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COPELCO CAPITAL, INC.,
SELLER AND SERVICER
AND
COPELCO CAPITAL FUNDING CORP. X,
PURCHASER
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FORM OF SALES AND SERVICING AGREEMENT
Dated as of [May 1], 1997
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ALL RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT OF COPELCO CAPITAL
FUNDING CORP. X HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN
FAVOR OF [MANUFACTURERS AND TRADERS TRUST COMPANY], AS TRUSTEE, UNDER THE
INDENTURE DATED AS OF [MAY 1], 1997, FOR THE BENEFIT OF THE PERSONS REFERRED TO
THEREIN.
TABLE OF CONTENTS
Page
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R E C I T A L S...................................................... 1
A G R E E M E N T S.................................................. 2
SECTION 1. PURCHASE AND SALE........................................ 2
1.01 Purchase of Leases....................................... 2
1.02 Consideration and Payment................................ 2
1.03 Capital Contribution..................................... 2
1.04 Grant of Security Interest............................... 2
1.05 Servicer to Act as Custodian............................. 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE
SELLER......................................................... 4
2.01 Corporate Organization and Authority..................... 4
2.02 Business and Property.................................... 5
2.03 Financial Statements..................................... 5
2.04 Equipment and Leases..................................... 5
2.05 Payments................................................. 9
2.06 Full Disclosure.......................................... 9
2.07 Pending Litigation....................................... 10
2.08 Title to Properties...................................... 10
2.09 Transactions Legal and Authorized........................ 10
2.10 Governmental Consent..................................... 11
2.11 Taxes.................................................... 11
2.12 Compliance with Law...................................... 11
2.13 ERISA.................................................... 12
2.14 Ability to Perform....................................... 12
2.15 Ordinary Course; No Insolvency........................... 12
2.16 Assets and Liabilities................................... 13
2.17 Fair Consideration....................................... 13
2.18 Ability to Pay Debts..................................... 13
2.19 Bulk Transfer Provisions................................. 13
2.20 Transfer Taxes........................................... 13
2.21 Principal Executive Office............................... 14
2.22 Servicing Provisions Customary........................... 14
2.23 Nonconsolidation......................................... 14
2.24 Sale Treatment........................................... 15
2.25 Leases are Chattel Paper................................. 15
SECTION 3. ADMINISTRATION OF LEASES................................. 15
3.01 Servicer to Act.......................................... 15
3.02 Lease Amendments and Modifications....................... 18
Non-Performing Leases.................................... 19
3.04 Costs of Servicing; Servicing Fee;
Administrative Expenses.................................. 20
3.05 Other Transactions....................................... 21
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SECTION 4. SERVICER ADVANCES AND SELLER'S SUPPORT................... 21
4.01 Late Lease Payments...................................... 21
4.02 Early Termination Leases................................. 21
4.03 Indemnification.......................................... 22
4.04 Repurchases; Other Payments.............................. 22
4.05 Payment Advices.......................................... 24
SECTION 5. INFORMATION TO BE PROVIDED............................... 24
5.01 Monthly Status Reports; Servicing Reports................ 24
5.02 Certain Reports and Calculations......................... 25
5.03 Annual Independent Public Accountant's
Report................................................... 26
SECTION 6. THE SERVICER............................................. 27
6.01 Merger or Consolidation of the Servicer.................. 27
6.02 Limitation on Liability of the Servicer and
Others................................................... 27
6.03 Servicer Not to Resign or Be Removed..................... 27
6.04 Financial and Business Information....................... 28
6.05 Officers' Certificates................................... 30
6.06 Inspection............................................... 30
6.07 Servicer Records......................................... 31
SECTION 7. THE SELLER............................................... 31
7.01 Merger or Consolidation of the Seller.................... 31
7.02 Control of Company....................................... 31
7.03 Financial and Business Information....................... 31
7.04 Officers' Certificates................................... 33
7.05 Inspection............................................... 33
7.06 Books and Records........................................ 34
7.07 Communications........................................... 34
SECTION 8. DEFAULT.................................................. 34
8.01 Servicer Events of Default............................... 34
8.02 Termination.............................................. 36
8.03 Trustee to Act; Appointment of Successor................. 37
8.04 Servicer to Cooperate.................................... 38
8.05 Notification to Noteholders.............................. 38
8.06 Remedies Not Exclusive................................... 38
SECTION 9. SUBSTITUTION AND ADDITION OF LEASES...................... 39
9.01 Substitution and Addition................................ 39
9.02 Procedure................................................ 41
9.03 Objection and Repurchase................................. 42
9.04 Seller's and Servicer's Subsequent
Obligations.............................................. 42
SECTION 10. ASSIGNMENT.............................................. 42
10.01 Assignment to Trustee................................ 43
10.02 Assignment by Seller or Servicer..................... 43
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SECTION 11. NATURE OF SELLER'S OBLIGATIONS
AND SECURITY THEREFOR...................... 43
11.01 Seller's Obligations Absolute...................... 43
11.02 Security for Obligations........................... 44
11.03 Further Assurances; Financing
Statements............................................... 44
SECTION 12. DEFINITIONS............................................. 45
SECTION 13. INTER-COMPANY LOANS..................................... 51
13.01 Inter-Company Loans................................ 51
SECTION 14. MISCELLANEOUS........................................... 51
14.01 Continuing Obligations............................. 51
14.02 GOVERNING LAW...................................... 51
14.03 Successors and Assigns............................. 51
14.04 Modification....................................... 52
14.05 No Proceedings..................................... 52
14.06 Notices............................................ 52
14.07 Counterparts....................................... 52
Schedule 1 - Subsidiaries of the Seller
Exhibit A - Schedule of Leases and Equipment
Exhibit B - Form of Inter-Company Loan Note
Exhibit C - Form of Servicing Report
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SALES AND SERVICING AGREEMENT
This SALES AND SERVICING AGREEMENT is made and dated as of [May 1,] 1997,
by and between COPELCO CAPITAL FUNDING CORP. X, a Delaware corporation, as
purchaser hereunder (the "Company"), and COPELCO CAPITAL, INC., a Delaware
corporation, as seller (in such capacity, the "Seller") and servicer (in such
capacity, the "Servicer") hereunder.
R E C I T A L S
A. The Seller wishes to sell and assign to the Company, and the Company
wishes to purchase from the Seller, all right, title and interest of the Seller
in, to and under the Leases (such term and all other capitalized terms used
herein having the meanings ascribed thereto in Section 12 hereof unless
otherwise indicated).
B. Contemporaneously with such sale and assignment, the Seller wishes to
contribute to the Company all right, title and interest of the Seller in and to
each item of Equipment subject to each Lease.
C. Pursuant to the Indenture, the Company is issuing one class of ______%
Class A-1 Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-1 Notes"), one class of ______% Class A-2
Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-2 Notes"), one class of ______% Class A-3
Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-3 Notes"), one class of ______% Class A-4
Lease-Backed Notes, Series 1997-A in the aggregate principal amount of
$__________ (the "Class A-4 Notes"), one class of _____% Class B
Leased-Backed Notes, Series 1997-A (the "Class B Notes"), in the aggregate
principal amount of $__________ and one class of ______% Class C
Lease-Backed Notes, Series 1997-A, in the aggregate principal amount of
$__________ (the "Class C Notes") (the Class A Notes, the Class B Notes
and the Class C Notes are referred to collectively as the "Notes"), the proceeds
of which are being used by the Company to make payment to the Seller for the
Leases.
D. Pursuant to the Indenture, the Company 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 Company in, to and
under the Leases, the interests in the Equipment and this Sales and Servicing
Agreement.
A G R E E M E N T S
SECTION 1. PURCHASE AND SALE
1.01 Purchase of Leases. By their execution and delivery of this Sales and
Servicing Agreement, the Seller hereby sells and assigns to the Company, and the
Company hereby purchases from the Seller without recourse (except to the extent
of the Seller's repurchase obligations as set forth herein), all of the Seller's
right, title and interest in and to each of the Leases (including the right to
receive all payments due or to become due thereunder since the Cut-Off Date).
1.02 Consideration and Payment. The purchase price of the Leases (including
the right to receive all payments due or to become due thereunder since the
Cut-Off Date) is $________________.
1.03 Capital Contribution. The Seller and the Company each acknowledge and
confirm that contemporaneously with the sale and purchase of the Leases as
hereinabove provided, the Seller, as the sole stockholder of the Company, is
contributing and transferring to the Company, and in connection with each sale,
transfer and assignment of Additional Leases and Substitute Leases the Seller
will contribute and transfer to the Company, without recourse, all right, title
and interest of the Seller in and to each item of Equipment subject to each
Lease, Additional Lease and Substitute Lease. After such contribution and
transfer by the Seller to the Company, all right, title and interest of the
Seller in and to each item of Equipment subject to each Lease shall be vested in
the Company.
