1
EXHIBIT 10.17
================================================================================
SERVICING AGREEMENT
among
T & W FUNDING COMPANY IV, L.L.C.
("Issuer")
and
T & W LEASING, INC.
("Servicer")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
("Indenture Trustee" and "Back-up Servicer")
Dated as of July 1, 1995
================================================================================
2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ................................................... 1
Section 1.01. Defined Terms ............................................. 1
ARTICLE II SERVICER REPRESENTATIONS, WARRANTEES AND COVENANTS ............ 3
Section 2.01. Representations and Warranties ............................ 3
Section 2.02. Covenants ................................................. 5
ARTICLE III ADMINISTRATION AND SERVICING OF LEASE CONTRACTS ............... 5
Section 3.01. Responsibilities of Servicer .............................. 5
Section 3.02. Servicer Standard of Care ................................. 8
Section 3.03. Servicer Remittances ...................................... 8
Section 3.04. Servicer Advances ......................................... 9
Section 3.05. Financing Statements ...................................... 9
Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds ....... 10
Section 3.07. Personal Property and Sales Taxes ......................... 10
Section 3.08. No Offset ................................................. 10
Section 3.09. Servicing Compensation .................................... 10
Section 3.10. Substitution or Purchase of Lease Contracts ............... 10
Section 3.11. Titles .................................................... 11
ARTICLE IV ACCOUNTINGS, STATEMENTS AND REPORTS ........................... 12
Section 4.01. Monthly Servicer's Reports ................................ 12
Section 4.02. Financial Statements; Certification as to Compliance;
Notice of Default ......................................... 12
Section 4.03. Annual Independent Accountants' Servicing Reports;
Annual Federal Tax Lien Search ............................ 14
Section 4.04. Access to Certain Documentation and Information ........... 14
Section 4.05. Other Necessary Data ...................................... 16
Section 4.06. Indenture Trustee to Cooperate ............................ 16
ARTICLE V THE SERVICER AND THE ISSUER ................................... 16
Section 5.01. Servicer Indemnification .................................. 16
Section 5.02. Corporate Existence; Reorganizations ...................... 17
Section 5.03. Limitation on Liability of the Servicer and Others ........ 18
3
Section 5.04. The Servicer Not to Resign ....... ........................ 18
Section 5.05. Issuer Indemnification .................................... 18
ARTICLE VI SERVICING TERMINATION ......................................... 19
Section 6.01. Servicer Events of Default ................................ 19
Section 6.02. Back-up Servicer to Act; Taking of Bids; Appointment of
Successor Servicer ........................................ 22
Section 6.03. Notification to Noteholders ............................... 23
Section 6.04. Waiver of Past Defaults ................................... 23
Section 6.05. Effects of Termination of Servicer ........................ 23
Section 6.06. No Effect on Other Parties ................................ 24
ARTICLE VII THE BACK-UP SERVICER .......................................... 24
Section 7.01. Representations of Back-up Servicer ....................... 24
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, Back-up Servicer .......................... 25
Section 7.03. Back-up Servicer Resignation .............................. 25
Section 7.04. Oversight of Servicing .................................... 25
Section 7.05. Additional Back-up Servicer Duties ........................ 27
Section 7.06. Back-up Servicer Compensation ............................. 27
ARTICLE VIII MISCELLANEOUS PROVISIONS ...................................... 27
Section 8.01. Termination of This Agreement ............................. 27
Section 8.02. Amendments ................................................ 27
Section 8.03. Governing Law ............................................. 28
Section 8.04. Notices ................................................... 28
Section 8.05. Severability of Provisions ................................ 29
Section 8.06. Binding Effect ............................................ 29
Section 8.07. Article Headings and Captions ............................. 29
Section 8.08. Legal Holidays ............................................ 29
Section 8.09. Assignment for Security for the Notes ..................... 30
Section 8.10. No Servicing Assignment ................................... 30
Section 8.11. Bond Insurer Default ...................................... 30
Section 8.12. Counterparts .............................................. 30
Section 8.13. Third Party Beneficiary ................................... 30
EXHIBIT A -- Form of Monthly Servicer's Report A-1
EXHIBIT B -- Servicer Disk Information B-1
3
4
This SERVICING AGREEMENT (as amended and supplemented from time to time,
this "Agreement"), dated as of July 1, 1995, is entered into by and among T & W
Funding Company IV, L.L.C. (herein, together with its permitted successors and
assigns, the "Issuer"), T & W Leasing, Inc., as servicer (herein, together with
its permitted successors and assigns, the "Servicer"), and Norwest Bank
Minnesota, National Association, as indenture trustee (herein, together with its
permitted successors and assigns, the "Indenture Trustee"), and as back-up
servicer (herein, together with its permitted successors and assigns, the
"Back-up Servicer").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of July 1, 1995, (the
"Indenture"), with the Indenture Trustee, the Back-up Servicer and the Servicer,
pursuant to which the Issuer intends to issue from time to time its Notes,
limited to $70,000,000 in unpaid principal balance outstanding and issuable in
one or more tranches, as provided in the Indenture.
The Issuer, T & W Leasing, Inc. (the "Company") and T & W Finance Corp.
III, T & W Finance Corp. IV and T & W Finance Company V, L.L.C. (each, a
"Contributor" and collectively, the "Contributors") have entered into a
Contribution Agreement dated as of July 1, 1995 (the "Contribution Agreement"),
providing for, among other things, the agreement by the Company and the
Contributors to repurchase certain Lease Assets that are being contributed to
the Issuer and pledged to the Indenture Trustee pursuant to the Indenture as
security for the Notes. As a precondition to the effectiveness of the
Contribution Agreement, the Contribution Agreement requires that the Servicer,
the Issuer, the Indenture Trustee and the Back-up Servicer enter into this
Agreement to provide for the servicing of the Lease Assets.
In order to further secure the Notes, the Issuer is granting to the
Indenture Trustee a security interest in, among other things, the Issuer's
rights derived under this Servicing Agreement and the Contribution Agreement,
and the Servicer agrees that all covenants and agreements made by the Servicer
herein with respect to the Lease Assets shall also be for the benefit and
security of the Indenture Trustee and all holders from time to time of the
Notes. For its services under the Servicing Agreement, the Servicer will receive
a Servicer Fee as provided herein and in the Indenture. For its services
hereunder the Back-up Servicer will receive a Back- up Servicer Fee as provided
herein and in the Indenture.
ARTICLE I
DEFINITIONS
4
5
Section 1.01. Defined Terms. Except as otherwise specified or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of the Servicing Agreement, and the definitions
of such terms are equally applicable both to the singular and plural forms of
such terms and to the masculine, feminine and neuter genders of such terms.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned to such terms in the Indenture or, if not defined
therein, in the Contribution Agreement.
"Back-up Servicer" shall initially mean Norwest Bank Minnesota, National
Association, a national banking association.
"Company" shall mean T & W Leasing, Inc., a Washington corporation.
"Contribution Agreement" shall mean the Contribution Agreement, dated as
of July 1, 1995, between the Company, the Contributors and the Issuer, as
amended and supplemented.
"Indenture Trustee" shall initially mean Norwest Bank Minnesota,
National Association, a national banking association.
"Liquidated Lease Receivable" shall mean a Lease Receivable that has
been liquidated pursuant to Section 3.01(b) hereof.
"Local Bank" shall have the meaning specified in Section 3.03 hereof.
"Lock Box" shall have the meaning specified in Section 3.03 hereof.
"Local Bank Account" shall mean the account established in the name of
the Indenture Trustee pursuant to Section 3.03 hereof, into which account shall
be deposited payments related to the Lease Receivables.
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer pursuant to Section 4.01 hereof.
"Officer's Certificate" shall mean a certificate signed by the Chairman
of the Board, the Vice-Chairman of the Board, the President, a Vice President,
the Treasurer or the Secretary of the Servicer.
"Reported Company" shall mean T & W Leasing, Inc. and its affiliates on
a combined basis, and if the initial Servicer is no longer acting as Servicer,
then any successor Servicer appointed pursuant to this Agreement.
5
6
"Reported Company's Financial Statements" shall include the Reported
Company's audited consolidating balance sheet and income statement, consolidated
statement of sources and uses/applications of cash, consolidated statement of
change in financial position, auditors opinion letter regarding audited
financial statements, and all notes to the audited financial statements.
"Servicer" shall initially mean T & W Leasing, Inc. until a successor
Person shall have become the Servicer pursuant to the applicable provisions of
this Agreement, and thereafter "Servicer" shall mean such successor Person.
"Servicer Advance" shall have the meaning set forth in Section 3.04
hereof.
"Servicer Default" shall mean any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of Default under
this Servicing Agreement.
"Servicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer State of Incorporation" means the State of Washington.
"Servicer Termination Notice" means the notice described in Section 6.01
hereof.
"Servicing Officer" shall mean those officers of the Servicer involved
in, or responsible for, the administration and servicing of the Lease Contracts,
as identified on the list of Servicing Officers furnished by the Servicer to the
Indenture Trustee, the Back-up Servicer, the Bond Insurer and the Noteholders
from time to time.
"Substitution Criterion" shall have the meaning specified in the
Contribution Agreement.
ARTICLE II
SERVICER REPRESENTATIONS,
WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties, which shall survive the Closing Date:
(a) Organization and Good Standing. The Servicer has been duly
incorporated and is validly existing in good standing as a corporation
under the laws of the Servicer State of Incorporation, with requisite
corporate power and authority to own
6
7
its properties, perform its obligations under this Agreement and to
transact the business in which it is now engaged or in which it proposes
to engage.
(b) Authorization and Binding Obligation. Each of this
Agreement, the Indenture and the Insurance Agreement has been duly
authorized, executed and delivered by the Servicer and constitutes the
valid and legally binding obligation of the Servicer enforceable against
the Servicer in accordance with its terms, subject as to enforcement to
any bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of whether
enforcement is sought in a court of equity or law.
(c) No Violation. The entering into of this Agreement, the
Indenture and the Insurance Agreement and the performance by the
Servicer of its obligations under this Agreement, the Indenture and the
Insurance Agreement and the consummation of the transactions herein and
therein contemplated 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 such Servicer pursuant to the terms of
any material indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or to which
any of its property or assets is subject, nor will such action result in
any violation of the provisions of its Certificate of Incorporation or
By-laws, or any statute or any order, rule or regulation of any court or
any regulatory authority or other governmental agency or body having
jurisdiction over it or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any
court, or any such regulatory authority or other governmental agency or
body is required for the Servicer to enter into this Agreement, the
Indenture and the Insurance Agreement.
(d) No Proceedings. There are no proceedings or investigations
pending, or to the knowledge of the Servicer, threatened against or
affecting the Servicer or any subsidiary in or before any court,
governmental authority or agency or arbitration board or tribunal,
including but not limited to any such proceeding or investigation with
respect to any environmental or other liability resulting from the
ownership or use of any of the Equipment, which, individually or in the
aggregate, involve the possibility of materially and adversely affecting
the properties, business, prospects, profits or condition (financial or
otherwise) of the Servicer and its subsidiaries, or the ability of the
Servicer to perform its obligations under this Agreement, the Indenture
or the Insurance Agreement. The Servicer is not in default with respect
to any order of any court, governmental authority or agency or
arbitration board or tribunal.
