1
EXHIBIT 4.1
EXECUTION COPY
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
dated as of February 26, 1999
among
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as Lessor,
NATIONAL CAR RENTAL SYSTEM, INC.,
as Lessee,
and those subsidiaries
of Republic Industries, Inc.
from time to time
becoming Lessees hereunder
and
REPUBLIC INDUSTRIES, INC.,
as Guarantor and Servicer
AS SET FORTH IN SECTION 21 HEREOF, THE LESSOR HAS ASSIGNED TO THE TRUSTEE (AS
DEFINED HEREIN) ALL OF THE LESSOR'S RIGHT, TITLE AND INTEREST IN AND TO THIS
LEASE. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH
TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED
COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
THIS IS NOT THE ORIGINAL EXECUTED COUNTERPART NO. 1
2
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
This Master Motor Vehicle Lease and Servicing Agreement (the "Base
Lease" and, as supplemented by the Lease Annexes, this "Lease" or the "Group I
Lease"), dated as of February 26, 1999, is by and among NATIONAL CAR RENTAL
FINANCING LIMITED PARTNERSHIP, a special purpose Delaware limited partnership
(the "Lessor"), NATIONAL CAR RENTAL SYSTEM, INC., a Delaware corporation
(together with its successors including any successor by merger and permitted
assigns, "National"), as a lessee, and those subsidiaries of Republic
Industries, Inc., from time to time becoming lessees hereunder pursuant to
Section 29 hereof (each, an "Additional Lessee"), as lessees (National and each
of the Additional Lessees, in its respective capacity as lessee, a "Lessee" and,
collectively, the "Lessees") and REPUBLIC INDUSTRIES, INC. a Delaware
corporation ("Republic"), as servicer (in such capacity, the "Servicer") and as
guarantor (in such capacity, the "Guarantor").
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with each other
capitalized term used herein, having the meaning assigned thereto in Section 1)
intends to refinance the Refinanced Vehicles and certain Eligible Receivables
and to purchase, and finance and refinance the purchase of, additional Eligible
Vehicles and Eligible Receivables with the proceeds obtained by the issuance of
its Series 1999-1 Notes and, if any, each other Series of Notes secured by the
Collateral (collectively, the "Group I Notes") issued pursuant to the Indenture
and the increase from time to time in the Invested Amounts thereof and with
certain other funds; and
WHEREAS, the Lessor desires to lease to the Lessees and the Lessees
desire to lease from the Lessor, Vehicles for use in the domestic daily rental
car operations of the Lessees and their Fleet Sharing Parties;
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
Section 1.1. Certain Definitions. As used in this Lease and unless the
context requires a different meaning, capitalized terms not otherwise defined
herein or in the Annexes hereto shall have the meanings assigned to such terms
in the Definitions List, attached as Schedule 1 to the Base Indenture, dated as
of April 30, 1996 (as amended by the Supplement and Amendment to Base Indenture,
dated as of December 20, 1996, and as such agreement may be further amended,
supplemented, restated or otherwise modified from time to time in accordance
with its terms, the "Base Indenture"), between the Lessor and The Bank of New
York, as trustee, as in effect on the date hereof and as such Schedule 1 has
been, for purposes of the Group I Notes, supplemented by
-2-
3
the Series Supplement relating to the Series 1999-1 Notes (the "Series 1999-1
Supplement" and, together with other Series Supplements relating to Group I
Notes, the "Group I Supplements") and may be further amended, supplemented or
otherwise modified from time to time in accordance with the terms of the Base
Indenture (the "Definitions List"). Capitalized terms not defined herein and
defined in both Schedule 1 to the Base Indenture and in an applicable Group I
Supplement shall, unless context otherwise requires, have the meanings assigned
to such terms in such Series Supplement.
Section 1.2. Accounting and Financial Determinations. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined, or any accounting computation is required to be made,
for the purpose of this Lease, such determination or calculation shall, to the
extent applicable, be made in accordance with GAAP applied on a Consistent Basis
except insofar as:
(a) a Lessee or the Guarantor shall have elected (with the
concurrence of its independent public accountants and upon prior
written notification to the Lessor and the Trustee) to adopt more
recently promulgated GAAP (which election shall continue to be
effective for subsequent years); and
(b) the Lessor shall have consented to such election.
Upon a change in GAAP which becomes effective after the Initial Closing
Date and which would have a material effect on a Lessee's or the Guarantor's
consolidated financial statements and the assets and liabilities reflected
therein or otherwise affect the application or effect of the terms of this
Lease, such change shall not be given effect for purposes hereof until sixty
(60) days from the otherwise effective date of such change. Prior to such
effectiveness, the Trustee, the Lessor, the Guarantor and the Lessees shall, as
applicable, in good faith negotiate to amend the pertinent provisions of this
Lease to account for such change to the extent appropriate to effect the
substance thereof as of the Initial Closing Date. If such an amendment, if
applicable, is not entered into with respect to any such change, such change
shall not be given effect for purposes hereof.
Section 1.3. Cross References; Headings. The words "hereof", "herein"
and "hereunder" and words of a similar import when used in this Lease shall
refer to this Lease as a whole and not to any particular provision of this
Lease. Annex, Section, Schedule and Exhibit references contained in this Lease
are references to Annexes, Sections, Schedules and Exhibits in or to this Lease
unless otherwise specified. Any reference in any Section or definition to any
clause is, unless otherwise specified, to such clause of such Section or
definition. The various headings in this Lease are inserted for convenience only
and shall not affect the meaning or interpretation of this Lease or any
provision hereof.
Section 1.4. Interpretation. In this Lease, unless the context
otherwise requires:
-3-
4
(a) the singular includes the plural and vice versa;
(b) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Lease, and reference to any Person in a particular
capacity only refers to such Person in such capacity;
(c) reference to any gender includes the other gender;
(d) reference to any Requirement of Law means such Requirement
of Law as amended, modified, codified or reenacted, in whole or in
part, and in effect from time to time;
(e) "including" (and, with correlative meaning, "include")
means including without limiting the generality of any description
preceding such term;
(f) "or" is not exclusive;
(g) provisions apply to successive events and transactions;
and
(h) with respect to the determination of any period of time,
"from" means "from and including" and "to" means "to but excluding."
SECTION 2. GENERAL AGREEMENT. (a) As specified in the Lease Annexes,
the Lessees and the Lessor intend that this Lease be (i) a true lease with
respect to the Acquired Vehicles and (ii) a financing arrangement with respect
to the Financed Vehicles.
(b) It is the intention of the parties that this Lease together with
the Master Collateral Agency Agreement, as such agreements apply to the Acquired
Vehicles, shall constitute a true lease for commercial law and bankruptcy
purposes. It is also the intention of the parties that this Lease together with
the Master Collateral Agency Agreement, as such agreements apply to the Financed
Vehicles and the Eligible Receivables financed hereunder, shall in all events
constitute a security agreement under applicable law. Each Lessee hereby
acknowledges that it has granted to the Master Collateral Agent, pursuant to the
Master Collateral Agency Agreement, for the benefit of the Trustee (on behalf of
the Holders of the Group I Notes (the "Group I Noteholders") and the Additional
Permitted Beneficiaries a first priority security interest in all of such
Lessee's right, title and interest in and to the Lessee Grantor Master
Collateral (as defined therein) as collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all of the obligations and liabilities of such
Lessee to the Lessor and the Trustee, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred
(including interest accruing after the Lease Expiration Date and interest
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding), which may arise under, out
of, or in connection with, this Lease and any other document made, delivered or
given by
-4-
5
such Lessee in connection herewith, whether on account of rent,
principal, interest, reimbursement obligations, fees, indemnities, costs or
expenses (including all fees and disbursements of counsel to the Lessor or the
Trustee that are required to be paid by such Lessee pursuant to the terms
hereof).
Section 2.1. Leasing of Vehicles. (a) General. From time to time,
subject to the terms and conditions hereof, the Lessor agrees to lease to each
Lessee and each Lessee agrees to lease from the Lessor the Refinanced Vehicles
and each additional Acquired Vehicle or Financed Vehicle identified in Vehicle
Orders (as defined below) produced from time to time by such Lessee, listing
Vehicles ordered by such Lessee from Manufacturers, dealers or other sellers,
for itself or as agent for the Lessor, pursuant to the terms of any applicable
Manufacturer Programs or otherwise. The Lessor shall make available to the
Lessees under this Lease financing for Financed Vehicles and Eligible
Receivables, and Acquired Vehicles for lease to the Lessees hereunder, in each
case subject to and in accordance with the terms hereof (including Sections 2.3
and 4 hereof) and of the Indenture. Notwithstanding anything to the contrary
contained in this Lease, the Lessor shall lease to the Lessees, and the Lessees
shall lease from the Lessor pursuant to this Lease, only Vehicles that are
Eligible Vehicles.
(b) Refinanced Vehicles and Eligible Receivables. On or prior to the
applicable Vehicle Funding Date, each of the Lessor, if it desires to lease
Refinanced Vehicles to a Lessee under this Lease, and any Lessee, if it desires
to refinance Refinanced Vehicles and Eligible Receivables under this Lease,
shall prepare or, as applicable, cause the Lessee to prepare, and upon request
of the Lessor, make available to the Lessor, a schedule as set forth in
Attachment A-1 hereto containing information concerning the Refinanced Vehicles
of the Lessor to be leased to such Lessee under this Lease on such Vehicle
Funding Date or the Refinanced Vehicles of such Lessee and the Eligible
Receivables to be refinanced by such Lessee under this Lease on such Vehicle
Funding Date (each such schedule, a "Refinanced Vehicle Schedule").
(c) Program Vehicles. On or prior to the applicable Vehicle Funding
Date, each Lessee desiring to lease Program Vehicles (other than Refinanced
Vehicles) under this Lease shall prepare and, upon request of the Lessor, make
available to the Lessor (i) a summary of each such additional Program Vehicle to
be leased hereunder by such Lessee (including, in the case of each such Program
Vehicle subject to the GM Repurchase Program, the Designated Period for such
Program Vehicle) and the Capitalized Cost thereof, (ii) a schedule containing
the information with respect to the Vehicles included within the related Vehicle
order summaries as is set forth in Attachment A-2 hereto, or in such form as is
otherwise requested by the Lessor (each such Vehicle order summary and each
Refinanced Vehicle Schedule, a "Vehicle Order"), and (iii) the Manufacturer's
invoice. In addition, the applicable Lessee shall provide such other information
regarding Program Vehicles as the Lessor may reasonably require from time to
time. This Lease, together with the Manufacturer Programs and other incentive
programs relating to such Vehicles and any other related documents attached to
this Lease or submitted with a Vehicle Order (collectively, the "Supplemental
Documents"), will constitute the entire agreement regarding the leasing of
Program Vehicles by the Lessor to the Lessees.
-5-
6
(d) Non-Program Vehicles. On or prior to the applicable Vehicle Funding
Date, each Lessee desiring to lease Non-Program Vehicles (other than Refinanced
Vehicles or Used Vehicles) under this Lease shall prepare and, upon request of
the Lessor, make available to the Lessor (i) a summary of each such additional
Non-Program Vehicle to be leased hereunder by such Lessee and the Capitalized
Cost thereof, (ii) a Vehicle Order for such Non-Program Vehicles and (iii) an
invoice for the Capitalized Cost of such Non-Program Vehicles. In addition, the
applicable Lessee shall provide such other information regarding Non-Program
Vehicles as the Lessor may reasonably require from time to time. This Lease,
together with any Supplemental Documents related to or submitted with a Vehicle
Order will constitute the entire agreement regarding the leasing of such
Non-Program Vehicles by the Lessor to the Lessees.
(e) Used Vehicles. Either concurrently with the execution and delivery
of this Lease or after the date of this Lease on or prior to the applicable
Vehicle Funding Date, any Lessee may request that the Lessor purchase, or
finance the Lessee's purchase of, a used Non-Program Vehicle (other than a
Refinanced Vehicle) from a licensed independent automobile dealer, through an
auction, from a manufacturer or pursuant to another vehicle sale (a "Used
Vehicle") for a purchase price equal to the Capitalized Cost of such Used
Vehicle, in which event such Lessee shall, immediately upon the consummation of
such sale, lease such Used Vehicle from the Lessor pursuant to this Lease (each
such transaction is referred to as a "Used Vehicle Transaction"). In connection
with each Used Vehicle Transaction, to evidence the conveyance of the Used
Vehicles from the applicable seller to the Lessor (in the case of Acquired
Vehicles and Company Vehicles) or the applicable Lessee (in the case of Financed
Vehicles other than Company Vehicles), the applicable Lessee shall have obtained
the original Certificate of Title for each Used Vehicle and shall prepare or
obtain and, upon request of the Lessor, make available to the Lessor, the
following:
(i) a Vehicle Order with respect to all Used Vehicles covered
by such Used Vehicle Transaction; and
(ii) a ▇▇▇▇ of sale or other instrument of transfer
customarily used in the wholesale motor vehicle resale market,
conveying title to the Used Vehicles, and copies of any certificate
given by the related auction house regarding the absence of liens
and/or the ownership of each such Used Vehicle.
After any purchase of Used Vehicles by the Lessor or a Lessee under this Section
2.1(e), such Vehicles will be subject to all the terms and conditions of this
Agreement. Promptly following such Used Vehicle Transaction, the applicable
Lessee shall complete and deliver an application to retitle such Used Vehicle in
the name of the Lessor (in the case of Acquired Vehicles and Company Vehicles)
or such Lessee (in the case of Financed Vehicles other than Company Vehicles)
and to have noted thereon the Master Collateral Agent's security interest in
such Used Vehicle pursuant to the Master Collateral Agency Agreement.
Section 2.2. Right of Lessee to Act as Lessor's Agent; Titling of
Vehicles in the Name of
-6-
7
Nominees. (a) The Lessor agrees that each Lessee and the Servicer may act as the
Lessor's agent in placing Vehicle Orders on behalf of the Lessor, conducting
pre-delivery inspection, titling and ▇▇▇▇▇▇▇ of Vehicles, filing claims on
behalf of the Lessor for damage in transit, and other delivery claims related to
the Vehicles leased hereunder, facilitating payment for Vehicles leased
hereunder and performing any other duties of the Servicer hereunder; provided,
however, that the Lessor may hold the applicable Lessee or the Servicer liable
for losses due to such Lessee's or the Servicer's actions in performing as the
Lessor's agent hereunder. In addition, the Lessor agrees that each Lessee may
make arrangements for delivery of Vehicles leased by such Lessee hereunder to a
location selected by such Lessee at such Lessee's expense to the extent that any
such expense has not been included in the Capitalized Cost of such Vehicle. Each
Lessee agrees to accept Vehicles leased by such Lessee as produced and
delivered, except that each Lessee will have the option to reject upon delivery
any such Program Vehicle that may be rejected pursuant to the terms of the
applicable Manufacturer Program, or any such Non-Program Vehicle in accordance
with the Lessee's customary business practices, and any such Vehicle, if
rejected, will be deemed a Casualty hereunder to the extent the Lessor has paid
the Capitalized Cost thereof to the Manufacturer, dealer or other seller thereof
or to the applicable Lessee. Each Lessee or the Servicer (as applicable), acting
as agent for the Lessor, shall be responsible for pursuing any rights of the
Lessor with respect to the return of any such related Vehicle to the
Manufacturer, dealer or other seller thereof pursuant to the preceding sentence.
Each Lessee and the Servicer agrees that all Program Vehicles ordered as
provided herein shall be ordered utilizing the procedures consistent with the
applicable Manufacturer Program.
(b) Notwithstanding any provision in this Lease to the contrary, any
Vehicle titled in the name of a nominee for the Lessor or any Lessee pursuant to
a vehicle title nominee agreement with respect to which the Rating Agency
Confirmation Condition has been satisfied with respect to each Series of Group I
Notes shall nonetheless be deemed for purposes of this Lease to be titled in the
name of the Lessor or such Lessee, as the case may be.
Section 2.3. Payment of Purchase Price by Lessor; Certain Additional
Payments to the Servicer. (a) Refinanced Vehicles and Eligible Receivables on
Lease Commencement Date. With respect to the Refinanced Vehicles being
refinanced on the Lease Commencement Date, subject to satisfaction of the
requirements of Section 4, the Lessor shall, on the Lease Commencement Date, pay
to the party specified in the Payoff Letter an amount equal to the sum of (x)
the aggregate Net Book Value as of the Lease Commencement Date of the Refinanced
Vehicles which are designated in the Payoff Letter as being refinanced hereunder
on the Lease Commencement Date and (y) the face amount of the Eligible
Receivables being refinanced hereunder on the Lease Commencement Date.
(b) Other Refinanced Vehicles and Eligible Receivables. On any Vehicle
Funding Date after the Lease Commencement Date on which the Lessor or a Lessee
(including any Additional Lessee) desires to refinance Refinanced Vehicles and,
in the case of such Lessee, related Eligible Receivables, the Lessor shall,
subject to satisfaction of the requirements of Section 4, on the related Vehicle
Funding Date, pay to or as directed by the related Beneficiary (in the case of a
refinancing of Acquired Vehicles by the Lessor) or pay to or as directed by such
Lessee (in the case of a
-7-
8
refinancing by such Lessee) an amount equal to (x) the
aggregate Net Book Value as of such Vehicle Funding Date of such Refinanced
Vehicles and, as applicable, (y) the face amount of the Eligible Receivables
being refinanced by such Lessee on such Vehicle Funding Date.
(c) Vehicles Other than Refinanced Vehicles. Upon satisfaction of the
requirements of Section 2.1 in respect of any Vehicle, then on or prior to the
Vehicle Funding Date proposed in the related Vehicle Order for such Vehicle, but
not more than five Business Days prior to such proposed Vehicle Funding Date,
the Lessor or its agent shall, subject to satisfaction of the requirements of
Section 4, pay or cause to be paid the Capitalized Cost of such Vehicle to the
Manufacturer, dealer or other seller of such Vehicle or reimburse or cause to be
reimbursed the applicable Lessee for funds expended by such Lessee to purchase
such Vehicle. Such payment to a Manufacturer, dealer or other seller shall be
made in accordance with the payment terms of such Manufacturer, dealer or other
seller, as applicable. The Servicer or the applicable Lessee, as agent of the
Lessor, shall be authorized to transfer funds of the Lessor (but not funds in
any account in which the Trustee has a Lien or other interest) representing the
amount payable by the Lessor in accordance with the foregoing by check, wire
transfer or other electronic funds transfer to the Manufacturer, dealer or other
seller of such Vehicle or to reimburse the applicable Lessee for funds expended
by such Lessee to purchase such Vehicle. The Lessee leasing such Vehicle shall
pay all applicable costs and expenses of freight, packing, handling, storage,
shipment and delivery of such Vehicle, and sales and use tax (if any), to the
extent that the same have not been included within the Capitalized Cost.
(d) Excluded Payments. All amounts paid by the Manufacturer, dealer or
other seller on account of vehicle preparation services or work covered by
warranty performed by a Lessee or the Servicer with respect to Vehicles
acquired, financed or refinanced pursuant to this Lease or as incentive payments
(other than incentive payments for selling Program Vehicles outside the related
Manufacturer Program) shall inure to the benefit of such Lessee or the Servicer
and, to the extent any such payments are received by the Lessor, the Trustee or
the Master Collateral Agent, shall promptly be paid over to such Lessee or the
Servicer, subject in each case to Section 24.10 hereof and Section 2.5(c) of the
Master Collateral Agency Agreement.
Section 2.4. Non-liability of Lessor. The Lessor shall not be liable to
any Lessee for any failure or delay in obtaining Vehicles or making delivery
thereof. AS BETWEEN THE LESSOR AND ANY LESSEE, ACCEPTANCE FOR LEASE OF THE
VEHICLES LEASED BY SUCH LESSEE SHALL CONSTITUTE THE LESSEE'S ACKNOWLEDGMENT AND
AGREEMENT THAT SUCH LESSEE HAS FULLY INSPECTED SUCH VEHICLES, THAT SUCH VEHICLES
ARE IN GOOD ORDER AND CONDITION AND ARE OF THE MANUFACTURE, DESIGN,
SPECIFICATIONS AND CAPACITY SELECTED BY SUCH LESSEE, THAT SUCH LESSEE IS
SATISFIED THAT THE SAME ARE SUITABLE FOR THIS USE AND THAT THE LESSOR IS NOT A
MANUFACTURER, AN AGENT OF THE MANUFACTURER OR OTHERWISE ENGAGED IN THE SALE OR
DISTRIBUTION OF VEHICLES, AND HAS NOT MADE AND DOES NOT HEREBY MAKE ANY
-8-
9
REPRESENTATION, WARRANTY OR COVENANT, EXPRESS OR IMPLIED, WITH RESPECT TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY,
CAPABILITY, WORKMANSHIP, DURABILITY OR SUITABILITY OF SUCH VEHICLES IN ANY
RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES OR USES OF SUCH LESSEE, OR ANY
WARRANTY THAT SUCH LEASED VEHICLES WILL SATISFY THE REQUIREMENTS OF ANY LAW OR
ANY CONTRACT SPECIFICATION, OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT OF
ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT THERETO, AND AS BETWEEN
THE LESSOR AND SUCH LESSEE, SUCH LESSEE AGREES TO BEAR ALL SUCH RISKS AT ITS
SOLE COST AND EXPENSE. EACH LESSEE SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIMS
AGAINST THE LESSOR AND ANY LEASED VEHICLE FOR BREACH OF ANY WARRANTY OF ANY KIND
WHATSOEVER AND, AS TO THE LESSOR, EACH LESSEE LEASES THE LEASED VEHICLES "AS
IS." The Lessor shall not be liable for any failure or delay in delivering any
Vehicle ordered for lease pursuant to this Lease, or for any failure to perform
any provision hereof, resulting from fire or other casualty, natural disaster,
riot, strike or other labor difficulty, governmental regulation or restriction,
or any cause beyond the Lessor's direct control. IN NO EVENT SHALL THE LESSOR BE
LIABLE FOR ANY INCONVENIENCE, LOSS OF PROFITS OR ANY OTHER CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES, WHATSOEVER OR HOWSOEVER CAUSED, WHETHER RESULTING
FROM ANY DEFECT IN OR ANY THEFT, DAMAGE, LOSS OR FAILURE OF ANY VEHICLE, OR
OTHERWISE, AND THERE SHALL BE NO ABATEMENT OF RENT OR OTHER AMOUNTS PAYABLE
HEREUNDER BECAUSE OF THE SAME.
SECTION 3. TERM.
Section 3.1. Vehicle Lease Commencement Date. The "Vehicle Lease
Commencement Date" shall mean, (i) for each Vehicle leased under this Lease as
of the Initial Closing Date, the Initial Closing Date, or with respect to each
Vehicle in the Initial Fleet of an Additional Lessee, the Additional Lessee
Closing Date, or with respect to each Vehicle included in the Initial Fleet of a
Lessee pursuant to a Fleet Purchase Transaction, the Vehicle Funding Date for
such Vehicle, and (ii) for each other Vehicle, including Refinanced Vehicles
that are not in an Initial Fleet, the date referenced in the Vehicle Order with
respect to such Vehicle, but in no event later than the date that funds are
expended by the Lessor to acquire, finance the acquisition of or refinance such
Vehicle (such date, the "Vehicle Funding Date" for such Vehicle). A vehicle
shall be deemed hereunder to be a Vehicle leased under this Lease on each day
during the period (the "Vehicle Term") from and including the Vehicle Lease
Commencement Date for such Vehicle to but excluding the Vehicle Lease Expiration
Date for such Vehicle.
Section 3.2. Lease Commencement Date. The "Lease Commencement Date"
shall mean the Initial Closing Date. The "Lease Expiration Date" shall mean the
later of (i) the date of the final payment in full of the last Group I Note
outstanding, and all outstanding Carrying Charges, and (ii) the Vehicle Lease
Expiration Date for the last Vehicle subject to lease by any Lessee
-9-
10
hereunder. The "Term" of this Lease shall mean the period commencing on the
Lease Commencement Date and ending on the Lease Expiration Date.
SECTION 4. CONDITIONS PRECEDENT.