1.04 Transfer of Leases; Grant of Security Interest. It is the intention
of the parties hereto that the transfer of Leases, Additional Leases, Substitute
Leases, Lease Payments and all other amounts due or becoming due with respect
thereto and Equipment (or interests therein) being made hereunder shall
constitute a purchase and sale or capital contribution and not a loan. The
Seller shall take no action inconsistent with the Company's ownership of the
Leases, the Lease Receivables and all other amounts due or becoming due with
respect thereto and the interests in the Equipment, the Seller shall indicate in
its records that ownership of each of the Leases, the Lease Receivables and the
interests in the Equipment is held by the Company, and the Seller shall respond
to any inquiries from third parties by indicating that its ownership in the
Leases, Additional Leases, Substitute Leases, the Lease Receivables and all
other amounts due or becoming due with respect thereto and the interests in the
Equipment is held by the Company and pledged to the Trustee. In the event,
however, that a court
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of competent jurisdiction were to hold that any transaction evidenced hereby
constitutes a loan and not a purchase and sale or capital contribution, it is
the intention of the parties hereto that this Agreement shall constitute a
security agreement under applicable law and that the Seller shall be deemed to
have granted to the Company and the Trustee a first priority security interest
in all of the Seller's right, title and interest in, to and under the Leases,
Additional Leases, Substitute Leases, the Lease Payments and the Equipment, and
all proceeds of any such Leases and Equipment.
1.05 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.
(b) The Servicer shall perform its duties under this Section 1.05 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 Sales and 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,
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evidencing that all right, title and interest in the Leases has been granted to
the Trustee as provided in the Indenture.
(d) The Servicer agrees to maintain the Leases at either its office in Mt.
Laurel, New Jersey or Mahwah, New Jersey 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.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants as follows:
2.01 Corporate Organization and Authority.
The Seller:
(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 Seller or impair the
enforceability of any Lease) and to enter into and perform its
obligations under this Sales and Servicing Agreement, and the
transactions contemplated hereby, including performance of the duties
of the Servicer and the Seller'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
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would not have a material adverse effect on the Trust Estate or the
business or condition (financial or otherwise) of the Seller or impair
the enforceability of any Lease).
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 Seller. The Seller has no subsidiaries other than those
listed on Schedule 1 hereto.
2.03 Financial Statements. (a) The consolidated balance sheet of the Seller
and its consolidated subsidiaries for the fiscal periods ended December 31,
1996 and December 31, 1995 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 KPMG Peat Marwick, independent
certified public accountants, and the unaudited interim consolidated balance
sheet of the Seller and its consolidated subsidiaries as of March 31, 1997 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 Seller 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
December 31, 1996 there has been no change in the business, condition or
prospects (financial or otherwise) of the Seller except changes in the ordinary
course of business, none of which individually or in the aggregate has been
materially adverse. Neither the Seller 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 Seller relating to other
asset securitization transactions involving the Seller.
2.04 Equipment and Leases. (a) Prior to the date of each transfer of any
Leases and contribution of Equipment in accordance with Sections 1.01 and 1.03,
respectively, the Seller purchased each item of Equipment from either (i) the
manufacturer or other supplier following
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receipt of an invoice from such manufacturer or supplier or (ii) a Lessee
following confirmation that such item of Equipment was on such Lessee's
premises. The Seller has paid in full, to the manufacturer or supplier or
Lessee, as the case may be, the purchase price and any related charges in
connection with the acquisition of the Equipment. The sale to the Company of the
Leases and all of the Seller's right, title and interest in each item of
Equipment does not violate the terms or provisions of any Lease or any other
agreement to which the Seller is a party or by which it is bound.
(b) Upon payment of the consideration described in Section 1.02 hereof,
issuance of its common stock as described in Section 1.03 hereof, and transfer
of the Seller's interest in the Equipment, the Company will (i) be the legal
owner of the Leases (including the right to receive all payments due or to
become due thereunder), (ii) have good title to each item of the Equipment
subject to any Lease other than a Nominal Buy-Out Lease, and (iii) have a valid
security interest in each item of Equipment with a purchase price in excess of
$25,000 subject to a Nominal Buy-Out Lease. At such time, the Leases (including
the right to receive all payments due or to become due thereunder) and the
Seller's interest in the Equipment will be free and clear of all Liens other
than the rights of each Lessee under the Lease to which such Lessee is a party
and the Lien created by the Indenture; and there will be no delinquent taxes or
other outstanding charges affecting the Equipment which are or may be Liens
prior to, or equal or coordinate with, the Lien of the Trustee under the
Indenture.
(c) At the time of each transfer of a Lease hereunder, each such Lease (i)
is or will be a triple-net lease and (ii) is or will be a legal, valid and
binding full recourse obligation of the Lessee thereunder, enforceable by the
Company (and by the Trustee as assignee of the Company) against such Lessee in
accordance with the terms thereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights and by general equity principles,
is noncancellable by the Lessee and is in full force and effect, and any and all
requirements of any federal, state or local law, including, without limitation,
usury, truth-in-lending and equal credit opportunity laws applicable to each
Lease have been complied with; and the Seller has no knowledge (after due
inquiry) of any challenge, dispute or claim by or against the Lessee under or
affecting any Lease or of the bankruptcy or insolvency of any such Lessee. As of
the initial Determination Date, or the effective date of the transfer of any
Additional Lease
6
or Substitute Lease, each Lessee has paid at least one installment of rent under
its respective Lease.
(d) At the time that any item of Equipment (including the Seller's security
interest in any item not owned by it) is contributed hereunder, the Seller will
have no knowledge that any item of the Equipment has suffered any loss or damage
which has not been repaired.
(e) Each Lease requires the Lessee thereunder to maintain insurance on the
Equipment subject thereto in an amount at least equal to the fair market value
thereof.
(f) In addition to the insurance maintained by the Lessees with respect to
the Equipment, the Seller (or an Affiliate of the Seller) maintains (i) one or
more casualty insurance policies which, in the aggregate, are in an amount not
less than the aggregate Outstanding Principal Amount of the Notes, (ii) a
general liability insurance policy in the aggregate amount of $1,000,000 and
(iii) an excess liability insurance policy in umbrella form in the aggregate
amount of $10,000,000. Each of such policies is in full force and effect and
covers all equipment owned by the Seller and the Company. All premiums in
respect of such policies have been paid. Each of the Trustee and the Company are
named as loss payees and additional insureds, as their interests may appear, on
such casualty and liability policies maintained by the Seller.
(g) At the time of each transfer of a Lease hereunder, no Lease had
outstanding rent which was [63] or more days past due as of the Cut-Off Date.
(h) Each Lease was entered into or acquired by the Seller in accordance
with the Seller's regular credit approval process described in the Prospectus,
and no selection procedures adverse to the credit quality of the Leases were
employed in selecting the Leases for sale under this Sales and Servicing
Agreement.
(i) The obligation of each Lessee to pay rent under each of the Leases
throughout the term thereof is and will be unconditional, without any right of
setoff by such Lessee and without regard to any event affecting the Equipment,
the obsolescence of any Equipment, any claim of such Lessee against the Company,
the Seller or the Servicer or any change in circumstance of such Lessee or any
other circumstance whatsoever except to the extent that in the event of a
casualty of any item of Equipment, the Lessee is obligated to pay, in lieu of
the future Lease Payments with respect to such item, an amount which equals or
exceeds the Discounted Present Value of the Lease as of the Payment Date next
succeeding the making of such payment.
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(j) In the case of each Lease which consists of a master lease and one or
more exhibits or schedules thereto, the Seller has neither assigned such master
lease in its entirety, nor delivered physical possession of such master lease,
to any Person other than the Company or the Trustee (including the trustee under
another indenture in a transaction substantially similar to the transaction
contemplated hereby, which other indenture provides that the lien thereof on
such master lease extends only to such master lease insofar as it relates to
lease schedules which are not part of the Trust Estate).
(k) As of the time of each transfer of Leases and Equipment hereunder,
there are no facts or circumstances which give rise, or would give rise at any
time in the future, to any right of rescission, setoff, counterclaim or defense,
including the defense of usury, to obligations of any Lessee, including the
obligation of such Lessee to pay all amounts due with respect to any Lease to
which such Lessee is a party, and neither the operation of any of the terms of
any Lease or the exercise of any right thereunder will render such Lease
unenforceable in whole or in part or subject to any right of rescission, setoff,
counterclaim or defense, including the defense of usury, and no such right of
rescission, setoff, counterclaim or defense has been asserted with respect
thereto.
(l) As of the time of each transfer of Leases and Equipment hereunder, no
Lease has been amended, altered or modified in any respect, except in writing
and copies of all such writings are attached to the Lease delivered to the
Trustee.
(m) As of the time of each transfer of Leases and Equipment hereunder, no
Lessee will have been released, in whole or in part, from any of its obligations
in respect of any Lease; no Lease will have been satisfied, cancelled or
subordinated, in whole, or in part, or rescinded, and no Equipment covered by
any Lease will have been released from such Lease, in whole or in part, nor has
any instrument been executed that would effect any such satisfaction, release,
cancellation, subordination or rescission.
(n) As of the time of each transfer of Leases and Equipment hereunder, each
Lease was either (a) originated by the Seller in the ordinary course of its
business or (b) purchased by the Seller for value and taken into possession
prior to the Cut-Off Date in the ordinary course of its business.
(o) No Lease was originated in or is subject to the laws of any
jurisdiction whose laws would make the
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transfer and sale thereof under this Sales and Servicing Agreement unlawful.
(p) All parties to each Lease had authority and capacity to execute such
Lease.
(q) None of the Leases is a consumer lease and each Lessee has accepted the
Equipment leased to it.
(r) The Booked Residual Value of the Equipment as of the Cut-Off Date
equals $__________.
(s) All parties to each Lease had all requisite authority and capacity to
execute such Lease.
(t) As of the Cut-Off Date, the Final Lease Payment on each Lease was due
and payable on or prior to _________.
[(u) There is only one original of each Lease for purposes of the UCC as in
effect in New Jersey and in New York and such counterpart will be delivered to
the Servicer on or before the Closing Date.]
