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JLA CREDIT CORPORATION,
as Seller and as Servicer,
and
JLA FUNDING CORPORATION II,
as Purchaser
SALE AND SERVICING AGREEMENT
Dated as of August 15, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions ......................................... 1
ARTICLE II.
PURCHASE AND SALE OF THE LEASE ASSETS
SECTION 2.01 Purchases and Sales ........................... 6
SECTION 2.02 Conditions to Obligations of the Purchaser..... 6
SECTION 2.03 Conditions to Obligations of the Seller........ 7
SECTION 2.04 Lease Purchase Dates........................... 8
ARTICLE III.
THE LEASES
SECTION 3.01 Representations and Warranties of the Purchaser 8
SECTION 3.02 Representations and Warranties of the Seller... 9
SECTION 3.03 Retransfer of Leases........................... 14
SECTION 3.04 Custody of Lease Files......................... 14
SECTION 3.05 Duties of Servicer as Custodian................ 15
SECTION 3.06 Instructions; Authority to Act................. 16
SECTION 3.07 Effective Period and Termination............... 16
SECTION 3.08 Substitution of Leases......................... 16
SECTION 3.09 Notice of Substitution......................... 17
SECTION 3.10 Subsequent Obligations......................... 18
ARTICLE IV.
ADMINISTRATION AND SERVICING OF LEASES
SECTION 4.01 Duties of Servicer; Subservicing Arrangements.. 18
SECTION 4.02 Collection of Rent Payments.................... 20
SECTION 4.03 Repossession of Equipment...................... 20
SECTION 4.04 Theft and Physical Damage Insurance............ 21
SECTION 4.05 Covenants of the Servicer...................... 21
SECTTON 4.06 Transfer of Leases upon Breach................. 23
SECTION 4.07 Servicing Fee.................................. 24
SECTION 4.08 Monthly Servicer Report........................ 24
SECTION 4.09 Annual Statement as to Compliance.............. 24
SECTION 4.10 Annual Accountants' Statement.................. 25
SECTION 4.11 Access to Certain Information.................. 25
SECTION 4.12 Weekly Servicer Verification................... 26
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Section Page
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ARTICLE V.
DISTRIBUTIONS; STATEMENTS
SECTION 5.01 Accounts....................................... 26
SECTION 5.02 Collections; Applications...................... 26
SECTION 5.03 Additional Deposits............................ 27
SECTION 5.04 Distributions.................................. 27
SECTION 5.05 Statements to Noteholders...................... 27
ARTICLE VI.
THE SELLER
SECTION 6.01 Additional Representations of the Seller....... 27
SECTION 6.02 Merger or Consolidation of Seller.............. 29
SECTION 6.03 Limitation on Liability of Seller and others... 30
SECTION 6.04 Covenants of Seller............................ 30
SECTION 6.05 Other Liens or Interests....................... 32
SECTION 6.06 Costs and Expenses............................. 32
SECTION 6.07 Indemnification................................ 32
SECTION 6.08 Sale........................................... 33
SECTION 6.09 Accounting Statements.......................... 34
ARTICLE VII.
THE SERVICER; REPRESENTATIONS AND INDEMNITIES
SECTION 7.01 Representations of the Servicer................ 34
SECTION 7.02 Liability of Servicer; Indemnities............. 35
SECTION 7.03 Merger or Consolidation of Servicer............ 37
SECTION 7.04 Limitation on Liability of Servicer and Others. 38
SECTION 7.05 Servicer Not to Resign......................... 38
SECTION 7.06 Protection of Interest of Trust Property....... 38
ARTICLE VIII.
DEFAULT
SECTION 8.01 Events of Default.............................. 40
SECTION 8.02 Trustee to Act; Appointment of Successor....... 42
SECTION 8.03 Notification to Noteholders.................... 44
SECTION 8.04 Waiver of Past Defaults........................ 44
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.01 Amendment ..................................... 44
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Section Page
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SECTION 9.02 Counterparts................................... 45
SECTION 9.03 Governing Law.................................. 45
SECTION 9.04 Notices........................................ 45
SECTION 9.05 Severability of Provisions..................... 46
SECTION 9.06 Assignment..................................... 46
SECTION 9.07 Submission to Jurisdiction; Venue.............. 46
SECTION 9.08 No Bankruptcy Petition......................... 46
SECTION 9.09 Rule 144A Information.......................... 47
SECTION 9.10 Limited Recourse............................... 47
SECTION 9.11 Trustee Rights................................. 47
Exhibit A Form of ▇▇▇▇ of Sale
Exhibit B Form of Monthly Servicer Report
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This SALE AND SERVICING AGREEMENT dated as of August 15, 1997
is by and among JLA CREDIT CORPORATION, as Seller (the "Seller") and as Servicer
(the "Servicer"), and JLA FUNDING CORPORATION II, as Purchaser (the
"Purchaser").
RECITALS
The Seller desires to sell to the Purchaser, and the Purchaser
desires to buy from the Seller, from time to time during the Note Issuance
Period (as defined herein), Leases (and related Lease Assets), and the Seller
and Purchaser desire, in addition, that the Seller act as Servicer of such
Leases and Lease Assets.
In consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions. Whenever used in this Agreement,
capitalized terms used and not defined herein have the meanings specified in the
Indenture (as defined herein) and the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
"Agreement" means this Sale and Servicing Agreement, as it
may be amended or supplemented from time to time.
"▇▇▇▇ of Sale" means the ▇▇▇▇ of Sale to be delivered on each
Lease Purchase Date pursuant to which the Seller sells to the Purchaser the
Leases identified in such ▇▇▇▇ of Sale on such Lease Purchase Date, a form of
which is attached hereto as Exhibit A.
"Cut-Off Date" means, as to any Lease, the last day of the
calendar month immediately preceding the applicable Lease Purchase Date of such
Lease, as specified in the related ▇▇▇▇ of Sale delivered on the applicable
Lease Purchase Date.
"Eligibility Criteria," means, as to each Lease, the
requirements for such Lease to be an "'Eligible Lease" pursuant to Section 3.02.
"Eligible Lease" has the meaning specified in Section 3.02.
"Eligible Servicer" means an entity which, at the time of its
appointment as Servicer or as a subservicer, (i) (a) is servicing a portfolio of
equipment lease contracts, (b) is legally qualified and has the capacity to
service the Leases, (c) has demonstrated the ability to professionally and
competently service a portfolio of similar contracts in accordance with high
standards of skill and care, (d) has (if not the Seller) combined capital and
surplus of at least $10,000,000 and (e) is qualified and entitled to use, and
agrees to maintain the confidentiality of, the software that the Servicer or any
subservicer uses in connection with performing its duties and responsibilities
under this Agreement or the related subservicing agreement or obtains rights to
use or develops its own software which is adequate to perform its duties and
responsibilities under this Agreement or the related subservicing agreement,
(ii) so long as no Event of Default has occurred and is continuing, is a
subsidiary of the Servicer or a subservicer (which itself is an Eligible
Servicer) and which satisfies the requirements of (i)(b), (i)(c) and (i)(d)
above, or (iii) is a successor by merger or consolidation to the Servicer in
accordance with the provisions of Section 7.03 hereof:
"Equipment" means any new or used equipment, together with all
accessions thereto and replacement parts, accessories and repairs with respect
thereto, which is the subject of a Lease.
"Event of Default" means an event specified in Section 8.01.
"Excluded Equipment" means any of the following: restaurant
equipment, gas supply equipment, gas pumps, gas or chemical tanks, paint booths,
processing, dispensing and disposal equipment for environmental waste, real
estate, pianos, containers, working capital loans, yellow iron (construction and
mining equipment) and sale/leaseback transactions.
"Indenture" means the Indenture, dated as of the date hereof,
between the Purchaser, the Servicer and LTCB Trust Company, as Trustee, as may
be from time to time amended or supplemented pursuant to the applicable
provisions thereof.
"JLACC" means JLA Credit Corporation, a Delaware corporation,
and its successors in interest.
"Lease" means, for any applicable Lease Purchase Date, each
commercial loan contract or equipment finance lease contract, secured by
commercial and/or industrial equipment, including any amendment or modification
of such contract and any schedules and promissory notes incorporated therein
(including, without limitation, all right to receive Rental Payments) sold and
transferred to the Purchaser on such Lease Purchase Date, as identified in
the related ▇▇▇▇ of Sale.
"Lease Files" means the documents specified in Section 3.04.
"Lease Purchase Date" means each date during the Note Issuance
Period that is designated by the Company to the Seller, upon not less than five
Business Days' prior notice to the Seller and the Trustee, and approved by the
Seller, on which Leases are to be purchased by the Company pursuant to this Sale
and Servicing Agreement.
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"Lease Purchase Price" has the meaning specified in Section
2.01(b).
"Lessee" means each lessee under a Lease and its permitted
assigns.
"Lien" means any lien, security interest or encumbrance of any
kind.
"Liquidation Proceeds" has the meaning specified in Section
4.03.
"Lock-Box Account" means the account designated as such,
established and maintained pursuant to the Lock Box Agreement and in accordance
with Section 5.01.
"Lock-Box Agreement" means the agreement, dated as of April 3,
1990, by and among the Servicer and Bank of America National Trust and Savings
Association (as successor to Continental Bank), as Lock Box Bank (as amended by
a letter agreement to be entered into prior to the initial Note Issuance Date
and as may be further amended from time to time), pursuant to which the Lock-Box
Account is established and maintained.
"Lock-Box Bank" means, as of any date, the bank or trust
company at which the Lock-Box Account is established and maintained as of such
date.
"Monthly Payment Date" means the 16th day of each month (or if
such date is not a Business Day, the next succeeding Business Day), commencing
in the calendar month immediately succeeding the first Note Issuance Date, and
ending with the Scheduled Final Payment Date.
"Monthly Servicer Report" means a report substantially in the
form attached as Exhibit B hereto, completed by and executed on behalf of the
Servicer by a Servicing Officer of the Servicer in accordance with Section 4.08.
"Note Amortization Period" means the period from (and
including) the date that is the earlier of (i) the first day following the end
of the Note Issuance Period and (ii) the date (if any) on which any Early
Amortization Event or Indenture Event of Default shall have occurred, to (and
including) the Scheduled Final Payment Date.
"Note Issuance Period" means the period commencing on the
Closing Date and ending (unless sooner terminated as described herein) on the
date that is the earlier of (i) May 15, 1998 and (ii) the date (if any) on which
the aggregate outstanding principal amount of the Notes equals $75,000,000.
"Note Principal Balance" means (i) as of any date prior to the
first Monthly Payment Date, the outstanding principal
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balance of the applicable Class of Notes on the initial Note Issuance Date, and
thereafter (ii) as of any date, the outstanding principal balance of the
applicable Class of Notes as of the preceding Monthly Payment Date; provided
that the term "Note Principal Balance", as of any Monthly Payment Date on which
a payment in respect of principal has been made, shall mean the outstanding
principal balance of the applicable Class of Notes on such date after giving
effect to any distributions of Monthly Principal and overdue Monthly Principal
on such date.
"Pool Balance" means, as of any date, the aggregate Principal
Balance of the Leases as of such date.
"Predecessor Lease" has the meaning specified in Section 3.08.
"Principal Balance" means, with respect to any Lease on any
day, (i) the unamortized portion of the purchase price paid by JLACC for the
related Equipment and amounts paid by JLACC in respect of taxes and organization
costs and fees as of the related Cut-Off Date, minus (ii) the sum of the
following with respect to such Lease: (a) the Principal Component of all Rent
Payments since the applicable Cut-Off Date received by the Servicer and
deposited in the Collection Account (other than the Principal Component of any
payments received with respect to future Collection Periods, which will be
deposited in the Payahead Account and will constitute Rent Payments in the
Collection Period such payments were scheduled to be received) and (b) the
Principal Component of all proceeds of any Insurance Policies; provided,
however, that for any day following the Monthly Payment Date on which either (x)
the proceeds of a prepayment in full of a Lease or a Retransferred Lease are
payable to Noteholders under the definition of Monthly Principal or (y) a
Defaulted Lease first becomes a Defaulted Lease, the Principal Balance of any
such Lease shall be zero.
"Purchase Option Payment" shall mean, with respect to any
Lease, any payment (received on or after the applicable Cut-Off Date for such
Lease) made by a Lessee to purchase the Equipment subject to the Lease.
"Rent Payment" shall mean, with respect to each Lease, the
scheduled monthly rental payment for the Equipment leased to the Lessee under
such Lease, consisting of an Interest Component and a Principal Component.
"Retransfer Amount" means, with respect to any Lease, the
price equal to the Principal Balance of such Lease (prior to any amendment,
modification or exchange) on the first day of the month following the date on
which the reacquisition or purchase obligation with respect to such Lease arose
pursuant to Section 3.03 or 4.02 hereof, plus accrued interest on the Principal
Balance of such Lease, at a race equal to 1/12 of the sum of the (i) Class B
Rate and (ii) the Servicing Fee Rate, from the last date on which such amount
was paid to the date that is the date of payment of the
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Retransfer Amount, less the amount, if any, on deposit in the Payahead Account
with respect to such Lease.
"Retransferred Lease" means, for any Collection Period, a
Lease which has been transferred to the Seller or the Servicer as of the last
day of such Collection Period pursuant to Section 3.03 or 4.06.
"Retransferred Lease Receivables" means, for any Collection
Period, the Lease receivables under Leases which have been retransferred to the
Seller or Servicer as of the last day of such Collection Period pursuant to
Section 3.03 or 4.06.
"Schedule of Leases" means, as of any date, the schedule of
Leases owned by the Purchaser (and included in the Trust Property) on such date.
As of each Lease Purchase Date, a Schedule of Leases in respect of the Leases
purchased on such date shall set forth, as to each such Lease as of the related
Cut-Off Date, among other things, (a) its identifying number and the name of the
related Lessee; (b) its date of origination; (c) the original number of months
to stated maturity; (d) the original stated maturity; (e) the original Principal
Balance at inception of the Lease; (f) the Principal Balance as of the
applicable Cut-Off Date; (g) the location where the related Lease File is kept,
which shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, indicated
by the symbol "SRI", or ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, indicated by a "IT", or such other address in California as shall be
specified therein; (h) the Lease Rate; and (i) the scheduled monthly Rent
Payment.
"Scheduled Final Payment Date" has the meaning specified in
the Indenture.
"Seller" means JLACC in its capacity as Seller of Leases under
this Agreement, and each successor to JLACC (in the same capacity) pursuant to
Section 6.02.
"Servicer" means JLACC, as the servicer of the Leases under
this Agreement, and each successor to JLACC (in the same capacity) pursuant to
Section 8.02, and each successor Servicer pursuant to Section 7.03.
"Servicer Fee" means, with regard to any Collection Period,
the fee payable to the Servicer for services rendered during such Collection
Period, determined pursuant to Section 4.07.
"Servicing Fee Rate" means 1% per annum.
"Substitute Lease" means any Lease that is substituted by the
Seller pursuant to Section 3.08 for a Lease previously sold to the Purchaser
hereunder.
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ARTICLE II.
PURCHASE AND SALE OF THE LEASE ASSETS
SECTION 2.01 Purchases and Sales. On each Lease Purchase Date,
subject to the terms and conditions of this Agreement, the Seller agrees to sell
to the Purchaser, and the Purchaser agrees to purchase from the Seller, all of
the Seller's right, title and interest in, to and under such Leases as are
offered by the Seller for sale to, and accepted by the Purchaser for purchase
by, the Purchaser (including the rights to any Purchase Option Payments),
together with the property of the Seller constituting the related Lease Assets
and all of Seller's right, title and interest in and to the related Equipment.