Section 4.1. Conditions to Effectiveness of this Lease. It shall be a
condition precedent to the leasing of any Vehicles under this Lease that this
Lease shall have become effective in accordance with this Section 4.1. This
Lease shall become effective on the Lease Commencement Date, subject to the
satisfaction of the following conditions:
(a) All conditions to the effectiveness of the Series 1999-1
Supplement and the issuance of the Series 1999-1 Notes thereunder and
the Master Collateral Agency Agreement shall have been satisfied in all
respects; and
(b) The prior or concurrent delivery by the Lessees to the
Lessor, the Master Collateral Agent and the Trustee of each of the
following documents (in form and substance satisfactory to the Lessor,
the Master Collateral Agent and the Trustee):
(i) Resolutions. Copies of resolutions of the Board
of Directors of the Guarantor and each Lessee authorizing or
ratifying the execution, delivery and performance of this
Lease and the other Related Documents to which it is party and
those other documents and matters required of it, in its
capacity as Guarantor, Lessee, Servicer or otherwise, with
respect to this Lease and such other Related Documents, duly
certified by the Secretary or an Assistant Secretary thereof;
(ii) Consents, etc. Certified copies of all documents
evidencing any necessary corporate action, consents and
governmental approvals (if any) with respect to this Lease and
the other Related Documents to which the Guarantor or any
Lessee is party;
(iii) Incumbency and Signatures. A certificate of the
Secretary or an Assistant Secretary of the Guarantor and each
Lessee certifying the names of the individual or individuals
authorized to sign this Lease and the other Related Documents
to which it is party, together with a sample of the true
signature of each such individual (the Lessor, the Master
Collateral Agent and the Trustee may conclusively rely on each
such certificate until formally advised by a like certificate
of any changes therein);
(iv) Opinions of Counsel. The opinions of ▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇, special New York counsel for the Lessees and
the Guarantor, and ▇▇▇▇▇ ▇▇▇▇▇, P.A., counsel to the Lessees
and the Guarantor, in each case addressed to the Lessor, the
Trustee, the Master Collateral Agent and the Rating Agencies
and satisfactory in form and substance to the addressees
thereof;
-10-
11
(v) Good Standing Certificates. Certificates of good
standing for the Guarantor and each Lessee in the jurisdiction
of its organization and the jurisdiction of its principal
place of business;
(vi) Search Reports. A written search report or
reports (which may include reports previously delivered by a
Lessee) from a Person satisfactory to the Lessor, the Master
Collateral Agent and the Trustee, listing all effective
financing statements that name any Lessee as debtor or
assignor and that are filed in the jurisdictions in which
filings were made pursuant to subsection (vii) below, together
with copies of such financing statements, and tax and judgment
lien search reports from a Person satisfactory to the Lessor,
the Master Collateral Agent and the Trustee showing no
evidence of such liens filed against any Lessee and covering
any Collateral or any Master Collateral for which the Trustee
(on behalf of the Group I Noteholders) is designated as a
Beneficiary (other than liens filed in connection with any
Related Documents);
(vii) Financing Statements. Executed, proper
financing statements on Form UCC-1 with respect to each Lessee
as of the Lease Commencement Date (which financing statements
may include previously filed financing statements), (i) naming
such Lessee as debtor and the Master Collateral Agent as
secured party, or other, similar instruments or documents, as
may be necessary or, in the reasonable opinion of the Lessor,
the Master Collateral Agent or the Trustee, desirable under
the UCC of all applicable jurisdictions to (as applicable)
perfect and maintain the perfection of the Master Collateral
Agent's interest in the Master Collateral with respect to
which the Trustee (for the benefit of the Group I Noteholders)
is designated as the Beneficiary and (ii) naming such Lessee
as debtor, the Lessor as secured party and the Master
Collateral Agent as assignee, as may be necessary or desirable
under the UCC of all applicable jurisdictions to (as
applicable) perfect and maintain the perfection of the
security interest of the Lessor hereunder and the assignment
of the same to the Master Collateral Agent;
(viii) The Series 1999-1 Supplement. An executed copy
of the Series 1999-1 Supplement;
(ix) Indenture. An executed copy of the Indenture;
(x) Master Collateral Agency Agreement. An executed
copy of the Master Collateral Agency Agreement;
(xi) Assignment Agreement. An executed copy of the
Assignment Agreement of each Manufacturer of Program Vehicles
(including Refinanced Vehicles) which will be leased under
this Lease on the Initial Closing Date;
-11-
12
(xii) Certified Copy of Manufacturer Program. A copy
of each Manufacturer Program (and, to the extent required by a
Rating Agency, an opinion of counsel to such Manufacturer or
Officer's Certificate on behalf of such Manufacturer as to the
enforceability thereof in form satisfactory to the Trustee and
the Lessor and addressed to the Master Collateral Agent)
relating to Program Vehicles which will be leased hereunder on
the Initial Closing Date and, from each Lessee, an Officer's
Certificate, dated as of the Initial Closing Date, and duly
executed by an Authorized Officer of such Lessee, certifying
that each such copy is true, correct and complete as of the
Initial Closing Date; and
(xiii) Other. Such other documents as the Master
Collateral Agent, the Trustee or the Lessor may reasonably
request to be delivered on or prior to the Initial Closing
Date.
Section 4.2. Conditions to Each Lease of Vehicles. The agreement of the
Lessor to make available any Acquired Vehicles for lease to a Lessee as
described in a Vehicle Order, to make available financing for the acquisition or
refinancing of any Financed Vehicles for lease to a Lessee as described in a
Vehicle Order, and/or to make available funding for the financing or refinancing
of Refinanced Vehicles and Eligible Receivables, is subject to the terms and
conditions of the Indenture and the following conditions precedent as of the
Vehicle Funding Date for such Vehicles, and each Lessee hereby agrees that each
acceptance of Refinanced Vehicles for leasing hereunder and each acceptance of
funds for the acquisition of Acquired Vehicles, or the financing or refinancing
of Financed Vehicles or Eligible Receivables, in respect of any applicable
Vehicle Orders, shall be deemed hereunder to constitute a representation and
warranty by it, to and in favor of the Lessor and the Trustee, that all the
conditions precedent to the acquisition, financing or refinancing and leasing of
the Vehicles and Eligible Receivables identified in such Vehicle Order will have
been satisfied as of such Vehicle Funding Date.
(a) Vehicle Order. The applicable Lessee shall have complied
with the applicable provisions of Section 2.1 of this Lease.
(b) No Default. No Potential Lease Event of Default or Lease
Event of Default shall have occurred and be continuing on such date or
would result from the acquisition, financing or refinancing and leasing
of such Vehicles and Eligible Receivables.
(c) Funding. The aggregate amount of funds to be expended by
the Lessor on any one date to acquire, finance the acquisition of or
refinance such Vehicles and Eligible Receivables shall not exceed the
sum of (a) the aggregate Net Book Value of all such Vehicles plus (b)
the aggregate face amount of any related Eligible Receivables being
refinanced on such date.
(d) Related Documents. The leasing of such Vehicles shall not
be prohibited by
-12-
13
the provisions of this Lease, and sufficient proceeds shall be
available therefor under the Group I Supplements.
(e) Title. On or prior to the applicable Vehicle Funding Date,
the Lessor or, with respect to Financed Vehicles (other than the
Company Vehicles), the applicable Lessee, as the case may be, shall
have good and marketable title to each such Vehicle, free and clear of
all Liens and encumbrances, other than any Permitted Liens.
(f) Master Collateral Agent. Each Lessee and the Lessor shall
have granted to the Master Collateral Agent, for the benefit of the
Trustee on behalf of the Group I Noteholders, a first priority security
interest in all Vehicles and Eligible Receivables now or hereafter
purchased, financed or refinanced by the Lessor.
(g) Assignment Agreements. On or prior to the applicable
Vehicle Funding Date, the Trustee shall have received executed
counterparts of the Assignment Agreements related to the assignment of
rights under each Manufacturer Program under which such Vehicles will
be or have been purchased and are proposed to be leased under this
Lease, dated as of the Initial Closing Date (or, if later, on or prior
to such Vehicle Funding Date), duly executed by the applicable Lessee
and/or the Lessor, as assignor, and the Master Collateral Agent, as
assignee.
(h) Manufacturer Programs. On or prior to the applicable
Vehicle Funding Date, the Trustee shall have received a copy of each
Manufacturer Program under which such Vehicles will be or have been
purchased and are proposed to be leased under this Lease and an
Officer's Certificate, dated the Initial Closing Date (or, if later, on
or prior to such Vehicle Funding Date), and duly executed by an
Authorized Officer of the Lessor, certifying that each such copy is
true, correct and complete as of the Initial Closing Date (or, if
later, on or prior to such Vehicle Funding Date). Each Manufacturer
Program covering Program Vehicles identified in such Vehicle Order
shall be in full force and effect, and shall be enforceable against the
related Manufacturer in accordance with its terms.
(i) Eligible Vehicle. Each Vehicle identified in such Vehicle
Order shall be an Eligible Vehicle.
Section 4.3. Additional Conditions to Leases of Refinanced Vehicles and
Eligible Receivables. In addition to the conditions set forth in Section 4.2
above, in connection with the leasing of Refinanced Vehicles and refinancing of
related Eligible Receivables (including the refinancing of Eligible Receivables
owned by the Lessor under the Indenture), to evidence the refinancing of such
Refinanced Vehicles and related Eligible Receivables on the applicable Vehicle
Funding Date and the conveyance on such date of a security interest in such
Refinanced Vehicles and related Eligible Receivables to the Master Collateral
Agent, the Lessor and/or the applicable Lessees shall have prepared or caused to
be prepared and, as applicable, made available to the Lessor on or prior to the
applicable Vehicle Funding Date the following:
-13-
14
(a) a Refinanced Vehicle Schedule concerning such Refinanced
Vehicles and related Eligible Receivables being refinanced on such
Vehicle Funding Date;
(b) a report of the results of a search of the appropriate
records of each state in which the Lessor and/or each Lessee holding
title to such Refinanced Vehicles does business and the county and
state in which, as applicable, the Lessor's and/or each such Lessee's
principal office is located, which shall show no liens or other
security interests (other than Permitted Liens) with respect to such
Vehicles and the related Manufacturer Programs (to the extent not
already liened and assigned to the Master Collateral Agent) or, in the
event that such search reveals any such non-permitted Lien or security
interest, there shall be delivered to the Trustee a termination of such
Lien or security interest together with appropriate UCC termination
statements or UCC partial releases thereof;
(c) confirmation from each lender (or the agent or assignee
thereof) holding a security interest in any such Refinanced Vehicle
and/or Eligible Receivable stating unconditionally (A) that, if any
sums are to be paid to such lender (or such agent or assignee) in
connection with the lease of such Refinanced Vehicle and the
refinancing of the related Eligible Receivables, such lender (or such
agent or assignee) has been paid the full amount due to it in
connection with such refinancing and (B) that any lien or security
interest of such lender (or any such agent or assignee) in such
Refinanced Vehicle and/or related Eligible Receivable has been
released;
(d) a fully executed assignment agreement granting and
assigning to the Master Collateral Agent (to the extent not already
granted and assigned) a first priority security interest in each such
Refinanced Vehicle and Eligible Receivables, the related Manufacturer
Programs, if any, and any other Master Collateral relating to such
Refinanced Vehicles and Eligible Receivables;
(e) with respect to any of such Refinanced Vehicles which are
in an Initial Fleet, each Lessee thereof shall have delivered to the
Master Collateral Agent a duly executed Vehicle Assignment and Nominee
Agreement in form reasonably satisfactory to the Lessor and the
Trustee;
(f) fully executed UCC-1 Financing Statements as necessary to
perfect (if not already perfected) the interests of the Master
Collateral Agent in the Eligible Receivables;
(g) an Officer's Certificate stating that all the conditions
precedent under this Lease to the leasing of such Refinanced Vehicles
and financing of the Eligible Receivables under this Lease have been
satisfied, including (as applicable) a representation that each such
receivable is an Eligible Receivable.
SECTION 5. RENT AND CHARGES. Each Lessee will pay Rent and certain
other
-14-
15
charges on a monthly basis as set forth in this Section 5.
Section 5.1. Payment of Rent. On each Payment Date, and on each other
date on which interest is due and payable under the terms of a Group I
Supplement, each Lessee shall pay to the Lessor the aggregate of all Rent
payable on such Payment Date or other date, as the case may be, with respect to
the Vehicles leased by such Lessee, as provided in the related Lease Annexes.
Section 5.2. Reserved
Section 5.3. Payment of Monthly Supplemental Payments. On each Payment
Date, each Lessee shall pay to the Lessor the portion of the Monthly
Supplemental Payment that has accrued during the Related Month with respect to
the Financed Vehicles and Eligible Receivables previously leased or financed by
such Lessee under the Financing Lease, as provided in Sections 6 and 7 of Annex
B.
Section 5.4. Payment of Termination Payments and Casualty Payments. On
each Payment Date, each Lessee shall pay to the Lessor all Casualty Payments and
Termination Payments that have accrued with respect to the Vehicles leased
hereunder by such Lessee, as provided in, respectively, Sections 7 and 12.3 of
this Lease.
Section 5.5. Late Payment. In the event any Lessee fails to remit
payment of any amount due under this Lease on or before the Payment Date
therefor or when otherwise due and payable hereunder, the amount not paid will
be considered delinquent and such Lessee will pay a late charge on each Payment
Date with respect to the related Interest Period equal to the product of (a) the
VFR for such Interest Period (converted to a rate per annum) plus 1%, times (b)
the delinquent amount for the period during such Interest Period from the
Payment Date (or other date) on which such payment was due until the date such
delinquent amount (with accrued interest) is received by the Trustee times (c)
the actual number of days elapsed during such Interest Period or such relevant
portion thereof divided by 360.
Section 5.6. Making of Payments. All payments of Rent and of all other
Liabilities shall be made by the applicable Lessee to, or for the account of,
the Lessor (or, in the case of any payment pursuant to Section 15, the
applicable Indemnified Person) in immediately available funds, without setoff,
counterclaim or deduction of any kind. All such payments shall be made to the
Group I Collection Account or, in the case of payments made pursuant to Section
24.10(iii) or (iv), the Master Collateral Account (or, in each such case, such
other account as the Trustee may from time to time specify to the Lessees) or,
in the case of any such payment pursuant to Section 15 to, or for the account
of, any Indemnified Person other than the Lessor, to the account designated by
such Indemnified Person to the applicable Lessee, in each case with such payment
to be made not later than 12:00 noon, New York City time, on the date due; and
funds received after that hour shall be deemed to have been received by or for
the account of the Indemnified Person on the next following Business Day. The
Lessor hereby specifies that all (i) payments made in respect of Program
Vehicles by the Manufacturers and related auction dealers
-15-
16
under the Manufacturer Programs, (ii) amounts representing the proceeds from
sales of Program Vehicles and Non-Program Vehicles (including amounts paid to a
Lessee or the Lessor by a Manufacturer as a result of the sale of any such
Vehicle outside such Manufacturer's Manufacturer Program) to third parties
(other than under any related Manufacturer Program) and (iii) payments with
respect to any other Master Collateral for the Group I Notes (other than certain
amounts as and to the extent described in Section 2.3(d)), shall be deposited in
the Master Collateral Account for the benefit of the Trustee (on behalf of the
Group I Noteholders) and the Additional Permitted Beneficiaries. If any payment
of Rent (or other Liability) falls due on a day which is not a Business Day,
then such due date shall be extended to the next following Business Day and
Monthly Finance Rent and Monthly Variable Rent (as the case may be) shall accrue
through such Business Day.
SECTION 6. RESERVED.
SECTION 7. CASUALTY AND INELIGIBLE VEHICLES. If a Vehicle suffers a
Casualty or ceases to be an Eligible Vehicle, then the Lessee thereof shall (a)
cause the Servicer to include notice of such occurrence in the next related
Monthly Certificate required to be delivered by the Servicer under Section
24.6(vi), and (b) on the Payment Date next succeeding the last day of the
Related Month in which such Lessee obtained actual knowledge that such Vehicle
has suffered a Casualty or ceased to be an Eligible Vehicle, pay to the Lessor
an amount (a "Casualty Payment") equal to the Termination Value of such Vehicle,
calculated as of the first day of the Related Month in which such Lessee
obtained actual knowledge that such Vehicle suffered a Casualty or ceased to be
an Eligible Vehicle (net of Monthly Base Rent and Monthly Supplemental Payments
made in respect of such Vehicle during such Related Month). Upon payment by the
applicable Lessee to the Lessor in accordance herewith of the Casualty Payment
for any Vehicle that has suffered a Casualty or ceased to be an Eligible
Vehicle, (i) the Lessor, if requested by such Lessee, shall cause title to any
such Vehicle that is an Acquired Vehicle to be transferred to such Lessee to
facilitate liquidation of such Vehicle by the Lessee, (ii) such Lessee shall be
entitled to any physical damage insurance proceeds applicable to such Vehicle
(if at such time such Lessee carries such insurance coverage), and (iii) the
Lien of the Master Collateral Agent on such Vehicle shall automatically be
released thereby.
SECTION 8. VEHICLE USE. Each Lessee shall use Vehicles leased hereunder
solely for such Lessee's domestic daily rental car operations, whether through
Fleet Sharing Parties or directly; provided that a Lessee (the "Named Lessee")
may permit another Lessee or a lessee under any other Leasing Company Lease to
use Vehicles leased by the Named Lessee hereunder in the ordinary course of the
domestic daily rental car operations of such other Lessee or lessee (but the
Named Lessee shall remain fully liable for its obligations under this Lease and
the other Related Documents); provided further that a Lessee may, from time to
time, permit Fleet Sharing Parties to use Vehicles leased by such Lessee
hereunder pursuant to Lessee Agreements, including Fleet Sharing Agreements,
used in the ordinary course of the Lessee's business, and each such Fleet
Sharing Party shall rent Vehicles used by it pursuant to a Fleet Sharing
Agreement to consumers in the ordinary course of such Fleet Sharing Party's
domestic daily
-16-
17
rental car operations; provided further, however, that the aggregate Net Book
Value of all Vehicles subject to Fleet Sharing Agreements on any day plus the
aggregate Net Book Value (as defined in the applicable Leasing Company Lease) of
all Vehicles (as defined in the applicable Leasing Company Lease) leased under
all other Leasing Company Leases subject to Fleet Sharing Agreements (as defined
in the applicable Leasing Company Lease) on such day shall not exceed an amount
equal to the greater of (a) 10% of the sum of the aggregate Net Book Value of
all Vehicles leased under this Lease and the aggregate Net Book Value (as
defined in the applicable Leasing Company Lease) of all Vehicles (as defined in
the applicable Leasing Company Lease) leased under all such other Leasing
Company Leases on such day, and (b) such greater amount in respect of which the
Rating Agency Confirmation Condition with respect to each Series of Group I
Notes shall have been satisfied; provided, however, any such Rating Agency
Confirmation Condition in respect of Moody's shall be satisfied if ▇▇▇▇▇'▇ is
given prior written notice of the intention to increase the preceding 10%
limitation to a greater amount pursuant to clause (b). Notwithstanding any such
Lessee Agreement, each Lessee shall remain fully liable for its obligations
under this Lease and the other Related Documents (including any obligation
hereunder or thereunder that it may cause any Fleet Sharing Party to perform or
fulfill). Each Lessee shall promptly and duly execute, deliver, file and record
all such documents, statements, filings and registrations, and take such further
actions as the Lessor, the Master Collateral Agent, the Servicer or the Trustee
shall from time to time reasonably request in order (x) to establish, perfect
and maintain the Lessor's title to and interest in the Acquired Vehicles and
Company Vehicles and the related Certificates of Title and the Lessee's title to
and interest in all other Vehicles and the related Certificates of Title as
against any third party in any applicable jurisdiction and (y) to establish,
perfect and maintain the Master Collateral Agent's lien on all Vehicles as noted
(other than in respect of any Initial Fleet) on the related Certificates of
Title as a perfected first-priority lien in any applicable jurisdiction. A
Lessee may, at the Lessee's sole expense, change the place of principal location
of any Vehicles. Within sixty (60) days after any such change of location, the
Lessee shall take all actions necessary (i) to maintain the perfected
first-priority Lien of the Master Collateral Agent on such Vehicles as noted
(other than in respect of any Initial Fleet) on the Certificates of Title with
respect to such Vehicles and the Lessor shall cooperate to the extent required
for the Lessee to do so, and (ii) to meet all material legal requirements
applicable to such Vehicles in connection with, or as a result of, such change
of location. Following a Lease Event of Default or Manufacturer Event of
Default, and upon the Lessor's request, each Lessee shall advise the Lessor in
writing where all Vehicles leased hereunder as of such date are principally
located. No Lessee shall knowingly use any Vehicles, or knowingly permit the
same to be used, for any unlawful purpose. Each Lessee shall and shall require
the Fleet Sharing Parties to use reasonable precautions to prevent loss or
damage to Vehicles. Each Lessee shall or shall cause the Fleet Sharing Parties
to comply in all material respects with all applicable statutes, decrees,
ordinances and regulations regarding acquiring, titling, registering, leasing,
insuring and disposing of Vehicles and shall and shall require the Fleet Sharing
Parties to take reasonable steps to ensure that operators are licensed. Each
Lessee shall or shall cause each applicable Fleet Sharing Party to perform, at
its own expense, such vehicle preparation and conditioning services with respect
to Vehicles leased by it as are customary.
-17-
18
SECTION 9. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND
FINES. Each Lessee, at its expense, shall be responsible for proper registration
and licensing of Vehicles leased by it hereunder, for submitting the appropriate
documentation to the appropriate state authorities to obtain Certificates of
Title for Vehicles reflecting the name of the Lessor (in the case of Acquired
Vehicles and Company Vehicles) or such Lessee (in the case of all other Financed
Vehicles), in each case (other than with respect to Vehicles in an Initial
Fleet) with the Lien of the Master Collateral Agent noted thereon as first
lienholder, and where required, such Lessee shall or shall cause the related
Fleet Sharing Parties to have Vehicles inspected by any appropriate governmental
authority; provided, however, that possession of all Certificates of Title shall
remain with the Servicer or an Affiliate thereof (including the related
Sub-Servicer) unless a Liquidation Event of Default or Limited Liquidation Event
of Default shall have occurred and be continuing, in which event, upon the
request of the Trustee or the Master Collateral Agent, each Lessee shall deliver
the Certificates of Title for the Vehicles leased by it to the Master Collateral
Agent. Each Lessee shall pay or cause to be paid all registration fees, title
fees, license fees, traffic summonses, penalties, judgments and fines and other
similar amounts incurred with respect to any Vehicle during the Vehicle Term for
such Vehicle or imposed during the Vehicle Term for such Vehicle by any
governmental authority or any court of law or equity in connection with the
Lessee's operation of Vehicles, and any such amounts paid by the Lessor on a
Lessee's behalf, in its discretion upon at least fifteen (15) days' prior notice
to such Lessee, will be reimbursed within thirty (30) days of the Lessor
notifying such Lessee of such payment; provided, however, that the Lessor shall
not pay on any Lessee's behalf any traffic summons, or any penalty, judgment or
fine for so long as such amount is being contested by such Lessee in good faith
and by appropriate proceedings with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP and provided that
such Lessee has agreed in writing to indemnify and hold the Lessor harmless from
and against all loss, liability and expense arising out of such unpaid amounts
(and, in any case, for so long as forfeiture of any Vehicles or other Master
Collateral will not result from the failure to pay any such amounts). The Lessor
agrees to execute a power of attorney substantially in the form of Attachment B
hereto (a "Power of Attorney"), and such other documents as may be necessary in
order to allow the Lessees to title, register and dispose of the Acquired
Vehicles and the Company Vehicles leased hereunder; and each Lessee acknowledges
and agrees that with respect to the Acquired Vehicles, it has no right, title or
interest in or with respect to any Certificate of Title. Notwithstanding
anything herein to the contrary, the Lessor may terminate such Power of Attorney
as provided in Section 17.3(vii).
SECTION 10. MAINTENANCE AND REPAIRS. Each Lessee shall or shall cause
the related Fleet Sharing Parties to pay for all maintenance and repairs to keep
Vehicles leased by it hereunder in good working order and condition, and shall
or shall cause such Fleet Sharing Parties to take reasonable steps to maintain
such Vehicles as required in order to keep the Manufacturer's warranty in force.
Each Lessee shall or shall cause the related Fleet Sharing Parties to return
each Vehicle to an authorized Manufacturer facility or the applicable
Manufacturer's authorized warranty station (which may be a facility of any
Lessee) for warranty
-18-
19
work. Each Lessee shall or shall cause the related Fleet Sharing Parties to take
reasonable steps to comply with any Manufacturer's recall of any Vehicle. Each
Lessee shall or shall cause the related Fleet Sharing Parties to pay, or cause
to be paid, all usual and routine expenses incurred in the use and operation of
Vehicles leased by it hereunder including, but not limited to, fuel, lubricants,
and coolants. The Lessor, upon thirty (30) days' prior notice to the applicable
Lessee, may pay any such expenses that have not otherwise been paid by, or on
behalf of, such Lessee (including any failure by a Fleet Sharing Party to pay
any such expenses), and any expenses paid by the Lessor on a Lessee's behalf for
maintenance, repair, operation or use by the Lessee of Vehicles will promptly be
reimbursed (in any event no later than the next Payment Date following such
payment) by such Lessee to the Lessor. No Lessee shall, without the prior
consent of the Lessor, make any material alterations to (i) any Vehicle which is
a Program Vehicle which would result in a reduction of the Repurchase Price for
such Vehicle or make the Vehicle no longer eligible for repurchase or sale under
the applicable Manufacturer Program or (ii) any Vehicle which is a Non-Program
Vehicle which is likely to materially adversely affect the resale value of such
Non-Program Vehicle. Any improvements or additions to an Acquired Vehicle shall
become and remain the property of the Lessor, except that any addition or
improvement to an Acquired Vehicle made by a Lessee shall remain the property of
such Lessee if it can be disconnected or removed from the Vehicle without
impairing the functioning or resale value thereof, other than any function or
value provided by such addition or improvement.
SECTION 11. MANUFACTURER WARRANTIES. If a Vehicle leased hereunder is
covered by a manufacturer's warranty, the Lessee thereof, during the Vehicle
Term, shall have the right to make any claims under such warranty which the
Lessor could make and to receive related proceeds directly.
SECTION 12. VEHICLE RETURN GUIDELINES.
Section 12.1. Vehicle Turn-in Condition. As used herein "Vehicle
Turn-In Condition" with respect to each Program Vehicle leased hereunder shall
mean a set of criteria for evaluating such Vehicle upon its delivery at the end
of its Vehicle Term, which criteria will be determined in accordance with the
related Manufacturer Program. Each Program Vehicle not meeting the applicable
Manufacturer Program's vehicle turn-in condition requirements will, unless
redesignated as a Non-Program Vehicle in accordance with Section 14, be
purchased (or will otherwise be the subject of a Casualty Payment) by the
related Lessee as if it were a Casualty in accordance with the procedure set
forth in Section 7.
Section 12.2. Disposition Procedure. (a) Program Vehicles. Unless such
Vehicle is redesignated as a Non-Program Vehicle in accordance with Section 14
or the Lessee thereof exercises its option to purchase such Vehicle as permitted
by, and pursuant to the requirements of, this Lease, or such Vehicle is sold in
the ordinary course outside the Manufacturer Program for proceeds that equal or
exceed the payment that would be obtained from the Manufacturer under the
Manufacturer Program as contemplated by Section 27, then prior to the end of the
Vehicle Term, each Lessee will or will cause the related Fleet Sharing Party to
deliver each Program Vehicle leased by it hereunder (other than a Casualty or a
Vehicle that has ceased to be
-19-
20
an Eligible Vehicle) to the nearest related Manufacturer official auction or
other facility designated by such Manufacturer at the Lessee's sole expense and
in accordance with the terms of the applicable Manufacturer Program; provided,
that the timing of such delivery by the Lessee will be at its option so long as
such delivery is made in accordance with Section 24.5 hereof. Any transportation
allowance (for delivery costs), auction assistance allowance and any other
allowances offered under a Manufacturer Program, and any rebates or credits
applicable to the unexpired term of any license plates for a Vehicle shall inure
to the benefit of the Lessee thereof and, to the extent received by the Lessor,
the Trustee or the Master Collateral Agent, shall promptly be paid over to the
applicable Lessee. Each Lessee will comply with the requirements of law and the
requirements of the Manufacturer Programs in connection with, among other
things, the delivery of Certificates of Title, documents of transfer signed as
necessary, signed Condition Reports, and signed odometer statements for the
Vehicles.