2.05 Payments. (a) The aggregate amount of Lease Payments payable by the
Lessees under the Leases during each lease payment period, including amounts on
deposit in the Reserve Account, is sufficient to cover the Servicing Fee and pay
the principal and interest on the Notes, as such payments become due and
payable.
(b) The portfolio detail delivered or to be delivered to the Trustee on or
prior to the Closing Date (i) accurately sets forth, as of the Cut-Off Date, the
amount of each Lease Payment due under each of the Leases and the month in which
such Lease Payment is to be paid in accordance with the terms of the Lease under
which the same is to be paid, (ii) accurately sets forth, as of the Cut-Off
Date, the information with respect to certain other characteristics of the
Leases and the Equipment described in such portfolio detail and (iii) is
otherwise true and correct in all respects.
2.06 Full Disclosure. The Prospectus and the Private Placement Memorandum
(including, without limitation, the statistical and descriptive information with
respect to the initial Leases, Lessees and Equipment), as of their respective
dates, do not contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. There is no fact
peculiar to the Seller or any Affiliate of the Seller or, to the knowledge of
the Seller, any Lease, Lessee or item of Equipment, which the Seller has not or
will not disclose in the Prospectus or the Private Placement Memorandum which
materially affects adversely nor, so far as the Seller can now reasonably
foresee, will materially
9
affect adversely the ability of the Seller to perform the transactions
contemplated by this Sales and Servicing Agreement.
2.07 Pending Litigation. There are no proceedings or investigations
pending, or to the knowledge (after due inquiry) of the Seller threatened,
against or affecting the Seller or any subsidiary in or before any court,
governmental authority or agency or arbitration board or tribunal, including,
but not limited to, any such proceeding or investigation with respect to any
environmental or other liability resulting from the ownership or use of any of
the Equipment, which, individually or in the aggregate, involve the possibility
of materially and adversely affecting the properties, business, prospects,
profits or condition (financial or otherwise) of the Seller and its
subsidiaries, or the ability of the Seller to perform its obligations under this
Sales and Servicing Agreement. The Seller is not in default with respect to any
order of any court, governmental authority or agency or arbitration board or
tribunal.
2.08 Title to Properties. Immediately following the transfer by the Seller
to the Company of the Leases and the Seller's interest in the Equipment, the
Leases (including the right to receive all payments due or to become due
thereunder) and the interest in the Equipment will be free and clear of all
Liens, except the Lien on the Trust Estate in favor of the Trustee granted
pursuant to the Indenture (or the Lien in favor of the Company which is assigned
to the Trustee pursuant to the Indenture).
2.09 Transactions Legal and Authorized. The transfer by the Seller of all
of its right, title and interest in and to each item of Equipment and each Lease
(including the right to receive all payments due or to become due thereunder)
and compliance by the Seller with all of the provisions of this Sales and
Servicing Agreement:
(a) have been duly authorized by all necessary corporate action on the
part of the Seller, and do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of the Seller except such as have been duly obtained;
(b) are within the corporate powers of the Seller; and
(c) are legal and will not conflict with, result in any breach in any of
the provisions of, constitute a default under,
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or result in the creation of any Lien upon any property of the Seller
under the provisions of, any agreement, charter instrument, by-law or
other instrument to which the Seller 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 Seller or its
properties, or any order to which the Seller or its properties is
subject, of or by any government or governmental agency or authority.
2.10 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 Seller in connection with the execution
and delivery of this Sales and Servicing Agreement or the sale of the Leases and
contribution of the Equipment.
2.11 Taxes. (a) All tax returns required to be filed by the Seller or any
subsidiary in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Seller 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
Seller's knowledge all such tax returns were true and correct and neither the
Seller 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 Seller and each of its
subsidiaries are in accordance with generally accepted accounting principles.
2.12 Compliance with Law.
The Seller:
(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
11
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 Seller and its
subsidiaries.
2.13 ERISA. (a) The present value of all benefits vested under all
"employee pension benefit plans," as such term is defined in Section 3 of ERISA,
maintained by or contributed to by the Seller and its Related Persons (other
than multi-employer plans as such term is defined in Section 3 of ERISA), as
from time to time in effect (herein called the "Pension Plans"), does not exceed
the value of the assets of the Pension Plans allocable to such vested benefits
(based on the value of such assets as of [December 31, 1994,] [need
confirmation] the last annual valuation date);
(b) No Prohibited Transactions, Accumulated Funding Deficiencies,
Withdrawals or Reportable Events have occurred with respect to any Pension Plans
that, in the aggregate, could subject the Seller to any material tax, penalty or
other liability; and
(c) No notice of intent to terminate a Pension Plan under a distress
termination has been filed, nor has the PBGC instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has
occurred or condition exists which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan.
2.14 Ability to Perform. At the date hereof, the Seller does not believe,
nor does it have any reasonable cause to believe, that it cannot perform each
and every covenant contained in this Sales and Servicing Agreement.
2.15 Ordinary Course; No Insolvency. The transactions contemplated by the
Notes, the Indenture and this Sales and Servicing Agreement are being
consummated by the Seller in furtherance of the Seller's ordinary business
purposes and constitute a practical and reasonable course of action by the
Seller designed to improve the financial position of the Seller, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. The Seller will not, either as a result of
the transaction contemplated by this Sales and 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.
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2.16 Assets and Liabilities. (a) Both immediately before and after any
transfer of Leases (including the right to receive all payments due or to become
due thereunder) and the transfer of the interests in the Equipment contemplated
by this Sales and Servicing Agreement, the present fair salable value of the
Seller's assets was or will be in excess of the amount that will be required to
pay the Seller's probable liabilities as they then exist and as they become
absolute and matured; and
(b) Both immediately before and after any transfer of Leases (including the
right to receive all payments due or to become due thereunder) and the transfer
of the interests in the Equipment contemplated by this Sales and Servicing
Agreement, the sum of the Seller's assets was or will be greater than the sum of
the Seller's debts, valuing the Seller's assets at a fair salable value.
2.17 Fair Consideration. The consideration received by the Seller, in
exchange for the Leases (including the right to receive all payments due or to
become due thereunder) and the transfer of its interests in the Equipment, is
fair consideration having value equivalent to or in excess of the value of the
assets being transferred by the Seller.
2.18 Ability to Pay Debts. Neither as a result of the transaction
contemplated by this Sales and Servicing Agreement nor otherwise does the Seller
believe that it will incur debts beyond its ability to pay or which would be
prohibited by its charter documents or by-laws. The Seller's assets and cash
flow enable it to meet its present obligations in the ordinary course of
business as they become due.
2.19 Bulk Transfer Provisions. The sale, transfer, assignment and
conveyance of the Leases and its interests in the Equipment by the Seller
pursuant to this Sales and Servicing Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any applicable
jurisdiction.
2.20 Transfer Taxes. The sale, transfer, assignment and conveyance of the
Leases (including all payments due or to become due thereunder) and its
interests in the Equipment by the Seller pursuant to this Sales and Servicing
Agreement is not subject to and will not result in any tax, fee or governmental
charge payable by the Seller to any federal, state or local government
("Transfer Taxes"). In the event that the Company receives actual notice of any
Transfer Taxes arising out of the transfer, assignment and conveyance of the
Leases and/or its interests in the Equipment, on written demand by the Company,
or upon the
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Seller otherwise being given notice thereof, the Seller shall pay, and otherwise
indemnify and hold the Company, the Trustee and the holders of the Notes
harmless, on an after-tax basis, from and against any and all such Transfer
Taxes (it being understood that the holders of the Notes and the Trustee shall
have no obligation to pay such Transfer Taxes).
2.21 Principal Executive Office. The principal executive office of each of
the Seller and the Servicer is located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
2.22 Servicing Provisions Customary. The servicing arrangements hereunder,
including without limitation the terms and conditions pursuant to which the
Seller will act as Servicer and the Servicing Fee to be paid to the Seller, are
consistent with the arrangements and customary practices of the Seller when
providing comparable services to non-affiliated entities and of other servicers
in the equipment leasing industry.
2.23 Nonconsolidation. The Seller is and at all times since its
incorporation has been operated in such a manner that it would not be
substantively consolidated with the Company, such that the separate existence of
the Seller and the Company would be disregarded in the event of a bankruptcy or
insolvency of the Seller or the Company, and in such regard:
(a) the Seller is not involved in the day-to- day management of the
Company;
(b) the Seller maintains separate corporate records and books of account
from the Company and otherwise observes corporate formalities and has a separate
business office from the Company;
(c) the financial statements and books and records of the Seller prepared
after the Closing Date will reflect the separate existence of the Company;
(d) the Seller maintains its assets separately from the assets of the
Company (including through the maintenance of a separate bank account), the
Seller's funds and assets, and records relating thereto, have not been and are
not commingled with those of the Company and the separate creditors of the
Company will be entitled to be satisfied out of the Company's assets prior to
any value in the Company becoming available to the Company's equityholders or
the Seller's creditors;
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(e) all business correspondence of the Seller and other communications are
conducted in the Seller's own name and on its own stationery; and
(f) the Company does not act as an agent of the Seller in any capacity and
the Seller does not act as agent for the Company, but instead presents itself to
the public as a corporation separate from the Company; provided that the Seller
is the Servicer hereunder and under agreements substantially the same as this
Agreement.
2.24 Sale Treatment. The Seller will treat the transfer to the Company of
the Leases and the Lease Receivables as a sale for reporting and accounting
purposes and the Seller will treat the transfer to the Company of its interest
in the Equipment as a contribution for reporting and accounting purposes.