(a) Transfer of Leases. On each Lease Purchase Date,
the Seller shall sell, transfer, assign and otherwise convey to the Purchaser,
without recourse, all of the Seller's right, title and interest in, to and under
the Leases and related Lease Assets that the Purchaser has agreed to purchase on
such date. Each Lease to be so purchased shall be identified in a ▇▇▇▇ of Sale
delivered by the Seller to the Purchaser on such Lease Purchase Date.
(b) Lease Purchase Price. In consideration for the
Lease Assets being sold on a Lease Purchase Date, the Purchaser shall, on each
Lease Purchase Date, pay to the Seller an amount equal to the aggregate
Principal Balance of the Leases being sold as the purchase price for such Leases
and the related Lease Assets (the "Lease Purchase Price"). On each Lease
Purchase Date, the Seller may make a capital contribution to the Purchaser in an
amount that, together with all other amounts available to the Purchaser for the
purchase of Leases on such date in the Lease Purchase Account, along with the
proceeds of the issuance of Notes on the related Note Issuance Date, will be
applied by the Purchaser as a portion of the amount that is the Lease Purchase
Price of the Leases to be purchased by the Purchaser from the Seller on such
Lease Purchase Date. The amount so paid and contributed to the Purchaser will be
deposited into the Lease Purchase Account for application by the Trustee in
accordance with the Indenture.
SECTION 2.02 Conditions to obligations of the Purchaser.
The obligations of the Purchaser to purchase the Leases and related Lease
Assets and interest of the Seller in the related Equipment on each Lease
Purchase Date is subject to the satisfaction of the following conditions as
of such Lease Purchase Date:
(a) Representations and Warranties True. The
representations and warranties of each of the Seller and the
Servicer hereunder shall be true and correct on such Lease
Purchase Date and with the same effect as if made on such
date.
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(b) Compliance with Obligations. The Seller shall
have performed all obligations to be performed by it
hereunder on or prior to such Lease Purchase Date.
(c) No Defaults. No Event of Default hereunder or
Indenture Event of Default shall have occurred or be
continuing.
(d) Weighted Average Yield. Upon the transfer of each
Lease to be transferred to the Purchaser on such Lease
Purchase Date, the Weighted Average Yield of all Leases
acquired by the Purchaser on or prior to such date (and
included in the Trust Property pursuant to the Indenture) will
be not less than 10% per annum.
(e) ▇▇▇▇ of Sale. The Seller shall deliver to the
Purchaser a ▇▇▇▇ of Sale, duly completed and executed,
together with an attached duly prepared Schedule of Leases
identifying the Leases transferred pursuant to such ▇▇▇▇ of
Sale.
(f) Evidence of UCC Filing. On or prior to such Lease
Purchase Date, the Seller shall record and file, at the
Seller's expense, UCC financing statements in each
jurisdiction in which required by applicable law, executed by
the Seller, as seller or debtor, and naming the Purchaser, as
purchaser, identifying the Leases and related Lease Assets as
collateral, meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to perfect the
sale, transfer, assignment and conveyance of its interest in
such Lease Assets to the Purchaser. The Seller shall deliver a
file-stamped copy, or other evidence satisfactory to the
Purchaser, of each such filing, to the Purchaser on or prior
to such Lease Purchase Date.
(g) Computer Files Marked. The Seller shall, at its
own expense, on or prior to such Lease Purchase Date, indicate
in its computer files that the Leases to be purchased on such
date (together with all other Leases sold to purchaser by
Seller) have been sold to the Purchaser pursuant to this
Agreement and shall deliver to the Purchaser a cumulative
Schedule of Leases, certified by an officer of the Seller to
be true, correct and complete.
(h) Other Documents. At the Seller's expense, the
Seller shall deliver, or cause to be delivered, such other
documents, and take or cause to be taken such other actions,
as the Purchaser may reasonably request or as may be
otherwise necessary to vest in the Purchaser all of Seller's
right, title and interest in and to the Leases and related
Lease Assets.
SECTION 2.03 Conditions to Obligations of the Seller. The
obligation of the Seller to sell the Leases and the Lease
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Assets to the Purchaser on each Lease Purchase Date is subject to the
satisfaction of the following conditions:
(a) Performance of Agreement. The representations
and warranties of the Purchaser hereunder shall be true and correct
on such Lease Purchase Date with the same effect as if then made, and
the Purchaser shall have performed all obligations to be performed by
it hereunder on or prior to such Lease Purchase Date.
(b) Lease Purchase Price. On each Lease Purchase
Date, the Purchaser will deliver to the Seller the Lease Purchase
Price, as provided in Section 2.01(b).
SECTION 2.04 Lease Purchase Dates. At any time or from time to
time during the Note Issuance Period, not more frequently than once per calendar
month during such Note Issuance Period, the Seller and Purchaser may establish
one or more Lease Purchase Dates. As of the date hereof, the Lease Purchase Date
in each calendar month is expected to be a Business Day during the first or
second week of each calendar month, subject to agreement otherwise by Seller and
Purchaser. A Lease Purchase Date will occur only on a date on which the Seller
has an amount of Eligible Leases sufficient to be acceptable for purchase by the
Purchaser on such date and the Purchaser has sufficient available funds in the
Lease Purchase Account (from Note issuances, Seller capital contributions and
principal payments on Leases) to pay the applicable Lease Purchase Price on such
date; provided that no failure of Leases to constitute Eligible Leases shall
affect the validity of any ▇▇▇▇ of Sale or any purchase that occurs on any Lease
Purchase Date. Each purchase and sale of Leases on a Lease Purchase Date shall
be subject to the other conditions and provisions set forth in this Article II.
ARTICLE III.
THE LEASES
SECTION 3.01 Representations and Warranties of the
Purchaser. The Purchaser hereby represents and warrants to the Seller, as of the
date hereof, as of the Closing Date and as of each Lease Purchase Date, as
follows:
(a) The Purchaser has been duly incorporated and is validiy
existing as a corporation in good standing under the laws of the State of
Delaware, and has full corporate power and authority to execute and deliver this
Agreement and to perform the terms and provisions hereof.
(b) This Agreement has been duly authorized, executed and
delivered by the Purchaser, and is the legal, valid, binding and enforceable
obligation of the Purchaser, except as the same may be limited by insolvency,
bankruptcy, reorganization or
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other laws relating to or affecting the enforcement of creditors' rights or by
general equitable principles. The consummation of the transactions contemplated
by this Agreement, and the fulfillment of the terms hereof, will not conflict
with or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Purchaser pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement, guarantee or
similar agreement or instrument under which the Purchaser is a debtor or
guarantor (other than the liens created pursuant to this Agreement), nor will
such action result in any violation of the provisions of the certificate of
incorporation or the bylaws of the Purchaser.
(c) No legal or governmental proceedings are pending to which
the Purchaser is a party or of which any property of the Purchaser is the
subject, and no such proceedings are threatened or contemplated by governmental
authorities or threatened by others, other than such proceedings which will not
have a material adverse effect upon the general affairs, financial position, net
worth or results of operations of the Purchaser and will not materially and
adversely affect the performance by the Purchaser of its obligations under, or
the validity and enforceability of, this Agreement.
SECTION 3.02 Representations and Warranties of the Seller. The
Seller hereby makes the following representations and warranties as to each
Lease on the Lease Purchase Date therefor and each of the Purchaser, and the
Trustee, as pledgee of the Purchaser, shall rely upon such representations and
warranties in accepting each such Lease and the related Lease Assets. Such
representations and warranties shall be deemed to be made for each Lease as of
the related Lease Purchase Date unless otherwise specified, but shall survive
the transfer of such Leases to the Purchaser (and by the Purchaser to the
Trustee). As to each Lease to be purchased on the applicable Lease Purchase
Date:
(a) The Seller is the sole legal and beneficial owner of all
right, title and interest in and to the Leases and the Lease Assets, including
the rights to the Rent Payments and the Insurance Proceeds with respect to the
Leases, free from any Lien of any Person (except for (i) any Lien which has been
waived or released by any Person prior to the date hereof and (ii) the rights of
Lessees to Insurance Proceeds on account of reimbursements for equipment
repairs).
(b) The Seller is the owner of each item of Equipment that is
subject to any Lease that is not a finance lease and the Seller has a perfected
security interest in, or is the owner of, each item of Equipment that is the
subject of any other Lease, with a Lien or ownership that is prior to the
interest of any other Person, except for (i) any Lien which has been waived or
released by any Person prior to the date hereof and (ii) the rights
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of the Lessees with regard to the Equipment under the Leases and any liens
arising from action of Lessees.
(c) The Seller (i) has in its possession the original copy of
each Lease that constitutes "chattel paper" under the Uniform Commercial Code
and (ii) has in its possession, with respect to each other Lease, a copy of the
master lease, certified by the seller or other transferor of the Lease to the
Seller, and an original executed copy of the relevant lease schedule or
assignment agreement, and (iii) has provided the Purchaser and the Trustee with
access to original copies of all the Leases, including any amendments thereto
and any documents related thereto, and those copies will have been true and
complete copies of the Leases and such amendments and related documents, and no
provision of any Lease will have been amended, modified or waived other than by
documents included in the original copies to which the Purchaser and the Trustee
has been given access.
(d) Neither the Seller nor, insofar as the Seller is aware,
any Lessee, has done or failed to do anything (other than Rent Payment
delinquencies of 60 days or less) which would or might permit any Lessee or the
Seller to terminate any Lease or suspend or reduce any payments or obligations
due or to become due thereunder by reason of default by the other party to such
Lease, except for amounts which are not material to the business of the
Purchaser or to the value of such Leases to the Noteholders. Neither the rights
and interests of the Seller in any Lease nor the obligations of the Lessee under
any Lease are subject to any defense, offset, counterclaim, claim or right of
rescission, and none of the foregoing have been asserted or alleged against the
Seller as to any Lease.
(e) Each Lease is a legal, valid and binding obligation of the
Lessee under such Lease and of the Seller, enforceable against each of them in
accordance with its terms, except as such enforceability may be affected by
applicable bankruptcy, insolvency, reorganization and other similar laws
affecting the rights of creditors generally and by general principles of equity.
(f) All filings and other actions required to be made or taken
by the Seller to evidence the Purchaser's rights in respect of the Leases and
the Lease Assets have been accomplished and are in full force and effect, except
that the Seller will not have notified any insurer with respect to the transfer
of the right to receive Insurance Proceeds.
(g) The Seller has granted the Purchaser full access to its
books and records, which contain a complete and correct statement of the Rent
Payments payable by the Lessee under each Lease and with respect to the related
Equipment, separately setting forth such amounts with respect to each Lease for
each month for the number of months of anticipated Rent Payments under such
Lease.
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(h) The Lease complied at the time it was originated or made,
and at the applicable Lease Purchase Date will comply, in all material
respects with all requirements of applicable federal, state and local law and
regulations thereunder, including usury laws, the Federal Truth-in-Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇
Warranty Act, the Federal Reserve Board's Regulations B and S and other equal
credit opportunity and disclosure laws, in each case to the extent applicable to
nonconsumer transactions.
(i) As of the Lease Purchase Date, the Lease (i) has not been
terminated, is not a Defaulted Lease and is not more than 60 days past due as of
the related Cut-Off Date as to any amount required to be paid thereunder, (ii)
has a remaining term to scheduled maturity of not more than 60 months and not
less than 6 months as of the related Cut-Off Date, (iii) is a direct financing
lease, (iv) relates to an item of Equipment that is not in repossession by the
Lessor or subject to procedures for obtaining repossession by the Lessor or
possession by any other Person, (v) has a term ending not later than the last
day of the Collection Period immediately preceding the Scheduled Final Payment
Date, (vi) relates to a Lessee that (A) is an individual residing in the United
States or a corporation, limited liability company or limited liability
partnership organized under the laws of the United States or any state thereof,
(B) is not the United States or a state or any agency or instrumentality thereof
and (C) has not been disapproved by the Seller (based, in the Seller's
reasonable judgment, upon the creditworthiness of such Lessee), (vii)
constitutes "chattel paper" within the meaning of Section 9-105 of the UCC as in
effect in the state of New York and there is only one original executed copy of
each Lease, (viii) is denominated in United States dollars and is payable in the
United States in United States dollars, (ix) relates to an item of Equipment
which is located in the United States and has already been delivered, (x) is not
a "consumer lease" as defined in Section 2A-103(i) of the UCC, (xi) provides for
level monthly payments which, if made as scheduled, fully amortize the amount
financed (other than the Residual Amount, if any) over the original term of the
Lease; (xii) has a pre-tax yield (based on original net investment and timing of
payment amounts) of at least 8.75%, (xiii) has an original equipment cost of
less than $500,000, (xiv) is not secured by a bus, car, truck, trailer or any
type of motor vehicle which requires motor vehicle titling, and is not secured
primarily by any Excluded Equipment, (xv) was not more than 60 days past due
during the term of the Lease, and (xvi) has been determined by the Seller to
satisfy all applicable approval requirements of the Seller.
(j) The Lessee under the Lease has not been noted in the
electronic ledger of the Servicer as being the subject of a bankruptcy
proceeding.
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(k) No facts exist which would give rise to any right of
rescission, setoff, counterclaim or defense nor have any been asserted, or to
the best of the Seller's knowledge after due inquiry, threatened, with respect
to the Lease.
(l) The Lease has not been sold, transferred, assigned or
pledged by the Seller to any Person other than the Purchaser. Immediately prior
to the transfer of the Leases to the Purchaser, the Seller had good and
marketable title to such Lease free and clear of all Liens (except for any Lien
which has been waived or released by any Person prior to the date hereof) and
immediately upon the transfer thereof pursuant to the related ▇▇▇▇ of Sale, the
Purchaser will acquire good and marketable title to such Lease, free and clear
of all Liens, encumbrances, security interests, and rights of others.
(m) The Lease does not require the prior written consent of
the Lessee for, or contain any other restrictions on, the transfer or assignment
of the Lease.
(n) The Lease does not have a Lessee that is the obligor on a
Lease or Leases for which the aggregate Principal Balance exceeds 1.5% of the
Pool Balance as of the applicable Cut-Off Date for the third Lease Purchase Date
and as of the applicable Cut-Off Date for each Lease Purchase Date thereafter
during the Note Issuance Period (in each case after giving effect to the
purchase of Leases to occur on such Lease Purchase Date).
(o) The Lease was selected from equipment leases in the
Seller's portfolio that had met the applicable conditions specified in this
Section 3.02 utilizing no selection procedures adverse to the Purchaser relative
to similar equipment leases in the Seller's portfolio.
(p) The Lease provides that the Lessee's obligations under the
Lease including, without limitation, the obligation to make Rent Payments, are
absolute and unconditional and shall continue without any claim, defense,
set-off, counterclaim, reduction, or abatement of any kind whatsoever and
regardless of any inability of the Lessee to use the Equipment or any part
thereof because of any reason whatsoever including damage to or destruction
thereof.
(q) The Lease provides that the Lessee shall maintain the
Equipment in good operating condition, repair and appearance, and protect it
from deterioration other than normal wear and tear.
(r) The Lease was not previously transferred to or owned by
the Purchaser.
(s) If the Lease was not originated by the Seller but was
acquired by the Seller in a purchase transaction then such Lease (i) constitutes
a "finance lease" under generally accepted
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accounting principles, (ii) does not by its terms permit, on or after the
applicable Lease Purchase Date, the Lessor (or any transferee) to require the
predecessor owner or other transferor to repurchase such Lease or otherwise
provide credit support for payments due under the Lease.
