the Trustee or the issuance and original sale of the Notes, which shall be
indemnified by the Servicer pursuant to Section 7.02(ii) hereof and the
Indenture) and costs and expenses in defending against the same, arising by
reason of the acts to be performed by the Seller under this Agreement or imposed
against such Persons. In addition, the Trustee shall be indemnified by the
Seller for any liability or assessment against the Trustee resulting from an
error or omission in any tax or information return prepared by the Seller.
(d) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee and the Noteholders from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such cost,
expense, loss, claim, damage, or liability arose out of, or was imposed upon
such persons through the gross negligence, willful misfeasance, or bad faith of
the Seller in the performance of its duties under this Agreement or by reason of
reckless disregard of the Seller's obligations and duties under this Agreement.
(e) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee and the Noteholders from and against any loss, liability
or expense incurred by reason of the violation by the Seller of federal or
state securities laws in connection with the registration or the sale of the
Notes.
Indemnification under this Section 6.07 shall include
reasonable fees and expenses of counsel plus expenses of litigation and shall
survive termination of the Indenture pursuant to Section 11.01 thereof and the
resignation and removal of the Trustee (unless such resignation or removal is
caused by the Trustee's gross negligence or willful misconduct). The indemnity
obligations hereunder shall be in addition to any obligation that the Seller may
otherwise have.
SECTION 6.08 Sale. Each of the Seller and the Purchaser agrees
to treat each conveyance pursuant to this Agreement and each Xxxx of Sale
delivered hereunder for all purposes (subject to consolidation for financial
accounting and tax purposes) as a sale of the Seller's interest in the Contracts
and related Contract Assets, including all of the Seller's right, title and
interest in and to the related Equipment, on all relevant books, records and
other applicable documents.
The execution and delivery of this Agreement shall constitute
an acknowledgement by the Seller and the Purchaser that each intends that the
assignment and transfer herein contemplated constitute an outright sale and
assignment to the Purchaser by the Seller of its interest in the Contracts, and
the other Contract Assets and not for security, conveying good title in such
interests free and clear of any liens, and that such interest shall not be a
part of the Seller's estate in the event of the bankruptcy or the occurrence of
another similar event, of, or with respect to, the Seller. In the event that
such conveyance is determined to be made as security for a loan made by the
Purchaser, the Trustee or the Noteholders to the Seller, the parties intend that
the Seller shall have granted to the Purchaser a security interest in all of the
Seller's right, title and interest in the Contract Assets and that this
Agreement shall constitute a security agreement under applicable law.
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SECTION 6.09 Accounting Statements. The Seller will cooperate
with the Purchaser and its independent public accountants in making available
all information and taking all steps, in each case reasonably necessary to
permit such accountants to deliver the letters required of them, if any, under
the Indenture.
ARTICLE VII.
THE SERVICER; REPRESENTATIONS AND INDEMNITIES
SECTION 7.01 Representations of the Servicer. The Servicer
hereby makes the following representations on which the Trustee shall rely. The
representations shall speak as of the execution and delivery of this Agreement,
and shall survive the transfer of the Contracts and the other Trust Property to
the Trustee.
(i) Organization and Good Standing. The Servicer has been
duly incorporated and is validly existing in good standing under the laws of its
jurisdiction of incorporation, with power and authority to own its assets and to
transact the business in which it is currently engaged, and to acquire, own,
sell, and service the Contracts and the other Trust Property and to hold the
Contract Files as custodian on behalf of the Trustee.
(ii) Due Oualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in each jurisdiction in which the failure to
obtain such qualifications, licenses or approvals would have a material adverse
effect on the Trust Property or on the Servicer's ability to perform its
obligations hereunder.
(iii) Power and Authority; Binding Obligations. The Servicer
has the corporate power and authority to make, execute, deliver and perform its
obligations under this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement. When
executed and delivered, this Agreement will constitute the legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally, and by
the availability of equitable remedies.
(iv) No Violation. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or bylaws of the
Servicer, or conflict with or breach any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture, agreement or other instrument to which the Servicer is a party or by
which it is bound or to which its properties are subject; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than this
Agreement); nor violate any law or, to the best of the Servicer's knowledge, any
order, rule, or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
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(v) No Proceedings. No litigation or administrative proceeding
of or before any court, tribunal or governmental body is currently pending or,
to the knowledge of the Servicer, threatened, against the Servicer or any of its
properties or with respect to this Agreement or the Notes which, in the opinion
of the Servicer, has a reasonable likelihood of resulting in a material adverse
effect on the Notes or the transactions contemplated by this Agreement.