(b) Non-Program Vehicles. Each Lessee agrees to use commercially
reasonable efforts to dispose of, at its own expense, on behalf of the Lessor in
the case of Non-Program Acquired Vehicles, each Vehicle that is a Non-Program
Vehicle (i) in a manner reasonably likely to maximize proceeds from such
disposition and consistent with industry practice and (ii) prior to the
expiration of the Non-Program Maximum Term for such Non-Program Vehicle;
provided that Lessee may commence such efforts, at its option, any time prior to
the expiration of the Non-Program Maximum Term.
Section 12.3. Termination Payments for Acquired Vehicles. (a) Program
Vehicle Termination Payments. On the first Payment Date on or after the earlier
of (i) the last day of the Related Month in which the Repurchase Price with
respect to any Program Vehicle that is an Acquired Vehicle that has been
accepted for repurchase or sale pursuant to the applicable Manufacturer Program
is received by the applicable Lessee, the Lessor, the Master Collateral Agent or
the Trustee by deposit into the Master Collateral Account or the Group I
Collection Account (provided that, if for any reason the Repurchase Price has
been received directly by a Lessee, then such Repurchase Price shall be deemed
"received" for purposes of this Section 12.3 on the earlier of (a) the date on
which such Repurchase Price has been deposited into the Group I Collection
Account or Master Collateral Account, in accordance with the Master Collateral
Agency Agreement and (b) the second Business Day after receipt by such Lessee)
and (ii) the thirtieth (30th) day after the expiration of the Repurchase Period
for such Acquired Vehicle, the applicable Lessee shall pay to the Lessor in
respect of such Acquired Vehicle any Excess Damage Charges, Excess Mileage
Charges, early turnback surcharges and any other similar charges and penalties
(collectively a "Program Vehicle Termination Payment") as determined by the
Manufacturer or its agent in accordance with the applicable Manufacturer
Program.
(b) Non-Program Vehicle Termination Payments. On the first Payment Date
on or after the earlier of (i) the last day of the Related Month in which the
Disposition Proceeds from the sale or other disposition of an Acquired Vehicle
that is a Non-Program Vehicle (other than a Casualty or a Vehicle that has
ceased (prior to such sale or disposition) to be an Eligible Vehicle or that has
been repurchased by the Lessee thereof in accordance with this Lease) are
received by
-20-
21
the applicable Lessee, the Lessor, the Master Collateral Agent or the Trustee
by deposit into the Master Collateral Account or the Group I Collection Account
(provided that, if for any reason the Disposition Proceeds have been received
directly by a Lessee, then, such Disposition Proceeds shall be deemed "received"
for purposes of this Section 12.3 on the earlier of (a) the date on which such
Disposition Proceeds have been deposited into the Group I Collection Account or
the Master Collateral Account, in accordance with the Master Collateral Agency
Agreement and (b) the second Business Day after receipt by such Lessee) and (ii)
the thirtieth (30th) day after the Disposition Date for such Acquired Vehicle,
the applicable Lessee shall pay to the Lessor in respect of such Acquired
Vehicle an amount (a "Non-Program Vehicle Termination Payment") equal to (A) the
sum of all Program Vehicle Termination Payments due on the Payment Date that
occurred in the second preceding calendar month to the calendar month during
which the Vehicle Lease Commencement Date with respect to such Acquired Vehicle
occurred, divided by (B) the number of Acquired Vehicles previously leased under
this Lease in respect of which such Program Vehicle Termination Payments were
payable (or, if there are no Acquired Vehicles in respect of which Program
Vehicle Termination Payments were payable on such Payment Date, an amount equal
to (A) the sum of all "Program Vehicle Termination Payments" paid or payable
under (and as defined in) each other Leasing Company Lease with respect to the
Payment Date (as defined in such other Leasing Company Lease) that occurred in
the second preceding calendar month to the calendar month during which the
Vehicle Lease Commencement Date with respect to such Acquired Vehicle occurred,
divided by (B) the number of Acquired Vehicles (as defined in such other Leasing
Company Lease) previously leased under (and as defined in) each such other
Leasing Company Lease in respect of which such Program Vehicle Termination
Payments were paid or were payable) (Program Vehicle Termination Payments and
Non-Program Vehicle Termination Payments being referred to collectively as
"Termination Payments"). If a Vehicle's age is unknown as of its Vehicle Lease
Commencement Date, such age (in months) shall be the lesser of (i) the number
obtained by dividing the number of miles on the odometer of such Vehicle at the
Vehicle Lease Commencement Date by 1,500 and (ii) the number of months in the
period commencing on September 1 of the calendar year prior to the model year of
such Vehicle through the Vehicle Lease Commencement Date for such Vehicle. The
provisions of this Section 12.3 will survive the expiration or earlier
termination of the Term of this Lease.
SECTION 13. [RESERVED].
SECTION 14. REDESIGNATION OF VEHICLES. (a) At any time, including upon
the occurrence of a Manufacturer Event of Default with respect to the
Manufacturer of any Program Vehicle or any such Vehicle's becoming ineligible
for repurchase by its Manufacturer or for sale at Auction under the applicable
Manufacturer Program, due to physical damage, repair charges or accrued mileage,
in each case in excess of that permitted under the related Manufacturer Program,
or due to any failure or inability to return the Vehicle to the Manufacturer or
the designated auction prior to the expiration of the Repurchase Period, or due
to any other event or circumstance, the Servicer (or the related Sub-Servicer)
may designate the related Vehicle as a Non-Program Vehicle; provided that no
Amortization Event or Potential Amortization Event
-21-
22
with respect to any Series of Group I Notes has occurred and is continuing or
would be caused by such redesignation; and provided further, in each case, that
any additional Monthly Base Rent due with respect to such Vehicle, relating to
the decrease, if any, of the Net Book Value of such Vehicle under the newly
applicable Depreciation Schedule, shall be paid on the next succeeding Payment
Date. Subsequent to the occurrence of a Manufacturer Event of Default pursuant
to clause (ii) of the definition thereof with respect to the Manufacturer of any
Program Vehicle, the Servicer (or the related Sub-Servicer) shall promptly
notify the Rating Agencies with respect to each Series of Group I Notes of any
redesignation of Program Vehicles of such Manufacturer as Non-Program Vehicles
pursuant to this Section 14.
(b) At any time, the Servicer (or the related Sub-Servicer) may
designate a Non-Program Vehicle as a Program Vehicle if the related Manufacturer
has acknowledged that such Vehicle is entitled to the benefits of its
Manufacturer Program; provided further, in each case, that any additional
Monthly Base Rent due with respect to such Vehicle, relating to the decrease, if
any, of the Net Book Value of such Vehicle under the newly applicable
depreciation schedule specified under such Manufacturer Program, shall be paid
on the next succeeding Payment Date.
SECTION 15. GENERAL INDEMNITY AND PAYMENT OF EXPENSES.
Section 15.1. Indemnity and Payment of Expenses by the Lessees. Each
Lessee agrees jointly and severally to indemnify and hold harmless the Lessor
and the Lessor's directors, officers, agents and employees (collectively,
together with the Persons subject to indemnity under Section 15.2, the
"Indemnified Persons") against any and all claims, demands, actions, causes of
action, losses, costs, liabilities and damages of whatsoever nature, and all
reasonable expenses incurred in connection therewith (including reasonable fees
and disbursements of counsel), relating to or in any way arising out of:
Section 15.1.1. the ordering, delivery, acquisition, title on
acquisition, rejection, installation, possession, ownership, titling, retitling,
registration, re-registration, custody by the Lessee of title and registration
documents, use, non-use, misuse, operation, leasing, deficiency, defect,
transportation, repair, maintenance, control or disposition of any Vehicle
leased hereunder or to be leased hereunder, including, without limitation, any
such Vehicle shared with a Fleet Sharing Party. The foregoing shall include,
without limitation, any liability (or any alleged liability) of the Lessor or
any other Indemnified Person to any third party arising out of any of the
foregoing, including, without limitation, all reasonable legal fees, costs and
disbursements arising out of such liability (or alleged liability);
Section 15.1.2. all (i) federal, state, county, municipal, foreign or
other fees and taxes of whatsoever nature, including but not limited to license,
qualification, registration, sales, use, gross receipts, ad valorem, business,
property (real or personal), excise, motor vehicle, and occupation fees and
taxes, with respect to any Vehicle or the acquisition, purchase, sale, lease,
rental, use, operation, control, ownership or disposition of any Vehicle by any
Person or measured in any way by the value thereof or by the business of,
investment by, or ownership by
-22-
23
the Lessor or a Lessee with respect thereto, (ii) federal, state, local and
foreign income taxes and penalties and interest thereon, whether assessed,
levied against or payable by the Lessor or otherwise as a result of its being a
member of any group of corporations including any Lessee that files any tax
returns on a consolidated or combined basis, and (iii) documentary, stamp,
filing, recording, mortgage or other taxes, if any, which may be payable by the
Lessor, a Lessee or any other Indemnified Person in connection with the
execution, delivery, recording or filing of this Lease or the other Related
Documents or the leasing of any Vehicles hereunder and any penalties or interest
with respect thereto; provided, however, that the following taxes are excluded
from the indemnity provided in clauses (i) through (iii) above:
(A) any franchise tax or tax on, based on, with
respect to, or measured by the net income of such Indemnified
Person (including federal alternative minimum tax) other than
any taxes or other charges which may be imposed as a result of
any determination by a taxing authority that the Lessor is not
the owner for tax purposes of the Acquired Vehicles leased
hereunder or that the Operating Lease is not a "true lease"
for tax purposes or that depreciation deductions that would be
available to the owner of such Acquired Vehicles are
disallowed, or that the Lessor is not entitled to include the
full purchase price for any such Vehicle in basis including
any amounts payable in respect of interest charges, additions
to tax and penalties that may be imposed, and all attorneys'
and accountants' fees and expenses and all other fees and
expenses that may be incurred in defending against or
contesting any such determination; and
(B) any tax with respect to any Acquired Vehicle
leased by a Lessee hereunder or any transaction relating to
such Acquired Vehicle to the extent it covers any period
beginning after the earlier of (A) the discharge in full of
such Lessee's obligation to pay Monthly Base Rent, Monthly
Variable Rent and any other amount payable hereunder with
respect to such Acquired Vehicle or (B) the expiration or
other termination of this Agreement with respect to such
Acquired Vehicle, unless such tax accrues in respect of any
period during which such Lessee holds over such Acquired
Vehicle;
Section 15.1.3. any violation by a Lessee of this Lease or of any
Related Documents to which a Lessee is a party or by which it is bound or any
laws, rules, regulations, orders, writs, injunctions, decrees, consents,
approvals, exemptions, authorizations, licenses and withholdings of objection of
any governmental or public body or authority and all other requirements having
the force of law applicable at any time to any Vehicle or any action or
transaction by a Lessee with respect thereto or pursuant to this Lease;
Section 15.1.4. all costs, fees, expenses, damages and liabilities
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel) in connection with, or arising out of, any claim made by any third
party against the Lessor for any reason (including, without limitation, in
connection with any audit or investigation conducted by a Manufacturer
-23-
24
under its Manufacturer Program).
All obligations provided for in this Section 15 shall survive any
termination of this Lease, and, to the extent that any of such obligations are
unenforceable for any reason, each Lessee agrees to the payment and satisfaction
of each such obligation which is permissible under applicable law.
Notwithstanding the foregoing, the Lessees shall have no duty to
indemnify any Indemnified Person for any claim, demand, liability, cost, or
expense to the extent such claim, demand, liability, cost or expense arises out
of or is due to such Person's gross negligence or willful misconduct.
Section 15.2. Reimbursement Obligation by the Lessees. Each Lessee
shall forthwith upon demand reimburse each Indemnified Person for any sum or
sums expended with respect to any of the foregoing, or shall pay such amounts
directly upon request from such Indemnified Person; provided, however, that, if
so requested by a Lessee, such Indemnified Person shall submit to such Lessee a
statement documenting in reasonable detail any such demand for reimbursement or
payment. To the extent that a Lessee in fact indemnifies any Indemnified Person
under the indemnity provisions of this Lease, such Lessee shall be subrogated to
the rights of such Indemnified Person, in the affected transaction and shall
have a right to determine the settlement of claims therein. The obligations of
each Lessee contained in this Section 15 shall survive the expiration or earlier
termination of this Lease or any lease of any Vehicle hereunder; provided,
however, that, in the case of indemnities relating to the acquisition or leasing
of Vehicles, the factual or legal circumstances giving rise to the Lessor's or
any other Indemnified Person's exposure to liability occur during the period
that this Lease is in effect as to the Vehicle for which such exposure to
liability arose.
Section 15.3. Notice to Lessee of Claims. Each applicable Indemnified
Person, shall promptly notify the Lessee in writing (a "Notice of Claim") of the
pendency of any such claim, action or facts referred to in this Section 15 for
which indemnity may be required.
Section 15.4. Defense of Claims. Defense of any claim referred to in
this Section 15 for which indemnity may be required shall, at the option and
request of any applicable Lessee, be conducted by such Lessee. Following receipt
of any Notice of Claim, such Lessee will inform the Indemnified Person of its
election to defend such claim. Such Indemnified Person may participate in any
such defense at its own expense, provided such participation, in such Lessee's
reasonable opinion, does not interfere with such Lessee's defense. Each Lessee
agrees that no Indemnified Person will be liable to the Lessees for any claim
caused directly or indirectly by the inadequacy of any Vehicle for any purpose
or any deficiency or defect therein or the use or maintenance thereof or any
repairs, servicing or adjustments thereto or any delay in providing or failure
to provide such or any interruption or loss of service or use thereof or any
loss of business, all of which shall be the risk and responsibility of the
Lessees, except to the extent that any of the foregoing is caused by the gross
negligence or willful misconduct of such Indemnified
-24-
25
Person. The rights and indemnities of each Indemnified Person hereunder are
expressly made for the benefit of, and will be enforceable by, each Indemnified
Person notwithstanding the fact that such Indemnified Person is not or is no
longer a party to (or entitled to receive the benefits of) this Lease. This
general indemnity shall not affect any claims of the type discussed above, or
otherwise, which a Lessee may have against any Manufacturer.
SECTION 16. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Lease shall be
binding upon the Lessor, the Lessees, the Servicer, the Guarantor and their
respective successors and assigns, and shall inure to the benefit of the
Lessees, the Lessor, the Servicer, the Guarantor and the Trustee (for the
benefit of the Group I Noteholders), the Master Collateral Agent (for the
benefit of the Trustee on behalf of the Group I Noteholders) and the Additional
Permitted Beneficiaries, any other Indemnified Person, and their respective
successors and assigns; provided, however, that neither the Guarantor nor any
Lessee shall have the right to assign its rights or delegate its duties under
this Lease without (i) the prior written consent of the Lessor and the Trustee
and (ii) the Rating Agency Confirmation Condition, if any, with respect to each
Series of Group I Notes having been satisfied prior thereto; provided, further,
however, that nothing herein contained shall be deemed to restrict (w) the right
of any Lessee to rent Vehicles to customers in the ordinary course of its
domestic daily rental businesses, (x) the right of any Named Lessee to permit
another Lessee or a lessee under any other Leasing Company Lease to use Vehicles
leased by the Named Lessee hereunder in the ordinary course of the domestic
daily rental car operations of such other Lessee or lessee in accordance with
the terms of this Lease (but the Named Lessee shall remain fully liable for its
obligations under this Lease and the other Related Documents), (y) the right of
any Lessee to share certain of the Vehicles leased by it with Fleet Sharing
Parties (subject to the limitations specified in Section 8), for use in the
ordinary course of the domestic daily rental businesses of such Fleet Sharing
Parties in accordance with the terms of this Lease or (z) the right of the
Servicer to perform its obligations as Servicer through a Sub-Servicer, subject
to the limitations specified in Section 26 and provided that the Servicer shall
remain fully liable for its obligations under this Lease and the other Related
Documents. Any purported assignment in violation of this Section 16 shall be
void and of no force or effect. Nothing contained herein shall be deemed to
restrict the right of any Lessee to acquire or dispose of, by purchase, lease,
financing, or otherwise, motor vehicles that are not subject to the provisions
of this Lease.
SECTION 17. DEFAULT AND REMEDIES THEREFOR.
Section 17.1. Events of Default. Any one or more of the following will
constitute an event of default (a "Lease Event of Default") as that term is used
herein:
Section 17.1.1. Non-Payment of Liabilities . The occurrence of (i) a
default in the payment when due of any Monthly Base Rent, Additional Base Rent,
Monthly Variable Rent, Monthly Finance Rent, Termination Payment, Casualty
Payment or Monthly Supplemental Payment, and the continuance thereof for, except
in the case of any Monthly Variable Rent or Monthly Finance Rent, two (2)
Business Days and, in the case of any Monthly Variable Rent or
-25-
26
Monthly Finance Rent, five (5) Business Days, or (ii) a default by any Lessee
or the Guarantor in the payment when due of any amount payable under this Lease
(other than amounts described in clause (i) above) and the continuance thereof
for five (5) Business Days;
Section 17.1.2. Unauthorized Assignment. Any unauthorized assignment or
transfer of this Lease by a Lessee occurs;
Section 17.1.3. Non-Performance of Covenants and Obligations. Any
Lessee, the Servicer or the Guarantor fails to comply with or perform any
covenant, condition, agreement or provision of this Lease (which failure does
not constitute a Lease Event of Default under any of the other provisions of
this Section 17) and the continuance of such failure (other than any such
failure to comply with the provisions of Section 25.1 or 25.2 hereof, as to
which there shall be no cure period) for thirty (30) days after the earlier of
(x) the date the Lessor, the Master Collateral Agent, the Trustee or any Group I
Noteholder delivers written notice thereof to such Lessee, the Servicer or the
Guarantor and (y) the date such Lessee, the Servicer or the Guarantor obtains
actual knowledge thereof;
Section 17.1.4. Breach of Representation or Warranty. Any
representation or warranty made by a Lessee, the Servicer or the Guarantor in
this Lease or any Related Document is incorrect in any material respect (to the
extent that such representation or warranty does not incorporate a materiality
limitation in its terms (and otherwise, is incorrect in any respect)) as of the
date such warranty or representation is made and continues to be incorrect in
any material respect (to the extent that such warranty or representation does
not incorporate a materiality limitation in its terms (and otherwise, continues
to be incorrect in any respect)) for a period of thirty (30) days after the
earlier of (i) the date on which written notice thereof shall have been given to
such Lessee, the Servicer or the Guarantor by the Lessor, the Master Collateral
Agent, any Group I Noteholder or the Trustee, and (ii) the date on which such
Lessee, the Servicer or the Guarantor obtains actual knowledge thereof; or any
schedule, certificate, financial statement, report, notice, or other material
writing furnished by a Lessee, the Servicer or the Guarantor to the Lessor or
the Trustee is false or misleading in any material respect on the date as of
which the facts therein set forth are stated or certified and which continues to
be incorrect in any material respect for a period of ten (10) days after the
earlier of (a) the date on which written notice thereof shall have been given to
such Lessee, the Servicer or the Guarantor by the Lessor, the Master Collateral
Agent, the Trustee or any Group I Noteholder, and (b) the date on which such
Lessee, the Servicer or the Guarantor obtains actual knowledge thereof;
Section 17.1.5. Event of Bankruptcy. The occurrence of an Event of
Bankruptcy with respect to any Lessee or the Guarantor;
Section 17.1.6. Invalidity of Related Documents. All or any portion of
this Lease shall at any time and for any reason not be in full force and effect
or be declared to be null and void, or a proceeding shall be commenced by a
Lessee or the Guarantor, or by any governmental authority having jurisdiction
over the Lessee or the Guarantor, as applicable, seeking to establish the
invalidity or unenforceability thereof (exclusive of questions of interpretation
of any provision
-26-
27
thereof);
Section 17.1.7. Certain Amortization Events. The occurrence of an
Amortization Event under Section 9.1(d) or (g) of the Base Indenture or Section
7.1(b) of the applicable Group I Supplement or a Liquidation Event of Default
which in any such case continues beyond any applicable cure period specified in
the Indenture;
Section 17.2. Effect of Lease Event of Default; Limited Liquidation
Event of Default or Liquidation Event of Default. (a) If a Lease Event of
Default described in Section 17.1.1(i), 17.1.2, 17.1.5 or 17.1.7 shall occur,
then the Monthly Base Rent, Additional Base Rent, Monthly Supplemental Payments,
Casualty Payments (in each case calculated as if all Financed Vehicles had
suffered Casualties or had ceased to be Eligible Vehicles during the Related
Month), the Monthly Variable Rent, the Monthly Finance Rent (in each case
calculated as if the full amount of interest, principal and other charges under
the Group I Notes were then due and payable in full), Termination Payments and
all other charges, payments and amounts payable under this Lease shall, subject
to Section 17.4, automatically, without further action by the Lessor or the
Trustee, become immediately due and payable.
(b) If a Limited Liquidation Event of Default shall occur with respect
to any Series of Group I Notes, then, the Monthly Base Rent, Additional Base
Rent, the Monthly Supplemental Payments and Casualty Payments (in each case,
calculated as if each Financed Vehicle with respect to which the Lessor has
terminated the applicable Lessee's right to possession pursuant to Section
17.3(ii) or (iii) had suffered a Casualty or had ceased to be an Eligible
Vehicle during the Related Month), the Monthly Variable Rent and the Monthly
Finance Rent (in each case calculated as if the full amount of interest,
principal and other charges under such Group I Notes were then due and payable
in full) and Termination Payments (in each case, with respect to each Vehicle
with respect to which the Lessor has terminated the applicable Lessee's right to
possession pursuant to Section 17.3(ii) or (iii)) shall, subject to Section
17.4, automatically, without further action by the Lessor or the Trustee, become
immediately due and payable.
(c) If any Lease Event of Default (other than one described in
paragraph (a) above) or a Liquidation Event of Default shall occur, then the
Trustee may declare the Rent and all other charges, amounts and payments
(calculated as described in paragraph (a) above) to be due and payable,
whereupon such Rent and such other charges, amounts and payments (as so
calculated) shall, subject to Section 17.4, become immediately due and payable.
Section 17.3. Rights of Lessor and Trustee Upon Lease Event of Default,
Liquidation Event of Default or Limited Liquidation Event of Default. If a Lease
Event of Default, Liquidation Event of Default or Limited Liquidation Event of
Default shall occur:
(i) In the case of a Lease Event of Default that shall have
occurred and be continuing, the Lessor, if and as directed by the
Trustee, shall proceed by appropriate court action or actions, either
at law or in equity, to enforce performance by the
-27-
28
applicable Lessee of the applicable covenants and terms of this Lease
or to recover damages for the breach hereof calculated in accordance
with Section 17.4;
(ii) In the case of a Liquidation Event of Default or a
Limited Liquidation Event of Default that shall have occurred and be
continuing, the Lessor and the Trustee, to the extent provided in the
Indenture and subject to Section 17.4, shall have all the rights
against the Lessees and the Collateral provided in the Indenture upon
such a Liquidation Event of Default or a Limited Liquidation Event of
Default, as the case may be, including the right to take (under the
specified circumstances) possession of Vehicles (to the extent
specified in this Lease or the Indenture, as applicable) immediately;
(iii) In the case of a Liquidation Event of Default that shall
have occurred and be continuing, the Trustee may, by notice in writing
to the Lessees, terminate this Lease in its entirety and/or the right
of possession hereunder of the Lessees as to the Vehicles, and the
Lessor may direct delivery by the Lessees of documents of title to the
Vehicles, whereupon all rights and interests of the Lessees to the
Vehicles (except as otherwise provided herein) will cease and terminate
(but the Lessees will remain liable hereunder as herein provided,
calculated in accordance with Section 17.4); and, in the case of a
Limited Liquidation Event of Default that shall have occurred and be
continuing, the Trustee may, by notice in writing to the Lessees,
terminate the right of possession hereunder of any Lessee as to such
number of Vehicles as will generate proceeds from liquidation in an
amount sufficient to pay all principal of and interest on (and all
other amounts due to the holders of) the applicable Group I Notes or to
pay such lesser amount as is required to be paid pursuant to the
applicable Group I Supplement, and the Lessor may direct delivery by
such Lessees of documents of title to such Vehicles, whereupon all
right, title and interest of such Lessees to such Vehicles (except as
otherwise provided herein) will cease and terminate (but such Lessees
will remain liable hereunder as herein provided, calculated in
accordance with Section 17.4). Upon any termination of the right to
possession of any one or more Lessees pursuant to the previous
sentence, the Lessor or its agents may peaceably enter upon the
premises of any such Lessee or other premises where such Vehicles may
be located and take possession of them and thenceforth hold, possess
and enjoy the same free from any right of any such Lessee, or its
successors or assigns, to employ such Vehicles for any purpose
whatsoever consistent with the mitigation of losses and damages, and
the Lessor will, nevertheless, have a right to recover from the
applicable Lessee any and all amounts which under the terms of Section
17.2 (as limited by Section 17.4) of this Lease may be then due. The
Lessor will provide the Lessees with written notice of the place and
time of any sale of Financed Vehicles pursuant to this Section 17.3 at
least five (5) days prior to the proposed sale, which notice period
shall be deemed commercially reasonable, and the applicable Lessee may
purchase the Vehicle(s) at the sale. Each and every power and remedy
hereby specifically given to the Lessor will be in addition to every
other power and remedy hereby specifically given or now or hereafter
existing at law, in equity or in bankruptcy and each and every power
and remedy may be exercised from time to time and simultaneously and as
often and in
-28-
29
such order as may be deemed expedient by the Lessor; provided, however,
that the measure of damages recoverable against the Lessees will in any
case be calculated in accordance with Section 17.4. All such powers and
remedies will be cumulative, and the exercise of one will not be deemed
a waiver of the right to exercise any other or others. No delay or
omission of the Lessor in the exercise of any such power or remedy and
no renewal or extension of any payments due hereunder will impair any
such power or remedy or will be construed to be a waiver of any default
or any acquiescence therein. Any extension of time for payment
hereunder or other indulgence duly granted to any Lessee will not
otherwise alter or affect the rights of the Lessor or the obligations
hereunder of any Lessee. The acceptance by the Lessor of any payment
after it will have become due hereunder will not be deemed to alter or
affect the rights of the Lessor hereunder with respect to any
subsequent payments or defaults therein;
(iv) (a) If a Lessee shall default in the due performance and
observance of any of its obligations under Section 10, 24.4, 24.5,
24.6(iv), 24.6(viii), 24.7 (only to the extent such Lessee defaults in
the performance of its obligation to pay titling fees and registration
fees with respect to Vehicles under such Section 24.7) 24.8, 25.3 or
25.4 hereof, and such default shall continue unremedied for a period of
30 days (other than in the case of a default under Section 24.5, for
which the period will be 10 days) after notice thereof shall have been
given to such Lessee by the Lessor or the Master Collateral Agent or
(b) an Affiliate Issuer Liquidation Event of Default relating to an
"Enhancement Deficiency" with respect to any series of ARG Notes shall
have occurred, then the Lessor shall have the ability to exercise all
rights, remedies, powers, privileges and claims of such Lessee against
the Manufacturers under or in connection with the Manufacturer Programs
with respect to (1) Vehicles such Lessee has determined to turn back to
the Manufacturers under such Manufacturer Programs and (2) whether or
not such Lessee shall then have determined to turn back such Vehicles,
any Vehicles for which the applicable Repurchase Period will end within
one month or less;
(v) Upon a default in the performance (after giving effect to
any grace periods provided herein) by a Lessee of its obligations or
representations under Section 23.6 or 24.15 hereof with respect to any
Vehicle, the Lessor, the Master Collateral Agent or the Trustee shall
have the right to take actions reasonably necessary to correct such
default with respect to the subject Vehicle including the execution of
UCC-1 financing statements with respect to Manufacturer Programs and
other general intangibles and the completion of Vehicle Perfection and
Documentation Requirements on behalf of such Lessee or the Lessor, as
applicable;
(vi) Upon the occurrence of a Liquidation Event of Default,
the Servicer will return or cause to be returned all Vehicles which are
Program Vehicles to the related Manufacturer and will otherwise dispose
of Non-Program Vehicles, in each case in accordance with the
instructions of the Lessor. Upon the occurrence of a Limited
Liquidation Event of Default, the Servicer will return or cause to be
returned Vehicles
-29-
30
which are Program Vehicles to the related Manufacturer and will
otherwise dispose of Non-Program Vehicles, in each case to the extent
necessary to generate proceeds in an amount sufficient to pay all
interest on and principal of (and all other amounts due to the holders
of) the applicable Group I Notes or to pay such lesser amount as is
required to be paid pursuant to the applicable Group I Supplement, in
each case in accordance with the instructions of the Lessor. To the
extent any Manufacturer fails to accept any such Vehicles under the
terms of the applicable Manufacturer Program, the Lessor shall have the
right otherwise to dispose of such Vehicles and to direct the Servicer
to dispose of such Vehicles in accordance with its instructions. In
addition, the Lessor shall have all of the rights, remedies, powers,
privileges and claims vis-a-vis each Lessee necessary or desirable to
allow the Trustee to exercise the rights, remedies, powers, privileges
and claims given to the Trustee pursuant to Sections 9.2 and 9.3 of the
Base Indenture and Sections 7.2 and 7.3 of the applicable Group I
Supplement and the Guarantor and each Lessee acknowledges that it has
hereby granted the Lessor all of the rights, remedies, powers,
privileges and claims granted to the Trustee pursuant to Article 9 of
the Base Indenture and that, under certain circumstances set forth in
the Base Indenture, the Trustee may act in lieu of the Lessor in the
exercise of such rights, remedies, powers, privileges and claims; and
(vii) Upon the occurrence and during the continuation of a
Lease Event of Default, the Lessor by notice in writing to a Lessee,
may terminate the Power of Attorney as to such Lessee (provided that,
after any such termination of the Power of Attorney, the Lessor will
follow the direction of the Servicer to release liens on Acquired
Vehicles which liens are required to be released under the terms of
this Lease).