2.25 Leases are Chattel Paper. Each Lease agreement is "chattel paper"
within the meaning of the Uniform Commercial Code in the states of New York and
New Jersey.
SECTION 3. ADMINISTRATION OF LEASES
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 Company, will service and administer each Lease
in accordance with the terms thereof and of this Sales and 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 and such other notices as may be required to ensure that
all Lease Payments, Casualty Payments and Termination Payments on or 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 Collection Account
within two Business Days of the receipt thereof. Any other amount received by
the Servicer from time to time from the Seller, the Company 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 promptly turned over to the
15
Trustee or deposited into the Collection 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 Sales and
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
Company, 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 with respect to each item
of Equipment all rights and remedies it, the Company 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 to the Trustee for
deposit in the Collection Account.
(c) Without limiting the generality of the foregoing, the Servicer agrees
to (i) 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 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 Sales and 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 Company and the Trustee, any and all tax returns with respect to sales,
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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 Seller and the Servicer
agree to file Financing Statements on Form UCC-1 to perfect the security
interest of the Trustee in the Leases and the Lease Payments, and to the extent
provided herein, the Equipment.
(d) The Servicer will maintain, or cause to be maintained, with respect to
the Leases and the Equipment casualty and liability insurance in amounts at
least as great as those described in Section 2.04(f). Each such casualty and
liability policy (i) if maintained by the Servicer, shall name the Company and
Trustee as loss payees or additional insureds and (ii) if maintained by the
Lessee, 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 Company as loss payees and additional insureds if (A) the Seller
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 Section 9 and Lease
substitutions pursuant to Section 9 hereof or otherwise so that (i) the
ownership interest contemplated by this Agreement in favor of the Company and
the security interest contemplated by the Indenture in favor of the Trustee in
each of the Leases will be perfected by such filings with the appropriate
Uniform Commercial Code filing offices.
17
(f) The Servicer shall pay the Excess Copy Charges and Fee Per Scan
Charges, if any, owing the related vendor in a timely fashion.
3.02 Lease Amendments and Modifications. In performing its obligations
hereunder, the Servicer may, acting in the name of the Company and without the
necessity of obtaining the prior consent of the Company 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 Lease Payment, Casualty Payment or
Termination Payment to be made under a Lease (other than 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
could adversely affect the interests of any of the Company, the Trustee or the
holders of the Notes.
In addition, following the transfer of any Lease to the Company in
accordance herewith, 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. Except to the extent the Seller
substitutes a Substitute Lease therefor in accordance with Section 9 hereof, the
Servicer may permit such adjustments so long as the following conditions
precedent have been satisfied:
(i) after giving effect to such adjustments and any additions and
substitutions pursuant to Section 9, the aggregate Booked Residual Value of
such Leases will not be less than [90%] of the aggregate Booked Residual
Value of the Leases adjusted, replaced or substituted since the Issuance
Date.
(ii) after giving effect to such adjustment, either the final payment
on such Lease must be on or prior to _________ or, to the extent the final
payment on such Lease is due
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subsequent to _________, only scheduled payments due on or prior to such
date may be included in the Discounted Present Value of such Lease for the
purpose of making any calculation under the Indenture.
(iii) after giving effect to such adjustments and any additions and
substitutions pursuant to Section 9 the aggregate amount of Lease Payments
through the term of the Leases (including the Substitute Leases and the
Additional Leases) will not be materially less than the aggregate scheduled
Lease Payments of the Leases prior to such adjustment, substitution or
addition.
(iv) after giving effect to such adjustments, additions and
substitutions, the Discounted Present Value of the Performing Leases must
not be less than the Discounted Present Value of the Performing Leases
prior to such adjustment, addition and substitution.
3.03 Non-Performing Leases. (a) Upon receipt of notice from the Company,
the Trustee or any other Person, or if the Servicer otherwise learns that any
Lease is a Non-Performing 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 necessary to cause,
or 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. The
Servicer shall demand, on behalf of the Company, that the Seller immediately
repay any Inter-Company Loan representing the advance pursuant to Section 12.01
hereof of any security deposit with respect to any Lease which becomes a
Non-Performing Lease, and the Servicer shall apply such security deposit in
accordance with Section 3.03(d) hereof.
(b) The Servicer will use its best efforts to sell or lease any Equipment
upon the expiration or early termination of a Lease or that is subject to a
Non-Performing Lease in a timely manner and upon the most favorable terms and
conditions available at the time. In the event of an early lease termination,
any substitute Lease must have a Discounted Present Value equal to or greater
than that of the terminated Lease and monthly payments at least equal to those
of the terminated Lease through the remaining term of such terminated Lease.
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(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 Collection Account 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 Non-Performing 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 Non-Performing Lease before
depositing any such amounts pursuant to this Section 3.03(d).
3.04 Costs of Servicing; Servicing Fee; Administrative Expenses. (a) All
costs of servicing each Lease in the manner required by this Section 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 Section 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 Company on each Payment Date following the Closing Date a
servicing fee (the "Servicing Fee") in the amount 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 the Outstanding Principal Amount of the Notes at
the Determination Date for such Payment Date times one-twelfth of 0.75%.
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(c) The Servicer agrees to pay, out of the Servicing Fee, all Trustee's
Fees and expenses in connection with the Notes (including the expenses relating
to the preparation and delivery of reports to Noteholders) and all fees of
accountants in connection with the Notes.
3.05 Other Transactions. Nothing in this Sales and Servicing Agreement
shall preclude the Seller or 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 4. SERVICER ADVANCES AND SELLER'S SUPPORT
4.01 Late Lease Payments. 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. New York City time on the second Business Day prior to the
next succeeding Payment Date, an amount (a "Servicer Advance") equal to any
Lease Payment due during the prior Lease Payment 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 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 Collection Account in accordance with the Indenture on the second following
Payment Date.
4.02 Early Termination Leases. Following the Determination 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 Section 9 hereof (if the Seller is then entitled to substitute
Leases and Equipment in accordance with the provisions of Section 9.01 hereof)
on or before the second Business Day prior to the next succeeding Payment Date,
(b) repurchase from the Company 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 a.m. New York City time on the second Business Day prior to the
next succeeding Payment Date or (c) offer for sale to the Company one or more
Additional Leases in consideration of the proceeds thereof in accordance with
Section 9 hereof. Any Early Termination Lease and the Equipment subject thereto
which is repurchased, or for which Additional Leases have been purchased or
Substitute Leases transferred, pursuant to
21
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 Section 9 hereof or the Lease Purchaser Amount has been
deposited into the Collection Account. 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 2.04(a) through (r) and the
requirements of Section 9 hereof.
4.03 Indemnification. The Seller agrees to indemnify and hold harmless the
Company, the Servicer, 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 transactions contemplated
hereby or by the Indenture, including, without limitation, any claims resulting
from any use, operation, maintenance, repair, storage or transportation of any
item of Equipment, whether or not in the Servicer's possession or under its
control pursuant to this Sales and Servicing Agreement, 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;
provided that the foregoing indemnity shall in no way be deemed to impose on the
Seller any obligation, other than to the extent specifically set forth in this
Section 4, to make any payment with respect to principal or interest on the
Notes or to reimburse the Company for any payments on account of the Notes.
4.04 Repurchases; Other Payments. (a) In the event that (i) any of the
representations or warranties made by the Seller in Sections 2.04 and 2.05
hereof with respect to any of the Leases or the Equipment subject thereto proves
at any time to have been inaccurate in any material respect as of the Closing
Date or related transfer date, as the case may be or (ii) 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 Seller (other than any such action or inaction of the Seller, when acting as
Servicer, in connection with the enforcement of any Lease in a manner consistent
with the provisions of this Sales and Servicing Agreement) or any claim by any
Lessee against the Seller
22
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 Seller is
given notice thereof by the Company or the Trustee or the date on which the
Seller otherwise first has notice thereof, the Seller will repurchase such Lease
and the Equipment subject thereto by paying to the Trustee, not later than the
third Business Day after the Determination Date next following the expiration of
such 30-day period with respect to the events referenced in Section 4.04(a)(i)
and (ii), an amount equal to the Lease Repurchase Amount, and simultaneously
with such repurchase, the Seller shall reimburse the Servicer for all amounts,
if any, theretofore advanced by the Servicer pursuant to Section 4.01 with
respect to such Lease. Without limiting the generality of the foregoing, it is
agreed and understood that for purposes of this Section 4.04, any inaccuracy in
any representation or warranty with respect to (i) the priority of the Lien of
the Indenture with respect to any Lease or (ii) the amount (if less than
represented) of the Lease Payments, Casualty Payments or Termination Payment
under any Lease shall be deemed to be material.
