Exhibit 4.2
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CONTRIBUTION AND SERVICING AGREEMENT
AMONG
GREEN TREE LEASE FINANCE 1998-1, LLC
ISSUER
GREEN TREE LEASE FINANCE II, INC.
CONTRIBUTOR
GREEN TREE VENDOR SERVICES CORPORATION
IN ITS INDIVIDUAL CAPACITY AND AS SERVICER
U.S. BANK TRUST NATIONAL ASSOCIATION
TRUSTEE
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DATED AS OF DECEMBER 1, 1998
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TABLE OF CONTENTS
Page
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INTRODUCTION................................................................. 1
ARTICLE I DEFINITIONS ..................................................... 1
SECTION 1.1. Definitions .............................................. 1
SECTION 1.2. Usage of Terms ........................................... 9
SECTION 1.3. Calculations ............................................. 9
SECTION 1.4. Section References ....................................... 9
SECTION 1.5. No Recourse .............................................. 9
ARTICLE II CONVEYANCE OF LEASES ........................................... 9
SECTION 2.1. Conveyance of Leases and Related Assets .................. 9
SECTION 2.2. Custody of Lease Files ................................... 11
SECTION 2.3. Further Assurances ....................................... 12
SECTION 2.4. Representations and Warranties of Contributor ............ 12
SECTION 2.5. Nonpetition Covenant ..................................... 15
SECTION 2.6. Repurchase of Leases Upon Breach of Representations and
Warranties ............................................... 15
ARTICLE III ADMINISTRATION AND SERVICING OF LEASES ......................... 17
SECTION 3.1. Duties of the Servicer ................................... 17
SECTION 3.2. Collection of Lease Payments; Modifications of Leases .... 18
SECTION 3.3. Realization Upon Leases .................................. 20
SECTION 3.4. Insurance, Maintenance and Taxes ......................... 21
SECTION 3.5. Maintenance of Security Interests in Equipment ........... 24
SECTION 3.6. Covenants, Representations, and Warranties of Servicer ... 24
SECTION 3.7. Sub-Servicers ............................................ 26
SECTION 3.8. Total Servicing Fee; Payment of Expenses by Servicer ..... 26
SECTION 3.9. Servicer's Certificate ................................... 27
SECTION 3.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event ........................................ 27
SECTION 3.11. Annual Independent Accountants' Report ................... 28
SECTION 3.12. Access to Certain Documentation and Information
Regarding Leases ......................................... 29
SECTION 3.13. Certain Duties of the Servicer ........................... 29
SECTION 3.14. Duties of the Servicer under the Indenture ............... 29
SECTION 3.15. Fidelity Bond ............................................ 30
ARTICLE IV COLLECTIONS AND DEPOSITS ....................................... 31
SECTION 4.1. Initial Deposit .......................................... 31
SECTION 4.2. Collections .............................................. 31
SECTION 4.3. Application of Collections ............................... 32
SECTION 4.4. Net Deposits ............................................. 33
SECTION 4.5. Servicer Advances ........................................ 33
ARTICLE V TERMINATION .................................................... 34
SECTION 5.1. Optional Purchase of All Leases; Liquidation of Trust
Assets ................................................... 34
ARTICLE VI THE CONTRIBUTOR ................................................ 35
SECTION 6.1. Liability of Contributor ................................. 35
SECTION 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Contributor; Amendment of Certificate of
Incorporation ............................................ 35
SECTION 6.3. Limitation on Liability of Contributor and Others ........ 36
SECTION 6.4. Contributor May Own Notes ................................ 36
SECTION 6.5. Covenants of the Contributor.............................. 37
ARTICLE VII THE SERVICER ................................................... 37
SECTION 7.1. Liability of Servicer; Indemnities ....................... 37
SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer ............................. 38
SECTION 7.3. Limitation on Liability of Servicer and Others ........... 38
SECTION 7.4. Servicer Not to Resign ................................... 39
SECTION 7.5. Corporate Existence ...................................... 39
ARTICLE VIII SERVICER TERMINATION EVENTS .................................... 40
SECTION 8.1. Servicer Termination Event ............................... 40
SECTION 8.2. Consequences of a Servicer Termination Event ............. 41
SECTION 8.3. Trustee to Act; Appointment of Successor ................. 42
SECTION 8.4. Notification to Noteholders .............................. 42
SECTION 8.5. Waiver of Past Defaults .................................. 42
ARTICLE IX SUBSTITUTION OF LEASES ......................................... 43
SECTION 9.1. Substitution ............................................. 43
SECTION 9.2. Procedure ................................................ 44
SECTION 9.3. Objection and Repurchase ................................. 45
SECTION 9.4. Vendor Services' and Servicer's Subsequent
Obligations .............................................. 45
ARTICLE X MISCELLANEOUS PROVISIONS ....................................... 46
SECTION 10.1. Amendment ................................................ 46
SECTION 10.2. Protection of Title to Trust Assets ...................... 47
SECTION 10.3. Governing Law ............................................ 49
SECTION 10.4. Severability of Provisions ............................... 49
SECTION 10.5. Assignment ............................................... 49
SECTION 10.6. Third-Party Beneficiaries ................................ 49
SECTION 10.7. Counterparts ............................................. 49
SECTION 10.8. Intention of Parties ..................................... 50
SECTION 10.9. Notices .................................................. 50
SECTION 10.10. Income Tax Characterization .............................. 50
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EXHIBITS
Exhibit A -- Schedule of Leases and Equipment
Exhibit B -- Form of Servicer's Certificate
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THIS CONTRIBUTION AND SERVICING AGREEMENT, dated as of
December 1, 1998, is made among GREEN TREE LEASE FINANCE 1998-1, LLC, a Delaware
limited liability company (the "Issuer"), GREEN TREE LEASE FINANCE II, INC., a
Minnesota corporation, as Contributor (the "Contributor"), GREEN TREE VENDOR
SERVICES CORPORATION, a Delaware corporation, in its individual capacity and as
Servicer (in its individual capacity, "Vendor Services"; in its capacity as
Servicer, the "Servicer"), and U.S. Bank Trust National Association, a national
banking association organized and existing under the laws of the United States
of America, as trustee under the Indenture (the "Trustee").
In consideration of the mutual agreements herein contained,
and of other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. All terms defined in the Indenture
(as defined below) shall have the same meaning in this Agreement. Whenever
capitalized and used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
Accountants' Report: The report of a firm of nationally
recognized independent accountants described in Section 3.11.
Accounting Date: With respect to a Payment Date, the last day
of the preceding calendar month.
Adjusted Lease: A Lease that has had one or more terms
adjusted or modified by the Servicer, other than modifications permitted by
Section 3.2.
Administrative Fee: With respect to any Collection Period, all
administrative fees, expenses and charges collected in respect of the Leases
during such Collection Period, including late fees, late payment interest,
documentation fees, insurance administration charges and any Extension Fees.
Affiliate: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Agreement or "this Agreement": This Contribution and Servicing
Agreement, all amendments and supplements thereto and all exhibits and schedules
to any of the foregoing.
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Book Value: With respect to any Equipment, the value of such
Equipment as shown on the accounting books and records of Vendor Services as of
the Cut-Off Date. The Book Value for each item of Equipment shall be set forth
on Exhibit A hereto (as the same may be revised from time to time).
Business Day: Any day (other than a Saturday, Sunday or legal
holiday) on which commercial banking institutions in St. ▇▇▇▇, Minnesota, or any
other location of any successor Servicer or successor Trustee, are open for
regular business.
Collection Account: The account designated as such in, and
established and maintained pursuant to, Section 8.02 of the Indenture.
Collection Period: With respect to a Payment Date, the
calendar month preceding the month in which such Payment Date occurs (such
calendar month being referred to as the "related" Collection Period with respect
to such Payment Date). With respect to an Accounting Date, the Collection Period
in which such Accounting Date occurs is referred to herein as the "related"
Collection Period with respect to such Accounting Date.
Collection Records: All manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Leases.
Contributor: Green Tree Lease Finance II, Inc., a Minnesota
corporation, or its successor in interest pursuant to Section 6.2.
Cut-Off Date: The Initial Cut-Off Date or, in the case of a
Substitute Lease, the first day of the month of transfer of such Substitute
Lease to the Issuer.
Deposit Date: With respect to any Collection Period, the
Business Day immediately preceding the related Determination Date.
Determination Date: With respect to any Collection Period, the
first Business Day immediately preceding the related Payment Date.
Eligible Lease: A Lease satisfying the Representations and
Warranties.
Eligible Servicer: Vendor Services, the Trustee or another
Person which at the time of its appointment as Servicer (i) is servicing a
portfolio of equipment lease contracts, installment sale contracts, promissory
notes, loan and security agreements and/or other similar types of receivables
comparable to the Leases, (ii) is legally qualified and has the capacity to
service the Leases, (iii) has demonstrated the ability professionally and
competently to service a portfolio of equipment lease contracts, installment
sale contracts, promissory notes, loan and security agreements and other similar
types of receivables comparable to the Leases with reasonable skill and care,
(iv) has available software which is adequate to perform its duties and
responsibilities under this Agreement, and (v) satisfies the Rating Agency
Condition.
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Equipment: The Equipment subject to a Lease, as more
particularly described on Exhibit A hereto (as the same may be revised from time
to time).
Extension Fees: Any fee received by the Servicer in
consideration for the granting of an extension on the payment of any Scheduled
Payment due under a Lease.
Indenture: The Indenture, dated as of December 1, 1998,
between the Issuer and the Trustee, as the same may be amended and supplemented
from time to time.
Independent Accountants: As defined in Section 3.11(a).
Initial Cut-Off Date: December 1, 1998.
Initial Pool Principal Balance: $___________________.
Insurance, Maintenance and Tax Accounts: The accounts which
are established and maintained pursuant to Section 3.4(a).
Insurance Policy: Any insurance policy benefiting the lessor
or secured party under a Lease providing loss or physical damage, theft or
similar coverage with respect to the Equipment.
Issuer: Green Tree Lease Finance 1998-1, LLC.
Lease File: The documents, electronic entries, instruments and
writings listed in Section 2.2 pertaining to a particular Lease.
Lease Pool Principal Balance: With respect to any Payment
Date, the sum of the Principal Balances (computed as of the related Accounting
Date) for all Leases.
Leases: The lease contracts listed on Exhibit A hereto
(excluding any such lease contract which has become a Purchased Lease but
including all Substitute Leases) and all rights and obligations under such
contracts, including, without limitation, all monies at any time paid or payable
thereon or in respect thereof from and after the Cut-Off Date (whether in the
form of (i) Scheduled Payments (including those Scheduled Payments due prior to,
but not received as of, the Cut-Off Date, but excluding those Scheduled Payments
due on or after, but received prior to, the Cut-Off Date), (ii) Prepayments,
(iii) Liquidation Proceeds (including all net proceeds from the disposition of
the related Equipment), (iv) Extension Fees, (v) payments to be applied by the
Servicer to the payment of insurance charges, maintenance, taxes or other
similar obligations, (vi) payments to be retained by the Servicer in payment of
Administrative Fees, or otherwise), and all rights of the lessor in the related
Equipment (other than any ownership interest of the lessor in such Equipment),
Insurance Policies and any other security for the payment of amounts due under
such contracts.
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Lien: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of law.
Liquidated Lease: With respect to any Collection Period, (i) a
Lease which, during such Collection Period, was charged off as uncollectible by
the Servicer in accordance with its credit and collection policies and
procedures (which shall be no later than the date as of which the Servicer has
repossessed and disposed of the related Equipment and otherwise collected all
proceeds (including any proceeds of insurance to be applied as described in
Section 3.4(c)(ii)) which, in the Servicer's reasonable judgment, can be
collected under such Lease) following a default thereunder or upon damage to or
destruction of such Equipment (if such Equipment is not to be replaced or
repaired in accordance with Section 3.4(c)(i)), or (ii) a Lease as to which,
during such Collection Period, 10% or more of a Scheduled Payment shall have
become 180 days delinquent.
Liquidation Proceeds: All amounts received by the Servicer (i)
in connection with the liquidation of any Lease and disposition of the related
Equipment or (ii) as insurance proceeds with respect to any damaged or destroyed
Equipment to be applied as described in Section 3.4(c)(ii), in each case net of
(a) reasonable out-of-pocket expenses incurred by or on behalf of the Servicer
in connection with the collection of such Lease and the maintenance,
repossession, repair, storage and disposition of the related Equipment
(including taxes and insurance charges, to the extent in excess of amounts
available therefor and relating to such Lease in the Insurance, Maintenance and
Tax Accounts, as well as attorneys' fees) and (b) amounts that are required to
be refunded to the Obligor on such Lease; provided, however, that the
Liquidation Proceeds with respect to any Lease and disposition of the related
Equipment shall in no event be less than zero.
Monthly Records: All records and data maintained by the
Servicer with respect to the Leases in accordance with its customary standards,
policies and procedures.
Note Majority: Holders of Notes representing a majority of the
Principal Balance of each Class of the Notes then Outstanding.
Obligor: The lessee, borrower, purchaser or any other Person
or Persons who are obligated to make payments under a Lease.
Opinion of Counsel: A written opinion of counsel acceptable in
form and substance and from counsel acceptable to the Issuer and, if such
opinion or a copy thereof is required to be delivered to the Trustee, to the
Trustee.
Original Term: The term of a Lease as of the Cut-Off Date
(which shall include any renewals or extensions of the original term thereof
prior to the Cut-Off Date), as such term may be extended in accordance with
Section 3.2(c) or as a result of a bankruptcy proceeding with respect to the
related Obligor, but excluding, in the case of any Lease, any other extensions
or renewals thereof.