(vi) No Consent Required. The Servicer is not required to
obtain the consent of any other Person or any consent, license, approval or
authorization of, or make any registration or declaration with, any governmental
authority or agency in connection with the execution, delivery and performance
by the Servicer of this Agreement (except as have been obtained).
SECTION 7.02 Liability of Servicer; Indemnities. The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer or the Seller under this Agreement and
shall have no other obligations or liabilities hereunder.
(i) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Noteholders and the Seller from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from the use, ownership, operation or sale by the Servicer or any Affiliate
thereof of an item of Equipment.
(ii) The Servicer shall indemnify, defend and hold harmless
the Trustee, the Noteholders and the Seller from and against any taxes that may
at any time be asserted against such persons with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, general corporation, tangible or intangible personal property,
privilege, or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the transfer of the Contracts to the Purchaser or
asserted with respect to ownership of the Trust Property by the Purchaser, which
shall be indemnified by the Seller pursuant to Section 6.07(c) hereof) and costs
and expenses in defending against the same, arising by reason of the acts to be
performed by the Servicer under this Agreement or imposed against such Persons.
In addition, the Trustee shall be indemnified by the Servicer for any liability
or assessment against the Trustee resulting from any error or omission in any
tax or information return prepared by the Servicer.
(iii) The Servicer shall indemnify, defend and hold harmless
the Trustee, the Noteholders and the Seller from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such cost,
expense, loss, claim, damage, or liability arose out of, or was imposed upon
such persons through the actions or omissions of the Servicer or the willful
misfeasance, gross negligence, or bad faith of the Servicer in the performance
of its duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(iv) The Servicer shall indemnify, defend and hold harmless
the Trustee from and against all costs, expenses, losses, claims, damages, and
liabilities arising out of or incurred in connection with (x) any claims,
actions, suits or judgments asserted or imposed against it and arising out of
the transactions contemplated by this Agreement or the Indenture, (y) any breach
of any of the Servicer's representations or warranties contained herein and (z)
the acceptance, administration or performance of the trusts and duties herein
contained or set forth in the Indenture, except to the extent that such cost,
expense, loss, claim, damage or liability:
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(a) shall be due to the willful misfeasance, gross negligence
or bad faith of the Trustee; (b) relates to any tax other than the taxes with
respect to which the Servicer shall be required to indemnify the Trustee
pursuant to this Agreement or the Indenture; (c) shall arise from the Trustee's
breach of the Indenture; or (d) shall be one as to which the Seller has
reimbursed the Trustee.
For purposes of this Section, in the event of the termination
of the rights and obligations of the Servicer pursuant to Section 8.01, or a
resignation by the Servicer pursuant to this Agreement, such Servicer shall be
deemed to be the Servicer pending appointment of a successor Servicer pursuant
to Section 8.02. Furthermore, indemnities in this Section 7.02 from the Servicer
to the Trustee shall also include indemnities from the initial Servicer to the
Trustee in its capacity as successor Servicer hereunder; provided that no
failure or inability of the Servicer to provide or perform such indemnities
shall in any respect alter or affect the Trustee's obligations to act as
successor Servicer hereunder. For purposes of this Section, the reference to
Trustee includes any director, officer, employee or agent of the Trustee.
Indemnification under this Section 7.02 shall include
reasonable fees and expenses of counsel of each indemnified Person plus expenses
of litigation. If the Servicer or the Seller shall have made any indemnity
payments pursuant to this Section 7.02 and the recipient thereafter collects any
of such amounts from others, the recipient shall promptly repay such amounts to
the Servicer and/or the Seller, without interest. The indemnities under this
Section 7.02 shall survive the resignation or removal of the Servicer and the
Trustee, the termination of this Agreement and the termination of the Indenture
pursuant to Section 11.01 thereof.