(b) The Seller agrees to obtain and provide to the Trustee UCC searches
against it and the Company from the central filing offices in New Jersey
confirming the absence of any UCC filings against either the Seller or the
Company with respect to the Leases (including the right to receive all payments
due or to become due thereunder) and the Equipment, other than those naming the
Company as the purchaser of the Leases or the Trustee as secured party. If any
searches delivered pursuant to this Section 4.05(b) disclose UCC filings (which
are not in the process of being released pursuant to releases delivered on the
Closing Date) against the Company or the Seller with respect to Leases of
Equipment the Discounted Present Value of which (i) is greater than 2% but less
than 5% of all the Leases, then the Seller shall cause searches to be made in
additional states within 30 days following such disclosure so that the
Discounted Present Value of Leases of Equipment in states where searches have
been performed exceeds 75% of the aggregate Discounted Present Value of all
Leases and 75% of the Booked Residual Value of Equipment or (ii) is greater than
5% of all the Leases then the Seller shall cause searches to be made in
additional states within 30 days following such disclosure so that the
Discounted Present Value of Leases of Equipment in states where such searches
have been performed equals 100% of the aggregate Discounted Present Value of all
Leases. Without limiting the provisions of Section 4.04(a) or this Section
4.04(b), in the event the Seller fails to provide any such searches required by
the preceding sentences of this Section 4.05(b) within the required time period
or any search reveals the
23
existence of any conflicting Liens (which are not removed within 30 days of
receipt of such search), the Seller shall be required to repurchase not later
than the third Business Day after the Determination Date following the
expiration of the time period during which such search was to be obtained or
such Lien released, as the case may be, any Lease of Equipment in any such state
for which such searches are not provided or with respect to which conflicting
Liens are found to exist at the Lease Repurchase Amount for such Lease.
(c) The Seller's obligations under this Section 4.04 are the full recourse
obligations of the Seller and shall in no way be limited or discharged by the
application of any funds constituting part of the Trust Estate.
4.05 Payment Advices. Each payment by the Seller or the Servicer to the
Trustee pursuant to any of the provisions of this Sales and 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 Sales and 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.
SECTION 5. INFORMATION TO BE PROVIDED
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 Lease Payment Period, the Discounted Present Value 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 Lease Payment Period,
the Discounted Present Value 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 [93] or more days overdue as of the end
of the immediately preceding Lease Payment Period, the Discounted
24
Present Value 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
Non-Performing Lease as of the preceding Determination Date and specifying the
Discounted Present Value of such Lease as of such Determination Date (or, in the
case of the first such report, subsequent to the Cut-Off Date) and the aggregate
Discounted Present Value of all such Non-Performing Leases, (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 Lease Delinquency Payments
and Non-Performing Lease Payments previously made by the Seller and the Servicer
(and the specific amounts so recovered with respect to any Non-Performing Lease)
and (vi) indicating the Residual Realizations, the Available Residual Amount and
the Utilized Residual Amount as of the related Determination Date. 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 the Business Day following the Determination Date, the Servicer
shall deliver to the Trustee a certificate signed by an officer of the Servicer
(a "Servicing Report") stating the date and in the form of Exhibit C hereto.
The Trustee shall forward such report to the Noteholders and the Rating
Agencies on the respective Payment Date.
(c) The Servicing Report shall include, among other items, the total amount
of all Lease Payments, Casualty Payments, Termination Payments, Non-Performing
Lease Payments, Similar Transaction Payments and Other Lease Payments received
by the Servicer and deposited in the Collection Account prior to such
Determination Date and on or subsequent to the Determination Date preceding such
Determination Date (or, in the case of the first Determination Date, on or
subsequent to the Cut-Off Date). Such report shall indicate the amount of all
Lease Payments received by the Servicer and deposited in the Collection Account
which are for any Lease Payment Period other than the Lease Payment Period for
such Determination Date and shall identify each Lease with respect to which a
Casualty Payment, Termination Payment or Non-Performing Lease Payment was made
during such time period. Such report shall also indicate (i) the aggregate
amount paid by the Servicer on or
25
subsequent to the most recent Determination Date with respect to Non-Performing
Leases pursuant to Section 4.01 hereof, and (ii) the aggregate amount reimbursed
to the Servicer prior to the most recent Determination Date and on or subsequent
to the Determination Date preceding such Determination Date (or, in the case of
the first Determination Date, on or subsequent to the Cut-Off Date) for actual
cash payments made by the Servicer with respect to Non-Performing Leases
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 intends to withdraw any funds from the Collection
Account in accordance with Section 3.02(b) of the Indenture after the Payment
Date relating to the Determination Date for which a Servicing Report is
submitted, the Servicer shall submit 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 are all or part of any Lease Payment, Lease Delinquency
Payment, Non-Performing Lease Payment, Casualty Payment or Termination Payment,
and (iii) identifying the lease or leases to which such amounts relate.
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 or to the Seller) 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, 1997, 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 twenty-five Leases included in the Trust Estate
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
26
exceptions as such firm shall believe to be immaterial and (y) such other
exceptions as shall be set forth in such statement.
SECTION 6. THE SERVICER
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 Sales and 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 Company,
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.
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 Company, the Trustee or the holders of the
Notes for any action taken or not taken in good faith pursuant to the terms of
this Sales and Servicing Agreement with respect to any Lease (including any
Non-Performing Lease) or the Equipment subject thereto; provided, however, that
this provision shall not protect the Servicer or any such person 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.
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
27
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 8.02 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 (i) become
effective until the Trustee or a successor servicer shall have assumed the
Servicer's servicing responsibilities and obligations in accordance with Section
8.02 hereof, or (ii) affect the Seller's obligations pursuant to Section 4
hereof.
6.04 Financial and Business Information. The Servicer will deliver to the
Company 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 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
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(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;
(d) SEC and Other Reports - 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 involves or may involve the possibility of materially and adversely
affecting 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
29
(f) Requested Information - 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.
6.05 Officers' Certificates. With each set of financial statements
delivered pursuant to Section 6.04, the Servicer will deliver an Officers'
Certificate stating (i) that the officers signing such Officers' Certificate
have reviewed the relevant terms of this Sales and Servicing Agreement and have
made, or caused to be made under such officers' 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.
6.06 Inspection. The Servicer will permit, on reasonable prior notice, the
representatives of the Company 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.
Any expense incident to the exercise by the Company, 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.
6.07 Servicer Records. 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
30
the provisions of the Indenture as Custodian for the Trustee.
SECTION 7. THE SELLER
7.01 Merger or Consolidation of the Seller. The Seller 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 Seller's duties under this Sales and
Servicing Agreement.
The Seller 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 Seller, shall execute and deliver to the Company,
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 Seller
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 Seller hereunder.
7.02 Control of Company. So long as any of the Notes or the other
obligations secured by the Indenture remain outstanding, the Seller will not (i)
sell, pledge or otherwise transfer any of the capital stock in the Company held
by the Seller or (ii) vote such stock in favor of any amendment to or alteration
of the certificate of incorporation of the Company. In furtherance of the
Seller's negative covenant pursuant to clause (i) of the preceding sentence, the
Seller will deliver to the Trustee on the Closing Date each certificate
representing any share of the capital stock of the Company held by the Seller,
and the Seller will promptly deliver to the Trustee upon receipt by the Seller
each certificate representing any additional shares of the capital stock of the
Company at anytime thereafter received by the Seller.
7.03 Financial and Business Information. The Seller will deliver to the
Company and the Trustee and upon receipt thereof the Trustee 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 Notes (and,
upon the request of any holder of outstanding Notes, to any prospective
transferee of any Notes):
31
(a) 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 (with a copy to each Rating
Agency) describing its nature and period of existence and what action the
Seller is taking or proposes to take with respect thereto;
(b) SEC and Other Reports - promptly upon their becoming available,
one copy of each report (including the Seller'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;
(c) Report on Proceedings - promptly upon the Seller'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 involves or may involve the possibility of materially and adversely
affecting the properties, business, prospects, profits or condition (financial
or otherwise) of the Seller, a written notice specifying the nature of such
investigation or proceeding and what action the Seller is taking or proposes to
take with respect thereto and evaluating its merits;
(d) ERISA - (i) promptly and in any event within ten days after the
Seller knows or has reason, to know of the occurrence of a Reportable Event
with respect to a Pension Plan with regard to which notice must be provided
to the PBGC, a copy of such materials required to be filed with the PBGC
with respect to such Reportable Event and in each such case a statement of
the chief financial officer of the Seller setting forth details as to such
Reportable Event and the action which the Seller proposes to take with
respect thereto; (ii) at least ten days prior to the filing by any plan
administrator of a Pension Plan of a notice of intent to terminate such
Pension Plan, a copy of such notice; (iii) upon request of the Company and
the Trustee, and in no event more than ten days after such request, copies
of each annual report which is filed on Form 5500, together with certified
financial statements for the Pension Plan (if any) as of the end of such
year and actuarial statements on Schedule B to such Form
32
5500; (iv) promptly and in any event within ten days after it knows or has
reason to know of any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Pension Plan, a statement of the chief
financial officer of the Seller describing such event or condition; (v)
promptly and in no event more than ten days after receipt thereof by the
Seller or any Related Person, each notice received by the Seller or any
Related Person concerning the imposition of any withdrawal liability under
Section 4202 of ERISA; and (vi) promptly after receipt thereof a copy of
any notice the Seller or any Related Person may receive from the PBGC or
the Internal Revenue Service with respect to any Pension Plan; provided,
however, that this subsection (vi) shall not apply to notices of general
application promulgated by the PBGC or the Internal Revenue Service or
notices which would not require any material payment by the Seller or any
Related Person; and
(e) Requested Information - with reasonable promptness, any other
data and information which may be reasonably requested from time to time.
7.04 Officers' Certificates. With each set of financial statements
delivered pursuant to Section 7.03, the Seller will deliver an Officers'
Certificate stating that the officers signing such Certificate have reviewed the
relevant terms of this Sales and Servicing Agreement and have made, or caused to
be made under such officers' supervision, a review of the activities of the
Seller during the period covered by the income statements then being furnished
and, so long as the Seller is Servicer hereunder, 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 Seller has taken
and is taking with respect thereto.
