SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended March 31, 1997
or
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________to__________
Commission file number 0-21591
GRANITE FINANCIAL, INC.
(Name of small business issuer as specified in its charter)
Delaware 84-1349929
(State of Incorporation) (I.R.S. Employer Identification No.)
6424 West 91st Avenue
Westminster, Colorado 80030
(Address of principal executive offices)
(303) 650-4059
(IssuerOs telephone number)
Check whether the issuer (1) filed all reports required to
be filled by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13, or 15 (d) of the Exchange
Act after the distribution of securities under a plan confirmed
by court.
Yes __ No__
State the number of shares outstanding of each of the
issuerOs classes of common equity, as of the latest practicable
date.
Common stock, $.001 par value, 3,725,000 shares outstanding
as of March 31, 1997
Transitional Small Business Disclosure Format (check one):
Yes __ No_X
1
GRANITE FINANCIAL, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1997
INDEX
PART 1. FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS
Financial Statements:
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statement of Changes in 6
Members'/Stockholders' Equity
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-15
ITEM 2. MANAGEMENTOS DISCUSSION AND ANALYSIS OR PLAN
OF OPERATIONS 16-23
PART 2. OTHER INFORMATION 25
EXHIBITS
10.1 Trust and Security Agreement dated March 1, 1997, among
GF Funding Corp. III (the "Transferor"), Granite
Financial, Inc. (the "Company"), Norwest Bank
Minnesota, National Association (the "Trustee") and
Norwest Bank Minnesota, National Association (the "Back-
up Servicer");
10.2 Lease Acquisition Agreement dated March 1, 1997,
between the Company and the Transferor;
10.3 Servicing Agreement dated March 1, 1997, among the
Transferor, the Company, the Trustee and the Back-up
Servicer;
10.4 Unsecured Revolving Loan Agreement dated January 1997,
in the maximum principal amount of $2,000,000, between
the Company, as borrower, and Colorado National Bank,
as lender;
10.5 Loan and Security Agreement dated February 4, 1997, in
the maximum principal amount of $36,000,000, among the
Company, as borrower, CoreStates Bank, as lead lender,
and certain other lenders specified therein.
10.6 Amendment No. 1 to CoreStates Loan and Security
Agreement dated April 18, 1997.
10.7 Asset Purchase Agreement effective March 31, 1997 among
Granite Financial
Acquisition Corp. I, Global Finance & Leasing, Inc.
and Thomas Mannes.
11.1 Computation of Earnings per Common Share and
Common Equivalent Share
27 Financial Data Schedule
SIGNATURES 26
3
GRANITE FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, March 31,
1996 1997
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ - $4,774,653
Direct financing leases available for 8,671,869 11,194,158
sale
Direct financing leases assigned to 22,575,827 17,340,624
lender
Residual interest in securitized leases - 6,107,119
Other receivables - 897,207
Prepaid and other assets 255,716 389,786
Equipment held for sale - 349,628
Furniture and equipment, net of
accumulated depreciation of $37,350 399,150 780,793
(1996) and $130,210 (1997)
Loan origination fees, net of accumulated
amortization of $20,885 (1996) and 450,342 1,072,183
$76,354 (1997)
Goodwill - 2,588,567
Total assets $32,352,904 $45,494,718
Liabilities and Equity
Line-of-credit (Note 4) $ 3,690,618 $ 5,685,655
Accounts payable and accrued expenses 1,050,308 1,114,798
Security deposits - 401,570
Due to trustee - 514,266
Due to seller of acquired business (Note 8) - 1,884,000
Current and deferred income taxes payable - 618,060
Limited recourse Class A note payable 20,761,785 16,293,489
Notes payable (Note 4) 4,090,818 4,236,982
29,593,529 30,748,820
Commitments (Note 3)
Common stock, $.001 par value; 20,000,000
shares authorized; 3,725,000 shares - 3,725
issued and outstanding
Additional paid-in capital - 13,750,310
Members' equity/retained earnings 2,759,375 991,863
Total members' and stockholders' equity 2,759,375 14,745,898
(Note 5)
Total liabilities and equity $32,352,904 $45,494,718
</TABLE>
See notes to consolidated financial statements.
4
GRANITE FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Revenues
Sales of leases (Note 2) $3,895,621 $22,452,552 $16,380,270 $50,307,716
Income from direct 117,138 1,006,884 135,200 2,918,388
financing leases
Total revenues 4,012,759 23,459,436 16,515,470 53,226,104
Costs
Cost of leases sold (Note
2) 3,650,426 20,864,725 15,296,597 46,876,077
Provision for credit
losses 45,000 311,686 46,619 442,686
Interest expense 14,306 436,249 15,631 1,376,999
Securitization expenses - 113,926 - 257,157
and amortization
Total costs 3,709,732 21,726,586 15,358,847 48,952,919
Gross profit 303,027 1,732,850 1,156,623 4,273,185
Selling, general and
administrative 313,305 825,571 792,078 1,935,240
Income (loss) before income
taxes (10,278) 907,279 364,545 2,337,945
Pro forma income tax expense
(benefit) (see note below) (3,803) 353,042 134,880 982,563
Pro forma net income (loss) $ (6,475) $554,237 $229,665 $1,355,382
Pro forma earnings per share 0.00 0.14 0.11 0.44
Weighted average number of pro
forma common and common equivalent
shares (Notes 1 and 5) 2,000,000 3,858,134 2,000,000 3,093,900
</TABLE>
Note: Income taxes for the 1997 periods reflect federal and state income taxes
and the nine months ended March 31, 1997 includes a one-time charge to
earnings of $100,000 as part of the reorganization from an LLC Company
to a C Corporation. Income taxes for the 1996 periods reflect pro forma
taxes at 37% as if the entity was taxed as a C Corporation.
See notes to consolidated financial statements.
5
GRANITE FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Members'/Stockholders' Equity
For the Period June 30, 1996 to March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional
Members' Common Stock Paid-in Retained
Equity Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30,
1996 $2,759,375 - $ - $ - $ - $2,759,375
Net income for the
period July 1 -
October 25, 1996 363,519 - - - - 363,519
Distribution to
members to pay tax
liabilities related
to the LLC (Note 5) (111,000) - - - - (111,000)
Restructuring of
Granite Financial,
LLC into Granite
Financial, Inc. (3,011,894) 2,000,000 2,000 3,009,894 - -
Issuance of common
stock pursuant to
initial public
offering (net of
issuance costs
of $ 2,195,357)
(Note 5) - 1,725,000 1,725 10,740,416 - 10,742,141
Net income for the
period October 26,
1996 March 31, 1997 - - - - 991,863 991,863
Balance, March 31,
1997 $ - 3,725,000 $3,725 $13,750,310 $991,863 $14,745,898
</TABLE>
See notes to consolidated financial statements.
6
GRANITE FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
1996 1997
<S> <C> <C>
Cash flows from operating activities
Net income $ 364,545 $1,355,382
Adjustments to reconcile net income to
net cash used in operating activities
Provision for losses 46,619 442,686
Depreciation and amortization 16,343 638,634
Changes in operating assets and
liabilities
Direct financing leases available for
sale (8,545,283) 1,135,407
Residual interest in securitized
leases - (6,107,119)
Other receivables - (885,860)
Prepaids and other assets (55,505) (218,107)
Equipment held for sale - (333,778)
Accounts payable and accrued expenses 1,703,341 (252,205)
Due to trustee - 514,266
Current and deferred income taxes - 597,063
Security deposits - 401,570
(6,834,485) (4,067,443)
Net cash used in operating
activities (6,469,940) (2,712,061)
Cash flows from investing activities
Payments received on leases assigned to
lender - 5,235,203
Acquisition of subsidiary, net of cash
acquired - (410,725)
Purchase of furniture and equipment (131,336) (404,379)
Net cash (used) provided by
investing activities (131,336) 4,420,099
Cash flows from financing activities
Proceeds from notes payable - 1,032,255
Principal payments on notes payable - (5,056,627)
Net proceeds from line-of-credit 4,919,950 1,995,037
Principal payments on Class A note
payable - (4,468,296)
Expenditures for loan origination fees - (1,164,660)
Members' equity contribution net of
related costs 1,237,669 -
Net proceeds of common stock issuance - 10,839,906
Distributions to members - (111,000)
Net cash provided by financing
activities 6,157,619 3,066,615
Net (decrease) increase in cash (443,657) 4,774,653
Cash - beginning of period 443,657 -
Cash - end of period $ - $4,774,653
</TABLE>
Supplemental disclosure of cash flow information:
Cash paid during the nine months periods ended March 31,
1996 and 1997 for interest was $15,631 and $1,379,775,
respectively.
Cash paid during the nine month periods ending March 31,
1996 and 1997 for income taxes was $0 and $385,500,
respectively.
Non cash investing and financing activities:
Concurrently with the consummation of the initial public
offering and the related restructuring from an LLC to a
regular corporation, members' equity of $3,011,894 was
reclassified to common stock of $2,000 and additional paid-
in capital of $3,009,894. In addition, deferred offering
costs of $97,765 were reclassified to additional paid-in
capital upon consummation of the initial public offering.
On March 31, 1997, the Company acquired all of the assets
and recorded liabilities of Global Finance & Leasing, Inc. for
$1,884,000 cash (paid subsequent to period end).
Additionally, $916,000 is contingent consideration payable
to the seller based upon the collection of certain
receivables. The total aggregate purchase price is
$2,334,000. The assets and liabilities acquired were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Assets acquired
Cash $ 39,275
Direct financing leases 4,100,382
Other receivables 11,347
Prepaid and other assets 16,684
Equipment held for sale 15,850
Furniture and equipment 70,124
$4,253,662
Liabilities assumed
Accounts payable $ 316,696
Income taxes payable 20,997
Notes payable 4,170,536
4,508,229
(254,567)
Aggregate purchase price 2,334,000
Goodwill $2,588,567
</TABLE>
7
See notes to consolidated financial statements.
GRANITE FINANCIAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements of Granite
Financial, Inc. and subsidiaries (the Company) reflect all adjustments
(which include only normal recurring adjustments) necessary, in the
opinion of management, for a fair presentation of the interim periods
presented. The results of operations for the three and nine months ended
March 31, 1996 and 1997 are not necessarily indicative of the results of
the entire year. The consolidated financial statements included herein
are presented in accordance with the requirements of Form 10-QSB and
consequently do not include all of the disclosures normally made in the
registrantOs annual Form 10-KSB filing. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's Amendment No. 3 to Form SB-2 which was filed
with the Securities and Exchange Commission on October 24, 1996.
The Company's consolidated financial statements include the accounts
of Granite Financial, Inc. and its wholly-owned subsidiaries, GF
Funding Corp. I ("GF Funding I"), GF Funding Corp. II ("GF Funding
II"), GF Funding Corp. III ("GF Funding III") and Granite Financial
Acquisitions Corp. I ("GF Acquisitions"). All intercompany accounts and
transactions have been eliminated in consolidation. The assets of GF
Funding I, GF Funding II and GF Funding III are not available to
satisfy creditors of the Company.
(2) Adoption of FAS 125
On January 1, 1997, the Company adopted FAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("FAS 125"). FAS 125 provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. Under FAS 125, after a
transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. FAS 125 prohibits early
application and, accordingly, the Company adopted this standard for
transactions which occurred after December 31, 1996. Under FAS 125,
a transfer of lease assets in which the transferor surrenders control
of the lease assets is accounted for as a sale and the transferred
lease assets are removed from the balance sheet with the resulting
gain or loss on sale reflected in the statement of operations. The
adoption of FAS 125 did not have a material effect on the Company's
financial statements.
In November 1996, GF Funding II was formed to establish the Company's
second securitization facility. The facility provides for the
issuance of up to $65 million in aggregate principal amount of Class
A Lease-Backed Certificates due June 20, 2003 (the 1996 Certificates)
in a private placement. For purposes of computing interest, the 1996
Certificates are issued in two tranches, consisting of the Floating
Rate Tranche and the Fixed Rate Tranche. The principal amount of the
Floating Rate Tranche will generally convert to the Fixed Rate
Tranche on a quarterly basis. The Floating Rate Tranche bears
interest at an annual rate equal to the LIBOR Rate, as adjusted from
time to time, plus .50%. The Fixed Rate Tranche bears interest at an
annual rate equal to the Treasury Rate, as adjusted from time to
time, plus .70%. The annual interest rate on each tranche is subject
to a maximum annual rate of 10%. The 1996 Certificates represent an
undivided interest in a trust estate created by GF Funding II
comprised of (i) payments to be made under leases contributed to GF
Funding II, (ii) all of GF Funding II's right and interest in the
leased equipment, (iii) a cash collateral account and (iv) a
financial guaranty insurance policy. The initial funding under the
securitization facility was approximately $7,200,000. The Company is
required to sell a minimum of $1,500,000 in leases to the
securitization facility per month. As this securitization was
completed through the issuance of equity certificates and GF Funding
II has surrendered control over the future cash flows from these
lease assets for the benefit of the holders of the Certificates.
The transfer of the lease assets is accounted for as a
sale. Accordingly, the portion of the underlying lease assets sold
were removed from the consolidated balance sheet and the resulting
sales of leases and cost of leases sold are reflected in the
consolidated statement of operations. The sales of leases represent
the net proceeds from the certificate holders and the cost of leases
sold represent the Company's net investment in the portion of the
lease assets sold. The Company has recorded sales of leases and a
cost of leases sold with respect to this securitization of $7,271,065 and
$6,806,737, respectively, during the three months ended March 31,
1997. Included in the consolidated balance sheet is the allocated
portion of the Company's net investment in the lease assets which
represents the residual interest retained in the lease assets. The
allocation between the cost of leases sold and the residual interest
retained is based on their relative fair values on the date of sale.
The residual interest in securitized leases at March 31, 1997 for this
securitization totaled $3,278,415.
In March 1997, GF Funding III was formed to establish the Company's
third securitization facility. The facility provides for the
issuance of up to $27,500,000 in the aggregate principal amount of
6.82% Class A Lease-Backed Certificates due December 20, 2002 (the
1997 Certificates) in a private placement. The 1997 Certificates
represent an undivided interest in a trust estate created by GF
Funding III comprised of (i) payments to be made under leases
contributed to GF Funding III, (ii) all of GF Funding III's right and
interest in the leased equipment, (iii) a cash collateral account, a
capitalized interest account, a prefunding account and a collection
account and (iv) a financial guaranty insurance policy. The Company
and GF Funding III have surrendered control over all future cash
flows of the underlying lease assets and, under FAS 125, such
securitization was accounted for as a sale. The Company has recorded
sales of leases and cost of leases sold with respect to this
securitization of $15,181,487 and $14,057,988, respectively, during the
three months ended March 31, 1997. Included in the consolidated
balance sheet is the allocated portion of the Company's net investment
in the lease assets which represents the residual interest retained
in the lease assets. The allocation between the cost of leases sold and
the residual interest retained is based on their relative fair values
on the date of sale. The residual interest in securitized leases for
this securitization was $2,819,703 at March 31, 1997.
(3) Recourse Obligations on Sale of Leases
With respect to certain leases sold to Heartland Bank, there is recourse to
the Company for the amount of the equipment residual guarantees of
approximately $759,000 at March 31, 1997.
(4) Credit Facilities
<TABLE>
<CAPTION>
June 30, March 31,
Lines-of-Credit 1996 1997
(Unaudited)
<S> <C> <C>
$36,000,000 line-of-credit to a
consortium of lenders, due
February 1998. Interest at the lead
lender's prime rate plus 5/8 of one
percent (9.125% at March 31, 1997)
payable monthly. The line is
collateralized by first security
interest in specific leases pledged and
the underlying equipment. $3,690,618 $3,114,805
$2,000,000 unsecured line-of-credit to a
bank due January 1998. Interest is at
the bank's reference rate plus .75%
(9.25% at March 31, 1997) payable
monthly. - 1,800,000
$800,000 line-of-credit to a bank, due
May 1997. Interest at the prime rate
plus 1% (9.5% at March 31, 1997) payable
monthly. The line is collateralized by
all tangible and intangible property of
Granite Financial Acquisitions Corp. I. - 770,850
$3,690,618 $5,685,655
</TABLE>
<TABLE>
<CAPTION>
June 30, March 31,
Notes Payable 1996 1997
(Unaudited)
<S> <C> <C>
Note payable to bank; the note requires a
minimum monthly payment of $86,700, as
defined in the agreement, and interest at
11%, with all unpaid principal and
interest due July 31, 1997. The notes were
paid in full in November 1996 using
proceeds from the initial public offering. $1,126,600 $ -
Note payable to bank, payable in monthly
installments of $28,303, including
interest of 9.80% through January 2000.
The note is collateralized by certain
leases including a security interest in
the underlying equipment. The Company
has a total of a $3,000,000 line-of-
credit with the bank to be funded in
increments of $500,000 or more. - 837,296
Note payable to a limited partnership,
monthly interest only payments at 13%.
All unpaid principal and interest due at
maturity in January 2000. The note is
collateralized by all equipment,
inventory, accounts and intangibles of a
subsidiary. - 1,470,615
Note payable to a bank, payable in
monthly installments of $83,000,
including interest at 8.72% through May
1999. The note is collateralized by all
tangible and intangible property of a
subsidiary. - 1,929,071
Note payable to bank, payable in monthly
installments of $78,754, including
interest at the Treasury Rate plus 3% (9%
at June 30, 1996), through February, 2000
when all unpaid principal and interest is
due; collateralized by certain leases
including a security interest in the
underlying equipment. Note was repaid in
full in November 1996 as part of a sale
of leases into the Company's second
securitization. 2,964,218 -
$4,090,818 $4,236,982
</TABLE>
Maturities due on the notes payable are as follows:
<TABLE>
<CAPTION>
Year Ending June 30,
<S> <C>
1997 (remaining three months) $ 272,469
1998 1,154,900
1999 1,147,193
2000 1,662,420
$ 4,236,982
</TABLE>
(5) Members'/Stockholders' Equity
Initial Public Offering
In October 1996, the Company completed a public offering of 1,725,000
shares of common stock at $7.50 per share. The proceeds of the
offering were $10,742,141, net of offering costs of $2,195,357.
Additionally, the Company issued warrants to the underwriter to
purchase 150,000 shares at $10.50.
Stock Option Plans
In June 1996, the Company adopted a Stock Option Plan (the Plan)
allowing for the issuance of qualified and non-qualified stock
options. The Plan is administered by the Board of Directors. The
Plan provides that qualified stock options be granted at an exercise
price equal to fair market value of the common shares of the Company
on the date of the grant, and must be at least 110% of fair market
value when granted to a 10% or more shareholder. The term of all
qualified stock options granted under the Plan may not exceed ten
years, except the term of qualified stock options granted to a 10% or
more shareholder which may not exceed five years.
The Plan provides that non-qualified stock options be granted at an
exercise price not less than 85% of the fair market value of the
common shares of the Company on the date of grant. The term of all
non-qualified stock options granted under the Plan may not exceed ten
years, except the term of non-qualified stock options granted to a
10% or more shareholder which may not exceed five years.
An aggregate of 450,000 shares are currently reserved for the Plan.
The following is a summary of options and warrants:
<TABLE>
<CAPTION>
Exercise
Options Warrants Price
<S> <C> <C> <C>
Outstanding, June 30, 1996 250,000 - $5.95 to 6.55
Granted 45,000 150,000 $8.375 to 10.50
Canceled - - -
Exercised - - -
Outstanding, March 31, 1997 295,000 150,000 $5.95 to 10.50
</TABLE>
Subsequent to March 31, 1997, the Company granted 110,000 options
under the Plan at exercise prices ranging from $9.50 to $10.45 and
amended and restated the Plan to reflect changes in Rule 16b-3 of the
Securities and Exchange Commission.
(6) Income Taxes
The Company's status as an LLC was terminated upon the completion of
the initial public offering. At that time, the deferred tax
liabilities were recorded, and a charge to earnings of approximately
$100,000 was included in continuing operations during the period of
the change in tax status. The Company distributed $111,000 to the
members of the LLC to provide the members with sufficient funds to
pay the tax liabilities arising as a result of income received prior
to the date of the public offering.
(7) Major Supplier
The Company's leases are originated through a network of 48 independent
lease originators located throughout the United States. Transactions
generated by a single independent lease originator accounted for
approximately 12.8% of the CompanyOs leases funded during the quarter
ended March 31, 1997. Transactions generated by the CompanyOs ten largest
independent lease originators accounted for approximately 64.4% of leases
funded during the quarter ended March 31, 1997.
(8) Acquisitions
On March 31, 1997, the Company acquired certain assets and
liabilities of Global Finance & Leasing, Inc. (Global) for an
aggregate cash purchase price of $2,334,000. The acquisition has
been accounted for using the purchase method of accounting. Under
the purchase method of accounting, the results of Global will be
included in the Company's results from the acquisition date
(March 31, 1997). The allocation of the purchase price to the fair
market value of the net assets is based on preliminary estimates of
fair market value and may be revised as additional information is
obtained. Goodwill is being amortized over a twenty-year period.
The acquisition agreement provides for additional contingent
consideration of $916,000 based on the collection of certain
receivables. The Company believes the collection of the certain
receivables is remote; therefore, no liability is recorded at this
time.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF PLAN OF OPERATIONS
Factors that may Affect Operating Results
The statements contained in this Report on Form 10-QSB that are not purely
historical are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the Company's
expectations, hopes, intentions or strategies regarding the future. All
forward-looking statements included in this document are based on
information available to the Company on the date hereof, and the Company
assumes no obligation to update any such forward-looking statements. It
is important to note that the Company's actual results could differ
materially from those in such forward-looking statements. Among the
factors that could cause actual results to differ materially are the risk
factors set forth in the Company's Registration Statement on Form SB-2
(Registration No. 333-5264-D). The reader should consult these risk
factors as well as risk factors listed from time to time in the Company's
reports on Forms 10-QSB, 10-KSB and filings under the Securities Act of
1933, as amended.
Results of Operations
Three and nine months ended March 31, 1997 and 1996
Revenues - During the nine months ended March 31, 1997, sales of
leases increased $33.9 million compared to the nine months ended
March 31, 1996. Revenue is recognized in connection with the sale of
leases on the date of sale based upon the present value of the
payments to be received under the leases. The increase in sales of
leases is due to the consistent increase in the volume of leases
originated and sold by the Company since its inception. For the
quarters ended March 31, 1997 (1997 period) and 1996 (1996 period),
the Company sold leases for $22,452,552 and $3,895,621, respectively.
During the 1997 period, leases were sold into the Company's second
and third securitization facilities. For the 1996 period, the
majority of the sales were to Heartland Bank, a related party (Note
3) and a small portion to an independent third party. The
significant increase in lease sales from the 1996 period to the 1997
period is largely the result of an increase in leases funded which
increased from 438 in the 1996 period to 915 in the 1997 period.
During the nine months ended March 31, 1997, income from direct
financing leases increased $2.5 million when compared to the nine
months ended March 31, 1996. Income from direct financing leases
primarily consists of the accretion of income on the Company's lease
portfolio as well as servicing fees received on leases sold by the
Company. For the three months ended March 31, 1997 and 1996, the
Company has income from direct financing leases of $1,006,884
and $117,138, respectively. The significant increase from period to
period can be attributed to leases included in the April 1996
securitization and from the securitization residual interest portion
of leases sold into the Company's second and third securitization.
The April 1996 securitization is accounted for as a collateralized
borrowing due to the legal structure of such securitization. Under
this method of accounting, the Company records the securitized leases
and related limited recourse debt in the financial statements and
recognizes the related finance income over the life of the leases using
the interest method.
Expenses - During the nine months ended March 31, 1997, cost of
leases sold increased $31.4 million compared to the nine months
ended March 31, 1996. For the quarter ended March 31, 1997, cost of
leases sold increased $17.2 million as compared to the quarter ended
March 31, 1996. The increase for the nine and three month
comparative periods is in direct relation to the increase in sales of
leases experienced during said periods. Cost of leases sold includes
all direct costs of funding the leases and commissions and fees paid
to the Company's independent lease originators.
Provision for credit losses increased by $396,000 from the nine
months ended March 31, 1996 to the nine months ended March 31, 1997
and represented less than 1% of total revenues. The increase in the
provision reflects the significant increase in the volume of leases
held prior to sale. The Company maintains an allowance for credit
losses through periodic charges to the account. An allowance is
established through a charge to the provision in the period in which
it is probable a lease asset is impaired and the amount can be
reasonably estimated.
Interest expense was $1.4 million, or 2.6% of total revenues,
compared to $16,000 in the nine months ended March 31, 1996. The
increase in interest expense reflects increased borrowings under the
Company's credit lines and under the $21.7 million limited recourse
note issued in the April 1996 securitization. The increased
borrowing levels were required to support growth in the number of
leases funded by the Company.
From the nine month period ended March 31, 1996 to the nine month
period ended March 31, 1997, salaries and benefits increased
$604,000 and represented 2% of total revenues. The increase
reflects the addition of staff necessary to support growth in the
Company's business as well as certain salary increases for existing
personnel. General and administrative expenses increased by
$393,897 and represented 1% of total revenues. General and
administrative expenses include operational expenses such as office
overhead, accounting, legal and other expenses not directly
attributable to personnel. The increase is due to the overall growth
in the Company's business. Depreciation and amortization increased
by $125,000 due to the addition of office and computer equipment
necessary to support continued growth in the Company's business.
The Company plans to relocate its headquarters during July 1997 to a
larger facility in the Denver, Colorado area. The Company is engaged
in discussions regarding available facilities which would provide
10,000 to 12,000 square feet. As a result, the Company expects to
incur monthly occupancy expenses during fiscal 1998 which are
approximately $84,000 in excess of fiscal 1997 occupancy expenses.
The Company also expects to make capital expenditures and incur other
operating expenses in excess of fiscal 1997 levels as the Company's
business continues to grow.
Liquidity and Capital Resources
The Company requires capital to fund increases in its lease
portfolios, fund acquisitions, retain securitization residual
interests, provide for normal operating expenses and for general working
capital purposes.
From inception through March 31, 1997, the Company has funded its
operations primarily through sales of leases, recourse borrowings, the
initial public offering, private sales of equity and through
securitization transactions.
In February 1997, the Company entered into a $36 million revolving
line-of-credit agreement with a consortium of lenders which include
CoreStates Bank of Philadelphia, Pennsylvania as lead lender,
Colorado National Bank, Colorado, PNC National Bank of Philadelphia,
Pennsylvania and Bank Leumi of New York. The interest rate on this
facility is prime rate plus five-eighths of one percent. Prior to
this agreement, the Company had an existing credit facility with each
of CoreStates Bank and Colorado National Bank. These credit
facilities, which on a combined basis totaled $12 million, were
terminated upon the signing of the $36 million credit facility. The
interest rates on the terminated facilities were prime plus three
quarters of one percent and prime plus one percent for CoreStates and
Colorado National Bank, respectively. The new credit facility is
secured by a first security interest in the specific leases pledged
as collateral, as well as a first security interest in the underlying
equipment. The Company uses these facilities to warehouse leases
unless and until such leases are sold or securitized. Additionally,
in January 1997, the Company entered into an agreement with Colorado
National Bank for a $2 million unsecured revolving line-of-credit
agreement at an interest rate equal to the bank's reference rate plus
.75%.
In March 1997, the Company closed its third securitization facility.
The aggregate amount available for funding under such securitization
is $27.5 million of which the Company funded approximately $15
million through March 31, 1997. The remaining $12.5 million of such
facility is available for funding through June 1997. With the $36
million credit facility and the Company's second and third
securitizations in place, the Company did not sell any leases to
other sources during the quarter ended March 31, 1997. At March 31,
1997, the Company had funding availability of approximately $62
million in the Company's second and third securitizations combined.
For the nine months ended March 31, 1997, the Company had net cash
used in operating activities of $2.7 million. This was primarily the
result of an increase of $6.1 million of residual interests in
securitized leases and a net reduction in direct financing leases
available for sale of $1.925 million. Net cash provided by investing
activities was $4.42 million. Lease payments received from leases
assigned to lender contributed $5.235 during the period. Net cash
provided by financing activities was $3.1 million. Net proceeds from
the common stock issuance of $10.8 million combined with net proceeds
from the Company's line-of-credit and notes payable of $2 million and
$1 million, respectively, were partially offset by principal payments
on notes payable and the Class A note payable of $5 million and $4.5
million, respectively.
Static Pool Analysis - Since its inception, the Company has monitored
its underwriting and collections performance using "static pool"
analysis. Static pool analysis is a statistical monitoring
methodology by which each month's lease originations are treated as a
unique pool and the performance of this pool is tracked separately.
The measure of performance is based on several factors which include
delinquencies over 31 days and net investment write-offs. Static pool
analysis is one of the tools used by rating agencies and lenders to
analyze a company's historical performance and make estimates for
future performance.
The following table documents net write-offs for each quarter as a
percentage of original net investment in leases for that quarter.
Negative net write-off amounts indicate that recoveries exceeded
write-offs during the quarter.
Static Pool Reporting Net Investment Write-Off
<TABLE>
<CAPTION>
Original
Investment
Calendar Value
Quarter (In) Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Total
Thousands) 1 2 3 4 5 6 7 8 9
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $23 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
1995
2nd Quarter $1,337 0.0% 0.0% 0.0% 0.0% 1.0% 0.0% (0.4)% 0.8% 1.5%
1995
3rd Quarter $4,755 0.0% 0.0% 0.0% 0.0% 0.0% 0.5% 0.6% 1.1%
1995
4th Quarter $8,107 0.0% 0.0% 0.2% 0.2% 2.4% 0.8% 3.6%
1995
1st Quarter $12,377 0.0% 0.0% 0.1% 1.0% 1.6% 2.6%
1996
2nd Quarter $13,174 0.0% 0.0% 1.1% (0.1)% 1.1%
1996
3rd Quarter $12,077 (0.1)% 0.0% 0.6% 0.5%
1996
4th Quarter $17,338 0.0% 0.0% 0.0%
1996
1st Quarter $25,309 0.0% 0.0%
1997
</TABLE>
While the Company analyzes its static pools on a monthly basis, for
presentation purposes, the information in the table is presented on a quarterly
basis. The data in both tables above are in line with what the management of
the Company expected with respect to its overall portfolio performance.
Inflation
Increases in the rate of inflation in the nation generally results in
higher interest rates. Higher interest rates may decrease the
Company's net interest margins. To the extent not offset by
increases in the volume of leases funded by the Company, inflation
may therefore lead to decreases in the Company's profitability.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1Computation of Earnings Per Share
EXHIBIT 11.1
GRANITE FINANCIAL, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1996 1997
<S> <C> <C>
Earnings Per Share - Primary
Earnings
Income from continuing operations (a) $229,665 $1,355,382
Net income $229,665 $1,355,382
Shares
Weighted average shares outstanding 2,000,000 2,960,766
Shares issuable from assumed exercise
of stock options ( b ) - 133,134
Common stock and common stock equivalents 2,000,000 3,093,900
Earnings per share - primary
Income from continuing operations $0.11 $0.44
Earnings per share - primary $0.11 $0.44
Earnings Per Share - Assuming Full Dilution
Earnings
Income from continuing operations $ 229,665 $1,355,382
Net Income $ 229,665 $1,355,382
Shares
Common stock and primary common stock
equivalents 2,000,000 2,960,766
Additional dilutive effect of assumed
exercise of stock options (b) - 133,134
Common stock and common stock
equivalents 2,000,000 3,093,900
Earnings per share - assuming full
dilution ( c )
Income from continuing operations $ 0.11 $0.44
Earnings per share - fully diluted $ 0.11 $0.44
( a ) Income from continuing operations
for the 1997 period includes a one-time
charge to earnings of
$100,000 as part of the
reorganization from an LLC Company to a C
Corporation. The 1996 period.
reflects pro forma taxes at 37%
as if the entity was taxed as a C
Corporation.
( b ) Common stock equivalents are
calculated using the treasury stock
method.
( c ) This calculation is submitted in
accordance with Securities Exchange Act
of 1934 Release No. 9083,
although not required by Footnote
2 to paragraph 14 APB Opinion No.15
because it results in
dilution of less than 3%.
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Form 10-QSB to be signed on its behalf
by the undersigned, thereunto duly authorized.
GRANITE FINANCIAL, INC.
Dated: May 15, 1997 By: s/ William W. Wehner
William W. Wehner
Chairman and Chief Executive Officer
Dated: May 15, 1997 By: s/ William S. Cobb
William S. Cobb
Senior Vice President
</TABLE>
TRUST AND SECURITY
AGREEMENT
among
GF FUNDING CORP. III
(the "Transferor")
GRANITE FINANCIAL, INC.
(the "Servicer")
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
(the "Trustee")
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
(the "Back-up Servicer")
Dated as of March 1, 1997
TABLE OF CONTENTS
Page
ARTICLE ONE 2
DEFINITIONS 2
Section 1.01 Definitions 2
ARTICLE TWO 17
THE CERTIFICATES 17
Section 2.01 Form Generally 17
Section 2.02 Classes of Certificates; Denomination 17
Section 2.03 Formation, Execution, Authentication,
Delivery and Dating 18
Section 2.04 Temporary Certificates 18
Section 2.05 Registration, Registration of Transfer
and Exchange 19
Section 2.06 Limitation on Transfer and Exchange 19
Section 2.07 Mutilated, Destroyed, Lost or Stolen
Certificate 20
Section 2.08 Payment of Principal and Interest;
Principal and Interest Rights Preserved 21
Section 2.09 Persons Deemed Owner 22
Section 2.10 Cancellation 22
Section 2.11 Tax Treatment 23
ARTICLE THREE 24
FUNDINGS 24
Section 3.01 Fundings 24
Section 3.02 Determination of Funding Amounts;
Release from the Prefunding Account. 24
Section 3.03 Procedure for Fundings 24
Section 3.04 Verification of Funding Report 25
Section 3.05 Appointment of Certificate Funding
Administrator 27
ARTICLE FOUR 28
ISSUANCE OF CERTIFICATES; SUBSTITUTIONS OF COLLATERAL 28
Section 4.01 Conditions to Issuance of Certificates on
Closing Date 28
Section 4.02 Perfection of Transfer 29
Section 4.03 Substitution, Removal and Purchase of
Lease Assets 29
Section 4.04 Releases 31
Section 4.05 Trust Estate 32
Section 4.06 Notice of Release 32
Section 4.07 Nature of Transfer 32
Section 4.08 Issuances of Class B Certificates 32
ARTICLE FIVE 34
SATISFACTION AND DISCHARGE 34
Section 5.01 Satisfaction and Discharge
of Agreement 34
Section 5.02 Application of Trust Money 34
ARTICLE SIX 35
DEFAULTS AND REMEDIES 35
Section 6.01 Events of Default 35
Section 6.02 Acceleration of Maturity; Rescission
and Annulment 35
Section 6.03 Collection of Indebtedness and Suits for
Enforcement by Trustee 36
Section 6.04 Remedies 37
Section 6.05 Optional Preservation of Trust Estate 37
Section 6.06 Trustee May File Proofs of Claim 38
Section 6.07 Trustee May Enforce Claims Without
Possession of Certificates 38
Section 6.08 Application of Money Collected 39
Section 6.09 Limitation on Suits 40
Section 6.10 Unconditional Right of Certificateholders
to Receive Principal and Interest 40
Section 6.11 Restoration of Rights and Remedies 41
Section 6.12 Rights and Remedies Cumulative 41
Section 6.13 Delay or Omission; Not Waiver 41
Section 6.14 Control by MBIA or Certificateholders 41
Section 6.15 Waiver of Certain Events by MBIA or
Certificateholders 42
Section 6.16 Undertaking for Costs 42
Section 6.17 Waiver of Stay or Extension Laws 42
Section 6.18 Sale of Trust Estate 42
Section 6.19 Action on Certificates 43
ARTICLE SEVEN 44
THE TRUSTEE 44
Section 7.01 Certain Duties and Responsibilities 44
Section 7.02 Notice of Default and Other Events 45
Section 7.03 Certain Rights of Trustee 45
Section 7.04 Not Responsible for Recitals or Issuance
of Certificates 46
Section 7.05 May Hold Certificates 47
Section 7.06 Money Held in Trust 47
Section 7.07 Compensation and Reimbursement 47
Section 7.08 Corporate Trustee Required; Eligibility 48
Section 7.09 Resignation and Removal; Appointment of
Successor 48
Section 7.10 Acceptance of Appointment by Successor 49
Section 7.11 Merger, Conversion, Consolidation or
Succession to Business of Trustee 49
Section 7.12 Co-Trustees and Separate Trustees 49
Section 7.13 Rights with Respect to the Servicer 51
Section 7.14 Appointment of Authenticating Agent 51
Section 7.15 Trustee to Hold Lease Contracts 52
Section 7.16 Money for Certificate Payments to
Be Held in Trust 52
ARTICLE EIGHT 54
THE CERTIFICATE INSURANCE POLICY 54
Section 8.01 Payments under the Certificate Insurance
Policy 54
ARTICLE NINE 55
AMENDMENTS 55
Section 9.01 Amendments without Consent of
Certificateholders 55
Section 9.02 Amendments and Modifications to Agreement
with Consent of Certificateholders 56
Section 9.03 Execution of Amendments 57
Section 9.04 Effect of Amendments 57
Section 9.05 Reference in Certificates to Amendments 57
ARTICLE TEN 58
REDEMPTION OF CERTIFICATES 58
Section 10.01 Redemption at the Option of the Transferor;
Election to Redeem 58
Section 10.02 Notice to Trustee; Deposit of Redemption
Price 58
Section 10.03 Notice of Redemption by the Transferor 58
Section 10.04 Certificates Payable on Redemption Date 59
Section 10.05 Release of Lease Contracts 59
ARTICLE ELEVEN 60
REPRESENTATIONS, WARRANTIES AND COVENANTS 60
Section 11.01 Representations and Warranties 60
Section 11.02 Covenants 61
Section 11.03 Other Matters as to the Transferor 66
ARTICLE TWELVE 67
ACCOUNTS AND ACCOUNTINGS 67
Section 12.01 Collection of Money 67
Section 12.02 Collection Account; Redemption Account 67
Section 12.03 Cash Collateral Account 70
Section 12.04 Prefunding Account; Capitalized Interest
Account. 71
Section 12.05 Reports by Trustee to MBIA and
Certificateholders 72
ARTICLE THIRTEEN 74
PROVISIONS OF GENERAL APPLICATION 74
Section 13.01 General Provisions 74
Section 13.02 Acts of Certificateholders 74
Section 13.03 Notices, etc., to Trustee, MBIA,
Transferor and Servicer 74
Section 13.04 Notices to Certificateholders; Waiver 75
Section 13.05 Effect of Headings and Table of Contents 75
Section 13.06 Successors and Assigns 75
Section 13.07 Separability 75
Section 13.08 Benefits of Agreement 75
Section 13.09 Legal Holidays 76
Section 13.10 Governing Law 76
Section 13.11 Counterparts 76
Section 13.12 Corporate Obligation 76
Section 13.13 Compliance Certificates and Opinions 76
Section 13.14 MBIA Default or Termination 77
EXHIBITS AND SCHEDULES
Schedule I Initial Lease Schedule
Schedule II Terms Schedule
Exhibit A Form of Class A Certificate
Exhibit B Form of Class B Certificate
Exhibit C Form of Transferor Certificate
Exhibit D Form of Investment Letter
Exhibit E Form of Funding Report
Exhibit F Form of GF Certificate
Exhibit G Form of Class B Supplement
This TRUST AND SECURITY AGREEMENT (this "Agreement"), dated
as of March 1, 1997, is by and among GF Funding Corp. III
(the "Transferor"), Granite Financial, Inc., as servicer
(the "Servicer"), Norwest Bank Minnesota, National
Association, a national banking association, as back-up
servicer (the "Back-up Servicer"), and Norwest Bank
Minnesota, National Association, a national banking
association, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Transferor has duly authorized the execution
and
delivery of this Agreement to provide for the issuance of
the Certificates issuable as provided in this Agreement.
