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CHARTER FINANCIAL, INC.,
SERVICER,
CHARTER EQUIPMENT LEASE 1999-1 LLC,
ISSUER,
AND
LASALLE BANK NATIONAL ASSOCIATION
TRUSTEE
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SERVICING AGREEMENT
Dated as of August 1, 1999
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TABLE OF CONTENTS
Page
R E C I T A L S 1
ARTICLE 1. DEFINITIONS........................................................2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.....................3
Section 2.01 Corporate Organization and Authority.......................3
Section 2.02 Business and Property......................................4
Section 2.03 Financial Statements.......................................4
Section 2.04 Insurance..................................................4
Section 2.05 Pending Litigation.........................................4
Section 2.06 Transactions Legal and Authorized..........................5
Section 2.07 Governmental Consent.......................................5
Section 2.08 Taxes......................................................5
Section 2.09 Compliance with Law........................................6
Section 2.10 Ability to Perform.........................................6
Section 2.11 Ordinary Course; No Insolvency.............................6
Section 2.12 Principal Executive Office.................................6
Section 2.13 Servicing Provisions Customary.............................6
ARTICLE 3. ADMINISTRATION OF LEASES...........................................7
Section 3.01 Servicer to Act............................................7
Section 3.02 Lease Amendments and Modifications.........................8
Section 3.03 Defaulted Leases...........................................9
Section 3.04 Costs of Servicing; Servicing Fee.........................10
Section 3.05 Other Transactions........................................11
Section 3.06 Clean-Up Call.............................................11
ARTICLE 4. SERVICER ADVANCES AND SELLER'S SUPPORT............................11
Section 4.01 Late Lease Payments.......................................11
Section 4.02 Early Termination Leases..................................11
Section 4.03 Indemnification...........................................12
Section 4.04 Repurchases...............................................12
Section 4.05 Payment Advices...........................................13
ARTICLE 5. INFORMATION TO BE PROVIDED........................................13
Section 5.01 Monthly Status Reports; Servicing Reports.................13
Section 5.02 Annual Independent Public Accountant's Report.............14
ARTICLE 6. THE SERVICER......................................................15
Section 6.01 Merger or Consolidation of the Servicer...................15
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Section 6.02 Limitation on Liability of the Servicer and Others........15
Section 6.03 Servicer Not to Resign or Be Removed......................15
Section 6.04 Financial and Business Information........................16
Section 6.05 Officer's Certificates....................................17
Section 6.06 Inspection................................................17
Section 6.07 Servicer to Act as Custodian..............................18
ARTICLE 7. DEFAULT 19
Section 7.01 Servicer Events of Default................................19
Section 7.02 Termination...............................................20
Section 7.03 Trustee to Act; Appointment of Successor..................20
Section 7.04 Servicer to Cooperate.....................................21
Section 7.05 Notification to Noteholders...............................21
Section 7.06 Remedies Not Exclusive....................................22
Section 7.07 Database File.............................................22
Section 7.08 Indemnification of Trustee................................22
Section 7.09 Responsibilities of the Trustee Acting as Servicer........22
ARTICLE 8. SUBSTITUTION AND ADDITION OF LEASES...............................23
Section 8.01 Substitution and Addition.................................23
Section 8.02 Procedure.................................................24
Section 8.03 Servicer's Subsequent Obligations.........................25
ARTICLE 9. ASSIGNMENT........................................................25
Section 9.01 Assignment to Trustee.....................................25
Section 9.02 Assignment by Servicer....................................25
ARTICLE 10. NATURE OF OBLIGATIONS AND SECURITY THEREFOR......................26
Section 10.01 Obligations Absolute.....................................26
Section 10.02 Further Assurances; Financing Statements.................26
ARTICLE 11. MISCELLANEOUS....................................................26
Section 11.01 Continuing Obligations...................................26
Section 11.02 GOVERNING LAW............................................26
Section 11.03 Successors and Assigns...................................27
Section 11.04 Modification.............................................27
Section 11.05 No Petition or Proceedings...............................27
Section 11.06 Notices..................................................27
Section 11.07 Counterparts.............................................27
Schedule 1 - Schedule of Leases
Exhibit A - Form of Receivables Servicing Report
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SERVICING AGREEMENT
This SERVICING AGREEMENT is made and dated as of August 1, 1999, by and
among CHARTER FINANCIAL, INC., a New York corporation, as servicer (the
"Servicer") hereunder, CHARTER EQUIPMENT LEASE 1999 - 1 LLC, as issuer (the
"Issuer"), and LASALLE BANK NATIONAL ASSOCIATION, as Trustee (the "Trustee").
R E C I T A L S
WHEREAS, pursuant to the Seller Contribution and Sale Agreement, Charter
Financial, Inc. (the "Seller") is selling and making certain capital
contributions to Charter Funding Corporation V (the "Transferor") with respect
to the Leases, the related Equipment and other assets described therein (the
"Transferred Assets").
WHEREAS, pursuant to the Transferor Contribution and Sale Agreement, the
Transferor is selling and making certain capital contribution to Charter
Equipment Lease 1999-1 LLC (the "Issuer"), with respect to the Transferred
Assets.
WHEREAS, pursuant to the Indenture, the Issuer is pledging the Transferred
Assets thereunder for the benefit of the Holders of the Notes (as detailed
below) and is issuing one class of [ ]% Class A-1 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-1 Notes"), one class of [ ]%
Class A-2 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class A-2 Notes"), one class of [ ]% Class A-3 Lease-Backed Notes, [ ] in the
aggregate principal amount of $[ ] (the "Class A-3 Notes"), one class of [ ]%
Class A-4 Lease-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class A-4 Notes"; together with the Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes, the "Class A Notes"), one class of [ ]% Class B
Leased-Backed Notes, [ ] (the "Class B Notes"), in the aggregate principal
amount of $[ ], one class of [ ]% Class C Lease-Backed Notes, [ ], in the
aggregate principal amount of $[ ] (the "Class C Notes"), one class of [ ]%
Class D Leased-Backed Notes, [ ] in the aggregate principal amount of $[ ] (the
"Class D Notes"); together with the Class A Notes, the Class B Notes, the Class
C Notes, and the Class D Notes, are referred to collectively as the "Notes").
WHEREAS, the Servicer and the Trustee desire to enter into this Serving
Agreement in order that the Servicer may service the Transferred Assets in
accordance with the terms of this Servicing Agreement.
WHEREAS, pursuant to the Indenture, the Issuer is granting, inter alia, to
the Trustee, for the benefit of the Holders from time to time of the Notes, a
security interest in all right, title and interest of the Issuer in, to and
under the Leases, the interests in the Equipment and the other Transferred
Assets and this Servicing Agreement.
NOW, THEREFORE, the parties hereto agree, in consideration of the mutual
agreements set forth herein and other valuable consideration provided, as
follows:
ARTICLE 1. DEFINITIONS
As used in this Servicing Agreement, the following terms have the
respective meanings set forth below or set forth in the Section hereof or in any
other agreement indicated:
Additional Lease - each separate lease agreement and each lease schedule or
supplement (and each master lease agreement insofar as the same relates to any
such schedule or supplement) Granted by the Issuer to be a part of the Granted
Assets in exchange for all or a portion of the proceeds of an Early Termination
Lease that has been prepaid in full pursuant to Section 8.01(b) hereof.
Casualty Loss: with respect to any Lease, any loss, theft, condemnation,
governmental taking, destruction, or damage beyond repair of any item of
Equipment subject thereto which results, in accordance with the terms of the
Lease, in a reduction in the number or amount of any future Lease Payments due
thereunder or in the termination of the Lessee's obligation to make future Lease
Payments thereunder.
Clean-Up Call - as defined in Section 3.06 hereof.
Eligible Lease - as defined in Section 4.02 hereof.
Filing Requirements - Financing Statements necessary to perfect (a) the
ownership interest of the Issuer in the Leases, which name the Issuer as secured
party/buyer and the Transferor as the debtor/seller, and (b) the perfected
security interest of the Trustee in the Leases and the Equipment which name the
Issuer as debtor and the Trustee as the secured party..
Financing Statement - a statement filed pursuant to the UCC which evidences
a security interest in an asset in order to perfect such security interest.
Indemnified Party - as defined in Section 4.03 hereof.
Indenture - the Indenture dated as of August 1, 1999 among the Issuer, the
Servicer and the Trustee, as the same may be supplemented, modified or amended
from time to time in accordance with the terms thereof.
Issuer - Charter Equipment Lease 1999-1 LLC and any successor thereto.
Lien - means a security interest, lien, charge, pledge or encumbrance of
any kind other than tax liens, mechanics liens, and any liens that attach to a
Lease by operation of law.
Predecessor Lease - as defined in Section 8.01 hereof.