7
8
(e) Approvals. The Servicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject,
(ii) has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property
or to the conduct of its business, and (iii) is not in violation in any
material respect of any term of any agreement, charter instrument, bylaw
or instrument to which it is a party or by which it may be bound, which
violation or failure to obtain materially adversely affect the business
or condition (financial or otherwise) of the Servicer and its
subsidiaries.
(f) Investment Company. The Servicer is not an investment
company which is required to register under the Investment Company Act
of 1940, as amended.
(g) Net Worth. As of the Delivery Date, the Net Worth
Requirement is met.
Section 2.02. Covenants. (a) The Servicer covenants as to the Lease
Assets:
(i) The Servicer shall not release or assign any Lien in favor
of the Indenture Trustee on any item of Equipment related to any Lease
Contract in whole or in part, except as permitted herein or in the
Indenture.
(ii) The Servicer will in all material respects duly fulfill all
obligations on the Servicer's part to be fulfilled under or in
connection with the Lease Assets. The Servicer will not amend, rescind,
cancel or modify any Lease Contract or term or provision thereof, except
as permitted herein or in the Indenture, and the Servicer will not do
anything that would materially impair the rights of the Noteholders, the
Indenture Trustee or the Bond Insurer in the Lease Assets, except as
contemplated herein or in the Indenture.
(iii) In performing its servicing duties hereunder, the Servicer
shall collect all payments required to be made by the Customers under
the Lease Contracts, enforce all material rights of the Issuer under the
Lease Contracts and defend the Equipment against all Persons, claims and
demands whatsoever. The Servicer shall not assign, sell, pledge or
exchange or in any way encumber or otherwise dispose of the Equipment,
except as permitted hereunder or in the Indenture.
(b) The Servicer will deliver each of the accountings,
statements and reports described in Article IV hereof to each party as
set forth therein.
8
9
ARTICLE III
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for the
benefit of the Noteholders and the Indenture Trustee, shall be responsible for,
and shall, in accordance with its customary servicing procedure, pursue the
managing, servicing, administering, enforcing and making of collections on the
Lease Contracts, the Equipment and any Insurance Policies, the enforcement of
the Trust's security interest in the Lease contracts, Lease Receivables and
Equipment granted pursuant to the Indenture, and the sale or the releasing of
the Equipment upon the expiration or other termination of the related Lease
Contract (or repossession thereof without termination), each in accordance with
the standards and procedures set forth in this Agreement and any related
provisions of the Indenture and Contribution Agreement. The Servicer's
responsibilities shall include collecting and posting of all payments,
responding to inquiries of Customers, investigating delinquencies, accounting
for collections and furnishing monthly and annual statements to the Back-up
Servicer, the Indenture Trustee, the Bond Insurer, the Rating Agencies and the
Noteholders with respect to payments, making Servicer Advances, providing
appropriate federal income tax information to the Indenture Trustee for use in
providing information to the Noteholders or the Bond Insurer, collecting and
remitting sales and property taxes to taxing authorities, and using its best
efforts to maintain the perfected security interest of the Indenture Trustee in
the Trust Estate. The Servicer (at its expense), acting alone or through a
subservicer, shall have full power and authority, acting at its sole discretion,
to do any and all things in connection with such managing, servicing,
administration, enforcement, collection and such sale of the Equipment that it
may deem necessary or desirable, including the prudent delegation of such
responsibilities. Without limiting the generality of the foregoing, the
Servicer, in its own name or in the name of a subservicer, shall, and is hereby
authorized and empowered by the Indenture Trustee, subject to Section 3.02
hereof, to execute and deliver (on behalf of itself, the Noteholders, the
Indenture Trustee 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 Lease Contracts and the Lease Files.
The Servicer, acting alone or through a subservicer, also may, in its sole
discretion, waive any late payment charge or penalty, or any other fees that may
be collected in the ordinary course of servicing any Lease Contract.
Notwithstanding the foregoing, neither the Servicer, nor any subservicer, shall,
except pursuant to a judicial order from a court of competent jurisdiction, or
as otherwise expressly provided in this Agreement, release or waive the right to
collect the Scheduled Payments or any unpaid balance on any Lease Contract. The
Indenture Trustee shall, at the expense of the Servicer, furnish the Servicer,
or at the request of the Servicer, any subservicer, with any powers of attorney
and other documents necessary or appropriate to enable the Servicer or
subservicer to carry out its servicing and administrative duties hereunder, and
the Indenture Trustee shall not be responsible for the Servicer's or
subservicer's application thereof. Notwithstanding the
9
10
appointment by the Servicer of a subservicer hereunder, the Servicer shall
remain primarily liable for the full performance of its obligations hereunder.
(b) The Servicer (or a subservicer) shall conduct any Lease Contract
management, servicing, administration, collection or enforcement actions in the
following manner:
(i) The Servicer, as agent for and on behalf of the Issuer, with
respect to any Defaulted Lease Contract shall follow such practices and
procedures as are normal and consistent with the Servicer's standards
and procedures relating to its own lease contracts, lease receivables
and equipment that are similar to the Lease Contracts, Lease Receivables
and the Equipment, including without limitation, the taking of
appropriate actions to foreclose or otherwise liquidate any such
Defaulted Lease Contract, together with the related Equipment, to
collect any Guaranty Amounts, and to enforce the Issuer's rights under
the Contribution Agreement. All Recoveries or Residual Proceeds in
respect of any such Lease Receivable and the related Equipment received
by the Servicer shall be remitted to the Indenture Trustee for deposit
in the Collection Account pursuant to Section 3.03(a) hereof.
(ii) The Servicer may xxx to enforce or collect upon Lease
Contracts as agent for the Issuer. If the Servicer elects to commence a
legal proceeding to enforce a Lease Contract, the act of commencement
shall be deemed to be an automatic assignment of the Lease Contract 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 a Lease Contract on the ground that it is not a real party
in interest or a holder entitled to enforce the Lease Contract, then the
Indenture Trustee on behalf of the Issuer shall, at the Servicer's
request and expense, take such steps as the Servicer deems necessary and
instructs the Indenture Trustee in writing to take to enforce the Lease
Contract, including bringing suit in its name or the name of the Issuer,
as beneficial owner of the Lease Contract, or the names of the
Noteholders or the Bond Insurer, as third party beneficiaries
thereunder, and the Indenture Trustee shall be indemnified by the
Servicer for any such action taken;
(iii) The Servicer shall exercise any rights of recourse against
third parties that exist with respect to any Lease Contract in
accordance with the Servicer's usual practice. In exercising recourse
rights, the Servicer is authorized on the Indenture Trustee's behalf to
reassign the Lease Contract to the person against whom recourse exists
to the extent necessary, and at the price set forth in the document
creating the recourse. The Servicer will not reduce or diminish such
recourse rights, except to the extent that it exercises such right;
10
11
(iv) The Servicer may not accept Substitute Lease Contracts that
do not comply with Section 3.10 hereof, Sections 3.03 and 3.04 of the
Contribution Agreement and Section 4.03 of the Indenture;
(v) The Servicer may waive, modify or vary any terms of any
Lease Contract or consent to the postponement of strict compliance with
any such term if in the Servicer's reasonable and prudent determination
such waiver, modification or postponement is not materially adverse to
the Noteholders or the Bond Insurer; provided, however, that (A) the
Servicer shall not forgive any payment of rent, and (B) the Servicer
shall not permit any modification with respect to any Lease Contract
that would decrease the Scheduled Payment, defer the payment of any
principal or interest or any Scheduled Payment, reduce the Implicit
Principal Balance (except in connection with actual payments
attributable to such Implicit Principal Balance), or prevent the
complete amortization of the Implicit Principal Balance from occurring
by the Calculation Date preceding the Stated Maturity. The Servicer
shall provide the Back-up Servicer, the Bond Insurer and the Indenture
Trustee with an amendment to the Lease Schedule reflecting any
modification of any Scheduled Payment;
(vi) The Servicer shall not consent to the termination of any
Lease Contract in connection with loss of or damage to the related
Equipment unless the Customer has paid an amount not less than the
Purchase Price for such Lease Contract, or if less, the maximum amount
legally collectible under the related Lease Contract;
(vii) Upon termination of a Lease Contract after payment of the
last Scheduled Payment due thereunder or in the event that the Servicer
or any subservicer in the enforcement of any Lease Contract otherwise
(A) acquires title to any item of Equipment with respect to which title
was held by the Customer or (B) reclaims possession of Equipment from
the Customer, the Servicer shall use its best efforts to sell or
re-lease such item of Equipment promptly and consistent with the
standard of care set forth in Section 3.02 hereof. Any Recoveries or
Residual Proceeds related thereto shall be deposited in accordance with
Section 3.03(a) hereof; and
(viii) Notwithstanding any provision to the contrary contained
in this Agreement, the Servicer or any subservicer shall exercise any
right under a Lease Contract to accelerate the unpaid Scheduled
Payments, due or to become due thereunder in such a manner as to
maximize the net proceeds available; provided, however, that the
Servicer will not accelerate any Scheduled Payment unless permitted to
do so by the terms of the Lease Contract or under applicable law.
11
12
Section 3.02. Servicer Standard of Care. In managing, administering,
servicing, enforcing and making collections on the Lease Contracts and Equipment
pursuant to this Agreement, the Servicer will exercise that degree of skill and
care consistent with that which the Servicer customarily exercises with respect
to similar lease contracts and equipment owned by it, and in any event, in a
prudent and commercially reasonable manner. The Servicer shall punctually
perform all of its obligations and agreements under this Agreement and shall
comply with all applicable federal and state laws and regulations, shall
maintain all State and federal licenses and franchises necessary for it to
perform its servicing responsibilities hereunder, and shall not materially
impair the rights of the Bond Insurer or the Noteholders in any Lease Contracts
or payments thereunder.
Section 3.03. Servicer Remittances. (a) The Servicer, as agent of the
Issuer, shall remit to the Indenture Trustee for deposit in the Collection
Account by 12:00 noon, Minneapolis time, on each Tuesday and Thursday that is a
Business Day, or if such day is not a Business Day, on the next Business Day
thereafter, the amounts described below that have been collected through 4:00
p.m., Minneapolis time, on the preceding Business Day, so long as such amounts
exceed $1,000:
(i) all payments made under the Lease Contract relating to the
Lease Receivables, including prepayments but excluding taxes, received
directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Purchase Price of any Lease Contract purchased by the
Company, any of the Sellers or the Issuer, to the extent received by the
Servicer;
(iv) all Guaranty Amounts;
(v) all Servicing Charges; and
(vi) all Insurance Proceeds.
The Servicer shall hold in trust for the benefit of the Holders of the
Notes any payment it receives relating to items (i) through (vi) above until
such time as the Servicer transfers any such payment to the Indenture Trustee
for deposit in the Collection Account.