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Payment Date: The twentieth day of each calendar month (or, if
such twentieth day is not a Business Day, the next succeeding Business Day),
commencing February 20, 1999.
Person: Any legal person, including any individual,
corporation, partnership, joint venture, estate, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof, or any other entity.
Pledged Revenues: (i) All Scheduled Payments on the Leases
received on or after the Cut-Off Date (including all Scheduled Payments due
prior to, but not received as of, the CutOff Date, but excluding any Scheduled
Payments due on or after, but received prior to, the CutOff Date); (ii) any
Prepayments received on the Leases on or after the Cut-Off Date; (iii) the
Purchase Amount of any Leases repurchased by Vendor Services (to the extent
Vendor Services has not delivered a Substitute Lease) in accordance with Section
2.6 (other than any portion thereof attributable to the Book Value of the
Equipment); (iv) the amount paid by the Contributor to repurchase the Leases
pursuant to Section 5.1; (v) Liquidation Proceeds received in respect of any
Leases and the disposition of the related Equipment on or after the Cut-Off
Date; and (vi) any earnings on the investment of amounts credited to the
Collection Account.
Predecessor Lease: As defined in Section 9.1.
Prepayment: With respect to any Collection Period for any
Lease, a voluntary prepayment during such Collection Period of amounts due and
owing under such Lease.
Principal Balance: As of any Accounting Date,
(1) in the case of any Lease that does not by its terms permit
prepayment or early termination, the present value of the unpaid
Scheduled Payments due on such Lease after such last day of the
Collection Period (excluding all Scheduled Payments due on or prior to,
but not received as of, such last day, as well as any Scheduled
Payments due after such last day and received on or prior thereto),
after giving effect to any Prepayments received on or prior to such
last day, discounted monthly (assuming, for purposes of such
calculation, that each Scheduled Payment is due on the last day of the
applicable Collection Period) at the rate of ___% per annum;
(2) in the case of any Lease that permits prepayment or early
termination only upon payment of a premium that is at least equal to
the present value (calculated in the manner described in clause (1)
above) of the unpaid Scheduled Payments due on such Lease after the
date of such prepayment, the amount specified in clause (1) above; and
(3) in the case of any Lease that permits prepayment or early
termination without payment of a premium at least equal to the amount
specified in clause (2) above, the lesser of (a) the outstanding
principal balance of such Lease after giving effect to Scheduled
Payments due on or prior to such last day of the Collection Period,
whether or not received, as well as any Prepayments, and any Scheduled
Payments due after such last day, received on or prior to such last
day, and (b) the amount specified in clause (1) above;
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provided that the Principal Balance of any Lease which became a Liquidated Lease
during the related Collection Period or was required to be repurchased by Vendor
Services as of the last day of the related Collection Period in accordance with
Section 2.6, will be deemed to be zero on and after the last day of such
Collection Period.
Purchase Amount: With respect to a Lease and related Equipment
required to be repurchased by Vendor Services in accordance with Section 2.6,
the sum of (i) the Required Payoff Amount for such Lease as of the Accounting
Date on which such obligation to so repurchase arises, plus (ii) the Book Value
(if any) of the related Equipment.
Purchased Lease: As of any Deposit Date, any Lease which
Vendor Services has repurchased (or substituted with a Substitute Lease
therefor) as of the related Accounting Date, as required by Section 2.6.
Related Assets: The assets, in addition to the Leases,
transferred by the Contributor to the Issuer pursuant to Section 2.1(a).
Related Documents: The Indenture, the Underwriting Agreement
and related Terms Agreement with the Underwriters of the Notes, the Notes and
the Transfer Agreement. The Related Documents executed by any party are referred
to herein as "such party's Related Documents," "its Related Documents" or by a
similar expression.
Representations and Warranties: As defined in Section 2.6.
Required Payoff Amount: With respect to any Collection Period
for any Lease, the sum of (i) the Scheduled Payment due in such Collection
Period, together with any Scheduled Payments due in prior Collection Periods but
not yet received, plus (ii) the Principal Balance of such Lease (after taking
into account the Scheduled Payment due in such Collection Period, whether or not
received).
Reserve Account: The account designated as such in, and
established and maintained pursuant to, Section 8.07 of the Indenture.
Residual Account: The account designated as such in, and
established and maintained pursuant to, Section 8.06 of the Indenture.
Residual Realizations: Cash flows realized from the sale or
re-lease of the Equipment following the scheduled expiration dates or voluntary
early termination of the Leases, other than Equipment subject to Liquidated
Leases.
Responsible Officer: When used with respect to the Servicer,
the Contributor or any other Person, the President, any Vice-President or
Assistant Vice-President or the Controller of such Person, or any other officer
or employee having similar functions.
Schedule of Leases: Collectively, the schedules of Leases
(which shall be made available to the parties hereto on a computer disk or other
data storage medium) attached hereto
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as (or described in) Exhibit A, as such schedules may be revised from time to
time in accordance with Sections 2.6 and 9.2(a).
Scheduled Payment: With respect to any Collection Period for
any Lease during the Original Term of such Lease, the required payment or
payments due under such Lease in such Collection Period other than those
portions of such payments which, (i) under such Lease, are to be applied by the
Servicer to the payment of insurance charges, maintenance, taxes and other
similar obligations, or (ii) retained by the Servicer in payment of
Administrative Fees or are late payments as to which Servicer Advances were made
on a Payment Date.
Servicer: Green Tree Vendor Services Corporation, its
successor in interest pursuant to Section 8.2 or, after any termination of the
Servicer upon a Servicer Termination Event, any successor Servicer.
Servicer Advance: As defined in Section 4.5.
Servicer Termination Event: An event described in Section 8.1.
Servicer's Certificate: With respect to each Determination
Date, a certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 3.9, substantially in the form attached hereto as
Exhibit B.
Servicing Account: The account designated as such in, and
established and maintained pursuant to, Section 8.05 of the Indenture.
Servicing Fee: With respect to any Collection Period, the fee
payable to the Servicer for services rendered during such Collection Period,
which shall be equal to one-twelfth of the Servicing Fee Rate multiplied by the
Lease Pool Principal Balance determined as of the last day of the second
preceding Collection Period (or, in the case of the Servicing Fee with respect
to the Collection Period commencing on the Initial Cut-Off Date, an amount equal
to the product of (i) the Servicing Fee Rate, (ii) the Initial Lease Pool
Principal Balance, and (iii) a fraction, the numerator of which is __ and the
denominator of which is 360.
Servicing Fee Rate: ______% per annum.
Sub-Servicer: The Person named as servicer or sub-servicer in
any agreement between the Servicer and such Person by which such Person is
contractually obligated to perform on the Servicer's behalf all or a part of the
servicing obligations described herein.
Substitute Lease: An Eligible Lease substituted by Vendor
Services for (a) a Liquidated Lease, (b) a Warranty Lease or (c) an Adjusted
Lease, in accordance with Section 9.2.
Total Servicing Fee: The sum of the Servicing Fee, the
Administrative Fees and any earnings on the investment of amounts in the
Servicing Account.
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Transfer Agreement: The Transfer Agreement, dated as of
December 1, 1998, among Vendor Services and the Contributor.
Trust Accounts: The Collection Account, the Servicing Account,
the Residual Account, the Reserve Account, the Insurance, Maintenance and Tax
Accounts and such other accounts as may be established in the name of the Issuer
or the Trustee pursuant to the Indenture or this Agreement.
Trustee: The Person acting as Trustee under the Indenture, its
successors in interest and any successor Trustee under the Indenture.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
Vendor Services: Green Tree Vendor Services Corporation, a
Delaware corporation.
Warranty Lease: A Lease subject to repurchase by Vendor
Services pursuant to Section 2.6.
SECTION 1.2. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
SECTION 1.3. Calculations. All calculations of the Principal
Balance of any Lease and of the amount of the Servicing Fee shall be made on the
basis of a 360-day year consisting of twelve 30-day months. All references to
the Principal Balance of a Lease as of any date shall refer to the close of
business on such date.
SECTION 1.4. Section References. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
SECTION 1.5. No Recourse. No recourse may be taken, directly
or indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder, officer
or director, as such, of the Contributor, Vendor Services, the Servicer or the
Trustee or of any predecessor or successor of the Contributor, Vendor Services,
the Servicer or the Trustee.
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ARTICLE II
CONVEYANCE OF LEASES
SECTION 2.1. Conveyance of Leases and Related Assets. (a)
Subject to the terms and conditions of this Agreement, the Contributor, pursuant
to the mutually agreed upon terms contained herein, hereby transfers, assigns,
and otherwise conveys to the Issuer, without recourse (but without limitation of
its obligations in this Agreement), as of the Closing Date, all of the right,
title and interest, including any security interest, whether now owned or
hereafter acquired, of the Contributor in and to the following:
(i) the Leases, including, without limitation, (A) all monies
at any time paid or payable thereon or in respect thereof from and
after the Initial Cut-Off Date or, in the case of Substitute Leases,
the applicable Cut-Off Date, in the form of (1) Scheduled Payments
(including those Scheduled Payments due prior to, but not received as
of, the Cut-Off Date, but excluding those Scheduled Payments due on or
after, but received prior to, the Cut-Off Date), (2) Prepayments, (3)
Liquidation Proceeds (including all net proceeds from the disposition
of the related Equipment), (4) Extension Fees, (5) payments to be
applied by the Servicer to the payment of insurance charges,
maintenance, taxes or other similar obligations, and (6) payments to be
retained by the Servicer in payment of Administrative Fees, (B) all
rights of the lessor or the secured party, as the case may be, in all
present or future leases and other contracts relating to the Equipment
and all revenues, payments, rights to payment, profits, accounts,
chattel paper, products and contract rights arising from or related to
such Equipment or any use thereof or from any such lease or other
contract, (C) all rights of the lessor or secured party, as the case
may be, in all Insurance Policies and any other security (other than
any ownership interest of the lessor in the Equipment) for the payment
of amounts due under the Leases (including all rights, if any, the
lessor or the secured party may have against vendors and other third
parties for payments of such amounts) and (D) all items contained in
the related Lease Files and any and all other documents that are kept
on file in accordance with Vendor Services's customary procedures
relating to the Leases;
(ii) all funds on deposit from time to time in the Trust
Accounts and all investments therein and proceeds thereof;
(iii) the Transfer Agreement;
(iv) the Residual Realizations; and
(v) any and all proceeds of the foregoing;
The foregoing does not constitute, nor is it intended to result in, the creation
or assumption by the Issuer, the Trustee or any Noteholder of any obligation of
the Contributor, the Servicer or any other Person in connection with the Leases
or the related Equipment or any agreement or instrument relating thereto,
including any obligation to the Obligors.
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(b) As security for the payment of amounts described in
Section 2.1(a)(i)(3) and 2.1(a)(iv), the Contributor hereby grants to the Issuer
a security interest in all of the right, title and interest, whether now owned
or hereafter acquired, of the Contributor in and to the Equipment and all
proceeds thereof.
(c) The execution and delivery of this Agreement shall
constitute an acknowledgment by each of the Contributor and the Issuer that they
intend that each assignment and transfer herein contemplated constitute an
assignment outright, and not for security, of the property described in Section
2.1(a), conveying good title thereto free and clear of any Liens, from the
Contributor to the Issuer, and that all such property shall not be a part of the
estate of the Contributor in the event of the bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, or the occurrence of another similar
event, of, or with respect to the Contributor. In the event that such conveyance
is determined to be made as security for a loan made by the Issuer or the
Noteholders to the Contributor, the Contributor hereby grants to the Issuer a
security interest in all of the Contributor's right, title and interest in and
to the property described in Section 2.1(a) to secure the loan determined to
have been made to the Contributor and the payment and performance of the other
obligations of the Contributor under this Agreement, and agrees that in such
event this Agreement shall constitute a security agreement under applicable law.
SECTION 2.2. Custody of Lease Files.
(a) The Issuer hereby appoints the Servicer, and the Servicer
hereby accepts such appointment, to act as the agent of the Issuer as custodian
of the following documents or instruments (with respect to each Lease), which
will be, as of the Closing Date (or, in the case of a Substitute Lease, as of
the date of substitution in accordance with Section 9.2), in the possession of
the Servicer or its agents:
(i) the fully executed original of the Lease (together with
any agreements modifying the Lease, including, without limitation, any
extension agreements);
(ii) all documents related to the Leases;
(iii) documents evidencing or related to any Insurance Policy,
or copies thereof; and
(iv) such documents, if any, that Vendor Services keeps on
file in accordance with its customary procedures indicating that the
Equipment is owned or leased by the Obligor and subject to the interest
of the lessor or secured party.
(b) The Servicer agrees to maintain the Lease Files at the
locations where they are currently maintained, or at such other locations as
shall from time to time be identified to the Trustee by written notice. The
Servicer may temporarily move individual Lease Files or any portion thereof
without notice as necessary to conduct collection and other servicing activities
in accordance with its customary practices and procedures.
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(c) As custodian, the Servicer shall have and perform the
following powers and duties:
(i) hold the Lease Files on behalf of the
Contributor, the Issuer, the Noteholders and the Trustee, maintain
accurate records pertaining to each Lease to enable it to comply with
the terms and conditions of this Agreement and the Related Documents,
maintain a current inventory thereof and certify to the Trustee
annually that it continues to maintain possession of such Lease Files;
(ii) implement written policies and procedures with
respect to persons authorized to have access to the Lease Files and the
receipting for Lease Files taken from their storage area by an employee
of the Servicer for purposes of servicing or any other purposes; and
(iii) attend to all details in connection with
maintaining custody of the Lease Files on behalf of the Contributor,
the Issuer, the Noteholders and the Trustee.