Section 17.4. Measure of Damages. If a Lease Event of Default occurs
and the Lessor, the Master Collateral Agent or the Trustee exercises the
remedies granted to the Lessor, the Master Collateral Agent or the Trustee under
this Section 17 or under Section 9.2 of the Indenture, the amount that the
Lessor shall be permitted to recover shall be equal to:
(i) all Rent and other charges, payments and amounts owed
under this Lease (calculated as provided in Section 17.2); plus
(ii) any reasonable out-of-pocket damages and expenses which
the Lessor, the Master Collateral Agent or the Trustee shall have
sustained by reason of such Lease Event of Default, together with
reasonable sums for such attorneys' fees and such expenses as will be
expended or incurred in the seizure, storage, rental or sale of the
Vehicles or in the enforcement of any right or privilege hereunder or
in any consultation or action in such connection;
(iii) without duplication of payments made pursuant to Section
5.5, interest (calculated on the basis of a 360-day year) from time to
time on amounts due and unpaid under this Lease for each Interest
Period in the period from the date of the Lease Event of
-30-
31
Default or the date payments were originally due the Lessor under this
Lease or from the date of each expenditure by the Lessor, the Master
Collateral Agent or the Trustee, as applicable, which is recoverable
from the Lessee pursuant to this Section 17, as applicable, to and
including the date payments are made by the Lessee at a rate for each
such Interest Period equal to the VFR for such Interest Period
(converted to a rate per annum) plus 1%;
provided, however, that, to avoid duplication of payments, to the extent any
amounts described in clauses (i) through (iii) above have been paid to the
Lessor, the Master Collateral Agent or the Trustee from the liquidation of the
Financed Vehicles leased hereunder (either by receipt of payment from the
Manufacturers under Manufacturer Programs, from sales of Vehicles to third
parties, or otherwise), such amounts shall be deducted from amounts under this
Section 17.4.
Section 17.5. Application of Proceeds. The proceeds of any sale or
other disposition of any Financed Vehicles pursuant to Section 17.3 shall be
applied in the following order: (i) to the reasonable out-of-pocket costs and
expenses incurred by the Lessor or its agent in connection with such sale or
disposition, including any reasonable costs associated with repairing such
Vehicles, and reasonable attorneys' fees in connection with the enforcement of
this Lease, (ii) to the payment of outstanding Rent and other charges, payments
and amounts under this Lease (such proceeds to be applied first, to outstanding
Monthly Variable Rent and Monthly Finance Rent pro rata, second, to outstanding
Monthly Base Rent, Monthly Supplemental Payments and Additional Base Rent, pro
rata, third, to outstanding Termination Payments and Casualty Payments pro rata
and fourth, to outstanding late charges pursuant to Sections 5.5 and 17.4(iii)),
(iii) to the payment of all other amounts due hereunder and (iv) any remaining
proceeds to the applicable Lessee or such Person as may be lawfully entitled
thereto.
SECTION 18. MANUFACTURER EVENTS OF DEFAULT. Upon the occurrence of a
Manufacturer Event of Default set forth in clauses (i) or (ii) of the definition
thereof with respect to a Manufacturer, the Lessees on behalf of the Lessor (a)
shall no longer place Vehicle Orders for additional Vehicles from such
Manufacturer (each, a "Defaulting Manufacturer"), and (b) shall cancel any
Vehicle Order for Vehicles of such Defaulting Manufacturer to which a vehicle
identification number (a "VIN") has not been assigned as of the date of such
Manufacturer Event of Default (to the extent such Vehicle Order is cancelable,
with or without penalty). Notwithstanding the foregoing , upon the occurrence of
a Manufacturer Event of Default set forth in clause (iii) of the definition
thereof with respect to a Manufacturer (each, a "Defaulted Manufacturer"), the
Lessees on behalf of the Lessor (a) shall no longer place Vehicle Orders for
additional Program Vehicles from such Defaulted Manufacturer, and (b) shall
cancel any Vehicle Order for Program Vehicles of such Defaulted Manufacturer to
which a vehicle identification number (a "VIN") has not been assigned as of the
date of such Manufacturer Event of Default (to the extent such Vehicle Order is
cancelable, with or without penalty); provided that the Lessees shall not be
required to cancel Vehicle Orders for Non-Program Vehicles of such Defaulted
Manufacturer.
-31-
32
SECTION 19. CERTIFICATION OF TRADE OR BUSINESS USE. Pursuant to Section
7701 of the Code, each Lessee will deliver to the Lessor a certificate in the
form of Attachment C hereto, warranting and certifying that (1) such Lessee
intends to use the Acquired Vehicles leased by it hereunder in a trade or
business of such Lessee, and (2) such Lessee has been advised that it will not
be treated as the owner of the Acquired Vehicles leased by it hereunder for
federal income tax purposes.
SECTION 20. SURVIVAL. In the event that, during the term of this Lease,
a Lessee or the Guarantor becomes liable for the payment or reimbursement of any
obligations, claims or taxes pursuant to any provision hereof, such liability
will continue, notwithstanding the expiration or termination of this Lease,
until all such amounts are paid or reimbursed by such Lessee or the Guarantor.
SECTION 21. RIGHTS OF LESSOR PLEDGED TO MASTER COLLATERAL AGENT AND
TRUSTEE. Notwithstanding anything to the contrary contained in this Lease, each
Lessee and the Guarantor acknowledges that each of the Lessees and the Lessor,
pursuant to the Master Collateral Agency Agreement, has granted a security
interest to the Master Collateral Agent, for the benefit of the Trustee (for the
benefit of the Group I Noteholders), in all of its right, title and interest in,
to and under the Vehicles, the related Manufacturer Programs, the Master
Collateral Account and all other related Master Collateral specified in the
Master Collateral Agency Agreement as being pledged by any Lessee or the Lessor,
and each Lessee and the Guarantor further acknowledges that the Lessor, pursuant
to the Receivables Trust Agreement has conveyed to the Receivables Trustee, all
the Lessor's right, title and interest in respect of the Lease Payment Rights
and the Manufacturer Payment Rights and that, pursuant to the Group I
Supplements and the Indenture, the Lessor has granted a security interest to the
Trustee (for the benefit of the Group I Noteholders) in all of its right, title
and interest in, to and under the Collateral Agreements (other than the Lease
Payment Rights, and the Manufacturer Payment Rights), the Receivables Trust
Agreement, the Beneficial Interest, the Group I Collection Account and the other
Collateral described in the Group I Supplements. Accordingly, each Lessee and
the Guarantor agree that:
(i) Subject to the terms of the Indenture, the Trustee shall
have all the rights, powers, privileges and remedies of the Lessor
hereunder. Specifically, each Lessee and the Guarantor agrees that,
upon the occurrence of an Amortization Event, the Trustee or, with
respect to any Master Collateral, the Master Collateral Agent (for and
on behalf of the Trustee) may exercise any right or remedy available
upon the occurrence of the event or events giving rise to such
Amortization Event against any Lessee or the Guarantor provided for
herein or in the Indenture or the Master Collateral Agency Agreement,
as applicable, and neither any Lessee nor the Guarantor will interpose
as a defense that such claim should have been asserted by the Lessor;
(ii) Upon the delivery by the Master Collateral Agent or the
Trustee of any notice to a Lessee or the Guarantor stating that a Lease
Event of Default or any Amortization
-32-
33
Event has occurred, then the Lessee or the Guarantor, will, if so
requested by the Master Collateral Agent (with respect to the Master
Collateral) or the Trustee (with respect to the Collateral), treat the
Master Collateral Agent or the Trustee, as the case may be, or the
designee of the Master Collateral Agent or the Trustee, as the case may
be, for all purposes as the Lessor hereunder and in all respects comply
with all obligations under this Lease that are asserted by the Master
Collateral Agent or the Trustee (or such designee), as the case may be,
as the successor to the Lessor hereunder, irrespective of whether the
Lessee or the Guarantor has received any such notice from the Lessor;
(iii) Each Lessee acknowledges that pursuant to the Indenture,
the Lessor has irrevocably authorized and directed the Lessees to, and
the Lessees shall, make payments of Rent and other charges and payments
under this Lease by deposit directly to the Group I Collection Account
established by the Trustee for receipt of such payments pursuant to the
Indenture and the Group I Supplements (or to such other account as the
Trustee may from time to time specify to the Lessees), and such
payments shall discharge the obligation of the Lessees to the Lessor
hereunder with respect to Rent and other charges and payments to the
extent of such payments;
(iv) Upon request made by the Master Collateral Agent at any
time, each Lessee will take such actions as are requested by the Master
Collateral Agent to maintain the Master Collateral Agent's perfected
first priority security interest in the Vehicles leased by such Lessee
under this Lease, the Certificates of Title with respect thereto and
the Master Collateral pursuant to the Master Collateral Agency
Agreement;
(v) The Trustee is hereby irrevocably appointed the true and
lawful attorney-in-fact of each Lessee, in its name and stead, to make
all necessary deeds, bills of sale and instruments of assignment and
transfer of the property of such Lessee sold pursuant to Section 9.2(c)
of the Base Indenture (including, without limitation, any Financed
Vehicles), and for such other purposes as are necessary or desirable to
effectuate the provisions of the Indenture and for that purpose the
Trustee may execute and deliver all necessary deeds, bills of sale and
instruments of assignment and transfer, and may substitute one or more
Persons with like power, each Lessee hereby ratifying and confirming
all that its said attorney, or such substitute or substitutes, shall
lawfully do by virtue hereof, but if so requested by the Trustee or by
any purchaser, the Lessee shall ratify and confirm any such sale or
transfer by executing and delivering to the Trustee or to such
purchaser all such property, deeds, bills of sale, instruments of
assignment and transfer and releases as may be designated in any such
request;
(vi) In the event that the Trustee determines to take action
pursuant to the provisions of Section 9.2(d) of the Base Indenture, the
Trustee may, without notice to the Lessor (unless such notice is
required by applicable state law), the Servicer, any Lessee or the
Guarantor, direct the Master Collateral Agent to take legal proceedings
for the appointment of a receiver to take possession of Vehicles
pending the sale thereof and in
-33-
34
any such event the Trustee shall be entitled to the appointment of a
receiver for the Vehicles, and none of the Lessor, the Servicer, any
Lessee or the Guarantor shall object to such appointment; and
(vii) Each Lessee hereby authorizes the Lessor and the
Trustee, as applicable, to give directions to the Master Collateral
Agent to perform any obligation which such Lessee shall have failed to
perform under the Related Documents, including, but not limited to, any
directions permitted by Section 3.4 of the Master Collateral Agency
Agreement.
SECTION 22. MODIFICATION AND SEVERABILITY. No delay on the part of the
Lessor, the Trustee or the Master Collateral Agent in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by any of them of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Lease shall in any event be effective unless the same shall be
in writing and signed and delivered by the Lessor, the Lessees, and (except as
to the matters referred to in Section 28.3) the Guarantor.
Notwithstanding the foregoing provisions of this Section 22, the
Lessor, the Lessees and the Guarantor may, at any time and from time to time,
without the consent of the Trustee or the Group I Noteholders, enter into any
amendment, supplement or other modification to this Lease to cure any apparent
mistake, ambiguity or defect or to correct or supplement any provision in this
Lease that may be inconsistent with any other provision herein or to make any
other provisions with respect to matters or questions arising under this Lease;
provided, however, that (i) any such action shall not have a materially adverse
effect on the interests of any Group I Noteholders as set forth, at the request
of the Trustee, in an Opinion of Counsel and a certificate of the Lessor and
Lessees addressed to the Trustee and (ii) a copy of such amendment, supplement
or other modification is furnished to the Trustee and (as applicable) each
Rating Agency in accordance with the notice provisions hereof not later than ten
days prior to the execution thereof by the Lessor, the Lessees and the
Guarantor.
SECTION 23. CERTAIN REPRESENTATIONS AND WARRANTIES. Each Lessee and
the Servicer represents and warrants to the Lessor, as to itself and the
Vehicles leased by it, and the Guarantor represents and warrants to the Lessor
as to itself and as to each Lessee and the Servicer and as to all Vehicles,
that, as of the Initial Closing Date and, except to the extent such
representation and warranty expressly relates to an earlier date, (i) as of each
Vehicle Funding Date and (ii) as of the Closing Date with respect to each
subsequent Series of Group I Notes:
Section 23.1. Organization; Power; Qualification. The Guarantor and
each Lessee (i) is a corporation, limited liability company or partnership, as
applicable, duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, as applicable, (ii)
has the requisite power and authority to own its properties and to
-34-
35
carry on its business as now being and hereafter proposed to be conducted, and
(iii) is duly qualified, in good standing and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
businesses requires such qualification or authorization, except where the
failure to so qualify is not reasonably likely to have a Material Adverse
Effect.
Section 23.2. Authorization; Enforceability. The Guarantor (in its
capacities as Guarantor and as Servicer) and each Lessee has the requisite power
and has taken all necessary corporate action to authorize it to execute, deliver
and perform this Lease and each of the other Related Documents to which it is a
party in accordance with their respective terms, and to consummate the
transactions contemplated hereby and thereby. This Lease has been duly executed
and delivered by the Guarantor and each Lessee and is, and each of the other
Related Documents to which any Lessee or the Guarantor is a party is, a legal,
valid and binding obligation of such Lessee or the Guarantor, as applicable,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization and similar laws
affecting creditors generally and by the availability of equitable remedies.
Section 23.3. Compliance. The execution, delivery and performance, in
accordance with their respective terms, by each Lessee and the Guarantor (in its
capacities as Guarantor and as Servicer) of this Lease and each of the other
Related Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (i) require
any consent, approval, authorization or registration not already obtained or
effected, except where the failure to obtain any such consent, approval or
authorization or to register is not reasonably likely to have a Material Adverse
Effect, (ii) violate any applicable law with respect to any Lessee, the Servicer
or the Guarantor or otherwise, as applicable, which violation is reasonably
likely to have a Material Adverse Effect, (iii) conflict with, result in a
breach of, or constitute a default under the certificate of incorporation or
by-laws or other organizational documents, if applicable, of any Lessee, the
Servicer or the Guarantor, or under any indenture, agreement, or other
instrument to which any Lessee (in its capacities as Lessee or otherwise) or the
Guarantor (in its capacities as Guarantor or as Servicer), is a party or by
which its properties may be bound, which conflict, breach or default is
reasonably likely to have a Material Adverse Effect, or (iv) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Guarantor or any Lessee, except
Permitted Encumbrances.
Section 23.4. Financial Information; Financial Condition. All financial
statements (including the notes thereto) referred to in the following sentence
and hereafter furnished to the Lessor, the Master Collateral Agent or the
Trustee pursuant to Section 24.6 hereof have been and will be prepared in
accordance with GAAP and do and will present fairly the financial condition of
the entities involved as of the dates thereof and the results of their
operations for the periods covered thereby, subject, in the case of all
unaudited statements, to normal year-end adjustments and lack of footnotes and
other presentation items. Such financial statements include (i) the
-35-
36
audited consolidated balance sheet of the Guarantor and its Consolidated
Subsidiaries as of December 31, 1997 and the related statements of income,
changes in stockholders' equity and cash flow as of and for the fiscal year
ending on such date, and (ii) the unaudited consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of September 30, 1998 and the
related statements of income, changes in stockholders equity and cash flow as of
and for the nine months ended September 30, 1998, which (in the case of clause
(i) and (ii) above) have been furnished to the Lessor and the Trustee on or
prior to the date hereof.
Section 23.5. Litigation. Except for claims as to which the insurer has
admitted coverage in writing and which are fully covered by insurance, no claim,
litigation (including, without limitation, derivative actions), arbitration,
governmental investigation or proceeding or inquiry is pending or, to the best
of the Guarantor's and each Lessee's knowledge, threatened against the Guarantor
or any Lessee which is reasonably likely to have a Material Adverse Effect.
Section 23.6. Liens. The Vehicles and other Master Collateral are free
and clear of all Liens other than Permitted Liens. The Lessor (or the Master
Collateral Agent on behalf of the Lessor) has obtained, as security for the
liabilities of the Lessees under this Lease, a first priority perfected security
interest on all Vehicles and all the other Master Collateral with respect to
which the Trustee (for the benefit of the Group I Noteholders) and any
Additional Permitted Beneficiary is designated as the Beneficiary under the
Master Collateral Agency Agreement. All Vehicle Perfection and Documentation
Requirements with respect to all Vehicles (other than Vehicles in any Initial
Fleet) on or after the date hereof have been and will continue to be satisfied,
except to the extent that the failure to comply with such requirements does not,
in the aggregate, materially adversely affect either the interests of the Lessor
or Group I Noteholders under this Lease or the Indenture or the likelihood of
payment of all Rent and other charges and payments due under this Lease.
Section 23.7. Employee Benefit Plans. (a): (i) During the twelve
consecutive month period prior to the date hereof and prior to the Initial
Closing Date and the Closing Date for each other Series of Group I Notes, no
steps have been taken by the Guarantor, any Lessee, or any member of their
Controlled Group, or to the knowledge of the Guarantor or any Lessee, by any
Person, to terminate any Pension Plan that could give rise to any liability
under Title IV of ERISA and (ii) no contribution failure has occurred or exists
with respect to any Pension Plan maintained or previously maintained by the
Guarantor, any Lessee, or any member of their Controlled Group sufficient to
give rise to a Lien under Section 302(f)(1) of ERISA in connection with such
Pension Plan; and (b) no condition exists or event or transaction has occurred
with respect to any Pension Plan which could reasonably be expected to result in
the incurrence by the Guarantor, any Lessee, or any member of the Controlled
Group of liabilities (including, without limitation, Multiemployer Plan and
Multiple Employer Plan withdrawal liabilities), fines or penalties in an amount
that will have a Material Adverse Effect.
Section 23.8. Securities Laws. Neither the Guarantor nor any Lessee is
an "investment company" or is a company "controlled" by an "investment company",
within the meaning of the
-36-
37
Investment Company Act, and the entering into or performance by the Guarantor
and the Lessees of this Lease does not violate any provision of such Act and
does not require any consent, approval or authorization of, or registration
with, the Securities and Exchange Commission or any other similar governmental
or public body or authority.
Section 23.9. Regulations T, U and X. Neither the Guarantor nor any
Lessee is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation T, U or X of the Board of Governors of
the Federal Reserve System). Neither the Guarantor nor any Lessee nor any Person
acting on behalf of any of them has taken or will take action to cause the
execution, delivery or performance of this Lease or the financing or acquisition
of the Vehicles to violate Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
Section 23.10. Business Locations; Trade Names. Schedule 23.10 lists
where each Lessee and the Guarantor maintains its chief executive office,
principal place of business, and location of its consolidated business and
financial records as of the Initial Closing Date; and Schedule 23.10 also lists
as of the Initial Closing Date the legal name of each Lessee and the Guarantor
and each name under or by which each Lessee conducts its business and each state
in which such Lessee conducts business.
Section 23.11. Taxes. The Guarantor and each Lessee has filed all
material tax returns which have been required to be filed by it, and has paid or
provided in all material respects adequate reserves for the payment of all
taxes, including, without limitation, all payroll taxes and federal and state
withholding taxes, and all assessments payable by it that have become due, other
than those that are not yet delinquent or that are being contested in good faith
by appropriate proceedings and with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP. As of the
Initial Closing Date, there is no ongoing audit (other than routine audits) or,
to the Guarantor's or any Lessee's knowledge, other governmental investigation
of the tax liability of the Guarantor or any Lessee and there is no unresolved
claim by a taxing authority concerning the Guarantor's or any Lessee's tax
liability for any period for which returns have been filed or were due other
than those contested in good faith by appropriate proceedings and with respect
to which, in all material respects, adequate reserves have been established, and
are being maintained, in accordance with GAAP.
Section 23.12. Governmental Authorizations. The Guarantor and each
Lessee has all licenses, franchises, permits and other governmental
authorizations necessary for all businesses presently carried on by it
(including owning and leasing the real and personal property owned and leased by
it), except where failure to obtain such licenses, franchises, permits and other
governmental authorizations is not reasonably likely to have a Material Adverse
Effect.
Section 23.13. Eligible Vehicles; Fleet Sharing Parties. Each Vehicle
is or will be, on the Vehicle Funding Date therefor hereunder, an Eligible
Vehicle, and each party sharing a Vehicle with a Lessee (other than another
Lessee or a lessee under any other Leasing Company
-37-
38
Lease using, pursuant to Section 8, Vehicles leased by such Named Lessee) is or
will be, as the case may be, a Fleet Sharing Party on the date that the Fleet
Sharing Agreement applicable to such Vehicle commences.
Section 23.14. Accuracy of Information. All certificates, reports,
statements, documents and other information furnished to the Lessor, the Trustee
or the Master Collateral Agent by the Guarantor or any Lessee pursuant to any
provision of any Related Document, or in connection with or pursuant to any
amendment or modification of, or waiver under, any Related Document, shall, at
the time the same are so furnished, be complete and correct in all material
respects to the extent necessary to give the Lessor, the Trustee or the Master
Collateral Agent, as the case may be, true and accurate knowledge of the subject
matter thereof, and the furnishing of the same to the Lessor, the Trustee or the
Master Collateral Agent, as the case may be, shall constitute a representation
and warranty by the Guarantor or such Lessee, as applicable, made on the date
the same are furnished to the Lessor, the Trustee or the Master Collateral
Agent, as the case may be, to the effect specified herein.
Section 23.15. Solvency. Neither the Guarantor nor any Lessee is
insolvent (as such term is defined in the Bankruptcy Code), and the Guarantor
and each Lessee has adequate capital or assets to carry on its businesses, and
intends to and believes that it will be able to pay its debts as such debts
become due.
Section 23.16. Ownership. All partnership interests in the Lessor, or
stock of the General Partner, owned by the Guarantor or any Lessee are owned
free and clear of all Liens.
Section 23.17. Necessary Actions. Upon the Servicer causing the Lien of
the Master Collateral Agent to be noted on the Certificates of Title with
respect to the Vehicles (other than Vehicles in any Initial Fleet) or as
otherwise provided for by the Master Collateral Agency Agreement or the
Indenture, all filings, registrations and recordings necessary or appropriate to
create, preserve, protect and perfect the security interest granted to the
Master Collateral Agent in respect of the Master Collateral have been
accomplished and the security interest granted to the Master Collateral Agent
pursuant to the Master Collateral Agency Agreement in and to the Master
Collateral constitutes a perfected security interest therein prior to the rights
of all other Persons therein and subject to no other Liens other than Permitted
Liens and is entitled to all rights, priorities and benefits afforded to
perfected security interests by the UCC or other relevant law as enacted in any
relevant jurisdiction.