(b) On each Tuesday and Thursday that is a Business Day, or if such day
is not a Business Day, on the next Business Day, thereafter, the Servicer as
agent of the Indenture Trustee shall deposit in the Advance Payment Account, no
later than 12:00 noon, Minneapolis
12
13
time, the aggregate amounts of Advance Payments collected through 4:00 p.m.,
Minneapolis time, on the preceding Business Day and not previously deposited. On
the Determination Date preceding any Payment Date, the Indenture Trustee shall
withdraw from the Advance Payment Account and deposit in the Collection Account
the sum of (i) Reinvestment Income on the Advance Account and (ii) Advance
Payments related to the Due Period immediately preceding such Determination
Date, both as indicated on the Monthly Servicer's Report for such Payment Date.
(c) On each Business Day, the Servicer, under authority given to it
hereby by the Indenture Trustee, will collect from a post office box in the name
of Norwest Bank Minnesota, National Association, as Indenture Trustee (the "Lock
Box"), amounts representing payments sent by Customers and deposit such amounts
in an account (the "Local Bank Account") in a local bank (the "Local Bank"). The
Servicer will cause the Local Bank to deposit amounts in the Local Bank Account
in to the Collection Account in accordance with Section 3.03(a) and Section
3.03(b). The authority given to the Servicer by the Indenture Trustee to collect
checks from the Lock Box may be revoked at any time by the Indenture Trustee,
the Back-up Servicer or the Bond Insurer and shall be revoked in the event that
a Trigger Event has occurred and is continuing.
Section 3.04. Servicer Advances. Not later than 10:00 a.m., Minneapolis
time, on the Determination Date prior to each Payment Date, the Servicer shall
make a Servicer Advance for each Lease Contract which is a Delinquent Lease
Contract on such date by remitting to the Indenture Trustee for deposit in the
Collection Account an amount equal to the Scheduled Payments, or portion
thereof, which were due in the prior Due Period but not received and deposited
in the Collection Account on or prior to such Determination Date; provided,
however, that the Servicer shall not be obligated to make any Servicer Advance
pursuant to this Section 3.04 that the Servicer determines in good faith and in
accordance with its customary servicing practices that is unlikely to be
eventually repaid from Scheduled Payments made by or on behalf of the related
Customer; further provided, that the Servicer may make a Servicer Advance with
respect to a Lease Contract once it has become a Defaulted Lease Contract if it
reasonably believes that such Servicer Advamce will increase the Recoveries
available to the Issuer. On each Determination Date, the Servicer shall deliver
to the Back-up Servicer, the Indenture Trustee, the Bond Insurer and Placement
Agent the Monthly Servicer's Report listing the aggregate amount of Scheduled
Payments not received for the immediately prior Due Period, the amount of
Servicer Advances, and the amounts which it has determined in its sole
discretion, and in accordance with its customary servicing practices, are
unlikely to be recoverable from the related Customers.
Section 3.05. Financing Statements. The Servicer will make all Uniform
Commercial Code filings and recordings as may be required pursuant to the terms
of the Indenture. The
13
14
Servicer shall, in accordance with its customary servicing procedures and at its
own expense, be responsible for taking such steps as are necessary to maintain
perfection of such security interests. The Indenture Trustee hereby authorizes
the Servicer to re-perfect or to cause the re- perfection of such security
interest on its behalf as Indenture Trustee, as necessary.
Section 3.06. Maintenance of Insurance Policy; Insurance Proceeds. The
Servicer shall have no duty or obligation to verify, monitor or enforce the
acquisition and/or maintenance of Insurance Policies by a Customer. Any
Insurance Proceeds shall be remitted to the Indenture Trustee for deposit in the
Collection Account pursuant to Section 3.03(a).
Section 3.07. Personal Property and Sales Taxes. The Servicer shall, on
behalf of the Issuer, pay or cause to be paid all personal property, sales and
use taxes on or with respect to the Equipment, or the acquisition or leasing
thereof, as and when such taxes become due, to the extent a Customer has paid
amounts to the Servicer for such taxes. The Servicer shall also cause to be
filed in a timely manner any and all returns and reports required in connection
with the payment of such taxes.
Section 3.08. No Offset. Prior to the termination of this Agreement, the
obligations of the Servicer under this Agreement shall not be subject to any
defense, counterclaim or right of offset which the Servicer has or may have
against the Issuer, whether in respect of this Agreement, any Lease Contract,
Lease Receivable, Equipment or otherwise.
Section 3.09. Servicing Compensation. (a) As compensation for the
performance of its obligations under this Agreement, the Servicer shall be
entitled to receive the Servicer Fee and the Additional Servicer Fee, if
applicable. The Servicer Fee shall be paid monthly, commencing on the Initial
Payment Date and terminating on the first to occur of (i) the receipt of the
last Scheduled Payment and related Residual Proceeds with respect to the last
remaining Lease Contract, (ii) the receipt of Recoveries and Insurance Proceeds
with respect to the last remaining Lease Contract, or (iii) the date on which
the Issuer or the Bond Insurer purchases the last remaining Lease Contract. The
Servicer Fee shall be paid by the Issuer to the Servicer at the times and in the
priority as set forth in the Indenture. The Servicer shall pay all expenses
incurred by it in connection with its servicing activities hereunder, including,
without limitation, payment of the fees and disbursements of the Independent
Accountants and payment of expenses incurred in connection with distributions
and reports to the Indenture Trustee, the Back-up Servicer, the Bond Insurer,
the Rating Agencies and Noteholders and shall not be entitled to reimbursement
for such expenses; provided, however, that the Servicer will be entitled to
prompt reimbursement from the Issuer for reasonable costs and expenses incurred
by the Servicer (including reasonable attorney's fees and out-of-pocket
expenses) in connection with the realization, attempted realization or
enforcement of rights and remedies upon Defaulted Lease Contracts, from amounts
received as Recoveries from any Defaulted Lease Contracts.
14
15
(b) In connection with any transfer of the servicing obligations to a
successor Servicer in accordance with Section 6.02 hereof, the Back-up Servicer
shall be entitled to reimbursement of Transition Costs as provided in Section
6.02 hereof and in the Indenture.
Section 3.10. Substitution or Purchase of Lease Contracts. (a) The
Servicer shall not allow termination of a Lease Contract prior to the scheduled
expiration date or prepayment of any Lease Contract (except from an Advance
Payment or as may be specifically required under such Lease Contract in
connection with a casualty to the related Equipment), unless the Issuer has (i)
pledged to the Indenture Trustee a Substitute Lease Contract and the related
Equipment and Lease Receivables under such Substitute Lease Contract, and
delivered to the Indenture Trustee the original executed counterpart of the
Substitute Lease Contract or (ii) purchased such prepaid Lease Contract and the
related Equipment from the Indenture Trustee by remittance of the Purchase Price
to the Servicer for deposit in the Collection Account in accordance with Section
3.03(a) hereof; provided, further, that purchases and substitutions of Lease
Contracts pursuant to this subparagraph (a) shall comply with the requirements
of Section 4.03 of the Indenture and the criteria set forth in Section 3.04 of
the Contribution Agreement.
(b) The Servicer shall permit the Issuer to (i) purchase any Defaulted
Lease Contract or Delinquent Lease Contract by remittance by the Issuer to the
Servicer for deposit in the Collection Account in accordance with Section
3.03(a) hereof or (ii) substitute for any Defaulted Lease Contract or Delinquent
Lease Contract, a Substitute Lease Contract and the related Equipment and
Receivables under such Substitute Lease Contract, upon the delivery to the
Indenture Trustee of the original executed counterpart of the Substitute Lease
Contract; provided that, purchases and substitutions of Lease Contracts pursuant
to this subparagraph (b) shall comply with the requirements of Section 4.03 of
the Indenture and the criteria set forth in Section 3.04 of the Contribution
Agreement.
(c) Notwithstanding any other provision contained in this Agreement, the
Servicer shall not, with respect to a Defaulted Lease Contract (i) negotiate or
enter into a new lease with the Customer relating to the Equipment or the
Customer's obligations under such Defaulted Lease Contract or (ii) allow the
Customer thereunder to resume its rights under such Defaulted Lease Contract,
unless the Issuer has repurchased or made a substitution for such Defaulted
Lease Contract in the manner set forth in subsection (b) hereof.
(d) In the event that the Company or any of the Contributors is
required, as a result of the breach by it of certain representations or
warranties, to repurchase or substitute a Lease Contract pursuant to Section
3.03 of the Contribution Agreement, the Servicer shall permit such repurchase or
substitution in accordance with the terms of Sections 3.03 and 3.04 thereof.
15
16
Section 3.11. Titles. (a) The Servicer shall submit or shall have caused
to be submitted an application for title to the applicable governmental
authority for each Leased Vehicle no later than 10 calendar days after the
Delivery Date on which the Leased Vehicle has been contributed to the Issuer. If
the new certificate of title is not received within 90 days after such Delivery
Date, the Servicer shall notify the relevant Contributor, the Indenture Trustee
and the Bond Insurer that such certificate of title has not been obtained, and
the relevant Contributor or the Servicer shall repurchase, by the last day of
the then current Collection Period, the Leased Vehicle for which the certificate
of title has not been obtained.
(b) Upon receipt of any certificate of title, the Servicer shall
promptly verify that the information contained in the certificate of title is
materially correct, and that the Indenture Trustee is shown as the lienholder of
the Leased Vehicle covered thereby. If the Servicer determines that such
information is not correct, the Servicer shall promptly so advise the Indenture
Trustee and the Bond Insurer. Certificates of title will be held by the
Indenture Trustee. The Servicer may assist the Customer in retitling a Leased
Vehicle which has been permanently moved or transported to a different state.
ARTICLE IV
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01. Monthly Servicer's Reports. No later than 10:00 a.m.,
Minneapolis time, on each Determination Date, the Servicer shall deliver to the
Issuer, the Back-up Servicer, the Indenture Trustee, the Bond Insurer, each
Noteholder, the Placement Agent and the Rating Agencies the Monthly Servicer's
Report in the form attached as Exhibit A with respect to the activity in the
immediately preceding Due Period. In the course of preparing the Monthly
Servicer's Report, the Servicer shall seek direction from the Issuer as to
remittance of the funds to be paid pursuant to Section 12.02(d)(xviii) of the
Indenture. Lease Contracts which have been substituted for or purchased by the
Company, any of the Contributors or the Issuer shall be identified by Customer
lease number. On each Payment Date, the Servicer shall deliver to the Back-up
Servicer and the Bond Insurer a computer disk or tape in a format acceptable to
the Back-up Servicer containing the information described on Exhibit B hereto,
as well as any additional information reasonably requested by the Back-up
Servicer prior to such Payment Date.