SECTION 7.03 Merger or Consolidation of Servicer. Any entity
(i) into which the Servicer may be merged or consolidated, (ii) which may result
from any merger, conversion, or consolidation to which the Servicer shall be a
party, or (iii) which may succeed to all or substantially all of the business of
the Servicer, shall be the successor to the Servicer hereunder without the
execution or filing of any document or any further act on the part of any of the
parties to this Agreement. The Servicer may not enter into any merger,
conversion, sale of all or substantially all of its assets or consolidation
transaction unless (v) the surviving entity shall execute an agreement of
assumption to perform every obligation of the Servicer hereunder; (w) the
Servicer provides the Rating Agency with notice of such foregoing event and the
name of such surviving entity and delivers to the Trustee a letter from the
Rating Agency that such merger, conversion or consolidation will not result in a
reduction or withdrawal of the then current rating of either Class of Notes by
the Rating Agency; (x) immediately before and after giving effect to such
transaction, no representation or warranty made pursuant to Section 7.01 shall
have been breached (for purposes hereof, such representations and warranties in
Section 7.01 shall speak as of the date of consummation of such transaction) and
no event that, after notice or lapse of time, or both, would become an Event of
Default shall have occurred and be continuing; (y) the Servicer shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger, or succession and such agreement or
assumption complies with this Section 7.03 and that all conditions precedent, if
any, provided for in the agreement relating to such transaction have been
complied with; and (z) the Servicer shall have delivered to the Trustee an
Opinion of Counsel either (A) stating that, in the opinion of such counsel, all
UCC financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Trustee in the Trust Property as required herein, and reciting
the details of such filings, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest.
SECTION 7.04 Limitation on Liability of Servicer and Others.
(a) Neither the Servicer nor any agents of the Servicer shall be under any
liability to the Trustee or the Noteholders,
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except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or errors in judgment;
provided, however, that this provision shall not protect the Servicer or any
such agent against any liability that would otherwise be imposed by reason of
willful misfeasance, gross negligence, or bad faith in the performance of duties
or by reason of reckless disregard of obligations and duties under this
Agreement or a breach of any representation or warranty of the Servicer
contained herein.
(b) Except as provided in this Agreement, the Servicer shall
not be under any obligation to appear in, prosecute, or defend any legal action
that shall not be incidental to its duties to service the Contracts in
accordance with this Agreement; provided, however, that the Servicer may
undertake, in accordance with the terms hereof, at its expense, any reasonable
action that it may deem necessary or desirable in respect of this Agreement and
the rights and duties of the parties to this Agreement and the interests of the
Noteholders under this Agreement.
(c) The Servicer and any director or officer or employee or
agent of the Servicer may rely in good faith on the advice of counsel or on any
document of any kind, prima facie properly executed and submitted by any Person,
respecting any matters arising hereunder.
SECTION 7.05 Servicer Not to Resign. The Servicer shall not
resign from its obligations and duties under this Agreement except upon
determination that the performance of its duties shall no longer be permissible
under applicable law. Notice of any such determination permitting the
resignation of the Servicer shall be communicated to the Trustee and the Rating
Agency at the earliest practicable time (and, if such communication is not in
writing, shall be confirmed in writing at the earliest practicable time) and any
such determination permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel (which counsel shall be outside counsel) to such effect
delivered to the Trustee concurrently with such notice. No such resignation
shall become effective until the Trustee or another successor Servicer shall
have assumed the responsibilities and obligations of the Servicer in accordance
with Section 8.02.
SECTION 7.06 Protection of Interest of Trust Property.
(a) The Servicer shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain, and protect the respective interests of the Purchaser under this
Agreement and of the Noteholders and the Trustee under the Indenture in the
Trust Property and in the proceeds thereof. The Servicer shall deliver (or cause
to be delivered) to the Trustee file-stamped copies, or filing receipts for, any
document filed as provided above, as soon as available following such filing,
upon request of the Trustee. In the event that the Servicer fails to perform its
obligations under this subsection, the Trustee may (but shall not be required
to) do so, on behalf of the Servicer, at the Servicer's expense. The Servicer
hereby irrevocably appoints the Trustee its attorney-in-fact, and grants the
Trustee a power of attorney, coupled with an interest and with full power or
substitution, to effectuate the provisions of the preceding sentence.
(b) The Servicer shall not change its name, identity, or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of ss. 9-402(7) of the UCC, unless it
shall have given the Trustee at least 60 days prior written notice thereof and
unless the Servicer shall execute and file amended financing statements or
continuation statements to cure such misleading effect.