All
covenants and agreements made by the Transferor, the
Servicer, the Trustee and the Back-up Servicer herein are for
the benefit and security of the Holders of the Certificates
and MBIA. The
Transferor, the Servicer, the Trustee and the Back-up
Servicer are entering into this Agreement, and the Trustee is
accepting the trust created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Agreement a
valid
agreement of the Transferor, the Servicer, the Trustee and
the Back-up Servicer in accordance with its terms have been
done.
CONVEYANCE CLAUSE
The Transferor does hereby absolutely transfer, assign,
set over, and otherwise convey to the Trustee, for the
ratable benefit of the Holders of the Certificates and MBIA,
all of the Transferor's rights, title and interest in and to
the following and any and all benefits accruing to the
Transferor from (but none of the obligations under): (a)
the Lease Receivables and Lease Contracts and all payments
received on or with respect to the Lease Contracts and Lease
Receivables and due after the CutOff Date, with respect to
those Lease Contracts listed on the Initial Lease Schedule,
or the applicable Acquisition Dates, with respect to those
Lease Contracts acquired on such Acquisition Dates; (b) the
Transferor's rights and interests in the Equipment and any
security interest in the Equipment not owned by the
Transferor; (c) any rights of the Transferor under each
Insurance Policy related to the Lease Contracts or the
Equipment and Insurance Proceeds; (d) the Lease Acquisition
Agreement, the Servicing Agreement, the Broker Assignment
Agreements and any other Transaction Documents to which the
Transferor is a party; (e) all amounts from time to time on
deposit in the Collection Account, the Cash Collateral
Account, the Lockbox Account, the Capitalized Interest
Account, the Prefunding Account,
the
Redemption Account and the ACH Account (including any
Eligible Investments and other property in such accounts); (f)
the Lease Contract Files; (g) the Certificate Insurance
Policy, except that the Holders of the Class B Certificates
and the Transferor
Certificate shall have no right, title or interest in or to
the Certificate Insurance Policy; and (h) proceeds of the
foregoing (including, but not by way of limitation, all
cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to
payment of any and every kind, and other forms of obligations
and receivables which at any time constitute all or part or
are included in the proceeds of any of the foregoing), in
each case whether now owned or hereafter acquired, except
that the Holders of the Class B Certificates and the Transferor
Certificate shall have no right, title or interest in proceeds
of the Certificate Insurance Policy (all of the foregoing
being hereinafter referred to as the "Trust Estate"). The
foregoing transfer, assignment, set over and conveyance does
not constitute and is not intended to result in a creation or
an assumption by the Trustee, any Certificateholder or MBIA of
any obligation of the Transferor, the Company, the Servicer
or any other Person in connection with the Trust Estate or
under any agreement or instrument relating thereto. The
trust created by the foregoing assignment shall be known
as the "GF Funding Equipment Lease Trust 1997-1."
The Trustee acknowledges its acceptance on behalf of
the Certificateholders and MBIA of all right, title and
interest previously held by the Transferor in and to the Trust
Estate, and declares that it shall maintain such right, title
and interest in accordance with the provisions hereof and
agrees to perform the duties herein required to the best of
its ability to the end that the interests of the
Certificateholders and MBIA may be adequately and
effectively protected.
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions.
Except as otherwise expressly provided herein, or unless
the context otherwise requires, the following terms have
the
respective meanings set forth below for all purposes of
this Agreement, and the definitions of such terms are
equally applicable both to the singular and plural forms of
such terms. Capitalized terms used herein but not otherwise
defined shall have the respective meanings assigned to
such terms in the Servicing Agreement or the Lease
Acquisition Agreement.
"Accrual Period": The period beginning on the twentieth
day of each month (or, in the case of the Accrual Period
applicable to the Initial Payment Date, beginning on the
Closing Date) and ending on the nineteenth day of the
immediately following month.
"ACH": The National Automated Clearinghouse System.
"ACH Account": The meaning specified in Section
12.02(f) hereof.
"ACH Bank": The bank, if any, specified in the
Servicing Agreement so long as such bank meets the
requirements of a Trustee as set forth in Section 7.08
hereof.
"Acquisition Date": Any Funding Date or any date
of substitution of a Substitute Lease Contract, as applicable.
"Act": With respect to any Certificateholder, the
meaning specified in Section 13.02.
"Additional Lease Contract": Each Lease Contract
acquired by the Transferor on an Acquisition Date, including
pursuant to a Funding.
"Additional Principal Amount": The meaning specified
in Section 12.02(d)(x) hereof.
"Additional Servicer Fee": The amount, if any, of the
fee payable in accordance with Section 6.02 of the
Servicing Agreement to a successor Servicer appointed pursuant
to Section 6.02 of the Servicing Agreement that is in excess
of the Servicer Fee.
"Affiliate": With respect to any specified Person,
any other Person controlling or controlled by or under common
control with such specified Person. For the purposes of this
definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Aggregate IPB": The aggregate of the Implicit
Principal Balance of all Lease Contracts.
"Aggregate Initial IPB": The Aggregate IPB as of the
CutOff Date, which is $17,785,141.60, plus the sum of the
IPB of each Funded Lease Contract, as of the respective
Funding Date, of the Funded Lease Contracts.
"Agreement": This Agreement, in the form when
originally executed and, if from time to time further
supplemented or amended by one or more amendments hereto
pursuant to the applicable provisions hereof, as so
supplemented or amended. All references in this Agreement
designated "Articles," "Sections," "Subsections" and other
subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this Agreement as
originally executed, or if amended or supplemented, as so
amended and supplemented. The words "herein," "hereof,"
"hereunder" and other words of similar import when not related
to a specific subdivision of this Agreement, refer to this
Agreement as a whole and not to any particular Article,
Section, Subsection or other subdivision of this Agreement.
"Amended Lease Schedule": The list of Lease
Contracts amending the Lease Schedule pursuant to any
substitution, repurchase, modification or Funding of Lease
Contracts in accordance with the terms hereof and the
Lease Acquisition Agreement, and accompanied by a Company
Certificate or a GF Certificate, as applicable.
"Amortization Period": The period commencing on the
first day after the Funding Termination Date and ending on
the Final Payment Date.
"Annualized Gross Default Rate": For any Monthly
Period, the sum of the Implicit Principal Balance as of the
Calculation Date occurring in such Monthly Period of all Lease
Contracts that either (a) have become delinquent for a period
of 91 or more days during such Monthly Period (including any
such Lease Contracts that have been repurchased, removed or
substituted during such Monthly Period), or (b) the Servicer
has determined in accordance with its customary practices
that it shall not make a Servicer Advance with respect to
such Lease Contract, that a prior Servicer Advance with
respect to such Lease Contract is unrecoverable, or that
the remaining Scheduled Payments under the
related Lease Contract are uncollectible during such
Monthly Period (including any such Lease Contracts that
have been removed, repurchased or substituted during such
Monthly Period), divided by the Aggregate IPB on the
Calculation Date immediately preceding such Monthly Period
multiplied by twelve.
"Authenticating Agent": Initially, the Trustee,
and
thereafter any entity appointed by the Trustee pursuant
to Section 7.14 hereof.
"Back-up Servicer": Norwest Bank Minnesota,
National Association, and all successors thereto.
"Back-up Servicer Fee": The fee payable on each
Payment Date to the Back-up Servicer in consideration for
the Back-up Servicer's performance of its duties pursuant to
this Agreement and the Servicing Agreement as Back-up
Servicer, in an amount equal to the product of one-twelfth
of the Back-up Servicer Fee Rate and the Class A Certificate
Balance immediately following the preceding Payment Date,
provided, however, with respect to the Initial Payment
Date, the Back-up Servicer Fee shall equal $954.86.
"Back-up Servicer Fee Rate": The meaning given in the
Terms Schedule attached hereto.
"Benefit Plan Investor": The meaning set forth in 29
C.F.R.
2510.3-101.
"Board of Directors": Either the board of directors of
the Transferor or of the Servicer, as the context requires,
or any duly authorized committee of such board.
"Board Resolution": A copy of a resolution certified by
the Secretary or an Assistant Secretary of the Transferor or
of the Servicer to have been duly adopted by its Board of
Directors and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Broker Assignment Agreements": The assignments by
which the Company obtains an assignment of lease contracts
and the related equipment from the originating broker.
"Business Day": Any day other than a Saturday, a Sunday
or a day on which banking institutions in New York City or in
the city in which the principal place of business of the
Transferor or the Servicer or the corporate trust office of
the Trustee under this Agreement is located are authorized
or obligated by law or executive order to close. For
purposes of draws on the Certificate Insurance Policy pursuant
to Article Eight hereof, a "Business Day" means any day other
than a Saturday, a Sunday or a day on which MBIA or banking
institutions in New York City or in the city in which the
principal place of business of the Transferor or the
Servicer or the corporate trust office of the Trustee under
this Agreement is located are authorized or obligated by
law or executive order to close.
"Calculation Date": The last day of a Monthly
Period, except that (a) with respect to any calculations made
regarding any Funding, the Calculation Date shall mean the
Calculation Date that was the basis for the most recent Monthly
Servicer's Report; and (b) with respect to any calculations
that occur prior to delivery of the initial Monthly
Servicer's Report, the
Calculation Date shall mean the Cut-Off Date.
"Capitalized Interest Account": The trust account
created and maintained pursuant to Section 12.04 hereof.
"Capitalized Interest Account Deposit": $233,135.42,
which is an amount equal to one-fourth of the product of
(i) the difference between (A) the Discount Rate, and (B)
2.5% and (ii) the Prefunding Account Deposit.
"Cash Collateral Account": The trust account or
accounts created and maintained pursuant to Section 12.03
hereof.
"Cash Collateral Account Factor": One plus the quotient
of (a) the positive difference between (i) the sum of the
Class A Interest Rate, the MBIA Premium Rate, the Trustee Fee
Rate, and the Back-up Servicer Fee Rate, and (ii) 2.5% over
(b) twelve.
"Cash Collateral Account Required Balance": As of any
date of determination, an amount equal to the product of (i)
the Cash Collateral Account Factor and (ii) the Required
Collateralization Amount minus the positive difference
between: (A) the Aggregate IPB and, if applicable, the sum of
the IPB of the Lease Contracts relating to the Funding expected
to occur on the related Funding Date, and (B) the Class A
Certificate Balance (after giving effect to any payments
of principal expected to occur on a related Payment Date,
if any) less the Prefunding Account Deposit then on deposit
in the Prefunding Account (after releasing amounts
therefrom, if any, on a related Funding Date); provided,
however, if a Trigger Event has occurred, the Cash
Collateral Account Required Balance shall be an amount equal to
zero.
"Certificate" or "Certificates": Any one or
collectively, all Class A Certificates, Class B Certificates
and the Transferor Certificate or all Certificates of any
one Class, as is consistent with the context in which such
term is used.
"Certificate Balance": The Class A Certificate
Balance and/or the Class B Certificate Balance, as applicable.
"Certificate Funding Administration Agreement":
With respect to the Class A Certificates, the administration
agreement executed in connection therewith between the
Certificate Funding Administrator, the Servicer and the
Transferor.
"Certificate Funding Administrator": Rothschild Inc.,
or any successor Certificate Funding Administrator
approved in writing by MBIA.
"Certificate Insurance Policy": The certificate
guaranty insurance policy issued by MBIA insuring the Class A
Certificates in accordance with the terms thereof.
"Certificate Interest Rate": With respect to the Class
A Certificates, the Class A Interest Rate and with respect to
the Class B Certificates, the Class B Interest Rate.
"Certificate Purchase Agreement": Each Certificate
Purchase Agreement between the Transferor and one or more
purchasers of Certificates.
"Certificate Register" and "Certificate Registrar":
The respective meanings specified in Section 2.05 hereof.
"Certificateholder" or "Holder": The Person in whose name
a Certificate is registered in the Certificate Register.
"Class": The separate senior, junior and
subordinated classes of Certificates issued pursuant to
this Agreement, designated as Class A Certificates, Class B
Certificates and the
Transferor Certificate, respectively.
"Class A Certificates": Any one of the
Certificates executed by the Transferor and authenticated by
the Trustee in the form attached hereto as Exhibit A.
"Class A Certificate Initial Balance": The meaning given
in the Terms Schedule attached hereto.
"Class A Certificate Balance": The Class A
Certificate Initial Balance less all amounts allocable
to principal distributed to Class A Certificateholders.
"Class A Interest Rate": The meaning given in the
Terms Schedule attached hereto.
"Class A Percentage": The meaning given in the
Terms Schedule attached hereto.
"Class A Principal Distribution Amount": As of each
Payment Date during the Funding Period, zero, and as of each
Payment Date during the Amortization Period and prior to the
Stated Maturity, an amount equal to the Class A Targeted
Principal Distribution Amount for such Payment Date and as
of the Stated Maturity, an amount equal to the Class A
Certificate Balance as of such date. In addition, on the
first Payment Date following the end of the Funding Period,
pursuant to Section 12.04(d)(ii) hereof, the Trustee is
required to pay any portion of the Prefunding Account Deposit
remaining on deposit in the Prefunding Account to the Class
A Certificateholders.
"Class A Targeted Principal Distribution Amount":
With respect to each Payment Date after the Funding Period has
ended, if the Aggregate IPB is less than the Targeted Balance
for such Payment Date, an amount equal to the Class A
Certificate Balance (as of such Payment Date and before
giving effect to distributions on such date) minus the
Aggregate IPB, and if the Aggregate IPB equals or exceeds
the Targeted Balance for such Payment Date, an amount equal
to the Class A Certificate Balance (as of such Payment
Date and before giving effect to distributions on such
date) minus the Targeted Balance for such Payment Date.
"Class B Certificates": Any one of the
Certificates executed by the Transferor and authenticated by
the Trustee in the form attached hereto as Exhibit B
pursuant to the execution of the Class B Supplement.
"Class B Certificate Balance": The Class B
Certificate Initial Balance, less all amounts allocable
to principal distributed to the Class B Certificateholders.
"Class B Interest Rate": The meaning given in the Class
B Supplement.
"Class B Certificate Initial Balance": The meaning given
in the Class B Supplement.
"Class B Percentage": The meaning given in the Class
B Supplement.
"Class B Principal Distribution Amount": The meaning
given in the Class B Supplement.
"Class B Supplement": With respect to Class B
Certificates that may be issued hereunder, the supplement to
this Agreement in the form attached as Exhibit G hereto
for the Class B
Certificates and pursuant to which the terms of such Class
B Certificates are specified as provided in Section 2.02
hereof.
"Closing Date": March 25, 1997.
"Code": The Internal Revenue Code of 1986, as amended.
"Collection Account": The trust account or accounts
created and maintained pursuant to Section 12.02 hereof.
"Company": Granite Financial, Inc., and all
successors thereto in accordance with the Lease Acquisition
Agreement.
"Company Certificate": An Officer's Certificate
delivered by the Company substantially in the form of Exhibit
A to the Lease Acquisition Agreement.
"Concentration Limits": The meaning specified in the
Lease Acquisition Agreement.
"Controlling Holders": Holders of Class A
Certificates representing at least 51% of the Class A
Certificate Balance, and after the Class A Certificate Balance
has been reduced to zero, Holders of Class B Certificates
representing at least 51% of the Class B Certificate
Balance, and after the Class B Certificate Balance has been
reduced to zero, the Holder of the Transferor Certificate.
"Corporate Trust Office": The principal corporate
trust office of the Trustee at 6th Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0070, or at such other
address as the Trustee may designate from time to time by
notice to MBIA, the Certificateholders and the Transferor,
or the principal corporate trust office of any successor
Trustee.
"Cumulative Gross Default Rate": For any Monthly
Period, the sum of the Implicit Principal Balance of Lease
Contracts, determined in the Monthly Period during which
such Lease
Contracts became 91 or more days delinquent, that either (a)
are currently delinquent for a period of 91 or more days
(including any such Lease Contracts that have been
repurchased, removed or substituted during such Monthly
Period), or (b) the Servicer has determined in accordance
with its customary practices that it shall not make a
Servicer Advance with respect to such Lease Contract, that
a prior Servicer Advance with respect to such Lease
Contract is unrecoverable, or that the remaining Scheduled
Payments under the related Lease Contract are
uncollectible (including any such Lease Contracts that have
been removed, repurchased or substituted during such Monthly
Period) divided by the Aggregate Initial IPB.
"Customer": The lessee under each related Lease
Contract, including any guarantor of such lessee and their
respective successors and assigns.
"Cut-Off Date": February 28, 1997.
"Default": Any occurrence or circumstance which with
notice or the lapse of time or both would become an Event of
Default.
"Defaulted Lease Contract": A Lease Contract shall become
a
Defaulted Lease Contract at the earlier of (a) the
Calculation Date on which such Lease Contract becomes
delinquent for a period of 180 or more days, or (b) the
Servicer determines in accordance with its customary
practices that it shall not make a Servicer Advance with
respect to such Lease Contract, that a prior Servicer
Advance with respect to such Lease Contract is
unrecoverable, or that the remaining Scheduled Payments under
the related Lease Contract are uncollectible.
"Delinquency Rate": For any Monthly Period, the sum of
the Implicit Principal Balance as of the Calculation Date
occurring in such Monthly Period of all Lease Contracts that
are more than 60 days and less than 91 days delinquent, as of
such Calculation Date (including any such Lease Contracts
that have been repurchased, removed or substituted during
such Monthly Period), divided by the Aggregate IPB on such
Calculation Date (including any such Lease Contracts that have
been repurchased, removed or substituted during such Monthly
Period).
"Delinquent Lease Contract": For any Monthly Period,
any Lease Contract (a) as to which a full Scheduled Payment
was not received when due by the Servicer and remains unpaid
as of the Calculation Date at the end of such Monthly Period
and (b) which is not a Defaulted Lease Contract.
"Determination Date": The fourth Business Day
preceding each Payment Date.
"Discount Rate": The rate equal to the sum of the
Trustee Fee Rate, the Back-up Servicer Fee Rate, the MBIA
Premium Rate and the Class A Interest Rate.
"Dollar(s)": Lawful money of the United States of
America.
"Due Date": With respect to each Lease Contract, each
date on which payment is due thereunder.
"Electronic Ledgers": The electronic master records of
all lease contracts of the Company or the Servicer similar
to and including the Lease Contracts.
"Eligible Investments": Any and all of the following:
(a) direct obligations of, and obligations fully
guaranteed by, the United States of America, the
Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Federal Home Loan
Banks or any agency or instrumentality of the
United States of America the obligations of which are
backed by the full faith and credit of the United
States of America;
(b) (i) demand and time deposits in, certificates
of deposit of, banker's acceptances issued by or
federal funds sold by any depository institution
or trust company (including the Trustee or its
agent acting in their respective commercial
capacities) incorporated under the laws of the
United States of America or any State thereof
and subject to supervision
and
examination by federal and/or state authorities,
so long as at the time of such investment or
contractual commitment providing for such
investment, such depository institution or trust
company has a short term unsecured debt rating
in the highest available rating category of S&P
and Moody's and provided that each such
investment has an original maturity of no more
than 365 days, and (ii) any other demand or time
deposit or deposit which is fully insured by
the Federal Deposit Insurance Corporation;
(c) repurchase obligations with a term not to exceed
30 days with respect to any security described in
clause (a)
above and entered into with a depository
institution or trust company (acting as a
principal) rated in the highest available rating
category by S&P and
Moody's; provided, however, that collateral
transferred pursuant to such repurchase obligation
must be of the type described in clause (a) above
and must (i) be valued weekly at current market
price plus accrued interest, (ii) pursuant to
such valuation, equal, at all times, 105% of the
cash transferred by the
Trustee in exchange for such collateral and
(iii) be delivered to the Trustee or, if the Trustee
is supplying the collateral, an agent for the
Trustee, in such a manner as to accomplish
perfection of a security interest in the
collateral by possession of certificated
securities.
(d) securities bearing interest or sold at a
discount issued by any corporation incorporated
under the laws of the United States of America or
any State thereof which has a long term unsecured
debt rating in the highest available rating
category of each of the Rating Agencies at the time
of such investment;
(e) commercial paper having an original maturity of
less than 365 days and issued by an institution
having a short term unsecured debt rating in
the highest available rating category of each
of the Rating Agencies at the time of such
investment;
(f) a guaranteed investment contract approved in writing
by each of the Rating Agencies and MBIA and issued
by an insurance company or other corporation having
a long term unsecured debt rating in the highest
available rating category of each of the Rating
Agencies at the time of such investment;
(g) money market funds having ratings in the
highest available rating categories of S&P and
Moody's at the time of such investment which
invest only in other Eligible Investments; any such
money market funds which provide for demand
withdrawals being conclusively deemed to satisfy
any maturity requirement for Eligible Investments set
forth in this Agreement; and
(h) any investment approved in writing by each of the
Rating Agencies and MBIA.
The Trustee may purchase from or sell to itself or
an affiliate, as principal or agent, the Eligible Investments
listed above. All Eligible Investments shall be made in the
name of the Trustee for the benefit of the Certificateholders
and MBIA.
"Eligible Lease Contract": A Lease Contract that
satisfies the selection criteria set forth in Section 3.01(a)
of the Lease Acquisition Agreement as of the Closing Date
or applicable Acquisition Date.
"Equipment": The equipment leased to the Customers
pursuant to the Lease Contracts, including motor vehicles,
together with any replacement parts, additions and repairs
thereof, and any accessories incorporated therein and/or
affixed thereto.
"ERISA": The Employee Retirement Income Security Act
of
1974, as amended or any successor statute thereto.
"Event of Default": The meaning specified in Section
6.01
hereof.
"Existing Indebtedness": The meaning specified in the
Lease Acquisition Agreement.
"Expected Maturity": The meaning specified in the Class
B Supplement.
"Final Due Date": With respect to each Lease Contract,
the final Due Date thereunder.
"Final Payment Date": With respect to any Class
A Certificate or Class B Certificate, the date on which the
final principal payment on such Certificate is made as
therein or herein provided, whether at the Stated Maturity
or Expected Maturity, as applicable, or by acceleration or
redemption.
"Funded Lease Contract": A Lease Contract acquired by
the Transferor on a Funding Date.
"Funding": The acquisition of Funded Lease Contracts by
the Transferor from the Company pursuant to the Lease
Acquisition Agreement, the conveyance by the Transferor of such
Funded Lease Contracts to the Trust and the release of
funds from the Prefunding Account in accordance with Article
Three and Section 12.04(d)(i) hereof.
"Funding Amount": As of any Funding Date, the amount,
if any, by which the Aggregate IPB and the sum of the IPB of
the Lease Contracts relating to the Funding expected to occur
on such Funding Date exceeds the sum of (A) the
Required Collateralization Amount and (B) the Class A
Certificate Balance less the Prefunding Account Deposit
then on deposit in the Prefunding Account (prior to
releasing amounts therefrom, if any, on the related Funding
Date).
"Funding Date": At the option of the Transferor, any
of March 31, 1997, May 12, 1997 and June 10, 1997.
"Funding Period": The period of time commencing on
the Closing Date and ending on the Funding Termination Date.
"Funding Report": A Funding Report in the form of Exhibit
E hereto.
"Funding Termination Date": The earliest of (a) June
10, 1997, (b) the date on which amounts on deposit in the
Prefunding Account are reduced to $30,000 or less and (c) the
date on which a Trigger Event occurs.
"GF Certificate": An Officer's Certificate delivered by
the Transferor substantially in the form of Exhibit F hereto.
"Guaranty Amounts": Any and all amounts paid by
any guarantor indicated on the applicable Lease Contract.
"Holder" or "Certificateholder": The person in whose name
a Certificate is registered in the Certificate Register.
"Implicit Principal Balance" or "IPB": As of any date
of determination, with respect to any Lease Contract, the
present value of the remaining stream of Scheduled Payments
(reduced by the applicable Servicer Fee but not reduced by
any Additional Servicer Fee) due with respect to such Lease
Contract after the applicable Calculation Date, and
calculated by discounting such Scheduled Payments (assuming
such Scheduled Payments are received on the
last day of the related Monthly Period) to such
Calculation Date at an annual rate equal to the Discount Rate,
at the same frequency as the Payment Dates; except that on
the Calculation Date, (a) on or immediately following the
deposit into the Collection Account of any Insurance Proceeds
(and the termination of the related Lease Contract) or the
Removal Price, or on or immediately following the delivery of
a Substitute Lease Contract, (b) immediately on or after the
date that a Lease Contract has
become a Defaulted Lease Contract, or
(c) immediately preceding the Final Payment Date, the
Implicit Principal Balance of each such related Lease Contract
shall be zero. To the extent that the Final Due Date of
any Lease Contract is later than the Stated Maturity,
any Scheduled Payments due on such Lease Contract after the
Calculation Date immediately preceding such Stated Maturity
shall not be taken into account in calculating the
Implicit Principal Balance of such Lease Contract.
"Independent": When used with respect to any
specified Person means such a Person, who (a) is in fact
independent of the Transferor, (b) does not have any direct
financial interest or any material indirect financial
interest in the Transferor or in any Affiliate of the
Transferor and (c) is not connected with the Transferor as
an officer, employee, promoter, underwriter, trustee,
partner, director, or person performing similar
functions. Whenever it is herein provided that any
Independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be appointed by a
Transferor Order and approved by the Trustee in the exercise
of reasonable care, and such opinion or certificate shall
state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"Independent Accountants": Ehrhardt, Keefe, Steiner
& Hottman, or any firm of independent certified public
accountants of recognized national standing and reasonably
acceptable to MBIA, or if an MBIA Default or Termination has
occurred and is continuing, the Controlling Holders.
"Initial Payment Date": April 21, 1997.
"Initial Lease Schedule": The listing of Lease
Contracts and related Equipment attached hereto as Schedule I.
"Insurance Agreement": The Insurance Agreement dated as
of March 1, 1997 by and among MBIA, the Transferor, the
Company, the Servicer, the Back-up Servicer, the Trustee and
the Certificate Funding Administrator, as amended or
supplemented in accordance with the terms thereof.
"Insurance Policy": With respect to an item of
Equipment and a Lease Contract, any insurance policy
maintained by the Customer pursuant to the related Lease
Contract that covers physical damage to the Equipment or
general liability (including policies procured by the Company
or the Servicer on behalf of the Customer).
"Insurance Proceeds": With respect to an item of
Equipment and a Lease Contract, any amount received during
the related Monthly Period pursuant to an Insurance
Policy issued with respect to such Equipment and the related
Lease Contract, net of any costs of collecting such amounts
not otherwise reimbursed.
"Insurer": Any insurance company or other insurer
providing any Insurance Policy.
"Investment Letter": The letter required to be delivered
by each transferee of a Certificate, as provided in Section
2.06
hereof, substantially in the form of Exhibit D hereto.
"Lease Acquisition Agreement": The Lease
Acquisition Agreement dated as of March 1, 1997, by and
between the Transferor and the Company, as amended or
supplemented from time to time in accordance with the terms
thereof.
"Lease Assets": The meaning specified in the
Lease
Acquisition Agreement.
"Lease Contract File": The meaning specified in the
Lease Acquisition Agreement.
"Lease Contracts": The lease contracts including all
Loan Contracts (and all rights with respect thereto,
including all guaranties and other agreements or
arrangements of whatever character from time to time
supporting or securing payment of any Lease Contract and all
rights with respect to any agreements or arrangements with
the vendors, dealers or manufacturers of the Equipment to
the extent specifically related to any Lease Contract)
which are identified either (i) on the Initial Lease Schedule
delivered to the Trustee and MBIA on the Closing Date, or (ii)
on an Amended Lease Schedule delivered to the Trustee and MBIA
on an Acquisition Date; provided that, from and after the
date on which a Lease Contract is repurchased, removed
or substituted by the Company or the Transferor in accordance
with Section 4.03 hereof, such repurchased, removed or replaced
Lease Contract shall no longer constitute a Lease Contract for
purposes of the Transaction Documents.
"Lease Receivables": With respect to any Lease
Contract, all of, and the right to receive all of (a)
the Scheduled Payments, (b) any prepayments made with
respect of such Lease Contract, (c) any Guaranty Amounts,
(d) any Insurance Proceeds, (e) any Residual Proceeds, (f)
any Overdue Payments, and (g) any Recoveries.
"Lease Schedule": The Initial Lease Schedule, together
with and as amended by all Amended Lease Schedules, each of
which shall include with respect to each Lease Contract: (a)
a number identifying the Lease Contract, (b) the Implicit
Principal Balance, (c) the number identifying the Customer,
(d) the State of the Customer's billing address, (e) the
original and remaining term, (f) the Scheduled Payment and
the frequency thereof, (g) the Equipment type, (h) the zip
code of the Customer's billing address, (i) the broker of
the Lease Contract (j) whether such Lease Contract is a "true
lease" or a Loan Contract and (k) the amount of any PUT
Payment.
"Lien": The meaning specified in the Lease
Acquisition Agreement.
"Liquidated Lease Receivable": A Lease Receivable that
has been liquidated pursuant to Section 3.01(b) of the
Servicing Agreement.
"Loan Contract": A Lease Contract that evidences a sale
of the related Equipment to the Customer and the retention by
the lessor of a security interest in such Equipment.
"Lockbox Account": The meaning specified in the
Servicing Agreement.
"Material Affiliate": Any entity whose capital stock
the Company has majority ownership.
"MBIA": MBIA Insurance Corporation and any
successor thereto.
"MBIA Default or Termination": The occurrence
and
continuance of any of the following events:
(a) the failure by MBIA to make a payment under
the Certificate Insurance Policy in accordance
with its terms;
(b) the occurrence of an "Insurer Insolvency," as that
term is defined in the Insurance Agreement, with
respect to MBIA; or
(c) 124 days have elapsed since the Class A
Certificates have been paid in full, MBIA has been
paid all amounts owed to it under the
Insurance Agreement,
the
Certificate Insurance Policy has been surrendered
to MBIA and the Insurance Agreement has been
terminated.
"MBIA Premium": The MBIA Premium specified in the
Insurance Agreement.
"MBIA Premium Rate": The meaning specified in the
Insurance Agreement.
"Monthly Period": As to any Determination Date or
Payment Date, the period beginning on the first day and
ending on the last day of the calendar month preceding the
month in which such Determination Date or Payment Date occurs.
"Monthly Servicer's Report": The report prepared by
the Servicer pursuant to Section 4.01 of the Servicing
Agreement.
"Moody's": Moody's Investors Service, Inc. and
its
successors in interest.
"Negative Arbitrage Amount": For any Payment Date,
the product of (A) one-twelfth of the Discount Rate and
(B) the balance of the Prefunding Account at the beginning of
the related Accrual Period.
"Net Worth Requirement" has the meaning given in the
Terms Schedule attached hereto.
"Nonrecoverable Advance": The meaning specified in
the Servicing Agreement.
"Officer's Certificate": A certificate signed by
the
Chairman of the Board, the President, a Vice President,
the Treasurer, the Controller, an Assistant Controller or
the
Secretary of the company on whose behalf the certificate
is delivered, and delivered to the Trustee, which certificate
shall comply with the applicable requirements of Section 13.13
hereof. Unless otherwise specified, any reference in this
Agreement to an Officer's Certificate shall be to an Officer's
Certificate of the Transferor.
"Opinion of Counsel": A written opinion of outside
counsel who shall be reasonably satisfactory to the Trustee
and MBIA and which opinion shall comply with the applicable
requirements of Section
13.13 hereof.
"Original Issuance": The date of issuance, if any, of
the Class B Certificates.
"Outstanding": With respect to Certificates, as of any
date of determination, all Certificates theretofore
authenticated and delivered under this Agreement except:
(a) Certificates theretofore canceled by the
Certificate Registrar or delivered to the Certificate
Registrar for cancellation; and
(b) Certificates in exchange for or in lieu of which
other Certificates have been authenticated and
delivered pursuant to this Agreement, unless proof
satisfactory to the Trustee is presented that any
such Certificates are held by a bona fide purchaser;
provided, however, that for purposes of disbursing payments
from the Certificate Insurance Policy and in determining
whether the Holders of the requisite amount of Certificate
Balance have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Certificates
(other than the Transferor Certificate) owned by the
Transferor or any other obligor upon the Certificates or
any Affiliate of the Transferor or the Servicer or such
other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent, or
waiver, only Certificates which the Trustee knows to be so
owned shall be so disregarded.
"Overdue Payment": With respect to a Monthly Period and
a Lease Contract that is a Delinquent Lease Contract, all
payments due in a prior Monthly Period that the Servicer
receives from or on behalf of a Customer during the related
Monthly Period on such Delinquent Lease Contract, including any
Servicing Charges.
"Paying Agent": The Trustee or any other Person that
meets the eligibility standards for the Trustee specified in
Section 7.08 hereof and is authorized by the Transferor
pursuant to Section 7.16 hereof to pay the principal of, or
interest on, any Certificates on behalf of the Transferor.
"Payment Date": The twentieth day of each calendar
month (or if such day is not a Business Day, the next
succeeding Business Day) commencing on the Initial Payment
Date.
"Person": Any individual, corporation,
partnership, association, joint-stock company, limited
liability company, trust (including any beneficiary
thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Placement Agent": Rothschild Inc.
"Preference Claim": The meaning given in Section
8.01 hereof.
"Prefunding Account": The trust account established
and maintained pursuant to Section 12.04(b) hereof.
"Prefunding Account Deposit": The meaning given in the
Terms Schedule attached hereto.
"Private Placement Memorandum" or "Final Private
Placement Memorandum": The preliminary Private Placement
Memorandum dated March 5, 1997 or the final Private
Placement Memorandum dated March 24, 1997.
"Proceeding": Any suit in equity, action at law or
other judicial or administrative proceeding.
"PUT Payments": A provision in a Lease Contract
obligating the lessee to purchase the related Equipment upon
termination.
"Rating Agencies": Moody's and S & P.
"Record Date": The close of business on the last day of
the month preceding the applicable Payment Date, whether or
not a Business Day, except with respect to an Initial Payment
Date, the Record Date shall be the Closing Date.
"Recoveries": For any Monthly Period occurring after
the date on which any Lease Contract becomes a Defaulted
Lease Contract and with respect to such Defaulted Lease
Contract, all payments that the Servicer received from or
on behalf of a Customer during such Monthly Period in
respect of such Defaulted Lease Contract or from liquidation
or re-leasing of the related Equipment, including but not
limited to prepayments, Scheduled Payments, Overdue
Payments, Guaranty Amounts, and Insurance Proceeds.
"Redemption Account": The trust account or accounts
created and maintained pursuant to Section 12.02 hereof.
"Redemption Date": A date fixed pursuant to Section
10.01
hereof.