Private Placement Memorandum - the final Private Placement Memorandum used
in connection with the private offering of the Class C Notes and the Class D
Notes.
Prospectus - the form of final prospectus to be used in connection with the
public offering of the Class A Notes and the Class B Notes, as filed with the
Securities and Exchange Commission.
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Registration Statement - the registration statement (File No. 333-64045)
filed with the Securities and Exchange Commission for the registration of the
Class A Notes and the Class B Notes.
Servicer - the corporation so identified in the first paragraph of this
Servicing Agreement and any successor thereto in accordance with the provisions
hereof.
Servicer Event of Default - as defined in Section 7.01 hereof.
Servicing Fee - as defined in Section 3.04(a) hereof.
Servicing Report - as defined in Section 5.01(b) hereof.
Substitute Lease - as defined in Section 8.01(a) hereof.
Transferor - Charter Funding Corporation V and any successor thereto.
To the extent capitalized terms are used herein which are not otherwise
defined, such terms shall have meanings defined in the Indenture.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER
The Servicer hereby represents and warrants to the Trustee as to the
accuracy and correctness of the following statements set forth in Article 2:
Section 2.01 Corporate Organization and Authority.
The Servicer:
(a) is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation,
(b) has all requisite power and authority and all necessary licenses and
permits to own and operate its properties and to carry on its business
as now conducted (except where the failure to have such licenses and
permits would not have a material adverse effect on the business or
condition (financial or otherwise) of the Servicer or impair the
enforceability of any Lease) and to enter into and perform its
obligations under this Servicing Agreement, and the transactions
contemplated hereby, including performance of the duties of the
Servicer and the Servicer's support obligations hereunder, and
(c) has duly qualified and is authorized to do business and is in good
standing as a foreign corporation in each jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary (except where the failure to be so qualified
or in good standing would not have a material adverse effect on the
Granted Assets or the business or
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condition (financial or otherwise) of the Servicer or impair the
enforceability of any Lease).
Section 2.02 Business and Property.
The Prospectus and the Private Placement Memorandum, accurately describe in
all material respects the general nature of the business of the Servicer.
Section 2.03 Financial Statements.
(a) The consolidated balance sheet of the Servicer and its consolidated
subsidiaries for the fiscal periods ended December 31, 1998 and December 31,
1997 and the related consolidated statements of income, retained earnings and
cash flow for the respective period and fiscal years ended on such dates, all
accompanied by reports thereon containing opinions without qualification, except
as therein noted, by Ernst & Young, independent certified public accountants,
and the unaudited interim consolidated balance sheet of the Servicer and its
consolidated subsidiaries as of March 31, 1999 and the related consolidated
statements of income, retained earnings and cash flow for the three months ended
on such date have been prepared in accordance with generally accepted accounting
principles consistently applied, and present fairly the financial position of
the Servicer and its subsidiaries as of such dates and the results of their
operations for such periods.
(b) Except as disclosed in the Prospectus, the Private Placement Memorandum
and the financial statements referred to in the preceding Section 2.03(a), since
March 31, 1999 there has been no change in the business, condition or prospects
(financial or otherwise) of the Servicer except changes in the ordinary course
of business, none of which individually or in the aggregate has been materially
adverse. Neither the Servicer nor any of its subsidiaries has any material
liabilities or obligations not incurred in the ordinary course of business other
than those disclosed in the financial statements referred to in Section 2.03(a)
or for which adequate reserves are reflected in such financial statements and
certain contingent obligations of the Servicer relating to other asset
securitization transactions involving the Servicer.
Section 2.04 Insurance.
In addition to the insurance maintained by the Lessees with respect to the
Equipment, the Servicer (or an Affiliate of the Servicer) maintains (i) a
general liability insurance policy in the aggregate amount of $2,000,000 and
(ii) an excess liability insurance policy in umbrella form in the aggregate
amount of $4,000,000. Each of such policies is in full force and effect and
covers all equipment owned by the Servicer and the Issuer. All premiums in
respect of such policies have been paid. The Issuer is named as a loss payee and
additional insured, as its interests may appear, on such liability policies
maintained by the Servicer.
Section 2.05 Pending Litigation.
There are no proceedings or investigations pending, or to the knowledge
(after due inquiry) of the Servicer threatened, against or affecting the
Servicer or any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal, including,
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but not limited to, any such proceeding or investigation with respect to any
environmental or other liability resulting from the ownership or use of any of
the Equipment, which, individually or in the aggregate, involve the possibility
of materially and adversely affecting the properties, business, prospects,
profits or condition (financial or otherwise) of the Servicer and its
subsidiaries, or the ability of the Servicer or the Servicer to perform its
obligations under this Servicing Agreement. The Servicer is not in default with
respect to any order of any court, governmental authority or agency or
arbitration board or tribunal.
Section 2.06 Transactions Legal and Authorized.
The compliance by the Servicer with all of the provisions of this Servicing
Agreement:
(a) have been duly authorized by all necessary corporate action on the part
of the Servicer, and do not require any stockholder approval, or approval or
consent of any trustee or holders of any indebtedness or obligations of the
Servicer except such as have been duly obtained;
(b) are within the corporate powers of the Servicer; and
are legal and will not conflict with, result in any breach in any of the
provisions of, constitute a default under, or result in the creation of any Lien
upon any property of the Servicer under the provisions of, any agreement,
charter, instrument, by-law or other instrument to which the Servicer is a party
or by which it or its property may be bound or result in the violation of any
law, regulation, rule, order or judgment applicable to the Servicer or its
properties, or any order to which the Servicer or its properties is subject, of
or by any government or governmental agency or authority.
Section 2.07 Governmental Consent.
No consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority is necessary or required on the
part of the Servicer in connection with the execution and delivery of this
Servicing Agreement or the performance of its obligations as Servicer.
Section 2.08 Taxes.
(a) All tax returns required to be filed by the Servicer or any subsidiary
in any jurisdiction have in fact been filed, and all taxes, assessments, fees
and other governmental charges upon the Servicer or any subsidiary, or upon any
of their respective properties, income or franchises, shown to be due and
payable on such returns have been paid. To the best of the Servicer's knowledge
all such tax returns were true and correct and neither the Servicer nor any
subsidiary knows of any proposed additional tax assessment against it in any
material amount nor of any basis therefor.
(b) The provisions for taxes on the books of the Servicer and each of its
subsidiaries are in accordance with generally accepted accounting principles.
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Section 2.09 Compliance with Law.
The Servicer:
(a) is not in violation of any laws, ordinances, governmental rules
or regulations to which it is subject;
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of
its property or to the conduct of its business; and
(c) is not in violation in any material respect of any term of any
agreement, charter instrument, by-law or other instrument to
which it is a party or by which it may be bound, which violation
or failure to obtain might materially adversely affect the
business or condition (financial or otherwise) of the Servicer
and its subsidiaries.
Section 2.10 Ability to Perform.
At the date hereof, the Servicer does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and every covenant
contained in this Servicing Agreement or its ability to perform as Servicer.
Section 2.11 Ordinary Course; No Insolvency.
The transactions contemplated by the Indenture and this Servicing Agreement
are being consummated by the Servicer in furtherance of the Servicer's ordinary
business purposes and constitute a practical and reasonable course of action by
the Servicer designed to improve the financial position of the Servicer, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. The Servicer will not, either as a result of
the transaction contemplated by this Servicing Agreement, or immediately before
or after such transaction, be insolvent or have an unreasonably small capital
for the conduct of its business and the payment of anticipated obligations.
Section 2.12 Principal Executive Office.
The principal executive office of each of the Servicer and the Servicer is
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
Section 2.13 Servicing Provisions Customary.
The servicing arrangements hereunder, including, without limitation, the
terms and conditions pursuant to which the Servicer will act as Servicer and the
Servicing Fee to be paid to the Servicer, are consistent with the arrangements
and customary practices of the Servicer when providing comparable services to
non-affiliated entities and of other servicers in the equipment leasing
industry.
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ARTICLE 3. ADMINISTRATION OF LEASES
Section 3.01 Servicer to Act.