7.05 Inspection. The Seller will permit, on reasonable prior notice, the
representatives of the Company, the Servicer, the Trustee, or any holder of the
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 Seller, to make copies and extracts therefrom, and to
discuss the Seller's affairs, finances and accounts with its officers, employees
and independent public accountants (and by this provision the Seller authorizes
said accountants to discuss the finances and affairs of the Seller) 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 Seller or the
Seller's
33
performance of its duties and obligations hereunder. Any expense incident to the
exercise by the Company, the Trustee or any holder of the Notes during the
continuance of any default by the Seller in any of its obligations hereunder of
any right under this Section 7.05 shall be borne by the Seller.
7.06 Books and Records. The Seller will clearly ▇▇▇▇ its books and records
to reflect each sale of a Lease and contribution of the Equipment subject
thereto to the Company.
7.07 Communications. The Seller will reply to all inquiries by third
parties with respect to the transactions contemplated by this Agreement by
indicating that it has sold to the Company the Leases and contributed to the
Company its right, title and interest in the related Equipment.
SECTION 8. DEFAULT
8.01 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 Collection
Account or other applicable account within three Business Days following
the receipt thereof any monies received by the Servicer (including, without
limitation, any Lease Payments and any Non-Performing Lease Payments) and
required to be deposited hereunder;
(ii) so long as the Seller is the Servicer hereunder, failure on the
part of the Seller 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 Section 4 hereof;
(iii) failure on the part of either the Servicer or (so long as the
Seller is the Servicer) the Seller to observe or perform in any material
respect any other of their respective covenants or agreements in this Sales
and 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
34
shall have been given to the Seller or the Servicer, as the case may be, by
the Trustee, or to the Seller or the Servicer, as the case may be, and the
Trustee by any holder of the Notes;
(iv) if any representation or warranty made by the Seller in this
Sales and Servicing Agreement or in any certificate or other writing
delivered pursuant hereto or made by any successor Servicer in connection
with such successor Servicer's assumption of the duties of the Servicer
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 Seller or Servicer in this Sales and
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 Sales and Servicing Agreement with respect to
any of the Leases or the Equipment subject thereto will not constitute a
Servicer Event of Default if the Seller repurchases such Lease and
Equipment in accordance with this Sales and Servicing Agreement.
(v) the entry by a court having jurisdiction in the premises 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 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;
(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
35
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;
(vii) the failure of the Servicer to make one or more payments due
with respect to aggregate recourse debt or other obligations exceeding
$1,000,000, or the occurrence of any event or the existence of any
condition, the effect of which event or condition is to cause (or permit
one or more persons to cause) more than $1,000,000 of aggregate recourse
debt or other obligations of the Servicer to become due before its (or
their) stated maturity or before its (or their) regularly scheduled dates
of payment so long as such failure, event or condition shall be continuing
and shall not have been waived by the Person or Persons entitled to
performance; or
(viii) a final judgment or judgments (or decrees or orders) for the
payment of money aggregating in excess of $1,000,000 and any one of such
judgments (or decrees or orders) has remained unsatisfied and in effect for
any period of 60 consecutive days without a stay of execution.
8.02 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
Sales and Servicing Agreement. On the receipt by the Servicer of such written
notice, all authority and power of the Servicer under this
36
Sales and 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 Section 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.
8.03 Trustee to Act; Appointment of Successor. (a) On and after the time
the Servicer receives a notice of termination pursuant to Section 8.02 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 Sales and 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 (but not the
obligations of the Seller contained in Section 4 hereof which shall survive any
such termination as above provided) and shall be entitled to receive from the
Company 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.
(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 (but not the obligations of the Seller
contained in Section 4 hereof) 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
37
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 Sales and Servicing Agreement except that such
agreement shall not include any of the Seller's representations, warranties or
obligations and 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 ▇▇▇▇▇'▇ with prior written notice of the appointment of any successor to
the Servicer.
8.04 Servicer to Cooperate. The Servicer hereby agrees to cooperate with
the Trustee or any successor to the Servicer appointed in accordance with
Section 8.03 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.
8.05 Notification to Noteholders. Upon any such termination or appointment
of a successor to the Servicer, the Company 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.
8.06 Remedies Not Exclusive. Nothing in the preceding provisions of this
Section 8 shall be interpreted as limiting or restricting any rights or remedies
which the Company, the Trustee or any other Person would otherwise have at law
or in equity on account of the breach or
38
violation of any provision of this Sales and 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 9. SUBSTITUTION AND ADDITION OF LEASES
9.01 Substitution and Addition. (a) Subject to the satisfaction of the
requirements set forth in Section 9.01(b) hereof, the Seller 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 Section 9 referred to as a "Predecessor Lease") and the
Equipment subject thereto if:
(i) the Predecessor Lease became (A) a Non-Performing Lease, (B) a
Warranty Lease or (C) an Adjusted Lease during the immediately preceding
Due Period;
(ii) the aggregate Discounted Present Value of the Non-Performing
Leases that are Predecessor Leases shall not in the aggregate exceed 10%
of the Discounted Present Value of the Leases on the Cut-Off Date; and
(iii) the aggregate Discounted Present Value of the Adjusted Leases
and Warranty Leases that are Predecessor Leases shall not exceed 10% of
the Discounted Present Value of the Leases on the Cut-off Date.
Subject to the satisfaction of the requirements set forth in Section 4 and
Section 9.01(b) hereof, in the event of an Early Lease Termination which has
been prepaid in full, the Company 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 an amount equal to the proceeds
of such Early Termination Lease.
(b) Each transfer of Substitute Leases and addition of Additional Leases
will be subject to the satisfaction of the following conditions precedent:
(i) after giving effect to such additions and substitutions and any
adjustments pursuant to Section 3.02 thereof, the aggregate Booked Residual
Value of such Leases must be not less than [90%] of the Booked Residual
Value of the
39
Leases added, substituted or adjusted since the Issuance Date.
(ii) either the final payment on such Substitute Lease or Additional
Lease must be on or prior to April 2004 or, to the extent the final payment on
such Lease is due subsequent to April 2004, only scheduled payments due on or
prior to such date may be included in the Discounted Present Value of such Lease
for the purpose of making any calculation under the Indenture.
(iii) after giving effect to such additions and substitutions and any
adjustments pursuant to Section 3.02 thereof the aggregate amount of Lease
Payments through the term of the Leases (including the Substitute Leases
and the Additional Leases) and the Discounted Present Value of the
Performing Leases will not be materially less than the aggregate scheduled
Lease Payments of the Leases and the Discounted Present Value of the
Leases, respectively prior to such substitution or addition or adjustment;
and
(iv) after giving effect to such adjustments, additions and
substitutions, the Discounted Present Value of the Performing Leases must
not be less than the Discounted Present Value of the Performing Leases
prior to such adjustment, substitution or addition.
(v) such Additional Lease or Substitute Lease was originated in the
Healthcare Division, the Manufacturing Technology Division and the Business
Technology Division or its predecessors or successors.
(c) Each addition and substitution pursuant to this Section 9.01 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 Seller 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 Lease Payment Period during which such substitution or addition is made). At
the time of each such substitution and addition, the Seller shall transfer to
the Trustee all Lease Payments actually received by the Seller which became due
during the current Lease Payment Period.
40
9.02 Procedure. (a) By 11:00 a.m. on the third Business Day following each
Determination Date, the Seller shall give written notice to the Servicer of any
substitution of Substitute Leases for Predecessor Leases or addition of
Additional Leases for Early Termination Leases which have been prepaid in full
pursuant to Section 9.01 during the preceding Lease Payment Period. By 11:00
a.m. on the fourth Business Day following each Payment Date, the Seller shall
deliver to the Servicer and 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 Exhibit A 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
and the Booked Residual Value under each such Predecessor Lease and the amount
of each periodic Lease Payment and the Booked Residual Value 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 9.03, the delivery of any
Officer's Certificate and supplement to Exhibit A pursuant to Section 9.02(a)
shall be conclusive evidence, without further act or deed, that during the
immediately preceding Lease Payment Period (i) the Seller assigned to the
Company pursuant to Section 9.01 hereof all of the Seller's right, title and
interest in and to the Substitute Leases and Additional Leases identified in
such supplement and the related rights described in Section 9.01 hereof, (ii)
the Seller transferred to the Company, as a contribution to capital, all of the
Seller's right, title and interest in and to the Equipment subject to such
Substitute Leases (to the extent of the Seller's interest in such Equipment,
including the Seller's security interest in any Equipment which is not owned by
the Seller), and (iii) the Company assigned and transferred to the Seller,
without representation or warranty, all of the Company's right, title and
interest in and to the Predecessor Leases and Early Termination Leases
identified in such Officer's Certificate and the Equipment subject thereto (to
the extent of the Company's interest in such Equipment, including the Company's
security interest in any Equipment which is not
41
owned by the Company). The Seller shall promptly deliver to the Trustee the
original executed counterpart of each Substitute Lease and Early Termination
Lease assigned to the Company pursuant to Section 9.01 hereof and the Company
shall promptly request the Trustee to deliver to the Seller the original
executed counterpart of each Predecessor Lease for which substitution has been
made pursuant to Section 9.01 hereof.
9.03 Objection and Repurchase. If any holder of the Notes objects to any
substitution of Leases within ten days of receipt of the Servicer's monthly
report providing notice thereof pursuant to Section 5.01 above, on the grounds
either that any Substitute Lease or Additional Lease is not an Eligible Lease
within the meaning of the definition thereof or that such substitution or
addition is otherwise not permitted under the provisions of Section 9.01 hereof,
the Seller 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 6.01 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 the Seller shall be required to repurchase such Lease in
accordance with the provisions of Section 4.05 hereof.