Section 4.02. Financial Statements; Certification as to Compliance;
Notice of Default. (a) The Servicer (and the Company if the initial Servicer is
no longer the Servicer) will deliver to the Indenture Trustee, the Placement
Agent, the Bond Insurer, the Back-up Servicer, the Rating Agencies and to each
Noteholder of Outstanding Notes (and, upon the request of any Noteholder, to any
prospective transferee of any Note):
16
17
(i) within 120 days after the end of each fiscal year of the
Reported Company, four copies of the Reported Company's Financial
Statements, all in reasonable detail and accompanied by an opinion of
the Independent Accountants or a firm of independent certified public
accountants of recognized national standing stating that such financial
statements present fairly the financial condition of the Reported
Company (or, in the case of a successor Servicer, such successor
Servicer's financial condition) and have been prepared in accordance
with generally accepted accounting principles consistently applied
(except for changes in application in which such accountants concur),
and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances;
(ii) with each set of Reported Company's Financial Statements
delivered pursuant to subsection (a)(i) above, the Servicer will deliver
an Officer's Certificate stating that such officer has reviewed the
relevant terms of the Indenture, the Contribution Agreement, the
Insurance Agreement and this Agreement and has made, or caused to be
made, under such officer's supervision, a review of the transactions and
conditions of the Reported Company during the period covered by the
Reported Company's Financial Statements then being furnished, that the
review has not disclosed the existence of any Servicer Default or
Servicer Event of Default or, if a Servicer Default or a Servicer Event
of Default exists, describing its nature and what action the Servicer
has taken and is taking with respect thereto, and that on the basis of
such review the officer signing such certificate is of the opinion that
during such period the Servicer has serviced the Lease Contracts in
compliance with the procedures hereof except as disclosed in such
certificate;
(iii) immediately upon becoming aware of the existence of any
condition or event which constitutes a Servicer Default or a Servicer
Event of Default, a written notice describing its nature and period of
existence and what action the Servicer is taking or proposes to take
with respect thereto;
(iv) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it or the
Issuer by any governmental authority or agency, or
(B) any pending or proposed court or administrative
proceeding which involves or may involve the possibility of
materially and adversely affecting the
17
18
properties, business, prospects, profits or condition (financial
or otherwise) of the Servicer or the Issuer,
a written notice specifying the nature of such investigation or
proceeding and what action the Servicer is taking or proposes to take
with respect thereto and evaluating its merits;
(v) with reasonable promptness any other data and information
which may be reasonably requested from time to time, including without
limitation any information required to be made available at any time to
any prospective transferee of any Notes in order to satisfy the
requirements of Rule 144A under the Securities Act of 1933, as amended;
and
(vi) quarterly, unaudited versions of the Reported Company's
consolidating balance sheet and income statement and consolidated
statement of sources and uses of cash.
(b) On or before each April 15, so long as any of the Notes are
outstanding, the Servicer shall furnish to the Bond Insurer and the Indenture
Trustee an Officer's Certificate either stating that such action has been taken
with respect to the recording, filing, and rerecording and refiling of any
financing statements and continuation statements as necessary to maintain the
interest of the Indenture Trustee created by the Indenture with respect to the
Trust Estate and reciting the details of such action or stating that no such
action is necessary to maintain such interest. Such Officer's Certificate shall
also describe the recording, filing, rerecording and refiling of any financing
statements and continuation statements that will be required to maintain the
interest of the Indenture Trustee in the Trust Estate until the date such next
Officer's Certificate is due.
Section 4.03. Annual Independent Accountants' Servicing Reports; Annual
Federal Tax Lien Search. (a) Commencing with the 1995 fiscal year, and each
fiscal year thereafter, the Servicer, at its expense, shall cause the
Independent Accountant (who may also render and deliver other services to the
Servicer and its affiliates) to prepare a statement to the Back-up Servicer, the
Indenture Trustee, the Noteholders, the Bond Insurer, the Rating Agencies and
the Placement Agent, dated as of the close of such fiscal year, to the effect
that the Independent Accountant has examined the servicing procedures, manuals,
guides and records of the Servicer, and the accounts and records of the Servicer
relating to the Lease Contracts and the Lease Files (which procedures, manuals,
guides and records shall be described in one or more schedules to such
statement), that such Independent Accountant has compared the information
contained in the Monthly Servicer's Reports delivered in the relevant period
with information contained in the accounts and records for such period, and
that, on the basis of such examination and comparison, nothing has come to the
Independent Accountant's attention to indicate that the Servicer has not,
18
19
during the relevant period, serviced the Lease Contracts in compliance with such
servicing procedures, manual and guides and in the same manner required by the
Servicer's standards and with the same degree of skill and care consistent with
that which the Servicer customarily exercises with respect to similar Lease
Contracts owned by it and otherwise in compliance with this Agreement, that such
accounts and records have not been maintained in accordance with Section 4.04
hereof, that the information contained in the Monthly Servicer's Reports does
not reconcile with the information contained in the accounts and records or that
such certificates, accounts and records have not been properly prepared and
maintained in all material respects or in accordance with the requirements of
this Agreement, except in each case for (a) such exceptions as the Independent
Accountant shall believe to be immaterial and (b) such other exceptions as shall
be set forth in such statement. The Servicer shall deliver to the Back-up
Servicer, the Indenture Trustee, the Noteholders, the Bond Insurer and the
Rating Agencies a copy of any such statement within 120 days of the close of the
relevant fiscal year.
(b) Promptly after the end of the Servicer's fiscal year, the Servicer,
at its expense, shall cause a search of any and all federal tax liens against
the affiliated group of which the Company, the Contributors and the Issuer are
members with the meaning of Section 1504 of the Code (the "Affiliated Group") as
of the end of such fiscal year to be conducted and shall deliver to the Back-up
Servicer, the Indenture Trustee, the Noteholders and the Bond Insurer on or
before January 31 of each year, commencing January 31, 1996, an officer's
certificate signed by a Servicing Officer (i) stating that there are no
outstanding federal tax liens filed against any member of the Affiliated Group
or (ii) listing the outstanding federal tax liens filed against any member of
such Affiliated Group. In the event any such certificate shall disclose any such
federal tax liens, the Servicer shall promptly thereafter, satisfy any such
federal tax liens.
Section 4.04. Access to Certain Documentation and Information. (a) The
Servicer shall provide to the Back-up Servicer, the Bond Insurer, the Indenture
Trustee, or any Noteholder and their duly authorized representatives, attorneys
or accountants access to any and all documentation regarding the Trust Estate
(including the Lease Schedule) that the Servicer may possess, such access being
afforded without charge but only upon reasonable request and during normal
business hours so as not to interfere unreasonably with the Servicer's normal
operations or customer or employee relations, at offices of the Servicer
designated by the Servicer.
(b) At all times during the term hereof, the Servicer shall keep
available at its principal executive office for inspection by Noteholders, the
Indenture Trustee, the Back-up Servicer and the Bond Insurer a list of all Lease
Contracts then held as a part of the Trust Estate, together with a
reconciliation of such list to that set forth in the Lease Schedule and each of
the Monthly Servicer's Reports, indicating the cumulative addition and removal
of Lease Contracts from the Trust Estate.
19
20
(c) The Servicer will maintain accounts and records as to each
respective Lease Contract serviced by the Servicer that are accurate and
sufficiently detailed as to permit (i) the reader thereof to know as of the most
recent Calculation Date the status of such Lease Contract, including any
payments, Insurance Proceeds, Residual Proceeds and Recoveries received or owing
(and the nature of each) thereon and (ii) the reconciliation between payments,
Insurance Proceeds, Residual Proceeds or Recoveries on (or with respect to) each
Lease Contract and the amounts from time to time deposited in the Collection
Account in respect of such Lease Contract.
(d) The Servicer will maintain all of its computerized accounts and
records so that, from and after the time of the acquisition of the Lease Assets
by the Issuer and the grant of the security interest in the Lease Contracts,
Lease Receivables and Equipment to the Indenture Trustee, the Servicer's
accounts and records (including any back-up computer archives) that refer to any
Lease Contract, Lease Receivable or Equipment indicate clearly that the Lease
Contracts, Lease Receivables and Equipment are owned by the Issuer and pledged
to the Indenture Trustee for the benefit of the Noteholders. Indication of the
Indenture Trustee's interest in a Lease Contract will be deleted from or
modified on the Servicer's accounts and records when, and only when, the Lease
Contract has been paid in full, replaced with a Substitute Lease Contract or
purchased by the Company or the Issuer.
(e) Nothing in this Section 4.04 shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Customers, and the failure to provide information otherwise
required by this Section 4.04 as a result of such observance by the Servicer,
shall not constitute a breach of this Section 4.04.
(f) All information obtained by the Indenture Trustee, the Back-up
Servicer, the Bond Insurer or any Noteholder regarding the Customers and the
Lease Contracts, whether upon exercise of its rights under this Section 4.04 or
otherwise, shall be maintained by the Indenture Trustee, the Back-up Servicer,
the Bond Insurer or the Noteholder, as applicable, in confidence and shall not
be disclosed to any other Person, unless such disclosure shall not violate any
applicable law or regulation or any proprietary rights of the Company, the
Contributors, the Issuer or the Servicer or unless ordered by a court of
appropriate jurisdiction or so required by any regulatory body having
appropriate jurisdiction; provided that the Bond Insurer may make disclosures
with respect to any of the above matters to the Rating Agencies or any entity
having regulatory authority over the Bond Insurer and provided, further, that
the Indenture Trustee may provide any such information to any Noteholder.
Section 4.05. Other Necessary Data. The Servicer shall, on request of
the Back-up Servicer, Indenture Trustee or the Bond Insurer, on reasonable
notice (i) furnish the Back-up Servicer, Indenture Trustee or the Bond Insurer
such data necessary for the administration of the
20
21
Trust Estate as can be reasonably generated by the Servicer's existing data
processing systems, and (ii) on and after a Servicer Event of Default, provide
the Indenture Trustee and the Back-up Servicer with access to the Servicer's
existing data processing systems.
Section 4.06. Indenture Trustee to Cooperate. Upon payment (including
through application of any prepayment) in full of any Lease Contract, the
Servicer will notify the Indenture Trustee on the next succeeding Determination
Date by written certification (which certificate shall include a statement to
the effect that all amounts received in connection with such payments in full
which are required to be deposited in the Collection Account pursuant to Section
3.03 hereof have been so deposited) of a Servicing Officer and shall request
delivery of the Lease Contract to the Servicer. Upon receipt of such delivery
request, the Indenture Trustee shall within 60 days of such request by the
Servicer release such Lease Contract to the Servicer. Upon release of such Lease
Contract, the Servicer is authorized to execute an instrument in satisfaction of
such Lease Contract and to do such other acts and execute such other documents
as it deems necessary to discharge the Customer thereunder and, if applicable,
release any security interest in the Equipment related thereto. The Servicer
shall determine when a Lease Contract has been paid in full. Upon the written
request of a Servicing Officer and subject to the Indenture Trustee's rights to
indemnity contained herein and in the Indenture, the Indenture Trustee shall
perform such other acts as reasonably requested in writing by the Servicer and
otherwise cooperate with the Servicer in enforcement of the Noteholders' rights
and remedies with respect to Lease Contracts.