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(c) The Servicer shall give the Trustee at least 60 days prior
written notice of any relocation of any of their respective principal executive
offices 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. The Servicer shall at
all times maintain each office from which it shall service Contracts, and the
Servicer shall keep at all times its principal executive office and the Contract
Files, within the United States of America. The Servicer, as applicable, shall
pay all filing fees or taxes payable in respect of any financing or continuation
statements required to be filed pursuant to this Section.
(d) The Servicer shall maintain (and shall cause any
subservicer to maintain) accounts and records as to each Contract accurately and
in sufficient detail to permit (i) the reader thereof to know at any time the
status of such Contract, including payments and recoveries made and payments
owing (and the nature of each) and (ii) reconciliation between payments or
recoveries on (or with respect to) each Contract and the amounts from time to
time deposited in the Collection Account in respect of such Contract.
(e) If at any time the Servicer shall propose to sell, grant a
security interest in, or otherwise transfer any interest in an equipment lease
to any prospective purchaser, creditor or other transferee, the Servicer shall
make available to such prospective purchaser, creditor, or other transferee
computer tapes, records, or print-outs (including any restored from archives)
that, if they shall refer in any manner whatsoever to any Contract, shall
indicate clearly that such Contract is owned by the Trustee.
(f) The Servicer shall permit (and shall cause any subservicer
to permit) the Trustee and its agents upon reasonable notice at any time during
normal business hours which does not unreasonably interfere with the Servicer's
(or such subservicer's) normal operations or customer or employee relations to
inspect, audit, and make copies of and abstracts from the Servicer's (or such
subservicer's) records regarding the Contracts.
ARTICLE VIII.
DEFAULT
SECTION 8.01 Events of Default. If any one of the following
events ("Events of Default") shall occur and be continuing:
(i) any failure by the Servicer or the Seller to deliver to
the Trustee, for distribution to Noteholders, any proceeds or payment required
to be so delivered under the terms of this Agreement or the Indenture, in each
case that continues unremedied for a period of three Business Days after the due
date thereof; or
(ii) failure on the part of the Servicer or the Seller duly to
observe or to perform in any material respect any other covenants or agreements
of the Servicer, or the Seller set forth in the Notes, in the Indenture or in
this Agreement, which failure shall (a) materially and adversely affect the
rights of the Noteholders and (b) continues unremedied for a period of 30 days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given (1) to the Servicer by the Trustee or (2) to the
Trustee and the Servicer and the Seller (as the case may be) by the Noteholders
of Notes evidencing not less than a majority of the Note Principal Balance of
the Notes; or
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(iii) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Servicer or the Seller 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 or the Seller a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Servicer or the Seller under any applicable
federal or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Servicer, or the Seller
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any of the foregoing unstayed
and in effect for a period of 90 consecutive days; or
(iv) the commencement by the Servicer or the Seller 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 or the
Seller 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 the Seller or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Servicer or the Seller
in furtherance of any such action; or
(v) a final nonappealable judgment of a court of competent
jurisdiction for more than $1,000,000 shall be entered against JLACC and shall
not be stayed, vacated, bonded, paid or discharged within 30 days; or
(vi) JLACC shall fail to pay, when and as the same shall
become due and payable (after giving effect to any applicable grace period), any
principal or interest, regardless of amount, due in respect of any indebtedness
of JLACC in a principal amount in excess of $5,000,000; provided, however, that
such failure to pay shall not constitute an Event of Default pursuant to this
clause if such non-payment is subject to good faith dispute by JLACC; or
(vii) as of the last day of any calendar month, the
Three-Month Average Default Ratio for the Contracts exceeds 4.0%, or the
Three-Month Average Delinquency Ratio for the Contracts exceeds 5.0%.
then, and in each and every case and so long as an Event of Default shall not
have been remedied, the Trustee acting at the written direction of the
Noteholders of Notes evidencing not less than 66-2/3% of the aggregate Note
Principal Balance, by notice given in writing to the Servicer (and to the
Trustee if given by the Noteholders), shall terminate all of the rights and
obligations of the Servicer under this Agreement and/or direct the Obligors to
make all payments under the Contracts directly to the Trustee. On or after the
termination of the Servicer hereunder, all authority and power of the Servicer
under this Agreement, whether with respect to the Notes or the Trust Property or
otherwise, shall pass to and be vested in the Successor pursuant to Section
8.02; and, without limitation, the Trustee shall be hereby authorized and
empowered to execute and deliver, on behalf of the predecessor Servicer, as
attorney-in-
32
fact or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Contract Files or otherwise. The predecessor Servicer shall
cooperate with the successor Servicer and the Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, shall have been deposited by the Servicer in
the Collection Account, or shall thereafter be received with respect to a
Contract or any other portion of the Trust Property. All reasonable costs and
expenses (including attorneys' fees) incurred by the Trustee and the successor
Servicer in connection with the transfer of servicing to the successor Servicer
and amending this Agreement to reflect such succession as Servicer pursuant to
this Section 8.01 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses.