9.04 Seller's and Servicer's Subsequent Obligations. Upon any substitution
of Leases in accordance with the provisions of this Section 9, the Seller's and
the Servicer's obligations hereunder with respect to the Predecessor Lease shall
cease but the Seller 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.
SECTION 10. ASSIGNMENT
10.01 Assignment to Trustee. It is understood that this Sales and Servicing
Agreement and all rights of the Company hereunder will be assigned by the
Company 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. Each of the Seller and the
Servicer hereby expressly agrees to each such assignment and agrees that all of
its duties, obligations, representations
42
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.
10.02 Assignment by Seller or Servicer. None of the respective rights or
obligations of the Seller and the Servicer hereunder may be assigned without the
prior written consent of the Company, 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 agents to the extent
that such use is consistent with the Servicer's business practices in dealing
with leases and equipment for its own account.
SECTION 11. NATURE OF SELLER'S OBLIGATIONS
AND SECURITY THEREFOR
11.01 Seller's Obligations Absolute. The obligations of the Seller
hereunder, and the rights of the Trustee, as assignee of the Company, in and to
all amounts payable by the Seller 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 Seller may have against the Servicer, the Company, the Trustee, and any
holder of the Notes or any other Person for any reason whatsoever; nor, except
as otherwise expressly provided herein, shall this Sales and Servicing Agreement
terminate, or the respective obligations of the Company, the Seller or the
Servicer be otherwise affected, by reason of any defect in any Lease or in any
unit of Equipment or in the respective rights and interests of the Company, the
Seller and the Trustee therein, or by reason of any Liens, encumbrances,
security interests or rights of others with respect to any Lease or any unit of
Equipment, or any failure by the Company or the Servicer to perform any of its
obligations herein contained, or by reason of any other indebtedness or
liability, howsoever and whenever arising, of the Company, the Servicer, the
Trustee, or any holder of the Notes to the Seller or any other Person or by
reason of any insolvency, bankruptcy, or similar proceedings by or against the
Seller, the Servicer, the Company, the Trustee or any other Person or for any
other cause whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding, it being the intention of the
parties hereto that all obligations of the Seller hereunder and all
43
amounts payable by the Seller 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 Sales and Servicing Agreement.
11.02 Security for Obligations. As security for the full and timely
performance by the Seller and the Servicer of each of its obligations hereunder,
and by the Company of each of its obligations hereunder and under the Notes and
the Indenture, the Seller hereby pledges and grants to the Trustee (as a
precaution in the event that, contrary to the intent of the parties to the
transactions contemplated hereby, it is contended that the Seller has any
continuing interest in any Lease or item of Equipment subject to the Indenture)
a first priority Lien on and security interest in all right, title and interest
of the Seller now or hereafter acquired in and to each Lease (including the
right to receive all payments due or to become due thereunder) and each item of
Equipment at any time subject to the Indenture. The foregoing security interest
is granted upon and is subject to the same terms and provisions as are set forth
in the Indenture and shall continue in full force and effect until the same is
discharged in accordance with the terms therein, notwithstanding any waiver or
modification of any of the terms hereof or thereof or of any of the Notes,
whether with or without the consent of the Seller.
11.03 Further Assurances; Financing Statements. Each of the Seller and the
Servicer severally 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 Company 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 Company 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 Seller 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 Company or the Trustee may
request to protect and preserve the assignments and security interests granted
by this Agreement with respect to the Leases.
44
SECTION 12. DEFINITIONS
As used in this Sales and 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:
Accumulated Funding Deficiency - a funding deficiency described in Section
302 of ERISA.
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) acquired by the Company from the Seller with all or
a portion of the proceeds of an Early Termination Lease that has been prepaid in
full pursuant to Section 9 hereof.
Adjusted Lease - a Lease which has had one or more non-credit related
terms adjusted or modified by the Servicer.
Available Residual Amount - Section 1.01 of the Indenture.
Affiliate - Section 1.01 of the Indenture.
Booked Residual Value - the estimated residual value of the Equipment
recorded on the books of the Seller.
Business Day - any day that is not a Saturday, Sunday or other day on which
commercial banking institutions in the city in which the Corporate Trust Office
or the Servicer is located are authorized or obligated by law or executive order
to remain closed.
Casualty Payment - any payment pursuant to a Lease on account of the 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.
Class A Notes - the Company's Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes.
Class A-1 Notes - the Company's _______% Class A-1 Lease-Backed Notes,
Series 1997-A.
Class A-2 Notes - the Company's _______% Class A-2 Lease-Backed Notes,
Series 1997-A.
45
Class A-3 Notes - the Company's _______% Class A-3 Lease-Backed Notes,
Series 1997-A.
Class A-4 Notes - the Company's _______% Class A-4 Lease-Backed Notes,
Series 1997-A.
Class B Notes - the Company's _______% Class B Lease-Backed Notes, Series
1997-A.
Class C Notes - the Company's _______% Class C Lease-Backed Notes, Series
1997-A.
Closing Date - May ____, 1997, the date on which the Notes are originally
issued pursuant to the Prospectus and the Private Placement Memorandum.
Code - the Internal Revenue Code of 1986, as amended.
Collection Account - Section 1.01 of the Indenture.
Company - the corporation so identified in the first paragraph of
this Sales and Servicing Agreement and any successor corporation.
Corporate Trust - Section 1.01 of the Indenture.
Cut-Off Date - close of business on [May 1], 1997.
Delinquent Lease - Section 1.01 of the Indenture.
Determination Date - Section 1.01 of the Indenture.
Discounted Present Value of the Leases - Section 1.01 of the Indenture.
Early Termination Lease - a lease which has been terminated.
Eligible Lease - Section 4.02 hereof.
Equipment - all units or items of equipment from time to time subject to
any Lease and all such units or items of equipment (to the extent of the
Company's interest therein) remaining subject to the Lien of the Indenture
following the expiration or termination of the Lease to which the same was
previously subject.
ERISA - the Employee Retirement Income Security Act of 1974, as amended.
46
Event of Default - Section 1.01 of the Indenture.
Excess Copy Charges - Section 1.01 of the Indenture.
Fee Per Scan Charges - Section 1.01 of the Indenture.
Filing Requirements - Financing Statements necessary to perfect the
ownership interest of the Company and the perfected security interest of the
Trustee in the Leases and as of the Closing Date, in Equipment (i) subject to
Leases having a Discounted Present Value of at least 75% of the aggregate
Discounted Present Value of the Leases, which are not finance leases and (ii)
relating to not less than 75% of the Booked Residual Value of such Equipment.
Financing Statement - a statement filed pursuant to the UCC which evidences
a perfected security interest in an asset.
Granted Assets - The Granting Clause of the Indenture.
Indemnified Party - Section 4.03 hereof.
Indenture - the Indenture dated as of the date hereof, between the Company
and the Trustee, as the same may be supplemented, modified or amended from time
to time in accordance with the terms thereof.
Inter-Company Loans - Section 13.01 hereof.
Issuance Date - [May ______], 1997.
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) described on Exhibit A hereto, as the same may be
amended or modified from time to time in accordance with the provisions hereof
and thereof.
Lease Delinquency Payment - Section 1.01 of the Indenture.
Lease Payment - Section 1.01 of the Indenture.
Lease Payment Period - with respect to any Payment Date and the
Determination Date with respect thereto, the calendar month prior to the month
in which such Payment Date and Determination Date occur.
Lease Receivables - with respect to any Lease, all amounts owing by the
Lessee thereunder.
Lease Repurchase Amount - at any date with respect to any Lease, an amount
equal to the Discounted Present Value of the Lease as of the next following
Payment Date plus any amounts previously due and unpaid.
47
Lessee - each lessee under a Lease.
Lien - means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind other than tax liens, mechanics liens, and any liens
that attach to a Lease by operation of law.
Nominal Buy-Out Lease - each Lease identified on Exhibit A hereto as having
an estimated residual value of $0 or $1 in the column under the-heading
"RESIDUAL".
Non-Performing Lease - Section 1.01 of the Indenture.
Nonrecoverable Advance - any advance made or to be made by the Servicer
pursuant to Section 4.01 hereof which, in the good faith judgment of the
Servicer, will ultimately not be recoverable by the Servicer under the terms of
this Sales and Servicing Agreement and the Indenture.
Notes - the Class A Notes, Class B Notes and Class C Notes issued pursuant
to the Indenture and all notes issued in exchange therefor pursuant to the
Indenture.
Officers' Certificate - with respect to the Seller or Servicer, a
certificate delivered to the Trustee and signed by the Chairman, the President,
or a Vice President, and by another Vice President, the Treasurer, an Assistant
Treasurer, the Secretary, or an Assistant Secretary of the Seller or Servicer,
as the case may be, who is not the same person as the other officer signing such
certificate.
Original Principal Amount of the Notes - the principal amount of the Notes
originally issued on the Closing Date.
Other Lease Payments - Section 1.01 of the Indenture.
Outstanding Principal Amount - Section 1.01 of the Indenture.
PBGC - the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
Payment Date - the 20th day of each calendar month.
Predecessor Lease - Section 9.01 hereof.
Pension Plan - Section 2.13 hereof.
48
Person - an individual, partnership, corporation, joint venture,
association, limited liability company, trust (including any beneficiary
thereof) or unincorporated organization, or a government or agency or political
subdivision thereof.
Prime Rate - the [Manufacturers and Traders Trust Company] prime lending
rate.