(a) Notwithstanding the transfers and assignments of the Leases (including
the right to receive all payments due or to become due thereunder) and the
related interests in the Equipment contemplated hereby, the Servicer, for the
benefit of the Issuer, will service and administer each Lease in accordance with
the terms thereof and of this Servicing Agreement. The Servicer shall take, or
cause to be taken, all such actions as may be necessary or advisable to service,
administer and collect each Lease from time to time, all in accordance with (i)
customary and prudent servicing procedures for leases of a similar type, (ii)
all applicable laws, rules and regulations, and (iii) without limitation as to
its obligations under the preceding clauses (i) and (ii), no less a standard of
care than that which it applies to leases it services for its own account. The
Servicer shall provide the Lessees with appropriate invoices or payment coupons
and such other notices as may be required so that all Lease Payments, Casualty
Payments and Termination Payments in respect of each Lease are remitted by the
Lessees to the address specified by the Servicer. The Servicer shall deposit
such payments to the Distribution Account within two Business Days following the
receipt thereof. Any other amount received by the Servicer from time to time
from the Issuer or any Lessee which is or is intended to be subject to the Lien
of the Indenture shall be held in trust by the Servicer, as agent for the
Trustee and within two Business Days deposited into the Distribution Account for
application in accordance with the provisions of the Indenture.
(b) The Servicer shall do, and shall have full power and authority to do,
subject only to the specific requirements and prohibitions of this Servicing
Agreement, any and all things in connection with the servicing and
administration of the Leases and the interests in the Equipment which are
consistent with the manner in which it services leases and equipment
constituting part of its own portfolio and consistent with the customary
practices of servicers in the equipment leasing industry, but in performing its
duties hereunder, the Servicer will act on behalf and for the benefit of the
Issuer, the Trustee and the Holders of the Notes, subject at all times to the
provisions of the Indenture, without regard to any relationship which the
Servicer or any Affiliate of the Servicer may otherwise have with a Lessee. The
Servicer shall at all times act in accordance with the provisions of each Lease,
and shall observe and comply with all requirements of law applicable to it.
Except as permitted by the terms of any Lease following a default thereunder,
the Servicer shall not take any action which would result in the interference
with the Lessee's right to quiet enjoyment of the Equipment subject to the Lease
during the term thereof. The Servicer shall exercise in accordance with the
servicing standard described in this Section 3.01 with respect to each item of
Equipment all rights and remedies it, the Issuer or the Trustee shall have
against any vendor of the Equipment, subject to the provisions of any Lease, and
shall promptly pay all amounts realized from such actions into the Distribution
Account, in accordance with the terms of the Indenture.
(c) Without limiting the generality of the foregoing, the Servicer agrees
to (i) provide coupon books for or invoice each Lessee monthly (except
quarterly, semi-annually or annually in the case of Leases which provide for
quarterly, semi-annual or annual Lease Payments, respectively) for all Lease
Payments required to be paid by such Lessee in such manner and to the same
extent as the Servicer does with respect to leases held for its own
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account, (ii) maintain with respect to each Lease and each item of Equipment,
and with respect to each payment by each Lessee and compliance by each Lessee
with the provisions of each Lease, complete and accurate records in the same
form and to the same extent as the Servicer does with respect to leases and
equipment held for its own account (which records shall be at least as complete
and accurate as those maintained by the Servicer as of the date of this
Servicing Agreement), and (iii) from time to time execute, deliver and file (or
cause the same to be done), and the Servicer is hereby authorized and empowered
to execute, deliver, and file on behalf of the Issuer and the Trustee, any and
all tax returns with respect to sales, use, personal property and other taxes
(other than corporate income tax returns) and any and all reports or licensing
applications required to be filed in any jurisdiction with respect to any Lease
or any item of Equipment and any and all required Financing Statements and
assignments of Financing Statements and such additional Financing Statements and
continuation statements with respect thereto as may from time to time be
necessary because of Lease substitutions, equipment replacements in accordance
with the provisions of any Lease or otherwise so that the security interest
contemplated by the Indenture in favor of the Trustee in each of the Leases, at
all times will be perfected by such filings with the appropriate Uniform
Commercial Code filing offices. The Servicer agrees to complete and file
Financing Statements in accordance with the Filing Requirement.
(d) The Servicer will cause to be maintained with respect to the Leases and
the Equipment casualty insurance sufficient to cover the replacement cost of the
Equipment. Each such casualty policy shall name the Servicer or the Trustee as
loss payee and additional insured; provided that the Servicer shall cause all
such policies to name the Trustee and the Issuer as loss payees and additional
insureds if (A) the Servicer is no longer the Servicer, (B) an Event of Default
shall have occurred and be continuing or (C) a Servicer Event of Default shall
have occurred and be continuing.
(e) On or prior to the Closing Date, the Servicer will file the Financing
Statements and assignments of Financing Statements in accordance with the Filing
Requirements and thereafter will file such additional Financing Statements and
continuation statements and assignments with respect to the Leases as may be
necessary because of equipment replacements in accordance with the provisions of
any Lease, purchases of Additional Leases in accordance with Article 8 and Lease
substitutions pursuant to Article 8 hereof or otherwise so that (i) the
interests conveyed by the Seller Contribution and Sale Agreement in favor of the
Transferor in each of the Leases and Equipment, (ii) the interests conveyed by
the Transferor Contribution and Sale Agreement in favor of the Issuer, and (iii)
the security interest granted by the Indenture in favor of the Trustee in each
of the Leases and the Equipment will be perfected by such filings with the
appropriate Uniform Commercial Code filing offices (to the extent this may be
achieved by central filing).
Section 3.02 Lease Amendments and Modifications.
In performing its obligations hereunder, the Servicer may, acting in the
name of the Issuer and without the necessity of obtaining the prior consent of
the Issuer or the Trustee, enter into and grant modifications, waivers and
amendments to the terms of any Lease except for modifications, waivers or
amendments that (a) are inconsistent with the servicing standards set forth in
Section 3.01 above, (b) would reduce the amount or extend the time for payment
of any
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Lease Payment, Casualty Payment or Termination Payment to be made under a Lease
(other than as permitted in the following paragraph or to permit termination of
a Lease which does not otherwise provide for termination by requiring the
payment, in lieu of all future Lease Payments with respect to the Lease or
Equipment subject thereto, an amount which equals or exceeds the Lease
Repurchase Amount for such Lease as of such date) or the Lessee's absolute and
unconditional obligation to make payment of the same, (c) would reduce or
adversely affect the Lessee's obligation to maintain, service, insure and care
for the Equipment or would permit the alteration of any item of Equipment in any
way which could adversely affect its present or future value or (d) otherwise
would materially adversely affect the interests of any of the Issuer, the
Trustee or the Holders of the Notes.
Notwithstanding the foregoing paragraph, following the transfer of any
Lease to the Issuer in accordance with the Transferor Contribution and Sale
Agreement, the Servicer may make adjustments to such Lease which modify one or
more terms of such Lease, such as payment amount or payment date. Such
administrative adjustments may result in a re-booking of such Lease and the
assignment of a new Lease number, but will not be considered to be a
substitution or prepayment of such Lease. The Servicer may permit such
adjustments so long as the following conditions precedent have been satisfied:
(i) after giving effect to such adjustment, the final payment on such
Lease must be on or prior to January 1, 2006.
(ii) after giving effect to such adjustments the aggregate amount of
Lease Payments through the term of the Leases will not be materially less
than the aggregate scheduled Lease Payments of the Leases prior to such
adjustment.
(iii) after giving effect to such adjustments, the Discounted Lease
Balance of the Leases must not be less than the Discounted Lease Balance of
the Leases prior to such adjustment.
(iv) after giving effect to such adjustments, the weighted average
remaining term of the Leases must not be greater than the weighted average
remaining term of the Leases prior to such adjustment.
Section 3.03 Defaulted Leases.
(a) Upon receipt of notice from the Issuer, the Trustee or any other
Person, or if the Servicer otherwise learns that any Lease is a Defaulted Lease,
the Servicer will take such action as is appropriate, consistent with the
Servicer's administration of leases in its own portfolio and consistent with the
customary practices of servicers in the equipment leasing industry, including
such action as may be reasonably necessary to attempt to cause the Lessee
thereunder to cure such non-performance (if the same may be cured) or to
terminate or attempt to terminate such Lease and to recover, or attempt to
recover, all damages resulting from such default.
(b) The Servicer will use commercially reasonable efforts to sell or lease
any Equipment upon the expiration of a Lease or the early termination of an
Early Termination Lease or that is subject to a Defaulted Lease in a timely
manner and upon the most favorable terms and
9
conditions available at the time. In the event of an early lease termination of
an Early Termination Lease, any Additional Lease must have a Discounted Lease
Balance equal to or greater than that of the Early Termination Lease, monthly
payments at least equal to those of the Early Termination Lease through the
remaining term of such Early Termination Lease, and a remaining term less than
or equal to that of the Early Termination Lease.
(c) In the event that the Servicer is required to sell or lease any item of
Equipment pursuant to the provisions of this Section 3.03 at a time when the
Servicer has other similar items of equipment available to it, the Servicer will
not favor any such other item in its remarketing efforts.