Section 23.18. Supplemental Documents True and Correct. All information
contained in any Vehicle Order or any other material Supplemental Document which
has been submitted, or which may hereafter be submitted by the Guarantor or any
Lessee to the Lessor is, or will be as of the date of such Vehicle Order or
other Supplemental Document, true, correct and complete in all material
respects.
Section 23.19. Year 2000. The Servicer and each of the Lessees has
reviewed the areas
-38-
39
within their business and operations which could be adversely affected by, and
have developed programs to address on a timely basis, the "Year 2000 Problem"
(that is, the risk that computer applications used by the Servicer or the
Lessees may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999). Based on
such review and programs, the Servicer and each such Lessee reasonably believes
that the "Year 2000 Problem" will not result in a Material Adverse Effect, with
respect to the Servicer or such Lessee, as applicable.
SECTION 24. CERTAIN AFFIRMATIVE COVENANTS. Each Lessee and, as
applicable, the Servicer and the Guarantor, covenants and agrees that, until the
expiration or termination of this Lease, and thereafter until the obligations of
such Lessee, the Servicer and the Guarantor under this Lease and the Related
Documents are satisfied in full, unless at any time the Lessor, the Master
Collateral Agent (solely in respect of Sections 24.2 and 24.3 (as it relates to
keeping adequate books and records of account in which complete entries will be
made), 24.5, clauses (iii) through (viii) of Section 24.6 and Sections 24.7,
24.10, 24.11, 24.12 and 24.15) and the Trustee shall otherwise expressly consent
in writing, it will:
Section 24.1. Corporate Existence; Foreign Qualification. Do and cause
to be done at all times all things necessary to (i) maintain and preserve its
(a) existence as a corporation, limited liability company or partnership, as
applicable, and (b) power and authority to own its properties and to carry on
its business, (ii) be duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction where the nature of its business makes
such qualification necessary, except where the failure to so qualify is not
reasonably likely to have a Material Adverse Effect and (iii) comply with all
Contractual Obligations and Requirements of Law binding upon it, except to the
extent that the failure to comply therewith is not reasonably likely to, in the
aggregate, have a Material Adverse Effect.
Section 24.2. Books, Records and Inspections. (i) Maintain complete and
accurate books and records with respect to Vehicles leased under this Lease and
the other Master Collateral; (ii) at any time and from time to time during
regular business hours, upon not less than reasonable prior notice from the
Lessor, the Master Collateral Agent or the Trustee, permit the Lessor, the
Master Collateral Agent or the Trustee (or such other person who may be
designated from time to time by the Lessor, the Master Collateral Agent or the
Trustee), or its agents or representatives, to examine and make copies of such
books, records and documents in the possession or under the control of such
Lessee relating to the Vehicles leased under this Lease and the other Master
Collateral as the Lessor, the Master Collateral Agent, the Trustee, or such
person may reasonably request (including in connection with the Lessor's, the
Trustee's or the Master Collateral Agent's satisfaction of any requests of a
Manufacturer performing an audit under its Manufacturer Program); (iii) permit
the Lessor, the Master Collateral Agent or the Trustee (or such other person who
may be designated from time to time by the Lessor, the Master Collateral Agent
or the Trustee), or its agents or representatives, to visit the office (which
office shall be in the continental United States and, if it is not the office
where such materials normally are kept, shall be accessible without unreasonable
effort or expense) and properties of such
-39-
40
Lessee or the Servicer for the purpose of examining such materials, and to
discuss matters relating to the Vehicles leased under this Lease and the other
Master Collateral or such Lessee's (or the Servicer's) performance under this
Lease with such Lessee's or Servicer's independent public accountants or with
any of the officers or employees of such Lessee or the Servicer having knowledge
of such matters; (iv) permit the Lessor, the Master Collateral Agent or the
Trustee or any authorized representative of the Lessor, the Master Collateral
Agent or the Trustee, during reasonable business hours from time to time, upon
reasonable prior notice, without disruption of such Lessees' or the Fleet
Sharing Parties' business and subject to applicable law, to inspect Vehicles and
registration certificates, Certificates of Title and related documents covering
Vehicles wherever the same may be located; and (v) make reasonable efforts to
confirm to the Lessor, the Master Collateral Agent and the Trustee the location,
mileage and condition of each Vehicle and to make available for the Lessor's,
the Master Collateral Agent's or the Trustee's inspection (such inspection to be
conducted without disturbing the ordinary conduct of such Lessee's business)
within a reasonable time period, not to exceed forty-five (45) days, the
Vehicles at the location where the Vehicles are normally domiciled; provided,
however, that in the case of clauses (ii), (iii) and (iv) above, any of the
Master Collateral Agent and the Trustee and/or their agents or representatives,
as applicable, examining any such material on any date shall perform such
examination at the same time as the other such parties performing such
examination of such material on such date.
Section 24.3. Accounting Methods; Financial Records. Maintain, and
cause its material Subsidiaries to maintain, a system of accounting established
and administered in accordance with GAAP, keep, and cause its material
Subsidiaries to keep, adequate records and books of account in which complete
entries will be made in accordance with such accounting principles and
reflecting all transactions required to be reflected by such accounting
principles and keep, and cause its material Subsidiaries to keep, accurate and
complete records of their respective properties and assets.
Section 24.4. Insurance. (a) Maintain or cause to be maintained, with
financially sound and reputable insurers satisfactory to the Lessor and the
Trustee, (i) personal injury and damage insurance (including self-insurance)
with respect to the Vehicles and (ii) insurance with respect to its properties
and business against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar businesses
and similarly situated, in each case, of such types and in such amounts as are
customarily carried under similar circumstances by such other corporations, and
the Guarantor and each Lessee shall, from time to time, deliver to the Lessor
and the Trustee (as the Lessor or the Trustee shall request), copies of
certificates describing all such insurance then in effect; provided, however,
that any Lessee may continue its current practices of self-insurance setting
aside adequate reserves to cover any and all losses: (x) which would otherwise
be covered under any standard comprehensive and collision policies of insurance;
and (y) arising from liability to third parties for bodily injuries, death, and
property damage in an aggregate amount reasonably determined by such Lessee and
not less than that which is customary for companies of a similar size or engaged
in the same or similar activities which relative to Vehicles registered,
licensed, rented or to be used in the state
-40-
41
of Florida shall be in an amount which contains limits of not less than $100,000
per claim and $300,000 per occurrence for bodily injury liability and $50,000
property damage liability and bodily injury liability; provided, further,
however, that the Lessees shall obtain excess insurance coverage in an amount
not less than $30,000,000 for any claims of liability against the Lessees
relating to their ownership or use of Vehicles.
(b) Require that each insurance policy referred to in the foregoing
clause (a) provide for at least thirty (30) days' prior written notice to the
Master Collateral Agent of any termination of or proposed cancellation or
nonrenewal of such policy and that each insurance policy insuring assets pledged
to the Master Collateral Agent name the Master Collateral Agent as an additional
insured or additional loss payee, as appropriate, pursuant to certificates in
form and substance reasonably satisfactory to the Master Collateral Agent.
Section 24.5. Manufacturer Programs. Turn in each Program Vehicle leased by
a Lessee hereunder to the relevant Manufacturer within the Repurchase Period
therefor pursuant to Section 12.2 (unless the Lessee (i) sells such Vehicle
pursuant to Section 27 or Section 8 of Annex A hereto and, prior to the end of
the Repurchase Period therefor, causes to be deposited to the Master Collateral
Account the sales proceeds therefor in cash in the amount required pursuant to
such applicable Section, (ii) purchases such Vehicle as permitted by, and
pursuant to the requirements of, this Lease and, prior to the end of the
Repurchase Period therefor, deposits to the Group I Collection Account the
purchase price therefor in cash in the amount so required, (iii) in the case of
any Vehicle that suffers a Casualty or ceases to be an Eligible Vehicle,
deposits to the Group I Collection Account the Casualty Payment therefor in cash
pursuant to Section 7 or (iv) redesignates such Vehicle as a Non-Program Vehicle
in accordance with Section 14); and, with respect to each Program Vehicle leased
by the Lessee hereunder, comply in all material respects with all of its
obligations under the Manufacturer Program relating to such Vehicle.
Section 24.6. Reporting Requirements. Except as otherwise specified below,
furnish, or cause to be furnished to the Lessor, the Master Collateral Agent and
the Trustee:
(i) Audit Report. As soon as available and in any event within
one hundred and twenty (120) days after the end of each fiscal year of
the Guarantor, (x) consolidated financial statements consisting of a
balance sheet of the Guarantor and its Consolidated Subsidiaries as at
the end of such fiscal year and statements of income, stockholders'
equity and cash flows of the Guarantor and its Consolidated
Subsidiaries for such fiscal year, setting forth in comparative form
the corresponding figures for the preceding fiscal year (if
applicable), certified by and containing an opinion, unqualified as to
scope, of a firm of independent certified public accountants of
nationally recognized standing selected by the Guarantor and acceptable
to the Lessor and the Trustee, and (y) an Officer's Certificate of an
Authorized Officer of the Guarantor, addressed to the Lessor, the
Trustee and the Master Collateral Agent stating that such officer has
reviewed the books and records of the Guarantor and its Consolidated
Subsidiaries, and certifying that
-41-
42
no Potential Lease Event of Default or Lease Event of Default has
occurred which was continuing at the close of such fiscal year or on
the date of such Officer's Certificate or, if such an event has
occurred and was continuing at the close of such fiscal year or on the
date of such Officer's Certificate, the nature of such event;
(ii) Quarterly Statements. As soon as available and in any event
within sixty (60) days after the end of each of the first three
quarters of each fiscal year of the Guarantor, (x) financial
statements consisting of consolidated balance sheets of the Guarantor
and its Consolidated Subsidiaries as at the end of such quarter and
statements of income, stockholders' equity and cash flows of the
Guarantor and its Consolidated Subsidiaries for each such quarter,
setting forth in comparative form the corresponding figures for the
corresponding periods of the preceding fiscal year (if applicable),
all in reasonable detail and certified (subject to normal year-end
audit adjustments) by a senior financial officer of the Guarantor as
having been prepared in accordance with GAAP, and (y) a letter from
such officer addressed to the Lessor, the Trustee and the Master
Collateral Agent stating that no Potential Lease Event of Default or
Lease Event of Default has come to his attention which was continuing
at the end of such quarter or on the date of his letter, or, if such
an event has come to his attention and was continuing at the end of
such quarter or on the date of his letter, indicating the nature of
such event and the action which the Guarantor proposes to take with
respect thereto;
(iii) Lease Events of Default; Amortization Events. Promptly
after becoming aware thereof, (a) notice of the occurrence of any
Potential Lease Event of Default or Lease Event of Default, together
with a written statement of an Authorized Officer of the Lessee
describing such event and the action that the Guarantor or the
applicable Lessee proposes to take with respect thereto, and (b)
notice of any Potential Amortization Event or Amortization Event;
(iv) Monthly Vehicle Statements. To the Master Collateral Agent,
on or before each Determination Date, the Servicer shall deliver a
monthly vehicle statement (each, a "Monthly Vehicle Statement") which
shall specify (i) the last eight digits of the VIN for each Vehicle
leased hereunder during the Related Month by each Lessee, (ii) whether
such Vehicle is leased under Annex A or Annex B hereto, (iii) the
Capitalized Cost for each such Vehicle and (iv) the aggregate Net Book
Value of such Vehicles as of the end of the Related Month;
(v) Daily Reports. The Servicer shall deliver to the Master
Collateral Agent, on each Business Day, a copy of the most recent
Daily Report (as defined below). On each Business Day commencing on
the Lease Commencement Date, the Servicer shall prepare or cause to be
prepared and maintain at its office a record (each, a "Daily Report")
setting forth the aggregate of the amounts deposited in the Group I
Collection Account on the immediately preceding Business Day, which
shall consist of: (A) the aggregate amount of payments received from
Manufacturers and/or auction dealers under Manufacturer Programs
related to the Vehicles and deposited in the Group I Collection
Account from the Master Collateral Account or otherwise, plus (B) the
aggregate amount of proceeds received from third parties (other than
Manufacturers and auction dealers under Manufacturer
-42-
43
Programs) with respect to the sale of Vehicles and deposited in the
Group I Collection Account from the Master Collateral Account or
otherwise, plus (C) the aggregate amount of other Collections
deposited in the Group I Collection Account;
(vi) Monthly Noteholder's Statement. (a) On or before each
Determination Date, an Officer's Certificate of the Servicer (each, a
"Monthly Noteholder's Statement"), and (b) no later than 4:00 p.m.
(New York City time) on the day preceding each Payment Date (provided,
however, that if such day preceding a Payment Date is not a Business
Day, then no later than 10:00 a.m. (New York City time) on such
Payment Date), a supplementary Officer's Certificate of the Servicer
(each, a "Supplementary Noteholder's Statement"), in each case, with
respect to each Group I Supplement in such form and setting forth such
information as such Group I Supplement requires with respect thereto;
(vii) Non-Program Vehicle Report. On June 30, 1999 and December
31, 1999, and on an annual basis thereafter on December 31 of each
year, or as otherwise agreed by Standard & Poor's, the Servicer shall
cause a firm of nationally recognized independent public accountants
(who may also render other services to the Servicer and which is
acceptable to Standard & Poor's) to furnish a report with respect to
each Group I Supplement (each, a "Non-Program Vehicle Report") to the
Rating Agencies, with a copy furnished to the Lessor and the Trustee,
to the effect that they have performed certain agreed upon procedures
as are specified in such Group I Supplement;
(viii) Manufacturers. Promptly after obtaining actual knowledge
thereof, notice of any Manufacturer Event of Default or termination or
replacement of a Manufacturer Program or prospective change in any
Manufacturer Program;
(ix) Litigation. Promptly after becoming aware thereof, notice of
any claims, litigation, arbitration, governmental investigation or
proceeding or inquiry that is pending or, to the best of the
Guarantor's or any Lessee's knowledge, threatened against the
Guarantor or any Lessee which is reasonably likely to have a Material
Adverse Effect;
(x) ERISA. With respect to any Pension Plan maintained by any
member of the Guarantor's or any Lessee's Controlled Group, promptly
after becoming aware thereof, notice of (x) the termination of any
such Pension Plan; (y) the failure to make a contribution to any such
Pension Plan sufficient to give rise to a Lien under Section 302(f)(1)
of ERISA; and (z) the existence or occurrence of a condition, event or
transaction with respect to any such Pension Plan which could
reasonably be expected to result in the incurrence by the Guarantor,
any Lessee or any member of the Controlled Group of liabilities, fines
or penalties in an amount that is reasonably likely to have a Material
Adverse Effect;
-43-
44
(xi) Notice of Final Judgment. Promptly upon becoming aware
thereof, provide to Moody's notice of any final judgment rendered
against the Lessor; and
(xii) Other. Promptly, from time to time, such other information,
documents, or reports respecting the Vehicles or the other Master
Collateral or the condition, financial or otherwise, or operations of
the Guarantor, the Lessees or the Servicer as the Lessor, the Master
Collateral Agent or the Trustee may from time to time reasonably
request in order to protect the interests of the Lessor, the Master
Collateral Agent or the Trustee under or as contemplated by this Lease
or any other Related Document.
Section 24.7. Taxes and Liabilities. Pay when due all material taxes,
assessments and other material (determined on a consolidated basis) liabilities
(including titling fees and registration fees payable with respect to Vehicles)
except as contested in good faith and by appropriate proceedings with respect to
which in all material respects adequate reserves have been established, and are
being maintained, in accordance with GAAP and such nonpayment is not reasonably
likely to result in a Material Adverse Effect.
Section 24.8. Maintenance of the Vehicles. (i) Maintain and cause to be
maintained in good repair, working order, and condition all of the Vehicles in
accordance with its ordinary business practices with respect to all other
vehicles owned by it and will use commercially reasonable efforts to maintain
each such Vehicle that is a Program Vehicle as an eligible vehicle under the
related Manufacturer Program, except in each case to the extent that any such
failure to comply with such requirements is not reasonably likely to, in the
aggregate, materially adversely affect the interests of the Lessor, the Master
Collateral Agent, the Group I Noteholders or the Trustee in, to and under this
Lease, the Master Collateral Agency Agreement and its supplements and addenda,
the Indenture and the Group I Supplements then in effect or the likelihood of
the Lessee's payment of its obligations hereunder and (ii) perform (subject to
any applicable grace periods) all of its obligations as Servicer as set forth in
the Master Collateral Agency Agreement.
Section 24.9. Maintenance of Separate Existence. (i) Maintain in place
all policies and procedures, and take and continue to take all actions,
described in the factual assumptions set forth in those certain opinion letters
issued by ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, in each case dated February 26, 1999 addressing,
respectively, the issue of substantive consolidation as it may relate to the
Guarantor, the Lessees and the Lessor and the treatment of the Operating Lease
as a true lease for bankruptcy purposes (a copy of which opinion letters the
Guarantor and each Lessee hereby acknowledges it has received) and relating to
it, and (ii) on a semi-annual basis, provide to the Rating Agencies, the Trustee
and the Master Collateral Agent an Officer's Certificate certifying that it is
in compliance with its obligations under this Section 24.9.
Section 24.10. Repurchase Payments; Sales Proceeds. (i) Direct each
Manufacturer to make all payments under the Manufacturer Programs with respect
to Program Vehicles leased under this Lease directly to the Master Collateral
Account; (ii) cause all payments by any other
-44-
45
Persons (including payments contemplated by Section 12.2) with respect to any
Master Collateral to be made (subject to the proviso to this Section) directly
to the Master Collateral Account; (iii) in the case of any such payments with
respect to any Master Collateral received directly by a Lessee, except as
described in the proviso to this Section, by the second Business Day following
its receipt thereof, deposit such payments into the Master Collateral Account;
and (iv) within two Business Days of a Lessee's receipt thereof, deposit all
amounts representing the proceeds from sales by auction dealers under a
Guaranteed Depreciation Program and sales (including amounts paid to such Lessee
by a Manufacturer as a result of such Lessee's sale of such Vehicle outside such
Manufacturer's Manufacturer Program) of Vehicles by a Lessee to third parties
(other than under any related Manufacturer Program) into the Master Collateral
Account; provided, however, that insurance proceeds with respect to Vehicles
will only be deposited into the Master Collateral Account if an Amortization
Event or Potential Amortization Event shall have occurred and be continuing.
Section 24.11. Certificates of Title: Verification of Titles. (i) Take,
or cause to be taken, such action as shall be necessary to submit all of the
Certificates of Title (except the Certificates of Title for Vehicles in any
Initial Fleet) to the appropriate state authority for notation of the Master
Collateral Agent's lien thereon (it being understood and agreed that pursuant
and subject to the Master Collateral Agency Agreement, the original Certificates
of Title relating to the Vehicles and reflecting such lien notation by the
appropriate state authority shall be held by the applicable Sub- Servicer
thereof or by the Servicer or by an Affiliate thereof, in trust for the benefit
of the Master Collateral Agent and the Trustee as assignee of the Lessor, and
the Certificates of Title shall be subject to all of the provisions of the
Master Collateral Agency Agreement); (ii) no more than annually upon request of
any one (but not more than one) of the Lessor, the Trustee or the Master
Collateral Agent, cause a title check of a statistical sample of titles (such
statistical sample to be compiled taking into account the multiple locations at
which the Certificates of Title with respect to the Vehicles are held by the
Sub-Servicers and/or the Servicer or such Affiliates thereof) by the Servicer's
primary certified public accountants or another independent nationally
recognized firm of certified public accountants acceptable to the Group I
Noteholders, the Lessor, the Trustee and the Master Collateral Agent designed to
provide a 95% confidence level that no more than 5% of the Certificates of
Titles (other than titles of such Vehicles in any Initial Fleet or any
Refinanced Vehicles) do not comply with the requirement that (1) the Master
Collateral Agent be noted as the first lienholder on such titles or (2) the
Lessor (or, in the case of the Financed Vehicles other than Company Vehicles,
the applicable Lessee) be listed as registered owner on such titles and cause
such accountants to deliver a report stating, with the confidence level of at
least 95%, that no more than five percent (5%) of the Certificates of Title do
not correctly reference the lienholder or owner of the Vehicles described in the
immediately preceding clause; and (iii) at any time, upon the request of the
Lessor, the Trustee or the Master Collateral Agent, cause (at the requesting
party's expense) a title check in accordance with the above stated procedures to
be performed on the Vehicles.
Section 24.12. Master Collateral Agency Agreement. Concurrently with
each leasing of a Vehicle under this Lease or financing of an Eligible
Receivable under this Lease, indicate on its
-45-
46
computer records that the Master Collateral Agent as assignee of the Lessor or
the applicable Lessee, as the case may be, is the holder of a Lien on such
Vehicle or Eligible Receivable, as the case may be, for the benefit of the
Trustee (on behalf of the Group I Noteholders) and the Additional Permitted
Beneficiaries pursuant to the terms of the Master Collateral Agency Agreement.
No Lessee shall utilize selection procedures which it believes are adverse to
the Lessor or the Trustee in selecting the Vehicles or Eligible Receivables, as
the case may be, to be designated to the Lessor, as a Financing Source, and the
Trustee (on behalf of the Group I Noteholders), as a Beneficiary, under the
Master Collateral Agreement or to the Additional Permitted Beneficiaries.
Section 24.13. Compliance with Laws. (i) Not violate any law,
ordinance, rule, regulation or order of any Governmental Authority applicable to
it or its property, which violation is reasonably likely to have a Material
Adverse Effect, (ii) file in a timely manner all reports, documents and other
materials required to be filed by it with any governmental bureau, agency or
instrumentality, except where failure to make such filings is not reasonably
likely to have a Material Adverse Effect and (iii) retain all records and
documents required to be retained by it pursuant to any Requirement of Law,
except where failure to retain such records is not reasonably likely to have a
Material Adverse Effect.
Section 24.14. Delivery of Information. Provide the Lessor with any
information or materials reasonably necessary for the Lessor to comply with its
obligations under the Indenture, and provide any other party to the Related
Documents with any information or materials reasonably necessary for such Person
to comply with its obligations under the Related Documents.
Section 24.15. Deliveries: Further Assurances. At its sole expense, (i)
immediately deliver or cause to be delivered to the Lessor (or the Master
Collateral Agent on the Lessor's behalf), in due form for transfer (i.e.,
endorsed in blank), all securities, chattel paper, instruments and documents, if
any, at any time representing all or any of the Master Collateral with respect
to which the Trustee (for the benefit of the Group I Noteholders), or the
Trustee (for the benefit of the Group I Noteholders) and any Additional
Permitted Beneficiary, is designated as the Beneficiary (it being understood
that the Certificates of Title shall be held by the Servicer or an Affiliate
thereof (including the Sub-Servicer of such Vehicles) or the Master Collateral
Agent, as the case may be, pursuant to the provisions of the Master Collateral
Agency Agreement), and (ii) execute and deliver, or cause to be executed and
delivered, to the Lessor or the Master Collateral Agent, as the case may be, in
due form for filing or recording (and pay the cost of filing or recording the
same in all public offices reasonably deemed necessary or advisable by the
Lessor, the Master Collateral Agent or the Trustee, as the case may be), such
assignments, security agreements, mortgages, consents, waivers, financing
statements, and other documents, and do such other acts and things, all as may
from time to time be reasonably necessary or desirable to establish and maintain
to the satisfaction of the Lessor, the Master Collateral Agent, the Trustee and
each Additional Permitted Beneficiary a valid perfected first-priority Lien on
and security interest in all of the Master Collateral with respect to which the
Trustee (for the benefit of the
-46-
47
Group I Noteholders), or the Trustee (for the benefit of the Group I
Noteholders), and any Additional Permitted Beneficiary, is designated as the
Beneficiary now or hereafter existing or acquired.
Section 24.16. Additional Actions. The Servicer shall:
(a) instruct the Trustee or the Paying Agent, as applicable,
to make withdrawals and payments from the Group I Collection Account,
as contemplated in the Indenture;
(b) at the request of the Trustee as required or permitted
upon or after the occurrence of events specified in the Indenture and,
to the extent permitted under and in compliance with applicable laws
and regulations, execute and deliver, for the benefit of the Group I
Noteholders under the Indenture, any and all instruments necessary or
appropriate to commence or maintain enforcement proceedings with
respect to Manufacturer Programs or any Enhancement;
(c) upon the occurrence of a Lease Payment Deficit, deliver to
the Trustee a notice in the form attached as an exhibit to the series
supplement for each applicable series of ARG Notes; and
(d) supervise the servicing of the Vehicles and perform such
other functions and take such other actions as it is designated to
perform or take pursuant to the terms and conditions of any Related
Document.
Section 24.17. Fleet Sharing Agreements. Each Lessee agrees that each
Fleet Sharing Agreement will include provisions consistent with those contained
in Section 31 of this Lease pursuant to which, inter alia, each Fleet Sharing
Party expressly and irrevocably submits to the non-exclusive jurisdiction of all
federal and state courts of the State of New York and shall also include a
provision whereby each Fleet Sharing Party agrees to be bound by the provisions
of Section 9.2(b) of the Base Indenture.
Section 24.18. Minimum Depreciation Rate. The Servicer agrees that the
Depreciation Schedules with respect to Non-Program Vehicles leased under this
Lease shall be established such that the weighted average Depreciation Charges
accruing with respect to the Non-Program Vehicles during each Related Month
shall be at least equal to the lesser of (a) 1.25% and (b) such lower percentage
in respect of which the Rating Agency Confirmation and Consent Condition with
respect to each Series of Group I Notes shall have been satisfied.
SECTION 25. CERTAIN NEGATIVE COVENANTS. Until the expiration or
termination of this Lease and thereafter until the Liabilities are paid in full,
each Lessee agrees that, unless at any time the Lessor, the Master Collateral
Agent (other than in respect of Sections 25.1 and 25.2) and the Trustee shall
otherwise expressly consent in writing, it will not:
-47-
48
Section 25.1. Mergers, Consolidations. Be a party to any merger or
consolidation, other than a merger or consolidation of any Affiliate of a Lessee
into or with such Lessee (provided, that the Lessee is the surviving entity or,
if such Affiliate is also a Lessee or is a lessee under another Leasing Company
Lease, a Lessee or such lessee is the surviving entity).