(d) In performing its duties under this Section, the Servicer
agrees to service the Leases in accordance with customary and usual procedures
of institutions which service equipment Leases, installment sale contracts,
promissory notes, loan and security agreements and other similar types of
receivables comparable to the Leases and, to the extent more exacting, the
degree of skill and attention that the Servicer exercises from time to time with
respect to all comparable such contracts that it services for itself or others.
The Servicer shall promptly report to the Trustee any failure by it to hold the
Lease Files as herein provided and shall promptly take appropriate action to
remedy any such failure. In acting as custodian of the Lease Files, the Servicer
agrees further not to assert any beneficial ownership interests in the Leases or
the Lease Files. The Servicer agrees to indemnify the Contributor, the Issuer,
the Noteholders and the Trustee for any and all liabilities, obligations,
losses, damages, payments, costs or expenses of any kind whatsoever which may be
imposed on, incurred or asserted against the Contributor, the Issuer, the
Noteholders or the Trustee as the result of any act or omission by the Servicer
relating to the maintenance and custody of the Lease Files; provided, however,
that the Servicer will not be liable for any portion of any such amount
resulting from the negligence or willful misconduct of the Contributor, the
Issuer, any Noteholder or the Trustee.
SECTION 2.3. Further Assurances. Following the Closing Date,
the Contributor shall, at the reasonable request of the Trustee or the Servicer,
and at the Contributor's expense, execute and deliver any further instruments of
transfer or other documents, and shall take all such other actions that may be
necessary, appropriate or desirable, to fully convey the Leases and the Related
Assets to the Issuer or otherwise to evidence, effectuate or implement the
transactions contemplated hereby. In addition, the Contributor, as agent for the
Issuer, shall defend the Leases and the Related Assets against any and all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to that of the Issuer.
SECTION 2.4. Representations and Warranties of Contributor. By
its execution of this Agreement, the Contributor makes the following
representations and warranties. Unless otherwise specified, such representations
and warranties speak as of the Closing Date.
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(a) Organization and Good Standing. The Contributor
has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Minnesota, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority
and legal right to acquire, own and transfer the Leases and the other
property transferred to the Issuer.
(b) Due Qualification. The Contributor is duly
qualified to do business as a foreign corporation in good standing, and
has obtained all necessary licenses and approvals, in all jurisdictions
where the failure to do so would materially and adversely affect the
performance of its obligations under this Agreement and the Related
Documents.
(c) Power and Authority. The Contributor has the
power and authority to execute and deliver this Agreement and the
Contributor's Related Documents and to carry out the terms hereof and
thereof; the Contributor has full power and authority to transfer and
assign the Trust Assets to be transferred and assigned to and deposited
with the Issuer by it and has duly authorized such transfer and
assignment to the Issuer by all necessary corporate action; and the
execution, delivery and performance of this Agreement and the
Contributor's Related Documents have been duly authorized by the
Contributor by all necessary corporate action.
(d) No Consent Required. No consent, license,
approval or authorization of, or registration or declaration with, any
Person or any governmental authority, bureau or agency is required in
connection with the execution, delivery or performance of this
Agreement and the Related Documents, except for such as have been
obtained, effected or made or as described in paragraph (n) below.
(e) Valid Transfer; Binding Obligations. This
Agreement effects, as of the Closing Date, a valid transfer and
assignment of the Leases and the other Trust Assets, enforceable
against the Contributor and creditors of and purchasers from the
Contributor; and this Agreement and the Contributor's Related
Documents, when duly executed and delivered, shall constitute legal,
valid and binding obligations of the Contributor enforceable in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
(f) No Violation. The execution and delivery of this
Agreement and the Related Documents, the consummation of the
transactions contemplated by this Agreement and the Related Documents
and the fulfillment of the terms of this Agreement and the Related
Documents shall not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without notice or lapse
of time, or both) a default under the articles of incorporation or
by-laws of the Contributor, or any indenture, agreement, mortgage, deed
of trust or other instrument to which the Contributor is a party
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or by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument,
other than this Agreement, or violate any law, order, rule or
regulation applicable to the Contributor of any court or of any federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Contributor or any of its
properties.
(g) No Proceedings. There are no proceedings or
investigations pending or, to the Contributor's knowledge, threatened
against the Contributor, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Contributor or its properties (A)
asserting the invalidity of this Agreement or any of the Related
Documents, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Related
Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Contributor of
its obligations under, or the validity or enforceability of, this
Agreement or any of the Related Documents, or (D) seeking to adversely
affect (i) the federal income tax or other federal, state or local tax
attributes of the Notes or (ii) the federal, state or local tax
treatment of any of the transactions contemplated by this Agreement and
the Related Documents.
(h) Place of Business. The principal executive
offices of the Contributor, and the offices where the Contributor keeps
its records concerning the Leases and related documents, are located at
1100 Landmark Towers, ▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(i) Registration Statement. No stop order suspending
the effectiveness of the Registration Statement relating to the Notes
has been issued, and no proceeding for that purpose has been instituted
or is threatened, by the Securities and Exchange Commission.
(j) Filings. Since the effective date of the
Registration Statement relating to the Notes, there has occurred no
event required to be set forth in an amendment or supplement to the
Registration Statement or Prospectus that has not been so set forth,
and there has been no document required to be filed under the
Securities Exchange Act of 1934 and the rules and regulations of the
Securities and Exchange Commission thereunder that upon such filing
would be deemed to be incorporated by reference in the Prospectus that
has not been so filed.
(k) Good Title. Immediately prior to the transfer and
assignment of the Leases and Related Assets to the Issuer pursuant to
Section 2.1(a), the Contributor had good title thereto and was the sole
owner thereof (subject, in the case of amounts in the Insurance,
Maintenance and Tax Accounts, to the rights of the Obligors therein),
free of any Lien. Upon the transfer and assignment of the Leases and
Related Assets to the Issuer pursuant to Section 2.1(a), the Issuer
will have good title thereto and will be the sole owner thereof
(subject, in the case of amounts in the Insurance, Maintenance and Tax
Accounts, to the rights of the Obligors therein), free of any Lien.
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(l) No Impairment. No person has a participation in
or other right to receive Scheduled Payments under any Lease, and the
Contributor has taken no action to convey any right to any Person that
would result in such Person having a right to Scheduled Payments
received with respect to any Lease.
(m) Lawful Assignment. No Lease was originated in, or
is subject to the laws of, any jurisdiction the laws of which would
make unlawful, void or voidable the transfer and assignment of such
Lease from the Contributor to the Issuer under this Agreement. Each
Lease may be sold, assigned and transferred by the Contributor to the
Issuer without the consent of, or prior approval from, or any
notification to, the applicable Obligor, other than (i) certain Leases
(which, in proportion to the aggregate of all of the Leases, are not
material) that require notification of the assignment to the Obligor,
which notification will be given by the Servicer not later than 10 days
following the Closing Date, and (ii) certain Leases (which, in
proportion to the aggregate of all of the Leases, are not material)
that require the consent of the Obligor, which consent will be obtained
by the Servicer not later than 10 days following the Closing Date.
(n) All Filings Made. All filings and other actions
required to be made, taken or performed by any Person in any
jurisdiction to give the Issuer a first priority perfected lien or
ownership interest in the Leases has been made, taken or performed.
(o) Schedule of Leases Accurate. The information with
respect to the Leases contained in the Schedule of Leases is true and
correct in all material respects.
SECTION 2.5. Nonpetition Covenant. None of the Contributor,
the Servicer, nor Vendor Services shall petition or otherwise invoke the process
of any court or government authority for the purpose of commencing or sustaining
a case against the Issuer or the Contributor under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or the Contributor or any substantial part of its property, or ordering
the winding up or liquidation of the affairs of the Issuer or the Contributor.
SECTION 2.6. Repurchase of Leases Upon Breach of
Representations and Warranties. Concurrently with the execution and delivery of
this Agreement, Vendor Services and the Contributor have entered into the
Transfer Agreement, the rights of the Contributor under which have been assigned
by the Contributor to the Issuer pursuant to Section 2.1(a). Under the Transfer
Agreement, Vendor Services has made certain representations and warranties to
the Contributor with respect to the Leases (the "Representations and
Warranties"). As of the second Deposit Date following its discovery or its
receipt of notice of any breach of the Representations and Warranties that
materially and adversely affects the value of any Lease (including any
Liquidated Lease), Vendor Services shall, unless such breach shall have been
cured in all material respects, either (A) (i) repurchase such Lease from the
Issuer and (ii) repurchase the related Equipment from the Contributor or (B)
substitute a Substitute Lease for such Lease and the related Equipment. On or
before the related Deposit Date, Vendor Services shall pay the Purchase Amount
to the Servicer and the Contributor, as their interests may appear, or
substitute
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a Substitute Lease. The obligations of the Contributor with respect to any such
breach of representations and warranties shall be limited to taking any and all
actions necessary to enable the Issuer or the Trustee to enforce directly the
obligations of Vendor Services to repurchase the applicable Lease and Equipment
under the Transfer Agreement. It is understood and agreed that, except as set
forth in the following paragraph, the obligation of Vendor Services to
repurchase or substitute another Lease for any Lease, together with the related
Equipment, as to which a breach has occurred and is continuing shall, if such
obligation is fulfilled, constitute the sole remedy against Vendor Services for
such breach available to the Contributor or the Trustee on behalf of the
Noteholders and to the Contributor, as their interests may appear.
In addition to the foregoing and notwithstanding whether the
Lease and related Equipment shall have been repurchased by Vendor Services,
Vendor Services shall indemnify the Contributor, the Issuer, the Noteholders and
the Trustee against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach.
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ARTICLE III
ADMINISTRATION AND SERVICING OF LEASES
SECTION 3.1. Duties of the Servicer. The Servicer is hereby
authorized to act as agent for the Issuer and the Contributor and in such
capacity shall manage, service, administer and make collections on the Leases,
and perform the other actions required by the Servicer under this Agreement. The
Servicer agrees that its servicing of the Leases shall be carried out in
accordance with customary and usual procedures of institutions which service
equipment lease contracts, installment sale contracts, promissory notes, loan
and security agreements and other similar types of receivables comparable to the
Leases and, to the extent more exacting, the degree of skill and attention that
the Servicer exercises from time to time with respect to all comparable such
contracts that it services for itself or others. In performing such duties, so
long as Vendor Services is the Servicer, it shall comply in all material
respects with its customary standards, policies and procedures in effect from
time to time. The Servicer may at any time change its customary standards,
policies and procedures; provided that any such change shall not materially
impair the collectibility of any Lease nor the Servicer's ability to perform its
obligations under this Agreement and the Related Documents. The Servicer's
duties shall include, without limitation, billing, collection and posting of all
payments, responding to inquiries of Obligors on the Leases, investigating
delinquencies, sending invoices to Obligors, accounting for collections and
furnishing monthly and annual statements to the Issuer and the Trustee with
respect to distributions, monitoring the status of Insurance Policies with
respect to the Equipment and performing the other duties specified herein. The
Servicer shall also administer and enforce all material rights and
responsibilities of the lessor or secured party under the Leases and provided
for in the Insurance Policies, to the extent that such Insurance Policies relate
to the Leases, the Equipment or the Obligors. To the extent consistent with the
standards, policies and procedures otherwise required hereby, the Servicer shall
follow its customary standards, policies and procedures and shall have full
power and authority to do any and all things in connection with such managing,
servicing, administration and collection that it may deem necessary or
desirable, including the authority to forego collection efforts under
circumstances deemed appropriate by the Servicer in accordance with its
customary standards, policies and procedures. Without limiting the generality of
the foregoing, the Servicer is hereby authorized and empowered by the Issuer to
execute and deliver, on behalf of the Contributor and the Issuer or either 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 Leases and with respect to the Equipment in accordance with its customary
standards, policies and procedures. The Servicer is hereby authorized to
commence, in its own name (or in the name of the Issuer, provided the Servicer
has obtained the Issuer's consent, which consent shall not be unreasonably
withheld), a legal proceeding to enforce a Lease pursuant to Section 3.3 or to
commence or participate in any other legal proceeding (including, without
limitation, a bankruptcy proceeding) relating to or involving a Lease, an
Obligor or the related Equipment. If the Servicer commences or participates in
such a legal proceeding in its own name, the Issuer shall thereupon be deemed to
have automatically assigned such Lease to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Issuer to execute and deliver in
the Servicer's name any notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceeding.
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The Issuer shall furnish the Servicer with any powers of attorney and other
documents which the Servicer may reasonably request and which the Servicer deems
necessary or appropriate and take any other steps which the Servicer may deem
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
SECTION 3.2. Collection of Lease Payments; Modifications of
Leases.
(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the Leases as
and when the same shall become due, and shall follow such collection procedures
as it follows with respect to all comparable contracts that it services for
itself or others and otherwise act with respect to the Leases, the related
Equipment, the Insurance Policies and the other Trust Assets in such manner as
will, in the reasonable judgment of the Servicer, maximize the amount to be
received by the Issuer and the Contributor with respect thereto. The Servicer is
authorized in its discretion to waive any Administrative Fees or Extension Fees
that may be collected in the ordinary course of servicing any Lease.