(t) Neither the Seller nor any entity aggregated now or at any
relevant time with the Seller under Section 4001 of ERISA or Section 414 (b) or
(c) of the Code (i) has any material tax, penalty or other liability under ERISA
or the employee benefits provisions of the Code, or (ii) is subject to having
any of its property subject to a lien or other encumbrance thereunder, where
such liability is or could becom6 the liability of the Purchaser or the Trustee
or where the property of the Purchaser could be subject to such a lien or
encumbrance, (iii) no such liability, lien or encumbrance presently is expected
to occur or exist, (iv) no notice of intent to terminate any employee benefit
plan under ERISA (a "Plan") has been filed under Title IV of ERISA by it or any
plan administrator, (v) no "prohibited termination" under Section 406 (b) of
ERISA has been engaged in by it and (vi) no "accumulated funding deficiency"
under ERISA has occurred or exists with respect to any Plan.
(u) Upon the transfer of each Lease to be transferred to the
Purchaser (and included in the Trust Property pursuant to the Indenture) on such
date, (i) the aggregate Principal Balance of all Leases with Lessees having
billing addresses with the same postal zip code does not exceed 5% of the Pool
Balance, (ii) the aggregate Principal Balance of all Leases with Lessees located
(by billing address) in any one state other than California does not exceed 25%
of the Pool Balance, (iii) the aggregate Principal Balance of all Leases with
Lessees located (by billing address) in California does not exceed 60% of the
Pool Balance, (iv) the aggregate Principal Balance of all Leases relating to
Equipment that is used Equipment does not exceed 15% of the Pool Balance.
(v) the aggregate Principal Balance of all Leases that were
not originated by the Seller but were instead acquired by the Seller in purchase
transactions in which Form UCC-3 filings were not made naming the Lessee as
debtor and the Seller as assignee of the underlying seller secured party does
not exceed 5% of the Pool Balance.
(w) Upon the transfer of each Lease to be transferred to the
Purchaser, the Leases owned by the Purchaser (and included in the Trust Property
pursuant to the Indenture) will have a weighted average term to maturity of not
more than 50 months commencing from the last day of the Note Issuance Period.
(x) Statistical information appearing in the Confidential
Private Placement Memorandum dated June 1997, as amended or supplemented to the
date hereof, is true and accurate in all material respects as of the date
hereof.
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A Lease which satisfies all of the above representations and
warranties shall be deemed an "Eligible Lease".
SECTION 3.03 Retransfer of Leases. The Seller, the Servicer,
the Purchaser or the Trustee, as the case may be, shall inform the other parties
and the Trustee promptly, in writing, upon the discovery of a breach of any of
the Seller's representations and warranties set forth in Section 3.02, that
materially and adversely affects the interest of the Purchaser and the Trustee
in any Lease. Each such notice shall include a statement that such breach
materially and adversely affects the interest of the Purchaser in such Lease. As
of the last day of the month following the month (or, if the Seller elects, as
of the last day of the month) in which the Seller becomes aware or receives such
written notice of such breach, the Seller, unless it cures the breach, shall
reacquire such Lease materially and adversely affected by the breach. The Seller
shall remit the Retransfer Amount of such Lease as of the date of retransfer in
the manner specified in Section 5.03. Except as provided in Section 7.02, the
sole remedy of the Purchaser, the Trustee or the Noteholders against the Seller
with respect to a breach of a representation or a warranty set forth in Section
3.02 or any matter set forth in this Section 3.03 shall be to require the Seller
to reacquire Leases pursuant to this Section 3.03. With respect to all Leases
repurchased by the Seller pursuant to this Agreement, the Purchaser shall
assign, without recourse, representation or warranty (except as to the absence
of liens, claims, or encumbrances resulting from actions taken, or failed to be
taken, by the Purchaser), to the Seller all the Purchaser's right, title and
interest in and to such Leases and the related Lease Assets. The determination
of "material and adverse" as to the interest of the Purchaser or the Trustee in
a Lease would be made by the Purchaser, or by the Trustee (upon a Noteholders'
instruction pursuant to the Indenture), in determining whether notice would be
sent, and may be expected to include consideration of such matters as likelihood
of full repayment, enforceability of security for the loan and other similar
matters.
SECTION 3.04 Custodv of Lease Files. To assure uniform quality
in servicing the Leases and to reduce administrative costs, the Purchaser, upon
the execution and delivery of this Agreement, revocably appoints the Servicer,
acting directly or through a subservicer or another agent, and the Servicer
accepts such appointment, to act as the agent of the Trustee as custodian of the
following documents or instruments (the "Lease Files") which are hereby
constructively delivered to the Trustee with respect to each Lease:
(i) The original copy of each Lease that constitutes
"chattel paper" under the Uniform Commercial Code and, with
respect to each other Lease, a copy of the master lease,
certified by the seller or other transferor of the Lease to
the Seller, and an original executed copy of the relevant
lease schedule or assignment agreement,
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(ii) Documents, if any, evidencing the existence of
theft and physical damage insurance covering the Equipment or
the Lessee;
(iii) Copies of documents that the Servicer shall
keep on file, in accordance with its customary procedures,
evidencing the interest of Seller in the Equipment; and
(iv) Any and all other documents that the Seller or
the Servicer, as the case may be, shall keep on file, in
accordance with its customary procedures, relating to a Lease,
the related items of Equipment or other related Lease Assets
or a Lessee.
The Lease Files will not be stamped or otherwise marked to
reflect the transfer of the Leases from the Seller to the Purchaser or the
pledge of the Purchaser to the Trustee and will not be segregated from the files
of other leases and installment sale contracts of the Servicer. Prior to
conveyance of the Leases to the Purchaser, Seller will cause the electronic
ledger and computer systems used by Seller as a master record of the Leases to
be marked to show that such Leases have been conveyed by Seller to the Purchaser
and pledged to the Trustee and will file UCC financing statements reflecting
such sales and assignments with appropriate governmental authorities. The Seller
will not alter the electronic ledger designation referenced in this paragraph
with respect to any Lease during the term of this Agreement unless and until
such Lease becomes a Retransferred Lease. The Lessees under the Leases will not
be notified of the transfer of the Leases to the Purchaser.
SECTION 3.05 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer, in its capacity as agent of the
Purchaser and the Trustee and as custodian pursuant to Section 3.04 above, shall
hold (or have a subservicer or other agent hold on behalf of the Servicer) the
Lease Files on behalf of the Trustee for the benefit of all present and future
Noteholders and maintain such accurate and complete accounts, records and
computer systems pertaining to the Leases as shall enable the Trustee to comply
with its obligations pursuant to the Indenture. In performing its duties as
custodian, the Servicer shall act with reasonable care (and shall cause each
subservicer or agent to act with reasonable care), using that degree of skill
and attention that the Servicer (or subservicer or agent) exercises with respect
to the files of comparable equipment leases that the Servicer services for
itself or others. The Servicer shall promptly report to the Trustee any failure
on its part (or on the part of a subservicer or agent) to hold the Lease Files
and maintain its accounts, records and computer systems as herein provided, and
shall promptly take appropriate action to remedy any such failure. The Trustee
has not reviewed (and is not obligated to review) the Lease Files and has no
knowledge of their contents.
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(b) Maintenance of and Access to Records. The Servicer shall
maintain each Lease File at its office specified in Section 9.04 hereof or at
its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as
(in each case) specified in the applicable Schedule of Leases. The Servicer
shall make available (and shall cause each subservicer or agent to make
available) to the Purchaser and/or Trustee or its duly authorized
representatives, attorneys or auditors the Lease Files and the related accounts,
records and computer systems maintained by the Servicer or subservicer or agent
at such times during normal operating hours as the Purchaser and/or Trustee
shall reasonably instruct which do not unreasonably interfere with the
Servicer's or subservicer's or agent's normal operations or customer or employee
relations.
SECTION 3.06 Instructions; Authority to Act. The Servicer
shall be deemed to have received proper instructions from the Trustee with
respect to the Lease Files upon its receipt of written instructions signed by a
Responsible Officer.
SECTION 3.07 Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as to the Leases being sold on a
Lease Purchase Date as of the applicable Cut-Off Date for such Lease Purchase
Date and shall continue in full force and effect until terminated pursuant to
this Section 3.07 or until this Agreement and Indenture shall be terminated and
all of the Notes and other amounts due and owing under the Indenture are paid in
full. The Servicer may perform its duties as custodian through one or more
agents, which agents may maintain physical possession of Lease Files as agent
for the Servicer acting as custodian. If the Servicer shall resign as Servicer
under Section 7.05 or if all of the rights and obligations of the Servicer shall
have been terminated under Section 8.01, the appointment of the Servicer as
custodian may be terminated by the Trustee or by the Holders of Notes evidencing
not less than a majority of the Note Principal Balance, in the same manner as
the Trustee or such Holders may terminate the rights and obligations of the
Servicer under Section 8.01. The Purchaser or the Trustee may terminate the
Servicer's appointment as custodian at any time upon written notification to the
Servicer. As soon as practicable after any termination of such appointment, the
Servicer shall deliver the Lease Files to the Trustee or the Trustee's agent at
such place or places as the Trustee may reasonably designate. The Servicer shall
cooperate with the Trustee in making the transfer and shall bear all of its
costs and expenses with respect to such transfer. Notwithstanding the
termination of the Servicer as custodian, the Trustee agrees that upon any such
termination, the Trustee shall provide, or cause its agent to provide, access to
the Lease Files to the Servicer and each subservicer for the purpose of carrying
out the Servicer's duties and responsibilities with respect to the servicing of
the Leases hereunder.
SECTION 3.08 Substitution of Leases. (a) The Seller will
have the right (but not the obligation) at any time to
16
substitute one or more Eligible Leases (each a "Substitute Lease") and the
Equipment subject thereto (or, with respect to equipment notes, finance leases
and conditional sales agreements, a security interest therein) for a Lease (each
a "Predecessor Lease") and the Equipment subject thereto (or a security interest
therein) if:
(i) the Predecessor Lease is then subject to repurchase
by the Seller pursuant to Section 3.03; or
(ii) the Predecessor Lease has been a Defaulted Lease
since the last day of the most recent Collection Period.
provided, however, that (A) on the date of such substitution (and after giving
effect thereto) (x) the cumulative Principal Balance of all Leases substituted
pursuant to clauses (i) and (ii) of this Section 3.08(a) shall not exceed 10% of
the Pool Balance of the Leases, determined as of the date of such substitution,
and (y) the cumulative Principal Balance of all Leases substituted pursuant to
clause (ii) of this Section 3.08(a) shall not exceed 3% of the Pool Balance of
the Leases as of the date of such substitution, (B) no Lease shall be
substituted pursuant to clause (ii) of this Section 3.08 (a) on any date on
which any Class B Note is owned by the Seller or any Affiliate of the Seller,
(C) the final maturity of each Substitute Lease is not later than the final
maturity of the Predecessor Lease for which it is being substituted, (D) the
Lease Rate of each Substitute Lease is equivalent to or greater than the Lease
Rate of the Predecessor Lease for which it is being substituted, and (E) the
related Equipment to which each Substitute Lease relates is comparable to the
related Equipment of the Predecessor Lease for which it is being substituted. If
such Substitute Lease has a Principal Balance less than the Principal Balance of
the Predecessor Lease, the Seller shall, on the date of substitution, deposit
funds in an amount equal to such difference into the Collection Account for
application as provided in the Indenture.
(b) Any substitution pursuant to this Section 3.08 shall
become effective upon (i) delivery to the Trustee and the Purchaser of an
instrument or instruments effectively transferring to the Purchaser all right,
title and interest of the Seller in and to the Eligible Lease being substituted
and the Equipment subject thereto, and granting the Trustee a valid and first
priority security interest in such Substitute Leases and the related Equipment
(ii) the taking of such other action as the Trustee may reasonably request in
order to subject such Eligible Lease and the Equipment subject thereto to the
lien of the Indenture, and (iii) delivery to the Seller by the Purchaser of an
instrument or instruments transferring to the Seller, without representation or
warranty, all of the Purchaser's right, title and interest in and to the Lease
and the Equipment for which the substitution is being made.
SECTION 3.09 Notice of Substitution. In the Monthly Servicer
Report to be delivered on each Determination Date, the Seller shall give written
notice to the Truszee, the Servicer and
17
the Rating Agency of each substitution of Leases pursuant to Section 3.08 hereof
and of any related repurchase pursuant to Section 3.03 hereof during the
preceding Collection Period. Such notice shall (i) specify the amount of each
periodic Rent Payment under the Predecessor Lease and the amount of each
periodic Rent Payment under each Eligible Lease being substituted (and the
portion thereof, if any, constituting Excess Amount), (ii) specify the Principal
Balance of the Predecessor Lease and of the Substitute Lease and any shortfall
to be deposited in the Collection Account, and (iii) be accompanied by an
Officer's Certificate certifying as to each of the facts or conditions specified
in the definition of "Eligible Lease" set forth in Section 3.02 hereof and that
each such Substitute Lease is an Eligible Lease and complies with the
requirements of Section 3.08.
SECTION 3.10 Subsecruent obligations. Upon any substitution of
Leases in accordance with the provisions of Section 3.08 and 3.09, such
Substitute Lease shall become a "Lease" for all purposes of this Agreement and
the Indenture, the Seller's and the Servicer's obligations hereunder with
respect to the Predecessor Lease shall cease but the Seller and the Servicer
shall each thereafter have the same obligations with respect to the Substitute
Lease substituted as it has with respect to all other Leases subject to the
terms hereof.
ARTICLE IV.
ADMINISTRATION AND SERVICING OF LEASES
SECTION 4.01 Duties of Servicer; Subservicing Arrangements.
The Servicer, as agent for the Purchaser, shall manage, service, administer and
make collections on the Leases with reasonable care, using that degree of skill
and attention that the Servicer exercises with respect to comparable equipment
leases that it services for itself or others. The Servicer may enter into
subservicing agreements with one or more subservicers for the servicing and
administration of certain of the Leases; provided, however, that any such
subservicer shall be, and shall remain, for so long as it is acting as
subservicer, an Eligible Servicer. References in this Agreement to actions
taken, to be taken, permitted to be taken, or restrictions on actions permitted
to be taken, by the Servicer in servicing the Leases shall include actions
taken, to be taken, permitted to be taken, or restrictions on actions permitted
to be taken, by a subservicer on behalf of the Servicer, and references to
amounts collected by the Servicer shall be deemed to include amounts collected
by the subservicer on behalf of the Servicer. Each subservicing agreement will
be upon such terms and conditions as are not inconsistent with this Agreement
and the standard of care set forth herein and as the Servicer and the
subservicer have agreed. All compensation payable to a subservicer under a
subservicing agreement shall be payable by the Servicer from its servicing
compensation or otherwise from its own
18
funds, and none of the Purchaser, the Trustee or the Noteholders will have any
liability to the subservicer with respect thereto.
Notwithstanding any subservicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer or a subservicer or any reference to actions taken through such Persons
or otherwise, the Servicer shall remain obligated and liable to the Purchaser,
the Trustee and Noteholders for the servicing and administering of the Leases
and the other Trust Property in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue of such
subservicing agreements.