(d) All amounts realized by the Servicer in the performance of its duties
hereunder with respect to any Lease or Equipment remaining subject to the Lien
of the Indenture (net of the Servicer's actual out-of-pocket expenses reasonably
incurred in such realization) shall be held in trust by the Servicer, as agent
for the Trustee and deposited into the Distribution Account within two Business
Days of receipt for application in accordance with the provisions of the
Indenture; provided that, to the extent that (i) the Servicer has made any
advances pursuant to Section 4.01 hereof with respect to any Lease which
thereafter became a Defaulted Lease, and (ii) the Servicer has not otherwise
been fully reimbursed for such advances or payments, the Servicer shall
reimburse itself for such advances or payments from any amounts recovered with
respect to such Defaulted Lease before depositing any such amounts pursuant to
this Section 3.03(d).
Section 3.04 Costs of Servicing; Servicing Fee.
(a) All costs of servicing each Lease in the manner required by this
Article 3 shall be borne by the Servicer, but the Servicer shall be entitled to
retain, out of any amounts actually recovered by the Servicer in the performance
of its obligations under Section 3.03 hereof with respect to any Lease or the
interests in the Equipment subject thereto, the Servicer's actual out-of-pocket
expenses reasonably incurred in the course of such performance with respect to
such Lease or the interests in the Equipment. (For all purposes of this Article
3 the Servicer's "out-of-pocket expenses" means only those expenses incurred to
third parties (e.g., reasonable fees of outside counsel in a collection suit)
and not salaries, operating costs, overtime wages and other such "overhead"
costs or expenses of the Servicer.) In addition, the Servicer shall be entitled
to receive from the Issuer on each Payment Date following the Closing Date a
servicing fee with respect to the Notes (the "Servicing Fee") in the amounts
described in paragraph (b) below.
(b) The amount of the Servicing Fee which the Servicer shall be entitled to
receive on each Payment Date following the original issuance of the Notes shall
be determined by multiplying (i) the Aggregate Discounted Lease Balance of
Leases as of the prior Payment Date times (ii) one-twelfth of 0.50%.
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Section 3.05 Other Transactions.
Nothing in this Servicing Agreement shall preclude the Servicer from
entering into other leases or other financial transactions with any Lessee or
selling or discounting any such lease with any Person.
Section 3.06 Clean-Up Call.
The Servicer shall be permitted, in its sole discretion, to purchase all of
the remaining Leases and Lease Receivables which comprise the Granted Assets as
of the end of any Collection Period on which the Aggregate Discounted Lease
Balance is less than 10% of the Aggregate Discounted Lease Balance as of the
Closing Date (a "Clean-Up Call") through the deposit of an amount equal to the
sum of the Discounted Lease Balance of all remaining Leases into the
Distribution Account on the Business Day prior to the Payment Date following the
end of such Collection Period. Such payment shall be treated as Collections on
the Leases.
ARTICLE 4. SERVICER ADVANCES AND SELLER'S SUPPORT
Section 4.01 Late Lease Payments.
On the day prior to each Payment Date, the Servicer may, but will not be
required to, advance and remit to the Trustee for deposit in the Distribution
Account, in such manner as will ensure that the Trustee will have immediately
available funds on account thereof by 11:00 A.M. New York City time on the
Business Day prior to such Payment Date, an amount (a "Servicer Advance") equal
to any Lease Payment due during the prior Collection Period but unpaid or due
prior to the related Calculation 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 Lessee 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 Distribution Account in
accordance with the Indenture on any following Payment Date.
Section 4.02 Early Termination Leases.
Following the Calculation Date as of which any Lease first becomes an Early
Termination Lease the Seller may, but shall have no obligation to, either (a)
substitute one or more Eligible Leases and the Equipment subject thereto for
such Lease and the Equipment subject thereto pursuant to Article 8 hereof (if
the Seller is then entitled to substitute Leases and Equipment in accordance
with the provisions of Section 8.01 hereof) on or before the Business Day prior
to the next succeeding Payment Date, (b) repurchase from the Issuer such Lease
and the related Equipment by remitting to the Trustee an amount equal to the
Lease Repurchase Amount in such manner as will ensure that the Trustee will have
immediately available funds therefor by 11:00 A.M. New York City time on the
Business Day prior to the next succeeding Payment Date or (c) offer for sale to
the Issuer one or more Additional Leases in consideration of the proceeds
thereof in accordance with Article 8 hereof. Unless the Seller takes one of the
actions set forth in the prior sentence, the Servicer will not permit a
voluntary termination of a Lease prior to its stated maturity unless it receives
a payment in connection with such termination equal to at least the Prepayment
Amount. Any Early Termination Lease and the Equipment subject thereto which is
repurchased, or for which Additional Leases have been
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purchased or Substitute Leases transferred, pursuant to this Section 4.02 shall
nevertheless remain subject to the Lien of the Indenture until such time as an
Additional Lease or Additional Leases have been purchased or Substitute Lease or
Substitute Leases have been transferred in accordance with the provisions of
Article 8 hereof or the Lease Repurchase Amount has been paid. A Lease will be
considered to be an "Eligible Lease" if on the date such Lease is substituted
for or added in replacement of an Early Termination Lease, such Lease satisfies
the representations and warranties set forth in Section 3.04(c) of the Seller
Sale and Contribution Agreement and the requirements of Article 8 hereof.
Section 4.03 Indemnification.
The Servicer agrees to indemnify and hold harmless the Issuer, the Trustee
and each Holder of the Notes (each an "Indemnified Party") against any and all
liabilities, losses, damages, penalties, costs and expenses (including costs of
defense and legal fees and expenses) which may be incurred or suffered by such
Indemnified Party (except to the extent arising out of the gross negligence or
willful misconduct on the part of the Indemnified Party) as a result of claims,
actions, suits or judgments asserted or imposed against it and arising out of
the willful misconduct or negligence of the Servicer regarding the servicing of
any Lease or the related Equipment, and any tort claims and any fines or
penalties arising from any violation of the laws or regulations of the United
States or any state or local government or governmental authority by the
Servicer; provided that the foregoing indemnity shall in no way be deemed to
impose on the Servicer any obligation, other than to the extent specifically set
forth in this Article 4, to make any payment with respect to principal or
interest on the Notes or to reimburse the Issuer for any payments on account of
the Notes. This Section 4.03 shall bind any successor Servicer hereunder.
Section 4.04 Repurchases.
(a) In the event that any Lease shall be terminated in whole or in part by
a Lessee, or any amounts due with respect to any Lease shall be reduced or
impaired, as a result of any action or inaction by the Servicer (other than any
such action or inaction of the Servicer, in connection with the enforcement of
any Lease in a manner consistent with the provisions of this Servicing
Agreement) or any claim by any Lessee against the Servicer and, in any such
case, the event or condition causing such inaccuracy, termination, reduction,
impairment or claim shall not have been cured or corrected within 30 days after
the earlier of the date on which the Servicer is given notice thereof by the
Issuer or the Trustee or the date on which the Servicer otherwise first has
notice thereof, the Servicer will repurchase such Lease and the Equipment
subject thereto by paying to the Trustee, not later than the third Business Day
after the Calculation Date next following the expiration of such 30-day period
with respect to the events referenced in Section 4.04(a), an amount equal to the
Lease Repurchase Amount. The Servicer shall not be responsible under this
Section for the action or inaction of any successor Servicer.
(b) The Servicer's obligations under this Section 4.04 are the full
recourse obligations of the Servicer and shall in no way be limited or
discharged by the application of any funds constituting part of the Granted
Assets other than payments and amounts received with respect to the Lease in
question.
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Section 4.05 Payment Advices.
Each payment to the Trustee pursuant to any of the provisions of this
Servicing Agreement shall be accompanied by written advice containing sufficient
information to identify the Lease and/or Equipment to which such payment
relates, the Section of this Servicing Agreement pursuant to which such payment
is made, and the proper application pursuant to the provisions of the Indenture
of the amounts being paid.
ARTICLE 5. INFORMATION TO BE PROVIDED
Section 5.01 Monthly Status Reports; Servicing Reports.