Section 25.2. Regulations T, U and X. Use or permit any amounts funded
by the Lessor pursuant to the Financing Lease to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
"purchasing or carrying margin stock" within the meaning of Regulations T, U and
X of the Board of Governors of the Federal Reserve System, as amended from time
to time.
Section 25.3. Liens. Create or permit to exist any Lien with respect to
any Master Collateral with respect to which the Trustee (for the benefit of the
Group I Noteholders), or any Additional Permitted Beneficiary, is designated as
the Beneficiary, whether now or hereafter existing or acquired, except Permitted
Liens.
Section 25.4. Use of Vehicles. Use or contractually permit any Vehicles
to be used in any manner (i) that would make such Vehicles which are Program
Vehicles ineligible for repurchase or auction under the related Manufacturer
Program (unless such Vehicles are redesignated as Non-Program Vehicles pursuant
to Section 14), (ii) for any illegal purposes or (iii) that could subject any
Vehicles to confiscation.
Section 25.5. Change of Location or Name. Change (a) the location of
its principal place of business, chief executive office or its consolidated
records concerning its business and financial affairs, or (b) its legal name or
the name under or by which it conducts its business, in each case without first
giving the Master Collateral Agent, the Trustee, the Rating Agencies and the
Lessor at least fifteen (15) days' advance written notice thereof and having
taken any and all action required to maintain and preserve the first priority
perfected Lien of the Master Collateral Agent in the Master Collateral and of
the Trustee in the Collateral; provided, however, that notwithstanding the
foregoing, the Lessee shall not change the location of its principal place of
business, chief executive office or its consolidated records concerning its
business and financial affairs to any place outside the United States of
America.
SECTION 26. SERVICING COMPENSATION; EXPENSES OF SERVICER;
DELEGATION OF SERVICING DUTIES.
Section 26.1. As compensation for its servicing activities hereunder
and reimbursement for its expenses as set forth in Section 26.2, the Servicer
shall be entitled to receive from the Lessor a monthly servicing fee (the
"Monthly Servicing Fee"), payable in arrears on each Payment Date prior to the
termination of this Lease, the Indenture and the Master Collateral Agency
Agreement. Except as otherwise specified in the related Group I Supplement, the
Monthly Servicing Fee for each Series of Group I Notes (each, a "Series Monthly
Servicing Fee") on each Payment Date shall be equal to one-twelfth of the
product of (i) the Servicing Fee
-48-
49
Percentage for such Series and (ii) the Invested Amount of such Series as of the
preceding Payment Date (after giving effect to any payments of principal on such
date). The Series Monthly Servicing Fee for each Series shall be paid to the
Servicer pursuant to the procedures set forth in the applicable Group I
Supplement.
Section 26.2. The expenses of the Servicer include, and the Servicer
agrees to pay, the reasonable fees and disbursements of independent accountants
in connection with reports furnished pursuant to Sections 24.6(i) and (ii), plus
all other fees, expenses and indemnities by the Servicer in connection with the
Servicer's activities hereunder or under the Related Documents. The Servicer,
however, shall not be liable for any liabilities, costs or expenses of the
Lessor, the Trustee or the Noteholders arising under any tax law, including
without limitation any Federal, state or local income or franchise taxes or any
other tax imposed on or measured by income (or any interest or penalties with
respect thereto or arising from a failure to comply therewith), except to the
extent incurred as a result of the Servicer's violation of the provisions of
this Lease or of the Related Documents; provided, however, the foregoing
provisions of this sentence shall not affect the indemnification obligations of
the Lessees under Section 15 of this Lease.
Section 26.3. The Servicer may delegate to a Lessee or another
Affiliate of the Servicer (each such delegate, in such capacity, a
"Sub-Servicer") the performance of the Servicer's obligations as Servicer in
respect of Vehicles leased under this Lease (but the Servicer shall remain fully
liable for its obligations in respect of such Vehicles under this Lease and the
other Related Documents).
SECTION 27. RELEASE OF COLLATERAL. The parties agree that pursuant to
the provisions of this Section 27 and Sections 2.3 and 2.7 of the Master
Collateral Agency Agreement, any and all Liens for the benefit of the Lessor
(including the Lien of the Trustee as assignee of the Lessor and as Beneficiary
under the Master Collateral Agency Agreement) on the Vehicles and the
Certificates of Title therefor or Eligible Receivables financed hereunder shall
be released or deemed to be released, as provided below. From and after the
earliest of:
(a) in the case of a Vehicle subject to a Guaranteed
Depreciation Program, the date of the sale of such Vehicle by an
auction dealer to a third party, and in the case of any other Program
Vehicle, the Disposition Date for such Vehicle, and, in any case, in
accordance with Section 8 of Annex A, if applicable; or
(b) receipt of the purchase price by the Lessor or the Trustee
for a Vehicle sold in an ordinary course sale; or
(c) the payment in full of all obligations of the Servicer and
the applicable Lessee under this Lease with respect to a Financed
Vehicle or an Eligible Receivable (in the case of any Eligible
Receivables, pursuant to Section 12 of Annex B hereto),
-49-
50
any and all Liens for the benefit of the Lessor (including the Lien of the
Trustee as assignee of the Lessor and as Beneficiary under the Master Collateral
Agency Agreement) on such Vehicle and the Certificate of Title therefor or such
Eligible Receivable, as applicable, shall be deemed to be released; provided,
however, that no Lien for the benefit of the Lessor (including the Lien of the
Trustee as assignee of the Lessor and as Beneficiary under the Master Collateral
Agency Agreement) on the Vehicles and the Certificates of Title therefor shall
be released or deemed to be released if the release of such Lien would cause an
"Amortization Event" or "Potential Amortization Event" to occur with respect to
any series of ARG Notes. Subject to the Servicer's and the applicable
Sub-Servicer's right to redesignate Program Vehicles as Non-Program Vehicles in
accordance with Section 14, the Lessor or the Servicer or applicable
Sub-Servicer, acting as the agent of the Lessor, may sell any Program Vehicle
subject to this Lease that is an Acquired Vehicle or direct a Lessee to sell any
Program Vehicle leased by it hereunder that is a Financed Vehicle during the
Repurchase Period therefor in an ordinary course sale, provided that, if such
sale is not made pursuant to the related Manufacturer Program, it is made in
accordance with the requirements of this Section 27. The Lessor and each Lessee
agree that for purposes of this Section 27 if an ordinary course sale occurs
during the Repurchase Period with respect to a Program Vehicle that is an
Acquired Vehicle, in the case of a sale by the Lessor, or Program Vehicle that
is a Financed Vehicle, in the case of a sale by any Lessee, the Lessor or such
Lessee, as the case may be, shall only sell such Vehicle for a purchase price
(including any amounts paid by the Manufacturer as an incentive for selling such
Vehicle outside of the related Manufacturer Program), net of all fees and
expenses incurred in connection with such sale, equal to or greater than the
Repurchase Price that it would have received under the related Manufacturer
Program if it had turned back such Vehicle to the Manufacturer, net of all fees
and expenses that would have been incurred in connection with such turn-back
less reasonably predictable Excess Mileage Charges, Excess Damage Charges and
other similar charges payable by the Lessor or such Lessee, as applicable, to
such Manufacturer as a result of the Lessor's or Lessee's sale of such Program
Vehicle. In the case of a sale or turn back of a Financed Vehicle by a Lessee,
the Lessor shall, and shall cause the Trustee and the Master Collateral Agent
to, execute such documents and instruments as such Lessee may reasonably request
(including a power of attorney of the Master Collateral Agent appointing such
Lessee to act as the agent of the Master Collateral Agent in taking such actions
as are required to evidence the release of the Lien of the Master Collateral
Agent on Vehicles leased by such Lessee turned back or sold pursuant to the
provisions of this Section 27, which power of attorney shall be revocable
pursuant to Section 2.7(c) of the Master Collateral Agency Agreement).
SECTION 28. GUARANTY.
Section 28.1. Guaranty. In order to induce the Lessor to execute and
deliver this Lease and to lease Vehicles to the Lessees, and in consideration
thereof, the Guarantor hereby (i) unconditionally and irrevocably guarantees to
the Lessor the obligations of the Lessees to make any payments required to be
made by them under this Lease, (ii) agrees to cause the Lessees to perform and
observe duly and punctually all of the terms, conditions, covenants, agreements
and indemnities of the Lessees under this Lease, and (iii) agrees that, if for
any reason whatsoever,
-50-
51
any Lessee fails to so perform and observe such terms, conditions, covenants,
agreements and indemnities, the Guarantor will duly and punctually perform and
observe the same (the obligations referred to in clauses (i) through (iii) above
are collectively referred to as the "Guaranteed Obligations"). The liabilities
and obligations of the Guarantor under the guaranty contained in this Section 28
(this "Guaranty") will be absolute and unconditional under all circumstances.
This Guaranty shall be a guaranty of payment and not of collection, and the
Guarantor hereby agrees that it shall not be required that the Lessor or the
Trustee assert or enforce any rights against any of the Lessees or any other
person before or as a condition to the obligations of the Guarantor pursuant to
this Guaranty.
Section 28.2. Scope of Guarantor's Liability. The Guarantor's
obligations hereunder are independent of the obligations of the Lessees, any
other guarantor or any other Person, and the Lessor may enforce any of its
rights hereunder independently of any other right or remedy that the Lessor may
at any time hold with respect to this Lease or any security or other guaranty
therefor. Without limiting the generality of the foregoing, the Lessor may bring
a separate action against the Guarantor without first proceeding against any of
the Lessees, any other guarantor or any other Person, or any security held by
the Lessor, and regardless of whether the Lessees or any other guarantor or any
other Person is joined in any such action. The Guarantor's liability hereunder
shall at all times remain effective with respect to the full amount due from the
Lessees hereunder, notwithstanding any limitations on the liability of any
Lessee or the Servicer to the Lessor contained in any of the Related Documents
or elsewhere. The Lessor's rights hereunder shall not be exhausted by any action
taken by the Lessor until all Guaranteed Obligations have been fully paid and
performed.
Section 28.3. Lessor's Right to Amend this Lease. The Guarantor
authorizes the Lessor, at any time and from time to time without notice and,
subject to the proviso to Section 28.4(a)(ii), without affecting the liability
of the Guarantor hereunder, to: (a) alter the terms of all or any part of the
Guaranteed Obligations and any security and guaranties therefor including
without limitation modification of times for payment and rates of interest; (b)
accept new or additional instruments, documents, agreements, security or
guaranties in connection with all or any part of the Guaranteed Obligations; (c)
accept partial payments on the Guaranteed Obligations; (d) waive, release,
reconvey, terminate, abandon, subordinate, exchange, substitute, transfer,
compound, compromise, liquidate and enforce all or any part of the Guaranteed
Obligations and any security or guaranties therefor, and apply any such security
and direct the order or manner of sale thereof (and bid and purchase at any such
sale), as the Lessor in its discretion may determine; (e) release any Lessee,
any guarantor or any other Person from any personal liability with respect to
all or any part of the Guaranteed Obligations; and (f) assign its rights under
this Guaranty in whole or in part.
Section 28.4. Waiver of Certain Rights by Guarantor. The Guarantor
hereby waives each of the following to the fullest extent allowed by law:
(a) any defense based upon:
-51-
52
(i) the unenforceability or invalidity of any security or
other guaranty for the Guaranteed Obligations or the
lack of perfection or failure of priority of any
security for the Guaranteed Obligations; or
(ii) any act or omission of the Lessor or any other Person
that directly or indirectly results in the discharge
or release of any of the Lessees or any other Person
or any of the Guaranteed Obligations or any security
therefor; provided that the Guarantor's liability in
respect of this Guaranty shall be released to the
extent the Lessor expressly releases such Lessee or
other Person, in a writing conforming to the
requirements of Section 22, from any obligations with
respect to any of the foregoing; or
(iii) any disability or any other defense of any Lessee or
any other Person with respect to the Guaranteed
Obligations, whether consensual or arising by
operation of law or any bankruptcy, insolvency or
debtor-relief proceeding, or from any other cause;
(b) any right (whether now or hereafter existing) to require the
Lessor, as a condition to the enforcement of this Guaranty, to:
(i) accelerate the Guaranteed Obligations;
(ii) give notice to the Guarantor of the terms, time and
place of any public or private sale of any security
for the Guaranteed Obligations; or
(iii) proceed against any Lessee, any other guarantor or
any other Person, or proceed against or exhaust any
security for the Guaranteed Obligations;
(c) presentment, demand, protest and notice of any kind, including
without limitation notices of default and notice of acceptance of this Guaranty;
(d) all suretyship defenses and rights of every nature otherwise
available under New York law and the laws of any other jurisdiction;
(e) any right that the Guarantor has or may have to set-off with
respect to any right to payment from any Lessee; and
(f) all other rights and defenses the assertion or exercise of which
would in any way diminish the liability of the Guarantor hereunder in respect of
the Guaranteed Obligations.
Section 28.5. Lessees' Obligations to Guarantor and Guarantor's
Obligations to Lessees Subordinated. Until all of the Guaranteed Obligations
have been paid in full, the Guarantor
-52-
53
agrees that all existing and future unsecured debts, obligations and liabilities
of the Lessees to the Guarantor or the Guarantor to any of the Lessees
(hereinafter collectively referred to as "Subordinated Debt") shall be and
hereby are expressly subordinated to the prior payment in full of the Guaranteed
Obligations, on the terms set forth in clauses (a) through (e) below, and the
payment thereof is expressly deferred in right of payment to the prior payment
in full of the Guaranteed Obligations. For purposes of this Section 28.5, to the
extent the Guaranteed Obligations consist of the obligation to pay money, the
Guaranteed Obligations shall not be deemed paid in full unless and until paid in
full in cash.
(a) Upon any distribution of assets of the Guarantor or any Lessee upon
any dissolution, winding up, liquidation or reorganization of the Guarantor or
such Lessee, whether in bankruptcy, insolvency, reorganization or receivership
proceedings, or upon an assignment for the benefit of creditors or any other
marshaling of the assets and liabilities of the Guarantor or such Lessee, or
otherwise:
(i) the holders of the Guaranteed Obligations shall be
entitled to receive payment in full of the Guaranteed
Obligations before the Guarantor or the Lessee, as
the case may be, is entitled to receive any payment
on account of the Subordinated Debt;
(ii) any payment by, or distribution of assets of, the
Guarantor or such Lessee of any kind or character,
whether in cash, property or securities, to which
such Lessee or the Guarantor would be entitled except
for this subordination shall be paid or delivered by
the Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or
liquidating trustee, or otherwise, directly to the
Trustee, for the benefit of the holders of the
Guaranteed Obligations, to be held as additional
security for the Guaranteed Obligations in an
interest bearing account until the Guaranteed
Obligations have been paid in full; and
(iii) if, notwithstanding the foregoing, any payment by, or
distribution of assets of, the Guarantor or such
Lessee of any kind or character, whether in cash,
property or securities, in respect of any
Subordinated Debt shall be received by such Lessee or
the Guarantor before the Guaranteed Obligations are
paid in full, such payment or distribution shall be
held in trust in an interest bearing account of the
Guarantor or such Lessee, as appropriate, and
immediately paid over in kind to the holders of the
Guaranteed Obligations until the Guaranteed
Obligations have been paid in full.
(b) The Guarantor authorizes and directs each Lessee and each Lessee
authorizes and directs the Guarantor to take such action as may be necessary or
appropriate to effectuate and maintain the subordination provided herein.
-53-
54
(c) No right of any holder of the Guaranteed Obligations to enforce the
subordination herein shall at any time or in any way be prejudiced or impaired
by any act or failure to act on the part of the Guarantor, any Lessee, the
Lessor or any other Person or by any noncompliance by the Guarantor, any Lessee,
the Lessor or any other Person with the terms, provisions and covenants hereof
or of the Related Documents regardless of any knowledge thereof that any such
holder of the Guaranteed Obligations may have or be otherwise charged with.
(d) Except as provided in Section 28.9, nothing express or implied
herein shall give any Person other than the Lessees, the Lessor, the Trustee and
the Guarantor any benefit or any legal or equitable right, remedy or claim
hereunder.
(e) If the Guarantor shall institute or participate in any suit, action
or proceeding against any Lessee or any Lessee shall institute or participate in
any suit, action or proceeding against the Guarantor, in violation of the terms
hereof, such Lessee or the Guarantor, as the case may be, may interpose as a
defense or dilatory plea this subordination, and the holders of the Guaranteed
Obligations are irrevocably authorized to intervene and to interpose such
defense or plea in their name or in the name of such Lessee or the Guarantor, as
the case may be.
Section 28.6. Guarantor to Pay Lessor's Expenses. The Guarantor agrees
to pay to the Lessor (or the Trustee), on demand, all reasonable costs and
expenses, including attorneys' fees, incurred by the Lessor (or the Trustee) in
exercising any right, power or remedy conferred by this Guaranty, or in the
enforcement of this Guaranty, whether or not any action is filed in connection
therewith. Until paid to the Lessor, such amounts shall bear interest,
commencing with the Lessor's demand therefor, for each Interest Period during
the period from the date of such demand until paid, at the VFR for such Interest
Period plus 1% (calculated on the basis of a 360-day year).
Section 28.7. Reinstatement. This Guaranty shall continue to be
effective or be reinstated, as the case may be, and the rights of the Lessor
shall continue, if at any time payment of any of the amounts payable by any
Lessee under this Lease is rescinded or must otherwise be restored or returned
by the Lessor, upon an event of bankruptcy, dissolution, liquidation or
reorganization of any Lessee, the Guarantor, any other guarantor or any other
Person or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, any Lessee, the Guarantor,
any other guarantor or any other Person, or any substantial part of their
respective property, or otherwise, all as though such payment had not been made.
Section 28.8. Pari Passu Indebtedness. The Guarantor (i) represents and
warrants that, as of the date hereof, the obligations of the Guarantor under
this Guaranty will rank pari passu with any existing unsecured indebtedness of
the Guarantor and (ii) covenants and agrees that from and after the date hereof
the obligations of the Guarantor under this Guaranty will rank pari passu with
any unsecured indebtedness of the Guarantor incurred after the date hereof.
-54-
55
Section 28.9. Third-Party Beneficiaries. The Guarantor acknowledges
that the Trustee (on behalf of the Group I Noteholders) has accepted the
assignment of the Lessor's rights under this Lease as collateral for the Group I
Notes in reliance on the Guaranty and that the Trustee (for the benefit of the
Group I Noteholders) shall be a third-party beneficiary hereunder.
SECTION 29. ADDITIONAL LESSEES.
Section 29.1. Additional Subsidiary Lessees. Any direct or indirect
Subsidiary of the Guarantor (each, a "Guarantor Subsidiary") shall have the
right to become a "Lessee" under and pursuant to the terms of this Agreement by
complying with the provisions of this Section 29.1. In the event a Guarantor
Subsidiary desires to become a "Lessee" under this Agreement, then the Guarantor
and such Guarantor Subsidiary shall execute (if appropriate) and deliver to the
Lessor and the Trustee:
(a) a Joinder in Lease Agreement in the form attached hereto
as Attachment D (each, an "Affiliate Joinder in Lease");
(b) the certificate of incorporation for such Guarantor
Subsidiary, duly certified by the Secretary of State of the
jurisdiction of such Guarantor Subsidiary's incorporation, together
with a copy of the by-laws of such Guarantor Subsidiary, duly certified
by a Secretary or Assistant Secretary of such Guarantor Subsidiary;
(c) copies of resolutions of the Board of Directors of such
Guarantor Subsidiary authorizing or ratifying the execution, delivery
and performance, respectively, of those documents and matters required
of it with respect to this Agreement, duly certified by the Secretary
or Assistant Secretary of such Guarantor Subsidiary;
(d) a certificate of the Secretary or Assistant Secretary of
such Guarantor Subsidiary (or, as applicable, such Guarantor
Subsidiary's managing member, general partner or other Person charged
with the management of such Guarantor Subsidiary) certifying the names
of the individual or individuals authorized to sign the Affiliate
Joinder in Lease Agreement and the other Related Documents to be
executed by it, together with samples of the true signatures of each
such individual;
(e) a good standing certificate for such Guarantor Subsidiary
in the jurisdiction of its incorporation and the jurisdiction of its
principal place of business;
(f) a written search report from a Person satisfactory to the
Lessor, the Master Collateral Agent and the Trustee listing all
effective financing statements that name such Guarantor Subsidiary as
debtor or assignor, and that are filed in the jurisdictions in which
filings were made pursuant to clause (g) below, together with copies of
such financing statements, and tax and judgment lien search reports
from a Person satisfactory to the Lessor, the Master Collateral Agent
and the Trustee showing no evidence of liens filed
-55-
56
against such Guarantor Subsidiary that purport to affect any Vehicles
leased hereunder or any other Master Collateral or Collateral under the
Indenture;
(g) evidence of the filing of proper financing statements on
Form UCC-1 (i) naming such Guarantor Subsidiary as debtor and the
Master Collateral Agent as secured party, and (ii) naming such
Guarantor Subsidiary as debtor, the Lessor as secured party and the
Master Collateral Agent as assignee, in each case covering the
collateral described in Section 2(b) hereof;
(h) an Officer's Certificate and an opinion of counsel each
stating that such joinder by such Guarantor Subsidiary complies with
this Section 29.1 and that all conditions precedent herein provided for
relating to such transaction have been complied with;
(i) as applicable, a statement from each of the Rating
Agencies that such Guarantor Subsidiary becoming a "Lessee" under this
Agreement will not cause a failure to meet the Rating Agency
Confirmation Condition with respect to each Series of Group I Notes;
and
(j) any additional documentation that the Lessor, the Master
Collateral Agent or the Trustee may reasonably require to evidence the
assumption by such Guarantor Subsidiary of the obligations and
liabilities set forth in this Agreement.
Upon satisfaction of the foregoing conditions and receipt by such Guarantor
Subsidiary of the applicable Affiliate Joinder in Lease executed by the Lessor,
such Guarantor Subsidiary shall for all purposes be deemed to be a "Lessee" for
purposes of this Agreement (including, without limitation, the Guaranty) and
shall be entitled to the benefits and subject to the liabilities and obligations
of a Lessee hereunder.
SECTION 30. BANKRUPTCY PETITION AGAINST LESSOR. The Guarantor and each
Lessee hereby covenants and agrees that, prior to the date which is one year and
one day after the payment in full of all outstanding Group I Notes and all other
obligations of the Lessor under the Related Documents, it will not institute
against, or join any other Person in instituting against, the Lessor any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States. In the event that the Guarantor or any Lessee takes action in
violation of this Section 30, the Lessor agrees, for the benefit of the Group I
Noteholders, that it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such a petition by the Guarantor or such Lessee
against the Lessor or the commencement of such action and raise the defense that
the Guarantor or such Lessee has agreed in writing not to take such action and
should be estopped and precluded therefrom and such other defenses, if any, as
its counsel advises that it may assert. The provisions of this Section 30 shall
survive the termination of this Lease.
-56-
57
SECTION 31. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS LEASE, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE TRUSTEE, THE LESSOR, THE GUARANTOR, THE LESSEES OR THE
SERVICER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
VEHICLE, OTHER MASTER COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
LESSOR'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH VEHICLE, OTHER
MASTER COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE GUARANTOR AND EACH LESSEE
(IN SUCH CAPACITIES AND IN ALL OTHER APPLICABLE CAPACITIES) HEREBY EXPRESSLY AND
IRREVOCABLY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF ALL FEDERAL AND STATE
COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. THE GUARANTOR AND EACH LESSEE (IN SUCH
CAPACITIES AND IN ALL OTHER APPLICABLE CAPACITIES) FURTHER IRREVOCABLY CONSENT
TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE GUARANTOR, EACH LESSEE AND
THE LESSOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE GUARANTOR OR ANY LESSEE (IN SUCH CAPACITIES AND IN
ALL OTHER APPLICABLE CAPACITIES) HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS LEASE.
SECTION 32. GOVERNING LAW. THIS LEASE SHALL BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Whenever possible each provision of this Lease shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Lease shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such
-57-
58
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Lease. All obligations of the Guarantor and
the Lessees and all rights of the Lessor, the Master Collateral Agent or the
Trustee expressed herein shall be in addition to and not in limitation of those
provided by applicable law or in any other written instrument or agreement.
SECTION 33. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS LEASE OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE
OR ANY RELATED TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 34. NOTICES. All notices, amendments, waivers, consents and
other communications provided to any party hereto under this Lease shall be in
writing and addressed, delivered or transmitted to such party at its address or
facsimile number set forth below its signature hereto or at such other address
or facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed by certified or registered mail and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when transmitted upon receipt of electronic
confirmation of such. In each case, a copy of all notices, requests and other
communications (other than any such notices, requests and other communications
in the ordinary course of business) that are sent by any party or signatory
hereunder shall be sent to the Trustee at the following address:
THE BANK OF NEW YORK
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Floor 12 East
New York, New York 10286
Attention: Corporate Trust Division
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 35. HEADINGS. Section headings used in this Lease are for
convenience of reference only and shall not affect the construction of this
Lease.
SECTION 36. EXECUTION IN COUNTERPARTS. This Lease may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute one and the same agreement; provided that such counterparts taken
together shall constitute the original executed Counterpart No. 1 only as
specified on, and in accordance with, the legend appearing on the cover page of
this Lease (and
-58-
59
only if bearing original signatures).
[Remainder of Page Intentionally Blank]
-59-
60
IN WITNESS WHEREOF, the parties have executed this Lease or caused it
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
LESSEE:
NATIONAL CAR RENTAL SYSTEM, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Signatory
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
LESSOR:
---------------------------------
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL FINANCING
CORPORATION, its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President and Assistant
Secretary
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
60
61
GUARANTOR AND SERVICER:
REPUBLIC INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President Finance and Treasurer
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Address: ▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇
20th Floor
Attn: General Counsel
Facsimile: (954) 769-
Telephone: (954) 769-
Acknowledged by:
MASTER COLLATERAL AGENT:
CITIBANK, N.A.
By: /s/
-------------------------------
Name:
Title:
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Global Agency and Trust Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
61
62
ANNEX A
TO THE
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
Dated as of February 26, 1999
among
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as Lessor,
NATIONAL CAR RENTAL SYSTEM, INC.,
as Lessee,
and those subsidiaries
of Republic Industries, Inc.
from time to time
becoming Lessees hereunder
and
REPUBLIC INDUSTRIES, INC.,
as Guarantor and Servicer
62
63
1. Scope of Annex. This Annex A shall apply only to the acquisition,
leasing and servicing of the Acquired Vehicles by the Lessor pursuant to the
Base Lease, as supplemented by this Lease Annex (collectively, the "Operating
Lease").