Any subservicing agreement that may be entered into and any
other transactions or servicing arrangements relating to the Leases and the
other Trust Property involving a subservicer in its capacity as such shall be
deemed to be between the subservicer and the Servicer alone, and the Purchaser,
the Trustee and the Noteholders shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to the
subservicer except as set forth in the next succeeding paragraph.
In the event the Servicer shall for any reason no longer be
acting as such, the successor Servicer may, in its discretion, thereupon assume
all of the rights and obligations of the outgoing Servicer under a subservicing
agreement. In such event, the successor Servicer shall be deemed to have assumed
all of the outgoing Servicer's interest therein and to have replaced the
outgoing Servicer as a party to each such subservicing agreement to the same
extent as if such subservicing agreement had been assigned to the successor
Servicer, except that the outgoing Servicer shall not thereby be relieved of any
liability or obligations on the part of the outgoing Servicer to the subservicer
under such subservicing agreement. The outgoing Servicer shall, upon request of
the Purchaser, but at the expense of the outgoing Servicer, deliver to the
successor Servicer all documents and records relating to each such subservicing
agreement and the Leases and other Trust Property then being serviced thereunder
and an accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of any subservicing
agreement to the successor Servicer. In the event that the successor Servicer
elects not to assume a subservicing agreement, the outgoing Servicer, at its
expense, shall cause the subservicer to deliver to the successor Servicer all
documents and records relating to the Leases and the other Trust Property being
serviced thereunder and all amounts held (or thereafter received) by such
subservicer (together with an accounting of such amounts) and shall otherwise
use its best efforts to effect the orderly and efficient transfer of servicing
of the Leases and the other Trust Property being serviced by such subservicer to
the successor Servicer.
The Servicer's duties shall include collection and posting of
all payments, responding to inquiries by Lessees or by
19
federal, state or local governmental authorities with respect to the Leases,
investigating delinquencies, administering and enforcing the Insurance Policies
(if any) in accordance with its customary procedures, accounting for
collections, furnishing monthly and annual statements to the Purchaser and the
Trustee with respect to distributions, deposits and withdrawals, and preparing
applicable federal, state or local tax information returns and furnishing
applicable forms or statements, if any, to the Company. The Servicer shall
follow its customary standards, policies, and procedures for equipment leases in
performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer shall, subject to the terms of the Indenture, be
authorized and empowered by the Purchaser and the Trustee to execute and
deliver, on behalf of itself, the Trustee and the Purchaser, or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Leases or the Equipment. If the Servicer shall commence a legal proceeding to
enforce a Lease or any Insurance Policies in respect thereof, the Purchaser
shall thereupon be deemed to have automatically assigned such Lease and the
related Trust Property to the Servicer, solely for the purpose of collection
and, upon its receipt of notice in writing from the Servicer, the Trustee shall
be deemed to have released its Lien thereon. Upon written request of the
Servicer and receipt by the Purchaser and the Trustee of an Officer's
Certificate setting forth the facts underlying such request, the Purchaser shall
furnish the Servicer with any limited powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder and the Purchaser and the Trustee shall not be
held liable for such actions of the Servicer thereunder.
SECTION 4.02 Collection of Rent Payments. The Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Leases as and when the same shall become due, and in
connection therewith shall follow such collection procedures as it follows with
respect to comparable new or used equipment leases that it services for itself
or others; provided, however, that, within two Business Days after each Lease
Purchase Date, the Servicer shall notify each Lessee, if any, not already
required to make payments directly to the Lock Box Account to make all payments
with respect to its respective Leases on and after the Cut-Off Date directly to
the Lock-Box Account. The Servicer may, in accordance with its customary
standards, policies and procedures, in its discretion waive any Administrative
Fees that may be collected in the ordinary course of servicing a Lease.
SECTION 4.03 Repossession of Equipment. on behalf of the
Purchaser, the Servicer shall use its best efforts, consistent with its
customary servicing procedures, to repossess or otherwise take possession of the
Equipment relating to any Lease which the Servicer shall have determined to be a
Defaulted Lease (and shall specify such Lease to the Purchaser and the Trustee
no later than the Determination Date following the Collection Period in which
the
20
Servicer shall have made such determination). The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of equipment leases. The Servicer shall be entitled
to recover all reasonable expenses incurred by it in the course of recovery and
repossession of such Equipment solely from the proceeds of liquidation. All
proceeds of liquidation ("Liquidation Proceeds") realized in connection with any
such action with respect to a Lease which has not been retransferred under
Section 3.03 shall be deposited by the Servicer in the Collection Account in the
manner specified in Section 5.02 and shall be applied to reduce (or to satisfy,
as the case may be) unpaid Rent Payments on such Lease. The foregoing shall be
subject to the provision that, in any case in which the Equipment shall have
suffered damage, the Servicer shall not expend funds in connection with the
repair or the repossession of such Equipment unless it shall determine in its
sole discretion that such repair and/or repossession will increase the
Liquidation Proceeds of the related Lease by an amount equal to or greater than
the amount of such expenses which, in any event, shall not be unreasonable.
SECTION 4.04 Theft and Physical Damacte Insurance. The
Servicer shall require that each Lessee shall have obtained and shall maintain
theft and physical damage insurance covering the Equipment. The Servicer shall
enforce its rights under the Leases to require the Lessees to maintain theft and
physical damage insurance to the extent consistent with the Servicer's customary
practices and procedures with respect to comparable equipment leases that it
services for itself or others (but shall not, in any event, be required to
monitor the maintenance of or obtain such insurance). The Servicer may ▇▇▇ to
enforce or collect upon the Insurance Policies, in its own name, if possible, or
as agent for the Trustee. If the Servicer elects to commence a legal proceeding
to enforce an Insurance Policy, the act of commencement shall, upon the
Trustee's receipt of notice in writing from the Servicer, be deemed to be an
automatic assignment of the rights of the Trustee under such Insurance Policy to
the Servicer for purposes of collection only. If, however, in any enforcement
suit or legal proceeding it is held that the Servicer may not enforce an
Insurance Policy on the grounds that it is not a real party in interest or a
Holder entitled to enforce the Insurance Policy, the Trustee, at the Servicer's
expense, or the Purchaser at the Purchaser's expense, shall take such steps as
the Servicer deems necessary to enforce such Insurance Policy, including
bringing suit in its name or the names of the Noteholders.
SECTION 4.05 Covenants of the Servicer. The Servicer makes the
following covenants on which the Purchaser relies and on which the Trustee will
rely in accepting the Leases and executing and authenticating the Notes:
(a) The Servicer will keep copies of the originals of
all documents and related records and books evidencing all Leases and
Lease Proceeds at, and only at, its offices in 970
▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(b) Unless a default has occurred under a Lease, the
Servicer will: (i) continue to make the Equipment which is the subject
of each Lease available to the Lessee thereunder, (ii) do nothing to
impair such Lessee's possession of such Equipment and (iii) promptly
transfer the Equipment to the Lessee upon such Lessee's payment of the
applicable Purchase Option Payment.
(c) The Servicer will pay or cause to be paid all
taxes, fees or other costs in respect of the Equipment.
(d) Unless otherwise prohibited by law or court
order, the Servicer shall apply any security deposit held by it under a
Lease which the Servicer elects to terminate following a default by the
Lessee thereunder against defaulted Rent Payments under such Lease
before any other application thereof.
(e) The Servicer will deliver to the Trustee, from
time to time at the Trustee's request but in each case not more than
once in any calendar month, (i) schedules of all Rent Payments due
under the Leases and (ii) a revised Schedule of Leases, modified to
reflect reacquisitions by the Servicer of Leases, the exercise by
Lessees of expiration purchase options under the Leases and any other
occurrence that has had or will have the effect of altering the amount
or composition of the aggregate Rent Payments.
(f) The Servicer will not cancel, extend or terminate
any Lease except that the Servicer may (i) extend the term of any Lease
to a date not later than three months later than the original
expiration date of such Lease on the date of the acquisition thereof by
the Purchaser (except that the Servicer may extend a Lease to a later
date to the extent, if any, that after giving effect thereto the
aggregate Principal Balance of Leases owned by the Purchaser subject to
such longer extensions does not exceed 1% of the aggregate Principal
Balance of all Leases owned by the Purchaser); provided, however, that
in no event may the term of any Lease be extended to a date that is
later than the Scheduled Final Payment Date, and (ii) permit early
termination of any Lease with the payment by the Lessee of an amount at
least equal to the Retransfer Amount of such Lease (together with any
Purchase Option Payment or Residual Amount due to the Seller).
(g) Until the expiration of each Lease the Servicer
shall defend the Leases, the Lease Proceeds, each insurance Policy and
the Insurance Proceeds against all claims and demands of all persons at
any time claiming the same or any interest therein adverse to that of
the Seller, the
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Purchaser, the Trustee or the Noteholders (other than claims by
Les'sees to Insurance Proceeds on account of reimbursements for
equipment repairs). so long as any Equipment remains subject to a
Lease, the Servicer shall defend each such item of Equipment against
all claims and demands of all Persons at any time claiming the same or
any interest therein adverse to that of the Lessees, the Seller, the
Purchaser or the Trustee.
(h) The interests in the Equipment granted hereunder
shall not be transferred in whole or in part except as contemplated
herein.
(i) The Servicer shall not (nor will it permit any
subservicer to) impair the rights of the Purchaser or the Trustee in
the Trust Property or take any action inconsistent with the Trustee's
ownership of the Trust Property, except as expressly provided herein
with respect to the servicing of the Leases and Lease Assets.
SECTION 4.06 Transfer of Leases upon Breach. The Seller, the
Servicer or the Purchaser, as the case may be, shall inform the other parties
and the Trustee promptly, in writing, upon the discovery of a breach of any of
the Servicer's covenants set forth in Section 4.05. If such breach materially
and adversely affects the interest of the Trustee in a Lease, unless the breach
shall have been cured by the last day of the month following the month (or, if
the Trustee elects, (upon a Noteholders, instruction pursuant to the Indenture),
as of the last day of the month) in which the Servicer becomes aware or receives
such written notice of such breach, the Servicer shall acquire any Lease
materially and adversely affected by such breach; provided, however, that in the
case of a breach of the covenant contained in the last sentence of Section
4.05(f), the Servicer shall be obligated to acquire the affected Lease or Leases
on the Deposit Date immediately succeeding the Collection Period during which
the Servicer becomes aware of, or receives written notice of, such breach. The
Servicer shall remit the Retransfer Amount of such Lease as of the date of
retransfer in the manner specified in Section 5.03. Except as provided in
Section 7.02, the sole remedy of the Purchaser, the Trustee or the Noteholders
against the Servicer with respect to a breach of Section 4.05 shall be to
require the Servicer to acquire Leases pursuant to this Section 4.06. With
respect to all Leases purchased by the Servicer pursuant to this Agreement, the
Purchaser shall assign, without recourse, representation or warranty (except as
to the absence of liens, claims, or encumbrances resulting from actions taken,
or failed to be taken, by the Purchaser), to the Servicer all the Purchaser's
right, title and interest in and to such Leases and the related Lease Assets.
The determination of "material and adverse" as to the interest of the Purchaser
or the Trustee in a Lease would be made by the Purchaser or the Trustee (upon a
Noteholders' instruction pursuant to the Indenture) in determining whether
notice would be sent, and may be expected to include consideration of such
matters as likelihood of full.
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repayment, enforceability of security for the loan and other similar matters.
SECTION 4.07 Servicing Fee. The Servicing Fee for a Collection
Period shall be equal to the sum of (a) one-twelfth of the product of the
Servicing Fee Rate and the Pool Balance on the first day of the related
Collection Period (or in the case of the first Monthly Payment Date, the initial
Cut-Off Date) (except that in the case of a successor Servicer, the Servicing
Fee shall equal such amount as is arranged in accordance With Section 8.02) and
(b) net investment earnings on amounts on deposit in the Collection Account
during such Collection Period. In addition, the Servicer shall be entitled to
collect and retain' any Administrative Fees with respect to the Leases. The
Servicer shall be required to pay for its own account all expenses incurred by
it in connection with its activities hereunder (including fees and disbursements
of any subservicer or agent, the Trustee, Trustee's counsel and independent
accountants, taxes imposed on the Servicer, and expenses incurred in connection
with distributions and reports to Noteholders) except expenses in connection
with realizing upon Leases under Section 4.03.
SECTION 4.08 Monthly Servicer Report. On or before 3:00 p.m.
(New York time) on the third Business Day preceding each Monthly Payment Date,
the Servicer shall deliver to the Purchaser, the Trustee, the Paying Agent and
the Rating Agency a Monthly Servicer Report substantially in the form of Exhibit
B hereto, for the Collection Period preceding such Determination Date,
containing all information necessary to make the deposits, withdrawals and
distributions pursuant to Section 5.04, and all information necessary for the
Trustee to send statements to Noteholders pursuant to Section 7.14 of the
Indenture. The Servicer shall also specify (i) each Lease which is retransferred
to the Seller or the Servicer, as the case may be, as of the last day of such
Collection Period, (ii) each Lease which the Servicer shall have determined to
be a Defaulted Lease during such Collection Period, (iii) each Lease which has
been prepaid in full during such Collection Period, (iv) the aggregate Payahead
Amounts with respect to the Leases during such Collection Period and all other
information that the Trustee may require in order to make determinations and
calculations pursuant to the Indenture. The Trustee may rely upon all
information so furnished.
SECTION 4.09 Annual Statement as to Compliance.
(a) The Servicer shall deliver to the Purchaser, the Trustee
and the Rating Agency, within 45 days following the end of the Note Issuance
Period and within 90 days following December 31, 1998 and the end of each
calendar year thereafter during which any Note or other amount under the
Indenture is outstanding, an Officer's Certificate of the Servicer, stating that
(a) a review of the activities of the Servicer during the preceding calendar
year (or shorter period, in the case of the first such Officer's Certificate)
of its performance under this Agreement has been made
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under such officer's supervision and (b) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement throughout such preceding calendar year (or shorter period,
in the case of the first such Officers Certificate), or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof.
(b) The Servicer or Seller, as applicable, shall deliver to
the Trustee, promptly after such party has obtained knowledge thereof, but in no
event later than five Business Days thereafter, an Officer's Certificate
specifying any event which with the giving of notice or lapse of time, or both,
would become an Event of Default under Section 8.01.
SECTION 4.10 Annual Accountants' Statement. The Servicer shall
cause an independent firm of qualified certified public accountants to deliver
to the Purchaser, the Rating Agency and the Trustee, within 120 days following
the Note Issuance Period and 120 days following December 31, 1998 and the end of
each calendar year thereafter during which any Note or other amount under the
Indenture is outstanding, a report addressed to the Board of Directors of the
Servicer, the Board of Directors of the Seller and to the Purchaser and the
Trustee, to the effect that such independent accountants have performed certain
agreed upon procedures with respect to information contained in the Monthly
Servicer Reports in the relevant period and with respect to the information
contained in the accounts and records relating to the servicing of the Leases,
for such period, and report on any exceptions identified in their work. The
procedures shall be agreed upon with the Trustee, the Servicer and the Purchaser
and be consistent with professional auditing standards. The letter of the
independent certified public accountants shall also indicate that such
accounting firm is independent of the Servicer, the Seller and the Purchaser
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.
SECTION 4.11 Access to Certain Information. The Servicer shall
provide (and shall cause each subservicer or agent to provide) access to the
Lease Files to the Purchaser and the Trustee when required by applicable
statutes or regulations to have access to such documentation. Access shall be
afforded without charge, but only upon reasonable request and during normal
business hours which does not unreasonably interfere with the Servicer's,
subservicer's or agent's, as applicable, normal operations or customer or
employee relations. Nothing in this Section 4.31. shall affect the obligation of
the Servicer and each subservicer or agent to observe any applicable law
prohibiting disclosure of information regarding the Lessees, and the failure of
the Servicer or any subservicer or agent to provide access to information as a
result of such obligation shall not constitute a breach of this Section 4.11.