ARTICLE V
THE SERVICER AND THE ISSUER
Section 5.01. Servicer Indemnification. (a) The Servicer agrees (1) to
indemnify, defend, and hold harmless the Indenture Trustee, the Back-up
Servicer, the Bond Insurer and the Noteholders from and against any and all
costs, expenses, losses, damages, claims and liabilities arising out of or
resulting from the use, ownership or operation by the Issuer or any affiliate
thereof of the Equipment;
(2) To indemnify, defend and hold harmless the Indenture Trustee, the
Back-up Servicer, the Bond Insurer and the Noteholders from and against any
taxes that may at any time be asserted against the Indenture Trustee or the
Noteholders with respect to the transactions contemplated herein, including,
without limitation, any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes (but, in the case of the
Noteholders, not including any taxes asserted with respect to the issuance and
original sale of the Notes or federal or other income taxes arising out of
distributions on the Notes) and costs and expenses in defending against the
same;
21
22
(3) To indemnify, defend and hold harmless the Indenture Trustee, the
Back-up Servicer, the Bond Insurer and the Noteholders from against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent to that
such cost, expense, loss, claim, damage or liability arose out of, or was
imposed upon the Indenture Trustee or the Noteholders through the negligence,
willful misfeasance or bad faith of the Servicer in the performance of its
obligations and duties hereunder;
(4) To indemnify, defend and hold harmless the Indenture Trustee, the
Back-up Servicer, the Bond Insurer and the Noteholders from and against all
costs, expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the duties
contained herein, except to the extent that such cost, expense, loss, claim,
damage or liability shall be due to the willful misfeasance, bad faith or gross
negligence of such Person.
(b) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer has made any indemnity payments to the Bond
Insurer, the Indenture Trustee, the Back- up Servicer or the Noteholders
pursuant to this Section and such party thereafter collects any of such amounts
from others, such party will promptly repay such amounts collected to the
Servicer, without interest. The provisions of this Section 5.01 shall survive
any expiration or termination of this Agreement.
(c) The Servicer shall indemnify the Noteholders for any Breakage Costs
that are incurred on account of the Servicer allowing a Customer to terminate a
Lease Contract prior to the end of the term of such Lease Contract by depositing
an amount equal to such Breakage Costs into the Collection Account no later than
the Determination Date prior to the Payment Date on which such costs are to be
paid to the Noteholders.
Section 5.02. Corporate Existence; Reorganizations. (a) The Servicer
shall keep in full effect its existence and good standing as a corporation in
the Servicer State of Incorporation and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to enable the Servicer to
perform its duties under this Agreement, except where the failure to so qualify
would not have a material adverse effect on the Trust Estate or the ability of
the Servicer to perform its duties hereunder; provided, however, that the
Servicer may reincorporate in another state, if to do so would be in the best
interests of the Servicer and would not have a material adverse effect upon the
Noteholders.
(b) The Servicer shall not (i) (other than pursuant to one or more
additional lease financings) convey, transfer or lease substantially all of its
assets as an entirety to any Person, or
22
23
(ii) merge or consolidate with another Person, unless such Person or the merged
or consolidated entity acquires substantially all the assets of the Servicer as
an entirety and executes and delivers to the Issuer, the Bond Insurer, the
Backup Servicer and the Indenture Trustee an agreement, in form and substance
reasonably satisfactory to the Issuer, the Bond Insurer, the Backup Servicer and
the Indenture Trustee, which contains an assumption by such Person or entity of
the due and punctual performance and observance of each covenant and condition
to be performed or observed by the Servicer under this Agreement. The Servicer
shall provide prompt written notice of such event to the Rating Agencies.
Section 5.03. Limitation on Liability of the Servicer and Others. Except
as provided in Section 5.01, neither the Servicer nor any of the officers,
directors, employees or agents of the Servicer shall be under any liability for
any action taken or for refraining from the taking of any action in its capacity
as Servicer pursuant to this Agreement; provided, however, that this provision
shall not protect the Servicer or any such person against any liability which
would otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence (which includes negligence with respect to the duties of the Servicer
explicitly set forth in this Agreement) in the performance of its duties
hereunder. The Servicer and any officer, director, employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person with respect to any matters arising
hereunder. No implied covenants or obligations shall be read into this Agreement
against the Servicer. In the event the Servicer performs any activities beyond
the requirements of this Agreement, the Servicer shall have the option but will
not be required to perform such activities in the future.
Section 5.04. The Servicer Not to Resign. (a) The Servicer shall not
resign from the duties and obligations hereby imposed on it except upon a
determination by its Board of Directors that by reason of change in applicable
legal requirements, with which the Servicer cannot reasonably comply, the
continued performance by the Servicer of its duties under this Agreement would
cause it to be in violation of such legal requirements, said determination to be
evidenced by a resolution from its Board of Directors to such effect,
accompanied by an opinion of Counsel to such effect and reasonably satisfactory
to the Indenture Trustee and the Bond Insurer.
(b) No such resignation shall become effective until a successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the duties and
obligations of the Servicer under this Agreement shall continue until this
Agreement shall have been terminated as provided in Section 8.01 hereof, and
shall survive the exercise by the Issuer or the Indenture Trustee of any right
or remedy under this Agreement, or the enforcement by the Issuer, the Bond
23
24
Insurer, the Indenture Trustee, the Back-up Servicer or any Noteholder of any
provision of the Notes or this Agreement.
Section 5.05. Issuer Indemnification. The Issuer shall indemnify and
hold harmless the Servicer (but solely from the amounts to be distributed as set
forth in Section 12.02(d)(xviii) of the Indenture) from and against any loss,
liability, expense, damage or injury suffered or sustained by the Servicer,
including but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, which arises
out of the Servicer's activities hereunder; provided, however, that the Issuer
shall not indemnify the Servicer if the Servicer's activities constituted fraud,
willful misconduct, gross negligence (which includes negligence with respect to
the duties of the Servicer which are explicitly set forth in this Agreement) or
breach of fiduciary duty by the Servicer.
ARTICLE VI
SERVICING TERMINATION
Section 6.01. Servicer Events of Default. (a) Any of the following acts
or occurrences shall constitute a Servicer Event of Default:
(i) Any failure by the Servicer to deliver to the Indenture
Trustee for payment to Noteholders any proceeds or payments received
from a Customer or in respect of the Trust Estate and when required to
be so delivered under the terms of the Indenture and this Agreement that
continues unremedied until 10:00 a.m., Minneapolis time, on the second
successive Business Day, provided, however, that the Indenture Trustee,
upon receiving actual knowledge of such failure, shall give the Servicer
prompt written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Indenture Trustee to
deliver such notice to the Servicer shall not prevent the occurrence of
a Servicer Event of Default; or
(ii) Any failure by the Servicer to deliver a Monthly Servicer's
Report pursuant to Section 4.01 hereof that continues unremedied until
10:00 a.m., Minneapolis time, the following Business Day; provided,
however, that if the Servicer has not delivered the Monthly Servicer's
Report by 12:00 noon, Minneapolis time, on the Determination Date, the
Indenture Trustee shall give the Servicer notice of such failure.
Notwithstanding the foregoing, any failure by the Indenture Trustee to
deliver such notice to the Servicer shall not prohibit the occurrence of
a Servicer Event of Default; or
24
25
(iii) Any failure by the Servicer to make a Servicer Advance
pursuant to Section 3.04 hereof or to deposit any Purchase Price
received by it that continues unremedied until 10:00 a.m., Minneapolis
time, the following Business Day; provided, however, that if the
Servicer has not made the Servicer Advance or deposited any Purchase
Price received by it by 12:00 noon, Minneapolis time, on the
Determination Date and the Indenture Trustee has received written
notification from the Servicer by way of the Monthly Servicer's Report
or otherwise that such Servicer Advance or Purchase Price is to be paid,
the Indenture Trustee shall give the Servicer prompt written, telecopied
or telephonic notice of such failure. Notwithstanding the foregoing, any
failure by the Indenture Trustee to deliver such notice to the Servicer
shall not prevent the occurrence of a Servicer Event of Default; or
(iv) Any failure by the Servicer to make remittances or deliver
notices pursuant to Section 3.03 hereof, that continues unremedied until
10:00 a.m., Minneapolis time, of the third successive Business Day; or
(v) Any failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer, set forth in this Agreement or the Indenture, as the case may
be, or any representation or warranty of the Servicer set forth in
Section 2.01 of this Agreement shall prove to be incorrect, which
failure or breach (A) materially and adversely affects the interest or
rights of the Bond Insurer, the Indenture Trustee, the Back up Servicer
or the Noteholders and (B) continues unremedied for a period of 30 days
after the date on which the Servicer becomes aware of such failure or
breach or written notice of such failure or breach, requiring the
situation giving rise to such breach or non-conformity to be remedied,
shall have been given to a Servicing Officer of the Servicer by the
Indenture Trustee, the Bond Insurer, the Issuer, or the Back-up
Servicer, or to a Servicing Officer of the Servicer, the Bond Insurer
and the Indenture Trustee by Holders of Notes representing not less than
25% of the aggregate principal amount of the Notes Outstanding; or
(vi) Any assignment by the Servicer to a delegate of its duties
or rights under this Agreement, except as specifically permitted
hereunder, or any attempt to make such an assignment; or
(vii) The entry of a decree or order for relief by a court
having jurisdiction in respect of the Servicer or a petition against the
Servicer in an involuntary case under any federal bankruptcy laws, as
now or hereafter in effect, or any other present or future federal or
state bankruptcy insolvency or similar law, or the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for the Servicer or for any substantial part of
its property, or the ordering of the winding up or
25
26
liquidation of the affairs of the Servicer and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days; or
(viii) The commencement by the Servicer of a voluntary case
under any federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency,
reorganization or similar law, or the consent by the Servicer to the
appointment of or taking possession by a conservator, receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official in any insolvency, readjustment of debt, marshalling of assets
and liabilities, bankruptcy or similar proceedings of or relating to the
Servicer or relating to a substantial part of its property, or the
making by the Servicer of an assignment for the benefit of creditors, or
the failure by the Servicer generally to pay its debts as such debts
become due or if the Servicer shall admit in writing its inability to
pay its debts as they become due, or the taking of corporate action by
the Servicer in furtherance of any of the foregoing; or
(ix) The occurrence of a Trigger Event if the initial Servicer
is the Servicer.
(b) So long as a Servicer Event of Default shall not have been remedied
within the period set forth in (i), (ii), (iii), (iv), (v) or (vii) above, as
applicable, the Indenture Trustee, at the direction of the Bond Insurer shall,
or if there has been a Bond Insurer Default, the Indenture Trustee, the Issuer,
or the Back-up Servicer may, by notice (the "Servicer Termination Notice") then
given in writing to the Servicer and the Back-up Servicer, terminate all, but
not less than all, of the rights and obligations of the Servicer under this
Agreement. Notwithstanding the foregoing, a delay in or failure of performance
under Section 6.01(a)(v) hereof for a period of 30 or more Business Days, shall
not constitute a Servicer Event of Default if such delay or failure could not
have been prevented by the exercise of reasonable diligence by the Servicer and
such delay or failure was caused by acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement, and the
Servicer shall provide the Indenture Trustee, the Back-up Servicer, the Bond
Insurer, the Issuer and the Noteholders with prompt notice of such failure or
delay by it, together with a description of its efforts to so perform its
obligations.
(c) In the event of the occurrence of a Trigger Event, the Indenture
Trustee shall, at the direction of the Bond Insurer, or if there has been a Bond
Insurer Default, the Indenture Trustee, the Issuer, or the Back-up Servicer may,
by Servicer Termination Notice then given in writing to the Servicer and the
Back-up Servicer, terminate all but not less than all of the rights and
obligations of the Servicer under this Agreement.