"Redemption Price": With respect to any Class
of
Certificates being redeemed pursuant to Article Ten hereof,
and as of the related Redemption Date, the Certificate
Balance of such Class of Certificates, together with
interest accrued and unpaid thereon to but excluding the
related Redemption Date at the applicable Certificate
Interest Rate (exclusive
of
installments of interest and principal maturing on or prior
to such date, payment of which shall have been made or duly
provided for to the Holder of such Certificate on the
applicable Record Date or as otherwise provided in this
Agreement).
"Redemption Record Date": With respect to any redemption
of Certificates, a date fixed pursuant to Section 10.01 hereof.
"Registered Holder": The Person whose name appears on
the Certificate Register on the applicable Record Date or
Redemption Record Date.
"Reinvestment Income": Any interest or other
earnings earned on all or part of the Trust Estate.
"Removal Price": With respect to any Lease
Contract repurchased by the Company pursuant to Sections 2.06
or 3.03 of the Lease Acquisition Agreement or removed by
the Transferor pursuant to Section 4.03(d) hereof, the sum of
(a) the Implicit Principal Balance (computed without giving
effect to clauses (b) and (c) of the definition of "Implicit
Principal Balance") of the related
Lease Receivable on the Calculation Date on
or
immediately preceding the date when the Lease Contract is
removed or repurchased, (b) any Scheduled Payments with
respect to the Lease Contract due on or prior to such
Calculation Date but not received through such Calculation
Date, and (c) with respect to the related Equipment, the
amount, if any, recorded in the books and records of the
Transferor as the "unguaranteed residual."
"Required Collateralization Amount": The meaning given
in the Terms Schedule attached hereto.
"Residual Proceeds": With respect to a Lease Contract
that is not a Defaulted Lease Contract and the related
Equipment, the net proceeds (including Insurance Proceeds) of
any sale, re-lease (including any lease renewal) or other
disposition of such Equipment or any periodic payment under
the Lease Contract for use of the Equipment after the initial
term thereof.
"Responsible Officer": When used with respect to
the Trustee, any officer assigned to the Corporate Trust
Department (or any successor thereto), including any Vice
President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, any Trust Officer or
any other Officer of the Trustee customarily performing
functions similar to those performed by any of the above
designated officers and having direct responsibility for the
administration of this Agreement, and also, with respect to a
particular matter, any other officer, to whom such matter
is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Sale": The meaning specified in Section 6.18 hereof.
"Scheduled Expenses": On any Determination Date,
the
Servicer Fee, the Back-up Servicer Fee, the MBIA Premium and
the Trustee Fee to be due on the next succeeding Payment Date.
"Scheduled Payment": With respect to a Payment Date and
a Lease Contract, the periodic payment (exclusive of any
amounts in respect of taxes and including any PUT Payment but
excluding any other balloon payments) set forth in such Lease
Contract due from the Customer in the related Monthly Period,
calculated without regard to any modification granted pursuant
to Section 3.01(b)(v) of the Servicing Agreement.
"Servicer": Initially, the Company, and thereafter
any successor Servicer appointed pursuant to Section 6.02
of the Servicing Agreement.
"Servicer Advance": The meaning set forth in Section
3.04
of the Servicing Agreement.
"Servicing Officers": The persons listed on a
certificate of the Servicer from time to time delivered by
the Servicer to the Transferor and the Trustee.
"Servicer Fee": The meaning given in the Terms
Schedule attached hereto.
"Servicing Agreement": The Servicing Agreement dated as
of March 1, 1997 by and among the Servicer, the Transferor,
the Back-up Servicer and the Trustee, as amended or
supplemented from time to time in accordance with the terms
thereof.
"Servicing Charges": The sum of (a) all late
payment charges paid by Customers on Lease Contracts that are
Delinquent Lease Contracts after payment in full of any
Scheduled Payments due in a prior Monthly Period and
Scheduled Payments for the related Monthly Period and (b)
any other incidental charges or fees received from a
Customer, including but not limited to, late fees, collection
fees and bounced check charges.
"S & P": Standard & Poor's Ratings Services, a division
of The McGraw Hill Companies, Inc., and its successors in
interest.
"State": Any state of the United States of America and,
in addition, the District of Columbia and Puerto Rico.
"Stated Maturity": With respect to the Class
A Certificates, December 20, 2002.
"Substitute Lease Contract": The meaning specified in
the Lease Acquisition Agreement.
"Tangible Net Worth": The excess of (a) the tangible
assets of the Servicer and any subsidiaries calculated in
accordance with GAAP, as reduced by adequate reserves in each
case where reserves are proper, over (b) all
indebtedness (including subordinated debt) of the
Servicer and its subsidiaries; provided, however, that (i)
in no event shall there be included in the above calculation
any intangible assets such as patents, trademarks, trade
names, copyrights, licenses, goodwill, organizational
costs, advances or loans to, or receivables from, directors,
officers, employees or subsidiaries (other than
subsidiaries that are special purpose entities owned by
the Servicer or any subsidiary thereof), prepaid assets,
amounts relating to covenants not to compete, pension assets,
deferred charges or treasury stock or any securities of the
Servicer or any other securities unless the same are readily
marketable in the United States of America or entitled to be
used as a credit against federal income tax liabilities, (ii)
securities included as such intangible assets shall be taken
into account at their current market price or cost, whichever
is lower, and (iii) any write-up in the book value of any
assets shall not be taken into account.
"Targeted Balance": For each Payment Date occurring in
the Amortization Period, the amount indicated for such Payment
Date on the Targeted Balance Schedule
"Targeted Balance Schedule": The schedule prepared by
the Certificate Funding Administrator at the close of the
Funding Period in accordance with Section 3.03(c) hereof.
"Terms Schedule": Schedule II attached hereto.
"Transaction Documents": The Agreement, the
Servicing Agreement, the Lease Acquisition Agreement, the
Certificates, the Insurance Agreement, the Certificate
Insurance Policy and the Certificate Funding Administration
Agreement.
"Transaction Documents Date": March 1, 1997.
"Transferor": GF Funding Corp. III, and all
successors thereto in accordance with the terms hereof.
"Transferor Certificate": The Certificate substantially
in the form of Exhibit C attached hereto executed by the
Transferor and authenticated by the Trustee.
"Transferor Order" and "Transferor Request": A
written order or request signed in the name of the
Transferor by its President or a Vice President, and
delivered to the Trustee.
"Transition Cost": Any documented expenses
reasonably incurred by a successor Servicer, the Trustee
or MBIA in connection with a transfer of servicing from the
Servicer to a successor Servicer as successor Servicer
pursuant to Section 6.02
of the Servicing Agreement, but not to exceed $50,000.
"Trigger Event": The meaning given in the Terms
Schedule attached hereto.
"Trust": The meaning specified in the Conveyance Clause
of
this Agreement.
"Trust Estate": The meaning specified in the
Conveyance
Clause of this Agreement.
"Trustee": Norwest Bank Minnesota, National
Association, until a successor Person shall have become the
Trustee pursuant to the applicable provisions of this
Agreement, and thereafter "Trustee" shall mean such successor
Person.
"Trustee Fee": The fee payable on each Payment Date to
the Trustee in consideration for the Trustee's performance
of its duties pursuant to this Agreement as Trustee, in an
amount equal to the product of one-twelfth of the Trustee
Fee Rate and the Class A Certificate Balance immediately
following the preceding Payment Date, provided, however, with
respect to the Initial Payment Date, the Trustee Fee shall
equal $954.86.
"Trustee Fee Rate": The meaning given in the Terms
Schedule attached hereto.
"Vice President": With respect to the Transferor or
the Trustee, any vice president, whether or not designated
by a number or a word or words added before or after the
title "vice president."
ARTICLE TWO
THE CERTIFICATES
Section 2.01 Form Generally.
The Class A Certificates and the certificates
of authentication shall be in substantially the form set
forth in Exhibit A attached hereto and the Class B
Certificates shall be in substantially the form set forth in
Exhibit B attached hereto and the Transferor Certificate shall
be in substantially the form set forth in Exhibit C attached
hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are
required or permitted by this Agreement, and may have such
letters, numbers or other marks of identification and such
legends or endorsements placed thereon, as may,
consistently herewith, be determined by the officers
executing such Certificates, as evidenced by their
execution of the Certificates.
The definitive Certificates shall be typewritten,
printed, lithographed or engraved or produced by any
combination of these methods on steel engraved borders or
may be produced in any manner acceptable to the Trustee and
the initial purchasers of the Certificates, all as
determined by the officers executing such Certificates, as
evidenced by their execution of such Certificates.
Section 2.02 Classes of Certificates; Denomination.
(a) This Agreement provides for the issuance by
the Transferor of Certificates consisting of Class A
Certificates, Class B Certificates and the Transferor
Certificate, all subject to and in accordance with the terms
of this Agreement. Each Certificate shall bear upon the
face thereof the designation selected for the Class to which
it belongs.
All Class A Certificates issued under this Agreement
shall in all respects represent a fractional undivided
interest in the Trust Estate, pari passu with all other Class A
Certificates, and
shall be entitled to the benefits hereof without
preference, priority or distinction on account of the actual
time or times of authentication and delivery, all in accordance
with the terms and provisions of this Agreement.
All Class B Certificates issued under this Agreement
shall in all respects represent a fractional undivided
interest in the Trust Estate, pari passu with all other Class B
Certificates and subordinate to all Class A Certificates and
to certain other payments as provided herein (although the
Class B Certificates are not secured by and do not have the
benefit of the Certificate Insurance Policy or any proceeds
therefrom), and shall be entitled to the benefits hereof
without preference, priority or distinction on
account of the actual time or times
of
authentication and delivery, all in accordance with the terms
and provisions of this Agreement.
The rights of the Holders of the Class B Certificates
to receive payments of interest and principal in respect of
the Class B Certificates on any Payment Date shall be
subordinated to the rights of the Holders of Class A
Certificates to receive payments of principal and interest
in respect of the Class A Certificates on such Payment Date
and other payments as set forth in Section 12.02(d).
The rights of the Holders of the Transferor Certificate
to receive payments in respect of the Transferor Certificate on
any Payment Date shall be subordinated to the rights of the
Holders of Class A Certificates and Class B Certificates
to receive payments of principal and interest in respect of
the Class A Certificates and Class B Certificates on such
Payment Date and certain other payments as set forth in
Section 12.02(d).
(b) The aggregate principal amount of Class A
Certificates
that may be authenticated and delivered under this
Agreement shall be $27,500,000, and the aggregate principal
amount of Class B Certificates that may be authenticated and
delivered under this Agreement shall be set forth in the
Class B Supplement, except for Certificates authenticated and
delivered upon registration of transfer or in exchange for
or in lieu of, other Certificates pursuant to Sections 2.04,
2.05, 2.07 or 9.05 hereof. The Class A and Class B
Certificates shall be issuable only as registered Certificates
without coupons in denominations of at least $250,000
and any amount in excess thereof; provided, however, that,
the foregoing shall not restrict or prevent the transfer in
accordance with Sections 2.05 and 2.06 hereof of any
Certificate with a remaining Certificate Balance of less than
$250,000. The
Transferor Certificate shall have no stated principal amount
and no stated interest rate.
Section 2.03 Formation, Execution,
Authentication, Delivery and Dating.
(a) By its conveyance of the Trust Estate to the Trustee
as set forth in the Conveyance Clause hereof, the Transferor
hereby establishes the Trust in exchange for the Transferor
Certificate, the proceeds of the sale of the Class A
Certificates and the proceeds, when and if sold, of the
sale of the Class B Certificates, and all other rights of
the Transferor set forth herein. On
the Closing Date, Certificates shall be issued in
accordance with the terms hereof by the Trust and, upon
written order from the Transferor, the Trustee shall
authenticate (i) the Class A Certificates in an aggregate
principal amount
of
$27,500,000 and (ii) the Transferor Certificate. The Class
B Certificates may be issued at any time after the Closing Date
at the election of the Transferor subject to Section 4.08
hereof.
The terms of the Class B Certificates shall be set forth in
the Class B Supplement.
(b) The Certificates shall be executed on behalf of
the
Transferor by the President or one of the Vice-Presidents of
the Transferor under its corporate seal imprinted or
otherwise reproduced thereon. The signature of these
officers on the Certificates must be manual.
(c) Certificates bearing the manual signatures
of
individuals who were at any time the proper officers of
the Transferor shall bind the Transferor, notwithstanding that
such individuals or any of them have ceased to hold such
offices prior to the authentication or delivery of such
Certificates or did not hold offices at the date of
authentication or delivery of such Certificates.
(d) Each Certificate shall bear on its face the
Closing
Date (or the date of its issuance with respect to any Class
B Certificates which may be issued hereunder) and be dated as
of the date of its authentication.
(e) No Certificate shall be entitled to any benefit
under
this Agreement or be valid or obligatory for any purpose,
unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein
executed by the Trustee or by any Authenticating Agent by the
manual signature of one of its authorized officers, and such
certificate upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has
been duly authenticated and delivered hereunder.
Section 2.04 Temporary Certificates.
Pending the preparation of definitive Certificates,
the Transferor may execute, and upon Transferor Order, the
Trustee shall authenticate and deliver, temporary Certificates
which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any denomination, containing the
same terms and representing the same rights as the
definitive Certificates in lieu of which they are issued.
If temporary Certificates are issued, the Transferor
will cause definitive Certificates to be prepared without
unreasonable delay. After the preparation of definitive
Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of
the temporary Certificates at the office or agency of the
Transferor to be maintained as provided in Section 11.02(m)
hereof, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary
Certificates, the Transferor shall execute and the Trustee
shall authenticate and deliver in exchange therefor one
or more definitive Certificates of any authorized
denominations and of a like initial aggregate principal
amount and Stated Maturity or Expected Maturity, as
applicable. Until so exchanged, the temporary Certificates
shall in all respects be entitled to the same benefits under
this Agreement as definitive Certificates.
Section 2.05 Registration, Registration of Transfer
and Exchange.
(a) The Transferor shall cause to be kept at an office
or
agency to be maintained by the Transferor in accordance
with Section
11.02(m) hereof a register (the "Certificate Register"),
in which, subject to such reasonable regulations as it
may prescribe, the Transferor shall provide for the
registration of
Certificates and the registration of transfers of
Certificates. Norwest Bank Minnesota, National Association,
6th Street and Marquette Avenue, Minneapolis, Minnesota
55479-0113, is hereby appointed "Certificate Registrar" for
the purpose of registering Certificates and transfers of
Certificates as herein provided. The Trustee shall have
the right to examine the Certificate Register at all
reasonable times and to rely conclusively upon a Certificate
of the Certificate Registrar as to the names and addresses
of the Holders of the Certificates and the principal amounts
and numbers of such Certificates as held.
(b) Upon surrender for registration of transfer of
any
Certificate at the office or agency of the Transferor to
be maintained as provided in Section 11.02(m) hereof and
subject to the conditions set forth in Section 2.06 hereof,
the Transferor shall execute, and the Trustee or its agent
shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new
Certificates of any authorized denominations, and of a like
aggregate principal amount, Class and Stated Maturity or
Expected Maturity, as applicable.
(c) At the option of the Holder, Certificates may
be
exchanged for other Certificates of any authorized
denominations and of a like aggregate principal amount,
Class and Stated Maturity or Expected Maturity, as
applicable, upon surrender of the Certificates to be
exchanged at such office or agency. Whenever any
Certificates are so surrendered for exchange, the Transferor
shall execute, and the Trustee or its agent shall
authenticate and deliver, the Certificates which
the
Certificateholder making the exchange is entitled to receive.
(d) All Certificates issued upon any registration
of
transfer or exchange of Certificates shall be entitled to
the same benefits under this Agreement, as the
Certificates surrendered upon such registration of such
transfer or exchange.
Every Certificate presented or surrendered for
registration of transfer or exchange shall (if so required by
the Transferor or the Certificate Registrar) be duly endorsed
or be accompanied by a written instrument of transfer in form
satisfactory to the Transferor and the Certificate Registrar
duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made to a Holder for
any registration of transfer or exchange of Certificates,
but the Transferor may require payment of a sum sufficient to
cover any tax or other governmental charge that may be
imposed in
connection with any registration of transfer or exchange
of Certificates, other than exchanges pursuant to Section
2.04 or 9.05 hereof not involving any registration of
transfer.
Section 2.06 Limitation on Transfer and Exchange.
(a) The Certificates have not been registered or
qualified
under the Securities Act of 1933, as amended (the "1933 Act")
or the securities laws of any state. No transfer of any
Certificate shall be made unless that transfer is made in a
transaction which does not require registration or
qualification under the 1933 Act or under applicable state
securities or "Blue Sky" laws. In the event that a transfer
is to be made without registration or qualification, such
Certificateholder's prospective transferee shall either (i)
deliver to the Trustee an Investment Letter or (ii) deliver
to the Trustee an opinion of counsel that the transfer is
exempt from such registration or qualification (which opinion
shall not be at the expense of the Transferor, the
Trustee, the Servicer or the Trust Estate). Neither
the
Transferor nor the Trustee is obligated to register or
qualify the Certificates under the 1933 Act or any other
securities law. Any such Holder desiring to effect such
transfer shall, and does hereby agree to, indemnify the
Trustee, MBIA and the Transferor against any liability,
cost or expense (including attorneys' fees) that may result
if the transfer is not so exempt or is not made in accordance
with such federal and state laws. The Trustee shall promptly,
after receipt of such information as is provided by the
Servicer, furnish to any Holder, or any Prospective Owner
designated by a Holder, the information required to be
delivered to Holders and Prospective Owners of Certificates
in connection with resales of the Certificates to permit
compliance with Rule 144A of the 1933 Act in connection
with such resales. Such
information shall be provided to the Trustee by the Servicer.
(b) No acquisition or transfer of a Certificate or
any interest therein may be made to any "Benefit Plan
Investor" (as defined in 29 C.F.R. 2510.3-101) or to any
person who is directly or indirectly purchasing such
Certificates or an interest therein on behalf of, as named
fiduciary of, as trustee of, or with assets of, such a
Benefit Plan Investor unless the Trustee is provided with
evidence that establishes to the satisfaction of the
Trustee that (i) either no "prohibited transaction" under
ERISA or the Code will occur in connection with such
prospective acquiror's or transferee's acquisition and holding
of the Certificates or that the acquisition and holding of the
Certificates by such prospective acquiror or transferee is
subject to a statutory or administrative exemption, and (ii)
that the prospective acquiror's or transferee's
acquisition and
holding will not subject the Transferor, the Servicer,
the Trustee or
the Certificate Funding Administrator to
any
obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in
addition to those explicitly undertaken in the Transaction
Documents.
(c) No transfer of the Transferor Certificate by
the Transferor may be made except in accordance with Section
11.02(o) hereof.
(d) The Trustee shall have no liability to the Trust
Estate or any Certificateholder arising from a transfer of
any such Certificate in reliance upon a certification
described in this Section 2.06.
Section 2.07 Mutilated, Destroyed, Lost or
Stolen Certificate.
If (i) any mutilated Certificate is surrendered to
the Certificate Registrar, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft
of any
Certificate, and (ii) there is delivered to the Trustee and
MBIA such security or indemnity as may be required by the
Trustee to save the Transferor, the Trustee and MBIA or any
agent of any of them harmless, then, in the absence of notice
to the Transferor or the Certificate Registrar that such
Certificate has been acquired by a bona fide purchaser, the
Transferor shall execute and, upon its request, the
Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of the same tenor, initial
principal amount and Stated Maturity or Expected Maturity,
as applicable, bearing a number
not
contemporaneously outstanding. If after the delivery of such
new Certificate, a bona fide purchaser of the original
Certificate in lieu of which such new Certificate was
issued presents for payment such original Certificate, MBIA,
the Transferor and the Trustee shall be entitled to recover
such new Certificate from
the person to whom it was delivered or any person
taking therefrom, except a bona fide purchaser, and shall be
entitled to recover upon the security or indemnity provided
therefor to the extent of any loss, damage, cost or expenses
incurred by MBIA, the Transferor or the Trustee or any
agent of any of them in connection therewith. If any such
mutilated, destroyed, lost or stolen Certificate shall have
become or shall be about to become due and payable, or shall
have become subject to redemption in full, instead of
issuing a new Certificate, the Transferor may pay such
Certificate without surrender thereof, except that any
mutilated Certificate shall be surrendered.
No service charge shall be made to a Holder for
any registration of transfer or exchange of Certificates,
but the Transferor may require payment of a sum sufficient to
cover any tax or other governmental charge that may be
imposed in
connection with any registration of transfer or exchange
of Certificates, other than exchanges pursuant to Section
2.04 or 9.05 hereof not involving any registration of
transfer. Upon the issuance of any new Certificate under
this Section, the
Transferor may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Certificate issued pursuant to this Section
2.07, in lieu of any destroyed, lost or stolen
Certificate, shall constitute an original additional
contractual obligation of the Transferor, whether or not
the destroyed, lost or stolen Certificate shall be at any
time enforceable by anyone, and shall be entitled to all the
benefits of this Agreement equally and proportionately with
any and all other Certificates duly issued hereunder.
The provisions of this Section are exclusive and
shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Certificates.
Section 2.08 Payment of Principal and Interest;
Principal and Interest Rights Preserved.
(a) For each applicable Accrual Period, the Class
A Certificates and the Class B Certificates shall bear interest
on their respective Class A or Class B Certificate Balance at
their applicable Certificate Interest Rate, until the
last day
preceding the Final Payment Date and (to the extent that
the payment of such interest shall be legally enforceable)
on any overdue installment of interest from the date such
interest became due and until fully paid. Interest for
each Accrual Period shall be calculated on the basis of
a 360-day year consisting of 12 months of 30 days each.
Interest shall be due and payable in arrears on each Payment
Date, with each payment of interest calculated as described
above on the Certificate Balance immediately following the
preceding Payment Date or on the Closing Date, if there
has not been any preceding Payment Date; provided that the
payment of interest on the Class B Certificates is subordinate
to the payment of principal and interest on the Class A
Certificates and other fees and expenses as specified in
Section 12.02(d). In making any such interest payment, if
the interest calculation with respect to a Certificate shall
result in a portion of such payment being less than $0.01,
then such payment shall be decreased to the nearest whole
cent, and no subsequent adjustment shall be made in respect
thereof.
(b) The principal of each Class A and Class B
Certificate
shall be payable in installments ending no later than the
Stated Maturity or Expected
Maturity thereof unless such Certificate
becomes due and payable at an earlier date by declaration
of
acceleration, call for redemption or otherwise. All
reductions in the principal amount of a Certificate effected
by payments of installments of
principal made on any Payment Date shall be
binding upon all future Holders of such Certificate and of
any Certificate issued upon the registration of transfer
thereof or
in exchange therefor or in lieu thereof, whether or not
such
payment is noted on such Certificate. Each installment
of
principal payable on the Class A Certificates shall be in
an
amount equal to the Class A Principal Distribution Amount and
the Additional Principal Amount, if any, available to be
paid in
accordance with the priorities of Section 12.02(d) hereof.
Each
installment of principal payable on the Class B
Certificates shall be in an amount equal to the Class B
Principal Distribution Amount; provided that the payment of
the Class B Principal Distribution Amount
shall be subordinate to the payments of
principal and interest on the Class A Certificates and to
certain other payments in accordance with Section 12.02(d)
hereof. The
principal payable on the Class A Certificates shall be paid
on
each Payment Date beginning on the first Payment Date in
the Amortization Period
and ending on the Final Payment Date, and
unless otherwise stated in the Class B Supplement, the
principal payable on the Class B Certificates shall be paid on
each Payment Date beginning on the first Payment Date after
the later of the Funding Termination Date and issuance thereof
and ending on the applicable Final Payment Date. All
payments of principal with respect to all of the Certificates
of any Class, shall be made on a pro rata basis
based upon the ratio that the certificate
balance of a Certificate bears to the Certificate Balance of
all Certificates of such
Class; provided, however, that if as a
result of such proration a portion of such principal would
be
less than $.01, then such payment shall be increased to
the nearest whole cent, and such portion shall be deducted
from the next succeeding principal payment.
(c) The principal, interest and any other amounts paid
on
the Certificates are payable by check mailed by first-class
mail to the Person whose name appears as the Registered Holder
of such Certificate on the Certificate Register at the address
of such Person as it appears on the Certificate Register
or by wire transfer in immediately available funds to the
account specified in writing to the Trustee by such Registered
Holder at least five Business Days prior to the Record Date
for the Payment Date on
which wire transfers will commence, in such coin or currency
of
the United States of America as at the time of payment is
legal tender for the payment of public and private debts.
Except as
set forth in the final sentence of this Section 2.08(c),
all payments on the Certificates shall be paid without
any
requirement of presentment. The Transferor shall notify
the Person in whose name a Certificate is registered at the
close of
business on the Record Date next preceding the Payment Date
on
which the Transferor expects that the final installment
of
principal of such Certificate will be paid that the
Transferor expects that such final installment will be paid on
such Payment Date. Such notice
shall be mailed no later than the tenth day
prior to such Payment Date and shall specify the place where
such Certificate may be surrendered. Funds representing
any such checks returned undeliverable shall be held in
accordance with Section 7.16 hereof. Each Certificateholder
shall surrender its Certificate to the Trustee prior to
payment of the final installment of principal of such
Certificate.
(d) Notwithstanding any of the foregoing provisions
with respect to payments of principal of and interest
on the
Certificates, if the Certificates have become or been
declared due and payable following an Event of Default
and such
acceleration of maturity and its consequences have not
been rescinded and annulled, then payments of principal
of and interest on such Certificates shall be made in
accordance with Section 6.08 hereof.
(e) Payments on the Transferor Certificate shall be made
on each Payment Date to the extent funds are available
therefore pursuant to Section 12.02(d)(xvi).
(f) Each Holder of a Certificate, by acceptance of
its Certificate, agrees that during the term of this
Agreement and for one year and one day after the
termination hereof, such Holder or any Affiliate thereof
will not file any involuntary petition or otherwise
institute any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other proceeding
under any federal or state bankruptcy or similar law against
the Transferor.
(g) The Certificates are payable only out of the
Trust Estate and do not represent recourse obligations
of the
Transferor, the Servicer or any affiliate thereof or
any
successor thereto.
Section 2.09 Persons Deemed Owner.
Prior to due presentment for registration of transfer of
any Certificate, the Transferor, MBIA, the Trustee and any
agent of the Transferor, MBIA or the Trustee shall treat the
Person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving
payments of principal of and interest on such Certificate
and for all other purposes whatsoever, whether or not
such Certificate be overdue, and neither the Transferor,
MBIA, the Trustee nor any agent of the Transferor, MBIA or
the Trustee shall be affected by notice to the contrary.
Section 2.10 Cancellation.
All Certificates surrendered to the Trustee for
payment, registration of transfer or exchange (including
Certificates surrendered to any Person other than the Trustee
which shall be delivered to the Trustee) shall be promptly
canceled by the Trustee. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates
canceled as provided in this Section 2.10, except
as expressly permitted by this Agreement.
All canceled Certificates held by the Trustee shall be
disposed of by the Trustee as is customary with its standard
practice.
Section 2.11 Tax Treatment.
The Transferor has structured this Agreement and
the Certificates with the intention that the Class A
Certificates qualify under applicable tax laws as indebtedness
secured by the Trust Estate. The Transferor further intends
that the Trust formed hereby be disregarded as an entity
separate from the Transferor if and until the date when
there is more than one Certificateholder (not
including holders of Class A
Certificates), and thereafter be treated as a partnership,
with the assets of the partnership including all of the
assets comprising the Trust Estate, the partners of the
partnership being the Class B Certificateholders and the
holder of the Transferor Certificate, and the Class A
Certificates being nonrecourse debt of such partnership.
The Transferor, the Trustee, the Servicer, MBIA and each
Certificateholder, by
acceptance of its Certificate (and any Person that is
a beneficial owner of any interest in a Certificate, by virtue
of such Person's acquisition of a beneficial interest therein)
agree to report the transactions contemplated hereby in
accordance with the above stated intentions unless and until
determined to the contrary by an applicable taxing
authority. In connection therewith, at any time after the
date when there is more than one Certificateholder (not
including holders of Class
A
Certificates), the Holder of the Transferor Certificate shall
(i) maintain capital accounts and make partnership
allocations in accordance with section 704 of the Code, (ii)
file Form 8832 with the Internal Revenue Service and make the
election provided for to have the Trust be classified as a
partnership for federal income tax purposes and (iii) be
designated as the "tax matters partner" of the Trust.
ARTICLE THREE
FUNDINGS
Section 3.01 Fundings.
Subject to satisfaction of the conditions precedent
set forth in Section 3.03 hereof and Eligible Lease Contracts
being available to be acquired pursuant to the Lease
Acquisition Agreement, during the Funding Period the Transferor
shall acquire Funded Lease Contracts pursuant to the
Lease Acquisition Agreement with amounts on deposit in the
Prefunding Account.
Section 3.02 Determination of Funding Amounts;
Release from the Prefunding Account.
(a) The Funding Amount for the Funded Lease
Contracts acquired on a Funding Date shall be determined by the
Servicer on behalf of the Transferor, and confirmed by
the Certificate Funding Administrator and the Trustee and
shall be reflected in the Funding Report with respect to Lease
Contracts identified on the related Amended Lease Schedule
attached to the GF Certificate and the Company Certificate for
such Funding. Each Funded Lease Contract shall automatically
become subject to this Agreement, and the related Lease
Contract Files shall be held by the Trustee as provided herein.
(b) On each Funding Date, provided that the provisions
of Section 3.03 hereof are satisfied, the Trustee shall release
from the Prefunding Account the amounts specified in
Section
12.04(d)(i) and remit such funds in accordance with such
Section. Thereafter, the Trustee shall release from the Cash
Collateral Account the amount specified in Section
12.03(d)(iv) hereof and remit such funds in accordance with
such Section. At the end of the Funding Period, the
Trustee shall release all remaining amounts in the
Prefunding Account in accordance with Section 12.04(d)(ii)
hereof.
Section 3.03 Procedure for Fundings.
(a) Conditions Precedent. Each Funding is subject to
the satisfaction of the following conditions precedent on
the
relevant date specified below:
(i) the Servicer shall have provided three
Business Days advance notification to the Trustee,
MBIA and the Certificate Funding Administrator (by
telephone or in
writing) of a request for a Funding to occur;
(ii) no later than 11:00 a.m. (New York time)
the
second Business Day immediately prior to the
requested Funding Date, the Transferor shall have
delivered to the Certificate Funding Administrator and
the Trustee, by a diskette or electronic transfer, a
list of the proposed Lease Contracts to be funded, and
providing for each such Lease Contract all information
required to be provided in the Amended Lease Schedule
as provided in the definition thereof;
(iii) the delivery by the Transferor to the
Trustee on or before the second Business Day immediately
prior to the requested Funding Date of the
original executed counterpart of the Lease Contracts
relating to such Funding and the other items comprising
the related Lease Contract Files, including, in the
case of titled Equipment, a certificate of title
naming the Trustee as first lienholder of such titled
Equipment and, in the case of Lease Contracts which are
not Loan Contracts, a certificate of title naming the
Transferor as owner and naming the Trustee as first
lienholder of such titled Equipment;
(iv) the Transferor's delivery to the Trustee on
or before the Business Day immediately prior to the
requested Funding Date of the GF Certificate and
the Company Certificate, each accompanied by an Amended
Lease Schedule, executed by the Company or the
Transferor, as appropriate;
(v) the Trustee shall have no actual knowledge that
a Default, Event of Default or Trigger Event shall exist
or shall result from the Funding;
(vi) the Certificate Insurance Policy shall be in
full force and effect and the Trustee shall have no
actual knowledge that an MBIA Default or Termination
shall have occurred;
(vii) the Transferor shall have certified
pursuant
to the GF Certificate that (A) the Lease Contracts
proposed to be funded with such Funding shall be
Eligible Lease Contracts and (B) after giving effect to
such Funding, the Concentration Limits shall not have
been exceeded;
(viii) as of the second Business Day
immediately
prior to the requested Funding Date, a Certificate
Funding Administrator is in place in accordance with
Section 3.05 hereof;
(ix) such Funding shall occur on a Funding Date; and
(x) the Funding Report shall have been delivered
to the Trustee and MBIA pursuant to clause (b) below.
The Trustee may assume that MBIA has received all of
the documentation required to be delivered to MBIA pursuant to
this Article III if MBIA has not notified the Trustee, in
writing, no later than 11:00 a.m. (Minneapolis time) on any
Funding Date that MBIA has not received any such documentation.
(b) Preparation of Funding Report. The Servicer,
together with the Certificate Funding Administrator, shall
review such diskette or electronic transfer specified in
clause (a)(ii) above and prepare a Funding Report from the
information provided in such diskette or electronic
transfer, the existing information regarding all other Lease
Contracts and the existing information used to generate the
Monthly Servicer's Report. No later than 10:00 a.m. (New
York time) on each Business Day immediately
preceding a proposed Funding Date, the Certificate
Funding
Administrator shall fax the Funding Report, and the amount to
be released from the Cash Collateral Account and the
Prefunding Account, to the Transferor and the Transferor
shall thereupon execute such report and fax it to MBIA and
the Trustee no later than 11:00 a.m. (New York time) on such
date of receipt. The
Servicer shall forward to MBIA by overnight mail or
electronic transfer, for
receipt by MBIA on the related Funding Date, a
diskette or other electronic file, containing, in a
standardized format, the same information that was delivered by
the Transferor pursuant to clause (a)(ii) above.
(c) Preparation of Targeted Balance Schedule.
Immediately
after the Funding Termination Date, the Certificate
Funding Administrator shall prepare and deliver to the Trustee,
MBIA, the Transferor, the Servicer and the Certificateholders
the Targeted Balance Schedule. Such schedule shall be based
on all Lease Contracts then
assigned to the Trustee and shall reflect the
targeted decline of the Class A Certificate Balance
assuming (i) no delinquencies, defaults or prepayments on
the Lease Contracts, (ii) the Class A Certificateholders are
paid on each Payment Date the Class A Percentage of the
Scheduled Payments to be paid during the related Monthly
Period and (iii) such adjustments as may be necessary
pursuant to clause (b) or (c) of the definition of Required
Collateralization Amount are taken into account when such
clauses would be applicable for any
Payment Date.
Section 3.04 Verification of Funding Report.
(a) Upon the Trustee's receipt of a Funding Report
pursuant to Section 3.03(b) hereof, the Trustee shall recompute
all of the calculations in such Funding Report (including
without limitation a recalculation of the Implicit Principal
Balance of the related Lease Contracts) based on the
information contained in the list of Lease
Contracts forwarded to it by diskette or electronic
transfer, the existing information regarding all other
Lease
Contracts and the existing information used to generate
the
Monthly Servicer's Report. If the Trustee does not discover
and
is not notified of any errors in the calculations in such
Funding Report that have not been corrected by 3:00 p.m. (New
York time) on the Business Day immediately preceding the
proposed Funding Date and all of the conditions
precedent set forth in
Section 3.03 hereof have been satisfied (provided, however,
that
with respect to 3.03(a)(vii)(A), the Trustee may
conclusively rely on the Company Certificate), the Trustee
shall release the
amounts specified in Section 3.02(b) from the Cash
Collateral Account and the Prefunding Account in accordance
with Section 3.02 hereof. If the Trustee discovers or is
notified of any
error in the Funding Report that is not corrected by 3:00
p.m.
(New York time) on the Business Day immediately preceding
the
proposed Funding Date or if any of the conditions precedent
set
forth in Section 3.03(a) hereof have not been satisfied,
the
Trustee shall notify the Transferor that the applicable
Funding is postponed until the next Business Day following
resolution of any such error, and the Trustee shall thereupon
notify MBIA and
the Certificate Funding Administrator of such error. If
MBIA discovers any
error in the Funding Report after a Funding based
on such report, MBIA shall notify the Trustee, the Servicer,
the Company, the
Certificate Funding Administrator and the
Transferor.
(b) If a Funding occurs based upon a Funding Report
with
respect to which an error has been discovered and the
Certificate Funding Administrator or the Transferor is not
able to correct such error to the satisfaction of MBIA by
the next succeeding
date upon which a Funding is permitted to occur (or, in the
case of the final Funding preceding or on the applicable
Funding Termination Date, by the Payment Date immediately
following such Funding Termination Date), the Transferor shall
cause the Company to either (i) repurchase the affected Lease
Contracts at a price equal to the Removal Price of such Lease
Contracts, (ii) replace the affected Lease Contracts with
Substitute Lease Contracts, in each case on the earlier of
(x) the second succeeding date upon which the next Funding
is permitted to occur, (y) the following Determination Date
and (z) the Funding Termination Date or (iii) deposit
funds in the Prefunding Account (or, in the case of the
final Funding preceding or on the applicable Funding
Termination Date, the Collection Account) in the amount, if
any, by which the Funding Amount as recalculated based on the
correct information is less than the erroneous Funding Amount.