25
SECTION 4.12 Weekly Servicer Verification. Not later than 3:00
p.m. (New York time) on the first Business Day of each week, commencing in the
week following the initial Lease Purchase Date, the Servicer will deliver to the
Purchaser and the Trustee a written statement verifying the amount delivered by
the Servicer from the Lock Box Account to the Trustee for deposit into the
Collection Account on each Business Day during the preceding week.
ARTICLE V.
DISTRIBUTIONS; STATEMENTS
SECTION 5.01 Accounts. The Servicer shall maintain the
Lock-Box Account in accordance with the Lock Box Agreement and shall perform and
comply with all of the Servicer's obligations thereunder. The Lock-Box Account
shall be an account maintained with Bank of America or such other Lock-Box Bank
as the Servicer may select; provided, however, that the Servicer shall give the
Trustee prior written notice of any change in the-location of the Lock-Box
Account and the Servicer shall give at least 10 days prior written notice of the
new location to each Lessee.
SECTION 5.02 Collections; Applications.
(a) The Servicer shall remit, or cause the Lock-Box Bank to
remit, to the Collection Account all payments by the Lessees on the Leases
(including any Purchase Option Payment, any prepayments in full of a Lease and
any applicable Payahead Amounts related to such Collection Period) other than
Servicing Fees (to the extent that sufficient funds are allocated and available
for that purpose as provided in Section 5.04) and Administrative Fees (which may
be retained by the Servicer), and all Liquidation Proceeds and Insurance
Proceeds and Rate Cap Proceeds, as collected during the Collection Period, as
soon as practicable, but in no event later than the close of business on the
second Business Day after receipt thereof (except as may be otherwise permitted
in limited circumstances pursuant to Section 3.02 (a) of the Indenture).
(b) Notwithstanding the provisions of subsection (a) hereof,
the Servicer may retain, or will be entitled to be reimbursed from, amounts
otherwise payable into, or on deposit in, the Collection Account with respect to
a Collection Period, amounts previously deposited in the Collection Account but
later determined to have resulted from mistaken deposits or payments due before
the applicable Cut-Off Date or postings or checks returned for insufficient
funds (provided that the Servicer accounts for such amounts in the Monthly
Servicer Report for the related Collection Period). The amount to be retained or
reimbursed hereunder shall not be included in funds available for distribution
with respect to the related Monthly Payment Date.
26
(c) In those cases where a subservicer is servicing a Lease
pursuant to a subservicing agreement and where required by the Rating Agency to
maintain the rating on the Notes, the Servicer shall cause the subservicer to
remit to the Collection Account as soon as practicable, but in no event later
than the close of business on the second Business Day after receipt thereof by
the subservicer (but subject to the provisions of paragraph (b)), the amounts
referred to in Section 5.02 (a) in respect of a Lease being serviced by the
subservicer.
(d) Pending their deposit into the Collection Account, all
collections, Insurance Proceeds and Liquidation Proceeds shall be segregated by
book-entry or similar form of identification on the Servicer's books and
records and identified as the property of the Trustee.
SECTION 5.03 Additional Deposits. The Seller shall deposit, or
cause to be deposited, into the Collection Account the aggregate Retransfer
Amount pursuant to Section 3.02. All remittances shall be made to the Collection
Account in Automated Clearinghouse Corporation next-day funds or immediately
available funds, no later than 3:00 p.m., New York time, on the related Deposit
Date.
SECTION 5.04 Distributions. The Servicer shall direct and
instruct the Trustee to make the deposits, withdrawals and distributions to and
from the Collection Account as provided for in the Indenture.
SECTION 5.05 Statements to Noteholders. At least three
Business Days prior to each Monthly Payment Date, the Servicer shall prepare and
deliver to the Trustee and the Rating Agency for distribution by the Trustee to
each Noteholder, a statement setting forth for the related Collection Period the
information specified to be furnished pursuant to Section 7.14 of the Indenture
on each Monthly Payment Date. Within a reasonable period of time after the end
of each calendar year, but not later than the latest date permitted by law or
otherwise necessary to permit the Trustee to act under the last paragraph of
Section 7.14 of the Indenture, the Servicer shall furnish to the Trustee a
statement prepared by the Servicer and delivered to the Trustee containing the
sum of the amounts determined in clauses (ii) and (iii) of Section 7.14 of the
Indenture for such calendar year. The Servicer shall also furnish any such other
information as the Trustee may be required to deliver pursuant to Section 7.14
of the Indenture.
ARTICLE VI.
THE SELLER
SECTION 6.01 Additional Representations of the Seller. The
Seller hereby makes the following representations as to itself on which the
Purchaser and the Trustee shall rely. The
27
representations shall speak as of the execution and delivery of this Agreemdnt
and as of each Lease Purchase Date, and shall survive each transfer of the Trust
Property to the Purchaser.
(i) organization and Good Standing; - Authorization.
The Seller has been duly incorporated and is validly existing in good
standing under the laws of its jurisdiction of incorporation, with
power and authority to own its assets and to transact the business in
which it is currently engaged, and had at all relevant times, and has,
power, authority, and legal right to acquire, own, assign and sell the
Leases and the other Trust Property.
(ii) Due Qualification. The Seller is duly qualified
to do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in each jurisdiction in
which the failure to obtain such qualification, licenses or approvals
would have a material adverse effect on the Trust Property or on the
Seller's ability to perform its obligations hereunder.
(iii) Power and Authority; Binding Obligations. The
Seller has the corporate power and authority to make execute, deliver
and perform its obligations under this Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation of
the Seller enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors, rights generally,
and by the availability of equitable remedies.
(iv) No Violation. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
the fulfillment of the terms hereof will not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation, bylaws or other constitutive documents of the Seller, or
conflict with or breach any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under,
any indenture, agreement or other instrument to which the Seller is a
party or by which it is bound or to which its properties are subject;
nor result in the creation or imposition of any lien, security
interest, charge or encumbrance (except in favor of the Trustee for the
benefit of the Noteholders) upon any of the property or assets of the
Seller or any subsidiary thereof pursuant to the terms of any such
indenture, mortgage, deed of trust, loan agreement or other agreement
instrument (other than this Agreement) to which the Seller or any
subsidiary thereof is a party or by which the Seller or any subsidiary
thereof is bound or to
28
which any of the property or assets of any of them is subject; nor
violate any law or, to the best of the Seller's knowledge, any order,
rule or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties.
(v) No Proceedings. No litigation or administrative
proceeding of or before any court, tribunal or governmental body is
currently pending or, to the knowledge of the Seller, threatened
against the Seller or any of its properties or with respect to this
Agreement or the Notes which, in the opinion of the Seller, has a
reasonable likelihood of resulting in a material adverse effect on the
Notes or the transactions contemplated by this Agreement.
(vi) No Consent Recruired. The Seller is not required
to obtain the consent of any other Person or any consent, license,
approval or authorization of, or make any registration or declaration
with, any governmental authority or agency in connection with the
execution, delivery and performance of this Agreement (except as have
been obtained), other than as may be required under the blue sky laws
of any state.
(vii) Sale. This Agreement and each ▇▇▇▇ of Sale will
effect, on each Lease Purchase Date, a valid sale, transfer, and
assignment of the Seller's interest in the Leases and the related Lease
Assets covered by such ▇▇▇▇ of Sale, enforceable against creditors of
and purchasers from the Seller.
(viii) Insolvency. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
were not made in contemplation of the insolvency of the Seller or after
the commission of any act of insolvency by the Seller.
SECTION 6.02 Merger or Consolidation of Seller. Any entity (i)
into which the Seller may be merged or consolidated, (ii) which may result from
any merger, conversion or consolidation to which the Seller shall be a party, or
(iii) which may succeed to all or substantially all of the business of the
Seller, shall be the successor to the Seller hereunder without the execution or
filing of any document or any further act by any of the parties to this
Agreement. The Seller may not enter into any merger, conversion, sale of all or
substantially all of its assets or consolidation transactions unless (v) the
surviving entity shall execute an agreement of assumption to perform every
obligation of the Seller hereunder; (w) the Seller provides the Rating Agency
with notice of such foregoing event and the name of such surviving entity and
delivers to the Trustee a letter from the Rating Agency that such merger,
conversion or consolidation will not result in a reduction of the ratings for
the Notes; (x) immediately before and
29
after giving effect to any such transaction, no representation or warranty. made
pursuant to Section 3.02 or 6.01 shall have been breached (for purposes hereof,
such representations and warranties in Section 6.01 shall speak as of the date
of consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an Event of Default shall have occurred and be
continuing; (y) the Seller shall have delivered to the Trustee an Officer's
Certificate and an opinion of Counsel each stating-that such consolidation,
merger, or succession and such agreement or assumption complies with this
Section 6.02 and that all conditions precedent, if any, provided for in the
agreement relating to such transaction have been complied with; and (z) the
Seller shall have delivered to the Trustee an Opinion of Counsel, either (A)
stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Trustee in the
Trust Property as required herein, and reciting the details of such filings, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest.
SECTION 6.03 Limitation on Liability of Seller and Others. The
Seller and any director, officer, employee or agent of the Seller may rely in
good faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Seller shall not be under any obligation under this Agreement to
appear in, prosecute, or defend any legal action that shall be unrelated to its
obligations under this Agreement.
SECTION 6.04 Covenants of Seller.
(a) The Seller shall execute and file such UCC financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain, and protect the respective interests of the Purchaser and the Trustee
in the Leases, the Equipment, the other Lease Assets and the other Trust
Property and in the proceeds thereof. The Seller shall deliver (or cause to be
delivered) to the Purchaser and the Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing. In the event that the Seller fails to perform its
obligations under this subsection, the Purchaser or the Trustee may do so, on
the Seller's behalf, at the expense of the Seller. The Seller hereby grants the
Purchaser and the Trustee a power of attorney to effectuate the provisions of
the preceding sentence.
(b) The Seller shall not change its name, identity, or
corperate structure in any manner that would, could, or might make any UCC
financing statement or continuation statement filed by the Seller in accordance
with paragraph (a) above seriously misleading within the meaning of ss. 9-402
(7) of the UCC, unless it shall have given the Purchaser and the Trustee at
least 60 days'
30
prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed ▇▇▇▇ financing statements or continuation
statements as requested by the Purchaser or the Trustee.
(c) The Seller shall give the Purchaser at least 60 days'
prior written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed UCC financing or
continuation statement or of any new UCC financing statement and shall promptly
file any such amendment as requested by the Purchaser or the Trustee. The Seller
shall at all times maintain each office from which it shall service Leases, and
its principal executive office, within the United States of America. The Seller
shall pay all filing fees or taxes payable in respect of any UCC financing or
continuation statements required to be filed pursuant to this Section 6.05.
(d) The Seller shall maintain accounts and records as to
each Lease accurately and in sufficient detail to permit the reader thereof to
know at any time the status of such Lease, including payments and recoveries
made and payments owing (and the nature of each).
(e) The Seller shall maintain its computer systems so that,
from and after the time of sale hereunder of the Leases to the Purchaser, the
Seller's master computer records (including archives) that refer to a Lease
shall indicate clearly the interest of the Purchaser in such Lease and that such
Lease has been sold to the Purchaser and is owned by the Trustee. Indication of
the Purchaser's and the Trustee's ownership of a Lease shall be deleted from or
modified on the Seller's computer systems when, and only when, the Lease shall
have been paid in full or repurchased and the Retransfer Amount has been paid.
(f) If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in other equipment
leases or installment sale contracts to any prospective purchaser, lender, or
other transferee, the Seller shall give to such prospective purchaser, lender,
or other transferee computer tapes, records, or print-outs (including any
restored from archives) that, if they shall refer in any manner whatsoever to
any Lease, shall indicate clearly that such Lease has been sold to the Purchaser
and is owned by the Trustee.
(g) The Seller shall permit the Purchaser and the Trustee
and their respective agents upon reasonable notice at any time during normal
business hours which does not unreasonably interfere with its normal operations
or customer or employee relations, to confer with the Seller's officers and
relevant other personnel, to confer with the Seller's independent auditors and
to inspect, audit, and make copies of and abstracts from its records regarding
any Lease.
31
(h) Upon request by the Purchaser or the Trustee, the Seller
shall furnish to the Purchaser or the Trustee (as the case may be), within five
Business Days, a current composite Schedule of Leases held by the Purchaser as
of the end of the most recent Collection Period.
(i) The Seller shall deliver to the Purchaser and the
Trustee, promptly after the execution and delivery of this Agreement and of each
amendment hereto, an opinion of Counsel either (a) stating that, in the opinion
of such counsel, all UCC financing statements and continuation statements
necessary to preserve and protect fully the interest of the Purchaser and the
Trustee in the Lease Assets have been filed, or (b) stating that, in the opinion
of such counsel, no such action shall be necessary to preserve and protect such
interest and (c) stating that such amendment is in compliance with the terms of
this Agreement and the Indenture.
SECTION 6.05 Other Liens or Interests. Except for the
conveyances-hereunder, the Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create incur, assume or suffer to exist any Lien on
the Leases or any other Lease Assets or any interest therein, and the Seller
shall defend the right, title, and interest of the Purchaser and the Trustee in,
to and under the Lease and the other Lease Assets against all claims of third
parties claiming through or under the Seller; provided, however, that the
Seller's obligations to the Trustee under this Section 6.06 shall terminate upon
the termination of the Indenture pursuant to Section 11.01 thereof.
SECTION 6.06 Costs and Expenses. The Seller agrees to pay all
reasonable costs and disbursements in connection with the performance. of its
obligations hereunder and under the Sale and Servicing Agreement.
SECTION 6.07 Indemnification.
(a) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee, and the Noteholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from any breach of any of the Seller's representations and warranties contained
herein or in any manner relating to or arising out of the. transactions
contemplated by this Agreement.
(b) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee, and the Noteholders from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or resulting
from the use, ownership, operation or sale by the Seller or any Affiliate
thereof of any item of Equipment.
(c) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee, and the Noteholders from and
32
against any taxes that may at any time be asserted against such persons with
respect to the transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, general corporation, tangible or
intangible personal property, privilege, or license taxes (but not including any
taxes asserted with respect to, and as of the date of, the transfer and
assignment of the Trust Property to the Trustee or the issuance and original
sale of the Notes, which shall be indemnified by the Servicer pursuant to
Section 7.02 (ii) hereof and the Indenture) and costs and expenses in defending
against the same, arising by reason of the acts to be performed by the Seller
under this Agreement or imposed against such Persons. In addition, the Trustee
shall be indemnified by the Seller for any liability or assessment against the
Trustee resulting from an error or omission in any tax or information return
prepared by the Seller.
(d) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee and the Noteholders from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such cost,
expense, loss, claim, damage, or liability arose out of, or was imposed upon
such persons through the gross negligence, willful misfeasance, or bad faith of
the Seller in the performance of its duties under this Agreement or by reason of
reckless disregard of the Seller's obligations and duties under this Agreement.
(e) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Trustee and the Noteholders from and against any loss, liability
or expense incurred by reason of the violation by the Seller of federal or state
securities laws in connection with the registration or the sale of the
Certificates.