(b) The Servicer may at any time agree to a modification or
amendment of a Lease in accordance with its credit and collection policies and
procedures (it being acknowledged that any modification or amendment of a Lease
resulting from a bankruptcy proceeding with respect to the Obligor will not be
deemed to have been agreed to by the Servicer hereunder):
(i) in order to (A) change the Obligor's regular due
date to a date within the Collection Period in which such due date
occurs or (B) re-amortize (over the remainder of the original term) the
Scheduled Payments on a Lease following a partial Prepayment (provided
that the sum of such partial Prepayment and the Principal Balance of
the Lease after the re-amortization is at least equal to the Required
Payoff Amount for such Lease prior to the partial Prepayment), or
(ii) for any other purpose, provided that no such
modification or amendment shall:
(A) change the amount or the due date of any
Scheduled Payment (except as provided in clauses (i)(A) and
(B) above, Section 3.2(c) or Section 3.2(d)),
(B) release the related Equipment from the Lease,
unless (1) equipment of equal or greater value is substituted,
(2) the remaining related Equipment has a value at least equal
to the Required Payoff Amount of the Lease, or (3) the release
is pursuant to a partial Prepayment (which, in the case of a
partial Prepayment on a Lease, meets the requirements of
Section 3.2(d)) and the ratio of the value of the related
Equipment to the Principal Balance of the Lease after such
Prepayment and release is at least equal to such ratio prior
to such Prepayment and release;
(C) cause any of the representations or warranties
contained in the Representations and Warranties to cease to be
true; or
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(D) except as provided in clause (ii)(A) above,
result in the Principal Balance or Required Payoff Amount of
the Lease being less than it would have been absent such
modification or amendment.
(c) The Servicer may grant payment extensions on a Lease in
accordance with its credit and collection policies and procedures (it being
acknowledged that any extensions on a Lease resulting from a bankruptcy
proceeding with respect to the Obligor will not be deemed to have been granted
by the Servicer hereunder) if the Servicer believes in good faith that such
extension is necessary to avoid a termination and liquidation of such Lease and
will maximize the amount to be received by the Issuer with respect to such
Lease; provided, however, that:
(i) the aggregate period of all extensions granted on
a Lease shall not exceed six months; and
(ii) in no event may any Lease be extended beyond the
Collection Period immediately preceding the final Stated Maturity Date.
Nothing in this Section 3.2(c) shall be deemed to prevent the Servicer from
extending or renewing, or otherwise accepting the continued performance by the
Obligor under, a Lease after expiration of its stated term.
(d) The Servicer may, in its discretion, allow a Prepayment,
in whole or in part, of any Lease which, by its terms, is not prepayable, but
only if the amount of such Prepayment (or, in the case of a partial Prepayment,
the sum of such Prepayment and the remaining Principal Balance of the Lease
after application of such Prepayment), together with such additional amounts as
are (i) available to the Servicer for the purpose of prepaying such Lease
(excluding any monies otherwise constituting Pledged Revenues) and (ii)
deposited in the Collection Account in respect of such Lease contemporaneously
with the deposit therein of such Prepayment, is at least equal to the Required
Payoff Amount for such Lease.
(e) The Servicer shall remit all payments by or on behalf of
the Obligors (other than amounts constituting Administrative Fees) received by
the Servicer to the Servicing Account as soon as practicable, but in no event
later than the second Business Day after receipt thereof.
(f) If the Servicer agrees to a modification, amendment or
extension of a Lease not permitted by Sections 3.2(b) or 3.2(c), the Servicer
shall, on the next Deposit Date, either (i) repurchase such Adjusted Lease in
accordance with Section 2.6, or (ii) deliver a Substitute Lease therefor in
accordance with Article IX.
SECTION 3.3. Realization Upon Leases. Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall, except as provided in the following paragraph, take such action as is
reasonably necessary (including making commercially reasonable efforts to
repossess (or otherwise comparably convert the ownership of) and dispose of the
related Equipment) to collect from the Obligor or otherwise all amounts payable
under any Lease as to which the Obligor is in default in the making of one or
more Scheduled Payments
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thereunder, if the Servicer has determined such default is not likely to be
cured. The Servicer will not be required to repossess (or otherwise comparably
convert the ownership of) any Equipment the repossession of which, in accordance
with the Servicer's credit and collection policies and procedures, and based on
the Servicer's good faith estimate of the value of the Equipment and its
availability, would not be reasonable. The Servicer is authorized to follow such
customary practices and procedures as it shall deem necessary or advisable,
consistent with the standard of care required by Section 3.1, which practices
and procedures may include the sale of the related Equipment at public or
private sale, the submission of claims under an Insurance Policy and other
actions by the Servicer in order to realize upon such a Lease. The foregoing is
subject to the provision that, in any case in which the Equipment shall have
suffered damage, the Servicer shall not expend funds in connection with any
repair or towards the repossession of such Equipment unless it shall determine
in its reasonable judgment that such repair and/or repossession shall increase
the proceeds of liquidation of the related Lease by an amount greater than the
amount of such expenses. All amounts received upon liquidation of a Lease
(except as otherwise provided below), including any proceeds derived from the
disposition of the related Equipment, shall be remitted by the Servicer to the
Servicing Account as soon as practicable, but in no event later than the second
Business Day after receipt thereof. The Servicer shall, to the extent the
proceeds of such liquidation are sufficient therefor, be entitled to recover all
reasonable out-of-pocket expenses incurred by it in the course of liquidating a
Lease, which amounts may be retained by the Servicer from such proceeds (and
shall not be required to be deposited as provided in Section 3.2(e)) to the
extent of such expenses. The Servicer shall be entitled to retain in the
Servicing Account, from liquidation proceeds, a reserve for out-of-pocket
liquidation expenses in an amount equal to such expenses, in addition to those
previously incurred, as it reasonably estimates will be incurred. Upon
completion of such liquidation, the remainder of any such reserve, after
reimbursement to the Servicer of all out-of-pocket liquidation expenses, shall
constitute Liquidation Proceeds and be transferred as provided in Section
4.2(a). The Servicer shall, in accordance with Section 3.4(f), pay on behalf of
the Issuer and the Contributor any sales, use, personal property and other taxes
assessed on repossessed Equipment, as well as any sales or similar taxes on the
disposition thereof, and shall be entitled to reimbursement of any such tax from
liquidation proceeds with respect to the related Lease as provided in Section
3.4(b).
The Servicer will use its best efforts to sell or re-lease any
Equipment upon the termination of the Lease to which such Equipment is subject
(whether as a result of early termination following an Obligor default or upon
scheduled expiration of the Lease), in a timely manner and in a manner so as to
maximize, to the extent possible under the prevailing market conditions, the net
proceeds of such Equipment. The Servicer may, in its discretion, choose to
dispose of Equipment through a new lease or in some other manner which provides
for payment for the Equipment over time. In any such event (other than
permitting continued payments by the Obligor beyond the scheduled expiration
date of the Lease), the Servicer will be required to pay from its own funds, and
deposit in the Servicing Account, an amount which, in its reasonable judgment,
is equal to the fair market value of such Equipment (less any related
out-of-pocket liquidation expenses), and the Servicer will be entitled to all
payments received thereafter in respect of such Equipment. Any such amounts so
deposited by the Servicer shall be treated as additional Liquidation Proceeds,
or Residual Realizations, depending on the reason for the disposition of the
Equipment, with respect to the related Lease and Equipment.
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SECTION 3.4. Insurance, Maintenance and Taxes.
(a) The Servicer shall establish one or more insurance,
maintenance and tax accounts (collectively, the "Insurance, Maintenance and Tax
Accounts") in the name of the Servicer and for the benefit of the respective
Obligors and, to the extent provided herein, the Issuer and the Contributor. The
Servicer shall deposit into the Insurance, Maintenance and Tax Accounts any
payments made by or on behalf of Obligors which constitute (i) insurance charges
paid by an Obligor to the lessor or secured party under a Lease (unless paid
directly by such insurance company or comparable third party directly to the
Obligor), (ii) any insurance payments or recoveries paid by an insurance company
or comparable third party and related to the damage to, or destruction of, the
Equipment related to such Lease (unless paid directly by such insurance company
or comparable third party directly to the Obligor), (iii) any payments made by
or on behalf of Obligors which constitute amounts paid by an Obligor to the
lessor or secured party under a Lease in respect of the maintenance of the
related Equipment, and (iv) taxes paid by the Obligor with respect to the
related Lease or Equipment (except for any such payments in respect of taxes
which were paid by Vendor Services prior to the Cut-Off Date, which payments
shall constitute Scheduled Payments hereunder). None of the foregoing payments
shall constitute Pledged Revenues except under the circumstances described in
clause (c)(ii) below.
(b) The Servicer may pay from its own funds, or may withdraw
amounts from the Insurance, Maintenance and Tax Accounts, when and if
appropriate, to pay, when due (i) all insurance charges in the amounts received
under clause (a)(i) above, (ii) any amounts payable under any applicable
maintenance contract or otherwise with respect to the maintenance of the related
Equipment in the amounts received under clause (a)(iii) above, and (iii) all
taxes in the amounts received under clause (a)(iv) above. If the Servicer has
paid any such insurance charges, maintenance costs or taxes from its own funds
(including any such amounts that may have been paid prior to the Closing Date),
the Servicer shall be entitled to reimbursement therefor from any appropriate
amounts available therefor in the Insurance, Maintenance and Tax Accounts, from
payments thereafter received from the applicable Obligor in respect thereof or
from liquidation proceeds in the event such Lease is liquidated. The Servicer is
authorized in its discretion to waive its right to receive reimbursement of any
such amount.
(c) Amounts on deposit in the Insurance, Maintenance and Tax
Accounts which represent amounts received by the Servicer pursuant to clause
(a)(ii) above shall be applied by the Servicer as follows: (i) if equipment is
purchased to replace the Equipment that was damaged or destroyed, and such
replacement equipment is (in the reasonable opinion of the Servicer) of
comparable use and equivalent value to the Equipment that was damaged or
destroyed, or if the Equipment is to be repaired, the Servicer shall release
such amount so received from the insurance company or comparable third party in
payment or reimbursement for such replacement equipment or such repair; and (ii)
if such replacement option is not exercised or the Equipment is not to be
repaired, then the Servicer shall treat such amount as Liquidation Proceeds
(after netting any amounts therefrom as is provided pursuant to the definition
of "Liquidation Proceeds" herein) and transfer such amount from the Insurance,
Maintenance and Tax Accounts to the Collection Account.
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(d) The Servicer may ▇▇▇ to enforce or collect upon the
Insurance Policies, in its own name, if possible, or as agent of the Issuer and
the Contributor. If the Servicer elects to commence a legal proceeding to
enforce an Insurance Policy, the act of commencement shall be deemed to be an
automatic assignment of the rights of the Issuer and the Contributor under such
Insurance Policy to the Servicer for purposes of collection only. If, however,
in any enforcement suit or legal proceeding it is held that the Servicer may not
enforce an Insurance Policy on the grounds that it is not a real party in
interest or a holder entitled to enforce the Insurance Policy, the Issuer, on
behalf of the Contributor, shall take such steps as the Servicer deems necessary
to enforce such Insurance Policy, including bringing suit in its name or the
name of the Trustee for the benefit of the Noteholders.
(e) Consistent with its customary standards, policies and
procedures, with respect to each Lease, the Servicer shall maintain insurance
against casualty loss with respect to any Equipment financed by or leased
pursuant to the Lease, to the extent the Lease requires the lessor or secured
party under the Lease to maintain such insurance, and shall otherwise require
the Obligor under the Lease to maintain such insurance, to the extent the Lease
requires that such insurance be maintained by the Obligor. The Servicer shall
not otherwise be liable to the Issuer, the Trustee, the Contributor or any
Noteholder for any casualty loss with respect to any Equipment related to a
Lease, except to the extent otherwise explicitly provided in this Agreement.
(f) The Servicer shall determine and pay when due all sales,
use, personal property and other taxes payable in respect of the Equipment
related to each Lease. To the extent the Servicer has previously received from
the related Obligor payments with respect to such taxes and has deposited such
payments in the Insurance, Maintenance and Tax Accounts in accordance with
clause (a)(iv) above, the Servicer shall, in accordance with clause (b)(iii)
above, either (i) pay such taxes from amounts withdrawn from the Insurance,
Maintenance and Tax Accounts, or (ii) pay such taxes from its own funds and
thereafter reimburse itself from amounts withdrawn from the Insurance,
Maintenance and Tax Accounts. In the event the Servicer has not previously
received payments from the Obligor for this purpose, or to the extent any such
payments received were insufficient to pay the taxes due, the Servicer shall
nonetheless pay such taxes from its own funds and shall ▇▇▇▇ the Obligor for any
amounts so paid. The Servicer shall be entitled to reimbursement for any taxes
so paid from its own funds, as provided in clause (b)(iii) above. Failure on the
part of the Servicer to perform its duties in a timely fashion under this clause
shall constitute a breach of this Agreement by the Servicer for which indemnity
will be available in accordance with Section 7.1.
(g) The Servicer shall give prompt written notice to the
Trustee of the Servicer's failure to pay when due any insurance charge or tax
payment required to be paid pursuant to this Section 3.4 and the reason for such
failure. Upon receipt of any such notice, or if the Trustee has otherwise
received notice of any such failure to pay an insurance charge or tax payment,
the Trustee shall take such actions as are reasonably necessary (including the
withdrawal of monies, if any, available therefor in the Insurance, Maintenance
and Tax Accounts and attributable to payments previously made by the related
Obligor and payment of such insurance charge or tax payment) to cause any such
amounts to be paid. The Trustee shall be permitted to withdraw monies from the
Insurance, Maintenance and Tax Accounts for purposes
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of performing its obligations under this paragraph, but shall not, in any event,
be required to use its own funds for such purposes.
SECTION 3.5. Maintenance of Security Interests in Equipment.