(c) On the Funding Termination Date, the Transferor
will forward to the Independent Accountants by mailing
computer diskettes or by electronic transfer, the Funding
Reports prepared during the Funding Period together with the
information necessary to
calculate the Implicit Principal Balance of the Lease
Contracts. Within sixty (60) days following the
Funding
Termination Date, the Transferor shall cause the
Independent Accountants to (i) recalculate the Implicit
Principal Balance of the Lease Contracts included in such
Funding Reports and the related Funding Amounts, in each
case based solely on the information contained in such
reports or on such computer diskettes, and to send the
results of such recalculation to the Transferor, the
Trustee, the Servicer, the Certificate Funding Administrator
and MBIA and (ii) reunderwrite 10% of all Lease Contracts
acquired by the Transferor during the Funding Period and 100%
of all Lease Contracts acquired by the Transferor during the
Funding Period having titled Equipment underlying such Lease
Contracts. If any errors have been discovered by the
Independent Accountants in the course of any such review, and
the Certificate Funding Administrator or the Transferor is not
able to correct such error to the satisfaction of MBIA by
the next Payment Date following receipt by the Transferor
from the Independent Accountants of the results, the
Transferor shall cause the Company to either (i) repurchase
the affected Lease Contracts at a price equal to the
Removal Price of such Lease Contracts, (ii) replace the
affected Lease Contracts with Substitute Lease Contracts or
(iii) deposit funds in the Collection Account in the amount, if
any, by which the Funding Amount as recalculated based on the
correct information is less than the erroneous Funding
Amount.
Section 3.05 Appointment of Certificate
Funding
Administrator.
(a) As a condition to the issuance of the Class
A Certificates, the Transferor shall appoint Rothschild Inc. to
act as the Certificate Funding Administrator to perform the
functions described in this Article Three. If at any time
MBIA, or upon an MBIA Default or Termination, the
Controlling Holders, shall notify the Trustee and Rothschild
Inc. in writing that Rothschild Inc. has failed to perform
its duties in accordance with this Article Three or if at any
time, Rothschild Inc. shall become the subject of a proceeding
under the United States Bankruptcy Code or if
Rothschild Inc. resigns as Certificate
Funding
Administrator, the Servicer shall direct the Transferor
to appoint a successor Certificate Funding Administrator of
the Servicer's choosing which shall be acceptable to MBIA and
notify the
Trustee of such appointment. Upon notice of such
appointment, the Trustee shall mail written notice thereof
by first-class mail, postage prepaid, to all
Certificateholders.
Upon the Certificate Funding Administrator's resignation
or termination pursuant to this Section 3.05, (i) the
Certificate Funding Administrator shall comply with the
provisions hereof and the Insurance Agreement until the
acceptance of the appointment of a successor Certificate
Funding Administrator and (ii) until the Trustee receives
MBIA's written consent to a successor Certificate Funding
Administrator, no Funding shall occur.
Any
successor Certificate Funding Administrator upon acceptance
of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder,
with like effect as if originally named as the
Certificate Funding Administrator.
(b) The Transferor agrees to pay the Certificate
Funding
Administrator compensation for its services under this
Article Three in accordance
with the Certificate Administration
Agreement, which fee, if any, shall in no event be an
obligation of the Trust Estate.
ARTICLE FOUR
ISSUANCE OF CERTIFICATES; SUBSTITUTIONS OF COLLATERAL
Section 4.01 Conditions to Issuance of Certificates
on Closing Date.
All Certificates to be issued on the Closing Date shall
be executed by the Transferor and delivered to the Trustee
for authentication, and thereupon, the same shall be
authenticated and delivered by the Trustee upon Transferor
Order and upon receipt by the Trustee of the following:
(a) the Initial Lease Schedule;
(b) the original executed counterpart of each
Lease
Contract listed on the Initial Lease Schedule and all other
items included in the related Lease Contract File, subject
to such exceptions as shall be noted in an exception report
delivered by the Trustee to MBIA, the Servicer and the
Certificateholders within 10 days of the Closing Date;
(c) a Board Resolution of each of the Transferor,
the
Servicer and the Company authorizing, as applicable,
the
execution, delivery and performance of the Transaction
Documents and the transactions contemplated hereby and by
the other Transaction Documents, certified by the Secretary or
an Assistant Secretary of the Transferor, the Servicer or
the Company, as applicable;
(d) a copy of an officially certified document, dated
not
more than 30 days prior to the Closing Date, evidencing the
due organization and good standing of each of the
Transferor, the Servicer and the Company in their
respective states
of
incorporation;
(e) copies of the Certificate of Incorporation and By-
Laws
of each of the Transferor, the Servicer and the
Company, certified by the Secretary or an Assistant
Secretary of the Transferor, the Servicer and the Company, as
applicable;
(f) (i) evidence of filing with the Secretary of State
of
the State (and with the relevant county, if required by
the applicable state law) of the Company's chief executive
office of UCC-1 financing statements executed by the Company,
as debtor, and naming the Transferor as secured party, the
Trustee for the benefit of the Certificateholders and MBIA as
assignee and the
Lease Assets as collateral; and (ii) evidence of filing with
the Secretary of State of the State (and with the relevant
county, if required by the applicable state law) of the
Transferor's chief executive office of UCC-1 financing
statements executed by the Transferor, as debtor, and naming
the Trustee for the benefit of the Certificateholders and
MBIA as secured party, and the Trust Estate as collateral;
(g) a certificate listing the Servicing Officers of
the
Servicer as of the Closing Date;
(h) an executed copy of the Servicing Agreement and
the
Lease Acquisition Agreement;
(i) the Certificate Insurance Policy for the Class
A
Certificates;
(j) evidence of the deposit of the Prefunding
Account
Deposit and the Capitalized Interest Account Deposit;
(k) evidence of the deposit by the Transferor into
the
Collection Account of any amounts due and paid on the
Lease Contracts since the Cut-Off Date; and
(l) such other documents as the Trustee, MBIA or
the
Certificateholders may reasonably require, including
such documents and opinions described in the Certificate
Purchase Agreements or the Insurance Agreement.
MBIA shall have agreed, by delivering the
Certificate Insurance Policy, that the conditions precedent in
this Section 4.01 have been satisfied to MBIA's satisfaction
or waived by MBIA.
Section 4.02 Perfection of Transfer.
(a) The Transferor and the Company shall file UCC-
1
financing statements described in Section 4.01(f) hereof
in accordance with such Section. Within thirty days of the
Closing Date, the Transferor and the Company shall file an
application for certificate of title for each item of
titled Equipment, naming the Trustee as first lienholder and
with respect to Lease Contracts which
are not Loan Contracts, also naming the
Transferor as owner of such titled Equipment. On or prior to
the Funding Termination Date, the Transferor and the Company
shall deliver such original certificate of title to the
Trustee. From time to time, the Servicer shall take or cause
to be taken such actions and execute such documents as are
necessary to perfect and protect the Trustee's and MBIA's
respective interests in the Lease Contracts against all other
Persons, including, without limitation, the filing of
financing statements,
amendments
thereto and continuation statements, the execution of
transfer instruments and the making of notations on or taking
possession of all records or documents of title.
(b) If any change in either the Company's or
the
Transferor's name, identity, structure or the location of
its principal place of business or chief executive office
occurs, then the Transferor shall, or the Transferor shall
cause the Company to deliver 30 days prior written notice of
such change or relocation to the Servicer, MBIA and the
Trustee and no later than the effective date of such
change or relocation, the Servicer shall file such
amendments or statements as may be required to preserve
and protect the Trustee's and MBIA's respective interests
in the Trust Estate.
(c) During the term of this Agreement, the Transferor
will maintain its chief executive office and principal
place of business in one of the States of the United States.
(d) The Servicer agrees to pay all reasonable costs
and disbursements in connection with the perfection and
the
maintenance of perfection, as against all third parties, of
the Trustee's and MBIA's respective right, title and interest
in and to the Trust Estate.
(e) The Trustee shall hold the original
executed
counterparts of each Lease Contract at its office in the State
of Minnesota, and at any such new address in the State of
Minnesota as the Trustee shall inform the Servicer, the
Transferor, and MBIA in writing from time to time. The
Trustee shall hold each Lease Contract for the benefit of
Certificateholders and MBIA, and maintain accurate records
pertaining to each Lease Contract to maintain a current
inventory thereof. The Trustee may, if requested by the
Servicer in writing for purposes of servicing a Lease
Contract, temporarily release to the Servicer such Lease
Contract. Any Lease Contract temporarily released from
the custody of the Trustee to the Servicer or its agents shall
have stamped on it prior to delivery a legend to the effect
that the Lease Contract is the property of Norwest Bank
Minnesota, National Association, as Trustee. The Servicer
shall promptly return the Lease Contract to the Trustee when
the need therefor no longer exists.
Section 4.03 Substitution, Removal and Purchase of
Lease
Assets.
(a) If at any time the Transferor, MBIA or the
Trustee obtains knowledge (within the meaning of 7.01(e)
hereof), discovers or is notified by the Servicer that
any of the representations and warranties of the Company
in the Lease Acquisition Agreement were incorrect at the time
as of which such representations and warranties were made,
then the Person discovering such defect, omission, or
circumstance shall promptly notify MBIA and the other parties
to this Agreement.
(b) In the event that any representation or warranty of
the Company in the Lease Acquisition Agreement is
incorrect and materially and adversely affects the interests
of MBIA or the Holders of the Certificates, or if there is
any breach of any of the representations and warranties
set forth inSections
3.01(a)(ii), 3.01(a)(v), 3.01(a)(vii), 3.01(a)(xix)
or
3.01(c)(iii) of the Lease Acquisition Agreement, the
Transferor shall require the Company pursuant to the Lease
Acquisition Agreement to eliminate or otherwise cure the
circumstance or condition which has caused such representation
or warranty to be incorrect within 30 days of discovery or
notice thereof. If the Company fails or the Company or the
Back-up Servicer is unable to cure such circumstance or
condition in accordance with the Lease Acquisition Agreement,
then the Transferor shall require the Company to
substitute or purchase pursuant to the Lease Acquisition
Agreement for any Lease Asset as to which such
representation or warranty is incorrect within the time
specified in Section 3.03 of the Lease Acquisition Agreement.
The proceeds of a purchase shall be remitted by the Transferor
to the Servicer for deposit by the Servicer in the Collection
Account pursuant to Section 3.03(c) of the Servicing Agreement.
(c) If the Transferor fails to enforce the purchase
or substitution
obligation of the Company under the Lease
Acquisition Agreement at the direction of MBIA, or upon
the occurrence of an MBIA Default or Termination, the
Controlling
Holders (provided, in each case, that the requirements of
Section 7.03(e) have been satisfied) the Trustee shall
enforce such purchase or substitution obligation for the
benefit of the Certificateholders and MBIA, and the Trustee
is hereby appointed attorney-in-fact to act on behalf of and
in the name of the Transferor to require such purchase or
substitution.
(d) With respect to (i) any Lease Contract to be prepaid
or terminated early pursuant to Section 3.09 of the
Servicing Agreement and (ii) any Lease Contract that becomes
a Defaulted Lease Contract or any Lease Contract that becomes
a Delinquent Lease Contract, the Transferor shall be entitled
to, upon five Business Days notice to the Trustee, remove
such Lease Contract from the Trust Estate and deliver a
Substitute Lease Contract meeting the same requirements as
those specified in Section 3.04
of the Lease Acquisition Agreement for substitutions
and
purchases by the Company upon breaches of a representation
or warranty by the Company thereunder; provided, however, that
the aggregate Implicit Principal Balance of such prepaid and
early terminated Lease Contracts, Defaulted Lease
Contracts and
Delinquent Lease Contracts that are substituted or removed by
the Transferor shall be subject to an overall limit of 10%
of the Aggregate Initial IPB; and, provided, further
that no
substitution or repurchase shall be made if (i) such
substitution or repurchase is made with any intent to
hinder, delay, or defraud any entity to which the Company
is or will become indebted; (ii) there shall be any reason
to believe that the Company is insolvent or that such
substitution or repurchase will render the Company insolvent
on the date thereof or as a result of such substitution or
repurchase; (iii) at the time of such substitution or
repurchase, the Company is engaged in business, or about to
engage in business, for which the assets remaining with it
after the substitution or repurchase will be an
unreasonably small amount of capital; or (iv) the Company
intends or believes that it will incur debts beyond its ability
to pay as such debts mature.
(e) The Transferor shall comply with the
requirements
relating to Substitute Lease Contracts and Funded Lease
Contracts as set forth in the Lease Acquisition Agreement
(including compliance with the Eligibility Criteria and the
Concentration Limits) within the time periods set forth
therein. In addition, in the case of any Funded Lease
Contracts, the Transferor shall provide to the Trustee and
MBIA, as applicable, the items listed in Section 3.03(a)
hereof which are required to be delivered to the Trustee
and/or MBIA pursuant to such Section. On or prior to the
Business Day preceding the Closing Date or within two
Business Days of the related Funding Date the Trustee will
review the related Lease Contract Files. The Trustee shall
confirm, by execution and delivery of a certificate of the
Trustee to the Transferor, the Certificateholders and
MBIA, that: (1) the Trustee has received the Lease
Contract Files; and (2) that the Trustee has received the
originals of each Lease Contract. In
the case of any Substitute Lease Contracts acquired by
the Transferor, the Transferor shall provide to the Trustee
on the applicable date of delivery the items listed in (i)
and (ii) below, and to MBIA the item listed in (i) below. In
the case of any Funded Lease Contracts or Substitute Lease
Contracts acquired by the Transferor pursuant to either a
Funding or a substitution of a Lease Contract, the Transferor
shall provide to the Trustee and MBIA at the end of each
calendar quarter the items listed in (iii) below with
respect to any Substitute Lease Contracts substituted or
Funded Lease Contracts acquired during such period:
(i) a Company Certificate and a GF Certificate,
each
such certificate having attached thereto an Amended
Lease Schedule and subjecting such Substitute Lease
Contract to the provisions thereof and hereof and
providing with respect to the Substitute Lease Contract
the information required to supplement the Lease
Schedule, and with respect to titled Equipment, an
application to retitle or originate title in such
Equipment, as applicable, in the name of the Transferor
and naming the Trustee as secured party;
(ii) the original executed counterpart of the
Lease Contract relating to such Substitute Lease Contract
and all other items included in the Lease Contract File;
and
(iii) evidence that financing statements have
been filed with
respect to such Substitute Lease Contract or
Funded Lease Contract in accordance with Sections
4.01(f) and 4.02
hereof.
(f) If, upon examination of the Lease Contract Files
in
accordance with Section 4.03(e) hereof, the Trustee
determines
that any such Lease Contract File does not satisfy
the
requirements set forth in Section 4.03(e) hereof, or is unable
to confirm that the requirements have been met, the Trustee
shall promptly notify the Transferor, the Servicer and
MBIA by
telephone or telecopy. If the Transferor or the Servicer
does not satisfy the Trustee that the requirements of Section
4.03(e) hereof have been met prior to the related Funding
Date, the Trustee shall return the applicable Lease Contract
and related files to the Transferor.
(g) Within thirty days after the Funding Termination
Date,
the Trustee shall review the exception report delivered
pursuant to Section 4.01(b) and shall verify that it has
possession of the original executed counterpart of each Lease
Contract listed on such report and a certificate of title
naming the Transferor as owner (if the
underlying Lease Contract is not a Loan Contract)
and naming the Trustee as the first lienholder of all
titled Equipment underlying any Lease Contract. The Trustee
shall send such verification and notice of any defects to
the Transferor, the Company and MBIA within thirty days
after the Funding Termination Date and take any appropriate
action under the Lease Acquisition Agreement.
Section 4.04 Releases.
(a) The Transferor shall be entitled to obtain a
release
from the lien of this Agreement for any Lease Contract
and, except in the case of a re-lease under (iii) below, the
related Equipment at any time (i) after a payment by the
Company or the Transferor of the
Removal Price of the Lease Receivable,
(ii) after a Substitute Lease Contract is substituted for
such Lease Contract, or (iii) upon the termination of a Lease
Contract following the sale, lease or other disposition of
the related Equipment in accordance with Section
3.01(b)(vii) of the Servicing Agreement, if the Transferor
delivers to the Trustee and MBIA an Officer's Certificate
(A) identifying the Lease Receivable and the
related Lease Contract and Equipment to be
released, (B) requesting the release thereof, (C) setting
forth the amount deposited in the Collection Account with
respect thereto, in the event a Lease Contract and the related
Equipment are being released
from the lien of this Agreement pursuant to
(i) or (iii) above, and (D) certifying that the amount
deposited in the Collection Account (x) equals the Removal
Price of the Lease Contract, in the event a Lease Contract
and the related Equipment are being released from the lien
of this Agreement pursuant to (i) above or (y) equals
the entire amount of
Insurance Proceeds, Recoveries or Residual Proceeds received
or expected to be received with respect to such Lease Contract
and related Equipment in the event of a release from the lien
of this Agreement pursuant to (iii) above.
(b) Upon satisfaction of the conditions specified
in subsection (a), the Trustee shall release from the lien of
this Agreement and deliver to or upon the order of the
Transferor (or to or upon the order of the Company if it
has satisfied its obligations under Section 4.03 hereof and
Section 3.04 of the Lease Acquisition Agreement with respect
to a Lease Contract) the Lease Contract, the Lease Receivable
and the Equipment described in the Transferor's request for
release.
Section 4.05 Trust Estate.
The Trustee may, and when required by the provisions
of Articles Four, Five, Six and Twelve hereof shall,
execute instruments to release property from the lien of this
Agreement, or convey the Trustee's interest in the same, in a
manner and under circumstances which are not
inconsistent with
the
provisions of this Agreement. No party relying upon
an
instrument executed by the Trustee as provided in this
Article Four shall be bound to ascertain the Trustee's
authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
Section 4.06 Notice of Release.
The Trustee shall be entitled to receive at least 10
days' notice of any action to be taken pursuant to Section
4.04(a) hereof, accompanied by copies of any instruments
involved.
Section 4.07 Nature of Transfer.
To the extent that the transfer of the Trust Estate from
the Transferor to the Trustee is deemed to be a secured
financing, the Transferor shall be deemed hereunder to have
granted to the Trustee, and the Transferor does hereby grant
to the Trustee, a security interest in all of the
Transferor's right, title and interest in, to and under the
Trust Estate, whether now owned or hereafter acquired. For
purposes of such grant, this Agreement shall constitute a
security agreement under applicable law.
Section 4.08 Issuances of Class B Certificates.
(a) Class B Certificates may be issued by the Transferor
in accordance with the terms of this Agreement. On or before
the issuance date of such Class B Certificates, the parties
hereto will execute and deliver the Class B Supplement that
will specify the terms applicable to the Class B Certificates.
The terms set forth in the Class B Supplement may modify or
amend, subject to Article Nine hereof, the terms of this
Agreement solely as applied to such Class B Certificates.
The Class B Certificates may be executed by the Transferor
and delivered to the Trustee for authentication, and
thereupon, the same shall
be
authenticated and delivered by the Trustee upon Transferor
Order and upon receipt:
(i) by the Trustee, of an executed copy of a Class
B Supplement;
(ii) by the Trustee and MBIA, of an Officers' Certificate
of the Transferor to the effect that (A) such issuance
will not result in the occurrence of a Trigger Event or
a Default under this Agreement and the Transferor is
not in Default under this Agreement, (B) the issuance
of the Class B
Certificates applied for will not result in a breach of
any of the terms, conditions or provisions of, or
constitute a default under, any agreement or instrument
to which the Transferor is a party or by which it is
bound, or any order of any court or administrative
agency entered in any proceeding to which the
Transferor is a party or by which it may be bound or
to which it may be subject, (C) all conditions
precedent provided in this Agreement relating to the
authentication and delivery of the Class B Certificates
applied for have been complied with, and (D) specifying
the Expected Maturity, the principal amount and the
Class B Interest Rate of the Class B Certificates; and
(iii) by the Trustee and MBIA, an Opinion of Counsel
to the effect that the issuance of such Class B
Certificates will not adversely affect the
characterization of the Class A Certificates as debt
for tax purposes, and as to such
additional legal matters as MBIA may reasonably
request.
The Transferor shall notify the Trustee in writing no
later than 10:00a.m. (Minneapolis time) on the proposed
date of issuance of such Class B Certificates that MBIA has
been provided (A) the Officer's Certificate required by (ii)
above and (B) an opinion covering all matters required
pursuant to clause (iii) above.
Upon satisfaction of the above conditions, the Trustee
shall execute the Class B Supplement and issue and deliver to
or upon the order of the Transferor the Class B Certificates,
and provide notice to MBIA, the Rating Agencies and
all existing Certificateholders of the issuance of such Class
B Certificates.
ARTICLE FIVE
SATISFACTION AND DISCHARGE
Section 5.01 Satisfaction and Discharge of Agreement.
(a) Following payment in full of (i) all of
the
Certificates, (ii) the fees and charges of the Trustee, (iii)
all other obligations of the Transferor under the
Transaction Documents and (iv) all amounts owing to MBIA under
the Insurance Agreement, and the release by the Trustee of the
Trust Estate in accordance with Section 5.01(b) hereof, this
Agreement shall be discharged and the Trustee shall notify
the Rating Agencies thereof.
(b) Upon payment in full of the amounts referred to
in clauses (i) through (iv) of Section 5.01(a) hereof,
the
Transferor may submit to the Trustee an Officer's
Certificate requesting the release to the Transferor or its
designee of a stated amount of the funds on deposit in the
Cash Collateral Account and some or all of the other Trust
Estate (collectively, the "Withdrawn Collateral"), accompanied
by an Opinion of Counsel reasonably acceptable to MBIA or,
if an MBIA Default
or
Termination has occurred and is continuing, acceptable to
the Controlling Holders, to the effect that, after the release
of the Withdrawn Collateral, there will remain an amount in
the Cash Collateral Account or otherwise subject to this
Agreement at least equal to the payments of interest due on
the Outstanding Certificates and the Class A Principal
Distribution Amounts and Class B Principal Distribution
Amounts that are subject to recapture as preferential
transfers pursuant to Section 547 of the Bankruptcy Code or,
alternatively, to the effect that no such
payments are subject to recapture. In rendering such Opinion
of Counsel, such counsel may rely as to factual matters,
including, without limitation, the date on which funds were
received and the source of funds, upon an Officer's
Certificate. Promptly after receipt of such Officer's
Certificate, Opinion of Counsel and authorization to release
from MBIA, the Trustee shall release the Withdrawn Collateral
from the lien of this Agreement, and deliver the Withdrawn
Collateral to the Transferor or its designee. The Transferor
shall be entitled to deliver more than one such Officer's
Certificate and Opinion of Counsel until the entire Trust
Estate is released and delivered to the Transferor or its
designee. Notwithstanding the foregoing, MBIA or, if an
MBIA Default or Termination has occurred and is
continuing, the Controlling Holders, may waive the
requirement that the
Transferor deliver such Officer's Certificate and/or Opinion
of Counsel and authorize the Trustee by written direction to
release all or a portion of the Cash Collateral Account or
other items of the Trust Estate from the lien of this Agreement
upon payment in full of the amounts referred to in clauses
(i) through (iv) of Section 5.01(a)
hereof. Notwithstanding termination of this
Agreement, the Trustee shall remain obligated to make
claims under the Certificate Insurance Policy with respect
to any Preference Claim.
(c) In connection with the discharge of this Agreement
and the release of the Trust Estate, the Trustee shall release
from the lien of this Agreement and deliver to or upon the
order of the Transferor all property remaining in the Trust
Estate and shall execute and file, at the expense of the
Transferor, UCC financing statements evidencing such discharge
and release.
Section 5.02 Application of Trust Money.
Subject to the last paragraph of Section 7.16 hereof,
all
monies deposited with the Trustee pursuant to Section 5.01
hereof shall be held in trust and if invested, shall be
invested in Eligible Investments of the type described in
clause (a) of the definition thereof, and applied by the
Trustee, in accordance with the provisions of the
Certificates and this Agreement, to the payment, either
directly or through any Paying Agent as the Trustee may
determine, to the Persons entitled thereto, of the principal
and interest for whose payment such money has been
deposited with the Trustee; but such money need not be
segregated from other funds except to the extent required in
this Agreement or to the extent required by law.
ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
"Event of Default" wherever used herein means any one of
the following events:
(a) default in the payment of any interest or
any other amounts due and owing to
the Class A
Certificateholders when the same becomes due and
payable, and if there are no Class A Certificates
Outstanding, default in the payment of any interest upon
any Class B Certificates when the same becomes due and
payable; or
(b) default in the payment of any principal of
any Class A Certificate when the same becomes due and
payable, and if there are no Class A Certificates
Outstanding, default in the payment of any principal
upon any Class B
Certificates when the same becomes due and payable; or
(c) default in the performance of any covenant of
the Transferor, or breach of any representation or
warranty of the Transferor which has a material adverse
effect on the Certificateholders or MBIA, in this
Agreement, the Lease Acquisition Agreement, the
Insurance Agreement, the
Certificate Purchase Agreements or the Servicing
Agreement (other than a
covenant or warranty default in the
performance of which or breach of which is elsewhere in
this Section specifically dealt with), and continuance
of such default or breach for a period of 30 days
after the Transferor has actual knowledge thereof;
(d) the entry of a decree or order for relief by
a court having jurisdiction in the premises in respect of
the Transferor under the United States Bankruptcy Code
or any other applicable Federal or state bankruptcy,
insolvency, reorganization, liquidation or other similar
law now or hereafter in effect or any arrangement with
creditors or appointing a receiver, liquidator,
assignee, trustee, or sequestrator (or other similar
official) for the Transferor or for any substantial part
of its property, or ordering the winding up or
liquidation of the Transferor's affairs, and the
continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(e) the institution by the Transferor of
proceedings to be adjudicated a bankrupt or insolvent, or
the consent by the Transferor to the institution of
bankruptcy or
insolvency proceedings against the Transferor, or the
filing by the Transferor of a petition or answer or
consent seeking reorganization or relief under the United
States Bankruptcy Code or any other applicable Federal
or state bankruptcy insolvency, reorganization,
liquidation or other similar law now or hereafter in
effect, or the consent by the Transferor to the filing of
any such petition or to the appointment of or taking
possession by a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or other
similar
official) of the Transferor or of any substantial part
of the Transferor's property, or the making by the
Transferor of any assignment for the benefit of
creditors, or the admission by it in writing of its
inability, or the failure by it generally, to pay its
debts as they become due, or the taking of corporate
action by the Transferor in furtherance of any such
action.
Section 6.02 Acceleration of Maturity; Rescission
and Annulment.
If an Event of Default with respect to any of
the
Certificates at the time Outstanding occurs and is
continuing, then, and in every such case, the Trustee shall, at
the direction of MBIA, or if there is an MBIA Default or
Termination, the Trustee shall, at the direction of the
Controlling Holders, declare the Certificate Balance of all
the Certificates to be immediately due and payable, by
notice given in writing to the Transferor (and to the
Trustee if given by Certificateholders); provided that, MBIA
shall not declare the Certificate Balance of all of the
Certificates immediately due and payable unless it shall
have endorsed the Certificate Insurance Policy to provide
coverage for any shortfall in the payment of
accelerated principal and any interest due on the Class A
Certificates on the date established for redemption
thereof pursuant to such acceleration, and upon any such
declaration, such principal shall become immediately due and
payable without any presentment,
demand, protest or other notice of any kind (except such
notices as shall be expressly required by the provisions
of this Agreement), all of which are hereby expressly waived.
At any time after such a declaration of acceleration
has been made, but before any Sale of the Trust Estate has
been made or a judgment or decree for payment of the money
due has been obtained by the Trustee as hereinafter in this
Article provided, MBIA, or if an MBIA Default or Termination
has occurred, the Controlling Holders, by written notice to
the Transferor and the Trustee, may rescind and annul
such declaration and
its
consequences (except that in the case of a payment default on
the Class A Certificates, or if no Class A Certificates
are
Outstanding, the Class B Certificates, the consent of all
the Holders of such Class shall be required to rescind and
annul such a declaration and its consequences) if:
(1) the Transferor has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue installments of interest on all
Class A Certificates, or if no Class A Certificates are
Outstanding, the Class B Certificates;
(B) the principal of any Class A Certificates, or
if no Class A Certificates are Outstanding, the Class B
Certificates which have become due otherwise than by
such declaration of acceleration and interest thereon
at the rate borne by such Certificates from the
time such principal first became due until the
date when paid; and
(C) all sums paid or advanced, together
with interest thereon, by the Trustee, MBIA
or any
Certificateholder hereunder or by MBIA under
the
Insurance Agreement or the Certificate
Insurance Policy, and the reasonable
compensation, expenses, disbursements and advances
of the Trustee, MBIA and the Certificateholders,
their agents and counsel incurred in connection
with the enforcement of this Agreement to the date of
such payment or deposit; and
(2) all Events of Default, other than the
nonpayment of the principal on the Class A
Certificates, or if no Class A Certificates are
Outstanding, the Class B Certificates which have
become due solely by such declaration of
acceleration, have been cured or waived as provided
in Section 6.15 hereof.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
Section 6.03 Collection of Indebtedness and Suits
for
Enforcement by Trustee.
The Transferor covenants that if an Event of Default
shall occur and be continuing and any of the Certificates
have been declared due and payable and such declaration
has not been rescinded and annulled, the Transferor will,
upon demand of the Trustee and at the direction of MBIA, or
if an MBIA Default or Termination has occurred at the
direction of the Controlling Holders, pay to the Trustee,
for the benefit of the Holders of the Certificates and MBIA,
the whole amount then due and payable on the Certificates for
principal and interest, with interest upon the overdue
principal at the rate borne by the Certificates and, in
addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee and MBIA, their
respective agents and counsel.
If the Transferor fails to pay such amount forthwith
upon such demand, the Trustee, in its own name and as Trustee
of an express trust shall, at the direction of MBIA, and if
an MBIA Default or Termination has occurred the Trustee may,
and shall, at the direction of the Controlling
Holders, institute
Proceedings for the collection of the sums so due and unpaid,
and prosecute such Proceeding to judgment or final
decree, and enforce the same against the Transferor and
collect the monies adjudged or decreed to be payable in the
manner provided by law out of the property of the Transferor,
wherever situated.
If an Event of Default occurs and is continuing, the
Trustee shall, at the direction of MBIA, and if an MBIA
Default or Termination has occurred the Trustee may in
its discretion proceed, and shall at the direction of the
Controlling Holders proceed, to protect and enforce its rights
and the rights of MBIA by such appropriate Proceedings as the
Trustee, at the direction of MBIA, or if an MBIA Default or
Termination has occurred, at its discretion shall deem most
effectual to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in
this Agreement or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 6.04 Remedies.
If an Event of Default shall have occurred and
be
continuing, the Trustee shall, at the direction of MBIA, and
if an MBIA Default or Termination has occurred, the Trustee
shall, at the direction of the Controlling Holders, do one or
more of the following:
(a) institute Proceedings for the collection of
all
amounts then due and payable on the Certificates or
under this Agreement, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the
Transferor the monies adjudged due;
(b) take possession of and sell the Trust
Estate
securing the Certificates or any portion thereof or
rights or interest therein, at one or more Sales
called and conducted in any manner permitted by law;
(c) institute any Proceedings from time to time
for
the complete or partial foreclosure of the lien created
by this Agreement with respect to the Trust Estate;
(d) during the continuance of a default under a
Lease
Contract, exercise any of the rights of the lessor
under such Lease Contract;
(e) exercise any remedies of a secured party under
the Uniform Commercial Code or any applicable law and
take any other appropriate action to protect and enforce
the rights and remedies of the Trustee, MBIA and the
Holders of the Certificates hereunder; and
(f) institute proceedings against MBIA for
the
collection of any amounts then due and payable under
the Certificate Insurance Policy, whether by
declaration or otherwise, enforce any judgment obtained,
and collect from
MBIA the monies adjudged due;
provided, however, that without the consent of MBIA, or if
an MBIA Default or Termination has occurred, all the
Controlling Holders, the Trustee may not sell or otherwise
liquidate any portion of the Trust Estate unless the proceeds
of such Sale or liquidation distributable to the
Certificateholders are
sufficient to discharge in full the amounts then due and
unpaid upon the Certificates of such Controlling Holders for
principal and interest together with any amounts owed to MBIA
under the Insurance Agreement.
Section 6.05 Optional Preservation of Trust Estate.
If (i) an Event of Default shall have occurred and
be continuing with respect to the Certificates and
(ii) no
Certificates have been declared due and payable, or
such declaration and its consequences have been
annulled and
rescinded, the Trustee shall, at the direction of MBIA, or if
an MBIA Default or Termination has occurred, the Trustee may in
its sole discretion if it determines it to be in the best
interests of the Controlling Holders and shall, upon
request from the Controlling Holders elect, by giving
written notice of such election to the Transferor, to take
possession of and retain the Trust Estate securing the
Certificates intact, collect or cause the collection of the
proceeds thereof and make and apply all payments and
deposits and maintain all accounts in respect of such
Certificates in accordance with the provisions of Article
Twelve of this Agreement. If the Trustee is unable to or
is stayed from giving such notice to the Transferor for any
reason whatsoever, such election shall be effective as of the
time of such determination or request, as the case
may be,
notwithstanding any failure to give such notice, and the
Trustee shall give such notice upon the removal or cure of such
inability or stay (but shall have no obligation to effect such
removal or cure). Any such election may be rescinded with
respect to any portion of the Trust Estate securing the
Certificates remaining at the time of such rescission by
written notice to the Trustee and the Transferor from MBIA
or, if an MBIA Default
or
Termination has occurred, from the Controlling Holders.
Section 6.06 Trustee May File Proofs of Claim.
In case of the pendency of any receivership,
insolvency, conservatorship, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other
judicial Proceeding relating to the Transferor or any other
obligor upon any of the Certificates or the property of the
Transferor or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of any of the
Certificates shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the
Transferor for the payment of overdue principal or interest)
shall be entitled and empowered, to intervene in such
proceeding or otherwise,
(a) to file and prove a claim for the whole amount
of principal and interest owing and unpaid in respect of
the Certificates issued hereunder and to file such other
papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses,
disbursements and
advances of the Trustee, its agents and counsel and
any other amounts due the Trustee under Section 7.07
hereof) and of MBIA and the Certificateholders allowed in
such judicial Proceeding, and
(b) to collect and receive any monies or
other property payable or deliverable on any such claims
and to distribute the same,
and any receiver, assignee, trustee, liquidator, or
sequestrator (or other similar official) in any such judicial
Proceeding is hereby authorized by MBIA and each
Certificateholder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of
such payments directly to MBIA or the Certificateholders, to
pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof.
Nothing contained in this Agreement shall be deemed
to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of MBIA or any Certificateholder
any plan of reorganization, arrangement, adjustment or
composition affecting MBIA or any of the Certificates or
the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of MBIA or any
Certificateholder in any such Proceeding.
Section 6.07 Trustee May Enforce Claims Without
Possession of Certificates.
(a) In all Proceedings brought by the Trustee (and also
any Proceedings involving the interpretation of any provision
of this Agreement to which the Trustee shall be a party),
the Trustee shall be held to represent all of the
Certificateholders, and it shall not be necessary to make any
Certificateholder a party to any such Proceedings.
(b) All rights of actions and claims under this
Agreement
or any of the Certificates may be prosecuted and enforced by
the Trustee without the possession of any of the Certificates
or the production thereof in any Proceeding relating thereto,
and any such Proceedings instituted by the Trustee shall be
brought in its own name as Trustee of an express trust, and
any recovery whether by judgment, settlement or otherwise
shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, be for MBIA and the
ratable benefit of the Holders of the Certificates.
Section 6.08 Application of Money Collected.
If the Certificates have been declared due and
payable following an Event of Default and such declaration has
not been rescinded or annulled, any money collected by the
Trustee with respect to the Certificates pursuant to this
Article Six or otherwise and any other money that may be held
thereafter by the Trustee as security for the Certificates
shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such
money on account of principal or interest, upon presentation
of the Certificates and the notation thereon of the
payment if only partially paid and upon surrender thereof if
fully paid; provided that proceeds of a claim under the
Certificate Insurance Policy will be used only to pay interest
and principal on the Class A Certificates in the manner set
forth in clauses Fifth and Sixth below:
FIRST: To the payment to the Trustee of the
Trustee Fee then due, and any costs and expenses incurred
by it in connection with enforcing the remedies provided
for in this Article Six;
SECOND: To the payment of all the Servicer Fee and
other
amounts due the Servicer pursuant to Section 12.02(d)(i)
hereof and to pay the Servicer the amount necessary to
reimburse the Servicer for any other unrecovered Servicer
Advances;
THIRD: To the payment to the Back-up Servicer of
the
Back-up Servicer Fee then due;
FOURTH: To the payment to MBIA of the MBIA Premium
then
due;
FIFTH: To the payment of the amounts then due and
unpaid
upon the Class A Certificates for interest, with interest (to
the extent payment thereof is legally enforceable at the
respective rate or rates prescribed therefor in the Class A
Certificates) on overdue principal, without preference or
priority of any kind among Class A Certificateholders,
according to the amounts due and payable on the Class A
Certificates for interest;
SIXTH: To the payment of the remaining Class
A
Certificate Balance, without preference or priority of any
kind among Class A Certificateholders;
SEVENTH: To the payment to MBIA of any amounts
previously
paid by MBIA under the Certificate Insurance Policy and
not theretofore repaid, together with interest thereon and any
other amounts due under the Insurance Agreement;
EIGHTH: To reimburse MBIA, and in the event an
MBIA
Default or Termination has occurred, to reimburse
the
Certificateholders, for any costs or expenses incurred
in connection with any enforcement action with respect to
this Agreement or the Certificates;
TENTH: To the payment to the Servicer of any
other
amounts due the Servicer as expressly provided herein and in
the Servicing Agreement;
ELEVENTH: To the payment to the Trustee and the Back-
up Servicer, any other amounts due to the Trustee or the
Back-up Servicer as expressly provided herein and in the
Servicing Agreement;
TWELFTH: To the payment of the amounts then due and
unpaid upon the Class B Certificates for interest, with
interest (to the extent such interest has been collected by
the Trustee or a sum sufficient therefor has been so collected
and payment thereof is legally enforceable at the respective
rate or rates prescribed therefor in the Class B
Certificates) on overdue principal, without preference or
priority of any kind among Class B Certificateholders,
according to the amounts due and payable on the Class B
Certificates for interest;
THIRTEENTH: To the payment of the remaining Class
B
Certificate Balance, without preference or priority of any
kind among Class B Certificateholders;
FOURTEENTH: To the payment of any surplus to or at
the
written direction of the Holder of the Transferor Certificate
or any other person legally entitled thereto.