2. General Agreement. The Lessor and the Lessee intend that for all
purposes (including, but not limited to, financial accounting, regulatory
accounting, federal income tax purposes and all applicable state and local
income, franchise, sales, use and excise tax purposes and for purposes of any
foreign corporation, business registration or doing business statutes), (A) the
Group I Lease with regard to Acquired Vehicles will be treated as an "operating
lease" pursuant to Statement of Financial Accounting Standards No. 13, as
amended, as well as for all tax purposes, (B) the Lessor will be treated as the
owner and lessor of the Acquired Vehicles, (C) the Lessee thereof will be
treated as the lessee of the Acquired Vehicles, and (D) the Lessor will be
entitled to all tax benefits ordinarily available to an owner of property
similar to the Acquired Vehicles for such tax purposes.
3. Operating Lease Commitment. (a) Upon the execution and delivery of
this Operating Lease, the Lessor shall, subject to the terms and conditions of
the Agreement, purchase or refinance (as applicable) from time to time on or
after the Lease Commencement Date and prior to the Lease Expiration Date, (i)
all Refinanced Vehicles to be leased under this Operating Lease and identified
in Refinanced Vehicle Schedules for a purchase price or refinancing payment
amount equal to the aggregate Net Book Value thereof, and (ii) all other
Acquired Vehicles identified in Vehicle Orders placed under this Operating Lease
by a Lessee for a purchase price equal to the Capitalized Cost thereof, and
simultaneously therewith, the Lessor shall under the Operating Lease enter into
operating leases with the applicable Lessee with respect to such Vehicles.
4. Reserved.
5. Maximum Vehicle Lease Term. The maximum Vehicle lease term of the
Operating Lease as it relates to each Acquired Vehicle leased hereunder shall be
from the Vehicle Lease Commencement Date to the date that is thirty-six (36)
months from the Vehicle Lease Commencement Date (provided, however, the maximum
Vehicle lease term of the Operating Lease as it relates to any Acquired Vehicle
titled in the State of Illinois shall be from the Vehicle Lease Commencement
Date to the date that is three hundred and sixty-four (364) days from the
Vehicle Lease Commencement Date; provided, further, that if on such three
hundred sixty-fourth (364th) day, the Vehicle lease term for any Acquired
Vehicle titled in the State of Illinois has not theretofore been terminated, and
the Vehicle lease term for such Acquired Vehicle has not previously been
terminated and renewed pursuant to this Paragraph 5, the Vehicle lease term as
it relates to such Acquired Vehicle shall be deemed to have been terminated and
renewed for an additional Vehicle lease term of up to three hundred sixty-four
(364) days). On the occurrence of such date for a Vehicle not previously
disposed of, the Lessee of such Vehicle shall, (a) on behalf of the Lessor,
promptly purchase or dispose of such Vehicle in accordance with the terms of
this Operating Lease and in accordance with any instructions of the Lessor for
such disposition,
63
64
which instructions shall not be inconsistent with the terms of this Operating
Lease, (b) in each case, provide that Disposition Proceeds be paid directly to
the Master Collateral Account for the benefit of the Trustee and (c) pay to the
Master Collateral Agent or the Trustee, in accordance with this Operating Lease,
any other amounts unpaid and owing from the Lessee under the Group I Lease in
respect of such Vehicle.
6. Lessee's Rights to Purchase Vehicles. Each Lessee will have the
option, exercisable with respect to any Acquired Vehicle leased by it hereunder
during the Vehicle Term with respect to such Acquired Vehicle, to purchase any
such Acquired Vehicles leased under this Operating Lease at the Vehicle Purchase
Price, in which event the Lessee will pay the Vehicle Purchase Price, plus all
accrued and unpaid Monthly Base Rent, Monthly Variable Rent and other unpaid
charges, payments and amounts due and payable with respect to such Vehicle
through the date of such purchase, to the Master Collateral Agent or deposit
such Vehicle Purchase Price directly into the Group I Collection Account on or
before the Payment Date next succeeding such purchase by the Lessee. In
addition, each Lessee will have the option, exercisable with respect to any
Manufacturer Receivable related to an Acquired Vehicle which was leased by such
Lessee under this Operating Lease, to purchase such Manufacturer Receivable for
a price equal to the amount due from the Manufacturer under such Manufacturer
Receivable, in which event the Lessee will pay such amount to the Master
Collateral Agent or deposit such amount into the Group I Collection Account on
or before the Payment Date next succeeding such purchase by the Lessee. Upon
receipt of such funds by the Master Collateral Agent or the deposit of such
funds in the Group I Collection Account, as the case may be, the Lessor, at the
request of such Lessee, shall cause title to any such Vehicle or Manufacturer
Receivable, as applicable, to be transferred to such Lessee, the lien of the
Master Collateral Agent in such Vehicle or Manufacturer Receivable, as
applicable, will automatically be released and, with respect to a purchase of a
Vehicle, the Servicer (or the Sub-Servicer thereof) shall cause the Master
Collateral Agent to cause the notation of its lien to be removed from the
Certificate of Title for such Vehicle, concurrently with or promptly after the
Vehicle Purchase Price for such Vehicle (and any unpaid Monthly Base Rent,
unpaid Monthly Variable Rent and other unpaid charges, payments and amounts) is
paid by the Lessee to the Master Collateral Agent or the Trustee, as applicable.
7. Vehicle Disposition. Subject to the Servicer's (and the applicable
Sub-Servicer's) right to redesignate Program Vehicles as Non-Program Vehicles
under Section 14 of the Base Lease, the Lessor and the Lessees agree that, with
respect to Acquired Vehicles leased hereunder that are Program Vehicles, the
applicable Lessee shall, pursuant to Section 24.5 of the Base Lease (unless not
required by such Section) deliver each Program Vehicle for sale at auction or
return each Program Vehicle to the related Manufacturer, in each case in
accordance with the applicable Manufacturer Program during the Repurchase Period
for such Vehicle; provided, however, if for any reason, the Lessee fails to
deliver such a Program Vehicle to the applicable Manufacturer for repurchase by
the Manufacturer or to an auction for sale, in each case in accordance with the
applicable Manufacturer Program, during the Repurchase Period, and such Lessee
does not or is not entitled to redesignate such Program Vehicle as a Non-Program
Vehicle
64
65
in accordance with Section 14 of the Base Lease, then such Lessee shall be
obligated to pay a Casualty Payment in respect of such Vehicle, as provided in
Section 7 of the Base Lease. Each Lessee shall, with respect to Acquired
Vehicles which are Program Vehicles leased by it hereunder, pay the Monthly
Variable Rent accrued with respect to such Vehicle through the Turnback Date,
plus the equivalent of the Monthly Base Rent for the remainder of the minimum
holding period under the applicable Manufacturer Program for Program Vehicles
returned before the expiration of such minimum holding period, regardless of
actual usage, unless such minimum holding period is waived by the Manufacturer
or such a Vehicle is a Casualty or has ceased to be an Eligible Vehicle, in
which case Section 7 of the Base Lease shall apply with respect to such Vehicle.
All Repurchase Prices and Disposition Proceeds due from the disposition of
Vehicles pursuant to this Section shall be due and payable to the Lessor and
shall be deposited to the Master Collateral Account. The Lessor and the Lessee
agree, with respect to Acquired Vehicles that are Non-Program Vehicles, that the
Lessee thereof shall use commercially reasonable efforts to dispose of each
Non-Program Vehicle leased by it hereunder (a) in a manner reasonably likely to
maximize proceeds from such disposition and consistent with industry practice,
(b) within forty-two (42) months after the date of the original dealer invoice
for such Vehicle sold as a new vehicle and (c) prior to the expiration of the
maximum Vehicle lease term for such Vehicle. All Disposition Proceeds due from
the disposition of Non- Program Vehicles pursuant to this Section shall be due
and payable to the Lessor and shall be deposited into the Master Collateral
Account.
8. Lessor's Right to Cause Vehicles to be Sold. Notwithstanding
anything to the contrary contained in this Operating Lease (subject to the
Servicer's (and the applicable Sub-Servicer's) right to redesignate Program
Vehicles as Non-Program Vehicles under Section 14 of the Base Lease), the Lessor
shall have the right, at any time after the date fourteen (14) days prior to the
expiration of the Repurchase Period for any Program Vehicle leased under this
Operating Lease, to require that the Lessee thereof deliver such Program Vehicle
to the Manufacturer for repurchase or, as applicable, to the designated auction
for sale, or exercise commercially reasonable efforts to arrange for the sale of
such Program Vehicle to a third party for a price greater than the Net Book
Value thereof, in which event such Lessee shall, prior to the expiration of such
Repurchase Period, deliver such Vehicle to its Manufacturer or the designated
auction or arrange for the sale of such Vehicle to a third party for a price
greater than the Net Book Value (or purchase the Vehicle itself from the Lessor
for the Vehicle Purchase Price). If a sale of such Program Vehicle to a third
party is arranged by such Lessee prior to the expiration of such Repurchase
Period, then the Lessee shall deliver such Program Vehicle to the purchaser
thereof, the Lien of the Master Collateral Agent in such Program Vehicle will
automatically be released upon the receipt of the purchase price by the Lessor
or the Trustee and the Servicer (or the Sub-Servicer thereof) shall cause the
Master Collateral Agent to cause the notation of its lien to be removed from the
Certificate of Title for such Program Vehicle, and such Lessee shall cause to be
delivered to the Lessor the funds paid for such Program Vehicle by the
purchaser. If the Lessor shall have directed such Lessee, and such Lessee shall
be unable, to arrange for a sale of such Program Vehicle at such a price prior
to the expiration of its Repurchase Period, then such Lessee shall, if a
Manufacturer Event of Default has not occurred with respect to the applicable
Manufacturer, cease attempting to arrange for such a sale and shall return such
65
66
Program Vehicle to such Manufacturer or tender such Program Vehicle for auction
or purchase such Vehicle as herein provided; provided, however, that if a
Manufacturer Event of Default has occurred and is continuing with respect to
such Manufacturer, such Program Vehicle may be sold or otherwise disposed of in
accordance with the requirements applicable to Non-Program Vehicles leased under
the Operating Lease, including Section 12.2(b) of the Base Lease. In no event
may any Program Vehicle be sold pursuant to this Section 8 (other than pursuant
to a Manufacturer Program) unless such sale complies with Section 12.2 of the
Base Lease.
9. Calculation of Rent. Rent shall be due and payable on a monthly
basis as set forth in this Section 9:
"Monthly Base Rent", with respect to each Payment Date and
each Acquired Vehicle leased under the Operating Lease on any day
during the Related Month, shall be the sum of all Depreciation Charges
that have accrued with respect to such Vehicle during the Related
Month.
"Monthly Variable Rent", with respect to each Payment Date and
each Acquired Vehicle leased under the Operating Lease on any day
during the Related Month, shall equal the sum of (I) the product of (a)
an amount equal to the sum, without double counting, of (i) the
interest accruing on all Group I Notes during the applicable interest
period relating to such Payment Date plus (ii) all Carrying Charges for
the Related Month, and (b) the quotient obtained by dividing the Net
Book Value as of the last day of the Related Month (or, if earlier, the
Disposition Date) of such Acquired Vehicle by the Net Book Value as of
the last day of the Related Month (or, if earlier, the Disposition
Date) of all Vehicles leased under the Group I Lease on any day during
the Related Month plus (II) if such Acquired Vehicle is a Non-Program
Vehicle, an amount equal to 1.5% of the Net Book Value of such Acquired
Vehicle as of the first day of the Related Month (or, if later, as of
the Vehicle Lease Commencement Date of such Vehicle) plus (III) an
amount equal to one twelfth of the Additional Spread Percentage of the
Net Book Value of such Acquired Vehicle as of the first day of the
Related Month (or, if later, as of the Vehicle Lease Commencement Date
of such Vehicle); provided, however, that if an Event of Bankruptcy
with respect to any Lessee or the Guarantor has occurred during or
prior to the Related Month, Monthly Variable Rent, with respect to each
Payment Date and each Acquired Vehicle leased under the Operating Lease
on any day during the Related Month, shall equal the sum of (I) the
product of (a) the aggregate amount of interest accruing during the
applicable interest period relating to such Payment Date with respect
to all Group I Notes that is allocated to the Acquired Vehicles (as
specified in the Monthly Noteholder's Statement with respect to each
Series of Group I Notes delivered with respect to the related
Determination Date and the Supplementary Noteholder's Statement with
respect to each Series of Group I Notes, if any, delivered with respect
to the related Payment Date) and (b) the quotient obtained by dividing
the Net Book Value as of the last day of the Related Month (or, if
earlier, the Disposition Date) of such Acquired Vehicle by the Net Book
Value as of the last day of the Related Month (or, if earlier, the
Disposition Date) of all Acquired Vehicles leased under the Operating
Lease on any day during the Related Month, plus (II) the product of (a)
the sum of all Carrying Charges for the Related Month and (b) the
quotient obtained by dividing the Net Book Value as of the last day of
the Related Month (or, if
66
67
earlier, the Disposition Date) of such Acquired Vehicle by the Net Book
Value as of the last day of the Related Month (or, if earlier, the
Disposition Date) of all Vehicles leased under the Group I Lease on any
day during the Related Month, plus (III) if such Acquired Vehicle is a
Non-Program Vehicle, an amount equal to 1.5% of the Net Book Value of
such Acquired Vehicle as of the first day of the Related Month (or, if
later, as of the Vehicle Lease Commencement Date of such Vehicle) plus
(IV) an amount equal to one twelfth of the Additional Spread Percentage
of the Net Book Value of such Acquired Vehicle as of the first day of
the Related Month (or, if later, as of the Vehicle Lease Commencement
Date of such Vehicle).
"Rent" means Monthly Base Rent plus Monthly Variable Rent.
10. Payment of Rent and Other Payments.
(a) Monthly Base Rent. On each Payment Date, after giving
credit for all prepayments on account thereof pursuant to (e) below,
each Lessee shall pay to the Lessor the Monthly Base Rents that have
accrued during the Related Month with respect to all Vehicles that were
leased by such Lessee under the Operating Lease on any day during the
Related Month;
(b) Monthly Variable Rent. On each Payment Date, after giving
credit for all prepayments on account thereof pursuant to (e) below and
to payments previously made pursuant to the next following sentence,
each Lessee shall pay to the Lessor the Monthly Variable Rents that
have accrued during the Related Month with respect to all Vehicles that
were leased by such Lessee under the Operating Lease on any day during
the Related Month. On each other date on which interest is due and
payable under the terms of a Group I Supplement, each Lessee shall pay
to the Lessor, as Monthly Variable Rent, an amount equal to the product
of (x) the quotient obtained by dividing the aggregate Net Book Value
of all Vehicles leased by such Lessee under the Operating Lease as of
the last day of the calendar month preceding the month in which such
date occurs by the aggregate Net Book Value of all Vehicles leased
under the Operating Lease and the Financing Lease as of the last day of
the calendar month preceding the month in which such date occurs and
(y) the amount of interest due and payable on such date in respect of
the Group I Notes.
(c) Termination Payments and Casualty Payments. On each
Payment Date, after giving credit for all prepayments on account
thereof pursuant to (e) below, each Lessee shall pay to the Lessor all
Termination Payments and Casualty Payments payable by such Lessee as
provided in Section 5.4 of the Base Lease; and
67
68
(d) Certain Other Payments. After giving credit for all
prepayments on account thereof pursuant to (e) below, each Lessee shall
direct all Repurchase Prices and Disposition Proceeds payable in
respect of Acquired Vehicles to be deposited directly to the Master
Collateral Account for the benefit of the Trustee. The Servicer and
each Lessee agree that in the event that the Servicer or any such
Lessee shall receive directly any such payment, including cash,
securities, obligations or other property, the Servicer or Lessee, as
the case may be, shall accept the same as the agent of the Master
Collateral Agent and shall hold the same in trust on behalf of and for
the benefit of the Master Collateral Agent, and shall deposit the same,
by the date required for such deposit in Section 24.10 of the Base
Lease, into the Master Collateral Account in the same form received,
with the endorsement of the Servicer or Lessee, as the case may be,
when necessary or appropriate.
(e) Prepayments. On any date, a Lessee may prepay to the
Lessor, in whole or in part, the Rent or other payments accrued during
the Related Month with respect to any Acquired Vehicles leased by such
Lessee.
11. Net Lease. THE OPERATING LEASE SHALL BE A NET LEASE, AND EACH
LESSEE'S OBLIGATION TO PAY ALL RENT AND OTHER SUMS HEREUNDER SHALL BE ABSOLUTE
AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT OR REDUCTION FOR
ANY REASON WHATSOEVER. The obligations and liabilities of each Lessee hereunder
shall in no way be released, discharged or otherwise affected
(except as may be expressly provided herein including, without limitation, the
right of such Lessee to reject Vehicles pursuant to Section 2.2 of the Base
Lease) for any reason, including without limitation: (i) any defect in the
condition, merchantability, quality or fitness for use of the Vehicles or any
part thereof; (ii) any damage to, removal, abandonment, salvage, loss, scrapping
or destruction of or any requisition or taking of the Vehicles or any part
thereof; (iii) any restriction, prevention or curtailment of or interference
with any use of the Vehicles or any part thereof; (iv) any defect in, or any
Lien on, title to the Vehicles or any part thereof; (v) any change, waiver,
extension, indulgence or other action or omission in respect of any obligation
or liability of any Lessee or the Lessor; (vi) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to any Lessee, the Lessor or any other Person, or any action
taken with respect to the Operating Lease by any trustee or receiver of any
Person mentioned above, or by any court; (vii) any claim that any Lessee has or
might have against any Person, including without limitation the Lessor; (viii)
any failure on the part of the Lessor to perform or comply with any of the terms
hereof or of any other agreement; (ix) any invalidity or unenforceability or
disaffirmance of the Operating Lease or any provision hereof or any of the other
Related Documents or any provision thereof, in each case whether against or by
any Lessee or otherwise; (x) any insurance premiums payable by any Lessee with
respect to the Vehicles; or (xi) any other occurrence whatsoever, whether
similar or dissimilar to the foregoing, whether or not any Lessee shall have
notice or knowledge of any of the foregoing and whether or not foreseen or
foreseeable, in each case subject to applicable law.
68
69
The Operating Lease shall be noncancelable by the Lessees and, except as
expressly provided herein, each Lessee, to the extent permitted by law, waives
all rights now or hereafter conferred by statute or otherwise to quit, terminate
or surrender the Operating Lease, or to any diminution or reduction of Rent
payable by such Lessee hereunder. All payments by a Lessee made hereunder shall
be final (except to the extent of adjustments provided for herein), absent
manifest error and, except as otherwise provided herein, no Lessee shall seek to
recover any such payment or any part thereof for any reason whatsoever, absent
manifest error. If for any reason whatsoever the Operating Lease shall be
terminated in whole or in part by operation of law or otherwise except as
expressly provided herein, each Lessee shall nonetheless pay an amount equal to
each Rent payment at the time and in the manner that such payment would have
become due and payable under the terms of the Operating Lease as if it had not
been terminated in whole or in part. All covenants and agreements of any Lessee
herein shall be performed at its cost, expense and risk unless expressly
otherwise stated.
12. Liens. Except for Permitted Liens, each Lessee shall keep all
Vehicles leased by it free of all Liens arising during the Term of this
Operating Lease. Upon the Vehicle Lease Expiration Date for each Vehicle leased
hereunder, the Lessor may, in its discretion, remove any such Lien and any sum
of money that may be paid by the Lessor in release or discharge thereof,
including attorneys' fees and costs, will be paid by the applicable Lessee upon
demand by the Lessor. The Lessor may grant security interests in the Vehicles
and the other Master Collateral to the Master Collateral Agent, and in this
Operating Lease and the other Collateral to the Trustee, in accordance with the
Master Collateral Agency Agreement and the Indenture, and each Group I
Noteholder may grant security interests in its Group I Notes, the related Series
Supplements and other Collateral to certain of its creditors and their
respective designees, without consent of any Lessee. Each Lessee acknowledges
that the granting of Liens and the taking of other actions pursuant to the
Indenture and the Related Documents does not interfere with the rights of the
Lessees under the Operating Lease.
13. Non-Disturbance. So long as each Lessee satisfies its obligations
hereunder, its quiet enjoyment, possession and use of the Vehicles will not be
disturbed during the Term of this Operating Lease subject, however, to Section 8
of this Annex A and Section 17 of the Base Lease and except that the Lessor, the
Master Collateral Agent and the Trustee each retains the right, but not the
duty, to inspect the Vehicles without disturbing the ordinary conduct of such
Lessee's business in accordance with Section 24.2 of the Base Lease.
14. Certain Risks of Loss Borne by Lessees. Upon delivery of each
Vehicle to the applicable Lessee, as between the Lessor and such Lessee, such
Lessee assumes and bears the risk of loss, damage, theft, taking, destruction,
attachment, seizure, confiscation or requisition and all other risks and
liabilities with respect to such Vehicle, however caused or occasioned,
including personal injury or death and property damage, arising with respect to
any Vehicle or the manufacture, purchase, acceptance, rejection, delivery,
leasing, possession, use, inspection, registration, operation, condition,
maintenance, repair or storage of such Vehicle, howsoever arising.
69
70
15. Title. This is an agreement to lease only, and title to the
Acquired Vehicles will at all times remain in the Lessor's name. No Lessee will
have any rights or interest in such Acquired Vehicles whatsoever other than the
rights of possession and use as provided by this Operating Lease. In addition,
each Lessee, by its execution hereof, acknowledges and agrees that (i) the
Lessor is the sole owner and holder of all right, title and interest in and to
the Manufacturer Programs as they relate to the Acquired Vehicles leased
hereunder and (ii) the Lessees have no right, title or interest in any
Manufacturer Program as it relates to any Acquired Vehicle leased hereunder. To
confirm the foregoing, each Lessee, by its execution hereof, hereby assigns and
transfers to the Lessor any rights that such Lessee may have in respect to any
Manufacturer Programs as they relate to the Acquired Vehicles leased hereunder.
* * *
70
71
ANNEX B
TO THE
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
Dated as of February 26, 1999
among
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as Lessor,
NATIONAL CAR RENTAL SYSTEM, INC.,
as Lessee,
and those subsidiaries
of Republic Industries, Inc.
from time to time
becoming Lessees hereunder
and
REPUBLIC INDUSTRIES, INC.,
as Guarantor and Servicer
71
72
1. Scope of Annex. This Annex B shall apply only to the acquisition or
financing, leasing and servicing of the Financed Vehicles by the Lessees
pursuant to the Base Lease, as supplemented by this Lease Annex (collectively,
the "Financing Lease").
2. General Agreement. (a) The Lessor and each Lessee intend that for
all purposes (including, but not limited to, financial accounting, regulatory
accounting, federal income tax purposes and all applicable state and local
income, franchise, sales, use and excise tax purposes and for purposes of any
foreign corporation, business registration or doing business statutes), (A) the
Financing Lease with regard to Financed Vehicles and Eligible Receivables will
be treated as a financing arrangement, (B) the Lessor will be treated as a
lender making loans to the Lessees in amounts equal to the Capitalized Costs or,
in the case of Refinanced Vehicles, the Net Book Values of Financed Vehicles and
the face amount of Eligible Receivables, which loans are secured by the Financed
Vehicles and Eligible Receivables, (C) the Lessees will be treated as making
payments of principal and interest (denominated as Monthly Base Rent, Additional
Base Rent and Monthly Supplemental Payments, and Monthly Finance Rent,
respectively) to the Lessor and (D) each Lessee will be treated as the owner of
the Financed Vehicles leased by it and the Eligible Receivables acquired by it
and will be entitled to all tax benefits ordinarily available to an owner of
property similar to the Financed Vehicles and Eligible Receivables for such tax
purposes.
(b) It is the intention of the parties that the Financing Lease
together with the Master Collateral Agency Agreement shall constitute a security
agreement under applicable law.
3. Financing Lease Commitment. Subject to the terms and conditions of
the Financing Lease, upon execution and delivery of the Financing Lease, the
Lessor shall from time to time on or after the Lease Commencement Date and prior
to the Lease Expiration Date (i) refinance all Refinanced Vehicles and Eligible
Receivables to be leased under this Financing Lease and identified in Refinanced
Vehicle Schedules for a refinancing payment amount equal to the sum of (x) the
aggregate Net Book Value of such Refinanced Vehicles and (y) the aggregate face
amount of such Eligible Receivables, and (ii) finance the purchase of all other
Financed Vehicles identified in Vehicle Orders placed by each Lessee for a
purchase price equal to the Capitalized Cost thereof, and in each case
simultaneously therewith enter into the Financing Lease with the applicable
Lessee with respect to such Refinanced Vehicles and other Financed Vehicles, as
the case may be.
4. Reserved.
5. Maximum Vehicle Lease Term. The maximum Vehicle lease term of the
Financing Lease as it relates to each Financed Vehicle leased hereunder shall be
from the Vehicle Lease Commencement Date to the date that is sixty (60) months
from the Vehicle Lease Commencement Date. On the occurrence of such date, the
Lessee thereof shall pay to the Master Collateral Agent or the Trustee, in
accordance with this Financing Lease, any amounts unpaid and owing under the
Financing Lease in respect of such Vehicle.
72
73
6. Calculation of Rent and Monthly Supplemental Payment. Rent and the
Monthly Supplemental Payment shall be due and payable on a monthly basis as set
forth in this Section 6:
"Additional Base Rent" with respect to the Non-Program
Vehicles leased under the Financing Lease, with respect to each Payment
Date, shall equal the amount, if any, by which (a) 100% of the
aggregate Net Book Value of such Non-Program Vehicles leased under the
Financing Lease on the last day of the Related Month exceeds (b) the
three (3) month rolling average of the Fair Market Value of such
Non-Program Vehicles for the preceding three (3) calendar months.
"Monthly Base Rent", with respect to each Payment Date and
each Financed Vehicle leased under the Financing Lease on any day
during the Related Month, shall be the sum of all Depreciation Charges
that have accrued with respect to such Vehicle during the Related
Month.