Private Placement Memorandum - the final Private Placement Memorandum used
in connection with the private offering of the Class C Notes.
Prohibited Transaction - any transaction described in Section 406 of ERISA
which is not exempt by reason of Section 408 of ERISA or the transitional rules
set forth in Section 414(c) of ERISA and any transaction described in Section
4975(c) of the Code which is not exempt by reason of Section 4975(c)(2) or
Section 4975(d) of the Code, or the transitional rules of Section 2003(c) of
ERISA.
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 pursuant to Rule 424(b).
Rating Agency - Standard & Poor's Ratings Services, a Division of the
▇▇▇▇▇▇-▇▇▇▇ Companies, ▇▇▇▇▇'▇ Investors Services, Inc., Fitch Investors
Service, L.P. or Duff & ▇▇▇▇▇▇ Credit Rating Co.
Registration Statement - the registration statement (File No. 333-23679)
filed with the Securities and Exchange Commission for the registration of the
Class A Notes and the Class B Notes.
Related Person - any Person (whether or not incorporated) which is under
common control with the Seller within the meaning of Section 414(c) of the
Internal Revenue Code of 1986, as amended, or of Section 4001(b) of ERISA.
Reportable Event - any of the events set forth in Section 4043(c) of ERISA
or the regulations thereunder, a withdrawal from a Pension Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4062(e)
of ERISA.
Reserve Account - Section 1.01 of the Indenture.
Residual Account - Section 1.01 of the Indenture.
Residual Realization - Section 1.01 of the Indenture.
49
Seller - Copelco Capital, Inc., a Delaware corporation, and any successor.
Servicer - the corporation so identified in the first paragraph of this
Sales and Servicing Agreement and any successor thereto in accordance with the
provisions hereof.
Servicer Event of Default - Section 8.01 hereof.
Servicing Fee - Section 3.04(a) hereof.
Servicing Report - Section 5.01(b) hereof.
Similar Transaction Amount - Section 1.01 of the Indenture.
Similar Transaction Payments - Section 1.01 of the Indenture.
Substitute Lease - Section 9.01(a) hereof.
Stated Maturity of the Notes - The ______, ______
Payment Date for the Class A-1 Notes; the ______,______
Payment Date for the Class A-2 Notes; the ______,______
Payment Date for the Class A-3 Notes; the ______, ______
Payment Date for the Class A-4 Notes; and the ______, ______
Payment Date for the Class B Notes.
Termination Payment - Section 1.01 of the Indenture.
Transaction Payment Amount - Section 1.01 of the Indenture.
Trust Estate - Section 1.01 of the Indenture.
Trustee - Manufacturers and Traders Trust Company, and any successor
thereto, as trustee under the Indenture.
Underwriting Agreement - the Underwriting Agreement dated May ____, 1997
among the Company, ▇▇▇▇▇▇ Brothers Inc. and First Union Capital Markets Corp.
and, with respect to the Class A Notes, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated for
the purchase and sale of the Class A Notes and the Class B Notes.
Uniform Commercial Code or UCC - with respect to a particular jurisdiction,
the Uniform Commercial Code, as in effect from time to time in such
jurisdiction, or any successor statute thereto.
50
Utilized Residual Amount - Section 1.01 of the Indenture.
Warranty Lease - Section 1.01 of the Indenture.
SECTION 13. INTER-COMPANY LOANS
13.01 Inter-Company Loans. With the purchase of the Leases, the Company has
acquired the right to hold and apply in accordance with the provisions of
certain of the Leases, security deposits in the amounts [indicated on Schedule
II of Exhibit A to this Agreement]. The Company may from time to time, to the
extent permitted by law, lend such security deposits and any amounts disbursed
to the Company pursuant to Sections 3.03(b) or 6.06 of the Indenture to the
Seller (each such advance, an "Inter-Company Loan"). Each Inter-Company Loan
shall be on a demand basis, shall bear interest at an annual rate equal to the
Prime Rate plus one percent, shall be in the form attached hereto as Exhibit B
and shall otherwise be on such arm's-length terms and conditions as the Company
and the Seller may agree.
SECTION 14. MISCELLANEOUS
14.01 Continuing Obligations. This Sales and 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.
14.02 GOVERNING LAW. THIS SALES AND 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. IF ANY PROVISION OF THIS SALES AND
SERVICING AGREEMENT IS DEEMED INVALID, IT SHALL NOT AFFECT THE BALANCE OF THIS
SALES AND SERVICING AGREEMENT.
14.03 Successors and Assigns. This Sales and Servicing Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company, the Seller, 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.
14.04 Modification. The terms of this Sales and Servicing Agreement shall
not be waived, modified or amended without the written consent of the party
against whom such waiver, modification or amendment is claimed and, in any
51
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).
14.05 No Proceedings. The Seller and the Servicer, each hereby agree that
it will not, directly or indirectly, institute, or cause to be instituted,
against the Company any proceeding of the type referred to in Section 6.01(e) or
(f) of the Indenture 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.
14.06 Notices. All notices and other communications given in connection
with this Sales and 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 Seller, to East Gate
Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (telecopy: 609-273-9288) and in the case of the Company, the
Servicer and 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 14.06.
14.07 Counterparts. This Sales and Servicing Agreement may be executed in
any number of counterparts, each counterpart constituting an original, but all
together constituting only one Agreement.
52
IN WITNESS WHEREOF, the parties hereto have executed this Sales and
Servicing Agreement as of the date and year first written above.
COPELCO CAPITAL, INC., as
Seller and Servicer
By:_____________________________________
Name:
Title:
COPELCO CAPITAL FUNDING CORP. X
By:_____________________________________
Name:
Title:
Address:
The undersigned hereby acknowledges receipt of a copy of the foregoing Sales and
Servicing Agreement and agrees to, and to be bound by, each of the provisions
thereof applicable to the undersigned.
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee
By: ________________________________________
Name:
Title:
Schedule 1
SUBSIDIARIES OF COPELCO CAPITAL, INC.
1. Copelco Lease Funding Corp. IV, a New Jersey corporation.
2. Copelco Lease Funding Corp. V, a New Jersey corporation.
3. Copelco Lease Funding Corp. VI, a New Jersey corporation.
4. Copelco Capital Funding Corp. I, a Delaware corporation.
5. Copelco Capital Funding Corp. II, a Delaware corporation.
6. Copelco Capital Funding Corp. III, a Delaware corporation.
7. Copelco Capital Funding Corp. IV, a Delaware corporation.
8. Copelco Capital Funding Corp. V, a Delaware corporation.
9. Copelco Capital Funding Corp. VI, a Delaware corporation.
10. Copelco Capital Funding Corp. VIII, a Delaware corporation.
11. Copelco Capital Funding Corp. IX, a Delaware corporation.
12. Copelco Capital Funding Corp. X, a Delaware corporation.
13. Copelco Credit Funding Corp. VII, a New Jersey corporation.
14. Copelco Credit Funding Corp. VIII, a New Jersey corporation.
15. Copelco Credit Funding Corp. IX, a New Jersey corporation.
16. National Equipment Rental Program, Inc., a Delaware corporation.
17. CDRI, Inc., a Delaware corporation.
18. Copelco Equipment Leasing Co., a Delaware corporation.
19. Copelco Specialized Finance Corp., a Delaware corporation.
EXHIBIT A
SCHEDULE OF LEASES AND EQUIPMENT
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EXHIBIT B
[FORM OF INTER-COMPANY LOAN NOTE]
ALL RIGHT, TITLE AND INTEREST IN AND TO THIS PROMISSORY NOTE ON THE PART OF
COPELCO CAPITAL FUNDING CORP. X HAS BEEN ASSIGNED TO AND IS SUBJECT TO A
SECURITY INTEREST IN FAVOR OF _______________, AS TRUSTEE, UNDER AN INDENTURE
DATED AS OF ___________, 1997, FOR THE BENEFIT OF THE PERSONS REFERRED TO
THEREIN.
$__________ [Date]
COPELCO CAPITAL, INC., a Delaware corporation (the "Maker"), with its
principal office at _________________________ , FOR VALUE RECEIVED, hereby
promises to pay to the order of Copelco Capital Funding Corp. X, a corporation
with its offices located at _______________ or its assignee (the "Payee"), for
its account, at __________________, the principal sum of _______________ Dollars
($____________) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Payee to the Maker under the Sale
Agreement (as defined below)), together with interest per annum on the unpaid
principal amount hereof at the Prime Rate plus one per cent, in lawful money of
the United States of America and in immediately available funds immediately on
the demand of the Payee.
The date, amount and interest rate, of each Loan made by the Payee to the
Maker, and each payment made on account of the principal thereof, shall be
recorded by the Payee on its books and, prior to any transfer of this Note,
endorsed by the Payee on the schedule attached hereto or any continuation
thereof.
This Note evidences certain Inter-Company Loans from Payee to Maker
pursuant to Section 13.01 of that certain Sales and Servicing Agreement dated as
of [May 1, 1997], between the Maker and the Payee (the "Sale Agreement").
Capitalized terms used in this Note have the respective meanings assigned to
them in the Sale Agreement.
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THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
COPELCO CAPITAL, INC.
By_________________________
SCHEDULE OF LOANS
This Note evidences demand Loans made under the within-described Sale
Agreement to the Maker, on the date, at the interest rate, and in the principal
amounts set forth below, subject to the payments and prepayments of principal
set forth below:
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Principal Amount Unpaid
Amount of Interest Paid or Principal Notation
Date Loan Rate Prepaid Amount Made By
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