Section 6.09 Limitation on Suits.
No Holder of any Certificate shall have any right
to institute any Proceeding, judicial or otherwise, with
respect to
this Agreement, or for the appointment of a receiver or
trustee, or for any other remedy hereunder for so long as an
MBIA Default or Termination has not occurred, and if an
MBIA Default or Termination has occurred, unless
(a) such Holder has previously given written
notice to the Trustee of a continuing Event of Default;
(b) the Controlling Holders shall have made
written request to the Trustee to institute Proceedings
in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to
the Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 30 days after its receipt
of such notice, request and offer of security or
indemnity has failed to institute any such
Proceedings; and
(e) no direction inconsistent with such
written request has been given to the Trustee
during such 30-day period by the Controlling
Holders; it being understood and intended that no
one or more Holders of Certificates shall have
any right in any manner whatever by virtue of,
or by availing of, any provision of this Agreement
to affect, disturb or prejudice the rights of any
other Holders of Certificates, or to obtain or to
seek to obtain priority or preference over any other
Holders or to enforce any right under this
Agreement, except in the manner herein provided and
for the equal and ratable benefit of all the
Holders of Certificates.
Section 6.10 Unconditional Right of Certificateholders
to Receive Principal and Interest.
Notwithstanding any other provision in this Agreement,
the Holder of any Class A Certificate shall have the right,
which is absolute and unconditional, to receive payment of
the principal and interest on such Class A Certificate as
such principal and interest becomes due and payable and to
institute any Proceeding for the enforcement of any such
payment, and such right shall not be impaired without the
consent of such Holder.
Section 6.11 Restoration of Rights and Remedies.
If the Trustee, MBIA or any Certificateholder has
instituted any Proceeding to enforce any right or remedy
under this Agreement and such Proceeding has been
discontinued or abandoned for any reason, or has been
determined adversely to the Trustee, MBIA or to such
Certificateholder, then, and in every case, the Transferor,
the Trustee, MBIA and the Certificateholders shall, subject
to any determination in such Proceeding, be restored
severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the
Trustee, MBIA and the Certificateholders shall continue
as though no such Proceeding had been instituted.
Section 6.12 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or
stolen Certificates in the last paragraph of Section 2.07
hereof, no right or remedy
herein conferred upon or reserved to the Trustee, MBIA or to
the Certificateholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.13 Delay or Omission; Not Waiver.
No delay or omission of the Trustee, MBIA or of any
Holder of any Certificate to exercise any right or remedy
accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such
Event of Default or any acquiescence therein. Every
right and remedy given by this Article Six or by law
to the Trustee, MBIA or to the
Certificateholders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee, MBIA or
by the Certificateholders, as the case may be, subject in
each case, however, to the right of MBIA to control any
such right and remedy except as provided in Section 13.14
hereof.
Section 6.14 Control by MBIA or Certificateholders.
MBIA or, if an MBIA Default or Termination has occurred,
the Controlling Holders shall have the right to direct the
time, method and place of conducting any Proceeding for any
remedy available to the Trustee or exercising any trust
or power conferred on the Trustee; provided that:
(a) such direction shall not be in conflict with
any rule of law or with this Agreement including,
without limitation, any provision hereof which
expressly provides for approval by a greater percentage
of the Certificate Balance of Certificates;
(b) any direction to the Trustee by
the
Certificateholders of a Class to undertake a
private sale of the Trust Estate shall be by the
Holders of all Outstanding Certificates of such
Class, unless the condition set forth in Section
6.18(b)(ii) hereof is met;
(c) the Trustee may take any other action
deemed proper by the Trustee which is not
inconsistent with such direction; provided,
however, that, subject to Section 7.01 hereof,
the Trustee need not take any action if a
Responsible Officer or Officers of the Trustee in
good faith determines that it might involve the
Trustee or such officer in personal liability or be
prejudicial to the Certificateholders holding the
same Class of Certificates as the Controlling
Holders and not consenting; and
(d) the Trustee has been furnished
reasonable indemnity against costs, expenses and
liabilities which it might incur in connection
therewith as provided in Section 7.01(f)
hereof.
Section 6.15 Waiver of Certain Events by MBIA
or
Certificateholders.
MBIA, or if an MBIA Default or Termination has occurred
the Controlling Holders, may on behalf of the Holders of
all the
Certificates waive any past Default or Trigger Event
hereunder and its consequences, except:
(a) a Default in the payment of the principal of
or interest on any Certificate, or a Default described
in Sections 6.01(d) and (e) hereof, or
(b) in respect of a covenant or provision hereof
which under Article Nine hereof cannot be modified or
amended without the consent of the Holder of each
Outstanding Certificate affected.
Upon any such waiver, such Default or Trigger Event shall
cease to exist, and any Event of Default or other consequence
arising therefrom shall be deemed to have been cured for every
purpose of this Agreement; but no such waiver shall extend to
any subsequent or other Default or Trigger Event or impair any
right consequent thereon.
Section 6.16 Undertaking for Costs.
All parties to this Agreement agree, and each Holder of
any Certificate by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this
Agreement, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the
costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims
or defenses made by such party litigant; but the provisions
of this Section 6.16 shall not apply to any suit
instituted by the Trustee or MBIA, or to any suit instituted
by the Controlling Holders, or to any suit instituted by
any Certificateholder for the enforcement of the payment
of the principal of or interest on any Certificate on or
after the Stated Maturity or Expected Maturity
expressed in such Certificate.
Section 6.17 Waiver of Stay or Extension Laws.
The Transferor covenants (to the extent that it may
lawfully do so) that it will not, at any time, insist upon, or
plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the
covenants or the performance of this Agreement; and the
Transferor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though
no such law had been enacted.
Section 6.18 Sale of Trust Estate.
(a) The power to effect any sale (a "Sale") of any
portion of the Trust Estate pursuant to Section 6.04 hereof
shall not be exhausted by any one or more Sales as to any
portion of the Trust Estate remaining unsold, but shall
continue unimpaired until the entire Trust Estate securing
the Certificates shall have been sold or all amounts
payable on the Certificates and under this Agreement with
respect thereto shall have been paid. The Trustee may from
time to time postpone any Sale by public announcement made at
the time and place of such Sale.
(b) To the extent permitted by applicable law, the
Trustee
shall not, in any private Sale, sell to a third party the
Trust Estate, or any portion thereof unless:
(i) MBIA, or if an MBIA Default or Termination
has occurred the Controlling Holders, consent in
writing to or directs the Trustee to make such Sale; or
(ii) if an MBIA Default or Termination has
occurred, the proceeds of such Sale would not be less
than the sum of all amounts due to the Trustee
hereunder and the Certificate Balance of the Class of
Certificates held by the Controlling Holders and
interest due or to become due thereon on the Payment
Date next succeeding such Sale, together with any
amount owing to MBIA under the Insurance Agreement.
(c) The Trustee, MBIA or the Certificateholders may bid
for and acquire any portion of the Trust Estate in connection
with a public Sale thereof, and in lieu of paying cash
therefor, any Certificateholder may make settlement for the
purchase price by crediting against amounts owing on the
Certificates of such Holder or other amounts owing to such
Holder secured by this Agreement, that portion of the net
proceeds of such Sale to which such Holder would be entitled,
after deducting the reasonable costs, charges and expenses
incurred by the Trustee, MBIA or the Certificateholders in
connection with such Sale. The Certificates need not be
produced in order to complete any such Sale, or in order for
the net proceeds of such Sale to be credited against the
Certificates. The Trustee, MBIA or the Certificateholders
may hold, lease, operate, manage or otherwise deal with
any property so acquired in any manner permitted by law.
(d) The Trustee shall execute and deliver an
appropriate
instrument of conveyance transferring its interest in any
portion of the Trust Estate in connection with a Sale
thereof. In addition, the Trustee is hereby irrevocably
appointed the agent and attorney-in-fact of the Transferor to
transfer and convey its interest in any portion of the Trust
Estate in connection with a Sale thereof, and to take all
action necessary to effect such Sale. No purchaser or
transferee at such a sale shall be bound to ascertain the
Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any
monies.
(e) The method, manner, time, place and terms of any
Sale
of all or any portion of the Trust Estate shall be
commercially reasonable.
Section 6.19 Action on Certificates.
The Trustee's right to seek and recover judgment on
the Certificates or under this Agreement shall not be affected
by the seeking, obtaining or application of any other relief
under or with respect to this Agreement. Neither the
lien of this Agreement nor any rights or remedies of the
Trustee or the Certificateholders shall be impaired by the
recovery of any judgment by the Trustee against the
Transferor or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of
the assets of the Transferor.
ARTICLE SEVEN
THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of
Default known to the Trustee as provided in subsection (e)
below:
(i) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in
this Agreement, and no implied covenants or obligations
shall be read into this Agreement against the Trustee;
and
(ii) in the absence of bad faith or negligence on
its part, the Trustee may conclusively rely as to the
truth of the statements and the correctness of the
opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the
requirements of this Agreement; but in the case of any
such certificates or opinions, which by any provision
hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine
the same and to determine whether or not they conform
to the requirements of this Agreement.
(b) In case an Event of Default known to the Trustee
as provided in subsection (e) below has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and shall use the
same degree of care and skill in its exercise, as a
reasonable person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct or bad faith, except that:
(i) this subsection (c) shall not be construed to
limit the effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer
of the Trustee, unless it shall be proved that
the Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Trustee shall not be liable
with respect to any action taken or omitted to be
taken by it in good faith in accordance with the
direction of MBIA or the Controlling Holders
(or other such percentage as may be required by
the terms hereof) in accordance with Section 6.14
hereof relating to the time, method and place of
conducting any Proceeding for any remedy available
to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement,
the Lease Acquisition Agreement or the Servicing
Agreement; and
(iv) no provision of this Agreement shall
require the Trustee to expend or risk its own
funds or otherwise incur any financial
liability in
the
performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity
against such risk or liability is not reasonably
assured to it, provided that nothing contained in
this Agreement shall excuse
the Trustee for failure to perform its duties as
Trustee under this Agreement.
(d) Whether or not therein expressly so provided,
every
provision of this Agreement relating to the conduct or
affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section
7.01.
(e) For all purposes under this Agreement, the
Trustee
shall not be deemed to have notice of any Event of
Default described in Section 6.01(d) or 6.01(e) hereof or
any Default described in Section 6.01(c) hereof or of any
Trigger Event unless a Responsible Officer assigned to and
working in the Trustee's corporate trust department has
actual knowledge thereof or unless written notice of any event
which is in fact such an Event of Default, Default or
Trigger Event is received by the Trustee at the Corporate
Trust Office, and such notice references any of the
Certificates generally, the Transferor, the Trust Estate or
this Agreement.
(f) The Trustee shall be under no obligation to
institute
any suit, or to take any remedial proceeding under
this Agreement, or to enter any appearance or in any way defend
in any suit in which it may be made defendant, or to take any
steps in the execution of the trusts hereby created or in the
enforcement of any rights and powers hereunder until it shall
be indemnified to its satisfaction against any and all
costs and expenses, outlays and counsel fees and other
reasonable disbursements and against all liability, except
liability that is adjudicated, in connection with any action
so taken.
(g) Notwithstanding any extinguishment of all right,
title
and interest of the Transferor in and to the Trust
Estate following an Event of Default and a consequent
declaration of acceleration of the maturity of any of the
Certificates, whether such extinguishment occurs through a
Sale of the Trust Estate to another person or the
acquisition of the Trust Estate by the Trustee, the rights
of the Certificateholders shall continue to be governed by the
terms of this Agreement.
(h) Notwithstanding anything to the contrary
contained
herein, the provisions of subsections (e) through (g),
inclusive, of this Section 7.01 shall be subject to the
provisions of subsections (a) through (c), inclusive, of this
Section 7.01.
(j) The Trustee shall provide the reports and
accountings
as required pursuant to Section 12.04 hereof.
Section 7.02 Notice of Default and Other Events.
Promptly after the occurrence of any Default, Trigger
Event or MBIA Default or Termination known to the Trustee
(within the meaning of Section 7.01(e) hereof) which is
continuing, within one Business Day of obtaining such
knowledge, the Trustee shall transmit by telephonic or
telegraphic communication confirmed by mail to MBIA and to
all Holders of Certificates, as their names and addresses
appear on the Certificate Register, notice of such Default,
Trigger Event or MBIA Default or Termination known to the
Trustee, unless in the case of notice of Default or notice of
any Trigger Event to Certificateholders, such Default shall
have been promptly cured or waived or such Trigger Event
shall have been waived by MBIA in accordance with this
Agreement.
Section 7.03 Certain Rights of Trustee.
Except as otherwise provided in Section 7.01,
(a) the Trustee may rely and shall be protected
in
acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order,
bond, note or other obligation, paper or document
believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the
Transferor
mentioned herein shall be sufficiently evidenced by
a Transferor Request or Transferor Order and any
resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this
Agreement
the Trustee shall deem it desirable that a matter be
proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an
Officer's Certificate;
(d) the Trustee may consult with counsel and
the
written advice of such counsel selected by the Trustee
with due care or any Opinion of Counsel shall be
full and complete authorization and protection in
respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation
to
exercise any of the rights or powers vested in it by
this Agreement at the request or direction of any
of the Certificateholders pursuant to this Agreement,
unless such Certificateholders shall have offered to
the Trustee
reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) unless so directed by the Controlling Holders
or
MBIA and if, in either case, the requirements of clause
(e) above have been satisfied, the Trustee shall not be
bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document,
but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or
investigation, it shall be entitled to examine the
books, records and premises of the Transferor, upon
reasonable notice and at reasonable times personally or
by agent or attorney; and
(g) the Trustee may execute any of the trusts
or
powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys.
Section 7.04 Not Responsible for Recitals or Issuance
of Certificates.
(a) The recitals contained in this Agreement and in
the Certificates, except the certificates of authentication
on the Certificates, shall be taken as the statements of the
Transferor, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as
to the validity or condition of the Trust Estate or any part
thereof, or as to the
title of the Transferor thereto or as to the security
afforded thereby or hereby, or as to the validity or
genuineness of any securities at any time pledged and
deposited with the Trustee hereunder or as to the validity
or sufficiency of this Agreement or any of the Certificates.
The Trustee shall not be accountable for the use or
application by the Transferor of any of the Certificates or
the proceeds thereof or of any money paid to the Transferor or
upon Transferor Order under any provisions hereof.
(b) Except as otherwise expressly provided herein and
in Section 7.15 and without limiting the generality of
the
foregoing, the Trustee shall have no responsibility or
liability for or with respect to the validity of any
Equipment or Lease Contract, the perfection of any security
interest (whether as of the date hereof or at any future
time), the maintenance of or the taking of any action to
maintain such perfection, the validity of the assignment of
any portion of the Trust Estate to the Trustee or of any
intervening assignment, the review of any Lease Contract
(it being understood that the Trustee has not reviewed and
does not intend to review the substance or form of any such
Lease Contract), the performance or enforcement of any
Lease Contract, the
validity and sufficiency of the Certificate
Insurance Policy, the compliance by the Transferor or
the Servicer with any covenant or the breach by the Transferor
or the Servicer of any warranty or representation made
hereunder or in any related document or the accuracy of any
such warranty or representation, any investment of monies
in the Collection Account or any loss resulting therefrom,
the acts or omissions of the Transferor, the Servicer, MBIA or
any Customer, any action of the Servicer taken in the name of
the Trustee, or the validity of the Servicing Agreement or the
Lease Acquisition Agreement.
(c) Except as otherwise expressly provided herein,
the Trustee shall not have any obligation or liability
under any Lease Contract by reason of or arising out of this
Agreement or the assignment of such Lease Contract hereunder
or the receipt by the Trustee of any payment relating to
any Lease Contract pursuant hereto, nor shall the Trustee be
required or obligated in any manner to perform or fulfill any
of the obligations of the Transferor under or pursuant to any
Lease Contract, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment
received by it, or the sufficiency of any performance by any
party, under any Lease Contract.
Section 7.05 May Hold Certificates.
The Trustee, the Servicer, any Paying Agent, the
Certificate Registrar, any Authenticating Agent or any other
agent of the Transferor, in its individual or any other
capacity, may become the owner or pledgee of Certificates,
and if operative, may otherwise deal with the Transferor
with the same rights it would have if it were not Trustee,
Servicer, Paying Agent, Certificate Registrar, Authenticating
Agent or such other agent.
Section 7.06 Money Held in Trust.
Money and investments held in trust by the Trustee or
any Paying Agent hereunder shall be held in one or more
trust accounts hereunder but need not be segregated from
other funds except to the extent required in this Agreement
or required by law. The Trustee or any Paying Agent shall be
under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Transferor or
otherwise specifically provided in this Agreement.
Section 7.07 Compensation and Reimbursement.
The Transferor agrees:
(a) to pay the Trustee monthly its fee for
all services rendered by it hereunder as Trustee,
in the amount of the Trustee Fee (which
compensation shall not otherwise be limited by any
provision of law in regard to the compensation of
a trustee of an express trust), and to pay to the
Back-up Servicer its fee for all services rendered
hereunder and under the Servicing Agreement as Back-
up Servicer, in the amount of the Back-up Servicer
Fee;
(b) except as otherwise expressly
provided
herein, to reimburse the Trustee or the Back-
up Servicer upon its request for all
reasonable
out-of-pocket expenses, disbursements and
advances incurred or made by the Trustee or the Back-
up Servicer in accordance with any provision of this
Agreement or Servicing
Agreement (including the
reasonable
compensation and the expenses and disbursements of
the Trustee's and Back-up Servicer's agents and
counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or
bad faith; and
(c) to indemnify and hold harmless the
Trust Estate and the Trustee from and against
any loss, liability, expense, damage or injury
(other than those attributable to a
Certificateholder in its capacity as an investor
in any of the Certificates) sustained or suffered
pursuant to this Agreement by reason of any acts,
omissions or alleged acts or omissions arising out
of activities of the Trust Estate or the Trustee
(including without limitation any violation of
any applicable laws by the Transferor as a result
of the transactions contemplated by this
Agreement), including, but not limited to, any
judgment, award, settlement, reasonable attorneys'
fees and other expenses incurred in connection
with the defense of any actual or threatened
action, proceeding or claim; provided that the
Transferor shall not indemnify the Trustee if such
loss, liability, expense, damage or injury is due
to the Trustee's gross negligence or willful
misconduct, willful misfeasance or bad faith in the
performance of duties. Any indemnification pursuant
to this Section shall only be payable from the
assets of the Transferor and shall not be payable
from the assets of the Trust Estate. The
provisions of this indemnity shall run directly to
and be enforceable by an injured person subject to
the limitations hereof and this indemnification
agreement shall survive the
termination of this Agreement.
Section 7.08 Corporate Trustee Required;
Eligibility.
There shall at all times be a trustee hereunder which
shall be a corporation or association organized and doing
business under the laws of the United States of America or of
any state, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at
least $50,000,000 (or a lesser amount with the approval of
MBIA, the Rating Agencies and the Controlling Holders),
subject to supervision or examination by Federal or state
authority and having an office within the United States of
America, and which shall have a commercial paper or other
short-term rating of the highest short term rating
categories by each of the Rating Agencies, or
otherwise acceptable to each of the Rating Agencies. If
such corporation publishes reports of condition at least
annually, pursuant to
law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 7.09 Resignation and Removal; Appointment
of
Successor.
(a) No resignation or removal of the Trustee and
no
appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment
by the successor Trustee under Section 7.10 hereof.
(b) The Trustee may resign at any time by giving 30
days'
written notice thereof to the Transferor, MBIA and to
each Certificateholder. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a
successor Trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and may prescribe,
appoint a successor Trustee.
(c) The Trustee may be removed by MBIA or, if an
MBIA
Default or Termination shall have occurred and is continuing,
the Controlling Holders, at any time if one of the following
events have occurred:
(i) the Trustee shall cease to be eligible under
Section 7.08 hereof and shall fail to resign after
written request therefor by the Transferor, MBIA or by
any Certificateholder, or
(ii) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation, or
(iii) the Trustee has failed to perform its
duties in this Agreement or has breached any
representation of warranty made in this Agreement.
(d) If the Trustee shall resign, be removed or
become
incapable of acting, or if a vacancy shall occur in the office
of the Trustee for any cause with respect to any of
the
Certificates, the Transferor by a Board Resolution,
shall promptly appoint a successor Trustee satisfactory to
MBIA, or, if an MBIA Default or Termination has occurred, to
the Controlling Holders. If no successor Trustee shall have
been so appointed by the Transferor within 30 days of notice of
removal or resignation and shall have accepted appointment
in the manner hereinafter provided, then MBIA may appoint a
successor Trustee. If
MBIA
shall fail to appoint a successor Trustee within 90 days or
in the event of an MBIA Default or Termination, then the
Controlling Holders may petition any court of competent
jurisdiction for the appointment of a successor Trustee
with respectto the
Certificates.
(e) The Transferor shall give notice in the manner
provided in Section 13.04 hereof of each resignation and each
removal of
the Trustee and each appointment of a successor Trustee
with respect to the Certificates to the Certificateholders
and the Rating Agencies. Each notice shall include the
name of the successor Trustee and the address of its
Corporate Trust Office.
Section 7.10 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Transferor and
the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties
of the retiring Trustee but, on request of the Transferor or
the successor Trustee, such retiring Trustee shall, upon
payment of its reasonable out-of-pocket costs and expenses,
execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of
the retiring Trustee, and shall duly assign, transfer and
deliver to
such successor Trustee all property and money held by
such retiring Trustee hereunder, subject nevertheless to its
lien, if
any, provided for in Section 7.07 hereof. Upon request of
any such successor Trustee, the Transferor shall execute any
and all instruments for more fully and certainly vesting
in and
confirming to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment unless
at the time of such acceptance such successor Trustee
shall be
eligible under this Article.
Section 7.11 Merger, Conversion, Consolidation
or
Succession to Business of Trustee.
Any Person into which the Trustee may be merged or
converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation
to which the Trustee shall be a party, or any corporation
succeeding to all or
substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be otherwise qualified and
eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of
the parties hereto, and notice thereof shall be provided
by the Trustee to
the
Certificateholders and the Rating Agencies. In case
any
Certificates have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger,
conversion or
consolidation to such authenticating Trustee may adopt
such authentication and deliver the Certificates so
authenticated with the same effect as if such successor
Trustee had itself authenticated such Certificates.
Section 7.12 Co-Trustees and Separate Trustees.
At any time or times, for the purpose of meeting the
legal requirements of any jurisdiction in which any of the
Trust Estate may at the time be located, the Transferor, MBIA
and the Trustee shall have power to appoint, and, upon the
written request of the Trustee, MBIA or, if an MBIA Default or
Termination has occurred and is continuing, of the Holders
representing at least 25% of
the Certificate Balance of all Certificates, the Transferor
shall for such purpose join with the Trustee in the execution,
delivery
and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the
Trustee and meeting the requirements of Section 7.08 hereof,
either to act as co-Trustee, jointly with the Trustee of all
or any part of such Trust Estate, or to act as separate
Trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment,
and to vest in such Person or persons in the capacity
aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions
of this Section. If the Transferor does not join in such
appointment within 15 days after the receipt by it of a
request so to do, or in case an Event of Default has occurred
and is continuing, the Trustee alone shall have power to make
such appointment.
Should any written instrument from the Transferor
be
reasonably required by any co-Trustee or separate Trustee
so appointed for more fully confirming to such co-
Trustee or separate Trustee such property, title, right or
power, any and all such instruments shall, on request, be
executed, acknowledged and delivered by the Transferor.
Every co-Trustee or separate Trustee shall, to the
extent permitted by law, but to such extent only, be appointed
subject to the following terms:
(a) the Certificates shall be authenticated and
delivered by, and all rights, powers, duties and
obligations under this Agreement in respect of the
custody of securities, cash and other personal property
held by, or required to be deposited or pledged with,
the Trustee under this Agreement, shall be exercised
solely by the Trustee;
(b) the rights, powers, duties and obligations
conferred or imposed upon the Trustee by this Agreement
in respect of any property covered by such
appointment shall be conferred or imposed upon and
exercised or performed by the Trustee or by the
Trustee and such co-Trustee or separate Trustee
jointly, as shall be provided in the instrument
appointing such co-Trustee or separate Trustee,
except to the extent that under any law of any
jurisdiction in which any particular act is to be
performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event
such rights, powers, duties and obligations
shall be
exercised and performed by such co-Trustee or
separate Trustee;
(c) the Trustee at any time, by an instrument
in writing executed by it, with the concurrence of
the Transferor evidenced by a Board Resolution, may
accept the resignation of or remove any co-Trustee or
separate Trustee, appointed under this Section, and,
in case an Event of Default has occurred and is
continuing, the Trustee shall have power to accept
the resignation of, or remove, any such co-
Trustee or separate Trustee without the
concurrence of the Transferor. Upon the written
request of the Trustee, the Transferor shall join
with the Trustee in the execution, delivery and
performance of all instruments and agreements
necessary or proper to effectuate such resignation or
removal. A successor to any co-Trustee or separate
Trustee that has so resigned or been removed may be
appointed in the manner provided in this Section;
(d) no co-Trustee or separate Trustee
hereunder
shall be personally liable by reason of any act
or omission of the Trustee or any other such
Trustee hereunder nor shall the Trustee be liable by
reason of any act or omission of any co-Trustee
or separate Trustee selected by the Trustee with
due care or appointed in accordance with directions
to the Trustee pursuant to Section 6.14; and
(e) any Act of Certificateholders delivered
to
the Trustee shall be deemed to have been delivered
to each such co-Trustee and separate Trustee.
Section 7.13 Rights with Respect to the Servicer.
The Trustee's rights and obligations with respect to
the Servicer and the Back-up Servicer shall be governed
by the Servicing Agreement.
Section 7.14 Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or
Agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee to authenticate
Certificates issued upon original issue or upon exchange,
registration of transfer or pursuant to
Section 2.05 hereof, and Certificates so
authenticated shall be entitled to the benefits of this
Agreement and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Agreement to the
authentication and delivery of Certificates by the Trustee
or the Trustee's certificate of authentication or the
delivery of Certificates to the Trustee for authentication,
such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by
an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent
and delivery of the Certificates to the Authenticating Agent
on behalf of the Trustee. Each Authenticating Agent shall be
acceptable to the Transferor, MBIA and if an MBIA Default
or Termination has occurred and is continuing, the
Certificateholders and shall at all times be a corporation
having a combined capital and surplus of not less than the
equivalent of $50,000,000 and subject to supervision or
examination by Federal or state authority or the equivalent
foreign authority, in the case of an Authenticating Agent
who is not organized and doing business under the laws of the
United States of America, any state thereof or the District of
Columbia. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to
the
requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and
surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion
or
consolidation to which such Authenticating Agent shall be
a party, or any corporation succeeding to the corporate agency
or corporate trust business of such Authenticating Agent,
shall continue to be an Authenticating Agent without the
execution or filing of any paper or any further act on the
part of the Trustee or such Authenticating Agent; provided,
such corporation shall be
otherwise eligible under this Section.
An Authenticating Agent may resign at any time by
giving written notice thereof to the Trustee, MBIA and
to the
Transferor. The Trustee may at any time terminate the agency
of an Authenticating Agent by giving written notice thereof to
such Authenticating Agent, MBIA and to the Transferor. Upon
receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating
Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to
the Transferor and MBIA and shall mail written notice of such
appointment by first-class mail, postage prepaid, to all
Holders of Certificates, if any, with respect to which such
Authenticating Agent will serve, as their names
and
addresses appear in the Certificate Register. Any
successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless
eligible under the provisions of this Section.
The Trustee may pay to each Authenticating Agent from
time to time reasonable compensation for its services
under this Section and the Trustee shall be entitled to be
reimbursed for such payments, subject to the provisions of
Section 7.07 hereof.
If an appointment is made pursuant to this Section,
the Certificates may have endorsed thereon, in addition
to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Certificates described in
the
within-mentioned Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
As Trustee
By:_________________________
__ __
As
Authenticating Agent
By:_________________________
__ __
Authorized Officer
Section 7.15 Trustee to Hold Lease Contracts.
The Trustee hereby acknowledges receipt (subject to
any exceptions as may be noted by the Trustee to the Servicer,
MBIA and the Certificateholders within 10 days of the Closing
Date) of each Lease Contract listed on the Initial Lease
Schedule and shall hold each Lease Contract together with
any documents relating thereto that may from time to time be
delivered to the Trustee, until such time as such Lease
Contract is released from the Trust Estate pursuant to the
terms of this Agreement.
Upon receipt of the Lease Contracts, the Trustee
shall determine that they are listed on the Lease Schedule.
Within thirty days of the Funding Termination Date, the
Trustee shall conduct the review provided for in Section
4.03(g). The Trustee
shall be under no duty or obligation to inspect, review
or examine the Lease Contracts and other documents to determine
that
the same are genuine, enforceable or appropriate for
the
represented purpose or that they have actually been recorded
or
that they are other than what they purport to be on their face.
Section 7.16 Money for Certificate Payments to Be Held
in
Trust.
The Trustee agrees, and if there is any Paying Agent
other than the Trustee, the Transferor will cause each
Paying Agent other than the Trustee to execute and deliver to
the Trustee and MBIA an instrument in which such Paying
Agent shall agree with the Trustee that, subject to the
provisions of this Section, such Paying Agent will:
(a) hold all sums held by it for the payment
of
principal or interest on Certificates in trust for
the benefit of the Certificateholders entitled thereto and
MBIA until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee, MBIA and the
Certificateholders notice of any Default by the
Transferor (or any other obligor upon the
Certificates) in the making of any payment of principal or
interest; and
(c) at any time during the continuance of any
such Default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust by
such Paying Agent.
The Transferor may at any time, for the purpose of
obtaining the satisfaction and discharge of this Agreement or
for any other purpose, pay, or by Transferor Order direct any
Paying Agent
to
pay, to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts
as those upon which such sums were held by such Paying Agent;
and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent
in
trust for the payment of the principal or interest on any
Certificate and remaining unclaimed for three years after
such principal or interest has become due and payable shall be
paid to the Transferor on Transferor Request or to MBIA if
such payment had been made by MBIA; and the Holder of such
Certificate shall thereafter, as an unsecured general
creditor, and subject to any applicable statute of
limitations, look only to the Transferor for payment
thereof, and all liability of the Trustee, such Paying
Agent or MBIA with respect to such trust money or the
related Certificate, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being
required to
make any such repayment, may at the expense of the
Transferor cause to be published once, in a newspaper
published in the English language, customarily published on
each Business Day and of general circulation in the city in
which the Corporate Trust Office is located, notice that such
money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such
money then remaining will be repaid to the Transferor; and
provided, further, that any amounts held that are proceeds of
a claim made under the Certificate Insurance Policy shall be
returned to MBIA, and the Certificateholders shall look only
to MBIA for such payments. The Trustee may also adopt and
employ, at the expense of the Transferor, any other
reasonable means of notification of such repayment
(including, but not limited
to, mailing notice of such repayment
to
Certificateholders whose right to or interest in monies due
and payable but not claimed is determinable from the records
of any Paying Agent, at the last address as shown on the
Certificate Register for each such Certificateholder).
ARTICLE EIGHT
THE CERTIFICATE INSURANCE POLICY
Section 8.01 Payments under the Certificate Insurance
Policy.
If on the close of business on the third Business Day
prior to any Payment Date, the funds on deposit in the
Collection Account and available to be distributed on such
Payment Date pursuant to Section 12.02(d) hereof, after any
transfer from the Cash Collateral Account in accordance with
Section 12.03 hereof and the Capitalized Interest Account in
accordance with Section 12.04(c) hereof, are not sufficient to
make the payment of any interest due on the Outstanding
Class A Certificates on such Payment Date in accordance with
Section 12.02(d)(v) hereof, the Trustee shall, no later than
10:00 a.m. New York time, on the second Business Day
immediately preceding such Payment Date make a claim under the
Certificate Insurance Policy in an amount equal to such
insufficiency. In addition, if on the close of business on
the third Business Day immediately prior to the Stated
Maturity the funds on deposit in the Collection Account after
any transfer from the Cash Collateral Account in accordance
with Section 12.03 hereof are not sufficient to pay the entire
Class A Certificate Balance, the Trustee shall, no later than
10:00 a.m. New York time, on the second Business Day
immediately preceding the Stated Maturity, make a claim under
the Certificate Insurance Policy in an amount equal to such
insufficiency. Proceeds of claims on the Certificate
Insurance Policy shall be deposited in the Collection
Account and used solely to pay amounts due in respect of
interest on the Class A Certificates on each Payment Date and
the Class A Certificate Balance at the Stated Maturity.
In addition, on any day that the Trustee has
actual knowledge or receives notice that any amount previously
paid to a Holder of Class A Certificates has been
subsequently recovered from such Certificateholder pursuant
to a final order of a court of competent jurisdiction that
such payment constitutes an avoidable preference within
the meaning of any applicable bankruptcy law to such
Certificateholder (a "Preference Claim"), the Trustee shall
make a claim within one Business Day upon the Certificate
Insurance Policy for the full amount of
such
Preference Claim in accordance with the terms of the
Certificate Insurance Policy. Any proceeds of any such
Preference Claim received by the Trustee shall be paid to
the related Class A Certificateholders.
ARTICLE NINE
AMENDMENTS
Section 9.01 Amendments without Consent
of
Certificateholders.
The Transferor, the Servicer, the Back-up Servicer and
the Trustee, with the prior written consent of MBIA but
without the consent of the Holders of any Certificates, at any
time and from
time to time, may enter into one or more amendments hereto,
in form satisfactory to the Trustee, for any of the
following purposes, provided that any such amendment, as
evidenced by an Opinion of Counsel if requested by the
Trustee, will not have a material adverse affect on the
Controlling Holders:
(a) to correct or amplify the description of any
property at any time included in the Trust Estate, or
better to assure, convey and confirm unto the Trustee
any property included or required to be included in the
Trust Estate, or to include in the Trust Estate any
additional property; or
(b) to evidence the succession of another Person
to the Transferor, and the assumption by such successor
of the covenants of the Transferor herein and in
the Certificates contained, in accordance with
Section 11.02(o) hereof; or
(c) to add to the covenants of the
Transferor,
for the benefit of MBIA or the Holders of
all Certificates or to surrender any right or power
herein conferred upon the Transferor; or
(d) to convey, transfer, assign, mortgage
or
pledge any property to or with the Trustee; or
(e) to cure any ambiguity, to correct
or
supplement any provision herein which may be
defective or inconsistent with any other provisions
with respect to matters or questions arising under
this Agreement, which shall not be inconsistent with
the provisions of this Agreement;
(f) to evidence the succession of the
Trustee
pursuant to Article Seven hereof; provided that
any such amendment does not modify this Agreement
in a manner described in paragraphs (i) through
(viii) of Section 9.02(a) hereof; or
(g) as may be necessary to effectuate
the
issuance of any Class B Certificates in accordance
with the terms of this Agreement and the Class B
Supplement; provided that any such amendment does
not modify this Agreement in a manner described
in paragraphs (i) through (viii) of Section 9.02(a)
or (b) hereof.
The Trustee is hereby authorized to join in the execution
of any such amendment and to make any further appropriate
agreements and stipulations that may be therein contained, but
the Trustee shall not be obligated to enter into any such
amendment that affects the
Trustee's own rights, duties, liabilities or
immunities under this Agreement or otherwise.
Promptly after the execution by the Transferor,
the
Servicer, the Back-up Servicer and the Trustee of any
amendment pursuant to this Section, the Transferor shall mail
to the Rating Agencies and each Certificateholder a copy of
such amendment.
Section 9.02 Amendments and Modifications to
Agreement with Consent of Certificateholders.