To the extent the Servicer's credit and collection policies and procedures in
this regard would so require (it being acknowledged that, in certain instances,
such credit and collection policies and procedures would not so require), the
Servicer shall take such steps as are necessary to maintain perfection of any
security interest created by each Lease in the related Equipment on behalf of
the Issuer and the Contributor, including, but not limited to, obtaining the
execution by the Obligors and the recording, registering, filing, re-recording,
re-filing, and re-registering of all security agreements, financing statements
and continuation statements as are necessary to maintain such security interest
granted by the Obligors under the respective Leases. The Issuer hereby
authorizes the Servicer, and the Servicer agrees (to the extent the Servicer's
credit and collection policies and procedures in this regard would so require),
to take any and all steps necessary to re-perfect such security interest on
behalf of the Issuer and the Contributor as necessary because of the relocation
of Equipment or for any other reason.
SECTION 3.6. Covenants, Representations, and Warranties of
Servicer. By its execution and delivery of this Agreement, the Servicer makes
the following representations, warranties and covenants.
(a) The Servicer covenants as follows:
(i) Liens in Force. The Equipment securing
each Lease shall not be released in whole or in part from any
interest the lessor or secured party may have in such
Equipment under the terms of the Lease, except upon payment in
full of the Lease or as otherwise contemplated herein;
(ii) No Impairment. The Servicer shall do
nothing to impair the rights of the Issuer, the Contributor or
the Noteholders in the Leases, the Insurance Policies or the
other Trust Assets; and
(iii) No Amendments. The Servicer shall not
extend or otherwise amend the terms of any Lease with respect
to the Scheduled Payments thereon, except (A) in accordance
with Section 3.2, or (B) at such time as the Notes are no
longer Outstanding, with the consent of the Issuer.
(b) The Servicer represents, warrants and covenants
as of the date of execution and delivery of this Agreement:
(i) Organization and Good Standing. The
Servicer has been duly organized and is validly existing and
in good standing under the laws of its jurisdiction of
organization, with power, authority and legal right to own its
properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and
had at all relevant times, and now has,
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power, authority and legal right to enter into and perform its
obligations under this Agreement and the Servicer's Related
Documents;
(ii) Due Qualification. The Servicer is duly
qualified to do business as a foreign corporation in good
standing, and has obtained all necessary licenses and
approvals, in all jurisdictions where the failure to do so
would materially and adversely affect the performance of its
obligations under this Agreement and the Related Documents;
(iii) Power and Authority. The Servicer has
the power and authority to execute and deliver this Agreement
and to carry out the terms hereof; and the execution, delivery
and performance of this Agreement and the Servicer's Related
Documents have been duly authorized by the Servicer by all
necessary corporate action;
(iv) Binding Obligation. This Agreement and
the Servicer's Related Documents shall each constitute the
legal, valid and binding obligation of the 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 generally and by equitable limitations on
the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or
at law;
(v) No Violation. The execution and delivery
of this Agreement, the consummation of the transactions
contemplated by this Agreement and the Servicer's Related
Documents, and the fulfillment of the terms hereof, shall not
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse
of time, or both) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture,
agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other
than this Agreement or any Related Document, or violate any
law, order, rule or regulation applicable to the Servicer of
any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality
having jurisdiction over the Servicer or any of its
properties;
(vi) No Proceedings. There are no
proceedings or investigations pending or, to the Servicer's
knowledge, threatened against the Servicer, before any court,
regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the
Servicer or its properties (A) asserting the invalidity of
this Agreement or any of the Servicer's Related Documents, (B)
seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this
Agreement or any of the Servicer's Related Documents, or (C)
seeking any determination or
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ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the
validity or enforceability of, this Agreement or any of the
Servicer's Related Documents or (D) seeking to adversely
affect (i) the federal income tax or other federal, state or
local tax attributes of the Notes or (ii) the federal, state
or local tax treatment of any of the transactions contemplated
by this Agreement and the Related Documents; and
(vii) No Consents. The Servicer is not
required to obtain the consent of any other party or any
consent, license, approval or authorization, or registration
or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or
any of the Servicer's Related Documents.
SECTION 3.7. Sub-Servicers. The Servicer may, without the
Issuer's or the Trustee's consent, maintain or enter into one or more agreements
with Sub-Servicers for the servicing and administration of the Leases by such
Sub-Servicers. Notwithstanding the terms or existence of any such agreement
between the Servicer and a Sub-Servicer, the Servicer shall not be relieved of
any of its obligations under this Agreement by reason of such agreement and
shall be obligated to the same extent and under the same terms and conditions as
if the Servicer alone was servicing and administering the Leases, and neither
the Issuer nor the Trustee shall have any obligation to deal with anyone other
than the Servicer with respect to the servicing of the Leases.
SECTION 3.8. Total Servicing Fee; Payment of Expenses by
Servicer. On each Payment Date, the Servicer shall be entitled to receive out of
the Collection Account the Servicing Fee for the related Collection Period and
any unreimbursed Servicer Advances in respect of a prior Payment Date, pursuant
to Section 8.03 of the Indenture. The Servicer shall be entitled to retain, as
additional servicing compensation under this Agreement, any Administrative Fees
and any earnings on the investment of amounts in the Servicing Account. The
Servicer shall be required to pay all expenses incurred by it in connection with
its activities under this Agreement (including taxes imposed on the Servicer and
all expenses incurred in connection with reports to Noteholders). In addition,
the Servicer shall pay to the Trustee, and the Trustee shall be entitled to,
certain annual fees and shall reimburse the Trustee for all ordinary and
reasonable out-of-pocket expenses incurred or made by it in connection with the
performance of its duties under the Indenture (excluding those incurred or made
in the performance of its duties under Article V of the Indenture, as referred
to in Section 6.07(b) of the Indenture).
SECTION 3.9. Servicer's Certificate. No later than 10:00 a.m.
St. ▇▇▇▇, Minnesota time on each Determination Date, the Servicer shall deliver
to the Issuer, the Trustee and each Rating Agency a Servicer's Certificate
executed by a Responsible Officer of the Servicer containing, among other
things, (i) all information necessary to enable the Trustee to make the
withdrawals and distributions required by Section 8.03 of the Indenture, (ii)
all information necessary to enable the Trustee to send the statements to
Noteholders required by Section 7.05 of the Indenture, and (iii) all information
necessary to enable the Trustee to reconcile all deposits to, and withdrawals
from, the Servicing Account, the Collection Account, the Residual Account and
the Reserve Account for the related Collection Period and Payment Date,
including the accounting required by Section 4.4. Leases repurchased (or for
which a
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Substitute Lease was substituted) by Vendor Services on the related Deposit Date
or by the Contributor on the related Accounting Date and each Lease which became
a Liquidated Lease or which was paid in full during the related Collection
Period, shall be identified by account number (as set forth in the Schedule of
Leases), and information regarding each Substitute Lease shall be provided. A
copy of such certificate may be obtained by any Noteholder (or by any Note
Owner, upon certification that such Person is a Note Owner and payment of any
expenses associated with the distribution thereof) by a request in writing to
the Trustee addressed to the Corporate Trust Office.
SECTION 3.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event.
(a) The Servicer shall deliver to the Issuer, the Trustee and
each Rating Agency, on or before March 31 (or 90 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
March 31, 1999, a certificate signed by any Responsible Officer of the Servicer,
dated as of December 31 (or other applicable date) of the immediately preceding
year, stating that (i) a review of the activities of the Servicer during the
preceding 12-month period (or such other period as shall have elapsed from the
Closing Date to the date of the first such certificate) and of its performance
under this Agreement has been made under such officer's supervision, and (ii) to
such officer's knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such period, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Issuer, the Trustee and
each Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in a certificate
signed by any Responsible Officer of the Servicer of any event which with the
giving of notice or lapse of time, or both, would become a Servicer Termination
Event under Section 8.1(a). The Contributor or the Servicer shall deliver to the
Issuer, the Trustee, the Servicer or the Contributor (as applicable) and each
Rating Agency promptly after having obtained knowledge thereof, but in no event
later than three Business Days thereafter, written notice in a certificate
signed by any Responsible Officer of the Servicer of any event which with the
giving of notice or lapse of time, or both, would become a Servicer Termination
Event under any other clause of Section 8.1.
SECTION 3.11. Annual Independent Accountants' Report.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer, to deliver to the Issuer, the
Trustee and each Rating Agency, on or before March 31 (or 90 days after the end
of the Servicer's fiscal year, if other than December 31) of each year,
beginning on March 31, 1999, with respect to the twelve months ended the
immediately preceding December 31 (or other applicable date) (or such other
period as shall have elapsed from the Closing Date to the date of such
certificate), a statement (the "Accountant's Report") addressed to the Board of
Directors of the Servicer, to the Issuer and to the Trustee, to the effect that
such firm has audited the financial statements of the Servicer and issued its
report
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thereon and that such audit was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances, including procedures as determined by the Independent
Accountants related to (i) the documents and records concerning the servicing of
equipment lease contracts, installment sale contracts, promissory notes, loan
and security agreements and/or other similar types of receivables under
servicing agreements substantially similar one to another (such Accountant's
Report to have attached thereto a schedule setting forth the servicing
agreements covered thereby, including this Agreement); and (ii) the delinquency
and loss statistics relating to the Servicer's portfolio of equipment lease
contracts, installment sale contracts, promissory notes, loan and security
agreements and/or other similar types of receivables; and except as described in
the Accountant's Report, disclosed no exceptions or errors in the records
relating to the contracts serviced for others that, in the firm's opinion,
generally accepted auditing standards requires such firm to report. The
Accountant's Report shall further state that (1) a review of certain agreed upon
procedures was performed with respect to two randomly selected Servicer's
Certificates during the applicable period, and (2) except as disclosed in the
Report, no exceptions or errors in the Servicer's Certificates so examined were
found.
(b) The Accountants' Report shall also indicate that the firm
is independent of the Contributor and the Servicer within the meaning of the
Code of Professional Ethics of the American Institute of Certified Public
Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Noteholder (or by any Note Owner, upon certification that such Person is a Note
Owner and payment of any expenses associated with the distribution thereof) by a
request in writing to the Trustee addressed to the Corporate Trust Office.
SECTION 3.12. Access to Certain Documentation and Information
Regarding Leases. The Servicer shall provide to representatives of the Issuer
and the Trustee reasonable access to the documentation regarding the Leases. In
each case, such access shall be afforded without charge but only upon reasonable
request and during normal business hours. Nothing in this Section shall derogate
from the obligation of the Servicer to observe any applicable law, rule or
contractual provision with an Obligor prohibiting disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access as
provided in this Section as a result of such obligation shall not constitute a
breach of this Section.
SECTION 3.13. Certain Duties of the Servicer. The Servicer
shall, and hereby agrees that it will, monitor the Issuer's compliance with all
applicable provisions of federal securities laws, notify the Issuer of any
actions to be taken by the Issuer necessary for compliance with such laws and
prepare on behalf of the Issuer all notices, filings or other documents or
instruments required to be filed under such laws.
SECTION 3.14. Duties of the Servicer under the Indenture. The
Servicer shall, and hereby agrees that it will, perform on behalf of the Issuer
the following duties of the Issuer under the Indenture (references are to the
applicable Sections in the Indenture):
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(a) the direction to the Paying Agents, if any, to
deposit moneys with the Trustee (Section 3.03);
(b) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes and each other instrument
and agreement included in the Trust Estate (Section 3.04);
(c) the preparation of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section 3.05 of the
Indenture, necessary to protect the Trust Estate (Section 3.05);
(d) the annual delivery of Opinions of Counsel, in
accordance with Section 3.06 of the Indenture, as to the Trust Estate,
and the annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section 3.09 of the Indenture, as to
compliance with the Indenture (Sections 3.06 and 3.09);
(e) the preparation and obtaining of documents and
instruments required for the release of the Issuer from its obligations
under the Indenture (Section 4.01);
(f) the monitoring of the Issuer's obligations as to
the satisfaction and discharge of the Indenture and the preparation of
an Officers' Certificate and the obtaining of the Opinion of Counsel
and the Independent Certificate relating thereto (Section 4.01);
(g) the preparation of any written instruments
required to confirm more fully the authority of any co-trustee or
separate trustee and any written instruments necessary in connection
with the resignation or removal of any co-trustee or separate trustee
(Sections 6.08 and 6.11);
(h) the opening of one or more accounts in the
Issuer's name, the preparation of Issuer Orders, Officers' Certificates
and Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections
8.02, 8.04, 8.05 and 8.06);
(i) the preparation of Issuer Orders and the
obtaining of Opinions of Counsel with respect to the execution of
supplemental indentures (Sections 9.01, 9.02 and 9.03);
(j) the preparation of all Officers' Certificates,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Trustee to take any action under the
Indenture (Section 11.01); and
(k) the recording of the Indenture, if applicable
(Section 11.15).
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SECTION 3.15. Fidelity Bond. Within 30 days after the Closing
Date, the Servicer shall obtain, and shall thereafter maintain, (i) a policy or
policies of insurance covering errors and omissions by the Servicer, and (ii) a
fidelity bond. Such policy or policies and such fidelity bond shall be in such
form and amount as is generally customary among persons that service a portfolio
of equipment lease contracts, installment sale contracts, promissory notes, loan
and security agreements and/or other similar types of receivables having an
unpaid balance of at least $100,000,000 and which are generally regarded as
servicers acceptable to institutional investors. Each such policy shall name the
Issuer, the Trustee and the Contributor as parties insured thereunder as their
respective interests may appear.
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ARTICLE IV
COLLECTIONS AND DEPOSITS
SECTION 4.1. Initial Deposit. No later than the second
Business Day following the Closing Date, the Servicer shall deposit in the
Servicing Account (i) all Scheduled Payments and Prepayments of Leases received
by the Servicer on or after the Initial Cut-Off Date (including those Scheduled
Payments due prior to, but not received as of, the Initial Cut-Off Date, but
excluding those Scheduled Payments due on or after, but received prior to, the
Cut-Off Date) and on or prior to the second Business Day immediately preceding
such date and (ii) all Liquidation Proceeds (including proceeds of Insurance
Policies to be treated as such in accordance with Section 3.4) realized in
respect of the Leases and related Equipment and applied by the Servicer on and
after the Initial Cut-Off Date.