26
27
(d) On or after the receipt by the Servicer of a Servicer Termination
Notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Notes or the Lease Contracts or otherwise, shall pass to and
be vested in the successor Servicer appointed pursuant to Section 6.02 hereof,
and, without termination, such successor Servicer is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-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 of the
Lease Contracts and related documents, or otherwise. The Servicer agrees to
cooperate with the Indenture Trustee, the Back-up Servicer and the successor
Servicer in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the transfer to the successor
Servicer for administration by it of all cash amounts that shall at the time be
held by the Servicer for deposit, or have been deposited by the Servicer, in the
Collection Account or the Advance Payment Account or thereafter received with
respect to Lease Contracts. To assist the successor Servicer in enforcing all
rights under the Lease Contracts and the Insurance Polices to the extent they
relate to the Lease Contracts, the outgoing Servicer, at its own expense, shall
transfer its records (electronic and otherwise) relating to such Lease Contracts
to the successor Servicer in such form as the successor Servicer may reasonably
request and shall transfer the related Lease Contracts (to the extent not held
by the Indenture Trustee) and all other records, correspondence and documents
relating to the Lease Contracts that it may possess to the successor Servicer in
the manner and at such times as the successor Servicer shall reasonably request.
In addition to any other amounts that are then payable to the Servicer under
this Agreement, the Servicer shall be entitled to receive reimbursements for any
unreimbursed Servicer Advance made during the period prior to the delivery of a
Servicer Termination Notice pursuant to this Section 6.01 which terminates the
obligations and right of the Servicer under this Agreement.
Section 6.02. Back-up Servicer to Act; Taking of Bids; Appointment of
Successor Servicer. (a)(i) Except as provided in Section 6.02(d) hereof, on and
after the time the Servicer receives a Servicer Termination Notice pursuant to
Section 6.01, the Back-up Servicer shall, unless prevented by law, automatically
and without further action be the successor Servicer. If the Back-up Servicer
cannot serve or, for some other reason does not serve, as successor Servicer,
another firm acceptable to the Bond Insurer shall be appointed.
(ii) The successor Servicer shall be the successor in all respects to
the Servicer in its capacity as Servicer under this Agreement, and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the successor
Servicer (x) shall not be required to make any Servicer Advance if such Servicer
Advance would be prohibited by applicable law or if there exists any requirement
that additional capital be maintained by the Servicer by applicable regulatory
authority and (y) shall not be liable for any
27
28
acts or omissions of the outgoing Servicer or for any breach by the outgoing
Servicer of any of its representations and warranties contained herein or in any
related document or agreement. With the prior written consent of the Bond
Insurer (which consent shall not be unreasonably withheld), the successor
Servicer may subcontract with another firm to act as subservicer so long as the
successor Servicer remains fully responsible and accountable for performance of
all obligations of the Servicer on and after the time the Servicer receives the
Servicer Termination Notice. The successor Servicer shall be entitled to the
Servicer Fee and any Additional Servicer Fee, subject to the taking of bids as
described in subsection (b) below.
(b) Upon receipt of a Servicer Termination Notice, the Back-up Servicer
shall solicit written bids, with a copy to the Bond Insurer (such bids to
include a proposed servicer fee and servicing transfer costs) from not less than
three entities experienced in the servicing of lease contracts similar to the
Lease Contracts and that are not affiliates of the Indenture Trustee, the
Back-up Servicer, the Servicer or the Issuer and are reasonably acceptable to
the Bond Insurer. The Issuer may also solicit additional bids from other such
entities. Any such written solicitation shall prominently indicate that any fees
and transfer costs in excess of the Servicer Fee shall be paid only pursuant to
Section 12.02(d) of the Indenture. The successor Servicer shall act as Servicer
hereunder and shall, subject to the availability of sufficient funds in the
Collection Account pursuant to Section 12.02 of the Indenture, receive as
compensation therefor a fee equal to the greater of the Servicer Fee or the fee
proposed in the bid so solicited which provides for the lowest Servicer Fee, as
reasonably determined by the Bond Insurer.
(c) The Servicer, the Back-up Servicer, the Issuer, the Indenture
Trustee and such successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The Back-up
Servicer (or the Indenture Trustee or the Holders of the Notes if such Holders
have previously reimbursed the Back-up Servicer and the Indenture Trustee
therefor) shall be reimbursed for all Transition Costs incurred in connection
with the assumption of responsibilities of the successor Servicer, upon receipt
of documentation of such costs and expenses and in accordance with Section
12.02(d)(xi) of the Indenture.
(d) Upon written notification to the Indenture Trustee that on any
Determination Date following the solicitation of bids provided for in Section
6.02(b) hereof, the sum of the aggregate Implicit Principal Balance for all
Lease Contracts plus the amount on deposit in the Cash Collateral Account less
the principal amount of the Notes then outstanding is less than $50,000; then
the Back-up Servicer shall be relieved of its obligation under Section
6.02(a)(i) hereof, and the Bond Insurer, or if there is a Bond Insurer Default,
the Issuer shall appoint a successor Servicer. In such event, the Bond Insurer
shall be reimbursed for any Transition Costs incurred solely pursuant to Section
6.02(b) in the manner and to the extent provided for in Section 12.02(d)(xi) of
the Indenture.
28
29
Section 6.03. Notification to Noteholders. The Servicer shall promptly
notify the Back-up Servicer, the Bond Insurer, the Issuer and the Indenture
Trustee of any Servicer Event of Default upon actual knowledge thereof by a
Servicing Officer. Upon any termination of, or appointment of a successor to,
the Servicer pursuant to this Article VI, the Indenture Trustee shall give
prompt written notice thereof to the Noteholders at their respective addresses
appearing in the Note Register.
Section 6.04. Waiver of Past Defaults. The Indenture Trustee shall, at
the direction of the Bond Insurer or at the direction of the Holders of Notes
representing more than 50% of the principal amount of the Notes Outstanding, on
behalf of all Noteholders, with the written consent of the Bond Insurer, so long
as there is no Bond Insurer Default, and may, if a Bond Insurer Default is
continuing, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences, other than a default with respect to
required deposits and payments in accordance with Article III or a default of
the type set forth in clause (vii) or (viii) of Section 6.01(a) hereof, which
waiver shall require the consent of each Noteholder and the Bond Insurer. Upon
any such waiver of a past default, such default shall cease to exist, and any
Servicer 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 waived.
Section 6.05. Effects of Termination of Servicer. (a) Upon the
appointment of the successor Servicer, the predecessor Servicer shall remit any
Scheduled Payments, Advance Payments, Overdue Payments and any other payments or
proceeds that it may receive pursuant to any Lease Contract or otherwise to the
successor Servicer after such date of appointment.
(b) After the delivery of a Servicer Termination Notice, the outgoing
Servicer shall have no further obligations with respect to the management,
administration, servicing, enforcement, custody or collection of the Lease
Contracts and the successor Servicer shall have all of such obligations, except
that the outgoing Servicer will transmit or cause to be transmitted directly to
the successor Servicer, promptly on receipt and in the same form in which
received, any amounts held by the outgoing Servicer (properly endorsed where
required for the successor Servicer to collect them) received as payments upon
or otherwise in connection with the Lease Contracts. The outgoing Servicer's
indemnification obligations pursuant to Section 5.01 hereof will survive the
termination of the Servicer but will not extend to any acts or omissions of a
successor Servicer.
Section 6.06. No Effect on Other Parties. Upon any termination of the
rights and powers of the Servicer pursuant to Section 6.01, or upon any
appointment of a successor Servicer, all the rights, powers, duties and
obligations of the other parties under this Agreement,
29
30
the Indenture, and the Contribution Agreement shall remain unaffected by such
termination or appointment and shall remain in full force and effect thereafter.
ARTICLE VII
THE BACK-UP SERVICER
Section 7.01. Representations of Back-up Servicer. The Back-up Servicer
makes the following representations and warranties:
(a) The Back-up Servicer has been duly organized and is validly
existing as a national banking association in good standing under the
laws of the United States of America, with power and authority to own
its properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted.
(b) The Back-up Servicer has the power and authority to execute
and deliver this Agreement, the Indenture and the Insurance Agreement
and to carry out its terms; and the execution, delivery, and performance
of this Agreement, the Indenture and the Insurance Agreement shall have
been duly authorized by the Back-up Servicer by all necessary corporate
action.
(c) This Agreement, the Indenture and the Insurance Agreement
shall constitute a legal, valid, and binding obligation of the Back-up
Servicer enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
or other similar laws affecting the enforcement of creditors' rights in
general and by general principles of equity, regardless of whether such
enforceability shall be considered in a proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this
Agreement, the Indenture and the Insurance Agreement and the fulfillment
of the terms thereof shall not conflict with, result in any breach of
any of the terms and provisions of, nor constitute (with or without
notice or lapse of time) a default under, the articles of incorporation
or by-laws of the Back-up Servicer, or any indenture, agreement, or
other instrument to which the Back-up Servicer is a party or by which it
shall be bound; 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; nor violate any law or any order, rule,
or regulation applicable to the Back-up Servicer of any court or of any
Federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Back-up
Servicer or its properties.
30
31
(e) There are no proceedings or investigations pending or, to
the Back-up Servicer's best knowledge, threatened before any court,
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Back-up Servicer or its
properties (i) asserting the invalidity of this Agreement, the Indenture
or the Insurance Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement, the Indenture or
the Insurance Agreement, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Back-up
Servicer of its obligations under, or the validity or enforceability of,
this Agreement, the Indenture or the Insurance Agreement.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, Back- up Servicer. Any Person (a) into which the Back-up
Servicer may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Back-up Servicer shall be a party, or (c) which may
succeed to the properties and assets of the Back-up Servicer substantially as a
whole, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Back-up Servicer hereunder, shall
be the successor to the Back- up Servicer under this Agreement without further
act on the part of any of the parties to this Agreement. In the event that the
resulting entity does not meet the eligibility requirements for the Indenture
Trustee set forth in the Indenture, the Back-up Servicer, upon the written
request of the Bond Insurer, shall resign from its obligations and duties under
this Agreement.
Section 7.03. Back-up Servicer Resignation. The Back-up Servicer shall
not resign from its obligations and duties under this Agreement or the Insurance
Agreement except (i) as provided in Section 7.02 above, or (ii) upon
determination that the performance of its duties shall no longer be permissible
under applicable law (any such determination permitting the resignation of the
Back-up Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee and the Bond Insurer).
Section 7.04. Oversight of Servicing. (a) Prior to each Payment Date,
the Back-up Servicer shall review the Monthly Servicer's Report related thereto
and shall determine the following:
(i) that such Monthly Servicer's Report is complete on its face;
and
(ii) that the amounts credited to and withdrawn from the
Collection Account, Advance Payment Account, and the Cash Collateral
Account, and the balance of such accounts, as set forth in the records
of the Indenture Trustee, are the same as the amount set forth in the
Monthly Servicer's Report.
31
32
(b) The Back-up Servicer shall, within 30 days of the receipt thereof,
load the computer disk or tape received from the Servicer pursuant to Section
4.01 hereof, make sure such computer disk or tape is in readable form and shall:
(i) calculate the Aggregate Implicit Principal Balance as of the
most recent Calculation Date;
(ii) calculate the Principal Distribution Amount for the most
recent Payment Date; and
(iii) calculate the Annualized Default Rate and the Delinquency
Rate for the related Due Period and compare such calculated amounts with
those set forth in the most recent Monthly Servicer's Report.