SECTION 8.02 Appointment of Successor Servicer.
(a) Upon the Servicer's receipt of notice of termination
pursuant to Section 8.01 or upon resignation of the Servicer pursuant to Section
7.05, the Trustee shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement, and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the Servicer by the terms and provisions of this Agreement; provided
that the Trustee as successor Servicer shall have no obligations whatsoever with
respect to Sections 3.03, 4.05(c), 4.06, 4.10, or 7.02 and shall not be deemed
at any time to have made any of the representations or warranties of the
Servicer.
(b) Without limiting any of the foregoing, under no
circumstance shall the Trustee (as successor Servicer) be deemed to have
incurred any obligation to make any advance hereunder or to repurchase or
substitute any Contracts.
(c) Prior to the time specified in Paragraph (a) of this
Section, the Trustee shall have no obligation to perform any back-up or standby
Servicer operations or functions.
(d) The Trustee shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under this Agreement if no such notice of
termination or resignation had been given.
(e) The successor Servicer shall not be liable in any respect
for any duties, responsibilities, obligations or liabilities of the Servicer or
any predecessor Servicer arising prior to the date of the successor Servicer's
assumption of duties or appointment.
(f) In the event the Trustee becomes the successor Servicer,
the prior Servicer must agree to indemnify the Trustee against any claims or
expenses arising out of such prior servicing performance and, notwithstanding
the appointment of any successor Servicer, the initial Servicer shall continue
to be obligated in favor of the Trustee with regard to Section 7.02 hereof;
provided that no failure or inability of the initial Servicer to perform such
obligations shall in any respect alter or affect the Trustee's obligations to
act as successor Servicer hereunder.
(g) Notwithstanding the above, the Trustee shall, if it shall
be legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, any established financial institution, having a net
worth of not less than $10,000,000 and whose regular business shall include the
servicing of equipment leases, as successor Servicer under this Agreement;
provided that, pending such appointment, the Trustee shall continue to act as
Servicer (unless it is legally unable to act as Servicer);
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and provided further that (unless the Trustee is legally unable to act as
Servicer, in which event the outgoing Servicer shall act as Servicer until the
appointment) the appointment of any such successor Servicer will not result in
the withdrawal or reduction of the outstanding rating assigned to the Notes of
either Class by the Rating Agency. In connection with such appointment, the
Trustee may make such arrangements for the compensation of such successor
Servicer out of payments on the Trust Property as it and such successor Servicer
shall agree; provided, however, that the amount of such compensation shall not
exceed a reasonable fee (taking into account the estimated costs of servicing
and a reasonable profit). Such reasonable fee shall be determined by the
Trustee, but shall not be greater in any month than the Servicing Fee would be
if the Servicing Fee Rate were 1.0% per annum, and provided such fee is paid
solely from the Collection Account in accordance with the priorities of payment
specified in Section 3.07(b) and the other provisions of the Indenture. The
Trustee and such successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The Trustee
(unless the Trustee is legally unable to act as Servicer, in which event the
outgoing Servicer shall act as Servicer until the appointment, and the
acceptance of appointment) shall not be relieved of its duties as successor
Servicer under this Section 8.02 until the newly appointed successor Servicer
shall have assumed the responsibilities and obligations of the Servicer under
this Agreement.
(h) The outgoing Servicer shall provide the successor Servicer
With all files, computer tapes and software, ledgers and records, and access to
all Servicer locations and personnel, that (in each case) are necessary to
enable the successor Servicer to perform the Servicer's duties hereunder.
(i) Neither the Trustee nor any other successor Servicer shall
be deemed to be in default hereunder by reason of any failure to make, or any
delay in making any distribution hereunder or any portion thereof caused solely
by the failure or delay of the outgoing Servicer to deliver cash, documents,
files, computer tapes, ledgers or records to it or otherwise on account of the
inaccuracy of any information that it receives from the outgoing Servicer.