(a) Within five Business Days following each Payment Date, the Servicer
will send to the Trustee (copies of which the Trustee shall send to each Rating
Agency and to each holder of the Notes as provided in the Indenture) a written
report, signed by one of the Servicer's financial officers, (i) identifying each
Lease with respect to which any Lease Payment was 30 or more days overdue as of
the end of the immediately preceding Collection Period, the Discounted Lease
Balance of such Lease as of such Payment Date, the amount advanced by the
Servicer with respect to such Lease pursuant to Section 4.01 hereof since the
Servicer's previous monthly report (or, in the case of the first such report,
since the Cut-Off Date), (ii) identifying each Lease with respect to which any
Lease Payment was 60 or more days overdue as of the end of the immediately
preceding Collection Period, the Discounted Lease Balance of such Lease as of
such Payment Date, the amount advanced by the Servicer with respect to such
Lease pursuant to Section 4.01 hereof since the Servicer's previous monthly
report (or, in the case of the first such report, since the Closing Date), (iii)
identifying each Lease with respect to which any Lease Payment was more than 120
days overdue as of the end of the immediately preceding Collection Period, the
Discounted Lease Balance of such Lease as of such Payment Date, the amount
advanced by the Servicer with respect to such Lease pursuant to Section 4.01
hereof since the Servicer's previous monthly report (or, in the case of the
first such report, since the Closing Date), (iv) identifying each Lease which
became a Defaulted Lease as of the preceding Calculation Date and specifying the
Discounted Lease Balance of such Lease as of such Calculation Date (or, in the
case of the first such report, subsequent to the Cut-Off Date) and the aggregate
Discounted Lease Balance of all such Defaulted Leases, and (v) indicating the
aggregate amount recovered by the Servicer subsequent to the preceding Payment
Date (or, in the case of the first Payment Date, subsequent to the Cut-Off Date)
and on or prior to such Payment Date with respect to Servicer Advances
previously made by the Servicer. Each such report shall also describe generally
what action or actions the Servicer is then taking or proposes to take to
recover from the appropriate Lessees any amounts previously paid by the Servicer
to the Trustee pursuant to Section 4.01 hereof.
(b) On or before the third Business Day preceding the Payment Date, the
Servicer shall deliver to the Trustee and to each Rating Agency an Officer's
Certificate signed by an officer of the Servicer accompanying a servicing report
(a "Servicing Report") stating the date and in the form of Exhibit A hereto.
Such report shall be provided in an electronic format reasonably acceptable to
the Trustee.
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(c) The Servicing Report shall include, among other items, the total amount
of all Lease Payments, Casualty Payments, Termination Payments, Lease Repurchase
Amount, recoveries related to Servicer Advances, and Other Lease Payments
received by the Servicer and deposited in the Distribution Account. Such report
shall indicate the amount of all Lease Payments received by the Servicer and
deposited in the Distribution Account, as applicable, which are for any
Collection Period other than the Collection Period for such Payment Date and
shall identify each Lease with respect to which a Casualty Payment, Termination
Payment or Lease Repurchase Amount was made during such time period. Such report
shall also indicate (i) the aggregate amount of Servicing Advances to be paid by
the Servicer on the related Payment Date pursuant to Section 4.01 hereof, and
(ii) the aggregate amount expected to be reimbursed to the Servicer on the
related Payment Date for Servicer Advances made by the Servicer pursuant to
Section 4.01 hereof. The Servicer hereby represents and warrants that such
calculations will be correct and accurate, and the Servicer shall be fully
responsible for, and shall reimburse and indemnify each Indemnified Party for,
any loss resulting from such Indemnified Party's reliance on any such
calculations which are not correct.
(d) If the Servicer requests the withdrawal of any funds from the
Distribution Account which constitute any part of the Granted Assets other than
on a Payment Date, the Servicer shall submit to the Trustee with such report a
certificate (i) setting forth the amounts to be withdrawn (on an item-by-item
basis), (ii) stating that none of such amounts, other than those pertaining to
the Servicing Fee or other servicer compensation, are all or part of any Lease
Payment, Servicer Advances, recoveries related to Defaulted Leases, Lease
Repurchase Amount, Casualty Payment or Termination Payment, and (iii)
identifying the Lease or Leases to which such amounts relate.
Section 5.02 Annual Independent Public Accountant's Report.
The Servicer shall cause a firm of independent public accountants (who may
also render other services to the Servicer) to deliver to the Trustee, with a
copy to each Rating Agency, within 135 days following the end of each fiscal
year of the Servicer, beginning with the Servicer's fiscal year ending December
31, 1999, a written statement to the effect that such firm has (a) obtained from
the Servicer a copy of the monthly status report pursuant to Section 5.01 for a
single month during the previous calendar year; (b) compared the information
contained in such monthly status report and in the monthly summaries prepared by
the Servicer in support of such monthly status report to the computer printouts
and accounts prepared by the Servicer and supporting such reports; and (c)
selected, at random, at least 20 Leases included in the Granted Assets and
compared the activity in the files maintained by the Servicer for such Leases to
the activity as reported for those Leases to the monthly summaries prepared by
the Servicer and supporting the monthly status report, and that, on the basis of
such examination and comparison, such firm is of the opinion that the Servicer
has prepared such monthly status report and summaries in agreement with the
computer printouts, accounts and individual Lease files, except in each case for
(x) such exceptions as such firm shall believe to be immaterial and (y) such
other exceptions as shall be set forth in such statement.
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ARTICLE 6. THE SERVICER
Section 6.01 Merger or Consolidation of the Servicer.
The Servicer will keep in full force and effect its existence, rights and
franchise as a corporation under the laws of its jurisdiction of incorporation
and will preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is necessary to protect the
validity and enforceability of any of the Leases or to permit performance of the
Servicer's duties under this Servicing Agreement.
The Servicer shall not merge or consolidate with any other Person unless
(i) the entity surviving such merger or consolidation is a corporation organized
under the laws of the United States or any jurisdiction thereof and (ii) the
surviving entity, if not the Servicer, shall execute and deliver to the Issuer,
the Servicer and the Trustee, in form and substance satisfactory to each of
them, (a) an instrument expressly assuming all of the obligations of the
Servicer hereunder and (b) an opinion of counsel to the effect that such Person
is a corporation of the type described in the preceding clause (i) and has
effectively assumed the obligations of the Servicer hereunder. Upon the
occurrence of any such merger or consolidation, the Servicer shall give notice
promptly to the Rating Agencies.
Section 6.02 Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors, officers, employees or
agents of the Servicer shall incur any liability to the Issuer, the Trustee or
the Holders of the Notes for any action taken or not taken in good faith
pursuant to the terms of this Servicing Agreement with respect to any Lease or
the Equipment subject thereto; provided, however, that this provision shall not
protect the Servicer against any breach of warranties, representations or
covenants made by it herein or in any certificate delivered in conjunction with
the purchase of the Notes or for any liability which would otherwise be imposed
for any action or inaction resulting from willful misconduct or bad faith or for
negligence in the performance or nonperformance of its duties hereunder.
Section 6.03 Servicer Not to Resign or Be Removed.
The Servicer shall not resign from the servicing obligations and duties
hereby imposed on it except upon determination that such duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an opinion of independent
counsel to the Servicer, in form and substance satisfactory to the holders of
the Notes, to such effect delivered to the Trustee.
Except as provided in Section 7.02 hereof, the Servicer shall not be
removed or be replaced as Servicer with respect to any Lease or any of the
Equipment.
No resignation or removal of the Servicer shall in any event become
effective until the Trustee or a successor servicer shall have assumed the
Servicer's servicing responsibilities and obligations in accordance with Section
7.02 hereof.
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Section 6.04 Financial and Business Information.
The Servicer will deliver to the Issuer and the Trustee, and the Trustee
upon receipt thereof shall deliver to each Rating Agency and upon request, to
any Holder of outstanding Notes evidencing not less than 25% of the Outstanding
Principal Amount of the Notes (and, upon the request of any holder of
outstanding Notes, to any prospective transferee of any Notes) and, in the case
of a notice of a Servicer Event of Default as provided in subsection (c) below:
(a) Quarterly Statements - within 45 days after the end of each of the
first three quarterly fiscal periods in each fiscal year of the Servicer, a copy
of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries at the end of such quarter, and
(2) consolidated statements of income, retained earnings and cash flow
of the Servicer (or its parent) and its consolidated subsidiaries for that
quarter and for the portion of the fiscal year ending with such quarter,
accompanied by a certificate signed by a principal financial officer of the
Servicer stating that such financial statements present fairly the financial
condition of the Servicer and its consolidated subsidiaries and have been
prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Annual Statements - within 135 days after the end of each fiscal year
of the Servicer, a copy of:
(1) a consolidated balance sheet of the Servicer (or its parent) and
its consolidated subsidiaries, at the end of that year, and
(2) consolidated statements of income, retained earnings and cash flow
of the Servicer (or its parent) and its consolidated subsidiaries for that
year, setting forth in each case in comparative form the figures for the
previous fiscal year,
all in reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants of recognized national standing stating that such
financial statements present fairly the financial condition of the Servicer and
its consolidated subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur and footnote), and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(c) Notice of Servicer Event of Default - immediately upon becoming aware
of the existence of any condition or event which constitutes a Servicer Event of
Default, a written notice, by certified mail return receipt requested, hand
delivery or overnight courier, describing its nature and period of existence and
what action the Servicer is taking or proposes to take with respect thereto;
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(d) SEC and Other Reports - if so required to be filed and promptly upon
their becoming available, one copy of each report (including the Servicer's
annual report to shareholders and reports on Form 8-K, 10-K, and 10-Q), proxy
statement, registration statement, prospectus and notice filed with or delivered
to any securities exchange, the Securities and Exchange Commission or any
successor agencies; and
(e) Report on Proceedings - promptly upon the Servicer's becoming aware of
(1) any proposed or pending investigation of it by any governmental
authority or agency, or
(2) any court or administrative proceeding
which materially and adversely affect the properties, business, prospects,
profits or conditions (financial or otherwise) of the Servicer, a written notice
specifying the nature of such investigation or proceeding and what action the
Servicer is taking or proposes to take with respect thereto and evaluating its
merits; and
(f) Requested Information - with respect to the Class C Notes and the Class
D Notes, with reasonable promptness, any other data and information which may be
reasonably requested from time to time, including, without limitation, any
information required to be made available at any time to any prospective
transferee of any Notes in order to satisfy the requirements of Rule 144A under
the Securities Act of 1933, as amended.