SECTION 4.2. Collections.
(a) Pursuant to the Indenture, the Trustee has established the
Servicing Account. The Servicer shall make deposits to and transfers from the
Servicing Account, and shall be entitled to make withdrawals therefrom, as
provided in this Agreement. The Servicer shall remit to the Servicing Account
all payments by or on behalf of the Obligors on the Leases (other than amounts
constituting Administrative Fees), all Residual Realizations and all Liquidation
Proceeds (including (1) proceeds of Insurance Policies to be treated as such in
accordance with Section 3.4 and (2) deficiency amounts paid by the Servicer with
respect to the disposition of Equipment to be treated as such in accordance with
the last paragraph of Section 3.3) received by the Servicer, in each case, as
soon as practicable, but in no event later than the second Business Day after
receipt thereof. Within three Business Days after the deposit of such payments
and proceeds therein, the Servicer shall transfer all amounts credited to the
Servicing Account on account of such payments and proceeds (i) to the extent
they constitute Pledged Revenues, to the Collection Account and (ii) to the
extent they represent Residual Realizations, to the Residual Account.
Notwithstanding the foregoing, the Servicer may utilize an alternative
remittance schedule acceptable to the Servicer if the Servicer provides to the
Trustee written confirmation from each Rating Agency that such alternative
remittance schedule will not result in the downgrading or withdrawal by the
Rating Agency of the rating then assigned to the Notes. Amounts from time to
time in the Servicing Account shall be invested in accordance with Section 8.07
of the Indenture, and the Servicer shall be entitled to any earnings on such
investments as additional servicing compensation hereunder. In the event of any
losses on such investments, the Servicer shall deposit in the Servicing Account
the amount thereof, net of any earnings otherwise distributable to the Servicer.
(b) The Servicer shall remit to the Collection Account (i) no
later than the second Business Day prior to a Payment Date, that portion of any
Purchase Amount relating to the Required Payoff Amount received by the Servicer
upon the repurchase by Vendor Services of any Lease pursuant to Section 2.6, and
(ii) that portion of the amount paid by the Contributor to repurchase the Leases
pursuant to Section 5.1 as is required to be deposited in the Collection Account
pursuant to such Section.
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(c) Notwithstanding the provisions of subsections (a) and (b)
hereof, the Servicer will be entitled to be reimbursed from amounts on deposit
in the Servicing Account or the Collection Account with respect to a Collection
Period for amounts previously deposited in the Servicing Account or the
Collection Account but later determined by the Servicer in good faith to (i)
have resulted from mistaken deposits or postings or checks returned for
insufficient funds, or (ii) be required to be repaid to an Obligor. The amount
to be reimbursed hereunder may be retained pursuant to Section 4.4 at any time
or may otherwise be paid to the Servicer on the related Payment Date pursuant to
Section 8.03(i) of the Indenture upon certification by the Servicer of such
amounts and the provision of such information to the Trustee as may be necessary
to verify the accuracy of such certification.
SECTION 4.3. Application of Collections. For the purposes of
this Agreement, all collections for a Collection Period shall be applied by the
Servicer as follows:
(a) With respect to each Lease, payments by or on
behalf of the Obligor thereof (other than Administrative Fees with
respect to such Lease, to the extent collected) shall be applied to
Scheduled Payments and Prepayments in accordance with the terms of such
Lease and the Servicer's credit and collection policies and procedures.
With respect to each Liquidated Lease, the Liquidation Proceeds shall
be applied, for purposes of this Agreement and the Indenture only, to
Scheduled Payments and Prepayment on the Lease as if the Liquidation
Proceeds had been paid by the Obligor on the Accounting Date, and then
to any other amounts due and payable with respect to such Lease. The
Servicer shall not be entitled to any Administrative Fees with respect
to a Liquidated Lease unless the Required Payoff Amount for such Lease
has been deposited in the Collection Account.
(b) With respect to each Lease that has become a
Purchased Lease as of any Deposit Date, the Purchase Amount shall be
applied, for purposes of this Agreement and the Indenture only, to
Scheduled Payments and Prepayment on the Lease as if the Purchase
Amount had been paid by the Obligor on the related Accounting Date. All
payments by or on behalf of an Obligor received with respect to any
Purchased Lease after the Accounting Date immediately preceding the
Deposit Date on which the Purchase Amount was paid by Vendor Services,
shall be paid to Vendor Services and shall not be included in Pledged
Revenues.
(c) With respect to each Lease that has been
repurchased by the Contributor pursuant to Section 5.1, the purchase
price shall be applied, for purposes of this Agreement and the
Indenture only, to Scheduled Payments and Prepayments on the Lease as
if such purchase price had been paid by the Obligor on the Accounting
Date. All payments by or on behalf of an Obligor received with respect
to any Lease so repurchased after the Accounting Date on which the
purchase price was paid by the Contributor, shall be paid to the
Contributor and shall not be included in the Amount Available.
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SECTION 4.4. Net Deposits. So long as no Servicer Termination
Event shall have occurred and be continuing with respect to the Servicer, the
Servicer may make the remittances or transfers to be made by it pursuant to
Section 4.2 net of amounts (which amounts may be netted prior to any such
remittance or transfer) that would otherwise be distributed to it pursuant to
Section 8.03(i) of the Indenture; provided, however, that the Servicer shall
account for all of such amounts in the related Servicer's Certificate as if such
amounts were deposited and distributed separately. If an error is made by the
Servicer in calculating the amount to be deposited or retained by it, with the
result that an amount less than required is deposited in the Collection Account,
the Servicer shall make a payment of the deficiency to the Collection Account
immediately upon becoming aware, or receiving notice from the Trustee, of such
error.
SECTION 4.5. Servicer Advances. On each Determination Date,
the Servicer may, but will not be required to, advance and remit to the Trustee,
in such manner as will ensure that the Trustee will have immediately available
funds on account thereof by 11:00 a.m. St. ▇▇▇▇, Minnesota time on the second
Business Day prior to the next succeeding Payment Date, an amount (a "Servicer
Advance") equal to any Scheduled Payments due during the prior Collection Period
but unpaid prior to such Determination Date with respect to any Lease. In
consideration of each Servicer Advance the Servicer will be entitled to retain
any late payment fees recovered from the Obligor with respect to any Lease
Payment covered by a Servicer Advance. In addition, the Servicer will be
reimbursed for Servicer Advances from funds in the Collection Account in
accordance with the Indenture on the second following Payment Date.
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ARTICLE V
TERMINATION
SECTION 5.1. Optional Purchase of All Leases; Liquidation of
Trust Assets.
(a) At such time as the sum of the Aggregate Principal Balance
of the Notes is less than 10% of the Initial Pool Principal Balance, the
Contributor shall have the option to purchase all of the Leases from the Issuer;
provided, however, that the amount to be paid for such purchase (as set forth in
the following sentence) shall, in any event, be sufficient to pay the full
amount of unpaid principal of and interest payable on the Notes on the related
Payment Date. To exercise such option, Contributor shall, on any Accounting
Date, pay to the Servicer the aggregate purchase price for the Leases (which
shall be an amount equal to the sum of the Required Payoff Amounts for all of
the Leases), plus the appraised value of any other property (including the right
to receive any future recoveries) held as Trust Assets, such appraisal to be
conducted by an appraiser mutually agreed upon by the Contributor and the
Trustee (or, if the Notes are no longer Outstanding, the Issuer), and shall
succeed to all interests in and to the Trust Assets. The fees and expenses
related to such appraisal shall be paid by the Contributor. The Servicer shall
immediately deposit the purchase price so paid into the Collection Account, to
be treated as Available Pledged Revenues and distributed in accordance with
Section 8.03 of the Indenture.
(b) Notice of any termination of the Issuer shall be given by
the Servicer to the Issuer and the Trustee as soon as practicable (but in no
event more than three Business Days) after the Servicer has received notice
thereof.
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ARTICLE VI
THE CONTRIBUTOR
SECTION 6.1. Liability of Contributor. The Contributor shall
be liable hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Contributor and the representations made by the
Contributor.
SECTION 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, Contributor; Amendment of Certificate of Incorporation.
(a) The Contributor shall not merge or consolidate with any
other Person or permit any other Person to become the successor to the
Contributor's business except in accordance with the requirements of this
Section. The certificate of incorporation of any corporation (i) into which the
Contributor may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Contributor shall be a party, or (iii) succeeding to
the business of Contributor, shall contain provisions relating to limitations on
business and other matters substantively identical to those contained in the
Contributor's certificate of incorporation. Any such successor corporation shall
execute an agreement of assumption of every obligation of the Contributor under
this Agreement and each Related Document and, whether or not such assumption
agreement is executed, shall be the successor to the Contributor under this
Agreement without the execution or filing of any document or any further act on
the part of any of the parties to this Agreement. The Contributor shall provide
prompt notice of any merger, consolidation or succession pursuant to this
Section 6.2 to the Issuer, the Trustee and the Rating Agencies. Notwithstanding
the foregoing, the Contributor shall not merge or consolidate with any other
Person or permit any other Person to become a successor to the Contributor's
business, unless (w) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 2.4 shall have been breached
(for purposes hereof, such representations and warranties shall speak as of the
date of the consummation of such transaction) and no event that, after notice or
lapse of time, or both, would become an Event of Default or a Servicer
Termination Event shall have occurred and be continuing, (x) the Contributor
shall have delivered to the Issuer and the Trustee a certificate of a
Responsible Officer of the Contributor and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section 6.2 and that all conditions precedent, if any, provided
for in this Agreement relating to such transaction have been complied with, (y)
the Contributor shall have delivered to the Issuer and the Trustee an Opinion of
Counsel, stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary to preserve and protect the interest of the Issuer
in the Trust Assets and reciting the details of the filings or (B) no such
action shall be necessary to preserve and protect such interest, and (z) the
Rating Agency Condition shall have been satisfied.
(b) The Contributor hereby agrees that it shall not (i) take
any action prohibited by Article VIII of its certificate of incorporation or
(ii) without the prior written consent of the Issuer and the Trustee and without
satisfaction of the Rating Agency Condition, amend Article III, Article V,
Article VI or Article VIII of its certificate of incorporation.
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SECTION 6.3. Limitation on Liability of Contributor and
Others. The Contributor and any director or officer or employee or agent of the
Contributor may rely in good faith on the advice of counsel or on any document
of any kind prima facie properly executed and submitted by any Person respecting
any matters arising under this Agreement. The Contributor shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations as transferor of the Leases under this Agreement
and that in its opinion may involve it in any expense or liability.
SECTION 6.4. Contributor May Own Notes. Each of the
Contributor and any Affiliate of the Contributor may in its individual or any
other capacity become the owner or pledgee of Notes with the same rights as it
would have if it were not the Contributor or an Affiliate thereof except as
otherwise specifically provided herein or in the Related Documents. Notes so
owned by or pledged to the Contributor or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement or any Related
Document, without preference, priority, or distinction as among all of Notes;
provided that any Notes owned by the Contributor or any Affiliate thereof,
during the time such Notes are owned by them, shall be without voting rights for
any purpose set forth in this Agreement or any Related Document. The Contributor
shall notify the Issuer and the Trustee promptly after it or any of its
Affiliates become the owner or pledgee of a Note.
SECTION 6.5. Covenants of the Contributor. The Contributor
hereby covenants that:
(a) Separate Business. The Contributor will not permit its
assets to be commingled with those of Vendor Services and the Contributor shall
maintain separate corporate records, books of accounts and bank accounts from
those of Vendor Services. The Contributor will not conduct its business in the
name of Vendor Services and will cause Vendor Services to conduct its business
solely in its own name so as not to mislead others as to the identity of the
entity with which those others are concerned. The Contributor will provide for
its own operating expenses and liabilities from its own funds, except that the
organizational expenses of the Contributor may be paid by Vendor Services. The
Contributor will not hold itself out, or permit itself to be held out, as having
agreed to pay, or as generally being liable for, the debts of Vendor Services.
The Contributor shall cause Vendor Services not to hold itself out, or permit
itself to be held out, as having agreed to pay, or as generally being liable
for, the debts of the Contributor except that the organizational expenses of the
Contributor may be paid by Vendor Services. The Contributor will maintain an
arm's length relationship with Vendor Services with respect to any transactions
between the Contributor, on the one hand, and Vendor Services, on the other.
(b) Adequate Capitalization. The Contributor shall at all
times remain adequately capitalized for the normal obligations reasonably
foreseeable in the conduct of its business, and shall not make any dividend or
other distribution to its shareholders unless the net worth of the Contributor
following such distribution is adequate for the normal obligations reasonably
foreseeable in the conduct of its business.
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ARTICLE VII
THE SERVICER
SECTION 7.1. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such and, in the case of
Vendor Services, without limitation of its obligations under the Transfer
Agreement) shall be liable hereunder only to the extent of the obligations in
this Agreement specifically undertaken by the Servicer and the representations
made by the Servicer.
(b) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Trustee, the Contributor, their respective officers, directors,
agents and employees and the Noteholders from and against any and all costs,
expenses, losses, claims, damages and liabilities to the extent that such cost,
expense, loss, claim, damage or liability arose out of, or was imposed upon the
Issuer, the Trustee, the Contributor or the Noteholders through the Servicer's
breach of this Agreement, the gross negligence, willful misfeasance or bad faith
of the Servicer in the performance of its duties under this Agreement or by
reason of reckless disregard of its obligations and duties under this Agreement.