(j) Notwithstanding the foregoing provisions of this Section,
the Trustee upon becoming obligated to be successor Servicer hereunder may
designate another Person to instead be such successor Servicer, with the prior
written approval of each Noteholder and with a letter from the Rating Agency
stating that such designation would not result in the ratings on the Notes to be
withdrawn or downgraded; provided that such approvals are obtained from each
Noteholder and the Rating Agency and such Person agrees in writing to be the
successor Servicer in substantially such manner as the Trustee would have been
for all purposes of this Agreement.
SECTION 8.03 Notification to Noteholders. Upon any notice of
an Event of Default or upon any termination of the Servicer or appointment of a
successor Servicer pursuant to this Article VIII, the Trustee shall give written
notice within two Business Days thereof to Noteholders at their respective
addresses of record and to the Rating Agency.
SECTION 8.04 Waiver of Past Defaults. The Noteholders holding
Notes evidencing not less than 66-2/3% of the Note Principal Balance of all
Notes may, on behalf of all Noteholders, waive any default by the Servicer (or,
so long as JLACC is the Servicer, the Seller) in the performance of its
obligations hereunder and its consequences, except a default in the failure to
make any required deposits to or payments from the Collection Account in
accordance with this Agreement, which shall require the consent of 100% of the
Noteholders. Upon any such waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived.
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ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.01 Amendment. This Agreement may be amended in
writing by the Seller, the Servicer and the Purchaser, with the consent of the
Trustee, without prior notice to or the consent of any of the Noteholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement
which may be inconsistent with any other provision herein, or to add any other
provisions with respect to matters or questions arising under this Agreement
which are not inconsistent with the provisions of this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee, adversely and materially affect the interests of the
Trustee or any Noteholder. A copy of any such amendment shall be delivered by
the Servicer to the Rating Agency promptly following the execution and delivery
thereof.
This Agreement may also be amended in writing from time to
time by the Seller, the Servicer and the Purchaser, subject to the receipt by
the Purchaser and the Trustee of notice in writing from the Rating Agency that
the execution and delivery of such amendment would not result in the reduction
or withdrawal of the then-current rating of the Notes of either Class by the
Rating Agency, with the consent of the Trustee acting with the consent of
Noteholders evidencing not less than 66-2/3% of the Note Principal Balance, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement, or of modifying in any manner the
rights of the Noteholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments of Contracts, or distributions that shall be
required to be made on any Note or (b) reduce the aforesaid percentage required
to consent to any such amendment, in each case without the consent of
Noteholders of all Notes then outstanding. Promptly after the execution of any
such amendment or consent, the Trustee shall furnish written notification of the
substance of such amendment or consent to each Noteholder. Further, any
amendment, modification or waiver of this Agreement which affects the rights,
duties or obligations of LTCB Trust Company (as Trustee or as successor
Servicer) or The Bank of New York (as Backup Trustee, Trustee or successor
Servicer) may only be effected with the prior written consent of (as applicable)
LTCB Trust Company or The Bank of New York, in their respective capacities.
SECTION 9.02 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 9.03 Governing Law. This Agreement shall be construed
in accordance with the substantive laws of the State of New York (without regard
to conflicts of laws) and the obligations, rights, and remedies of the parties
under this Agreement shall be determined in accordance with such laws.
SECTION 9.04 Notices. All demands, notices, and communications
under this Agreement shall be in writing, personally delivered or mailed by
certified mail, telecopy or courier, return receipt requested, and shall be
deemed to have been duly given upon receipt
35
(a) in the case of the Seller and the Servicer,
JLA Credit Corporation
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(b) in the case of the Purchaser,
JLA Funding Corporation III
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Treasurer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
A copy of notice sent to either party hereto shall be sent by
first class mail, postage prepaid, to the Trustee at 000 Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Corporate Trust Administration.
SECTION 9.05 Severability of Provisions. If any one or more
of the covenants, agreements, provisions, or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions, or terms shall be deemed severable from the remaining covenants,
agreements, provisions, or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or of
the Notes or the rights of the Noteholders thereof.
SECTION 9.06 Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Section 6.02 or Section 7.03,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Trustee and Noteholders of Notes evidencing not
less than 66-2/3% of the Note Principal Balance.