Section 6.05 Officer's Certificates.
With each set of financial statements delivered pursuant to Section 6.04,
the Servicer will deliver an Officer's Certificate stating (i) that the officer
signing such Officer's Certificate have reviewed the relevant terms of this
Servicing Agreement and have made, or caused to be made under such officer's
supervision, a review of the activities of the Servicer during the period
covered by the statements then being furnished, (ii) that the review has not
disclosed the existence of any Servicer Event of Default or, if a Servicer Event
of Default exists, describing its nature and what action the Servicer has taken
and is taking with respect thereto, and (iii) that on the basis of such review
the officers signing such certificate are of the opinion that during such period
the Servicer has serviced the Leases in compliance with the procedures hereof
except as described in such certificate.
Section 6.06 Inspection.
The Servicer will permit, on reasonable prior notice, the representatives
of the Issuer and the Trustee and the Holder of any Notes evidencing not less
than 25% of the Outstanding Principal Amount of any Class of Notes to examine
all of the books of account, records, reports and other papers of the Servicer,
to make copies and extracts therefrom, and to discuss the Servicer's affairs,
finances and accounts with its officers, employees and independent public
accountants (and by this provision the Servicer authorizes said accountants to
discuss the finances and affairs of the Servicer) all at such reasonable times
and as often as may be reasonably requested for the purpose of reviewing or
evaluating the financial condition or affairs of the Servicer or the Servicer's
performance of its duties and obligations hereunder.
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Any expense incident to the exercise by the Issuer, the Trustee, or any holder
of the Notes during the continuance of any Servicer Event of Default, or any
event or condition which with the giving of notice or the lapse of time or both
would become a Servicer Event of Default, of any right under this Section 6.06
shall be borne by the Servicer.
Section 6.07 Servicer to Act as Custodian.
(a) The Servicer shall hold and acknowledges that it is holding the Leases
and all other Granted Assets that it may from time to time receive hereunder as
custodian for the Trustee; provided that the Trustee shall not be liable for the
action, inaction of omission of the Servicer.
(b) The Servicer shall perform its duties under this Section 6.07 in
accordance with the standard set forth in Section 3.01 as such standard applies
to servicers acting as custodial agents. The Servicer shall promptly report to
the Trustee any failure by it to hold the complete Leases as herein provided and
shall promptly take appropriate action to remedy any such failure but only to
the extent (i) any such failure is caused by the acts or omissions of the
Servicer and (ii) such remedial action is otherwise within its capabilities or
control. As custodian, the Servicer shall have and perform the following powers
and duties:
(A) hold the Leases on behalf of the Trustee for the benefit of the
Noteholders, maintain accurate records pertaining to each Lease to enable
it to comply with the terms and conditions of this Servicing Agreement, and
maintain a current inventory thereof;
(B) implement policies and procedures in accordance with the
Servicer's normal business practices with respect to the handling and
custody of the Leases so that the integrity and physical possession of the
Leases will be maintained; and
(C) attend to all details in connection with maintaining custody of
the Leases on behalf of the Trustee on behalf of the Noteholders.
(c) In acting as custodian of the Leases, the Servicer agrees further that
it does not and will not have or assert any beneficial ownership interest in
such Leases. The Servicer on behalf of the Noteholders shall ▇▇▇▇ conspicuously
each original contractual document with a Lessee, and its master data processing
records evidencing each Lease with a legend, acceptable to the Trustee,
evidencing that all right, title and interest in the Leases has been granted to
the Trustee as provided in the Transaction Document.
(d) The Servicer agrees to maintain the Leases at either its office in New
York, New York or at such other offices of the Servicer as shall from time to
time be identified by prior written notice to the Trustee. Subject to the
foregoing, the Servicer may temporarily move individual Leases or any portion
thereof without notice as necessary to conduct collection and other servicing
activities.
(e) The Servicer will indicate in its records that it is servicing and
administering each Lease in its capacity as Servicer hereunder, and to the
extent it is in possession of any original Lease agreement, will hold such
Lease, subject to the provisions of the Indenture as custodian for the Trustee.
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ARTICLE 7. DEFAULT
Section 7.01 Servicer Events of Default.
The following events and conditions shall constitute Servicer Events of
Default hereunder:
(i) failure on the part of the Servicer to deposit to the Distribution
Account or other applicable account in accordance with the terms of the
Indenture within two Business Days following the receipt thereof any monies
received by the Servicer and required to be deposited hereunder, which
failure continues unremedied;
(ii) so long as the Servicer is the Servicer hereunder, failure on the
part of the Servicer to pay to the Trustee on the date when due in
accordance with the terms hereof, any payment required to be made by the
Seller pursuant to Article 4 hereof;
(iii) failure on the part of the Servicer to observe or perform in any
material respect any other of their respective covenants or agreements in
this Servicing Agreement which failure continues unremedied for a period of
30 days after the earlier of (A) the date it first becomes known to any
officer of the Seller or the Servicer, as the case may be, and (B) the date
on which written notice thereof requiring the same to be remedied shall
have been given to the Servicer by the Trustee;
(iv) if any representation or warranty made by the Servicer in this
Servicing Agreement or in any certificate or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of
the time when the same shall have been made; provided, however, that the
breach of any representation or warranty made by the Servicer in this
Servicing Agreement will be deemed to be "material" only if it affects the
Noteholders, the enforceability of the Indenture or of the Notes; and
provided, further, that a material breach of any representation or warranty
made by the Servicer in this Servicing Agreement with respect to any of the
Leases or the Equipment subject thereto will not constitute a Servicer
Event of Default if the Servicer repurchases such Lease and Equipment in
accordance with this Servicing Agreement;
(v) the entry by a court having jurisdiction of (A) a decree or order
for relief in respect of the Servicer in an involuntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (B) a decree or order adjudging the
Servicer bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of or in
respect of the Servicer under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or other similar official of the Servicer or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the
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continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(vi) the commencement by the Servicer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Servicer in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization, or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator, or similar official of the Servicer or of any substantial
part of its property, or the making by it of an assignment for the benefit
of creditors, or the failure by the Servicer to pay its debts generally as
they become due, or the taking of corporate action by the Servicer in
furtherance of any such action.
Section 7.02 Termination.
So long as a Servicer Event of Default shall be continuing, the Trustee
shall, upon the instructions of the Holders of 66-2/3% in Outstanding Principal
Amount of the Notes, by notice in writing to the Servicer terminate all of the
rights and obligations of the Servicer (but not the Seller's obligations which
shall survive any such termination) under this Servicing Agreement. On the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Servicing Agreement to take any action with respect to any
Lease or Equipment shall cease and the same shall pass to and be vested in the
Trustee pursuant to and under this Article and the Indenture; and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and assignment of any
Lease and the related Equipment, or otherwise.
Section 7.03 Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 7.02 hereof, the Trustee, subject to the terms of Section
5.02 of the Indenture, shall be the successor in all respects to the Servicer in
its capacity as servicer of the Leases under this Servicing Agreement and, to
such extent, shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof and shall be entitled to receive from the Issuer the Servicing Fee
provided for in Section 3.04 hereof; provided that the Trustee shall in no way
be responsible or liable for any action or actions of the Servicer before the
time the Servicer receives such a notice of termination.