(iv) confirm that the information in the fields set forth on
Exhibit B is the same in the Monthly Servicer Report (to the extent
reported therein) as it is on the computer disk delivered to the Backup
Servicer pursuant to Section 4.01 hereof.
(c) In the event of any discrepancy between the information set forth in
subparagraphs (a) and (b) of this Section as calculated by the Servicer from
that determined or calculated by the Back-up Servicer, the Back-up Servicer
shall promptly notify the Servicer of such discrepancy. If within 30 days of
such notice being provided to the Servicer, the Back-up Servicer and the
Servicer are unable to resolve such discrepancy, the Back-up Servicer shall
promptly notify the Bond Insurer, the Rating Agencies and the Holders of the
Notes of such discrepancy.
(d) Based solely on the information included in the Lease Schedule
delivered on the related Delivery Date and the computer disks or tapes provided
pursuant to Section 4.01 hereof, the Back-up Servicer shall determine that any
Substitute Lease Contracts delivered under Section 3.10 satisfy the Substitution
Criterion.
(e) The Back-up Servicer will make a site visit to the offices of the
Servicer within 60 days of the end of each calendar year for the purpose of
reviewing the operations of the Servicer, commencing December 31, 1995. The
reasonable out-of-pocket costs and expenses of the Back- up Servicer incurred in
connection with this Agreement, including without limitation, the site visit
referred to in the preceding sentence will be reimbursed to the Back-up Servicer
by the Issuer or the Servicer.
32
33
(f) Other than as specifically set forth elsewhere in this Agreement,
the Back-up Servicer shall have no obligation to supervise, verify, monitor or
administer the performance of the Servicer and shall have no liability for any
action taken or omitted by the Servicer.
(g) The Back-up Servicer shall consult fully with the Servicer as may be
necessary from time to time to perform or carry out the Back-up Servicer's
obligations hereunder, including the obligation to succeed at any time to the
duties and obligations of the Servicer as servicer under Section 6.02 hereof.
Section 7.05. Additional Back-up Servicer Duties. In addition to its
other duties enumerated herein and in the Indenture, the Back-up Servicer shall
re-calculate the information set forth in each Funding Report within 10 Business
Days of each related Delivery Date to verify (i) that the condition set forth in
Section 4.01(c)(ix) of the Indenture has been satisfied, (ii) compliance with
the concentration limits set forth therein and (iii) that the Funding Report
reflects the interest rate reflected on the related Notes, and, with respect to
each Tranche of Floating Rate Notes, the Maximum Floating Rate as set forth in
the related Floating Rate Cap Agreement.
Section 7.06. Back-up Servicer Compensation. As compensation for the
performance of its obligations as Back-up Servicer under this Agreement the
Back-up Servicer shall be entitled to receive the Back-up Servicer Fee.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01. Termination of This Agreement. (a) Absent a termination
pursuant to Section 6.01 hereof, the respective duties and obligations of the
Servicer, the Issuer, the Back-up Servicer and the Indenture Trustee created by
this Agreement shall terminate upon the discharge of the Indenture in accordance
with its terms; and the respective duties and obligations of the Indenture
Trustee shall terminate with respect to the Indenture Trustee in the event the
Indenture Trustee resigns or is replaced under Section 7.09 of the Indenture;
provided, however, that no resignation or removal of the Indenture Trustee and
no appointment of a successor Indenture Trustee shall become effective until the
acceptance of appointment by the successor Indenture Trustee under Section 7.10
of the Indenture. Upon the termination of this Agreement pursuant to this
Section 8.01(a), the Servicer shall pay all monies with respect to the Lease
Receivables and Equipment held by the Servicer and to which the Servicer is not
entitled to the Issuer or upon the Issuer's order.
33
34
(b) This Agreement shall not be automatically terminated as a result of
an Event of Default under the Indenture or any action taken by the Indenture
Trustee thereafter with respect thereto, and any liquidation or preservation of
the Trust Estate by the Indenture Trustee thereafter shall be subject to the
rights of the Servicer to service the Lease Receivables and to collect servicing
compensation as provided hereunder.
Section 8.02. Amendments. (a) This Agreement may be amended from time to
time by the Issuer, the Servicer, the Back-up Servicer, and the Indenture
Trustee, with the consent of the Bond Insurer but without the consent of any of
the Noteholders, to cure any ambiguity, to correct or supplement any provisions
herein that may be inconsistent with any other provisions herein and therein, as
the case may be, or to add or amend any other provisions with respect to matters
or questions arising under this Agreement; provided, however, that such action
shall not, as evidenced by an opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
(b) This Agreement may also be amended from time to time by the Servicer
and the Back-up Servicer, with the consent of the Indenture Trustee, the Bond
Insurer and the Holders of not less than 50% of the aggregate principal amount
of Notes Outstanding, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, provided,
however, that no such amendment shall, without the consent of each Noteholder,
(i) alter the priorities with which any allocation of funds shall be made under
this Agreement; (ii) permit the creation of any lien on the Trust Estate (other
than the lien of the Indenture) or any portion thereof or deprive any such
Noteholder of the benefit of this Agreement with respect to the Trust Estate or
any portion thereof; or (iii) modify this Section 8.02 or Sections 5.02 or 5.04
hereof.
(c) Promptly after the execution of any amendment, the Servicer shall
send to the Indenture Trustee, the Bond Insurer, each Holder of the Notes and
each Rating Agency a conformed copy of each such amendment.
(d) It shall not be necessary, in any consent of Noteholders under this
Section 8.02, for the Noteholders to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consent and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such
reasonable regulations as the Indenture Trustee may prescribe.
(e) Any amendment or modification effected contrary to the provisions of
this Section 8.02 shall be void.
34
35
Section 8.03. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York without regard to
conflict of laws principles and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
Section 8.04. Notices. All demands, notices and communications hereunder
shall be in writing and shall be delivered via telecopy or overnight or
messenger delivery, or mailed by registered or certified United States mail,
postage prepaid, and addressed as follows:
(a) if to the Issuer, at 0000 00xx Xx. X., Xxxxxx, Xxxxxxxxxx
00000, Attention: President;
(b) if to the Servicer, at 0000 00xx Xx. X., Xxxxxx, Xxxxxxxxxx
00000, Attention: President;
(c) if to the Back-up Servicer, at 0xx Xxxxxx & Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Corporate Trust
Department;
(d) if to the Indenture Trustee at 0xx Xxxxxx & Xxxxxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Corporate Trust
Department;
(e) if to the Bond Insurer at 000 Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx
00000, Attention: Structured Surveillance to Insured Portfolio
Management-Structured Finance (IPM-SF);
(f) if to any Noteholder, at its address for notices specified
in the Note Register;
(g) if to the Rating Agencies, at Standard & Poors, 00 Xxxxxxxx,
Xxx Xxxx, XX 00000 and Xxxxx'x Investor Service, 00 Xxxxxx Xxxxxx, Xxx
Xxxx, XX 00000, Attention: ABS Surveillance Group.
Any of the Persons in subclauses (a) through (d) and (f) above may
change the address for notices hereunder by giving notice of such change to
other Persons. Any change of address shown on the Note Register shall, after the
date of such change, be effective to change the address for such Noteholder
hereunder.
All notices and demands shall be deemed to have been given either at the
time of the delivery thereof to any officer of the Person entitled to receive
such notices and demands at the
35
36
address of such Person for notices hereunder, or on the third day after the
mailing thereof to such address, as the case may be.
Section 8.05. Severability of Provisions. If one or more of the
provisions of this Agreement shall be for any reason whatever held invalid, such
provisions shall be deemed severable from the remaining covenants and provisions
of this Agreement, and shall in no way affect the validity or enforceability of
such remaining provisions, the rights of any parties hereto, or the rights of
the Indenture Trustee, the Bond Insurer or any Noteholder. To the extent
permitted by law, the parties hereto waive any provision of law which renders
any provision of this Agreement prohibited or unenforceable in any respect.
Section 8.06. Binding Effect. All provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto, and all such provisions shall inure to the benefit of the
Noteholders. This Agreement may not be modified except by a writing signed by
all parties hereto.
Section 8.07. Article Headings and Captions. The article headings and
captions in this Agreement are for convenience of reference only, and shall not
limit or otherwise affect the meaning hereof.
Section 8.08. Legal Holidays. In the case where the date on which any
action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment need
not be made on such date, but may be made on the next succeeding Business Day.
Section 8.09. Assignment for Security for the Notes. The Servicer and
the Back-up Servicer understand that the Issuer will assign to and grant to the
Indenture Trustee a security interest in its right, title and interest to this
Agreement. The Servicer and the Back-up Servicer consent to such assignment and
grant and further agree that all representations, warranties, covenants and
agreements of the Servicer and the Back-up Servicer made herein shall also be
for the benefit of and inure to the Indenture Trustee and all Holders from time
to time of the Notes.
Section 8.10. No Servicing Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 5.02 and 5.04 hereof,
this Agreement may not be assigned by the Issuer or the Servicer (except with
respect to the appointment of a subservicer) without the prior written consent
of the Bond Insurer [the Indenture Trustee, the Back-up Servicer] and the
Holders of Notes representing not less than 50% of aggregate principal amount of
the Notes Outstanding.
36
37
Section 8.11. Bond Insurer Default. If a Bond Insurer Default occurs,
the Bond Insurer's right to consent hereunder and to direct the Indenture
Trustee shall be voided and, in such event, in all provisions of this Agreement
wherein the Bond Insurer's consent or direction is required or permitted, the
consent or direction of the Holders of Notes representing more that 50% of
aggregate principal amount of the Notes Outstanding shall be required or
permitted.
Section 8.12. Counterparts. This Servicing Agreement may be executed in
one or more counterparts, all of which together shall constitute one original
document.
Section 8.13. Third Party Beneficiary. The Bond Insurer is an express
third party beneficiary to this Agreement.
37
38
IN WITNESS WHEREOF, the Issuer, the Servicer, the Back-up Servicer and
the Indenture Trustee have caused this Servicing Agreement to be duly executed
by their respective officers thereunto duly authorized as of the date and year
first above written.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Indenture Trustee
By: /s/ XXX XXXXXXXX
----------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, Back-up Servicer
By: /s/ XXX XXXXXXXX
----------------
Name:
Title:
T & W FUNDING COMPANY IV, L.L.C.,
Issuer
By: /s/ XXXXXXX X. PRICE
--------------------
Name:
Title:
T & W LEASING, INC., Servicer
By: /s/ XXXXXXX X. PRICE
--------------------
Name:
Title:
38
39
EXHIBIT A
T & W LEASING, INC.
MONTHLY SERVICER REPORT
To: Norwest Bank Minnesota, National Association,
as Indenture Trustee and Back-up Servicer
MBIA Insurance Corporation,
as the Bond Insurer
Dear Sirs:
In accordance with Section 4.01 of the Servicing Agreement, dated as of July 1,
1995 (the "SV"), by and among T & W Leasing, Inc. as Servicer, Norwest Bank
Minnesota, National Association, as Indenture Trustee and Back-up Servicer, and
T & W Funding Company IV, L.L.C., as Issuer, this letter constitutes the Monthly
Servicer's Report for the Payment Date occurring on ______________. Unless
otherwise expressly noted, all data contained herein has been calculated as of
the related Calculation Date and with respect to the related Due Period.