(a) With the prior written consent of MBIA and
the Controlling Holders, by Act of said Holders delivered
to the Transferor and the Trustee, the Transferor, the
Servicer, the Back-up Servicer and the Trustee may enter into
an amendment or
modification of this Agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of the Certificates under
this Agreement (other than as described in Section 9.01);
provided, however, that no such amendment shall, without the
consent of the Holders of each Outstanding Certificate affected
thereby:
(i) change the Stated Maturity or Expected
Maturity of any Certificate or the due date of any
installment of principal of, or any installment of
interest on, any Certificate, or change the principal
amount thereof or the Certificate Interest Rate or
change any place of payment where, or the coin or
currency in which, any Certificate or the interest
thereon is payable, or impair the right to institute
suit for the enforcement of any such payment; or
(ii) reduce the percentage of Certificate Balance
of Certificates, the consent of the Holders of which is
required for any such amendment, or the consent of the
Holders of which is required for any waiver of
compliance with certain provisions of this Agreement or
Events of Default or their consequences; or
(iii) impair or adversely affect the Trust
Estate; or
(iv) modify or alter the definition of the term
"Outstanding" or "Class A Certificate Balance" or
"Class B Certificate Balance" or "Controlling Holders"
or "Required Collateralization Amount"; or
(v) modify or alter the provisions of the proviso
to Section 6.04 hereof; or
(vi) modify any of the provisions of this Section
9.02, except to increase the percentage of Holders
required for any modification or waiver or to provide
that certain other provisions of this Agreement cannot
be modified or waived without the consent of
each Holder of each Outstanding Certificate
affected
thereby; or
(vii) permit the creation of any lien
ranking prior to, on a parity with, or subordinate to
the lien of this Agreement with respect to any part
of the Trust Estate or terminate or release the
lien of this Agreement on any property at any time
subject hereto or deprive the Holder of any
Certificate of the security afforded by the lien of
this Agreement; or
(viii) modify any of Sections 6.01, 6.02,
6.03,
6.18, or Section 12.02(d) hereof.
(b) With the prior written consent of MBIA and the
Holders of Certificates representing not less than 66-2/3% of
the Class A Certificate Balance, by Act of said Holders
delivered to the Transferor and the Trustee, the
Transferor, the Servicer, the Back-up Servicer and the
Trustee may enter into amendments hereto for the purpose of
adding any provisions to or changing in any manner or
eliminating any of the provisions of Article Three hereof
or the definitions therein, provided that any such
amendment does not modify the Agreement in a manner described
in clauses (i) through (viii) of paragraph (a) of this Section
9.02.
(c) With the prior written consent of MBIA and the
Holders
of Certificates representing not less than 66-2/3% of the Class
B Certificate Balance, by Act of said Holders delivered to
the Transferor and the Trustee, the Transferor, the
Servicer, the Back-up Servicer and the Trustee may enter into
amendments hereto for the purpose of adding any provisions to
or changing in any manner or
eliminating any of the provisions, including
definitions, contained herein relating to the Class
B Certificates, provided that any such amendment does not
modify this Agreement in a manner described in clauses (i)
through (viii) of paragraph (a) of this Section 9.02.
(d) The Trustee is hereby authorized to join in
the
execution of any amendments to this Agreement pursuant to
clause (a), (b) or (c) above and to make any further
appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to
enter into any such amendment that affects the
Trustee's own rights, duties,
liabilities or immunities under this Agreement. It shall not
be necessary for any Act of Certificateholders under this
Section to approve the particular form of any proposed
supplemental agreement, but it shall be sufficient if such Act
shall approve the substance thereof. Promptly after the
execution by the Transferor, the Servicer, the Back-up
Servicer and the Trustee of any amendment pursuant to this
Section, the Transferor shall mail to the Holders of the
Certificates, MBIA and the Rating Agencies a copy of such
amendment, together with any consents obtained from MBIA in
connection therewith.
Section 9.03 Execution of Amendments.
In executing any amendment permitted by this Article or
the modifications thereby of the trusts created by this
Agreement, the Trustee shall be entitled to receive upon
request, and (subject to Section 7.01 hereof) shall be
fully protected in relying in good faith upon, an Opinion
of Counsel reasonably acceptable to the Trustee stating
that the execution of such amendment is authorized or
permitted by this Agreement. The Trustee may, but shall
not be obligated to, enter into any such amendment which
affects the Trustee's own duties or immunities under this
Agreement or otherwise.
Section 9.04 Effect of Amendments.
Upon the execution of any amendment under this Article,
this Agreement shall be modified in accordance therewith,
and such amendment shall form a part of this Agreement for
all purposes; and every Holder of Certificates
theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.05 Reference in Certificates to Amendments.
Certificates authenticated and delivered after the
execution of any amendment pursuant to this Article may, and if
required by the Trustee shall, bear a notation in form
approved by the Trustee as to any matter provided for in such
amendment. If the Transferor shall so determine, new
Certificates so modified as to conform, in the opinion of the
Trustee and the Transferor, to any such amendment may be
prepared and executed by the Transferor and authenticated and
delivered by the Trustee in exchange for Outstanding
Certificates.
ARTICLE TEN
REDEMPTION OF CERTIFICATES
Section 10.01 Redemption at the Option of the
Transferor; Election to Redeem.
The Transferor shall have the option to redeem (a) all
of the Outstanding Class B Certificates at any time after the
Class A Certificates have been redeemed or the Class A
Certificate Balance has been reduced to zero and (b) all of
the Outstanding Class A Certificates at any time after the
Class A Certificate Balance is less than 10% of the Class A
Certificate Balance as of the Closing Date, in each case at the
applicable Redemption Price plus any fees due hereunder and all
amounts due to MBIA under the Insurance Agreement. With
respect to any redemption permitted by clause (b) above, MBIA
shall have the same option to redeem the Class A
Certificates in the absence of the exercise thereof by the
Transferor.
The Transferor shall set the Redemption Date and
the Redemption Record Date for the Certificates and give
notice thereof to the Trustee pursuant to Section 10.02 hereof.
Installments of principal and interest that are
due
regarding a Class of Certificates on or prior to the
related Redemption Date shall continue to be payable to the
Holders of such Certificates called for redemption as of the
relevant Record Dates according to the terms and the
provisions of Section
2.08
hereof. The election of the Transferor or MBIA to redeem
any
Certificates pursuant to this Section shall be evidenced by
a Board Resolution or written notice from MBIA,
respectively, directing the Trustee to make the payment of the
Redemption Price on all of the Certificates to be redeemed
from monies deposited with the Trustee pursuant to Section
10.04 hereof.
Section 10.02 Notice to Trustee; Deposit of
Redemption Price.
In the case of any redemption pursuant to Section
10.01
hereof, the Transferor or MBIA, as applicable, shall, at least
15 days prior to the related Redemption Date, notify the
Trustee and the applicable Certificateholders of such
Redemption Date and shall deposit into the Redemption
Account on such notification date an amount equal to the
Redemption Price of all Certificates to be redeemed on such
Redemption Date plus any fees due hereunder and all
amounts due to MBIA under the Insurance Agreement.
Section 10.03 Notice of Redemption by the Transferor.
Upon receipt of such notice and such deposit set forth
in Section 10.02 above, the Trustee shall provide notice
of redemption pursuant to Section 10.01 hereof by first-class
mail, postage prepaid, mailed no later than the Business Day
following the date on which such deposit was made, to each
Holder of Certificates whose Certificates are to be
redeemed, at such Holder's address in the Certificate
Register.
All notices of redemption shall state: (a) the applicable
Redemption Date;
(b) the applicable Redemption Price; and
(c) that on such Redemption Date, the Redemption Price
will become due and payable upon each such Certificate,
and that interest thereon shall cease to accrue on such date.
Notice of redemption of Certificates shall be given by
the Trustee in the name and at the expense of the Holder
of the Transferor Certificate or MBIA, as applicable. Failure
to give notice of redemption, or any defect therein, to any
Holder of any Certificate selected for redemption shall not
impair or affect the validity of the redemption of any other
Certificate.
Section 10.04 Certificates Payable on Redemption Date.
Notice of redemption having been given as provided
in Section 10.03 hereof, the Certificates to be redeemed
shall, on the applicable Redemption Date, become due and
payable at the Redemption Price and on such Redemption Date
such Certificates shall cease to bear interest. The Holders
of such Certificates shall be paid the Redemption Price by
the Paying Agent on behalf of the Transferor; provided,
however, that installments of principal and interest that
are due regarding such Certificates on or prior to such
Redemption Date shall be payable to the Holders of such
Certificates registered as such on the relevant Record Dates
according to the terms and the provisions of Section 2.08
hereof.
If the Holders of any Certificate called for
redemption shall not be so paid, the principal on such
Certificates shall, until paid, bear interest from the
applicable Redemption Date at the related Certificate Interest
Rate.
Section 10.05 Release of Lease Contracts.
In connection with any redemption permitted under
this Article Ten, the Transferor or MBIA, as the case may be,
shall be permitted to obtain a release of the Lease
Contracts to the extent that (a) after giving effect to such
release, (x) the sum of (i) the amount of funds then held
in the Cash Collateral Account and (ii) the Aggregate IPB is
equal to or exceeds (y) (i) the Certificate Balance of any
Outstanding Certificates (after giving effect to such
redemption) divided by (ii) a ratio equal to (A) the sum of
the Class A Certificate Balance and the Class B Certificate
Balance over (B) the sum of the Aggregate IPB and any amounts
on deposit in the Cash Collateral Account (with all
amounts in such ratio calculated as of the Determination
Date relating to the first Payment Date preceding the
Redemption Date), provided that in connection with a redemption
of the Class B Certificates, the Transferor shall be entitled
to a release of all of the Lease Contracts and (b) the
applicable Redemption Price shall have been deposited into
the Redemption Account as required by Section 10.02.
ARTICLE ELEVEN
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 11.01 Representations and Warranties.
The Transferor hereby makes the following
representations and warranties for the benefit of the
Trustee, MBIA and the Certificateholders on which the
Trustee relies in accepting the Trust Estate in trust and in
authenticating the Certificates and on which MBIA relies in
issuing the Certificate Insurance Policy. Such representations
and warranties are made as of the Closing Date and each
Funding Date and shall survive the transfer, conveyance and
assignment of the Trust Estate to the Trustee.
(a) Organization and Good Standing. The Transferor is
a corporation duly organized, validly existing and in good
standing under the law of the State of Delaware and each other
State where
the nature of its business requires it to qualify, except to
the extent that the failure to so qualify would not in the
aggregate materially
adversely affect the ability of the Transferor to
perform its obligations under the Transaction Documents;
(b) Authorization. The Transferor has the power,
authority and legal right to execute, deliver and perform
under the terms of the Transaction Documents and the
execution, delivery and performance
of the Transaction Documents have been
duly
authorized by the Transferor by all necessary corporate action;
(c) Binding Obligation. Each of (i) this
Agreement,
assuming due authorization, execution and delivery by
the
Trustee, the Back-up Servicer and the Servicer, (ii)
the
Insurance Agreement, assuming due authorization, execution
and delivery by MBIA, the Trustee, the Back-up Servicer, the
Company, the Certificate Funding Administrator and the
Servicer, (iii) the Servicing Agreement, assuming due
authorization, execution and delivery by the Transferor,
the Servicer, the Trustee and the Servicer and (iv) the
applicable Certificate Purchase Agreement, assuming due
authorization, execution and delivery by the
purchaser named therein and (v) the Lease Acquisition
Agreement, assuming due authorization, execution and
delivery by the
Company, constitutes a legal, valid and binding obligation of
the Transferor, enforceable against the Transferor in
accordance with its terms
except that (A) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or
other similar laws (whether statutory, regulatory or
decisional) now or hereafter in effect relating to creditors'
rights generally and (B) the remedy of specific performance
and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor
may be brought, whether a proceeding at law or in equity;
(d) No Violation. The consummation of the
transactions
contemplated by the fulfillment of the terms of the
Transaction Documents will not conflict with, result in any
breach of any of the terms
and provisions of or constitute (with or without
notice, lapse of time or both) a default under the
organizational documents or bylaws of the Transferor, or any
material indenture, agreement, mortgage, deed of trust or other
instrument to which the Transferor is a party or by which
it is bound, or in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of such
indenture, agreement, mortgage, deed of trust or other such
instrument, other than any Lien created or imposed
pursuant to the terms of the Transaction Documents,
or violate any law, or any material order, rule or
regulation applicable to the Transferor of any court or of
any federal or state regulatory body, administrative agency or
other governmental
instrumentality having jurisdiction over the
Transferor or any of its properties.
(e) No Proceedings. There are no Proceedings
or
investigations to which the Transferor, or any of
the
Transferor's Affiliates, is a party pending, or, to the
knowledge of Transferor, threatened, before any court,
regulatory body, administrative
agency or other tribunal or governmental
instrumentality (A) asserting the invalidity of the
Transaction Documents,
(B) seeking to prevent the issuance of any of the
Certificates or the consummation of any of the
transactions contemplated by the Transaction Documents or
(C) seeking any determination or ruling that would
materially and adversely affect the performance by the
Transferor of its obligations under, or
the validity or enforceability of, the Transaction
Documents.
(f) Approvals. All approvals, authorizations,
consents,
orders or other actions of any Person, or of any
court, governmental agency or body or official, required in
connection with the execution and delivery of the Transaction
Documents and with the valid and proper authorization,
issuance and sale of the Certificates pursuant to this
Agreement (except approvals of State securities officials
under the Blue Sky Laws), have been or will be taken or
obtained on or prior to the Closing Date.
(g) Place of Business. The Transferor's principal place
of business and chief executive office is located at 6424 W.
91st Avenue, Suite C, Westminster, CO 80030, and the
Transferor has done business only under the name GF Funding
Corp. III.
(h) Transfer and Assignment of Lease Assets. Upon
the
delivery to the Trustee of the Lease Contracts and the filing
of the financing statements described in Sections 4.01(f)
hereof, the Trustee for the benefit of the Certificateholders
shall have a first priority perfected security interest
in the Lease Receivables and the Lease Contracts and in the
proceeds thereof, except for Liens permitted under Section
11.02(a) and limited to the extent set forth in Section 9-306
of the UCC as in effect in the applicable jurisdiction. All
filings (including, without limitation, UCC filings) as are
necessary in any jurisdiction to perfect the ownership or
other interest of the Trustee in the Trust Estate (other
than filings with respect to Equipment underlying Lease
Contracts), including the transfer of the Lease Contracts and
the payments to become due thereunder, have been made.
(i) Parent of the Transferor. The Company is
the
registered owner of all of the issued and outstanding
common stock of the Transferor, all of which common stock
has been validly issued, is fully paid and nonassessable.
(j) Lease Acquisition Agreement The Transferor has
entered into the Lease Acquisition Agreement with the Company
relating to its acquisition of the Lease Contracts, the Lease
Receivables and the Equipment, and the representations and
warranties made by the Company relating to the Lease
Contracts, Lease Receivables and the Equipment have been
validly assigned to and are for the benefit of the
Transferor, the Trustee, MBIA and
the
Certificateholders and such representations and warranties
are true and correct in all material respects.
(k) Bulk Transfer Laws. The transfer, assignment
and
conveyance of the Lease Contracts, the Equipment and the
Lease Receivables by the Company to the Transferor pursuant
to the Lease Acquisition Agreement or by the Transferor
pursuant to this Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in
any applicable jurisdiction.
(l) The Lease Contracts. The Transferor hereby
restates
and makes each of the representations and warranties with
respect to the Lease Contracts, the Lease Receivables and the
Equipment that are made by the Company in Section 3.01 of
the Lease Acquisition Agreement as of the date on
which such representations and warranties were made.
(m) Investment Company Act. The Transferor is not
an
"investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
Section 11.02 Covenants.
The Transferor hereby makes the following covenants for
the benefit of the Trustee, MBIA and the Certificateholders, on
which the Trustee relies in accepting the Trust Estate in trust
and in authenticating the Certificates. Such covenants
shall survive the transfer, conveyance and assignment of the
Trust Estate to the Trustee.
(a) No Liens. Except for the conveyances and
assignment hereunder, the Transferor will not sell,
pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien on any
Trust Estate now existing or hereafter created, or any
interest therein prior to
the
termination of this Agreement pursuant to Section 5.01
hereof; the Transferor will notify the Trustee of the
existence of any Lien on any Trust Estate immediately upon
discovery thereof; and the Transferor shall defend the right,
title and interest of the Trustee in, to and under the
Trust Estate now existing or hereafter created, against
all claims of third parties claiming through or under the
Transferor; provided, however, that nothing in this Section
11.02(a) shall prevent or be deemed to prohibit the Transferor
from suffering to exist upon any of the Equipment any Liens
for municipal or other local taxes and other
governmental charges owed by the Transferor or a Customer
if such taxes or governmental charges shall not at the time be
due and payable or if the Transferor or related Customer
shall currently be contesting the validity thereof in good
faith by appropriate proceedings and the Transferor shall have
set aside on its books adequate reserves with respect thereto.
(b) Delivery of Collections. The Transferor agrees to
hold in trust and promptly pay to the Servicer all amounts
received by the Transferor in respect of the Trust Estate
(other than amounts distributed to or for the benefit of the
Transferor pursuant to Article Twelve hereof).
(c) Obligations with Respect to Lease Contracts.
The
Transferor will duly fulfill all obligations on its part to
be fulfilled under or in connection with each Lease Contract
and will do nothing to impair the rights of the Trustee
(for the benefit of the Certificateholders and MBIA) in the
Lease Receiv ables, the Lease Contracts and any other Trust
Estate. As long as there is no event of default under
the applicable Lease Contract, the Transferor will not
disturb the Customer's quiet and peaceful possession of
the related Equipment and the Customer's unrestricted use
thereof for its intended purpose.
(d) Compliance with Law. The Transferor will comply,
in all material respects, with all acts, rules, regulations,
orders, decrees and directions of any governmental authority
applicable to the Lease Contracts or any part thereof. The
Transferor will comply, in all material respects, with all
requirements of
law
applicable to the Transferor.
(e) Preservation of Security Interest. The
Transferor shall execute and file such continuation statements
and any other documents which may be required by law to
fully preserve and protect the interest of the Trustee
(for the benefit of the Certificateholders and MBIA) in the
Trust Estate.
(f) Maintenance of Office, etc. The Transferor will
not, without providing 30 days notice to the Trustee and
MBIA and without filing such amendments to any previously
filed financing statements as the Trustee or MBIA may
require or as may be required in order to maintain the
Trustee's perfected security interest in the Trust Estate,
(a) change the location of its principal executive office,
or (b) change its name, identity or
corporate structure in any manner which would make any
financing statement or continuation statement filed by the
Transferor in accordance with the Servicing Agreement or
this Agreement seriously misleading within the meaning of
Article 9-402(7) of any applicable enactment of the UCC.
(g) Further Assurances. The Transferor will make,
execute
or endorse, acknowledge, and file or deliver to the Trustee
from time to time such schedules, confirmatory
assignments, conveyances, transfer endorsements, powers
of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the
Trust Estate, as the Trustee may request and reasonably
require.
(h) Notice of Liens. The Transferor shall notify
the
Trustee and MBIA promptly after becoming aware of any Lien on
any Trust Estate, except for any Liens on Equipment for
municipal or other local taxes if such taxes shall not at the
time be due or payable without penalty or if the Transferor
or the related Customer shall currently be contesting the
validity thereof in good faith by appropriate proceedings
and the Transferor shall have set aside on its books
adequate reserves with respect thereto.
(i) Activities of the Transferor. The Transferor (a)
shall engage in only (1) the acquisition, ownership, leasing,
selling and pledging of the property acquired by the
Transferor pursuant to the Lease Acquisition Agreement, and
causing the issuance of, receiving and selling the
Certificates issued pursuant to this Agreement and (2) the
exercise of any powers permitted to corporations under the
corporate law of the State of Delaware which are incidental
to the foregoing or necessary to accomplish the foregoing and
the Transferor shall incur no debt other than trade payables
and expense accruals in connection with its operations in
the normal course of business, and other than as contemplated
by the Transaction Documents; (b) will (1) maintain its books,
records and cash management accounts separate from the books
and records of any other entity and in accordance with
generally accepted accounting principles, (2) maintain
separate bank accounts and no funds of the Transferor shall be
commingled with funds of any other entity except for a
limited period of time between receipt by (I) the Company
in its capacity as Servicer, (II) the Lockbox Bank or (III)
the ACH Bank of certain payments on the Lease Contracts and
the underlying proceeds as specified in the Servicing
Agreement, (3) keep in full effect its existence, rights and
franchises as a corporation under the laws of its State of
incorporation, and will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement,
(4) observe all corporate procedures required by its
Certificate of Incorporation, its bylaws and the laws of
the state of Delaware, (5) maintain its good standing under
the laws of the state of Delaware, (6) keep correct and
complete books and records of account and minutes of
meeting and other proceedings of its Board of Directors and
shareholder meetings, (7) obtain proper authorization from
its directors or shareholders, as appropriate and act solely
in its corporate name and through its duly authorized
officers and agents in the conduct of its business, (8)
disclose in its financial statements that the Lease Assets have
been sold and assigned to the Transferor and from the
Transferor to the Trust and that the assets of the Transferor
are not available to pay the creditors of the Company, (9)
maintain a separate telephone number and stationery reflecting
a separate address and identity from that of the Company; and
(c) will not (1) dissolve or liquidate in whole or in
part, (2) own any
subsidiary or lend or advance any moneys to, or make
an
investment in, any Person, (3) make any capital
expenditures,
(4)(A) commence any case, proceeding or other action under
any existing or future bankruptcy, insolvency or similar law
seeking to have an order for relief entered with respect
to it, or seeking reorganization,
arrangement, adjustment, wind-up,
liquidation, dissolution, composition or other relief
with respect to it or its debts, (B) seek appointment of a
receiver, trustee, custodian or other similar official for it
or any part of its assets, (C) make a general assignment for
the benefit of creditors, or
(D) take any action in furtherance of, or
consenting or acquiescing in, any of the foregoing, (5)
guarantee (directly or
indirectly), endorse or otherwise become
contingently liable (directly or indirectly) for the
obligations of, or own or purchase any stock, obligations or
securities of or any other interest in, or make any capital
contribution to, any other Person, (6) merge or consolidate
with any other Person, (7) engage in any other action that
bears on whether the separate legal identity of the
Transferor will be respected, including without limitation (A)
holding itself out as being liable for the debts of any
other party or (B) acting other than in its corporate
name and through its duly authorized officers or agents,
or (8) create, incur, assume, or in any manner become liable
in respect of any indebtedness other than as contemplated by
the Transaction Documents and other than trade payables and
expense accruals incurred in the ordinary course of business
and which are incidental to its business purpose; provided,
however, that the Transferor may take any action prohibited
by this
clause (8) if (x) the Transferor shall cause, prior to
the
taking of such action, an Opinion of Counsel experienced
in
federal bankruptcy matters, in substance satisfactory to
the Trustee, the Certificateholders, MBIA and the Rating
Agencies confirming the
non-consolidation of the Transferor and the
Company, to be delivered to the Trustee, the
Certificateholders, MBIA and the Rating Agencies, (y) the
Rating Agencies shall indicate in writing that the taking
of such action will not affect the then current rating of
any Certificates, and (z) MBIA, and if an MBIA Default or
Termination has occurred, the Controlling Holders, shall
have given their prior
written
consent. The Transferor shall not amend any article in
its
Certificate of Incorporation that deals with any matter
discussed above without the prior written consent of MBIA. On
or before April 15 of each year, so long as any of the
Certificates are Outstanding, the Transferor
shall furnish to each
Certificateholder, the Trustee and MBIA, an Officer's
Certificate confirming that
the Transferor has complied with its obligations
under this Section 11.02(i).
(j) Directors. The Transferor agrees that at all times,
at least two of the directors and one of the executive
officers of the Transferor (or two persons, one of whom is
serving as both a director and an executive officer) will
not be a director, officer or employee of any direct
or ultimate parent, or Affiliate of the parent or of the
Transferor; provided, however, that such independent directors
and officers may serve in similar capacities for other "special
purpose corporations" formed by the Company and its
Affiliates. The Transferor's Certificate of Incorporation
shall at all times provide that such independent directors
shall have a fiduciary duty to the Holders of the
Certificates and will always require unanimous consent of
the board of directors to file any bankruptcy petition.
(k) Preservation of the Equipment. The Transferor
warrants that it is the lawful owner and possessor of the
Equipment or has a valid security interest therein and that
it will warrant and defend such Equipment against all Persons,
claims and demands
whatsoever. The Transferor shall not assign, sell, pledge,
or exchange, or in any way encumber or otherwise dispose of
the Equipment, except as permitted under this Agreement.
(l) Tax Treatment. The Transferor shall comply
with Section 2.11 of this Agreement at all times and its
financial and tax records shall reflect such intended tax
treatment.
(m) Maintenance of Office or Agency. The Transferor
will maintain an office or agency within the United States of
America where Certificates may be presented or surrendered for
payment, where Certificates may be surrendered for
registration of transfer or exchange and where notices and
demand to or upon the Transferor in respect of the
Certificates and this Agreement may be served. The Transferor
hereby initially appoints the Trustee as the Paying Agent and
its Corporate Trust Office as the office for each of said
purposes. The Transferor will give 30 days prior written notice
to the Trustee, MBIA and the Certificateholders of any change
in the identity of the Paying Agent or the location, of any
such office or agency. If at any time the Transferor shall fail
to maintain any such office or agency or shall fail to
furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or
served at the Trustee, and the Transferor hereby appoints the
Trustee its agent to receive all such presentations,
surrenders, notices and demands.
(n) Enforcement of Servicing Agreement and
Lease Acquisition Agreement. The Transferor will take all
actions necessary, and diligently pursue all remedies available
to it, to the extent commercially reasonable, to enforce the
obligations of the Servicer under the Servicing Agreement and
the Company under the Lease Acquisition Agreement and to
secure its rights thereunder.
(o) Transferor May Consolidate, etc., Only on
Certain Terms. The Transferor shall not consolidate or merge
with or into any other Person or convey or transfer its
properties and assets substantially as an entirety to any
Person, unless:
(i) the Person (if other than the Transferor)
formed by or surviving such consolidation or merger or
which acquires by conveyance or transfer the properties
and assets of the Transferor substantially as an
entirety shall be a Person organized and existing as a
limited purpose corporation under the laws of the
United States of America or any State thereof and
shall have expressly assumed, by an amendment hereto,
executed and delivered to the Trustee and MBIA, in form
and substance reasonably satisfactory to the Trustee
and MBIA, the obligation to make due and punctual
payments of the principal of and interest on all of the
Certificates and to perform every covenant of this
Agreement on the part of the Transferor to be performed
or observed; and
(ii) the Transferor shall have caused the
Trustee to have received a letter from the Rating
Agencies to the effect that the rating issued with
respect to the Certificates is confirmed,
notwithstanding
the
consummation of such merger, consolidation, transfer
or conveyance together with the consent of MBIA to
such merger, consolidation transfer or conveyance;
and
(iii) immediately after giving effect to
such transaction, no Event of Default or Default
shall have
occurred and be continuing; and
(iv) the Transferor shall have delivered to
the Trustee and MBIA an Officer's Certificate
and an Opinion of Counsel each stating
that such
consolidation, merger, conveyance or transfer
comply with this Article Eleven and that all
conditions precedent herein provided for
relating to such transaction have been complied
with; and
(v) such consolidation, merger, conveyance
or transfer shall be on such terms as shall fully
preserve the lien and security of this Agreement, the
perfection and priority thereof and the rights and
powers of the Trustee, MBIA and the Holders of
the Certificates under this Agreement; and
(vi) the surviving corporation shall be a
"special purpose corporation"; i.e., shall
have an
organizational charter substantially similar to
the Certificate of Incorporation of the
Transferor
including specific limitations on the
business purposes, and provisions for independent
directors; and
(vii) MBIA shall have given its prior
written consent, which consent shall not be
unreasonably withheld or delayed.
(p) Successor Substituted. Upon any consolidation
or
merger, or any conveyance or transfer of the properties
and assets of the Transferor
substantially as an entirety in
accordance with Section 11.02(o) hereof, the Person formed by
or surviving such consolidation or merger (if other than
the Transferor) or the Person to which such conveyance or
transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Transferor under
this Agreement with the same effect as if such Person had
been named as the Transferor herein upon
the execution of an assignment and
assumption agreement by such Person. In the event of any
such
conveyance or transfer, the Person named as the "Transferor"
in
the first paragraph of this Agreement or any successor
which
shall theretofore have become such in the manner prescribed
in this Article shall be released from its liabilities as
obligor and maker on all the Certificates and from its
obligations under this Agreement and may be dissolved, wound-
up and liquidated at any time thereafter.
(q) Use of Proceeds. The proceeds from the sale of
the
Certificates will be used by the Transferor (i) to pay
the Existing Indebtedness,
(ii) to deposit to the Capitalized
Interest Account the Capitalized Interest Account Deposit and
to deposit to the Prefunding Account the Prefunding Account
Deposit, (iii) to pay the expenses associated with this
transaction and (iv) for general
corporate purposes, including the cost of
funding Funded Lease Contracts. None of the
transactions
contemplated in the Transaction Documents (including the use
of the proceeds from the sale of the Certificates) will result
in a violation of Section 7 of the Securities and Exchange
Act of 1934, as amended, or any regulations issued pursuant
thereto, including Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II. The
Transferor does not own or intend to carry or purchase
any
"margin security" within the meaning of said Regulation
G, including margin securities originally issued by it or
any "margin stock" within the meaning of said Regulation U.
(r) Notice of Trigger Events. Upon the
Transferor's
obtaining knowledge of the occurrence of any Trigger Event,
the Transferor shall within one Business Day of obtaining
such knowledge notify MBIA, the Trustee, the Rating Agencies
and the Certificateholders of such occurrence.
Section 11.03 Other Matters as to the Transferor.
(a) Limitation on Liability of Directors, Officers,
or
Employees of the Transferor Except as provided in subsection
(b) of this Section and elsewhere in this Agreement, the
directors, officers, or employees of the Transferor shall not
be under any personal liability
to the Trust, the Trustee, the
Certificateholders, the Servicer, or any other Person
hereunder or pursuant to any documents delivered
hereunder, it being expressly understood that all such
liability is expressly waived and released as a condition
of, and as consideration for, the execution of this Agreement
and the issuance of the Certificates, except with respect to
liability resulting from such person's fraudulent or
willful misconduct. The Transferor and any
director or officer or employee or agent of the Transferor
may rely in good faith on the advice of counsel or on any
documents of any kind, prima facie properly executed and
submitted by any Person respecting any matters arising
hereunder.
(b) Parties Will Not Institute Insolvency
Proceedings.
During the term of this Agreement and for one year and one
day after the termination hereof, none of the parties hereto
or any Affiliate thereof will file any involuntary petition or
otherwise institute any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other
proceeding under any federal
or state bankruptcy or similar law
against the Transferor. ARTICLE TWELVE
ACCOUNTS AND ACCOUNTINGS
Section 12.01 Collection of Money.
Except as otherwise expressly provided herein, the
Trustee may demand payment or delivery of, and shall receive
and collect, all money and other property payable to or
receivable by the Trustee pursuant to this Agreement. The
Trustee shall, upon request from the Servicer, provide the
Servicer with sufficient information regarding the amount of
collections with respect to the Lease Contracts received
by the Trustee in the Lockbox Account (if such account is
held by the Trustee) and the other accounts held in the name
of the Trustee to permit the Servicer to perform its duties
under the Servicing Agreement. The Trustee shall hold all such
money and property so received by it as part of the Trust
Estate and shall apply it as provided in this Agreement.
If any Lease Contract becomes a Defaulted Lease Contract,
the Trustee, upon Transferor or Servicer request may, and upon
the request of MBIA or if an MBIA Default or Termination has
occurred and is continuing, the Controlling Holders shall
take such action as may be appropriate to enforce such payment
or performance, including the institution and
prosecution of
appropriate Proceedings. Any such action shall be
without
prejudice to any right to claim a Default or Event of
Default under this Agreement and to proceed thereafter as
provided in Article Six hereof. If the Transferor
receives any amounts payable to or receivable by the
Trustee pursuant to this Agreement, the Transferor shall
immediately, but not later than two Business Days after
receipt, remit such amounts to the Trustee for deposit in
the Collection Account.
Section 12.02 Collection Account; Redemption Account.
(a) Prior to the Closing Date, the Trustee shall open
and
maintain a trust account at its Corporate Trust Office
(the
"Collection Account") in the name of the Trustee for the
benefit of the
Certificateholders and MBIA, for the receipt of
(i) payments remitted to the Trustee by the Servicer and ACH
Bank pursuant to Sections 3.03 and 3.04 of the Servicing
Agreement, amounts transferred from the Lockbox Account in
accordance with Section 3.03 of the Servicing Agreement and
any amounts received by the Trustee pursuant to Section 12.01
hereof, (ii) amounts transferred
from the Cash Collateral Account in accordance with
Section 12.03(d)(i), (ii) and (iii) hereof, (iii)
amounts transferred
from the Capitalized Interest Account in accordance
with Section 12.04(c)(i), (iv) with respect to the Class
A Certificates, proceeds of claims made under the
Certificate Insurance Policy, in accordance with Article Eight
hereof, upon receipt, (v) amounts transferred from the
Prefunding Account in accordance with Section 12.04(d)(ii)
and (vi) any Reinvestment Income. Funds in the Collection
Account shall not be commingled with any other monies. All
payments to be made from time to time by the Transferor to the
Certificateholders out of funds in the Collection Account
pursuant to the Agreement shall be made by the Trustee or
the Paying Agent of the Transferor. All monies
deposited from time to time in the Collection Account pursuant
to this Agreement shall be held by the Trustee as part of the
Trust Estate as herein provided.
(b) Upon Transferor Order, the Trustee shall invest
the
funds in the Collection Account in Eligible
Investments;
provided, however, that all monies on deposit in the
Collection Account pursuant to Section 12.02(a)(iii) hereof
shall remain uninvested.
The Transferor Order shall specify the Eligible
Investments in which the Trustee shall invest, shall state
that the same are Eligible Investments and shall further
specify the percentage of funds to be invested in each
Eligible Investment. No such Eligible Investment shall
mature later than the second Business Day preceding the next
following Payment Date and shall not be sold or disposed of
prior to its maturity; provided that, Eligible Investments of
the type described in clause (a) of the definition of
Eligible Investments may mature on such Payment Date. In
the absence of a Transferor Order, the Trustee shall invest
funds in the Collection Account in Eligible Investments
described in clause (g) of the definition thereof.
Eligible Investments
shall be made in the name of the Trustee for the
benefit of the Certificateholders and MBIA. The Trustee
shall
provide to the Servicer and MBIA monthly written confirmation
of such investments, describing the Eligible Investments in
which such amounts have been invested. Any funds not so
invested must be insured by the Federal Deposit Insurance
Corporation.
(c) Any income or other gain from investments in
Eligible
Investments as outlined in (b) above shall be credited to
the
Collection Account and any loss resulting from such
investments shall be charged to such account; provided,
however, that the Transferor shall make or cause to be made
no later than the applicable Payment Date a deposit to the
Collection Account to the
extent of any losses therein. Except as otherwise
specifically set forth herein, the Trustee shall not be
liable for any loss incurred on any funds invested in
Eligible
Investments pursuant to the provisions of this Section
12.02
(other than in its capacity as obligor under any
Eligible Investment).
(d) On each Payment Date if either no Default or Event
of
Default shall have occurred and be continuing or a Default
or
Event of Default shall have occurred and be continuing but
the entire Certificate Balance of the Class A and
Class B Certificates shall not have been declared due
and payable pursuant to Section 6.02 hereof, then on such
Payment Date, after making all transfers and deposits to
the Collection Account referred to in Section 12.02(a)
hereof, the Trustee shall withdraw from the Collection
Account (other than amounts representing payments of
Lease Receivables due after the
Calculation Date immediately preceding such Payment Date
unless such amounts are used toward Servicer Advances
pursuant to Section 3.04 of
the Servicing Agreement) including
the
Reinvestment Income therein, and shall make the
following disbursements in the following order in
accordance with the provisions of and instructions on the
Monthly Servicer's Report; provided, however, that (x) the
proceeds of claims under the Certificate Insurance Policy
shall be used solely to pay interest and principal due under
paragraphs (v) and (vi) of this Section 12.02(d) in
accordance with the terms of the Certificate Insurance
Policy; and (y) the Trustee shall withdraw from the
Collection Account and make interest payments based on the
Class A Certificate Balance even if it shall not have
received the Monthly Servicer's Report:
(i) to pay to the Servicer: (A) the Servicer Fee
then due for all Certificates; (B) the amounts
necessary to reimburse the Servicer and any successor
Servicer and subservicer as provided in Section 3.08(a)
of the Servicing Agreement for reasonable costs
and expenses incurred by the Servicer (including
reasonable attorney's fees and out-of-pocket
expenses) in connection with the realization,
attempted realization or enforcement of rights
and remedies upon Lease Contracts that have
become Defaulted Lease Contracts, from amounts
received as Recoveries from such Defaulted Lease
Contracts; (C) any amounts received from
Customers to pay the taxes described in Section 3.07
of
the Servicing Agreement, to the extent deposited in
the Collection Account; (D) the amount
necessary to reimburse the Servicer for any
Nonrecoverable Advance; and (E) all amounts
received in respect of Lease Receivables as to
which the Servicer has made an unrecovered
Servicer Advance, to the extent of such Servicer
Advance;
(ii) to pay to the Trustee the Trustee Fee
then due for all Certificates;
(iii) to pay to the Back-up Servicer
the
Back-up Servicer Fee then due for all Certificates;
(iv) to pay to MBIA the MBIA Premium then due
for all of the Class A Certificates;
(v) to pay the interest due on that Payment
Date
on all Outstanding Class A Certificates and any
overdue interest, to be applied as provided in
Section 2.08 hereof;
(vi) to pay the Class A Principal
Distribution Amount to all Outstanding Class A
Certificates, to be applied as provided in Section
2.08 hereof;
(vii) unless a Trigger Event has occurred,
to
deposit into the Cash Collateral Account an
amount necessary to bring the balance therein to
an amount
equal to the Cash Collateral Account Required
Balance;
(viii) to pay to MBIA, any amounts
previously paid by MBIA under the Certificate
Insurance Policy and not heretofore repaid, together
with interest thereon in accordance with the
Insurance Agreement;
(ix) to pay to a successor Servicer after
a successor Servicer has been appointed pursuant
to Section 6.02 of the Servicing Agreement, the
Additional Servicer Fee, if any, and to pay any
successor
Servicer, MBIA or the Trustee, any Transition
Costs incurred by any successor Servicer, MBIA
(solely
pursuant to Section 6.02(d) of the Servicing
Agreement) or the Trustee and not previously
reimbursed;
(x) on and after each Payment Date following
the
initial occurrence of a Trigger Event, apply
any remaining funds (the "Additional Principal
Amount") to the payment of principal on the Class A
Certificates;
(xi) to pay to the Trustee and the Back-
up Servicer, any other amounts due to the Trustee or
the Back-up Servicer as expressly provided herein
and in the Servicing Agreement;
(xii) to pay to MBIA, any other amounts
due under the Insurance Agreement;
(xiii) to pay to the Servicer any
other amounts due the Servicer as expressly provided
herein and in the Servicing Agreement;
(xiv) to pay the interest due on that
Payment Date on all Outstanding Class B
Certificates and any overdue interest and interest
thereon, to be applied as provided in Section 2.08
hereof;
(xv) to pay the Class B Principal
Distribution Amount due on that Payment Date on
all Outstanding Class B Certificates, to be applied
to the payment of Certificate principal as
provided in Section 2.08
hereof; and
(xvi) to remit any excess funds to or at
the direction of the Holder of the Transferor
Certificate.