Indemnification under this Section 6.08 shall include
reasonable fees and expenses of counsel plus expenses of litigation and shall
survive termination of the Indenture pursuant to Section 11.01 thereof. The
indemnity obligations hereunder shall be in addition to any obligation that the
Seller may otherwise have.
SECTION 6.08 Sale. Each of the Seller and the Purchaser agrees
to treat each conveyance pursuant to this Agreement and each ▇▇▇▇ of Sale
delivered hereunder for all purposes (subject to consolidation for financial
accounting and tax purposes) as a sale of the Seller's interest in the Leases
and related Lease Assets, including all of the Seller's right, title and
interest in and to the related Equipment, on all relevant books, records and
other applicable documents.
The execution and delivery of this Agreement shall constitute
an acknowledgement by the Seller and the Purchaser that each intends that the
assignment and transfer herein contemplated constitute an outright sale and
assignment to the Purchaser by the Seller of its interest in the Leases, and the
other Lease Assets and not for security, conveying good title in such interests
free and clear of any liens, and that such interest shall not be a part
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of the Seller's estate in the event of the bankruptcy or the occurrence of
another similar event, of, or with respect to, the Seller. In the event that
such conveyance is determined to be made as security for a loan made by the
Purchaser, the Trustee or the Noteholders to the Seller, the parties intend that
the Seller shall have granted to the Purchaser a security interest in all of the
Seller's right, title and interest in the Lease Assets and that this Agreement
shall constitute a security agreement under applicable law.
SECTION 6.09 Accounting Statements. The Seller will cooperate
with the Purchaser and its independent public accountants in making available
all information and taking all steps, in each case reasonably necessary to
permit such accountants to deliver the letters required of them, if any, under
the Indenture.
ARTICLE VII.
THE SERVICER; REPRESENTATIONS AND INDEMNITIES
SECTION 7.01 Representations of the Servicer. The Servicer
hereby makes the following representations on which the Trustee shall rely. The
representations shall speak as of the execution and delivery of this Agreement,
and shall survive the transfer of the Leases and the other Trust Property to the
Trustee.
(i) Organization and Good Standing. The Servicer has
been duly incorporated and is validly existing in good standing under
the laws of its jurisdiction of incorporation, with power and authority
to own its assets and to transact the business in which it is currently
engaged, and to acquire, own, sell, and service the Leases and the
other Trust Property and to hold the Lease Files as custodian on behalf
of the Trustee.
(ii) Due Qualification. The Servicer is duly
qualified to do business as a foreign corporation in good standing, and
has obtained all necessary licenses and approvals, in each jurisdiction
in which the failure to obtain such qualifications, licenses or
approvals would have a material adverse effect on the Trust Property or
on the Servicer's ability to perform its obligations hereunder.
(iii) Power and Authority; Binding Obligations. The
Servicer has the corporate power and authority to make, execute,
deliver and perform its obligations under this Agreement, and has
taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. When executed and
delivered, this Agreement will constitute the legal, valid and binding
obligation of the Servicer enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of
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creditors' rights generally, and by the availability of
equitable remedies.
(iv) No Violation. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
the fulfillment of the terms hereof will not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or conflict with or breach any
of the terms or provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, agreement or other
instrument to which the Servicer is a party or by which it is bound or
to which its properties are subject; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement or other instrument (other than this
Agreement); nor violate any law or, to the best of the Servicer's
knowledge, any order, rule, or regulation applicable to the Servicer of
any court or of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over
the Servicer or its properties.
(v) No Proceedings. No litigation or administrative
proceeding of or before any court, tribunal or governmental body is
currently pending or, to the knowledge of the Servicer, threatened,
against the Servicer or any of its properties or with respect to this
Agreement or the Notes which, in the opinion of the Servicer, has a
reasonable likelihood of resulting in a material adverse effect on the
Notes or the transactions contemplated by this Agreement.
(vi) No Consent Recruired. The Servicer is not
required to obtain the consent of any other Person or any consent,
license, approval or authorization of, or make any registration or
declaration with, any governmental authority or agency in connection
with the execution, delivery and performance by the Servicer of this
Agreement (except as have been obtained).
SECTION 7.02 Liability of Servicer; Indemnities. The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer or the Seller under this Agreement and
shall have no other obligations or liabilities hereunder.
(i) The Servicer shall indemnify, defend and hold
harmless the Trustee, the Noteholders and the Seller from and against
any and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from the use, ownership, operation or sale
by the Servicer or any Affiliate thereof of an item of Equipment.
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(ii) The Servicer shall indemnify, defend and hold
harmless the Trustee, the Noteholders and the Seller from and against
any taxes that may at any time be asserted against such persons with
respect to the transactions contemplated in this Agreement, including,
without limitation, any sales, gross receipts, general corporation,
tangible or intangible personal property, privilege, or license taxes
(but not including any taxes asserted with respect to, and as of the
date of, the transfer of the Leases to the Purchaser or asserted with
respect to ownership of the Trust Property by the Purchaser, which
shall be indemnified by the Seller pursuant to Section 6.07(c) hereof)
and costs and expenses in defending against the same, arising by reason
of the acts to be performed by the Servicer under this Agreement or
imposed against such Persons. In addition, the Trustee shall be
indemnified by the Servicer for any liability or assessment against the
Trustee resulting from any error or omission in any tax or information
return prepared by the Servicer.
(iii) The Servicer shall indemnify, defend and hold
harmless the Trustee, the Noteholders and the Seller from and against
any and all costs, expenses, losses, claims, damages, and liabilities
to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon such persons through the
actions or omissions of the Servicer or the willful misfeasance, gross
negligence, or bad faith of the Servicer in the performance of its
duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(iv) The Servicer shall indemnify, defend and hold
harmless the Trustee from and against all costs, expenses, losses,
claims, damages, and liabilities arising out of or incurred in
connection with (x) any claims, actions, suits or judgments asserted or
imposed against it and arising out of the transactions contemplated by
this Agreement or the Indenture, (y) any breach of any of the
Servicer's representations or warranties contained herein and (z) the
acceptance, administration or performance of the trusts and duties
herein contained or set forth in the Indenture, except to the extent
that such cost, expense, loss, claim, damage or liability: (a) shall be
due to the willful misfeasance, gross negligence or bad faith of the
Trustee; (b) relates to any tax other than the taxes with respect to
which the Servicer shall be required to indemnify the Trustee pursuant
to this Agreement or the Indenture; (c) shall arise from the Trustee's
breach of the indenture; or (d) shall be one as to which the Seller has
reimbursed the Trustee.
For purposes of this Section, in the event of the
termination of the rights and obligations of the Servicer pursuant to
Section 8.01, or a resignation by the Servicer pursuant to this
Agreement, such Servicer shall be deemed to be the Servicer pending
appointment of a successor Servicer
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(other than the Trustee) pursuant to Section 7.02. Furthermore,
indemnities in this Section 7.02 from the Servicer to the Trustee
shall also include indemnities from the initial Servicer to the Trustee
in its capacity as successor Servicer hereunder; provided that no
failure or inability of the Servicer to provide or perform such
indemnities shall in any respect alter or affect the Trustee's
obligations to act as successor Servicer hereunder. For purposes of
this Section, the reference to Trustee includes any director, officer,
employee or agent of the Trustee.
Indemnification under this Section 7.02 shall include
reasonable fees and expenses of counsel of each indemnified Person plus expenses
of litigation. If the Servicer or the Seller shall have made any indemnity
payments pursuant to this Section 7.02 and the recipient thereafter collects any
of such amounts from others, the recipient shall promptly repay such amounts to
the Servicer and/or the Seller, without interest. The indemnities under this
Section 7.02 shall survive the resignation or removal of the Servicer and the
Trustee, the termination of this Agreement and the termination of the Indenture
pursuant to Section 11.01 thereof.
SECTION 7.03 Merger or Consolidation of Servicer. Any entity
(i) into which the Servicer may be merged or consolidated, (ii) which may result
from any merger, conversion, or consolidation to which the Servicer shall be a
party, or (iii) which may succeed to all or substantially all of the business of
the Servicer, shall be the successor to the Servicer hereunder without the
execution or filing of any document or any further act on the part of any of the
parties to this Agreement. The Servicer may not enter into any merger,
conversion, sale of all or substantially all of its assets or consolidation
transaction unless (v) the surviving entity shall execute an agreement of
assumption to perform every obligation of the Servicer hereunder; (w) the
Servicer provides the Rating Agency with notice of such foregoing event and the
name of such surviving entity and delivers to the Trustee a letter from the
Rating Agency that such merger, conversion or consolidation will not result in a
reduction or withdrawal of the then current rating of either Class of Notes by
the Rating Agency; (x) immediately before and after giving effect to such
transaction, no representation or warranty made pursuant to Section 7.01 shall
have been breached (for purposes hereof, such representations and warranties in
Section 7.01 shall speak as of the date of consummation of such transaction) and
no event that, after notice or lapse of time, or both, would become an Event of
Default shall have occurred and be continuing; (y) the Servicer shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger, or succession and such agreement or
assumption complies with this Section 7.03 and that all conditions precedent, if
any, provided for in the agreement relating to such transaction have been
complied with; and (z) the Servicer shall have delivered to the Trustee an
Opinion of Counsel either (A) stating that, in the opinion of such counsel, all
UCC financing statements and continuation statements and amendments thereto
have
37
been executed and filed that are necessary fully to preserve and protect the
interest of the Trustee in the Trust Property as required herein, and reciting
the details of such filings, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest.
SECTION 7.04 Limitation on Liability of Servicer and Others.
(a) Neither the Servicer nor any agents of the Servicer shall be under any
liability to the Trustee or the Noteholders, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or errors in judgment; provided, however, that this
provision shall not protect the Servicer or any such agent against any liability
that would otherwise be imposed by reason of willful misfeasance, gross
negligence, or bad faith in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement or a breach of any
representation or warranty of the Servicer contained herein.
(b) Except as provided in this Agreement, the Servicer
shall not be under any obligation to appear in, prosecute, or defend any legal
action that shall not be incidental to its duties to service the Leases in
accordance with this Agreement; provided, however, that the Servicer may
undertake, in accordance with the terms hereof, at its expense, any reasonable
action that it may deem necessary or desirable in respect of this Agreement and
the rights and duties of the parties to this Agreement and the interests of the
Noteholders under this Agreement.
(c) The Servicer and any director or officer or employee or
agent of the Servicer may rely in good faith on the advice of counsel or on any
document of any kind, prima facie properly executed and submitted by any Person,
respecting any matters arising hereunder.
SECTION 7.05 Servicer Not to Resign. The Servicer shall not
resign from its obligations and duties under this Agreement except upon
determination that the performance of its duties shall no longer be permissible
under applicable law. Notice of any such determination permitting the
resignation of the Servicer shall be communicated to the Trustee and the Rating
Agency at the earliest practicable time (and, if such communication is not in
writing, shall be confirmed in writing at the earliest practicable time) and any
such determination permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel (which counsel shall be outside counsel) to such effect
delivered to the Trustee concurrently with such notice. No such resignation
shall become effective until the Trustee or a successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 8.02.
SECTION 7.06 Protection of Interest of Trust Property.
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(a) The Servicer shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain, and protect the respective interests of the Purchaser under this
Agreement and of the Noteholders and the Trustee under the Indenture in the
Trust Property and in the proceeds thereof. The Servicer shall deliver (or cause
to be delivered) to the Trustee file-stamped copies, or filing receipts for, any
document filed as provided above, as soon as available following such filing. In
the event that the Servicer fails to perform its obligations under this
subsection, the Trustee may (but shall not be required to) do so, on behalf of
the Servicer, at the Servicer's expense. The Servicer hereby irrevocably
appoints the Trustee its attorney-in-fact, and grants the Trustee a power of
attorney, coupled with an interest and with full power or substitution, to
effectuate the provisions of the preceding sentence.
(b) The Servicer shall not change its name, identity, or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9-402(7) of the UCC, unless
it shall have given the Trustee at least 60 days prior written notice thereof
and unless the Servicer shall execute and file amended financing statements or
continuation statements to cure such misleading effect.
(c) The Servicer shall give the Trustee at least 60 days
prior written notice of any relocation of any of their respective principal
executive offices if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. The
Servicer shall at all times maintain each office from which it shall service
Leases, and the Servicer shall keep at all times its principal executive office
and the Lease Files, within the United States of America. The Servicer, as
applicable, shall pay all filing fees or taxes payable in respect of any
financing or continuation statements required to be filed pursuant to this
Section.
(d) The Servicer shall maintain (and shall cause any
subservicer to maintain) accounts and records as to each Lease accurately and in
sufficient detail to permit (i) The reader thereof to know at any time the
status of such Lease, including payments and recoveries made and payments owing
(and the nature of each) and (ii) reconciliation between payments or recoveries
on (or with respect to) each Lease and the amounts from time to time deposited
in the Collection Account in respect of such Lease.
(e) The Servicer shall maintain its computer systems so
that, from and after the time of transfer under this Agreement of the Leases to
the Trustee, the master computer records
39
of the Seller and the Servicer (or the subservicer) (including archives) that
refer to a Lease shall indicate clearly that such Lease is owned by the Trustee.
Indication of the Trustee's ownership of a Lease shall be deleted from or
modified on such computer systems when, and only when, the Lease shall have
expired, been terminated, or been reacquired pursuant hereto.
(f) If at any time the Servicer shall propose to sell, grant
a security interest in, or otherwise transfer any interest in an equipment lease
to any prospective purchaser, creditor or other transferee, the Servicer shall
make available to such prospective purchaser, creditor, or other transferee
computer tapes, records, or print-outs (including any restored from archives)
that, if they shall refer in any manner whatsoever to any Lease, shall indicate
clearly that such Lease is owned by the Trustee.
(g) The Servicer shall permit (and shall cause any
subservicer to permit) the Trustee and its agents upon reasonable notice at any
time during normal business hours which does not unreasonably interfere with the
Servicer's (or such subservicer's) normal operations or customer or employee
relations to inspect, audit, and make copies of and abstracts from the
Servicer's (or such subservicer's) records regarding the Leases.
ARTICLE VIII.