Reference is also made to the Indenture, dated as of July 1, 1995, by and among
the Issuer, the Servicer, the Indenture Trustee and Back-Up Servicer (the "IN").
39
40
DEPOSITS INTO COLLECTION ACCOUNT
Deposits by or on behalf of the Servicer:
Scheduled and Overdue Payments Received
under the Lease Contracts directly by the Servicer $___________
Prepayments $___________
Residual Proceeds $___________
Recoveries $___________
Purchase Price received $___________
Guaranty Amounts $___________
Insurance Proceeds $___________
Servicer Advances $___________
Other amounts received by Servicer $___________
Total $___________
Transfers made by Trustee to the Collection Account
Transfer from Advance Payment Account $___________
(per 3.03(c)(ii) of SV)
Advance Payment Account Investment Earnings $___________
(per 3.03(c)(i) of SV)
Transfer from Cash Collateral Account $___________
(per 12.03(d)(i) and (d)(iii) of IN)
Collection Account Investment Earnings $___________
Total $___________
Amounts from other sources (e.g., Issuer reimbursement of
losses on eligible investments) $___________
Total deposited into the Collection Account (other than payments
from the Bond Insurer) $___________
40
41
DISBURSEMENTS FROM COLLECTION ACCOUNT:
Prior to Payment of Principal and Interest due
Servicer Fee $___________
Reinvestment Income (Collection Account and Advance
Payment Account) to Servicer $___________
Reimburse Servicer and Back-up Servicer pursuant to
Section 3.09 of SV (for costs assoc with Defaulted Leases) $___________
Pay Servicer any tax amounts deposited in
Collection Account pursuant to Section 3.07 of SV $___________
Un-reimbursed Servicer Advances now collected $___________
Non-recoverable Servicer Advances $___________
Breakage Costs for voluntarily terminated leases payable from the Collection $___________
Account
Trustee Fee $___________
Backup Servicer Fee $___________
Bond Insurer Premium $___________
Trustee and Back-up Servicer expenses $___________
Total $___________
TOTAL BALANCE AVAILABLE FOR NOTEHOLDER PAYMENTS $___________
Disbursements to Noteholder
Interest Due (current and overdue) $___________
Principal so that each Tranche is no greater than its respective IPB $___________
Principal Distribution Amount $___________
Portion covered by Bond Insurance Policy, (for every Payment
Date before Stated Maturity Date, only Interest due and amount by which unpaid
principal amount of Notes Outstanding is greater than the Aggregate Implicit
Principal Balance of Lease Contracts; for Stated Maturity Date, Interest due
plus outstanding Note Amount) $___________
Amounts received under the Bond Insurance Policy $___________
(Article 8 of IN)
TOTAL BALANCE AVAILABLE FOR OTHER PAYMENTS $___________
41
42
Other Disbursements
Unpaid Bond Insurer amounts, if any $___________
Deposit to the Cash Collateral Account $___________
to its Cash Collateral Account Required Balance (see below)
Additional Servicer Fee, if any $___________
Successor Servicer, Bond Insurer and Trustee Transition Costs
specified in 12.02(d)(xii) of IN $___________
Note Principal, if a Trigger Event has occurred $___________
(per 12.02(d)(xiii) of IN)
To the Servicer amounts specified in 12.02(d)(xiv) of IN $___________
To the Servicer any un-reimbursed Servicer Advances $___________
To Bond Insurer, amounts specified in the Insurance Agreement $___________
To Trustee and Back-Up Servicer, amounts specified in $___________
12.02(d)(xvi) of IN $___________
To the Noteholders, unpaid Breakage Costs $___________
To the Issuer, any excess amount remaining
in the Collection Account $___________
Total deposited into the Collection Account,
including payments from Bond Insurer $___________
Total disbursed from Collection Account $___________
ENDING BALANCE IN THE COLLECTION ACCOUNT $___________
SERVICER ADVANCES
Amount of Scheduled Payments not received (includes both Scheduled Payments on
Delinquent Leases as well as leases which have become Defaulted Leases in the
current Monthly
Period) $__________
Cumulative un-reimbursed Servicer Advances as of the previous
Servicer Remittance Date $__________
Plus Servicer Advances for the current Monthly Period $__________
Less Aggregate amount of Servicer Advance reimbursements
for the current Monthly Period $__________
Cumulative un-reimbursed Servicer Advances $__________
42
43
CASH COLLATERAL ACCOUNT
Beginning Balance $__________
Less amount transferred to Collection Account $__________
Plus amount transferred from Collection Account $__________
Investment earnings on Cash Collateral Account $__________
Less amounts in excess of Cash Collateral Account
Required Balance transferred to Issuer pursuant
to Section 12.03(d)(ii) of IN $__________
Ending Balance $__________
Percentage of the aggregate Note Principal Balance __________%
Cash Collateral Account Factor [ ]
Cash Collateral Account Required Balance:
Product of (a) Required Collateralization
Amount (see below) -(Implicit Principal Balance
-ending Note balance)) and (b) Cash Collateral
Account Factor or zero if a Trigger Event has occurred $__________
ADVANCE PAYMENT ACCOUNT
Beginning Balance $__________
Plus amount received during the Monthly Period
and Remitted by Servicer $__________
Plus Investment Earnings on Advance Payment Account $__________
Less amount transferred by Trustee to Collection Account $__________
Ending Balance $__________
43
44
IMPLICIT PRINCIPAL BALANCE DECREASE
IMPLICIT
PRINCIPAL
BALANCE # of Contracts
Beginning Aggregate Implicit Principal Balance $_______________ _____
Less Amortization of Scheduled Payments $_______________ _____
Less Unamortized Implicit Principal balance of:
Defaulted Contracts $_______________ _____
Matured Contracts $_______________ _____
Casualty Contracts (to extent
of Insurance Proceeds) $_______________ _____
Plus IPB of Substitute Contracts transferred
into the Trust $_______________ _____
Less IPB of Substituted Contracts transferred
out of the Trust $_______________ _____
Less IPB of Contracts repurchased by the
Seller or Transferor or purchased by the
Servicer during the current Due Period $_______________ _____
Other $_______________ _____
Aggregate Implicit Principal Balance Decrease $_______________ _____
Ending Aggregate Implicit Principal Balance $_______________ _____
NOTE INFORMATION
Initial Note Balance $___________
Less Principal Payment $___________
Ending Note Balance $___________
TRANCHE #1 Xxxxxxx #0 Xxxxxxx #0
---------- ---------- ----------
Ending Tranche Aggregate Implicit Principal
Balance: $__________ $__________ $__________
Outstanding Tranche Principal Amount: $__________ $__________ $__________
Fixed Rate or Floating Rate: $__________ $__________ $__________
44
45
Interest Rate for Fixed Rate Notes or Maximum
Floating Rate if Floating Rate Notes: $__________ $__________ $__________
45
46
REQUIRED COLLATERALIZATION AMOUNT
Collateralization Percentage [ ]%
A) Collateralization Percentage multiplied by
the Aggregate Implicit Principal Balance $___________
B) Implicit Principal Balance of the
3 largest Customers $___________
C) 4.0% of the Initial Aggregate Implicit Principal
Balance for all the Tranches combined $___________
Required Collateralization Amount equals the
greater of A), B) or C) $___________
Actual overcollateralization amount:
(Implicit Principal Balance plus Cash Collateral
Account balance) minus the Outstanding Note Amount $___________
TRIGGER EVENT CALCULATIONS:
Calculate Annualized Default Rate:
# of days delinquent to declare Defaulted Lease: 180
Implicit Principal Balance of Defaulted Lease Contracts during
current Due Period (including repurchased and Substitute Contracts) $___________
Less Recoveries received during the current Due Period $___________
Less Residuals $___________
Total $___________
Current Month Annualized Default Rate ____%
Detail on Defaulted Contracts (excluding Repurchased or Substituted Contracts):
IMPLICIT
PRINCIPAL
BALANCE Number
--------- ------
Servicer did not make Advance $______________ _______
Prior Advance Deemed Unrecoverable $______________ _______
180 days delinquent $______________ _______
Total Defaulted Contracts $______________ _______
46
47
Calculate Delinquency Rate:
% OF AGGREGATE
IMPLICIT Implicit
PRINCIPAL Principal Number of
BALANCE Balance Contracts
------- -------------- ---------
30-59 days delinquent $__________ _______% _________
60-89 days delinquent $__________ _______% _________
90-119 days delinquent $__________ _______% _________
120-149 days delinquent $__________ _______% _________
150-179 days delinquent $__________ _______% _________
Total $__________
Current Month Delinquency Rate _______%
Check Default and Delinquency Triggers:
Monthly
Sum of Period
Current & Prior to
Immediately Immediately Immediately
AVERAGE Preceding Current Preceding Preceding
PAST 3 MONTHS Monthly Pd. Monthly Pd. Monthly Pd. Monthly Pd.
------------- ----------- ----------- ----------- -----------
Annualized
Default Rate _______% _______% _______% _______% _______%
Delinquency
Rate _______% _______% _______% _______% _______%
Applicable Maximum Default Rate ___3___%
Applicable Maximum Delinquency Rate ___7___%
Net Worth:
Net Worth Minimum $5,000,000
47
48
Funding Period Net Worth Minimum $6,500,000
T & W Leasing, Inc.'s Consolidated Net Worth $_____________
(as of ___________, 199__, most recent quarterly audited or unaudited financial
statement)
48
49
DETAIL ON SUBSTITUTIONS AND PURCHASES:
Cumulative
IMPLICIT Implicit
PRINCIPAL Principal
BALANCE Balance
--------- ----------
Leases Terminated or
Prepaid and Substituted
per 4.03(d) of IN $__________ $__________ ([LESS THAN] $7,000,000)
Delinquent Lease Contracts,
Substituted or Purchased
per 4.03(d) of IN $__________ $__________ ([LESS THAN] $9,450,000)
Defaulted Lease Contracts,
Substituted or Purchased
per 4.03(d) of IN $__________ $__________ ([LESS THAN] $2,275,000)
TRANSITION COSTS:
Cumulative Transition Costs Paid to date
Pursuant to 12.02(d)(xii) of IN $__________
EXPLANATORY NOTES:______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Contact:________________________________________________________________________
Phone:__________________________________________________________________________
The undersigned officer of the Servicer hereby certifies that the
information contained in this Monthly Servicer Report is true and accurate in
all respects.
T & W LEASING, INC.
Servicer
By:
Name: Xxxxxxx X. Price
Title: President
49
50
EXHIBIT B
SERVICER DISK INFORMATION
FIELDS:
1. Xxxx #
0. lesse
3. eqcat
4. state
5. siccode
6. Yrs in Bus
7. Start Dt
8. FinalDt
9. Nxt date
10. basepmt
11. rec bal
12. cur recv
13. resid
14. securityop
15. lease term
16. pay term
17. status
18. zip code
19. Mos Del