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(b) Notwithstanding the above, the Trustee may, if it shall be unwilling to
so act, or shall, if it is unable to so act, give notice of such fact to each
Holder of the Notes and (i) appoint an established institution satisfactory to
the Holders of 66-2/3% in Outstanding Principal Amount of the Notes as the
successor to the Servicer hereunder to assume all of the rights and obligations
of the Servicer hereunder, including, without limitation, the Servicer's right
hereunder to receive the Servicing Fee or, (ii) if no such institution
satisfactory to the Holders of 66-2/3% in Outstanding Principal Amount of the
Notes is so appointed within 60 days following the giving of such notice,
appoint a bank or other established institution, which has experience in
servicing lease contracts and equipment similar to the Leases and Equipment and
as to which each of S&P and DCR has indicated in writing that the appointment of
such Person, as the successor to the Servicer hereunder will not result in the
reduction or withdrawal of such Rating Agency's then-current rating of the Notes
or, (iii) if no such institution is so appointed, petition a court of competent
jurisdiction to appoint an institution meeting such criteria as the Servicer
hereunder. Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee shall cause such successor to the
Servicer to enter into a servicing agreement substantially in the form of this
Servicing Agreement except that the Trustee may make arrangements for the
compensation of such successor out of payments on Leases as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that provided for a successor to the Servicer in Section 3.04 hereof.
The Trustee shall provide the Rating Agencies with prior written notice of the
appointment of any successor to the Servicer.
Section 7.04 Servicer to Cooperate.
The Servicer hereby agrees to cooperate with the Trustee or any successor
to the Servicer appointed in accordance with Section 7.03 hereof, as applicable,
in effecting the termination and transfer of the responsibilities and rights of
the Servicer hereunder to the Trustee or any successor to the Servicer,
including, without limitation, the execution and delivery of assignments of
Financing Statements, and the transfer to the Trustee or the successor to the
Servicer for administration by it of all cash amounts which shall at the time be
held by the Servicer or thereafter received with respect to the Leases. The
Servicer hereby agrees to transfer to any successor to the Servicer its
electronic records and all other records, correspondence and documents relating
to the Leases and Equipment in the manner and at such times as the successor to
the Servicer shall reasonably request. The Servicer hereby designates the
Trustee and any successor to the Servicer its agent and attorney-in-fact to
execute transfers of Financing Statements (including any and all Financing
Statements naming an individual Lessee as debtor and the Servicer as secured
party) and any other filings or instruments which may be necessary or advisable
to effect such transfer of the Servicer's responsibilities and rights hereunder.
Section 7.05 Notification to Noteholders.
Upon any such termination or appointment of a successor to the Servicer,
the Issuer shall cause the Trustee to give prompt written notice thereof to each
Rating Agency and to each Holder of the Notes in the manner provided in the
Indenture.
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Section 7.06 Remedies Not Exclusive.
Nothing in the preceding provisions of this Article 7 shall be interpreted
as limiting or restricting any rights or remedies which the Issuer, the Trustee
or any other Person would otherwise have at law or in equity on account of the
breach or violation of any provision of this Servicing Agreement by the
Servicer, including, without limitation, the right to recover full and complete
damages on account thereof to the extent not inconsistent with Section 6.02
hereof.
Section 7.07 Database File.
The Servicer, will provide the Trustee with a magnetic tape containing the
database file for each Lease (i) as of the Cut-Off Date, (ii) as of any Transfer
Dates, (iii) as of the last day of the preceding Collection Period on each
Calculation Date prior to a Servicer Event of Default and (iv) on and as of the
Business Day before the actual commencement of servicing functions by the
Trustee following the occurrence of a Servicer Event of Default.
Section 7.08 Indemnification of Trustee.
The original Servicer shall defend, indemnify and hold the Trustee acting
as a successor Servicer and any officers, directors, employees or agents of the
Trustee harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments and any other costs, fees,
and expenses that the Trustee may sustain in connection with the claims asserted
at any time by third parties against the Trustee acting in the capacity as
Servicer which result from (i) any willful or grossly negligent act taken or
omission by the original Servicer or (ii) a breach of any representations of the
original Servicer in Article 2 hereof. The indemnification provided by this
Section 7.08 shall survive the termination of this Servicing Agreement.
Section 7.09 Responsibilities of the Trustee Acting as Servicer.
(a) The Trustee will not be responsible for delays attributable to the
original Servicer's failure to deliver information, defects in the information
supplied by the original Servicer, or other circumstances beyond the control of
the Trustee.
(b) The Trustee will make arrangements with the original Servicer for the
prompt and safe transfer of, and the original Servicer shall provide to the
Trustee, all necessary servicing files and records, including (as deemed
necessary by the Trustee at such time): (i) Lease documentation, (ii) servicing
systems tapes, (iii) Lease payment history, (iv) collections history and (v) the
trial balances, as of the close of business on the day immediately preceding
conversion to the Trustee, reflecting all applicable Lease information. The
current Servicer shall be obligated to pay the costs associated with the
transfer of the servicing files and records to the Trustee.
(c) The Trustee shall have no responsibility and shall not be in default
hereunder nor incur any liability for any failure, error, malfunction or any
delay in carrying out any of its duties under this Servicing Agreement if any
such failure or delay results from the Trustee acting in accordance with
information prepared or supplied by a Person other than the
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Trustee or the failure of any such Person to prepare or provide such
information. The Trustee shall have no responsibility, shall not be in default
and shall incur no liability (i) for any act or failure to act by any third
party, including the Servicer, the Transferor or the Issuer or for any
inaccuracy or omission in a notice or communication received by the Trustee from
any third party or (ii) which is due to or results from the invalidity,
unenforceability of any Lease with applicable law or the breach or the
inaccuracy of any representation or warrant made with respect to any Lease. The
Trustee shall not be subject to Section 4.04 of this Servicing Agreement
pertaining to the repurchase of Lease and Equipment thereto.
(d) If the Trustee assumes the role of Servicer hereunder the Trustee shall
be entitled to the benefits of (and subject to the provisions of) Section 9.02
hereunder concerning delegation of duties to subservicers.
ARTICLE 8. SUBSTITUTION AND ADDITION OF LEASES
Section 8.01 Substitution and Addition.
(a) Subject to the satisfaction of the requirements set forth in Section
8.01(c) hereof, the Transferor will have the right (but not the obligation) at
any time to substitute one or more Eligible Leases and the Equipment subject
thereto (each, a "Substitute Lease") for a Lease (for purposes of this Article 8
referred to as a "Predecessor Lease") and the Equipment subject thereto if:
(i) the Predecessor Lease became (A) a Defaulted Lease, (B) a Lease
which is subject to a Warranty Event or (C) a Lease which is the subject of
a Casualty Loss, during the immediately preceding Collection Period; and
(ii) if Section 8.01(a)(i)(A) or (C) is applicable, the aggregate
Discounted Lease Balance of the Leases that are, or have been, Predecessor
Leases shall not in the aggregate exceed 10% of the Discounted Lease
Balance of the Leases on the Cut-Off Date.
(b) Subject to the satisfaction of the requirements set forth in Section
4.02 and Section 8.01(c) hereof, in the event of an Early Lease Termination
which has been prepaid in full, the Issuer will have the option to reinvest the
proceeds of such Early Termination Lease in one or more Additional Leases. The
purchase price of such Additional Lease or Leases will be paid to the Transferor
in an amount equal to the proceeds of such Early Termination Lease.
(c) Each transfer of Substitute Leases and addition of Additional Leases
will be subject to the satisfaction of the following conditions precedent:
(i) the final payment on such Substitute Lease or Additional Lease
must be on or prior to the date of the final payment of the Predecessor
Lease or Early Termination Lease;
(ii) after giving effect to such additions and substitutions and any
adjustments pursuant to Section 3.02 hereof the aggregate amount of Lease
Payments through the term of the Leases (including the Substitute Leases
and the
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Additional Leases) and the Discounted Lease Balance of the Leases will not
be materially less than the aggregate scheduled Lease Payments of the
Leases and the Discounted Lease Balance of the Leases, respectively prior
to such substitution or addition or adjustment;
(iii) after giving effect to such adjustments, additions and
substitutions, the Discounted Lease Balance of the Leases must not be less
than the Discounted Lease Balance of the Leases prior to such adjustment,
substitution or addition; and
(iv) after giving effect to such adjustments, additions, and
substitutions pursuant to Article 8, the weighted average remaining term of
the Leases must not be greater than the weighted average remaining term of
the Leases prior to such adjustment, addition, and substitution.
(d) Each addition and substitution pursuant to this Section 8.01 shall
include the right to receive all amounts due or to become due under each
Substitute Lease being substituted or Additional Leases being purchased and any
security deposits paid by the related Lessee to the Servicer in connection
therewith (other than any prepayments of rent required pursuant to the terms
thereof at or before the commencement of such Lease and any payments due before
the Transfer Date as to which such substitution or addition is made). At the
time of each such substitution and addition, the Servicer shall transfer to the
Trustee all Lease Payments actually received by the Servicer which became due on
or after the related Transfer Date.
Section 8.02 Procedure.