DEFAULT
SECTION 8.01 Events of Default. If any one of the following
events ("Events of Default") shall occur and be continuing:
(i) any failure by the Servicer or the Seller to
deliver to the Trustee, for distribution to Noteholders, any proceeds
or payment required to be so delivered under the terms of this
Agreement or the Indenture, in each case that continues unremedied for
a period of three Business Days after the due date thereof; or
(ii) failure on the part of the Servicer or the
Seller duly to observe or to perform in any material respect any other
covenants or agreements of the Servicer, or the Seller set forth in
the Notes, in the Indenture or in this Agreement, which failure shall
(a) materially and adversely affect the rights of the Noteholders and
(b) continues unremedied for a period of 30 days after the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given (1) to the Servicer by the Trustee or
(2) to the Trustee and the Servicer and the Seller (as the case may be)
by the Holders of Notes evidencing not less than a majority of the Note
Principal Balance of the Notes; or
40
(iii) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Servicer
or the Seller in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Servicer or the
Seller a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Servicer or the Seller under any applicable
federal or state law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Servicer, or the Seller or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any of the foregoing unstayed and in effect for a period
of 90 consecutive days; or
(iv) the commencement by the Servicer or the Seller
of a voluntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or
of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for
relief in respect of the Servicer or the Seller in an involuntary case
or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement
of any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law, or the consent by
it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestratorr or similar official of the Servicer or the Seller or of
any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due,
or the taking of corporate action by the Servicer or the Seller in
furtherance of any such action; or
(v) a final nonappealable judgment of a court of
competent jurisdiction for more than $1,000,000 shall be entered
against JLACC and shall not be stayed, vacated, bonded, paid or
discharged within 30 days; or
(vi) JLACC shall fail to pay, when and as the same
shall become due and payable (after giving effect to any applicable
grace period), any principal or interest, regardless of amount, due in
respect of any indebtedness Of JLACC in a principal amount in excess of
$5,000,000; provided, however, that such failure to pay shall not
constitute an Event of Default pursuant to this clause if such
non-payment is subject to good faith dispute by JLACC; or
41
(vii) as of the last day of any calendar month, the
Three-Month Average Default Ratlio for the Leases exceeds 4.0%, or the
Three-Month Average Delinquency Ratio for the Leases exceeds 5.0%.
then, and in each and every case and so long as an Event of Default shall not
have been remedied, either the Trustee or the Holders of Notes evidencing not
less than 66-2/3% of the aggregate Note Principal Balance, by notice given in
writing to the Servicer (and to the Trustee if given by the Noteholders) may
terminate all of the rights and obligations of the Servicer under this Agreement
and/or direct the Lessees to make all payments under the Leases directly to the
Trustee. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Notes or the Trust Property or otherwise, shall pass to and be vested in
the Trustee pursuant to this Section 8.01; and, without limitation, the Trustee
shall be hereby authorized and empowered to execute and deliver, on behalf of
the predecessor Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Lease Files
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer and the Trustee in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the successor Servicer for administration by it of all cash amounts
that shall at the time be held by the predecessor Servicer for deposit, shall
have been deposited by the Servicer in the Collection Account, or shall
thereafter be received with respect to a Lease or any other portion of the Trust
Property. All reasonable costs and expenses (including attorneys' fees) incurred
by the Trustee and the successor Servicer in connection with the transfer of
servicing to the successor Servicer and amending this Agreement to reflect such
succession as Servicer pursuant to this Section 8.01 shall be paid by the
predecessor Servicer upon presentation of reasonable documentation of such costs
and expenses.
SECTION 8.02 Trustee to Act; Appointment of Successor. Upon
the Servicer's receipt of notice of termination pursuant to Section 8.01 or upon
resignation of the Servicer pursuant to Section 7.05, the Trustee shall be the
successor in all respects to the Servicer in its capacity as Servicer under this
Agreement, and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the Servicer by the
terms and provisions of this Agreement; provided that the Trustee as successor
Servicer shall have no obligations whatsoever with respect to Sections 3.03,
4.05 (c), 4.06, 4.10, or 7.02 and shall not be deemed at any time to have made
any of the representations or warranties of the Servicer. Without limiting any
of the foregoing, under no circumstance shall the Trustee (as successor
Servicer) be deemed to have incurred any obligation to make any advance
hereunder or to repurchase or substitute any
42
Leases. Prior to the time specified in the first sentence of this Section, the
Trustee shall have no obligation to perform any backup or standby Servicer
operations or functions. As compensation therefor, the Trustee shall be entitled
to such compensation (whether payable out of the Collection Account or
otherwise) as the Servicer would have been entitled to under this Agreement if
no such notice of termination or resignation had been given. The successor
Servicer shall not be liable in any respect for any duties, responsibilities,
obligations or liabilities of the Servicer or any predecessor Servicer arising
prior to the date of the successor Servicer's assumption of duties or
appointment. In the event the Trustee becomes the successor Servicer, the prior
Servicer must agree to indemnify the Trustee against any claims or expenses
arising out of such prior servicing performance and, notwithstanding the
appointment of any successor Servicer, the initial Servicer shall continue to be
obligated in favor of the Trustee with regard to Section 7.02 hereof; provided
that no failure or inability of the initial Servicer to perform such obligations
shall in any respect alter or affect the Trustee's obligations to act as
successor Servicer hereunder. Notwithstanding the above, the Trustee shall, if
it shall be legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, any established financial institution, having a net
worth of not less than $10,000,000 and whose regular business shall include the
servicing of equipment leases, as successor Servicer under this Agreement;
Provided that, pending such appointment, the Trustee shall continue to act as
Servicer (unless it is legally unable to act as Servicer), and provided further
that (unless the Trustee is legally unable to act as Servicer, in which event
the outgoing Servicer shall act as Servicer until the appointment) the
appointment of any such successor Servicer will not result in the withdrawal or
reduction of the outstanding rating assigned to the Notes of either Class by the
Rating Agency. In connection with such appointment, the Trustee may make such
arrangements for the compensation of such successor Servicer out of payments on
the Trust Property as it and such successor Servicer shall agree; provided,
however, that the amount of such compensation shall not exceed a reasonable fee
(taking into account the estimated costs of servicing and a reasonable profit).
Such reasonable fee shall be determined by the Trustee, but shall not be greater
in any month than the Servicing Fee would be if the Servicing Fee Rate were 1.0%
per annum, and provided such fee is paid solely from the Collection Account in
accordance with the priorities of payment specified in Section 3.07(b) and the
other provisions of the Indenture. The Trustee and such successor Servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Trustee (unless the Trustee is legally
unable to act as Servicer, in which event the outgoing Servicer shall act as
Servicer until the appointment, and the acceptance of appointment) shall not be
relieved of its duties as successor Servicer under this Section 8.02 until the
newly appointed successor Servicer shall have assumed the responsibilities and
obligations of the Servicer under this Agreement. The outgoing Servicer shall
provide
43
the successor Servicer with all files, computer tapes and software, ledgers and
records, and access to all Servicer locations and personnel, that (in each case)
are necessary to enable the successor Servicer to perform the Servicer's duties
hereunder. Neither the Trustee nor any successor Servicer shall be deemed to be
in default hereunder by reason of any failure to make, or any delay in making
any distribution hereunder or any portion thereof caused solely by the failure
or delay of the outgoing Servicer to deliver cash, documents, files, computer
tapes, ledgers or records to it or otherwise on account of the inaccuracy of any
information that it receives from the outgoing Servicer. Notwithstanding the
foregoing provisions of this Section, the Trustee upon becoming obligated to be
successor Servicer hereunder may, with the prior written approval of each
Noteholder and of the Rating Agency, designate another Person to instead be such
successor Servicer; provided that such approvals are obtained from each
Noteholder and the Rating Agency and such Person agrees in writing to be the
successor Servicer in substantially such manner as the Trustee would have been
for all purposes of this Agreement.
SECTION 8.03 Notification to Noteholders. Upon any notice of
an Event of Default or upon any termination of the Servicer or appointment of a
successor Servicer pursuant to this Article IX, the Trustee shall give written
notice within two Business Days thereof to Noteholders at their respective
addresses of record and to the Rating Agency.
SECTION 8.04 Waiver of Past Defaults. The Noteholders holding
Notes evidencing not less than 66-2/3% of the Note Principal Balance of all
Notes may, on behalf of all Holders of Notes, waive any default by the Servicer
(or, so long as JLACC is the Servicer, the Seller) in the performance of its
obligations hereunder and its consequences, except a default in the failure to
make any required deposits to or payments from the Collection Account in
accordance with this Agreement, which shall require the consent of 100% of the
Noteholders. Upon any such waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.01 Amendment. This Agreement may be amended in
writing by the Seller, the Servicer and the Purchaser, with the consent of the
Trustee, without prior notice to or the consent of any of the Noteholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement
which may be inconsistent with any other provision herein, or to add any other
provisions with respect to matters or questions arising under this
44
Agreement, which are not inconsistent with the provisions of this Agreement;
provided however, that such action shall not, as agreement; provided, however,
that evidenced by an Opinion of Counsel delivered to the Trustee, adversely and
materially affect the interests of the Trustee or any Noteholder. A copy of any
such amendment shall be delivered by the Servicer to the Rating Agency promptly
following the execution and delivery thereof.
This Agreement may also be amended in writing from time to
time by the Seller, the Servicer and the Purchaser, subject to the receipt by
the Purchaser and the Trustee of notice in writing from the Rating Agency that
the execution and delivery of such amendment would not result in the reduction
or withdrawal of the then-current rating of the Notes of either Class by the
Rating Agency, with the consent of the Trustee acting with the consent of
Noteholders evidencing not less than 66-2/3% of the Note Principal Balance, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement, or of modifying in any manner the
rights of the Noteholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments of Leases, or distributions that shall be
required to be made on any Note or (b) reduce the aforesaid percentage required
to consent to any such amendment, in each case without the consent of Holders of
all Notes then outstanding. Promptly after the execution of any such amendment
or consent, the Trustee shall furnish written notification of the substance of
such amendment or consent to each Noteholder. Further, any amendment,
modification or waiver of this Agreement which affects the rights, duties or
obligations of the Trustee (as Trustee or as successor Servicer) may only be
effected with the prior written consent of (as applicable) the Trustee as
Trustee or as such successor Servicer.
SECTION 9.02 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 9.03 Governing Law. This Agreement shall be construed
in accordance with the substantive laws of the State of New York (without regard
to conflicts of laws) and the obligations, rights, and remedies of the parties
under this Agreement shall be determined in accordance with such laws.
SECTION 9.04 Notices. All demands, notices, and communications
under this Agreement shall be in writing, personally delivered or mailed by
certified mail, telecopy or courier, return receipt requested, and shall be
deemed to have been duly given upon receipt
45
(a) in the case of the Seller and the Servicer,
JLA Credit Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) in the case of the Purchaser,
JLA Funding Corporation II
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice required or permitted to be mailed to either party
hereto shall be given by first class mail, postage prepaid, at the address of
such party with (in each case) a copy to the Trustee at ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President, Corporate
Trust Administration. Any notice to any such party so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not such party shall receive such notice.
SECTION 9.05 Severability of Provisions. If any one or more of
the covenants, agreements, provisions, or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the Notes or
the rights of the Holders thereof.
SECTION 9.06 Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Section 6.02 or Section 7.03,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Trustee and Holders of Notes evidencing not less
than 66-2/3% of the Note Principal Balance.
SECTION 9.07 Submission to Jurisdiction; Venue. The parties
hereto with respect to any action or claim brought against or by the Trustee
submit to jurisdiction in the state or federal courts in New York, New York, and
agree to New York, New York as the venue for any such claim or action.
SECTION 9.08 No Bankruptcy Petition. Each of JLACC and the
Servicer covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all debt
46
securities issued by the Purchaser, it will not institute against, or join any
other Person in instituting against, the Purchaser any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law. The Purchaser
represents, warrants, and covenants that it has obtained, and will in the future
obtain, a no-petition agreement from each and every Person that enters into any
agreement of any kind with the Purchaser.
SECTION 9.09 Rule 144A Information. For so long as the Notes
are "restricted securities" within the meaning of Rule 144A of the Securities
Act, the Seller and the Servicer agree to cooperate with each other to provide
to any Noteholder and to any prospective purchaser of Notes designated by such a
Noteholder, upon the request of such Noteholder or prospective purchaser, any
information that is required to be provided to such Holder or prospective
purchaser to satisfy Rule 144A(d) (4) (or any successor provision) under the
Securities Act. The Seller will be responsible for the physical delivery of any
such information so requested.
SECTION 9.10 Limited Recourse. Each of the Seller and the
Servicer agrees that any payments to be made by the Purchaser hereunder shall be
made only to the extent that the Purchaser has funds available for such purpose.
The parties hereto agree, further, that the obligations of the Purchaser to make
any payment pursuant to this Agreement shall be subject entirely to the
availability of funds to the Purchaser and to the priorities of payment
specified in the Indenture and no insufficiency of such available funds shall
constitute a claim against the Purchaser. The provisions of this Section shall
survive any termination of this Agreement.
SECTION 9.11 Trustee Rights. Each of the Seller and the
Servicer agrees that the Trustee shall be a third party beneficiary of this
Agreement as if it were a party hereto with all corresponding rights. In
addition, each of the Seller and the Servicer expressly acknowledges and agrees
that all of the Purchaser's right, title and interest in, to and under this
Agreement, and each ▇▇▇▇ of Sale delivered hereunder, is being collaterally
assigned and pledged by the Purchaser to the Trustee for the benefit of the
Noteholders pursuant to the Indenture in order to secure the Purchaser's
obligations under the Indenture and the Notes.
47
IN WITNESS WHEREOF, the parties have caused this Sale and Servicing
Agreement to be duly executed by their respective offices as of the day and year
first above written.
JLA CREDIT CORPORATION,
Seller and Servicer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: SVPICF
JLA FUNDING CORPORATION II,
Purchaser
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
Consented and Agreed to:
LTCB TRUST COMPANY,
not in its individual capacity
but solely in its capacity
as Trustee
By:
-------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have caused this Sale and Servicing
Agreement to be duly executed by their respective offices as of the day and year
first above written.
JLA CREDIT CORPORATION,
Seller and Servicer
By:
----------------------------
Name:
Title:
JLA FUNDING CORPORATION II,
Purchaser
By:
----------------------------
Name:
Title:
Consented and Agreed to:
LTCB TRUST COMPANY,
not in its individual capacity
but solely in its capacity
as Trustee
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: SVP
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
EXHIBIT A
[FORM OF ▇▇▇▇ OF SALE]
▇▇▇▇ OF SALE
FOR VALUE RECEIVED, JLA CREDIT CORPORATION, a Delaware
corporation (the "Seller"), hereby sells transfers and assigns to JLA FUNDING
CORPORATION II, a Delaware corporation (the "Purchaser"), without recourse, all
of the right, title and interest of the Seller, whether now owned or hereafter
acquired, in, to and under all accounts, money, chattel paper, securities,
instruments, documents, deposit accounts, certificates of deposit, letters of
credit, advices of credit, banker's acceptances, uncertificated securities,
general intangibles, contract rights, goods and other property consisting of,
arising from or relating to the Leases listed on Schedule 1 hereto (the
"Schedule of Leases"), including, without limitation, (a) all Rent Payments,
Retransfer Amounts and other amounts due or becoming due with respect thereto
(other than any payments due pursuant to the terms of any Lease on or before the
last day of the calendar month preceding the date hereof or such other date as
is specified as the cut-off date in the attached Schedule of Leases (the
"related Cut-Off Date"), (b) all rights of the Seller to or under any guarantees
of or collateral for the Lessee's obligations under any Lease, (c) the amounts
representing Security Deposit Offsets applied to unpaid Rent Payments and
Purchase Option Payments due on or to become due after the applicable Cutoff
Date, any guaranty relating to a Lease and all moneys constituting collections
on such Leases from time to time on deposit in the Lock-Box Account, (d) all
rights of the Seller under any program agreement, purchase agreement, assignment
agreement, or other document pursuant to which the Seller acquired an interest
in any Lease and the Equipment subject thereto and any support agreements or
guarantees related thereto, and (e) each Insurance Policy, if any, covering
Equipment, including any Insurance Proceeds received pursuant to such Insurance
Policy after the applicable Cut-off Date, and (f) all proceeds of any of the
foregoing. The Seller hereby also sells, transfers and assigns to the Purchaser
all of the Seller's right, title and interest in and to all Equipment covered by
each of the Leases listed in the Schedule of Leases and all proceeds thereof.