(e) Prior to the Closing Date, the Transferor shall
cause the Trustee to open and maintain a trust account at the
Corporate Trust Office (the "Redemption Account") in the
name of the Trustee for the benefit of Certificateholders
and MBIA, for the receipt of the Redemption Price of any
Certificates to be redeemed in accordance with Article
Ten hereof. On any
Redemption Date, the Trustee shall withdraw the
applicable Redemption Price from the Redemption Account and the
Paying Agent shall remit the Redemption Price to
the applicable Certificateholders in accordance with
Section 10.04 hereof.
Moneys in the Redemption Account shall be invested in
Eligible Investments that mature no later than two Business
Days prior to the relevant Redemption Date. Eligible
Investments shall be made inthe name of the Trustee for
the benefit of the
Certificateholders and MBIA. Any monies deposited in
the Redemption Account for purposes of redeeming
Certificates
pursuant to Article Ten hereof shall, subject to Section
7.16 hereof, remain in the Redemption Account until used to
redeem such Certificates.
(f) If payments on the Lease Contracts are made by means
of electronic transfers from a Customer bank account, the
Servicer shall either remit such payments to the Collection
Account in accordance with Section 3.03(a) of the Servicing
Agreement, or the Transferor shall open and maintain an
account at the ACH Bank (the "ACH Account") in the name of the
Trustee and in the name of any other Permitted Parties.
Section 12.03 Cash Collateral Account.
(a) Prior to the Closing Date, the Transferor shall
cause
the Trustee to open and maintain a trust account at the
Corporate Trust Office (the "Cash Collateral Account") in the
name of the Trustee for the benefit of the Certificateholders
and MBIA, for the receipt of deposits pursuant to
Section 12.02(d)(vii). Monies received in the Cash Collateral
Account will be invested at the
written direction of the Transferor in
Eligible
Investments during the term of this Agreement, and any income
or other gain realized from such investment, shall be held by
the Trustee in the Cash Collateral Account as part of the
Trust Estate subject to disbursement and withdrawal as herein
provided. Eligible Investments shall be made in the name of the
Trustee for the benefit of the Certificateholders and
MBIA. No such Eligible Investment shall mature later than
the second Business Day preceding the next following Payment
Date and shall not be sold or disposed of prior to its
maturity; provided that, Eligible Investments of the type
described in clause (a) of the definition of Eligible
Investments may mature on such Payment Date. In the
absence of a Transferor Order, the Trustee shall invest funds
in the Collection Account in Eligible Investments described
in clause (g) of the definition thereof Monies shall be
subject to withdrawal in accordance with Section 12.03(d)
hereof.
(b) The Trustee shall provide to the Servicer and
MBIA
monthly written confirmation of investments of funds held in
the Cash Collateral Account, describing the Eligible
Investments in which such amounts have been invested. Any
funds not so invested must be insured by the Federal Deposit
Insurance Corporation.
(c) If any amounts invested as provided in Section
12.03(a) hereof shall be needed for disbursement from the Cash
Collateral Account as set forth in Section 12.03(d) hereof,
the Trustee shall cause such investments of such Cash
Collateral Account to be sold or otherwise converted to cash
to the credit of such Cash Collateral Account. The Trustee
shall not be liable for any investment loss resulting from
investment of money in the Cash Collateral Account in any
Eligible Investment in accordance with the terms hereof (other
than in its capacity as obligor under any Eligible Investment).
(d) Disbursements from the Cash Collateral Account shall
be made, to the extent funds therefore are available,
only as follows:
(i) in the event that the amount in the
Collection Account at 10:00 a.m. Minneapolis time on
the Determination Date immediately preceding any
Payment Date (other than amounts representing payments
of Lease Receivables due after the Calculation
Date immediately preceding such Payment Date
unless such amounts are used toward Servicer
Advances pursuant to Section 3.04 of the Servicing
Agreement and taking into account funds transferred
from the Capitalized Interest Account pursuant to
Section 12.04(c)(i)) is less than
the amounts required to be paid from the
Collection Account on such Payment Date pursuant to
clauses (i) through (vi) of Section 12.02(d)
hereof, the Trustee shall withdraw funds from the
Cash Collateral Account on or prior to 4:00
p.m. New York time on such Determination Date to
the extent necessary to make such payments on such
Payment Date and deposit such funds into the
Collection Account;
(ii) subject to subparagraph (iii) of this
Section 12.03(d), in the event that on any Payment
Date the balance in the Cash Collateral Account
equals an amount greater than the Cash Collateral
Account Required Balance (after giving effect to
the distributions listed in clause (i) of this
Section 12.03(d) and clauses (i) through (vi) of
Section 12.02(d) on such Payment Date), the Trustee
shall withdraw funds in the Cash Collateral Account
in such amount so that the remaining amount in
the Cash Collateral Account after such withdrawal
will equal the Cash Collateral Account Required
Balance, and deposit such amounts in the
Collection Account for distribution on such
Payment Date in accordance with the priorities set
forth in Section 12.02(d);
(iii) in the event that on any Payment Date
a Trigger Event has occurred, the Trustee shall
withdraw all funds from the Cash Collateral Account
and deposit such funds into the Collection Account
for disbursement in accordance with the provisions
of Section 12.02(d) hereof; and
(iv) subject to subparagraph (iii) of this
Section 12.03(d), in the event that on any Funding
Date the balance in the Cash Collateral Account,
after giving effect to any Funding occurring on
such Funding Date, equals an amount greater than
the Cash Collateral Account Required Balance, the
Trustee shall withdraw funds in the Cash Collateral
Account in such amount so that the remaining
amount in the Cash Collateral Account after
such withdrawal will equal the Cash Collateral
Account Required Balance, and disburse such amounts
to or at the direction of the Transferor.
Section 12.04 Prefunding Account; Capitalized Interest
Account.
(a) Prior to the Closing Date, the Trustee shall open
and maintain a segregated trust account in the name of the
Trustee at the Corporate Trust Office (the "Capitalized
Interest Account") for the benefit of the
Certificateholders and MBIA, for the receipt of funds
transferred from the Transferor on the Closing Date. The
Transferor hereby instructs the Trustee on the Closing Date to
deposit into the Capitalized Interest Account from the
proceeds of the sale of the Certificates an amount equal to
the Capitalized Interest Account Deposit. Monies held in
the
Capitalized Interest Account shall be subject to withdrawal
in accordance with Section 12.04(c) hereof. Funds on deposit
in the Capitalized Interest Account shall not be commingled
with any other monies.
(b) Prior to the Closing Date, the Trustee shall open
and maintain a segregated trust account in the name of the
Trustee at the Corporate Trust Office (the "Prefunding
Account") for the benefit of the Certificateholders and
MBIA, for the receipt of funds transferred from the
Transferor on the Closing Date. The
Transferor hereby instructs the Trustee on the Closing Date
to
deposit into the Prefunding Account from the proceeds of the
sale of the Certificates an amount equal to the Prefunding
Account Deposit. Monies held in the Prefunding Account shall
be subject to withdrawal in accordance with Section 12.04(d)
hereof. Funds on deposit in the Prefunding Account shall not
be commingled with any other monies.
(c) Disbursements from the Capitalized Interest
Account shall be made as follows provided that funds
therefor are available:
(i) On each Determination Date through the
first
Determination Date following the end of the Funding
Period, the Trustee will withdraw from the Capitalized
Interest Account and deposit into the Collection Account
an amount equal to the Negative Arbitrage Amount.
(ii) On the first Determination Date after the end
of the Funding Period, after the payment in full of the
amounts specified in clause (i), the Trustee will
withdraw any remaining amounts in the Capitalized
Interest Account and disburse such amounts to or at
the direction of the Transferor; provided that no
Trigger Event or Event of Default shall have occurred
and be continuing and if such event shall have
occurred and be continuing, the Trustee shall deposit
such funds to the Collection Account.
(d) Disbursements from the Prefunding Account shall be
made as follows provided that funds therefor are available:
(i) Prior to the end of the Funding Period on
any
Funding Date, provided that the conditions precedent
set forth in Section 3.03(a) have been satisfied, the
Trustee shall withdraw from the Prefunding Account an
amount equal to the Funding Amount for the Lease
Contracts being acquired on such Funding Date and shall
disburse such amounts to or at the direction of the
Transferor.
(ii) On the first Payment Date in the
Amortization Period, the Trustee shall deposit to the
Collection Account and pay to the Class A
Certificateholders as a payment of principal any of the
Prefunding Account Deposit remaining in the Prefunding
Account.
(iii) On each Determination Date through the
first Determination Date following the end of the Funding
Period, the Trustee shall withdraw from the Prefunding
Account all income or gains from investments in Eligible
Investments and deposit such amounts to the Capitalized
Interest Account.
(e) Upon Transferor Order, the Trustee shall invest
the funds in the Capitalized Interest Account and the
Prefunding Account in Eligible Investments. The Transferor
Order shall specify the Eligible Investments in which the
Trustee shall invest, shall state that the same are Eligible
Investments and shall further specify the percentage of funds
to be invested in each Eligible Investment. No such
Eligible Investment shall mature later than the next
Determination Date and shall not be sold or disposed of
prior to its maturity. In the absence of a Transferor Order,
the Trustee shall invest funds in the
Capitalized Interest Account and Prefunding Account in
Eligible Investments described in clause (g) of the
definition thereof. Eligible Investments shall be made in the
name of the Trustee for the benefit of the
Certificateholders and MBIA. The Trustee shall provide
to the Servicer and MBIA monthly
written
confirmation of such investments, describing the
Eligible
Investments in which such amounts have been invested. Any
funds not so invested must be insured by the Federal Deposit
Insurance Corporation.
(f) Any income or other gain from investments in
Eligible
Investments as outlined in (e) above shall be credited to
the Capitalized Interest Account or the Prefunding
Account, as applicable, and any loss resulting from such
investments shall be charged to such applicable account;
provided, however, that the Transferor shall make or cause
to be made no later than the applicable Determination
Date a deposit to the Capitalized Interest Account or the
Prefunding Account to the extent of any losses in such
applicable account. Except as otherwise specifically set
forth herein, the Trustee shall not be liable for any loss
incurred on any funds invested in Eligible Investments
pursuant to the provisions of this Section 12.04
(other than in its capacity as obligor under any
Eligible Investment).
Section 12.05 Reports by Trustee to MBIA
and
Certificateholders.
(a) On each Payment Date the Trustee shall account to
each
Holder of Certificates on which payments of principal
and interest are then being made the amount which
represents
principal and the amount which represents interest, and
shall contemporaneously advise the Transferor and MBIA of
all such payments. The Trustee may satisfy its obligations
under this Section 12.04 by delivering the Monthly Servicer's
Report to each such Holder of the Certificates, MBIA, the
Transferor, the Rating Agencies and the Placement Agent. On or
before the 15th day prior to any Final Payment Date the
Trustee shall provide notice to MBIA, the Rating Agencies
and the Holders of the applicable Certificates of the
Final Payment Date for such Certificates. Such notice shall
include (1) a statement that interest shall cease to accrue
as of the last day preceding the date on which the Final
Payment Date occurs, and (2) shall specify the place or places
at which presentation and surrender may be made.
(b) The Trustee shall notify MBIA and
the
Certificateholders of the credit rating or, if more than
one credit rating has been assigned, each such credit rating of
each institution in which funds are invested pursuant to clause
(g) of the definition of Eligible Investments and shall
promptly notify MBIA and the Certificateholders if any such
credit rating has been lowered.
(c) At least annually, or as otherwise required by law,
the Trustee shall distribute to Certificateholders any
information returns or other tax information or statements as
are required by applicable tax law to be
distributed to the
Certificateholders. The Servicer shall prepare or cause to
be prepared all such information for distribution by the
Trustee to the Certificateholders.
ARTICLE THIRTEEN
PROVISIONS OF GENERAL APPLICATION
Section 13.01 General Provisions.
All of the provisions of this Article shall apply to this
Agreement.
Section 13.02 Acts of Certificateholders.
(a) Any request, demand, authorization, direction,
notice,
consent, waiver or other action provided by this Agreement to
be given or taken by Certificateholders may be embodied in
and evidenced by one or more instruments of substantially
similar tenor signed by such Certificateholders in person or
by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly
required, to the Transferor. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the
Certificateholders signing such instrument or instruments.
Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any
purpose of this Agreement and (subject to Section 7.01 hereof)
conclusive in favor of the Trustee and the Transferor, if
made in the manner provided in this Section 13.02.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved in any manner
which the Trustee deems sufficient.
(c) The ownership of Certificates shall be proved by
the
Certificate Register.
(d) Any request, demand, authorization, direction,
notice,
consent, waiver or other action by the Holder of any
Certificate shall bind the Holder of every Certificate
issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything
done, omitted or suffered to be done by the Trustee or the
Transferor in reliance thereon, whether or not notation of
such action is made upon such Certificate.
Section 13.03 Notices, etc., to Trustee, MBIA,
Transferor and Servicer.
Any request, demand, authorization, direction,
notice,
consent, waiver or Act of Certificateholders or other
document provided or permitted by this Agreement to be made
upon, given or furnished to, or filed with any party hereto
shall be sufficient for every purpose hereunder if in
writing and telecopied or mailed, first-class postage
prepaid and addressed to the
appropriate address below:
(a) to the Trustee at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070, or
at any other address previously furnished in writing to
the Transferor, MBIA, the Certificateholders and the
Servicer; or
(b) to MBIA at MBIA Insurance Corporation, 113
King Street, Armonk, New York 10504, Attention:
Structured Finance - Insured Portfolio Management (SF-
IPM), or at any other address previously furnished in
writing by MBIA to the Trustee, the Certificateholders,
the Servicer and the
Transferor; or
(c) to the Transferor at 6424 W. 91st Avenue, Suite
C, Westminster, CO 80030, Attention: President, or at
any other address previously furnished in writing
to the
Trustee, MBIA, the Certificateholders and the Servicer
by the Transferor; or
(d) to the Servicer at 6424 W. 91st
Avenue,
Westminster, CO 80030, Attention: President, or at
any
other address previously furnished in writing to
the
Trustee, MBIA, the Certificateholders and the Transferor.
(e) to each of (i) S & P at 26 Broadway, New
York, New York 10004, Attention: Asset Backed
Surveillance Group, and (ii) Moody's at 99 Church Street,
New York, NY 10007.
Section 13.04 Notices to Certificateholders; Waiver.
Where this Agreement provides for notice
to
Certificateholders of any event, such notice shall
be
sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage
prepaid, to each Certificateholder affected by such event, at
his address as it appears on the Certificate Register, not
later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any
case in which notice
to
Certificateholders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed,
to any particular Certificateholder shall affect the
sufficiency of such notice with respect to other
Certificateholders, and any notice which is mailed in the
manner herein provided shall conclusively be presumed to have
been duly given.
Where this Agreement provides for notice in any manner,
such notice may be waived in writing by any Person entitled to
receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers
of notice by Certificateholders shall be filed with the
Trustee, but such filing shall not be a condition precedent
to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of regular mail
service as a result of a strike, work stoppage or similar
activity, it shall be impractical to mail notice of
any event to
Certificateholders when such notice is required to be
given pursuant to any provision of this Agreement, then any
manner of giving such notice as shall be satisfactory to the
Trustee shall be deemed to be a sufficient giving of such
notice.
Section 13.05 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect
the construction hereof.
Section 13.06 Successors and Assigns.
All covenants and agreements in this Agreement by
the Transferor shall bind its successors and assigns,
whether so expressed or not. Notwithstanding the foregoing,
no party shall assign any of its rights under this Agreement,
or delegate any of its duties, except in accordance with the
provisions of Sections 2.06, 7.11 and 11.02(o) hereof.
Section 13.07 Separability.
In case any provision in this Agreement or in
the
Certificates shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired
thereby.
Section 13.08 Benefits of Agreement.
Nothing in this Agreement or in the Certificates, express
or implied, shall give to any Person, other than the parties
hereto,
the Certificateholders, and any Paying Agent which may
be appointed pursuant to the provisions hereof, and any of
their successors hereunder, any benefit or any legal or
equitable right, remedy or claim under this Agreement or
under the Certificates, except that MBIA is an express
third party beneficiary to this Agreement.
Section 13.09 Legal Holidays.
In any case in which the date of any Payment Date or
the Stated Maturity or Expected Maturity of any Certificate
shall not be a Business Day, then (notwithstanding any other
provision of a Certificate or this Agreement) payment of
principal or interest need not be made on such date, but
may be made on the next succeeding Business Day with the
same force and effect as if made on the nominal date of
any such Stated Maturity, Expected Maturity or Payment Date
and, assuming such payment is actually made on such
subsequent Business Day, no additional interest shall accrue
on the amount so paid for the period from and after any such
nominal date.
Section 13.10 Governing Law.
THE AGREEMENT AND EACH CERTIFICATE SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED THEREIN, WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS OF ANY STATE.
Section 13.11 Counterparts.
The Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 13.12 Corporate Obligation.
No recourse may be taken, directly or indirectly,
against any incorporator, subscriber to the capital stock,
stockholder, employee, officer or director of the
Transferor or of any predecessor or successor of the
Transferor with respect to the Transferor's obligations on
the Certificates or under this Agreement or any
certificate or other writing delivered in connection
herewith.
Section 13.13 Compliance Certificates and Opinions.
Upon any application, order or request by the Transferor
or the Servicer to the Trustee to take any action under
any provision of this Agreement for which a specific
request is required under this Agreement, the Transferor or
the Servicer, as applicable, shall furnish to the Trustee an
Officer's Certificate of the Transferor or the Servicer, as
applicable, stating that all conditions precedent, if any,
provided for in this Agreement relating to the proposed action
have been complied with, except that in the case of any such
application or request as to which the furnishing of a
different certificate is specifically required by any
provision of this Agreement relating to such particular
application or request, no additional certificate need be
furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Agreement
shall include:
(a) a statement that each individual signing
such certificate or opinion has read or has caused to
be read such covenant or condition and the
definitions herein relating thereto;
(b) a brief statement as to the nature and scope
of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(c) a statement that, in the opinion of each
such individual, such individual has made such
examination or investigation as is necessary to enable
such individual to express an informed opinion as to
whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of
each such individual, such condition or covenant
has been complied with.
Section 13.14 MBIA Default or Termination.
If an MBIA Default or Termination occurs and is
continuing, MBIA's right to consent hereunder and under any
other Transaction Document and to direct the Trustee shall be
void and, in such event, in all provisions of this Agreement
wherein MBIA's consent or direction is required or permitted,
the consent or direction of the Controlling Holders shall be
required or permitted unless a larger number of Holders is
required under the relevant provision of this Agreement.
IN WITNESS WHEREOF, the Transferor, the Servicer,
the Trustee and the Back-up Servicer have caused this Agreement
to be duly executed by their respective officers
thereunto duly authorized as of the date and year first above
written.
GF FUNDING CORP. III, Transferor
By:
Name:
Title:
GRANITE FINANCIAL, INC., Servicer
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee and Back-
up Servicer
By:
Name:
Title:
Schedule I
Attach Initial Lease Schedule
Schedule II
Terms Schedule
"Back-up Servicer Fee Rate": .05% per annum.
"Class A Certificate Initial Balance": $27,500,000, which
is the sum of (a) the product of (i) the Aggregate IPB as of
the Cut-Off Date and (ii) the Class A Percentage, and (b) the
Prefunding Account Deposit.
"Class A Interest Rate": 6.82%.
"Class A Percentage": 82.5%.
"Net Worth Requirement": The Servicer's consolidated
Tangible Net Worth shall not be less than the sum of
(i) $11,347,025 plus (ii) 75% of the cumulative after tax
consolidated net income since December 31, 1996, such amount
being calculated without any offset and reduction for net
losses incurred during the fiscal year for which such
calculation is being made. This requirement may be adjusted by
MBIA without the consent of the Certificateholders after
receipt of audited financial statements of the Company and the
Transferor for the year ending June 30, 1997.
"Prefunding Account Deposit": $12,827,258.18.
"Required Collateralization Amount": As of the Closing
Date, $3,112,399.78, and as of any date of determination
thereafter, the greatest of:
(a) (i) one minus the Class A Percentage multiplied
by (ii) the Aggregate IPB (including any Lease
Contracts to be purchased or funded and excluding any
Lease Contracts to be released pursuant to Section 10.05
hereof on such date of determination),
(b) the aggregate Implicit Principal Balance of the Lease
Contracts (including any Lease Contracts to be purchased
or funded on such date of determination and excluding any
Lease Contracts to be released pursuant to Section 10.05
hereof on such date of determination) relating to the
three Customers whose Lease Contracts have the greatest
remaining Implicit Principal Balance, and
(c) 5% multiplied by the Aggregate Initial IPB
(including any Lease Contracts to be purchased or funded
on such date of determination).
"Servicer Fee": $6 per Lease Contract per Scheduled
Payment on such Lease Contract, the amount payable to the
Servicer as the Servicer Fee on each Payment Date. The
Servicer Fee shall not include the Additional Servicer Fee.
"Trigger Event": The occurrence of any one of the
following events, and the declaration by MBIA, or if an MBIA
Default or Termination has occurred and is continuing, by the
Controlling Holders, that such occurrence shall constitute a
Trigger Event:
(a) commencing with the fourth Determination Date after
the Closing Date, the average of the Annualized Gross
Default Rates for the three consecutive prior Monthly
Periods was equal to or greater than 5.5%;
(b) the Cumulative Gross Default Rate exceeds 8.25%;
(c) commencing with the fourth Determination Date after
the Closing Date, the average of the Delinquency
Rates for the three consecutive prior Monthly Periods
was equal to or greater than 2%;
(d) the Net Worth Requirement is not met;
(e) the Transferor or the Trust Estate becomes an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(f) the occurrence of a Servicer Event of Default;
(g) either William W. Wehner or both of the following
employees, Mark Speros and William Cobb, terminate or
shall have terminated their employment with the
Servicer or any of its Affiliates or die;
(h) an Event of Default occurs or the Company or any
Material Affiliate shall be in default under, or in
violation of any covenant or obligation under any
loan agreement, such that the lender under such loan
agreement would be authorized, pursuant to the terms
of such agreement and upon the expiration of any cure
period or grace period with respect to such violation
or default, to demand immediate payment by the
Company or such Material Affiliate, as applicable, of
10% or more of the aggregate total recourse debt of
the Company and all affiliates of the Company, and
such default or violation shall not have been cured,
remedied or waived in writing by such lender after 90
days, counting from the initial date of the violation
or default and not from the expiration of any
applicable cure or grace period; or
(i) any payment by MBIA under the Certificate Insurance
Policy.
"Trustee Fee Rate": .05% per annum.
LEASE ACQUISITION AGREEMENT between
GRANITE FINANCIAL, INC. (the "Company")
and
GF FUNDING CORP. III (the "Transferor")
Dated as of March 1, 1997
TABLE OF CONTENTS
Page
ARTICLE 1DEFINITIONS 2
Section 1.01 Defined Terms 2
ARTICLE 2ACQUISITION OF LEASE ASSETS 4
Section 2.01 Authorization and Issuance of Common
Stock by the Transferor 4
Section 2.02 Lease Asset Acquisitions 4
Section 2.03 Assumption of Indebtedness by the
Transferor; Payment of Removal Price 4
Section 2.04 Delivery of Lease Contracts; Filing of
Financing Statements 4
Section 2.05 Servicing of Lease Contracts and Equipment 5
Section 2.06 Review of Lease Contracts 5
Section 2.07 Nature of Transfer 5
ARTICLE 3REPRESENTATIONS AND WARRANTIES 6
Section 3.01 Representations and Warranties of the
Company 6
Section 3.02 Representations and Warranties of the
Transferor 13
Section 3.03 Purchase or Substitution Required
Upon Breach of Certain
Representations and Warranties 14
Section 3.04 Requirements for Purchase or
Substitution of Lease Contracts and
Acquisition of Additional Lease Contracts 15
ARTICLE 4COVENANTS OF THE TRANSFEROR AND COMPANY 17
Section 4.01 Company Covenants 17
Section 4.02 Transferor Covenants 20
Section 4.03 Assignment of Lease Assets 20
ARTICLE 5CONDITIONS PRECEDENT 22
Section 5.01 Conditions to the Transferor's
Obligations 22
ARTICLE 6TERM AND TERMINATION 23
Section 6.01 Term 23
Section 6.02 Default by the Company 23
ARTICLE 7MISCELLANEOUS 24
Section 7.01 Amendments 24
Section 7.02 Governing Law 24
Section 7.03 Notices 24
Section 7.04 Separability Clause 24
Section 7.05 Assignment 24
Section 7.06 Further Assurances 24
Section 7.07 No Waivers; Cumulative Remedies 24
Section 7.08 Binding Effect; Third Party
Beneficiaries 25
Section 7.09 Set-Off 25
Section 7.10 MBIA Default or Termination 25
EXHIBITS
A FORM OF COMPANY CERTIFICATE
B FORM OF LEASE CONTRACTS
C POOL CONCENTRATION LIMIT EXCEPTIONS
D CONCENTRATION LIMITS
E FORM OF BROKER ASSIGNMENT AGREEMENTS
LEASE ACQUISITION AGREEMENT
This LEASE ACQUISITION AGREEMENT (the "Lease Acquisition
Agreement"), dated as of March 1, 1997, is by and between Granite
Financial, Inc. (the "Company") and GF Funding Corp. III (the
"Transferor").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and Security
Agreement, dated as of March 1, 1997 (as amended from time to
time, the "Trust and Security Agreement"), with Norwest Bank
Minnesota, National Association as the Trustee (the "Trustee")
and back-up servicer (the "Back-up Servicer") and
Granite Financial, Inc., as servicer (the "Servicer"), pursuant
to which the Transferor intends to issue the Certificates.
In furtherance thereof, the Transferor and the Company
are entering into this Lease Acquisition Agreement to provide
for, among other things, the acquisition by the Transferor of
all of the right, title and interest in and to certain
Lease Assets, which the Transferor is and will from time to
time convey to the Trustee for the benefit of MBIA and the
Certificateholders. As a precondition to the effectiveness
of this Lease Acquisition Agreement, the Transferor, the
Trustee, the Servicer and the Back-up Servicer will enter
into the Servicing Agreement to provide for the servicing of
the Lease Assets.
In addition, under the Trust and Security Agreement,
the Transferor is conveying to the Trustee, among other
things, all of the Transferor's rights derived under this
Lease Acquisition Agreement and the Servicing Agreement, and
the Company agrees that all covenants and agreements made
by it in this Lease Acquisition Agreement with respect to
the Lease Assets shall also be for the benefit of the Trustee,
MBIA and all Holders from time
to time of the Certificates. In consideration for
its
contribution and sale of the Lease Assets and
its
representations, warranties, covenants and other agreements
under this Lease Acquisition Agreement, the Company has
received all of the Common Stock of the Transferor and such
other consideration as may from time to time be paid hereunder.
ARTICLE 1
DEFINITIONS
Section 1.01 Defined Terms. For purposes of this
Lease Acquisition Agreement the following terms shall have the
meanings specified herein. Capitalized terms used herein
but not
otherwise defined shall have the respective meanings assigned
to such terms in the Trust and Security Agreement, or if not
defined therein, in the Servicing Agreement.
"Common Stock": All of the issued and outstanding shares
of common stock of the Transferor, which consists of 1,000
shares having a par value of $.01 per share.
"Company Certificate": The Company
Certificate substantially in the form attached hereto as
Exhibit A, one of which shall be entered into on any
Acquisition Date.
"Computer Tape": The diskette or other computer
readable medium, prepared by the Company, containing
descriptions and payment information on each Lease Contract on
the Lease Schedule.
"Concentration Limits": The limitations as to
the
composition of the Lease Contracts acquired by the
Transferor hereunder, as described on Exhibit D hereto, and as
amended from time to time with the prior written consent of
MBIA and with notice to the Rating Agencies and the
Certificateholders.
"Eligible Lease Contract": A Lease Contract that
satisfies the selection criteria set forth in Section 3.01(a)
hereof as of the Closing Date and each Acquisition Date.
"Existing Indebtedness": With respect to the
Certificates, the indebtedness that the Company shall incur
from time to time which relates to financings of the Lease
Receivables and which shall be assumed by the Transferor on
the Closing Date as set forth in Schedule II attached hereto
or on a Funding Date as set forth on Schedule II to a Company
Certificate.
"Closing Date": March 25, 1997.
"Initial Lease Schedule": The list of Lease Contracts
and Lease Receivables attached hereto as Schedule I.
"Lease Assets": All right, title and interest in and
to (a) the Lease Contracts, including the proceeds of the
Lease Contracts and all payments received on or with respect
to the Lease Contracts on or after the Cut-Off Date or any
Acquisition Date, other than payments due on the Lease
Contracts before the Cut-Off Date or Acquisition Date, (b)
the Lease Contract Files, (c) the Company's rights and
interests in the Equipment, (d) all rights and interests of
the Company under each Insurance Policy related to the
Lease Contracts and related Equipment
and
Insurance Proceeds, (e) the Servicing Charges with respect to
the Lease Contracts and (f) all income and proceeds of the
foregoing or relating thereto.
"Lease Contract File": With respect to each Lease
Contract,
the following documents:
(i) the one and only executed
original counterpart of the Lease Contract that
constitutes "chattel paper" for purposes of
Sections 9-105(1)(b) and 9-305 of the UCC;
(ii) copies of any evidence of insurance and
any other copies of documents evidencing or related
to any Insurance Policy;
(iii) copies of such documents, if any,
that
the Company keeps on file indicating that the
lessor has a perfected security interest in the
related Equipment in accordance with its customary
procedures relating to an individual Lease Contract,
Customer or Equipment, including, in the case of
titled Equipment a certificate of title or
application for certificate of title assigning all
of the Company's interest in the related Equipment
to the Transferor and the Trustee, as applicable,
naming the Transferor as the owner of the titled
Equipment (if the related Lease Contract is not a
Loan Contract) and naming the Trustee as first
lienholder;
(iv) copies of evidence that the Customer
received the Equipment and that the Equipment
was in good working order and acceptable to the
Customer at the time of receipt by the Customer;
and
(v) copies of any Broker Assignment Agreements
whereby the Company acquired the Lease Contract from a
broker.
"Lien": Any security interest, lien, charge, pledge,
equity or encumbrance of any kind other than liens for taxes
due and payable after the Closing Date or any
Acquisition Date,
mechanic's liens filed after the Closing Date or any
Acquisition Date and any liens that attach after the Closing
Date or any Acquisition Date by operation of law.
"Servicing Agreement": The Servicing Agreement dated as
of March 1, 1997 by and among the Servicer, the Transferor, the
Backup Servicer and the Trustee, as amended or supplemented from
time to time.
"PUT": A provision in a Lease Contract obligating the
lessee to purchase the related Equipment upon termination.
"Substitute Lease Contract": The meaning set forth
in Section 3.04(b) hereof.
ARTICLE 2
ACQUISITION OF LEASE ASSETS
Section 2.01 Authorization and Issuance of Common Stock
by the Transferor. Subject to all the terms and conditions
hereof and in reliance upon the representations,
warranties and covenants set forth in this Lease Acquisition
Agreement, as of the Closing Date the Transferor hereby
issues to the Company the Common Stock. Such Common Stock shall
be issued in the name of, and delivered directly to, the
Company and the Company hereby agrees to obtain directly from
the Transferor such Common Stock, all in accordance with the
terms hereof.
Section 2.02 Lease Asset Acquisitions. In return for
the
Common Stock and other rights created by this Lease
Acquisition Agreement, as of the Closing Date the Transferor is
acquiring the Lease Assets listed on the Initial Lease
Schedule. The Company, from time to time hereafter, shall
transfer to the Transferor or originate on behalf of the
Transferor, and the Transferor shall acquire from the Company
additional Lease Assets pursuant to a Company Certificate in
the case of Substitute Lease Contracts and Funded Lease
Contracts acquired on a Funding Date, with the applicable
Amended Lease Schedule attached thereto. The Company agrees
that all Lease Contracts transferred, assigned and
originated on behalf of the Transferor hereunder shall
be Eligible Lease Contracts and that all Lease Assets
acquired by the Transferor shall conform with all of the
requirements hereof. The Company hereby acknowledges that its
transfer and assignment of the
Lease Assets to the Transferor is absolute and
irrevocable, without reservation or retention of any
interest whatsoever by the Company.
To the extent that the Company shall retain any files
or documentation pertaining to the Lease Assets, it shall hold
such documents in trust for the benefit of the Trustee as the
owner thereof. The possession of any documents or files
pertaining to the Lease Assets by the Company is at the will
of the Transferor for the sole purpose of servicing such
Lease Assets, and such retention and possession by the
Company is in a custodial capacity only. The documents
and files retained by the Company relating to the Lease
Assets shall be segregated from the books and records of the
Company and shall be marked appropriately to reflect clearly
the sale of the related Lease Assets to the Transferor and
the assignment from the Transferor to the Trustee.
Section 2.03 Assumption of Indebtedness by the
Transferor; Payment of Removal Price. Subject to all
the terms and
conditions hereof and in reliance upon the
representations, warranties and covenants set forth herein, on
the Closing Date the Transferor hereby agrees to assume the
Existing Indebtedness and to repay the Existing Indebtedness
with the proceeds of the sale of the Certificates on the
Closing Date simultaneously with the issuance of the
Certificates. In addition, on any Funding Date the
Transferor hereby agrees to assume and repay any Existing
Indebtedness relating to the Funded Lease Contracts with the
proceeds of the Funding and any amounts released from the
Cash Collateral Account in connection therewith and to remit
any such excess proceeds to the Company as additional
consideration.
Section 2.04 Delivery of Lease Contracts; Filing
of Financing Statements.
(a) In connection with the Transferor's acquisition of
the Lease Assets, the Company, on behalf of the Transferor,
shall deliver the original Lease Contracts and all other items
included in the Lease Contract Files to the Trustee so that
the Trustee may retain possession thereof as provided in
the Transaction Documents. In addition, the Company agrees
to record and file prior to the Closing Date or within the
time period set forth in the Trust and Security Agreement,
at its own expense, financing statements (and thereafter
timely continuation statements with respect to such financing
statements) with respect to the Lease Assets, meeting the
requirements of the Transaction Documents.
(b) In connection with each acquisition of Lease Assets
by the Transferor hereunder, the Company shall promptly, at
its own expense, cause any Electronic Ledger maintained by
it to be marked to show that the Lease Assets have been
acquired by the Transferor in accordance with this Lease
Acquisition Agreement and transferred by the Transferor to
the Trustee in accordance
with the Transaction Documents.
Section 2.05 Servicing of Lease Contracts and
Equipment. The Servicer shall service the Lease Assets for the
benefit of the Transferor (and its successors and assigns),
the Trustee, MBIA and the Certificateholders, in accordance
with the terms and conditions of the Transaction Documents.
Notwithstanding the foregoing, the Company acknowledges
and agrees that its
obligations under this Lease Acquisition Agreement
are
independent of any obligations it may have as Servicer and
that its obligations under this Lease Acquisition
Agreement will continue in full force and effect, whether or
not it is acting as Servicer, until termination of this Lease
Acquisition Agreement in accordance with Section 6.01
hereof.
Section 2.06 Review of Lease Contracts. If the
Company discovers or is notified by the Trustee, MBIA
or the
Certificateholders that any Lease Contracts are missing
or defective (that is, mutilated, damaged, defaced,
incomplete, improperly dated, clearly forged or otherwise
physically altered) in any material respect, or, with respect
to titled Equipment, that the certificate of title naming the
Transferor as owner (if the related Lease Contract is not a
Loan Contract) and naming the Trustee as first lienholder is
not in the Lease Contract File, as of the Funding Termination
Date, the Company shall correct or cure such omission,
defect or other irregularity within 30 days from the date
the Company discovered, or is notified by the Trustee, MBIA
or the Certificateholders of, such omission or defect.