(a) By 11:00 A.M. on the third Business Day following each Transfer Date,
the Servicer shall give written notice to the Trustee of any substitution
pursuant to Section 8.01 of Substitute Leases for Predecessor Leases or addition
of Additional Leases for Early Termination Leases which have been prepaid in
full during the preceding Collection Period. By 11:00 A.M. on the fourth
Business Day following each Payment Date, the Servicer shall deliver to the
Trustee and, to the extent not included in the Monthly Servicer Report, the
Trustee shall promptly deliver to each Rating Agency (i) a supplement to
Schedule 1 hereto setting forth the information shown thereon for each such
Substitute Lease and Additional Lease, (ii) an Officer's Certificate (A)
certifying that each such Substitute Lease and Additional Lease is an "Eligible
Lease", (B) specifying each Predecessor Lease for which a substitution has been
made and each Early Termination Lease which is being replaced by an Additional
Lease and the amount of each periodic Lease Payment under each such Predecessor
Lease and the amount of each periodic Lease Payment under each Additional Lease
and 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 Additional Leases, Substitute Leases,
Early Termination Leases or Predecessor Leases as may be needed for the Servicer
to prepare its monthly reports pursuant to Section 5.01 hereof and to otherwise
carry out its duties as servicer hereunder.
(b) Subject to the provisions of Section 8.03 hereof, the delivery of any
Officer's Certificate and supplement to Schedule 1 pursuant to Section 8.02(a)
hereof shall be conclusive evidence that during the immediately preceding
Collection Period (i) the Transferor
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assigned to the Issuer, as a sale and a capital contribution in accordance with
Section 2.01 of the Transferor Contribution and Sale Agreement to the extent
made under Section 8.01(a)(i)(A) or (C) hereof, all of the Transferor's right,
title and interest in and to the Substitute Leases identified in such supplement
and the related rights described in Section 8.01 hereof, (ii) the Transferor
transferred to the Issuer, as a sale and a contribution to capital in accordance
with Section 2.01 of the Transferor Contribution and Sale Agreement to the
extent made under Section 8.01(a)(i)(A) or (C) hereof, all of the Transferor's
right, title and interest in and to the Equipment subject to such Substitute
Leases (to the extent of the Transferor's interest in such Equipment, including
the Transferor's security interest in any Equipment which is not owned by the
Transferor), and (iii) the Issuer assigned and transferred to the Transferor,
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 (to the extent of the Issuer's
interest in such Equipment, including the Issuer's security interest in any
Equipment which is not owned by the Issuer). The Servicer shall promptly deliver
to the Trustee (or a custodian on its behalf) the original executed counterpart
of each Substitute Lease and each Additional Lease assigned to the Issuer
pursuant to Section 8.01 hereof and the Issuer shall promptly request the
Trustee to deliver to the Servicer the original executed counterpart of each
Predecessor Lease and each Early Termination Lease for which a substitution or
an addition has been made pursuant to Section 8.01 hereof.
Section 8.03 Servicer's Subsequent Obligations.
Upon any substitution of Leases in accordance with the provisions of this
Article 8, the Servicer's obligations hereunder with respect to the Predecessor
Lease shall cease but the Servicer shall 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.
ARTICLE 9. ASSIGNMENT
Section 9.01 Assignment to Trustee.
It is understood that this Servicing Agreement and all rights of the Issuer
hereunder will be assigned by the Issuer to the Trustee pursuant to the
Indenture, for the benefit of the Trustee, the holders from time to time of the
Notes as provided in the Indenture, and may be subsequently assigned by the
Trustee to any successor Trustee or as otherwise provided in the Indenture. The
Servicer hereby expressly agrees to each such assignment and agrees that all of
its duties, obligations, representations and warranties hereunder shall be for
the benefit of, and may be enforced by, the Trustee, the holders from time to
time of the Notes, and any successor to or assignee of any thereof.
Section 9.02 Assignment by Servicer.
None of the respective rights or obligations of the Servicer hereunder may
be assigned without the prior written consent of the Issuer and the Trustee
(acting upon the instructions of the Holders of 66-2/3% of the then aggregate
unpaid Outstanding Principal Amount of the Notes); provided, that nothing herein
shall preclude the Servicer from performing its duties hereunder through the use
of subservicers or agents to the extent that such use is
25
consistent with the Servicer's business practices in dealing with leases and
equipment for its own account, so long as the Servicer remains responsible for
the actions of any subservicer.
ARTICLE 10. NATURE OF OBLIGATIONS AND SECURITY THEREFOR
Section 10.01 Obligations Absolute.
The obligations of the Servicer hereunder, and the rights of the Trustee,
as assignee of the Issuer, in and to all amounts payable hereunder, shall be
absolute and unconditional and shall not be subject to any abatement, reduction,
setoff, defense, counterclaim or recoupment whatsoever, including, without
limitation, abatements, reductions, setoffs, defenses, counterclaims or
recoupments due or alleged to be due to, or by reason of, any past, present or
future claims which the Servicer may have against the Issuer, the Trustee, and
any Holder of the Notes or any other Person for any reason whatsoever; it being
the intention of the parties hereto that all obligations of the Servicer
hereunder and all amounts payable by the Servicer hereunder shall continue to be
due and payable in all events and in the manner and at the times herein provided
unless and until the obligation to perform or pay the same shall be terminated
or limited pursuant to the express provisions of this Servicing Agreement.
Section 10.02 Further Assurances; Financing Statements.
The Servicer agrees that at any time and from time to time, at its expense,
it shall promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable or that the Issuer
or the Trustee may request to perfect and protect the assignments and security
interests granted or purported to be granted herein with respect to the Leases
and the Lease Payments or to enable the Issuer or the Trustee to exercise and
enforce its rights and remedies under this Agreement with respect to any Leases
and the Lease Payments. Without limiting the generality of the foregoing, the
Servicer shall execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be necessary or
desirable or that the Issuer or the Trustee may request to protect and preserve
the assignments and security interests granted by any Transaction Document with
respect to the Leases.
ARTICLE 11. MISCELLANEOUS
Section 11.01 Continuing Obligations.
This Servicing Agreement shall continue in full force and effect until each
of the Notes and any other amounts due to any holder of the Notes have been paid
in full and all other obligations, if any, secured by the Lien of the Indenture
have been fully satisfied.
Section 11.02 GOVERNING LAW.
THIS SERVICING AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. IF ANY
PROVISION OF THIS
26
SERVICING AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS
SERVICING AGREEMENT.
Section 11.03 Successors and Assigns.
This Servicing Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Issuer, the Servicer and the Trustee and shall
inure to the benefit of the successors and assigns of the Holders, from time to
time, of the Notes.
Section 11.04 Modification.
The terms of this Servicing Agreement shall not be waived, modified or
amended without (a) the written consent of the party against whom such waiver,
modification or amendment is claimed and, in any case, the Trustee (acting upon
the instructions of the Holders of 66-2/3% of the then aggregate unpaid
Outstanding Principal Amount of the Notes), and (b) confirmation from the Rating
Agencies that such waiver, modification or amendment will not cause the then
existing rating of the Notes to be decreased.
Section 11.05 No Petition or Proceedings.
So long as there shall not have elapsed one year plus one day since the
latest maturing Notes have been paid in full in cash, the Servicer hereby agrees
that it will not, directly or indirectly, institute, or cause to be instituted,
against the Issuer any petition or otherwise invoke the process of any
Governmental Authority for the purpose of commencing or sustaining a case
against the Issuer 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 any substantial part of
its respective property, or ordering the winding up or liquidation of the
affairs of the Issuer.
Section 11.06 Notices.
All notices and other communications given in connection with this
Servicing Agreement shall be sufficient for every Person hereunder (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid or certified mail return receipt requested, or sent by private
courier or confirmed telecopy, in case of the Servicer, the Seller, the Issuer
and the Transferor, to ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
Treasurer with a copy to the General Counsel (telecopy: 212-805-1181) and in the
case of the Trustee and the Holders of the Notes, to such addresses as are
provided pursuant to Sections 1.05 and 1.06 of the Indenture or to such other
address as either party may specify to the other from time to time in accordance
with this Section 11.06.
Section 11.07 Counterparts.
This Servicing Agreement may be executed in any number of counterparts,
each counterpart constituting an original, but all together constituting only
one Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Servicing
Agreement as of the date and year first written above.
CHARTER FINANCIAL, INC., as Servicer
By:
-----------------------------------
Name:
Title:
CHARTER EQUIPMENT LEAST 1999 - 1 LLC.,
By: CHARTER FUNDING CORPORATION V
By:
-----------------------------------
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------------------
Name:
Title:
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SCHEDULE 1
SCHEDULE OF LEASES
EXHIBIT A
Form of Receivables Servicing Report
[to come]