SECTION 9.07 Submission to Jurisdiction, Venue. The parties
hereto with respect to any action or claim brought against or by the Trustee
submit to jurisdiction in the state or federal courts in New York, New York, and
agree to New York, New York as the venue for any such claim or action. The
Purchaser hereby irrevocably designates and appoints Corporation Service Company
(the "Agent"), which on the date hereof has an office located at 00 Xxxxx
Xxxxxx, Xxxxxx, Xxx Xxxx 00000, Tel.: (000) 000-0000, Fax: (000) 000-0000, as
its authorized agent upon whom process may be served in any such suit or
proceeding. The Purchaser further agrees that, to the extent permitted by
applicable law, service of process upon the Agent shall be deemed in every
respect effective service of process upon the Purchaser in any such suit or
proceeding. Each of the Seller and the Servicer hereby irrevocably designates
and appoints the Agent, as its authorized agent upon whom process may be served
in any suit or proceeding related to the transactions contemplated by this
Agreement. Each of the Seller and the Servicer further agrees that, to the
extent permitted by applicable law, service of process upon the Agent shall be
deemed in every respect effective service of process upon the Seller or the
Servicer in any suit or proceeding related to the transactions contemplated by
this Agreement.
36
SECTION 9.08 No Bankruptcy Petition. Each of JLACC and the
Servicer covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all debt securities issued by the Purchaser, it
will not institute against, or join any other Person in instituting against, the
Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy or
similar law. The Purchaser represents, warrants, and covenants that it has
obtained, and will in the future obtain, a no-petition agreement from each and
every Person that enters into any agreement of any kind with the Purchaser.
SECTION 9.09 Rule 144A Information. For so long as the Notes
are "restricted securities" within the meaning of Rule 144A of the Securities
Act, the Seller and the Servicer agree to cooperate with each other to provide
to any Noteholder and to any prospective purchaser of Notes designated by such a
Noteholder, upon the request of such Noteholder or prospective purchaser, any
information that is required to be provided to such Noteholder or prospective
purchaser to satisfy Rule 144A(d)(4) (or any successor provision) under the
Securities Act. The Seller will be responsible for the physical delivery of any
such information so requested.
SECTION 9.10 Limited Recourse. Each of the Seller and the
Servicer agrees that any payments to be made by the Purchaser hereunder shall be
made only to the extent that the Purchaser has funds available for such purpose.
The parties hereto agree, further, that the obligations of the Purchaser to make
any payment pursuant to this Agreement shall be subject entirely to the
availability of funds to the Purchaser and to the priorities of payment
specified in the Indenture and no insufficiency of such available funds shall
constitute a claim against the Purchaser. The provisions of this Section shall
survive any termination of this Agreement.
SECTION 9.11 Trustee Rights. Each of the Seller and the
Servicer agrees that the Trustee and the Backup Trustee shall be a third party
beneficiary of this Agreement as if it were a party hereto with all
corresponding rights. In addition, each of the Seller and the Servicer expressly
acknowledges and agrees that all of the Purchaser's right, title and interest
in, to and under this Agreement, and each Xxxx of Sale delivered hereunder, is
being collaterally assigned and pledged by the Purchaser to the Trustee for the
benefit of the Noteholders pursuant to the Indenture in order to secure the
Purchaser's obligations under the Indenture and the Notes.
37
IN WITNESS WHEREOF, the parties have caused this Sale and
Servicing Agreement to be duly executed by their respective offices as of the
day and year first above written.
JLA CREDIT CORPORATION,
Seller and Servicer
By: /s/ Mitsamasa Sakka
---------------------------
Name: Mitsamasa Sakka
Title: President
JLA FUNDING CORPORATION III,
Purchaser
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Treasurer
Consented and Agreed to:
LTCB TRUST COMPANY,
not in its individual capacity
but solely in its capacity
as Trustee
By:
-------------------------------
Name:
Title:
THE BANK OF NEW YORK,
not in its individual capacity
but solely in its capacity
as Backup Trustee
By:
---------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have caused this Sale and
Servicing Agreement to be duly executed by their respective offices as of the
day and year first above written.