"Monthly Finance Rent", with respect to each Payment Date and
each Financed Vehicle leased under the Financing Lease on any day
during the Related Month, shall equal the sum of (I) the product of (a)
an amount equal to the sum, without double counting, of (i) the
interest accruing on all Group I Notes during the applicable interest
period relating to such Payment Date plus (ii) all Carrying Charges for
the Related Month, and (b) the quotient obtained by dividing the Net
Book Value as of the last day of the Related Month (or, if earlier, the
Disposition Date) of such Financed Vehicle by the Net Book Value as of
the last day of the Related Month (or, if earlier, the Disposition
Date) of all Vehicles leased under the Group I Lease on any day during
the Related Month plus (II) an amount equal to one twelfth of the
Additional Spread Percentage of the Net Book Value of such Financed
Vehicle as of the first day of the Related Month (or, if later, as of
the Vehicle Lease Commencement Date of such Vehicle); provided,
however, that if an Event of Bankruptcy with respect to any Lessee or
the Guarantor has occurred during or prior to the Related Month,
Monthly Finance Rent, with respect to each Payment Date and each
Financed Vehicle leased under the Financing Lease on any day during the
Related Month, shall equal the sum of (I) the product of (a) the
aggregate amount of interest accruing during the applicable interest
period relating to such Payment Date with respect to all Group I Notes
that is allocated to the Financed Vehicles (as specified in the Monthly
Noteholder's Statement with respect to each Series of Group I Notes
delivered with respect to the related Determination Date and the
Supplementary Monthly Noteholder's Statement with respect to each
Series of Group I Notes, if any, delivered with respect to the related
Payment Date), and (b) the quotient obtained by dividing the Net Book
Value as of the last day of the Related Month (or, if earlier, the
Disposition Date) of such Financed Vehicle by the Net Book Value as of
the last day of the Related Month (or, if earlier, the Disposition
Date) of all Financed Vehicles leased under the Financing Lease on any
day during the Related Month, plus (II) the product of (a) the sum of
all Carrying Charges for the Related Month and (b) the quotient
obtained by dividing the Net Book Value as of the last day of the
Related Month (or, if earlier, the
73
74
Disposition Date) of such Financed Vehicle by the Net Book Value as of
the last day of the Related Month (or, if earlier, the Disposition
Date) of all Vehicles leased under the Group I Lease on any day during
the Related Month, plus (III) an amount equal to one twelfth of the
Additional Spread Percentage of the Net Book Value of such Financed
Vehicle as of the first day of the Related Month (or if later, as of
the Vehicle Lease Commencement Date of such Vehicle).
"Monthly Supplemental Payment", with respect to each Payment
Date and all Vehicles that were leased under the Financing Lease on any
day during the Related Month, shall be an amount equal to the sum of
(i) the aggregate Termination Values (each as of the first date on
which such Financed Vehicle is no longer an Eligible Vehicle or suffers
a Casualty, as applicable) of all the Financed Vehicles financed under
this Financing Lease at any time during such Related Month that,
without double counting, while so financed either are no longer
Eligible Vehicles or have suffered a Casualty during the Related Month,
plus (ii) the aggregate Termination Values (each as of the date on
which such Financed Vehicle is sold or returned by the Lessee thereof)
of all the Financed Vehicles financed under the Financing Lease at any
time during such Related Month that, without double counting, are sold
or returned by the Lessees during the Related Month (it being
understood that each Lessee has agreed to sell Financed Vehicles only
in a manner consistent with the provisions hereof and of the Related
Documents) to any Person (including any Lessee) other than to a
Manufacturer pursuant to such Manufacturer's Manufacturer Program or to
a third party pursuant to an auction conducted through a Manufacturer's
Manufacturer Program plus (iii) the aggregate Termination Values (each
as of the applicable Disposition Date) of all the Financed Vehicles
financed under this Financing Lease that while so financed were
returned to (a) a Manufacturer whose Manufacturer Program is a
Guaranteed Depreciation Program by the Lessee thereof with respect to
which, during the Related Month, (x) the Repurchase Price has been
deposited in the Master Collateral Account or, if for any reason the
Repurchase Price has been received directly by a Lessee, and such
Repurchase Price has not theretofore been deposited in the Master
Collateral Account, the two Business Day period referred to in Section
24.10 of the Base Lease has expired during the Related Month or (y) a
Manufacturer Event of Default has occurred or (z) the one hundredth
(100th) day after the Due Date with respect thereto has occurred and
the Repurchase Price has not been received or (b) any other applicable
Manufacturer by the Lessee thereof with respect to which, during the
Related Month, (1) such Repurchase Price has been deposited in the
Master Collateral Account during the Related Month or, if for any
reason the Repurchase Price has been received directly by a Lessee and
such Repurchase Price has not theretofore been deposited in the Master
Collateral Account, the two Business Day period referred to in Section
24.10 of the Base Lease has expired during the Related Month or (2) a
Manufacturer Event of Default has occurred or (3) the one hundredth
(100th) day after the Due Date with respect thereto has occurred and
the Repurchase Price has not been received, plus (iv) the aggregate
face amount of all Eligible Receivables financed under this Financing
Lease with respect to which, during the Related Month, (a)
74
75
payment from the obligor thereon has been deposited in the Master
Collateral Account during the Related Month or, if for any reason such
payment has been received directly by a Lessee and such payment has not
theretofore been deposited in the Master Collateral Account, the two
Business Day period referred to in Section 24.10 of the Base Lease has
expired during the Related Month or (b) a Manufacturer Event of Default
has occurred with respect to the obligor or (c) the one hundredth
(100th) day after the Due Date with respect thereto has occurred and
the payment due from the obligor thereon has not been received, minus
(v) any amounts received by the Lessor or the Trustee, or deposited
into the Group I Collection Account, during the Related Month
representing (a) Repurchase Prices for repurchases of Financed Vehicles
or (b) the sales proceeds (including amounts paid to a Lessee by a
Manufacturer as a result of the Lessee's sale of such Vehicle outside
such Manufacturer's Manufacturer Program) for sales of Financed
Vehicles financed at the time of such sale under this Financing Lease
to a third party other than (1) to a Manufacturer or (2) through an
auction dealer of a Manufacturer whose Manufacturer Program is a
"guaranteed depreciation program" or (c) payments from obligors on
Eligible Receivables financed under the Financing Lease.
"Rent" means Monthly Base Rent plus Monthly Finance Rent plus
Additional Base Rent plus Monthly Supplemental Payments.
7. Payment of Rent and Other Payments. (a) On each Payment Date:
(i) Monthly Base Rent. After giving credit for all prepayments
on account thereof pursuant to (c) below, each Lessee shall pay to the
Lessor the Monthly Base Rents that have accrued during the Related
Month with respect to all Vehicles that were leased by such Lessee
under the Financing Lease on any day during the Related Month.
(ii) Monthly Finance Rent. After giving credit for all
prepayments on account thereof pursuant to (c) below and to any
payments previously made pursuant to the next following sentence, each
Lessee shall pay to the Lessor the Monthly Finance Rents that have
accrued during the Related Month with respect to all Vehicles that were
leased by such Lessee under the Financing Lease on any day during the
Related Month. On each other date on which interest is due and payable
under the terms of a Group I Supplement, each Lessee shall pay to the
Lessor, as Monthly Finance Rent, an amount equal to the product of (x)
the quotient obtained by dividing the aggregate Net Book Value of all
Vehicles leased by such Lessee under the Financing Lease as of the last
day of the calendar month preceding the month in which such date occurs
by the aggregate Net Book Value of all Vehicles leased under the
Operating Lease and the Financing Lease as of the last day of the
calendar month preceding the month in which such date occurs and (y)
the amount of interest due and payable on such date in respect of the
Group I Notes.
(iii) Additional Base Rent. After giving credit for all
prepayments on account thereof pursuant to (c) below, each Lessee shall
pay to the Lessor the monthly Additional
75
76
Base Rent that has accrued during the Related Month with respect to the
Non-Program Vehicles leased under the Financing Lease by such Lessee;
and
(iv) Monthly Supplemental Payment. After giving credit for all
prepayments on account thereof pursuant to (c) below, each Lessee shall
pay to the Lessor the portion of the Monthly Supplemental Payment that
has accrued during the Related Month with respect to the Financed
Vehicles and Eligible Receivables previously leased or financed by such
Lessee under this Financing Lease.
(b) On the expiration of the term of the Financing Lease with respect
to a Financed Vehicle, any remaining Base Amount, plus all other amounts payable
by the Lessee thereof under the Financing Lease with respect to such Vehicle,
shall be immediately due and payable.
(c) On any date, a Lessee may prepay to the Lessor, in whole or in
part, the Rent or other payments accrued during the Related Month with respect
to any Financed Vehicles leased by such Lessee. In addition, a Lessee may from
time to time prepay the Base Amount allocable to any Financed Vehicle, in whole
or in part, on any date, provided that such Lessee shall give the Lessor and the
Trustee not less than three (3) Business Days' prior notice of any such
prepayment, specifying the date and amount of such prepayment, and the Financed
Vehicle or Vehicles to which such prepayment relates.
8. Risk of Loss Borne by Lessees. Upon delivery of each Vehicle to the
applicable Lessee, as between the Lessor and such Lessee, such Lessee assumes
and bears the risk of loss, damage, theft, taking, destruction, attachment,
seizure, confiscation or requisition with respect to such Vehicle, however
caused or occasioned, and all other risks and liabilities, including personal
injury or death and property damage, arising with respect to any Vehicle or the
manufacture, purchase, acceptance, rejection, ownership, delivery, leasing,
possession, use, inspection, registration, operation, condition, repair,
storage, sale, return or other disposition of such Vehicle, howsoever arising.
9. Mandatory Repurchase of Company Vehicles. Prior to the Vehicle Lease
Expiration Date with respect to each Company Vehicle (other than a Vehicle Lease
Expiration Date arising in connection with the purchase of such Company Vehicle
pursuant to this Section 9), the Lessee of a Company Vehicle shall purchase such
Company Vehicle (including any such Vehicle which has suffered a Casualty or has
ceased to be an Eligible Vehicle) at a purchase price equal to the Net Book
Value of such Vehicle calculated as of the date of purchase (or, in the case of
a Casualty or a Vehicle that has ceased to be an Eligible Vehicle, at a purchase
price equal to the Monthly Supplemental Payments accruing in respect of such
Vehicle during the Related Month in which such Vehicle suffered a Casualty or
ceased to be an Eligible Vehicle), which shall be payable to the Master
Collateral Agent by deposit to the Master Collateral Account (together with all
accrued and unpaid Rent and other charges and payments due and payable on such
Payment Date with respect to such Company Vehicle through the date of such
purchase, each of which shall be payable in accordance with the Financing Lease)
on or prior to the Payment Date next succeeding such purchase by such Lessee.
Upon receipt of such purchase price by the
76
77
Lessor or the Master Collateral Agent, the Lessor shall, at the request of such
Lessee, cause title to such Company Vehicle to be transferred to such Lessee,
the lien of the Master Collateral Agent in such Company Vehicle will
automatically be released and the Servicer shall cause the Master Collateral
Agent to cause the notation of its lien to be removed from the Certificate of
Title for such Vehicle, concurrently with or promptly after such purchase price
for such Company Vehicle (and any such unpaid Rent, charges and payments) is
paid by such Lessee to the Master Collateral Agent or the Trustee, as
applicable. Notwithstanding anything to the contrary in this Financing Lease, no
Company Vehicle may be sold or otherwise disposed of (other than pursuant to
Section 17.3 of the Base Lease), including at auction or by return to its
Manufacturer pursuant to a Manufacturer Program, prior to its purchase by the
Lessee thereof pursuant to and in accordance with this Section 9.
10. Net Lease. THE FINANCING LEASE SHALL BE A NET LEASE, AND EACH
LESSEE'S OBLIGATION TO PAY ALL RENT AND OTHER SUMS HEREUNDER SHALL BE ABSOLUTE
AND UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT OR REDUCTION FOR
ANY REASON WHATSOEVER. The obligations and liabilities of each Lessee hereunder
shall in no way be released, discharged or otherwise affected (except as may be
expressly provided herein including, without limitation, the right of such
Lessee to reject Vehicles pursuant to Section 2.2 of the Base Lease) for any
reason, including without limitation: (i) any defect in the condition,
merchantability, quality or fitness for use of the Vehicles or any part thereof;
(ii) any damage to, removal, abandonment, salvage, loss, scrapping or
destruction of or any requisition or taking of the Vehicles or any part thereof;
(iii) any restriction, prevention or curtailment of or interference with any use
of the Vehicles or any part thereof; (iv) any defect in, or any Lien on, title
to the Vehicles or any part thereof; (v) any change, waiver, extension,
indulgence or other action or omission in respect of any obligation or liability
of any Lessee or the Lessor; (vi) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to any Lessee, the Lessor or any other Person, or any action taken with
respect to the Financing Lease by any trustee or receiver of any Person
mentioned above, or by any court; (vii) any claim that any Lessee has or might
have against any Person, including without limitation the Lessor; (viii) any
failure on the part of the Lessor to perform or comply with any of the terms
hereof or of any other agreement; (ix) any invalidity or unenforceability or
disaffirmance of the Financing Lease or any provision hereof or any of the other
Related Documents or any provision thereof, in each case whether against or by
any Lessee or otherwise; (x) any insurance premiums payable by any Lessee with
respect to the Vehicles; or (xi) any other occurrence whatsoever, whether
similar or dissimilar to the foregoing, whether or not any Lessee shall have
notice or knowledge of any of the foregoing and whether or not foreseen or
foreseeable, in each case subject to applicable law. The Financing Lease shall
be noncancelable by the Lessees and, except as expressly provided herein, each
Lessee, to the extent permitted by law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender the Financing
Lease, or to any diminution or reduction of Rent payable by such Lessee
hereunder. All payments by a Lessee made hereunder shall be final (except to the
extent of adjustments provided for herein), absent manifest error and, except as
otherwise provided herein, no Lessee shall seek to recover any such payment
77
78
or any part thereof for any reason whatsoever, absent manifest error. If for any
reason whatsoever the Financing Lease shall be terminated in whole or in part by
operation of law or otherwise except as expressly provided herein, each Lessee
shall nonetheless pay an amount equal to each Rent payment at the time and in
the manner that such payment would have become due and payable under the terms
of the Financing Lease as if it had not been terminated in whole or in part. All
covenants and agreements of any Lessee herein shall be performed at its cost,
expense and risk unless expressly otherwise stated.
11. Non-Disturbance. Subject to Section 17 of the Base Lease, so long
as each Lessee satisfies its obligations hereunder, its quiet enjoyment,
possession and use of the Financed Vehicles will not be disturbed during the
Term of this Financing Lease, except that the Lessor, the Master Collateral
Agent, and the Trustee each retains the right, but not the duty, to inspect the
Vehicles without disturbing the ordinary conduct of such Lessee's business in
accordance with Section 24.2 of the Base Lease.
12. Liens. Except for Permitted Liens, each Lessee shall keep all
Vehicles leased by it free of all Liens arising during the Term of this
Financing Lease. The Lessor may grant security interests in the Master
Collateral to the Master Collateral Agent, and in this Financing Lease and the
other Collateral to the Trustee, in accordance with the Master Collateral Agency
Agreement and the Indenture, and each Group I Noteholder may grant security
interests in its Group I Notes, the related Series Supplements and other
Collateral to certain of its creditors and their respective designees without
consent of any Lessee. Each Lessee acknowledges that the granting of Liens and
the taking of other actions pursuant to the Indenture and the Related Documents
does not interfere with the rights of the Lessees under the Financing Lease.
13. Lessee's Rights to Pay Off Financing of Manufacturer Receivables.
In addition, each Lessee will have the option, exercisable with respect to any
Manufacturer Receivable related to a Financed Vehicle which was leased by such
Lessee under this Financing Lease, to repay or refinance such Manufacturer
Receivable upon payment of an amount equal to the amount due from the
Manufacturer under such Manufacturer Receivable, in which event such Lessee will
pay such amount to the Master Collateral Agent on or before the Payment Date
next succeeding such repayment by such Lessee. Upon receipt of such funds by the
Master Collateral Agent, the Lessor, at the request of such Lessee, shall cause
title to any such Manufacturer Receivable to be transferred to such Lessee, and
the lien of the Master Collateral Agent in such Manufacturer Receivable will
automatically be released concurrently with or promptly after the payment for
such Manufacturer Receivable (and any unpaid Monthly Base Rent, unpaid Monthly
Variable Rent and other unpaid charges, payments and amounts) is made by the
Lessee to the Master Collateral Agent or the Trustee, as applicable.
* * *
78
79
Lessee for all purposes under the Group I Lease. By its execution and delivery
of this Joinder, Lessor acknowledges that the Joining Party is a Lessee for all
purposes under the Group I Lease.
IN WITNESS WHEREOF, the Joining Party has caused this Joinder to be
duly executed as of the day and year first above written.
[Name of Joining Party]
By: /s/
----------------------------
Name:
Title:
Accepted and Acknowledged by:
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL FINANCING
CORPORATION, its general partner
By: /s/
-------------------------------------
Name:
Title:
REPUBLIC INDUSTRIES, INC.
as Guarantor
By: /s/
-------------------------------------
Name:
Title:
-86-
80
TABLE OF CONTENTS
Page
----
SECTION 1. CERTAIN DEFINITIONS................................................................................... 1
Section 1.1. Certain Definitions................................................................. 1
Section 1.2. Accounting and Financial Determinations............................................. 2
Section 1.3. Cross References; Headings.......................................................... 2
Section 1.4. Interpretation...................................................................... 2
SECTION 2. GENERAL AGREEMENT..................................................................................... 3
Section 2.1. Leasing of Vehicles................................................................. 4
Section 2.2. Right of Lessee to Act as Lessor's Agent; Titling of Vehicles in
the Name of Nominees................................................................ 5
Section 2.3. Payment of Purchase Price by Lessor; Certain Additional
Payments to the Servicer............................................................ 6
Section 2.4. Non-liability of Lessor............................................................. 7
SECTION 3. TERM.................................................................................................. 8
Section 3.1. Vehicle Lease Commencement Date..................................................... 8
Section 3.2. Lease Commencement Date............................................................. 8
SECTION 4. CONDITIONS PRECEDENT.................................................................................. 8
Section 4.1. Conditions to Effectiveness of this Lease........................................... 8
Section 4.2. Conditions to Each Lease of Vehicles................................................ 11
Section 4.3. Additional Conditions to Leases of Refinanced Vehicles and
Eligible Receivables................................................................ 12
SECTION 5. RENT AND CHARGES...................................................................................... 13
Section 5.1. Payment of Rent..................................................................... 13
Section 5.2. Reserved............................................................................ 13
Section 5.3. Payment of Monthly Supplemental Payments............................................ 13
Section 5.4. Payment of Termination Payments and Casualty Payments............................... 14
Section 5.5. Late Payment........................................................................ 14
Section 5.6. Making of Payments.................................................................. 14
SECTION 6. RESERVED.............................................................................................. 14
SECTION 7. CASUALTY AND INELIGIBLE VEHICLES...................................................................... 14
SECTION 8. VEHICLE USE........................................................................................... 15
SECTION 9. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND FINES......................................... 16
-87-
81
TABLE OF CONTENTS
(continued)
Page
----
SECTION 10. MAINTENANCE AND REPAIRS.............................................................................. 17
SECTION 11. MANUFACTURER WARRANTIES.............................................................................. 17
SECTION 12. VEHICLE RETURN GUIDELINES............................................................................ 18
Section 12.1. Vehicle Turn-in Condition........................................................... 18
Section 12.2. Disposition Procedure............................................................... 18
Section 12.3. Termination Payments for Acquired Vehicles.......................................... 18
SECTION 13. [RESERVED]........................................................................................... 20
SECTION 14. REDESIGNATION OF VEHICLES............................................................................ 20
SECTION 15. GENERAL INDEMNITY AND PAYMENT OF EXPENSES............................................................ 20
Section 15.1. Indemnity and Payment of Expenses by the Lessees.................................... 20
Section 15.2. Reimbursement Obligation by the Lessees............................................. 22
Section 15.3. Notice to Lessee of Claims.......................................................... 22
Section 15.4. Defense of Claims................................................................... 22
SECTION 16. SUCCESSORS AND ASSIGNS; ASSIGNMENT................................................................... 23
SECTION 17. DEFAULT AND REMEDIES THEREFOR........................................................................ 24
Section 17.1. Events of Default................................................................... 24
Section 17.2. Effect of Lease Event of Default; Limited Liquidation Event of
Default or Liquidation Event of Default............................................. 25
Section 17.3. Rights of Lessor and Trustee Upon Lease Event of Default, Liquidation Event of
Default or Limited Liquidation Event of Default..................................... 26
Section 17.4. Measure of Damages.................................................................. 28
Section 17.5. Application of Proceeds............................................................. 29
SECTION 18. MANUFACTURER EVENTS OF DEFAULT....................................................................... 29
SECTION 19. CERTIFICATION OF TRADE OR BUSINESS USE............................................................... 30
SECTION 20. SURVIVAL............................................................................................. 30
SECTION 21. RIGHTS OF LESSOR PLEDGED TO MASTER COLLATERAL AGENT AND TRUSTEE...................................... 30
-88-
82
TABLE OF CONTENTS
(continued)
Page
----
SECTION 22. MODIFICATION AND SEVERABILITY........................................................................ 32
SECTION 23. CERTAIN REPRESENTATIONS AND WARRANTIES............................................................... 32
Section 23.1. Organization; Power; Qualification.................................................. 32
Section 23.2. Authorization; Enforceability....................................................... 33
Section 23.3. Compliance.......................................................................... 33
Section 23.4. Financial Information; Financial Condition.......................................... 33
Section 23.5. Litigation.......................................................................... 34
Section 23.6. Liens............................................................................... 34
Section 23.7. Employee Benefit Plans.............................................................. 34
Section 23.8. Securities Laws..................................................................... 34
Section 23.9. Regulations T, U and X.............................................................. 34
Section 23.10. Business Locations; Trade Names..................................................... 35
Section 23.11. Taxes............................................................................... 35
Section 23.12. Governmental Authorizations......................................................... 35
Section 23.13. Eligible Vehicles; Fleet Sharing Parties............................................ 35
Section 23.14. Accuracy of Information............................................................. 35
Section 23.15. Solvency............................................................................ 36
Section 23.16. Ownership........................................................................... 36
Section 23.17. Necessary Actions................................................................... 36
Section 23.18. Supplemental Documents True and Correct............................................. 36
Section 23.19. Year 2000........................................................................... 36
SECTION 24. CERTAIN AFFIRMATIVE COVENANTS........................................................................ 36
Section 24.1. Corporate Existence; Foreign Qualification.......................................... 37
Section 24.2. Books, Records and Inspections...................................................... 37
Section 24.3. Accounting Methods; Financial Records............................................... 38
Section 24.4. Insurance........................................................................... 38
Section 24.5. Manufacturer Programs............................................................... 38
Section 24.6. Reporting Requirements.............................................................. 39
Section 24.7. Taxes and Liabilities............................................................... 41
Section 24.8. Maintenance of the Vehicles......................................................... 41
Section 24.9. Maintenance of Separate Existence................................................... 42
Section 24.10. Repurchase Payments; Sales Proceeds................................................. 42
Section 24.11. Certificates of Title: Verification of Titles....................................... 42
Section 24.12. Master Collateral Agency Agreement.................................................. 43
Section 24.13. Compliance with Laws................................................................ 43
-89-
83
TABLE OF CONTENTS
(continued)
Page
----
Section 24.14. Delivery of Information............................................................. 43
Section 24.15. Deliveries: Further Assurances...................................................... 44
Section 24.16. Additional Actions.................................................................. 44
Section 24.17. Fleet Sharing Agreements............................................................ 44
Section 24.18. Minimum Depreciation Rate........................................................... 45
SECTION 25. CERTAIN NEGATIVE COVENANTS........................................................................... 45
Section 25.1. Mergers, Consolidations............................................................. 45
Section 25.2. Regulations T, U and X.............................................................. 45
Section 25.3. Liens............................................................................... 45
Section 25.4. Use of Vehicles..................................................................... 45
Section 25.5. Change of Location or Name.......................................................... 45
SECTION 26. SERVICING COMPENSATION; EXPENSES OF SERVICER; DELEGATION OF SERVICING DUTIES......................... 46
Section 26.1............................................................................................ 46
Section 26.2............................................................................................ 46
Section 26.3............................................................................................ 46
SECTION 27. RELEASE OF COLLATERAL................................................................................ 46
SECTION 28. GUARANTY............................................................................................. 48
Section 28.1. Guaranty............................................................................ 48
Section 28.2. Scope of Guarantor's Liability...................................................... 48
Section 28.3. Lessor's Right to Amend this Lease.................................................. 48
Section 28.4. Waiver of Certain Rights by Guarantor............................................... 49
Section 28.5. Lessees' Obligations to Guarantor and Guarantor's Obligations
to Lessees Subordinated............................................................. 50
Section 28.6. Guarantor to Pay Lessor's Expenses.................................................. 51
Section 28.7. Reinstatement....................................................................... 51
Section 28.8. Pari Passu Indebtedness............................................................. 51
Section 28.9. Third-Party Beneficiaries........................................................... 52
SECTION 29. ADDITIONAL LESSEES................................................................................... 52
Section 29.1. Additional Subsidiary Lessees....................................................... 52
SECTION 30. BANKRUPTCY PETITION AGAINST LESSOR................................................................... 53
SECTION 31. FORUM SELECTION AND CONSENT TO JURISDICTION.......................................................... 54
-90-
84
TABLE OF CONTENTS
(continued)
Page
----
SECTION 32. GOVERNING LAW................................... 54
SECTION 33. JURY TRIAL...................................... 55
SECTION 34. NOTICES......................................... 55
SECTION 35. HEADINGS........................................ 55
SECTION 36. EXECUTION IN COUNTERPARTS....................... 55
-91-
85
EXHIBITS
ANNEX A - Operating Lease Annex
ANNEX B - Financing Lease Annex
SCHEDULE 23.10 - Business Locations
ATTACHMENT A-1 - Information on Refinanced Vehicles and Eligible
Receivables
ATTACHMENT A-2 - Vehicle Order
ATTACHMENT B - Form of Power of Attorney
ATTACHMENT C - Form of Certification of Trade or Business Use
ATTACHMENT D - Form of Affiliate Joinder in Lease
-92-