The Seller warrants to the Purchaser that the right, title and interest assigned
hereby are not subject to any lien, claim or encumbrance. Although the parties
intend, and have expressly so stated, that the conveyance of the Seller's right,
title and interest in, to and under the Leases (including the related Equipment)
pursuant to this ▇▇▇▇ of Sale shall constitute a purchase and sale and not a
financing, in order to protect the Purchaser in the event that, despite such
express intention that the transaction be treated as a sale, such conveyance is
deemed to be a financing, the Seller hereby grants to the Purchaser a first
priority security interest in all of the Seller's right, title and interest in,
to and under the Leases, including all proceeds thereof, to secure the repayment
of such financing, and agrees that this ▇▇▇▇ of Sale shall constitute a
security agreement under applicable law. All capitalized terms used in this ▇▇▇▇
of Sale and not defined herein shall have the meanings assigned to such terms in
the Sale and Servicing Agreement. The Seller hereby additionally represents and
warrants to the Purchaser that all representations and warranties of Seller with
respect to the Leases in Section 3.02 of the Sale and Servicing Agreement are
true and correct as of the date hereof.
IN WITNESS WHEREOF, the Seller has executed this ▇▇▇▇ of Sale
as of the date set forth below.
Dated: ___________________ JLA CREDIT CORPORATION,
a Delaware corporation
By:_________________________________
Name:
Title:
Accepted: JLA FUNDING CORPORATION II,
a Delaware corporation
By:_________________________________
Name:
Title:
2
EXHIBIT B
Note Issuance Period
[FORM OF MONTHLY SERVICER REPORT]
SAMPLE
--------------------------------------------------------------------------------
JLA FUNDING CORPORATION II
For the November 16, 1997 Payment Date
For the period beginning on October 1, 1997
and ending on October 31, 1997 ("Collection Period")
--------------------------------------------------------------------------------
Date of Report November 10, 1997
Notes Distribution
a) Class A Note
Beginning Balance 9,421,052.63
----------------
Interest Distribution 75,645.16
New Issuance Amount 9,421,052.63
----------------
Ending Balance 18,842,105.26
b) Class B Note
Beginning Balance 578,947.37
----------------
Interest Distribution 4,918.76
New Issuance Amount 578,947.37
----------------
Ending Balance 1,157,894.74
c) Aggregate Note Principal Balance (a+b)
Total Beginning Balance 10,000,000.00
----------------
Total New Issuance 10,000,000.00
================
Total Ending Balance 20,000,000.00
Non-Utilization Premium Distribution 5,125.00
Aggregate Principal Balance of Receivables (see Annex A for further detail)
Beginning Balance 10,421,052.63
================
Ending Balance 20,842,055.26
Cash Reserve Account (see Annex B for further detail)
Total Available Cash Reserve for current distribution 105,482.46
----------------
Withdrawal from Cash Reserve for distribution -2,582.80
Deposit to Cash Reserve 105,263.16
or Release from Cash Reserve 0.00
----------------
Ending Cash Reserve Balance (after Withdrawal, Deposit and Release) 208,162.81
% of Cash Reserve Target Met 99.88%
Collection Account (see Annex A for further detail)
Collections allocable to Principal for Lease Purchase (prin + prepay + Recov) 208,561.00
Collections allocable to Interest (Interest + Cap Pmts + Oth.) 91,832.00
Withdrawals from the Reserve Account 2,582.80
----------------
Total Available Collections for current distribution 302,975.80
Note Issuance Period
Priority of Distributions (see Annex B for further detail)
Total Available Collections for current distribution 302,975.80
1) Monthly Trustee Fee & Servicing Fee paid 8,725.88
2) Class A Interest paid 75,645.16
3) Class B Interest paid 4,918.76
4) Unused Facility Fee 5,125.00
5) Principal deposit to Lease Purchase Account 208,561.00
------------
Total Excess Interest before Deposit to Reserve 0.00
% of beginning receivables bal. (Annualized) 0.00%
6) Deposit to Cash Reserve Account (see Annex B) 0.00
Release from Cash Reserve Account 0.00
============
7) Total Disbursement to the Company 0.00
Note Issuance Period
Annex A - Receivables and Collections
1) Receivables
Number of Aggregate
Leases Principal Balance
Beginning of Collection Period Receivables 10,421,052.63
Principal Collection 208,311.00
Prepayment Collections 200.00
Defaulted Leases during Collection Period 100.00
-----------------
Net Receivables 10,212,441.63
Deposit to Lease Purchase Account 208,561.00
New Purchase 10,421,052.63
------------ -----------------
Total 20,842,055.26
Aggregate Principal
Number of Days Number of Balance of Receivables
Delinquent Receivables before New Purchase
Current (1-29)
30-59
60-89
90-119
120-149
150-179
------------ -----------------
Total 10,212,441.63
2) Collections
Interest Collections 91,832.00
Principal Collections 208,311.00
Prepayment Collections 200.00
Cap Payments 0.00
Recoveries 50.00
Other 0.00
-----------------
Total Deposit to Lease Purchase Account (prin + prepay + recoveries) 208,561.00
Total Collections Allocable to I (int + cap + other) 91,832.00
3) New Notes Issuance and Initial Cash Reserve Deposit
New Notes Issuance Amount 10,000,000.00
New Class A Note Amount 89.50% 9,421,052.63
New Class B Note Amount 5.50% 578,947.37
Initial Cash Reserve Deposit 1% 105,263.16
New Collateral Principal Balance 99% 10,421,052.63
Note Issuance Period
Annex B - Distributions Due
1) Monthly Fees
Total Monthly Servicing Fee owing for the current Collection Period 8,684.21
-----------
Current Amount (% of beginning receivables bal.) (1.00%) 8,684.21
Amount owing but not paid on any preceding Payment Dates 0.00
Total Monthly Trustee Fee owing for the current Collection Period 41.67
-----------
Current Amount (% of beginning notes bat.) (0.005%) 41.67
Amount owing but not paid on any preceding Payment Dates 0.00
===========
Total Trustee & Servicing Fees 8,726.88
2) Distribution Schedule of Interest
---------------------------------------------------------------------------------------------------------------------
Class A (+0.30%) Interest Period
Libor Reset Interest% Note Balance From To Days Interest Schedule
---------------------------------------------------------------------------------------------------------------------
5.6875% 5.9875% 9,421,052.63 10/16/97 11/16/97 31 48,574.03
5.7850% 6.0850% 9,421,052.63 10/30/97 11/16/97 17 27,071.13
---------------------------------------------------------------------------------------------------------------------
Total 75,645.16
Class A Interest Payment Amount 75,645.16
Class A Prior Interest Shortfall 0.00
-----------
Total Class A Interest Payment Amount 75,645.16
---------------------------------------------------------------------------------------------------------------------
Class B (+0.65%) Interest Period
Libor Reset Interest% Note Balance From To Days Interest Schedule
---------------------------------------------------------------------------------------------------------------------
5.6875% 6.3375% 578,947.37 10/16/97 11/16/97 31 3,159.48
5.7850% 6.4350% 578,947.37 10/30/97 11/16/97 17 1,759.28
---------------------------------------------------------------------------------------------------------------------
Total 4,918.76
Class B Interest Payment Amount 4,918.76
Class B Prior Interest Shortfall 0.00
------------
Total Class B Interest Payment Amount 4,918.76
3) Non-Utilization Premium
----------------------------------------------------------------------------------------------------------------------
Related Interest Period
Note Issuance Amount Available Facility From To Days Premium Amount
----------------------------------------------------------------------------------------------------------------------
0.10%
65,000,000.00 10/16/97 10/30/97 14 2,527.78
10,000,000.00 55,000,000.00 10/30/97 11/16/97 17 2,597.22
--------------------------------------------------------------------------------------------------------
Total 5,125.00
Note Issuance Period
4) Cash Reserve Account
Available Cash Reserve - beginning of Collection Period (1.00%) 105,263.16
Interest earned on Available Cash Reserve (2.50%) 219.30
----------
Total Available Cash Reserve for current distribution 105,482.46
Withdrawal from Cash Reserve Account -2,582.80
Initial Deposit Amount due to Notes Issuance 105,263.16
Additional Deposit to Cash Reserve 0.00
Total Cash Reserve - before Release 208,162.81
Cash Reserve Target (% of ending receivables bal.) (1.00%) 208,420.55
Release from Cash Reserve 0.00
----------
Total Cash Reserve -End of Collection Period 208,162.81
% of Cash Reserve Target Met 99.88%
Annex C - Triggers
1) Target Reserve Percentage
1% during the Note Issuance Period
2) Loss Ratio and Delinquency Ratio as the end of Collection Period
Calculated % Trigger %
------------ ---------
3 mth Avg. Default% 4%
3 mth Avg. Delinquency% 5%
3) Compliance with principal schedule Interest Rate Cap YES
---------------
4) Compliance with Customer Concentration Limitation 1.50% YES
---------------
5) Portfolio Performance table (Format see p29 of PPM)
Note Amortization Period
[FORM OF MONTHLY SERVICER REPORT]
S A M P L E
--------------------------------------------------------------------------------
JLA FUNDING CORPORATION II
For the June 16, 1998 Payment Date
For the period beginning on May 1, 1998
and ending on May 31, 1998 ("Collection Period")
--------------------------------------------------------------------------------
Date of Report: June 10, 1997
Notes Distribution
a) Class A Note
Beginning Balance 70,658,000.00
-------------
Interest Distribution 364,305.78
Principal Distribution 1,472,167.99
-------------
Total Distributions 1,836,473.77
=============
Ending Balance 69,185,832.01
b) Class B Note
Beginning Balance 4,342,000.00
-------------
Interest Distribution 23,695.56
Principal Distribution 90,466.10
-------------
Total Distributions 114,161.66
=============
Ending Balance 4,261,533.90
c) Aggregate Note Principal Balance (a+b)
Beginning Balance 75,000,000.00
=============
Ending Balance 73,437,365.91
Aggregate Principal Balance of Receivables (see Annex A for further detail)
Beginning Balance 78,947.000.00
Ending Balance 77,384,365.91
Cash Reserve Account (see Annex B for further detail)
Total Available Cash Reserve for current distribution 790,643.75
Withdrawal from Cash Reserve for distribution 0.00
Deposit to Cash Reserve 0.00
or Release from Cash Reserve 16,800.09
Ending Cash Reserve Balance (after Withdrawal, Deposit and Release) 773,843.66
% of Cash Reserve Target Met 100.00%
Collection Account (see Annex A for further detail)
Total Collections (Interest + Principal + Prepayments + Cap Pmts + Oth.) 2,251,300.95
Withdrawals from the Reserve Account 0.00
-------------
Total Available Collections for current distribution 2,251,300.95
Note Amortization Period
Priority of Distributions (see Annex B for further detail)
Total Available Collections for current distribution 2,251,300.95
1) Monthly Trustee Fee & Servicing Fee paid 66,101.67
2) Class A Interest paid 364,305.78
3) Class B Interest paid 23,695.56
4) Class A Principal Payment Amount paid 1,472,167.99
5) Class B Principal Payment Amount paid 90,466.10
------------
Total Excess Interest before Deposit to Reserve 234,563.85
% of beginning receivables bal. (Annualized) 3.57%
6) Deposit to Cash Reserve Account (see Annex B) 0.00
Release from Cash Reserve Account 16,800.09
===========
7) Total Disbursement to the Company 251,363.94
Note Amortization Period
Annex A - Receivables and Collections
1) Receivables
Number of Aggregate
Leases Principal Balance
Beginning of Collection Period Receivables 1,883 78,947,000.00
Principal Collection 0 1,562,334.09
Prepayment Collections 0 200.00
Defaulted Leases during Collection Period 1 100.00
--------------------------------------------------------------
End of Collection Period Receivables 1,882 77,384,365.91
End of Collection Period
Number of Days Number of Aggregate Principal
Delinquent Receivables Balance of Receivables
Current(1-29)
30-59
60-89
90-119
120-149
150-179
---------------------------------------------------------------------------------------
Total 77,384,365.91
2) Collections
Interest Collections 688,746.86
Principal Collections 1,562,334.09
Prepayment Collections (partial + full prepay) 200.00
Recoveries 20.00
Cap Payments 0.00
Other - 0.00
------------
Total Available Collections for current distribution 2,251,300.95
Note Amortization Period
Annex B - Distributions Due
1) Monthly Fees
Total Monthly Servicing Fee owing for the current Collection Period 65,789.17
-----------------
Current Amount (% of beginning receivables bal.) (1.00%) 65,789.17
Amount owing but not paid on any preceding Payment Dates 0.00
Total Monthly Trustee Fee owing for the current Collection Period 312.50
-----------------
Current Amount (% of beginning notes bal.) (0.005%) 312.60
Amount owing but not paid on any preceding Payment dates 0.00
=================
Total Trustee & Servicing Fees 66,101.67
2) Total support for Class A (Beginning Receiv. - A + Resv) 9,079,643.75
Trigger for Pro-Rata to Sequential Allocation (<2,072,368 No
3) Distribution Schedule of Principal
Total Scheduled Principal Payment Amount including: 1,562,634.09
-----------------
(i) Total Collections allocated to Principal (prin + prepay) 1,562,534.09
(ii) Defaulted Receivables 100.00
Class A Percentage A/(A+B) 94.21%
Class A Principal Payment Amount 1,472,167.99
Class A Prior Principal Shortfall 0.00
-----------------
Total Class A Principal Payment Amount 1,472,167.99
Class B Percentage B/(A+B) 5.79%
Class B Principal Payment Amount 90,466.10
Class B Prior Principal Shortfall 0.00
-----------------
Total Class B Principal Payment Amount 90,466.10
4) Distribution Schedule of Interest
Libor Reset 5.6875%
Interest Period 5/15/98 to 6/15/98 31 days
Class A Interest Rate (+0.30%) 5.9875%
Class A Beginning Balance 70,658,000.00
-----------------
Class A Interest Payment Amount 364,305.78
Class A Prior Interest Shortfall 0.00
Total Class A Interest Payment Amount 364,305.78
Interest Period 5/15/98 to 6/15/98 31 days
Class B Interest Rate (+0.65%) 6.3375%
Class B Beginning Balance 4,342,000.00
-----------------
Class B Interest Payment Amount 23,695.56
Class B Prior Interest Shortfall 0.00
-----------------
Total Class B Interest Payment Amount 23,695.56
Total Scheduled Interest Payment Amount
388,001.34
Note Amortization Period
5) Cash Reserve Account
Available Cash Reserve - beginning of Collection Period 789,000.00
Interest earned on Available Cash Reserve (2.50%) 1,643.75
----------------------------
Total Available Cash Reserve for current distribution 790,643.75
Withdrawal from Cash Reserve Account 0.00
Deposit to Cash Reserve 0.00
Release from Cash Reserve 16,800.09
----------------------------
Total Cash Reserve - end of Collection Period 773,843.66
Cash Reserve Target (1.00%) 773,843.66
% of Cash Reserve Target Met 100.00%
Annex C -Triggers
1) Target Reserve Percentage (if triggered, resv target %=10%-calc%+1.5%)
Calculated % Trigger % Reserve Target %
------------ ---------
▇▇.▇▇▇.▇▇▇▇▇ Rate 11.16% 9.75% 1.00%
2) Loss Ratio and Delinquency Ratio as the end of Collection Period
Calculated % Trigger %
------------ ---------
3mth Avg. Default% 4%
3 mth Avg. Delinquency% 5%
3) Compliance with principal schedule of Interest Rate Cap (Yes/No) Yes
4) Compliance With Customer Concentration Limitation (Yes/No) 1.25% Yes
5) Occurance of Lease Substitution (Yes/No) No
If Yes, complicance with Lease Substitution (Yes/No/N.A.) N.A.
5) Portfolio Performance table
(Format see p29 of PPM)