(c) The Servicer shall indemnify, defend and hold harmless the
Issuer, in its individual capacity, its officers, directors, agents and
employees, from and against all costs, taxes, expenses, losses, claims, damages
and liabilities arising out of or incurred in connection with the acceptance or
performance of the trusts and duties contained in the Related Documents, except
to the extent that such cost, taxes (other than income taxes), expense, loss,
claim, damage or liability is due to the willful misfeasance or gross negligence
of the Issuer.
(d) Indemnification under this Article shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Servicer, together with any
interest earned thereon.
(e) Vendor Services, in its individual capacity, hereby
acknowledges that the indemnification provisions in the Transfer Agreement
benefiting the Issuer and the Trustee are enforceable by each hereunder.
(f) The provisions of this Section shall survive the
termination of the Related Documents.
SECTION 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not merge or consolidate with
any other Person, convey, transfer or lease substantially all its assets as an
entirety to another Person, or permit any other Person to become the successor
to the Servicer's business unless, after the merger, consolidation, conveyance,
transfer, lease or succession, the successor or surviving entity shall be an
Eligible Servicer and shall be capable of fulfilling the duties of the Servicer
contained in this Agreement.
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Any corporation (i) into which the Servicer may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Servicer shall be a
party, (iii) which acquires by conveyance, transfer, or lease substantially all
of the assets of the Servicer, or (iv) succeeding to the business of the
Servicer, in any of the foregoing cases shall execute an agreement of assumption
to perform every obligation of the Servicer under this Agreement and, whether or
not such assumption agreement is executed, shall be the successor to the
Servicer under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties to this Agreement, anything in
this Agreement to the contrary notwithstanding; provided, however, that nothing
contained herein shall be deemed to release the Servicer from any obligation.
The Servicer shall provide notice of any merger, consolidation or succession
pursuant to this Section to the Issuer, the Trustee and each Rating Agency.
Notwithstanding the foregoing, the Servicer shall not merge or consolidate with
any other Person or permit any other Person to become a successor to the
Servicer's business, unless (a) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 3.6 shall
have been breached (for purposes hereof, such representations and warranties
shall speak as of the date of the consummation of such transaction) and no event
that, after notice or lapse of time, or both, would become a Servicer
Termination Event shall have occurred and be continuing, (b) the Servicer shall
have delivered to the Issuer and the Trustee a certificate of a Responsible
Officer of the Servicer and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (c) the Servicer
shall have delivered to the Issuer and the Trustee an Opinion of Counsel,
stating that, in the opinion of such counsel, either (1) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary to preserve and protect the interest of the Issuer
in the Trust Assets and reciting the details of the filings or (2) no such
action shall be necessary to preserve and protect such interest, and (d) the
Rating Agency Condition has been satisfied.
SECTION 7.3. Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Issuer, the Contributor, the
Noteholders or the Trustee except as provided in this Agreement, for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Agreement; provided, however, that this provision shall not protect the
Servicer or any such person against any liability that would otherwise be
imposed by reason of a breach of this Agreement or willful misfeasance, bad
faith or gross negligence (excluding errors in judgment) in the performance of
duties, by reason of reckless disregard of obligations and duties under this
Agreement or any violation of law by the Servicer or such person, as the case
may be; provided further, that this provision shall not affect any liability to
indemnify the Issuer and the Trustee for costs, taxes, expenses, claims,
liabilities, losses or damages paid by the Issuer or the Trustee, each in its
individual capacity. The Servicer and any director, officer, employee or agent
of the Servicer may rely in good faith on the advice of counsel or on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising under this Agreement.
SECTION 7.4. Servicer Not to Resign. Subject to the provisions
of Section 7.2, the Servicer shall not resign from the obligations and duties
imposed on it by this Agreement as
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Servicer except upon a determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would have a
material adverse effect on the Servicer, and a Note Majority does not elect to
waive the obligations of the Servicer to perform the duties which render it
legally unable to act or to delegate those duties to another Person. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Issuer and the Trustee. No
resignation of the Servicer shall become effective until a successor Servicer
that is an Eligible Servicer shall have assumed the responsibilities and
obligations of the Servicer; provided, however, that in the event a successor
Servicer is not appointed within 60 days after the Servicer has given notice of
its resignation and has provided the Opinion of Counsel required by this
Section, the Servicer may petition a court for its removal.
SECTION 7.5. Corporate Existence. The Servicer shall maintain
its existence, rights and franchises as a corporation under the laws of the
jurisdiction of its incorporation, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which the failure to so qualify would have an adverse effect on the validity or
enforceability of any Lease or this Agreement or on the ability of the Servicer
to perform its duties under this Agreement.
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ARTICLE VIII
SERVICER TERMINATION EVENTS
SECTION 8.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deposit within the
time periods specified in this Agreement in the Collection Account for
distribution to Noteholders, or to distribute to the Contributor, any
proceeds or payment required to be so deposited or distributed under
the terms of this Agreement (or, if Vendor Services is the Servicer,
the Transfer Agreement) that continues unremedied for a period of five
Business Days (three Business Days with respect to payment of Purchase
Amounts) after written notice is received by the Servicer from the
Trustee or after discovery of such failure by a Responsible Officer of
the Servicer; or
(b) Failure by the Servicer to deliver to the Trustee
and the Issuer the Servicer's Certificate by the third Business Day
prior to the related Payment Date, or failure on the part of the
Servicer to observe its covenants and agreements set forth in Section
7.2; or
(c) 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, if Vendor
Services is the Servicer, the Transfer Agreement), which failure (i)
materially and adversely affects the rights of the Issuer or
Noteholders, and (ii) continues unremedied for a period of 30 days
after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer by the
Issuer, the Trustee or any Noteholder; or
(d) (i) The commencement of an involuntary case under
the federal bankruptcy laws, as now or hereinafter in effect, or
another present or future federal or state bankruptcy, insolvency or
similar law and such case is not dismissed within 60 days; or (ii) the
entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer in an
involuntary case under the federal bankruptcy laws, as now or hereafter
in effect, or another present or future, federal or state, bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
the Servicer or of any substantial part of their respective properties
or ordering the winding up or liquidation of the affairs of the
Servicer; or
(e) The commencement by the Servicer of a voluntary
case under the 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 consent by the Servicer to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of
the Servicer or of any substantial part of its property or the making
by the Servicer of an assignment for the benefit of creditors
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or the failure by the Servicer generally to pay its debts as such debts
become due or the taking of corporate action by the Servicer in
furtherance of any of the foregoing; or
(f) Any representation, warranty or statement of the
Servicer made in this Agreement or any certificate, report or other
writing delivered by the Servicer pursuant hereto shall prove to be
incorrect in any material respect as of the time when the same shall
have been made, the incorrectness of such representation, warranty or
statement has a material adverse effect on the Issuer or Noteholders,
and, within 30 days after written notice thereof shall have been given
to the Servicer or the Contributor by the Issuer, the Trustee or any
Noteholder, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured.
SECTION 8.2. Consequences of a Servicer Termination Event. If
a Servicer Termination Event shall occur and be continuing, the Trustee may, and
at the direction of a Note Majority shall, by notice given in writing to the
Servicer and the Issuer, terminate all of the rights and obligations of the
Servicer under this Agreement. On or after the receipt by the Servicer of such
written notice, all authority, power, obligations and responsibilities of the
Servicer under this Agreement, whether with respect to the Notes, the Trust
Assets or otherwise, shall be terminated and automatically shall pass to, be
vested in and become obligations and responsibilities of the Trustee (unless and
until a successor Servicer is appointed in accordance with Section 8.3);
provided, however, that the Trustee shall have no liability with respect to any
obligation which was required to be performed by the terminated Servicer prior
to the date that the Trustee becomes the Servicer or any claim of a third party
based on any alleged action or inaction of the terminated Servicer. The Trustee
is authorized and empowered by this Agreement to execute and deliver, on behalf
of the terminated 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.
The terminated Servicer agrees to cooperate with the Trustee in effecting the
termination of the responsibilities and rights of the terminated Servicer under
this Agreement, including, without limitation, the transfer to the Trustee for
administration by it of all cash amounts that shall at the time be held by the
terminated Servicer for deposit, or have been deposited by the terminated
Servicer, in any of the Trust Accounts or thereafter received with respect to
the Leases and the delivery to the Trustee of all Lease Files, Monthly Records
and Collection Records and a computer tape in readable form as of the most
recent Business Day containing all information necessary to enable the Trustee
or a successor Servicer to service the Leases and the other Trust Assets. The
terminated Servicer shall grant the Issuer, the Trustee and the successor
Servicer reasonable access to the terminated Servicer's premises at the
terminated Servicer's expense.
SECTION 8.3. Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 8.2, the Trustee 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 in this Agreement, and shall be
subject to all the responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Servicer by the terms and
provisions of this Agreement. As compensation therefor, the Trustee shall be
entitled to receive the Total
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Servicing Fee. The Issuer and the Trustee shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
(b) Notwithstanding the foregoing, the Trustee may, if it
shall be unwilling to so act, or shall, if it is legally unable to so act,
appoint, or petition a court of competent jurisdiction to appoint, any Eligible
Servicer as the successor to the Servicer hereunder in the performance of all or
any part of the responsibilities, duties or liabilities of the Servicer
hereunder. Pending appointment of a successor pursuant to the preceding
sentence, the Trustee shall act as successor Servicer unless it is legally
unable to do so, in which event the outgoing Servicer shall continue to act as
Servicer until a successor has been appointed and accepted such appointment.
(c) In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on the Leases as it and such successor shall agree; provided, however,
that no such monthly compensation shall, without the written consent of the
Contributor and 100% of the Noteholders, exceed the Total Servicing Fee. The
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
(d) If a successor Servicer is acting as Servicer hereunder,
it shall be subject to termination under Section 8.2 upon the occurrence of any
Servicer Termination Event applicable to it as Servicer.
SECTION 8.4. Notification to Noteholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article
VIII, the Issuer shall give prompt written notice thereof to each Rating Agency,
and the Trustee shall give prompt written notice thereof to Noteholders at their
respective addresses appearing in the Note Register.
SECTION 8.5. Waiver of Past Defaults. A Note Majority may
waive any default by the Servicer in the performance of its obligations
hereunder and its consequences. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Termination Event 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.
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ARTICLE IX
SUBSTITUTION OF LEASES
SECTION 9.1. Substitution.
(a) Subject to the satisfaction of the requirements set forth
in Section 9.1(b) hereof, Vendor Services will have the right (but not the
obligation) at any time to substitute one or more Substitute Leases and the
Equipment subject thereto for a Lease (for purposes of this Section 9.1, such
Lease referred to as a "Predecessor Lease") and the Equipment subject thereto
if:
(i) the Predecessor Lease became (A) a Liquidated
Lease, (B) a Warranty Lease or (C) an Adjusted Lease during
the immediately preceding Collection Period; and
(ii) the aggregate Principal Balance of the
Liquidated Leases, Adjusted Leases and Warranty Leases that
are Predecessor Leases shall not in the aggregate exceed 10%
of the Initial Pool Principal Balance.
(b) Each transfer of Substitute Leases will be subject to the
satisfaction of the following conditions precedent:
(i) after giving effect to such substitutions and any
adjustments pursuant to Section 3.2, the aggregate Book Value
of such Leases must be not less than 90% of the Book Value of
the Leases substituted or adjusted since the Closing Date.
(ii) either the final payment on such Substitute
Lease must be on or prior to _______ or, to the extent the
final payment on such Lease is due subsequent to _______, only
scheduled payments due on or prior to such date may be
included in the Principal Balance of such Lease for the
purpose of making any calculation under the Indenture.
(iii) the Lease Pool Principal Balance, after giving
effect to such adjustments and substitutions, must not be less
than the Lease Pool Principal Balance prior to such adjustment
or substitution (without giving effect to the proviso to the
definition of "Principal Balance").
(iv) the weighted average life of the Notes, after
giving effect to such adjustments and substitutions, must not
differ materially from the weighted average life of the Notes
prior to such adjustments and substitutions.
(v) after giving effect to such adjustments and
substitutions, the aggregate Principal Balance of the Leases
that were originated by Vendor Services must not be less than
the aggregate Principal Balance of the Leases that were
originated by Vendor Services prior to such adjustment or
substitution.
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SECTION 9.2. Procedure.
(a) By 11:00 a.m. on the Business Day prior to each Deposit
Date, Vendor Services shall give written notice to the Servicer of any
substitution of Substitute Leases for Predecessor Leases during the preceding
Collection Period. By 11:00 a.m. on the Deposit Date, Vendor Services shall
deliver to the Servicer and the Trustee and, to the extent not included in the
Servicer's Certificate, the Trustee shall promptly deliver to each Rating Agency
(i) a supplement to Exhibit A hereto setting forth the information shown thereon
for each such Substitute Lease, (ii) an Officer's Certificate (A) certifying
that each such Substitute Lease is an Eligible Lease, (B) specifying each
Predecessor Lease for which a substitution has been made and the Principal
Balance and the Book Value under each such Predecessor Lease and the Principal
Balance and the Book Value under each Substitute Lease being transferred thereby
and (C) that all conditions precedent to such addition or substitution have been
satisfied and (iii) such additional information concerning such Substitute
Leases or Predecessor Leases as may be needed for the Servicer to prepare its
Servicer's Certificates pursuant to Section 3.9 and to otherwise carry out its
duties as servicer hereunder.