JLA CREDIT CORPORATION,
Seller and Servicer
By:
-----------------------------
Name:
Title:
JLA FUNDING CORPORATION III,
Purchaser
By:
-----------------------------
Name:
Title:
Consented and Agreed to:
LTCB TRUST COMPANY,
not in its individual capacity
but solely in its capacity
as Trustee
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Senior Vice President
THE BANK OF NEW YORK,
not in its individual capacity
but solely in its capacity
as Backup Trustee
By:
----------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have caused this Sale and
Servicing Agreement to be duly executed by their respective offices as of the
day and year first above written.
JLA CREDIT CORPORATION,
Seller and Servicer
By:
------------------------------
Name:
Title:
JLA FUNDING CORPORATION III,
Purchaser
By:
------------------------------
Name:
Title:
Consented and Agreed to:
LTCB TRUST COMPANY,
not in its individual capacity
but solely in its capacity
as Trustee
By:
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK,
not in its individual capacity
but solely in its capacity
as Backup Trustee
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Assistant Vice President
EXHIBIT A
[FORM OF XXXX OF SALE]
XXXX OF SALE
FOR VALUE RECEIVED, JLA CREDIT CORPORATION, a Delaware
corporation (the "Seller"), hereby sells, transfers and assigns to JLA FUNDING
CORPORATION III, a Delaware corporation (the "Purchaser"), without recourse, all
of the right, title and interest of the Seller, whether now owned or hereafter
acquired, in, to and under all accounts, money, chattel paper, securities,
instruments, documents, deposit accounts, certificates of deposit, letters of
credit, advices of credit, banker's acceptances, uncertificated securities,
general intangibles, contract rights, goods and other property consisting of,
arising from or relating to the Contracts listed on Schedule I hereto (the
"Schedule of Contracts"), including, without limitation, (a) all Contract
Payments, Retransfer Amounts and other amounts due or becoming due with respect
thereto (other than any payments due pursuant to the terms of any Contract on or
before the last day of the calendar month preceding the date hereof or such
other date as is specified as the cut-off date in the attached Schedule of
Contracts (the "related Cut-Off Date"), (b) all rights of the Seller to or under
any guarantees of or collateral for the Obligor's obligations under any
Contract, (c) the amounts representing Security Deposit Offsets applied to
unpaid Contract Payments and Purchase Option Payments due on or to become due
after the applicable Cutoff Date, any guaranty relating to a Contract and all
moneys constituting collections on such Contracts from time to time on deposit
in the Lock-Box Account, (d) all rights of the Seller under any program
agreement, purchase agreement, assignment agreement, or other document pursuant
to which the Seller acquired an interest in any Contract and the Equipment
subject thereto and any support agreements or guarantees related thereto, and
(e) each Insurance Policy, if any, covering Equipment, including any Insurance
Proceeds received pursuant to such Insurance Policy after the applicable Cut-off
Date, and (f) all proceeds of any of the foregoing. The Seller hereby also
sells, transfers and assigns to the Purchaser all of the Seller's right, title
and interest in and to all Equipment covered by each of the Contracts listed in
the Schedule of Contracts and all proceeds thereof. The Seller warrants to the
Purchaser that the right, title and interest assigned hereby are not subject to
any lien, claim or encumbrance. Although the parties intend, and have expressly
so stated, that the conveyance of the Seller's right, title and interest in, to
and under the Contracts (including the related Equipment) pursuant to this Xxxx
of Sale shall constitute a purchase and sale and not a financing, in order to
protect the Purchaser in the event that, despite such express intention that the
transaction be treated as a sale, such conveyance is deemed to be a financing,
the Seller hereby grants to the Purchaser a first priority security interest in
all of the Seller's right, title and interest in, to and under the Contracts,
including all proceeds thereof, to secure the repayment of such financing, and
agrees that this Xxxx of Sale shall constitute a security agreement under
applicable law. All capitalized terms used in this Xxxx of Sale and not defined
herein shall have the meanings assigned to such terms in the Sale and Servicing
Agreement. The Seller hereby additionally represents and warrants to the
Purchaser that all representations and warranties of Seller with respect to the
Contracts in Section 3.02 of the Sale and Servicing Agreement are true and
correct as of the date hereof.
IN WITNESS WHEREOF, the Seller has executed this Xxxx of Sale
as of the date set forth below.
Dated: JLA CREDIT CORPORATION,
----------------------- a Delaware corporation
By:
---------------------------
Name:
Title:
Accepted: JLA FUNDING CORPORATION III,
a Delaware corporation
By:
---------------------------
Name:
Title:
2