(b) Subject to the provisions of Section 9.3, the delivery of
any Officer's Certificate and supplement to Exhibit A pursuant to Section 9.2(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Collection Period and as of the related Cut-Off Date (i)
Vendor Services assigned to the Contributor pursuant to the Transfer Agreement
all of Vendor Services' right, title and interest in and to the Substitute
Leases identified in such supplement and the related rights described in Section
2.1 of the Transfer Agreement, (ii) Vendor Services transferred to the
Contributor, as a contribution to capital pursuant to the Transfer Agreement,
all of Vendor Services' right, title and interest in and to the Equipment
subject to such Substitute Leases and the related rights described in Section
2.1 of the Transfer Agreement, and (iii) the Contributor assigned and
transferred to Vendor Services, without representation or warranty, all of the
Contributor's right, title and interest in and to the Predecessor Leases
identified in such Officer's Certificate and the Equipment subject thereto.
Vendor Services shall promptly deliver to the Servicer the original executed
copy of each Substitute Lease assigned to the Contributor pursuant to Section
9.1 hereof and the related Lease File and the Contributor shall promptly request
the Servicer to deliver to Vendor Services the original executed copy of each
Predecessor Lease for which substitution has been made pursuant to Section 9.1
hereof and the related Lease File.
(c) Subject to the provisions of Section 9.3, the delivery of
any Officer's Certificate and supplement to Exhibit A pursuant to Section 9.2(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Collection Period and as of the related Cut-Off Date (i)
the Contributor assigned to the Issuer pursuant to Section 9.1 hereof all of the
Contributor's right, title and interest in and to the Substitute Leases
identified in such supplement and the related rights described in Section 2.1
hereof, (ii) the Contributor transferred to the Issuer, as a contribution to
capital, all of the Contributor's right, title and interest in and to the rights
described in Section 2.1 hereof as they relate to the Equipment subject to such
Substitute Leases, and (iii) the Issuer assigned and transferred to the
Contributor, without representation or warranty, all of the Issuer's right,
title and interest in and to the Predecessor Leases identified in such Officer's
Certificate and the Equipment subject thereto. Upon such
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assignment of a Substitute Lease, the Issuer shall be deemed to have appointed
and the Servicer shall be deemed to have accepted appointment as Custodian of
the related Lease File pursuant to Section 2.2.
SECTION 9.3. Objection and Repurchase. If any holder of the
Notes objects to any substitution of Leases within ten days of receipt of the
Servicer's Certificate providing notice thereof pursuant to Section 3.9, on the
grounds either that any Substitute Lease is not an Eligible Lease or that such
substitution or addition is otherwise not permitted under the provisions of
Section 9.1 hereof, Vendor Services shall be entitled to present such additional
information as it deems appropriate in an effort to demonstrate that such Lease
is an Eligible Lease and that such substitution is permitted under the
provisions of Section 9.1 hereof. Following such presentation, the substitution
shall remain effective if each person originally objecting to the substitution
withdraws his objection. If the conditions specified in the preceding sentence
are not satisfied, or if at any time it is established that any lease was not,
at the time of substitution, an Eligible Lease, then Vendor Services shall be
required to repurchase such Lease in accordance with the provisions of Section
2.6 hereof.
SECTION 9.4. Vendor Services' and Servicer's Subsequent
Obligations. Upon any substitution of Leases in accordance with the provisions
of this Section 9, Vendor Services' and the Servicer's obligations hereunder
with respect to the Predecessor Lease shall cease but Vendor Services and the
Servicer shall each thereafter have the same obligations with respect to the
Substitute Lease substituted as it has with respect to all other Leases subject
to the terms hereof.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Amendment.
(a) This Agreement may be amended by the Contributor, the
Servicer, the Issuer and the Trustee without the consent of any of the
Noteholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions in this Agreement that may be inconsistent with any other provision
herein, or (iii) to make any other provisions with respect to matters or
questions arising under this Agreement that are not inconsistent with the
provisions hereof; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of the Noteholders.
(b) This Agreement may also be amended from time to time by
the Contributor, the Servicer, the Issuer and the Trustee with the consent of a
Note Majority (which consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders of such Note and of any
Note issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Note) for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Holders of Notes; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Leases or distributions required to be made on any
Note or the rate of interest payable thereon, (b) amend any provisions of
Section 5.06 or 8.03 of the Indenture in such a manner as to affect the priority
of payment of interest or principal to Noteholders, or (c) reduce the aforesaid
percentage required to consent to any such amendment or any waiver hereunder,
without the consent of the Holders of all Notes then Outstanding and affected
thereby; and provided, further, that no such amendment shall be effective unless
and until the Rating Agency Condition has been satisfied.
(c) Promptly after the execution of any such amendment or
consent, the Issuer or the Trustee, as appropriate, shall furnish written
notification of the substance of such amendment or consent to each Noteholder.
(d) It shall not be necessary for the consent of Noteholders
pursuant to Section 10.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any other
consents of Noteholders provided for in this Agreement) and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such
reasonable requirements as the Issuer or Trustee, as applicable, may prescribe,
including the establishment of record dates.
(e) Prior to the execution of any amendment to this Agreement,
the Issuer shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement, in addition to the Opinion of Counsel
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referred to in Section 10.2(h). The Issuer may, but shall not be obligated to,
enter into any such amendment which affects the Issuer's own rights, duties or
immunities under this Agreement or otherwise.
SECTION 10.2. Protection of Title to Trust Assets.
(a) The Contributor shall execute and file such financing
statements and cause to be executed and filed such continuation and other
statements (including those prepared by the Servicer pursuant to Section
3.14(c)), all in such manner and in such places as may be required by law fully
to preserve, maintain and protect the interest of the Issuer, the Issuer and the
Trustee in the Trust Assets and in the proceeds thereof; except that (i) UCC-1
financing statements and continuation statements, listing the Obligor as debtor
and the related Equipment as collateral, need be filed only as required by
Section 3.5; and (ii) no assignments of any such financing statements relating
to the Equipment shall be filed to reflect the assignment of the Leases by
Vendor Services to the Contributor and by the Contributor to the Issuer. The
Contributor shall deliver (or cause to be delivered) to the Issuer and the
Trustee file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) Neither the Contributor nor the Issuer shall change its
name, identity or corporate structure in any manner that would, could or might
make any financing statement or continuation statement filed by the Contributor
in accordance with paragraph (a) above seriously misleading within the meaning
of Section 9-402(7) of the UCC, unless it shall have given the Issuer and the
Trustee at least 60 days' prior written notice thereof, and shall promptly file
appropriate amendments to all previously filed financing statements and
continuation statements.
(c) Each of the Contributor, the Servicer and the Issuer shall
give the Issuer and the Trustee at least 60 days' prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement. The Servicer shall at all times maintain each office from
which it services Leases and its principal executive office within the United
States of America.
(d) The Servicer shall maintain accounts and records as to
each Lease accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Lease, including payments and recoveries
made and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Lease and the amounts from
time to time deposited in the Collection Account in respect of such Lease.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of transfer and assignment under this Agreement of the
Leases to the Issuer, the Servicer's master computer records (including any
backup archives) that refer to any Lease indicate clearly that the Lease is
owned by the Issuer. Indication of the Issuer's ownership of a Lease shall be
deleted from or modified on the Servicer's computer systems when, and only when,
the Lease has been paid in full, liquidated (including receipt of all recoveries
reasonably expected to be collected), a Substitute Lease substituted therefor,
or purchased by the Contributor or Vendor Services.
- 45 -
(f) Upon receipt by the Servicer of reasonable prior notice,
Servicer shall permit the Issuer, the Trustee and their respective agents, at
any time during the Servicer's normal business hours to inspect, audit and make
copies of and abstracts from the Servicer's records regarding any Leases or any
other portion of the Trust Assets.
(g) The Servicer shall furnish to the Issuer and the Trustee
at any time upon request a list (which may, at the option of the Servicer, be on
a computer disk or other electronic storage medium) of all Leases then held as
part of the Trust Assets, together with a reconciliation of such list to the
Schedule of Leases and to each of the Servicer's Certificates furnished before
such request indicating removal of Leases from the Issuer. Upon request, the
Servicer shall furnish a copy of any list to the Contributor. Subject to the
following sentence, the Issuer shall hold any such list and Schedule of Leases
for examination by interested parties during normal business hours at the
Corporate Trust Office upon reasonable notice by such Persons of their desire to
conduct an examination. The Issuer shall and shall cause its representatives to
hold in confidence all information thereon relating to the identity of the
Obligors except to the extent disclosure may be required by ss. 9-208 of the UCC
or by other applicable law (and all reasonable applications for confidential
treatment are unavailing) and except to the extent that the Issuer may
reasonably determine that such disclosure is consistent with its obligations
under the Indenture.
(h) The Contributor and the Servicer shall deliver to the
Issuer and the Trustee simultaneously with the execution and delivery of this
Agreement and of each amendment thereto and upon the occurrence of the events
giving rise to an obligation to give notice pursuant to Section 10.2(b) or (c),
an Opinion of Counsel either (a) stating that, in the opinion of such Counsel,
all financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Issuer and the Trustee in the Leases and the other Trust Assets, and reciting
the details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (b) stating that, in the opinion of such counsel, no
such action is necessary to preserve and protect such interest.
(i) The Servicer shall deliver to the Issuer and the Trustee,
within 90 days after the beginning of each calendar year beginning with the
first calendar year beginning more than three months after the Closing Date, an
Opinion of Counsel, either (a) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Issuer and
the Trustee in the Leases, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (b) stating
that, in the opinion of such counsel, no action shall be necessary to preserve
and protect such interest.
SECTION 10.3. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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SECTION 10.4. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or the
respective rights of the Holders thereof.
SECTION 10.5. Assignment. Notwithstanding anything to the
contrary contained in this Agreement, except as provided in Section 7.2 or
Section 8.2 (and as provided in the provisions of the Agreement concerning the
resignation of the Servicer), this Agreement may not be assigned by the
Contributor or the Servicer without (i) the prior written consent of the Issuer,
the Trustee and a Note Majority, and (ii) satisfaction of the Rating Agency
Condition.
SECTION 10.6. Third-Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
SECTION 10.7. Counterparts. For the purpose of facilitating
its execution and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.
SECTION 10.8. Intention of Parties. The parties hereto intend
that, in the event that the conveyance of the Leases and other Trust Assets
pursuant to this Agreement is determined to be made as security for a loan made
by the Issuer or the Noteholders to the Contributor, the Contributor hereby
grants to the Issuer to secure such loan a first priority security interest in
all of the Contributor's right, title and interest in and to the rights and
property intended to be conveyed to the Issuer pursuant to Section 2.1(a). This
Agreement shall, in such event, constitute a security agreement under applicable
law.
SECTION 10.9. Notices. All demands, notices and communications
under this Agreement shall be in writing, personally delivered or mailed by
certified mail-return receipt requested, or by facsimile transmission, and shall
be deemed to have been duly given upon receipt (a) in the case of Vendor
Services, the Contributor, the Issuer or the Servicer, at the following address:
1100 Landmark Towers, ▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: General Counsel and (b) in the case of the Trustee, at its Corporate
Trust Office, or at such other address as shall be designated by any such party
in a written notice to the other parties.
SECTION 10.10. Income Tax Characterization. The Contributor
has structured the Indenture and the Notes with the intention that the Notes
will qualify under applicable federal, state, local and foreign tax law as
indebtedness of the Contributor secured by the Leases. The Contributor and the
Servicer agree to treat and to take no action inconsistent with the treatment of
the Notes as such indebtedness for purposes of federal, state, local and foreign
income or franchise taxes and any other tax imposed on or measured by income.
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IN WITNESS WHEREOF, the Issuer, the Contributor, Vendor
Services, the Servicer and the Trustee have caused this Contribution and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
ISSUER:
GREEN TREE LEASE FINANCE 1998-1, LLC
By GREEN TREE LEASE FINANCE II, INC.
By _____________________________________
Name: ______________________________
Title: _____________________________
CONTRIBUTOR:
GREEN TREE LEASE FINANCE II, INC.
By _____________________________________
Name: ______________________________
Title: _____________________________
GREEN TREE VENDOR SERVICES
CORPORATION
In its individual capacity and as Servicer
By _____________________________________
Name: ______________________________
Title: _____________________________
TRUSTEE:
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Trustee
By _____________________________________
Name: ______________________________
Title: _____________________________
- 48 -
EXHIBIT A
SCHEDULE OF LEASES AND EQUIPMENT
A-1
EXHIBIT B
FORM OF SERVICER'S CERTIFICATE
The undersigned, on behalf of Green Tree Vendor Services
Corporation, in its capacity as servicer (the "Servicer") under the Contribution
and Servicing Agreement, dated as of December 1, 1998 (the "Contribution and
Servicing Agreement"), among Green Tree Lease Finance 1998-1, LLC, Green Tree
Lease Finance II, Inc., U.S. Bank Trust National Association, as trustee under
the Indenture, and Green Tree Vendor Services Corporation, in its individual
capacity and as Servicer, DOES HEREBY CERTIFY that he/she is a Responsible
Officer of the Servicer and, pursuant to Section 3.9 of the Contribution and
Servicing Agreement, DOES HEREBY FURTHER CERTIFY the following with respect to
the Payment Date occurring on _____________________:
B-1
This Certificate shall constitute the Servicer's Certificate
required by Section 3.9 of the Contribution and Servicing Agreement with respect
to the above Payment Date. Any term capitalized but not defined herein shall
have the meaning ascribed thereto in the Contribution and Servicing Agreement.
IN WITNESS WHEREOF the undersigned has hereunto set his/her
hand this __________ day of ______________, ______.
GREEN TREE VENDOR SERVICES
CORPORATION
By _____________________________________
Name: ______________________________
Title: _____________________________
B-2