Otherwise, the Company shall repurchase such Lease
Contract from the Transferor or replace such Lease Contract
with a Substitute Lease Contract in accordance with Section
3.04(c) hereof.
Section 2.07 Nature of Transfer.
(a) In the event that the transfer of the Lease Assets
from the Company to the Transferor is deemed to be a
secured financing, the Company shall be deemed hereunder to
have conveyed to the Transferor, and the Company does hereby
convey to the Transferor, a security interest in all of the
Company's right, title and interest in, to and under the Lease
Assets, whether now owned or hereafter acquired. For
purposes of such conveyance, this Lease Acquisition
Agreement shall constitute a security agreement under
applicable law.
(b) In the event that the transfer contemplated by
this Lease Acquisition Agreement is deemed for any reason to
be less than a transfer of complete legal title of all of
the Company's right, title and interest in, to and under the
Lease Assets, the parties hereto intend that this Lease
Acquisition Agreement operate to transfer all of the Company's
equitable interests in, to and under the Lease Assets to the
Transferor.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of
the
Company.
(a) The Company hereby makes the following
representations and warranties as to each Lease Contract to
the Transferor and for the benefit of MBIA, the Trustee
and Holders of the Certificates, on which the Transferor
relies in acquiring the Lease Assets. Such representations
and warranties speak as of the Closing Date with respect to
Lease Contracts listed on the
Initial Lease Schedule or the Acquisition Date with respect
to Additional Lease Contracts unless otherwise indicated, but
shall survive any subsequent transfer, assignment,
contribution or conveyance of the Lease Assets:
(i) The information set forth in the Lease Schedule
is true and correct as of the Closing Date or Acquisition
Date as applicable.
(ii) The Lease Contract is by its terms an absolute
and unconditional obligation of the Customer, non-
cancelable and, except in certain instances involving loss
or damage to the Equipment, non-prepayable prior to the
expiration of the initial term of such Lease Contract;
no Lease Contract provides for the substitution,
exchange or addition of any other items of Equipment
pursuant to such Lease Contract; and the rights with
respect to such Lease Contract are assignable by the
lessor thereunder without the consent of or notice to
any Person. Each Lease Contract is net to the lessor of
any maintenance, taxes, insurance or other expenses
and contains provisions requiring the Customer to assume
all risk of loss or malfunction of the related
Equipment.
(iii) The Company has heretofore provided to
the Trustee the sole original counterpart of each of the
Lease Contracts, as amended, and except for
amendments and
supplements already reflected in the Lease Contracts on
the Closing Date or Acquisition Date as applicable
and as reflected in the Lease Schedule, the Lease
Contracts have not been amended, waived or modified.
All such documents constitute the entire agreement
between the lessor and the lessee in respect of the
Equipment.
(iv) There is only one original executed counterpart
of the Lease Contract and it constitutes "chattel paper"
for purposes of section 9-105(1)(b) and 9-308 of the UCC
which has been delivered to the Trustee and the
Company's Electronic Ledgers have been marked as provided
in Section 2.04(b) hereof.
(v) The Lease Contract was not originated in, nor
is
it subject to the laws of, any jurisdiction, the laws
of which would make unlawful the sale, transfer or
assignment of such document under any of the
Transaction Documents, including any repurchase in
accordance with the Transaction Documents.
(vi) The Lease Contract is, and on the Closing Date
or Acquisition Date, as applicable, will be, in full force
and effect in accordance with its terms and neither the
Company nor any other obligated party has or will have
suspended or reduced any payments or obligations due or
to become due thereunder by reason of a default by the
other party to such Lease Contract; as of the Closing
Date or Acquisition Date, as applicable, none of the
Customers is more than 30 days delinquent in making a
Scheduled Payment (without regard to advances, if any,
made by the Servicer) and there are no proceedings
pending, or to the best of the Company's knowledge,
threatened asserting insolvency of a Customer; there has
been no other default, breach or violation and no event
permitting acceleration under the Lease Contract;
there are no proceedings pending, or to the best of
the Company's knowledge, threatened, wherein the
Customer, any other obligated party or any governmental
agency has alleged that any such Lease Contract is
illegal or unenforceable;
and none of the Scheduled Payments are subject to any
set-off or credit of any kind.
(vii) The Lease Contract is the valid, binding and
legally enforceable full recourse obligation of the parties
thereto, enforceable in accordance with its terms, subject,
as to enforcement, to applicable bankruptcy, insolvency,
reorganization and other similar laws of general
applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of
whether enforcement is sought in a court of law or equity.
(viii) All filings (including Uniform Commercial
Code filings), notices, transfers and recordings as required
under the Trust and Security Agreement or applicable law and
that may be necessary to perfect the first priority security
interest of the Transferor and the Trustee in the Lease
Contracts and the related Lease Receivables being acquired
hereunder, have been accomplished and are in full force and
effect; provided, however, that the Company shall not be
required to file any assignments of financing statements
with respect to the Equipment underlying the Lease
Contracts. The Company has a first priority perfected
security interest in the Equipment underlying all Loan
Contracts and in any Equipment exceeding $50,000 in value
underlying any other Lease Contracts. The Company has filed
or will file within thirty calendar days of the Closing
Date, an application for certificate of title for each item
of titled Equipment, naming the Trustee as first lienholder
and with respect to Lease Contacts which are not Loan
Contracts also naming the Transferor as owner of such titled
Equipment.
(ix) Each Lease Contract being acquired by the
Transferor is substantially in the form of lease contracts
attached hereto as Exhibit B (which may include addendums in
the forms included in such Exhibit B), except for immaterial
modifications or deviations from the form lease contracts
which appear in certain Lease Contracts or which may appear
in the future form Lease Contracts of the Company, which
immaterial modifications or deviations will not have a
material adverse effect on the Holders of the Certificates
or MBIA and will not reduce the Scheduled Payments or other
payments due under the Lease Contracts; provided, however,
that some Lease Contracts may include a rider providing
additional or alternate terms regarding the purchase of the
equipment upon the expiration of such Lease Contract. The
Broker Assignment Agreement pursuant to which Lease
Contracts were acquired by the Company from brokers is
substantially in the form of Exhibit E attached hereto.
(x) The Lease Contract was either (A) originated by
the Company on behalf of itself or the Transferor or
purchased from a broker in the ordinary course of business
and meets the Company's origination and underwriting
criteria used in originating the Lease Contracts delivered
to the Transferor on the Closing Date, or (B) purchased
from a leasing company that originated such leases pursuant
to agreed upon and well-articulated underwriting and
documentation standards acceptable to MBIA and with whom the
Company has regularly dealt in the past and underwritten
consistent with the criteria used to originate Lease
Contracts delivered to the Transferor on the Closing Date.
The origination and collection practices used by the Company
with respect to each Lease Contract have been in all
respects legal, proper, prudent and customary in the
equipment financing and servicing business. None of the
Lease Contracts is a consumer lease. Any acquisition from a
broker is a true sale or absolute transfer and not a loan to
the broker or a joint venture/co-ownership arrangement with
the broker.
(xi) In determining whether to lease Equipment to any
particular Customer, the Company considered each Customer's
ability to pay any PUT Payments included in the terms of the
Lease Contract. In determining whether to lease Equipment
to any particular Customer, the Company considered each
Customer's ability to pay any increases in the rental
payments due under the terms of the Lease Contract.
(xii) The Equipment related to the Lease Contract
was properly delivered to the Customer in good repair,
without defects and in satisfactory order and, to the best
knowledge of the Company, is currently in proper working
order as of the Closing Date or Acquisition Date as
applicable. Each Customer has accepted the Equipment leased
to it and, after reasonable opportunity to inspect and test
such Equipment, has not notified the Company of any defects
therein.
(xiii) Except as approved in writing by MBIA, each
Lease Receivable derives from a Lease Contract that has an
original stated term of at least 12 months and not more than
60 months. Each such Lease Contract is within its original
term and has not had any extensions.
(xiv) Except with respect to (A) any Additional
Lease Contract, (B) the Lease Contracts described in
Exhibit C hereto, and (C) such other Lease Contracts as
approved by MBIA (provided that the aggregate IPB of such
Lease Contracts approved by MBIA by this clause (C) does not
exceed 2% of the Aggregate IPB), each Customer under each
Lease Contract will have made at least one lease payment
with respect to such Lease Contract, including any security
deposit or advance payment made by the Customer upon the
execution of the Lease Contract or the delivery of the
Equipment, and each Initial Lease Contract will have a
Scheduled Payment due in April 1997. Each Lease Contract
obligates the related Customer to make all Scheduled
Payments thereunder in full notwithstanding the collection
by the lessor of a security deposit with respect thereto.
The calculation of the Implicit Principal Balance of each
Lease Receivable does not include any security deposits or
advance payments collected by or on behalf of the lessor
which are applied to Scheduled Payments.
(xv) None of the Customers is a lessee that is a
merchant with respect to the Equipment leased under any
Lease Contract, and none of the Customers is the United
States of America or any state, or agency, department or
instrumentality or political subdivision of the United
States of America or any state. Each Lease Contract is
payable in U.S. dollars and the obligor thereon is a United
States resident with a billing address in the U.S.
(xvi) All requirements of applicable Federal, state
and local laws, and regulations thereunder in respect of the
Lease Contract have been complied with in all material
respects, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, and any other
applicable consumer credit, equal opportunity and disclosure
laws if any, and each Lease Contract complied in all
material respects at the time it was originated or made and
now complies in all material respects with all legal
requirements of the jurisdiction in which it was originated.
(xvii) With the sole exception of the Customer's
right to quiet enjoyment, the Lease Contract is not and will
not be subject to any right of rescission, set-off, claim,
counterclaim or defense, including the defense of usury and
the operation of any of the terms of the Lease Contract or
the exercise by the Company or the Customer of any right
under the Lease Contract will not render such Lease Contract
unenforceable in whole or in part nor subject to any right
of rescission, setoff, claim, counterclaim or defense, and
no such right of rescission, set-off, claim, counterclaim or
defense, including a defense arising out of a breach of the
Customer's right of quiet enjoyment of the Equipment, has
been asserted with respect thereto.
(xviii) The Company has duly fulfilled all
obligations on the lessor's part to be fulfilled under or in
connection with the origination, acquisition and assignment
of the Lease Assets including, without limitation, giving
any notices or consents necessary to effect the acquisition
of the Lease Assets by the Transferor and the Company has
done nothing to impair the rights of the Trust Estate and
the Holders of the Certificates in the Lease Contract or
payments with respect thereto. The Company has obtained all
necessary licenses, permits and charters required to be
obtained by the Company, which failure to obtain would
render any portion of the Transaction Documents
unenforceable and would have a material adverse effect on
MBIA or the Certificateholders.
(xix) The Lease Contract and the Company's interest
in the Equipment have not been sold, transferred, assigned
or pledged by the Company to any Person other than the
Transferor (except for security interests in the Lease
Assets which shall be terminated on or prior to the Closing
Date or Acquisition Date as applicable), and upon execution
and delivery of this Lease Acquisition Agreement by the
Company and the repayment by the Transferor of any Existing
Indebtedness, the Transferor will have all of the right,
title and interest in and to the Lease Assets, free and
clear of all liens and encumbrances and any interest of the
Company or its successors, except for the interests of the
Customer pursuant to the Lease Contract and the interest of
the Trustee under the Trust and Security Agreement, and upon
the Transferor's conveyance of the Lease Assets to the
Trustee, the Trustee will either be the owner thereof or
have a first perfected security interest therein.
(xx) Each Lease Contract requires that the Customer
maintain the Equipment in good and workable order and that
the Customer obtain and maintain physical damage insurance
or purchase insurance from the Company covering the
Equipment. Insurance coverage required to be maintained by
the Customer under each Lease Contract is of a type
customary for the equipment covered thereby and consistent
with industry practice for monitoring compliance thereof.
Insurance and the loss payee endorsement on Equipment having
a purchase price in excess of $50,000 is in full force and
effect.
(xxi) The Company purchased each item of Equipment
from either (A) the manufacturer or other supplier or broker
following receipt of an invoice from such manufacturer,
supplier or broker or (B) a Customer following confirmation
that such item of Equipment was on such Customer's premises.
The sale to the Transferor of the Lease Assets does not
violate the terms or provisions of any lease or any other
agreement to which the Company is a party or by which it is
bound.
(xxii) Each item of Equipment is of a type described
in Exhibit D attached hereto under the category Equipment
type.
(xxiii) The transfer, assignment and conveyance of
the Lease Assets by the Company pursuant to this Lease
Acquisition Agreement and the assignment of the Lease Assets
by the Transferor to the Trustee are not subject to and will
not result in any tax, fee or governmental charge payable by
the Company or the Transferor to any federal, state or local
government ("Transfer Taxes") other than Transfer Taxes
which have or will be paid by the Company as due. In the
event that the Transferor or the Trustee receives actual
notice of any Transfer Taxes arising out of the transfer,
assignment and conveyance of the Lease Assets, on written
demand by the Transferor, or upon the Company otherwise
being given notice thereof, the Company shall pay, and
otherwise indemnify and hold the Transferor, the Trustee,
MBIA and the Trust Estate harmless, on an after-tax basis,
from and against any and all such Transfer Taxes (it being
understood that the holders of the Certificates, the
Trustee, MBIA and the Trust Estate shall have no obligation
to pay such Transfer Taxes).
(xxiv) Each Lease Contract File delivered to the
Trustee contains each applicable item described in the
definition of Lease Contract File.
(xxv) As of the Closing Date, approximately one
half of the Lease Contracts are Loan Contracts.
(b) The Company hereby makes the following representations
and warranties to the Transferor, and for the benefit of MBIA,
the Trustee and the Holders of the Certificates, on which the
Transferor relies in acquiring the Lease Assets and issuing the
Certificates. Such representations and warranties speak as of
the Closing Date with respect to Lease Contracts listed on the
Initial Lease Schedule or the Acquisition Date with respect to
Additional Lease Contracts, unless otherwise indicated, but shall
survive any subsequent transfer, assignment, contribution or
conveyance of the Lease Assets:
(i) Except as described in Exhibit C hereto, with
respect to all Lease Assets acquired by the Transferor on
the Closing Date and any Acquisition Date, each of the
Concentration Limits as set forth on Exhibit D hereto are
true and correct as of the Closing Date and any Acquisition
Date.
(ii) The Company used no selection procedures that
identified the Lease Contracts being acquired on the Closing
Date or any Acquisition Date as being less desirable or
valuable than other comparable equipment leases owned by the
Company.
(iii) The Computer Tape from which the selection of
the Lease Contracts being acquired on the Closing Date was
derived, was made available to the Transferor's accountants
that are providing any comfort letter to MBIA, any
Certificateholders or the Placement Agent in connection with
any information contained in the Private Placement
Memorandum, and such information was complete and accurate
as of its date and includes a description of the same Lease
Contracts that are described in the Lease Schedule and the
payments due thereunder as of the Cut-Off Date.
(c) The Company hereby makes the following representations
and warranties to the Transferor and for the benefit of MBIA, the
Trustee and the Holders of the Certificates on which the
Transferor relies in acquiring the Lease Assets and issuing the
Certificates. Such representations and warranties speak as of
the Closing Date and each Acquisition Date unless otherwise
indicated, but shall survive any subsequent transfer, assignment,
contribution or conveyance of the Lease Assets:
(i) As of the Closing Date, the Company has been duly
organized and is validly existing and in good standing as a
corporation under the laws of the state of Delaware with
corporate power and authority to own its properties and to
transact the business in which it is now engaged, and the
Company is duly qualified to do business in and is in good
standing under the laws of each State in which any Equipment
or any Customer is located or is not required under
applicable law to effect such qualification, except where
failure to so qualify would not have a material adverse
effect on the ability of the Company to perform its
obligations under the Transaction Documents or on any of the
Lease Contracts, the Lease Receivables or the Equipment.
(ii) The performance of the obligations of the Company
under this Lease Acquisition Agreement and the other
Transaction Documents and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in any breach of any of the terms or
provisions of, or constitute with or without notice, lapse
of time or both, a default under the Certificate of
Incorporation or Bylaws of the Company, or any material
indenture, agreement, mortgage, deed of trust or other
instrument to which the Company is a party or by which it is
bound, or result in the creation or imposition of any lien,
charge or encumbrance (except the lien created by the
Transaction Documents) upon any of the property or assets of
the Company pursuant to the terms of such indenture,
mortgage, deed of trust, or other agreement or instrument to
which the Company is a party or by which the Company is
bound or to which any of the Company's property or assets is
subject, nor will such action result in any violation of the
provisions of the Company's Certificate of Incorporation or
Bylaws or any statute or any order, rule or regulation of
any court or any regulatory authority or other governmental
agency or body having jurisdiction over the Company or any
of its properties; and no consent, approval, authorization,
order, registration or qualification of or with or other
action of any court, or any such regulatory authority or
other governmental agency or body is required for
consummation of the transactions contemplated by this Lease
Acquisition Agreement and the other Transaction Documents
except such consents, approvals and authorizations which
have been obtained or such registrations or qualifications
which have been made.
(iii) This Lease Acquisition Agreement and each
other Transaction Document to which the Company is a party
have been duly authorized, executed and delivered by the
Company by all necessary corporate action and such
agreements are the valid and legally binding obligations of
the Company, enforceable against the Company in accordance
with their respective terms, subject as to enforcement to
applicable bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or
affecting creditors' rights generally and to general
principles of equity regardless of whether enforcement is
sought in a court of law or equity.
(iv) As of the Closing Date, the Company's address
indicated in Section 7.03 hereof is the chief executive
office, principal place of business and the office where the
Company keeps its records concerning the Lease Contracts,
Lease Receivables and the Equipment, and the Company has
done business only under the name "Granite Financial, Inc."
or "Granite Financial, LLC."
(v) The Company does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and
every covenant contained in this Lease Acquisition
Agreement.
(vi) The transactions contemplated by the Transaction
Documents are being consummated by the Company in
furtherance of its ordinary business purposes, with no
contemplation of insolvency and with no intent to hinder,
delay or defraud any of its present or future creditors.
(vii) The consideration received by the Company
pursuant to this Lease Acquisition Agreement is fair
consideration having value reasonably equivalent to or in
excess of the value of the Lease Assets and the performance
of the Company's obligations hereunder.
(viii) Neither on the date of the transactions
contemplated by the Transaction Documents or immediately
before or after such transactions, nor as a result of the
transactions, will the Company:
(A) be insolvent such that the sum of
its debts is greater than all of its respective
property, at a fair valuation;
(B) be engaged in or about to engage
in, business or a transaction for which any property
remaining with the Company will be
an unreasonably small capital or the
remaining assets of the Company will be
unreasonably small in relation to its
respective business or the transaction;
or
(C) have intended to incur or believed
it would incur, debts that would be beyond
its respective ability to pay as such debts
mature or become due. The Company's assets
and cash flow enable it to meet its present
obligations in the ordinary course of
business as they become due.
(ix) Both immediately before and after the transactions
contemplated by the Transaction Documents (A) the present
fair salable value of the Company's assets was or will be in
excess of the amount that will be required to pay its
probable liabilities as they then exist and as they become
absolute and matured; and (B) the sum of the Company's
assets was or will be greater than the sum of its debts,
valuing its assets at a fair salable value.
(x) The acquisition of the Lease Assets by the
Transferor pursuant to this Lease Acquisition Agreement is
not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
(xi) There are no proceedings or investigations
pending, or to the knowledge of the Company, threatened,
against or affecting the Company in or before any court,
governmental authority or agency or arbitration board or
tribunal (including, but not limited to any such proceeding
or investigation with respect to any environmental or other
liability resulting from the ownership or use of any of the
Equipment) which, individually or in the aggregate, involve
the possibility of materially and adversely affecting the
properties, business, prospects, profits or condition
(financial or otherwise) of the Company, or the ability of
the Company to perform its obligations under this Lease
Acquisition Agreement. The Company is not in default with
respect to any order of any court, governmental authority or
agency or arbitration board or tribunal.
(xii) All tax returns or extensions required to be
filed by the Company in any jurisdiction have in fact been
filed, and all taxes, assessments, fees and other
governmental charges upon the Company, or upon any of the
respective properties, income or franchises of the Company,
shown to be due and payable on such returns have been, or
will be, paid when due. All such tax returns are true and
correct and the Company has no knowledge of any proposed
additional tax assessment against it in any material amount
nor of any basis therefor. The provisions for taxes on the
books of the Company are in accordance with generally
accepted accounting principles.
(xiii) The Company (A) is not in violation of any
laws, ordinances, governmental rules or regulations to which
it is subject, (B) has not failed to obtain any licenses,
permits, franchises or other governmental authorizations
necessary to the ownership of its property or to the conduct
of its business, and (C) is not in violation in any material
respect of any term of any agreement, charter instrument,
bylaw or instrument to which it is a party or by which it
may be bound which violation or failure to obtain might
materially adversely affect the business or condition
(financial or otherwise) of the Company.
(xiv) As of the date thereof, the Private Placement
Memorandum does not contain any untrue statement of fact
that would have a material effect on the Lease Contracts or
on the ability of the Trust Estate to realize the benefits
thereof.
(xv) It is the intention of the Company that the Lease
Assets be acquired by the Transferor and that the beneficial
interest in and title to the Lease Assets not be part of the
Company's estate in the event of the filing of a bankruptcy
petition by or against the Company under any bankruptcy law.
(xvi) Immediately prior to the acquisition of the
Lease Assets by the Transferor pursuant to this Lease
Acquisition Agreement, the Company was the sole owner of the
Lease Assets and with respect to each Loan Contract and each
Lease Contract as to which the underlying Equipment had a
purchase price in excess of $50,000, had a valid first
perfected security interest in the related Equipment, and
had good and marketable title thereto, free and clear of all
liens, claims and encumbrances (except for the Existing
Indebtedness and security interests in the Lease Assets
which shall be terminated on or prior to the Closing Date
with respect to Lease Contracts listed on the Initial Lease
Schedule or the Acquisition Date with respect to Additional
Lease Contracts); and the acquisition of the Lease Assets by
the Transferor does not violate the terms or provisions of
any Lease Asset.
(xvii) Upon the issuance of the Common Stock to the
Company in accordance with the terms of this Lease
Acquisition Agreement, the Company will be the registered
owner of all of the issued and outstanding common stock of
the Transferor, all of which Common Stock will be validly
issued, fully paid and nonassessable.
(xviii) The Company intends to treat the transfer of
the Lease Assets to the Transferor as a sale for accounting
purposes and a contribution to the Transferor for federal,
state and local income tax purposes.
(xix) The present value of all benefits vested
under all "employee pension benefit plans," as such term is
defined in Section 3 of ERISA, maintained by the Company, or
in which employees of the Company are entitled to
participate, as from time to time in effect (herein called
to "Pension Plans"), does not exceed the value of the assets
of the Pension Plans allocable to such vested benefits
(based on the value of such assets as of the last annual
valuation date). No prohibited transactions, accumulated
funding deficiencies, withdrawals or reportable events have
occurred with respect to any Pension Plans that, in the
aggregate, could subject the Company to any material tax,
penalty or other liability. No notice of intent to
terminate a Pension Plan has been filed, nor has any Pension
Plan been terminated under Section 4041(f) of ERISA, nor has
the Pension Benefit Guaranty Corporation instituted
proceedings to terminate, or appoint a trustee to
administer, a Pension Plan and no event has occurred or
condition exists which might constitute grounds under
Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan.
(xx) The transfer of the Lease Assets pursuant to this
Lease Acquisition Agreement constitutes the valid transfer
by the Company to the Transferor of all of the Company's
right, title and interest in the Lease Assets. The Company
has valid business reasons for contributing and selling the
Lease Assets to the Transferor pursuant to this Lease
Acquisition Agreement rather than obtaining a loan secured
by the Lease Assets. The Company will be operated generally
so as to not be substantively consolidated with the
Transferor.
(xxi) As of the Closing Date, the Company has in
place committed revolving credit facilities in an aggregate
amount greater than $17 million.
Section 3.02 Representations and Warranties of the
Transferor. The Transferor hereby represents and warrants to,
and agrees with the Company for the benefit of, MBIA, the Trustee
and Holders of the Certificates, on which representations and
warranties the Company relies in entering into this Lease
Acquisition Agreement with the Transferor. The Company agrees
that any breach by the Transferor of any such representations and
warranties shall not limit or excuse the full performance of the
Company's obligations hereunder. Such representations and
warranties speak as of the Closing Date and each Acquisition Date
unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Lease
Assets:
(a) The Transferor has been duly organized and is validly
existing in good standing as a corporation under the laws of the
State of Delaware, with corporate power and authority to own its
properties, perform its obligations under the Transaction
Documents and to transact the business in which it is now engaged
or in which it proposes to engage; the Transferor is duly
qualified to do business and is in good standing in each State in
which the nature of its business requires it to be so qualified,
except where failure to so qualify would not have a material
adverse effect on the ability of the Transferor to perform its
obligations under the Transaction Documents.
(b) The transfer to and receipt by the Transferor of the
Lease Contracts and the related Lease Receivables and the
Equipment pursuant to this Lease Acquisition Agreement and the
consummation of the transactions contemplated herein and in the
Transaction Documents will not conflict with or result in breach
of any of the terms or provisions of, or constitute (with or
without notice, lapse of time or both) a default under the
Certificate of Incorporation or By-laws of the Transferor or any
material indenture, agreement, mortgage, deed of trust or other
instrument to which the Transferor is a party or by which it is
bound, or result in the creation or imposition of any lien,
charge or encumbrance (except for the lien created by the Trust
and Security Agreement) upon any of the property or assets of the
Transferor pursuant to the terms of, such indenture, mortgage,
deed of trust, or other agreement or instrument to which the
Transferor is a party or by which it is bound or to which any of
the property or assets of the Transferor is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Transferor or any
statute or any order, rule or regulation of any court or
regulatory authority or other governmental agency or body having
jurisdiction over the Transferor or any of its properties; and no
consent, approval, authorization, order, registration or
qualification of or with or other action of any court or any such
regulatory authority or other governmental agency or body is
required for the acquisition of the Lease Contracts and the
related Lease Receivables and the Company's interest in the
Equipment hereunder.
(c) The Transaction Documents have been duly authorized,
executed and delivered by the Transferor by all necessary
corporate action and constitute valid and legally binding
obligations of the Transferor enforceable against the Transferor
in accordance with their terms, subject as to enforcement to
bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of
whether enforcement is sought in a court of equity or law.
(d) There are no proceedings or investigations to which the
Transferor is a party pending or, to the knowledge of the
Transferor, threatened, before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Lease
Acquisition Agreement, (ii) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Lease Acquisition Agreement, or (iii)
seeking any determination or ruling that would materially and
adversely affect the performance by the Transferor of its
obligations under, or the validity or enforceability of, this
Lease Acquisition Agreement.
(e) All approvals, authorizations, consents, orders or
other actions of any Person or of any court, governmental agency
or body or official, required in connection with the execution
and delivery of this Lease Acquisition Agreement, have been or
will be taken or obtained on or prior to the Closing Date.
(f) The Transferor's address indicated in Section 7.03
hereof is the principal place of business and chief executive
office of the Transferor.
Section 3.03 Purchase or Substitution Required Upon Breach
of Certain Representations and Warranties. If (i) the Company,
the Transferor, the Trustee, the Servicer, the Back-up Servicer
or MBIA discovers the breach of any representations or warranties
set forth in Section 3.01 hereof which materially and adversely
affects the value of a Lease Contract, the related Equipment, or
the interests of the Holders of the Certificates or MBIA, or a
breach of any of the representations and warranties set forth in
Sections 3.01(a)(ii), 3.01(a)(v), 3.01(a)(vii), 3.01(a)(xix) or
3.01(c)(iii), or (ii) the Company or the Transferor discovers the
occurrence of any missing or defective document as specified in
Section 2.06 hereof, or (iii) the Trustee shall fail to receive
evidence acceptable to MBIA that each assignment of a financing
statement required under Section 3.01(a)(viii) hereof or vehicle
lien application required under Section 3.01(a)(viii) has been
filed within the time period set forth therein, then the party
discovering such breach or condition shall give prompt written
notice to the other parties and the Company shall, within 30 days
from the date the Company was notified of, or otherwise
discovers, such breach or condition, cure such breach or
condition. If the Company fails to cure such breach in the
applicable time period, the Company shall either (1)(a) purchase
such Lease Contract and related Equipment from the Transferor at
the Removal Price or (b) provide a Substitute Lease Contract and
Equipment or (2) if the breach relates to a representation or
warranty regarding the selection criteria of the Lease Contracts
as a whole and is not cured (as the liquidated damages remedy
therefor) by the Company, either (a) purchase such non-conforming
Lease Contracts and related Equipment from the Transferor or (b)
provide Substitute Lease Contracts as set forth above, so that
the representations and warranties with respect to the selection
criteria are correct, as evidenced by a certificate of an officer
of the Company to the Trustee and MBIA. The Removal Price for a
purchased Lease Contract and the related Equipment shall be paid,
and any Substitute Lease Contract shall be delivered, by the
Company to the Transferor in accordance with Section 3.04(c)
hereof. It is understood and agreed that the obligation of the
Company to cure or purchase or replace any Lease Contract as to
which such a breach has occurred shall constitute the sole remedy
respecting such breach available to the Transferor, the Holders
of Certificates or the Trustee on behalf of such Holders (except
for any indemnities provided under Section 4.01(j) hereof or
under the Trust and Security Agreement) for any losses, claims,
damages and liabilities arising from the Transferor's ownership
of such Lease Contract or the inclusion of such Lease Contract in
the Trust Estate.
Section 3.04 Requirements for Purchase or Substitution of
Lease Contracts and Acquisition of Additional Lease Contracts.
(a) If the Company purchases any Lease Contract under
Sections 2.06 or 3.03 hereof, or if the Transferor removes any
Lease Contract under Section 4.03(d) of the Trust and Security
Agreement, or removes any Lease Contract under Section 3.09 of
the Servicing Agreement, such Lease Contract shall be purchased
or removed by the Company or the Transferor, as applicable, at
the Removal Price. All purchases shall be accomplished at the
times specified in subsection (c) below.
(b) (1) If the Company substitutes any Lease Contract under
Section 2.06 or 3.03 hereof, or if the Transferor substitutes any
Lease Contract under Section 4.03(d) of the Trust and Security
Agreement or under Section 3.09 of the Servicing Agreement (a
"Substitute Lease Contract"), or (2) if the Company conveys to
the Transferor or originates on behalf of the Transferor any
Additional Lease Contract, each such Substitute Lease Contract
and Funded Lease Contract (i) shall be an Eligible Lease
Contract; (ii) shall be with a Customer whose credit is equal to
or better than that of the Customer under any other Lease
Contract; (iii) shall be written on one of the Company's standard
lease forms; (iv) shall be accompanied by (A) a Company
Certificate substantially in the form of Exhibit A hereto
subjecting such Lease Contract to the provisions hereof and
providing with respect to such Substitute Lease Contract or
Funded Lease Contract, an Amended Lease Schedule and (B) evidence
of the UCC filings required, as set forth in the Trust and
Security Agreement; (v) shall not have been selected using any
other procedures that identified the Lease Contract as being less
desirable or valuable than other comparable equipment leases
owned by the Company; and (vi) shall not cause the Concentration
Limits to be violated.
In addition to the above criteria, the following shall apply
in connection with any Substitute Lease Contract and Funded Lease
Contract, as applicable: (1) any Substitute Lease Contracts
assigned by the Company on any date in substitution for Lease
Contracts on the Lease Schedule shall have an aggregate Implicit
Principal Balance at least equal to the aggregate Implicit
Principal Balance of the Lease Contracts on such Lease Schedule
being withdrawn, computed as to both the Substitute Lease
Contracts and the withdrawn Lease Contracts using the Discount
Rate; and (2) a Substitute Lease Contract or Funded Lease
Contract may have Scheduled Payments that are due after the last
day of the month preceding the Stated Maturity of the
Certificates, but such payments shall not be counted in any
Implicit Principal Balance computation.
Upon the substitution of any Substitute Lease Contract or
the addition of any Funded Lease Contract pursuant to the
provisions of this Section 3.04(b), the Company hereby agrees
that such Substitute Lease Contract or Funded Lease Contract will
be subject to all the terms and provisions of this Lease
Acquisition Agreement, the Servicing Agreement and the Trust and
Security Agreement just as if such Substitute Lease Contract or
Funded Lease Contract had been one of the original Lease
Contracts acquired on the Closing Date. Upon the substitution of
a Substitute Lease Contract or the addition of a Funded Lease
Contract pursuant to this Section 3.04(b), the Transferor and the
Company shall also comply with the provisions and limitations set
forth in the Trust and Security Agreement. All substitutions
shall be accomplished at the time specified in subsection (c)
below.
(c) Any purchase or substitution of a Lease Contract by the
Company in accordance with Sections 2.06 or 3.03 hereof or this
Section 3.04 shall be made either by remittance of the Removal
Price to the Servicer for deposit into the Collection Account in
accordance with Section 3.03(c) of the Servicing Agreement or by
substitution of a Substitute Lease Contract, as applicable, on or
prior to the Determination Date next following the expiration of
the cure period set forth in Sections 2.06 or 3.03 hereof, as
applicable. Such substitution or purchase shall be effective as
of the Payment Date immediately following such Determination
Date.
(d) Any voluntary purchase or substitution of a Lease
Contract by the Company pursuant to the terms of the Servicing
Agreement or Trust and Security Agreement in the event of a
default, delinquency, prepayment or modification with respect to
such Lease Contract shall satisfy the same requirements for a
purchase or substitution, as the case may be, as are set forth in
this Section 3.04.
ARTICLE 4
COVENANTS OF THE TRANSFEROR AND COMPANY
Section 4.01 Company Covenants. The Company hereby
covenants and agrees with the Transferor as follows:
(a) Except as hereinafter provided, the Company will keep
in full effect its existence, rights and franchises as a
corporation, and will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which
such qualification is or shall be necessary to protect the
validity and enforceability of this Lease Acquisition Agreement
or any of the Lease Contracts and to perform its duties
hereunder; provided, however, that the Servicer may reorganize as
a corporation in another state provided that the Transferor has
provided to MBIA and the Certificateholders an Officer's
Certificate to the effect that such action will not cause the
Company to breach any obligation hereunder. Any person into
which the Company may be merged or consolidated, or to whom the
Company has sold substantially all of its assets, or any
corporation resulting from any merger, conversion or
consolidation to which the Company shall be a party, or any
Person succeeding to the business of the Company shall be the
successor of the Company hereunder, without the execution or
filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding;
provided, however, that (u) MBIA shall have given its prior
written consent, (v) immediately after giving effect to such
transaction, the substance of each representation or warranty
made pursuant to Section 3.01(c) shall be accurate, (w) such
successor meets the Net Worth Requirement and executes an
agreement or assumption, in form reasonably satisfactory the
Trustee and MBIA, to perform every obligation under this Lease
Acquisition Agreement, (x) such successor has a net worth that is
sufficient to perform in accordance with the Transaction
Documents and at least approximately equivalent to the net worth
of the Company immediately prior to such sale, merger or
consolidation, (y) the Company shall have delivered to the
Transferor a certificate of an officer of the Company and an
Opinion of Counsel each stating that such consolidation, merger,
or succession and such agreement of assumption complies with this
Section 4.01 and that all conditions precedent, if any, provided
for in this Lease Acquisition Agreement relating to such
transaction have been complied with, and (z) the Company shall
have delivered to the Transferor and MBIA and the Trustee an
Opinion of Counsel either (1) stating that, in the opinion of
such Counsel, all financing statements, continuation statements
and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of the
Transferor in the Lease Contracts and reciting the details of
such filings, or (2) stating that, in the opinion of such
Counsel, no such action shall be necessary to preserve and
protect such interest.
(b) Neither the Company nor any of the directors, officers,
employees or agents of the Company shall be under any liability
to the Transferor, the Trustee or the Holders of Certificates for
any action taken or for refraining from the taking of any action
in good faith pursuant to this Lease Acquisition Agreement, or
for errors in judgment not involving recklessness or gross
negligence; provided, however, that this provision shall not
protect the Company against any breach of warranties or
representations made herein, or failure to perform its
obligations in strict compliance with this Lease Acquisition
Agreement, or any liability which would otherwise be imposed by
reason of any breach of the terms and conditions of this Lease
Acquisition Agreement. The Company, and any director, officer,
employee or agent of the Company, may rely in good faith on any
document of any kind prima facie properly executed and submitted
by any Person respecting any matters arising hereunder. The
Company shall not be under any obligation to appear in,
prosecute, or defend any legal action that is not incidental to
its obligations as the contributor of the Lease Assets under this
Lease Acquisition Agreement and that in its opinion may involve
it in any expense or liability.
(c) The Company, from time to time, at its own expense,
shall execute and file such additional financing statements
(including continuation statements) as may be necessary to
preserve the security interests and liens described in Section
3.01(a)(viii) hereof as may be reasonably requested by the
Transferor, MBIA or the Trustee and are reasonably satisfactory
in form and substance to the Trustee and MBIA.
(d) The Company will not change its name, identity or
corporate structure in any manner that would, could, or might
make any financing statement or continuation statement misleading
within the meaning of section 9-402 (7) of the UCC, unless it
shall have given the Transferor and the Trustee at least 30 days'
prior written notice thereof and shall have provided evidence of
appropriate UCC filings.
(e) The Company will give the Transferor, MBIA and the
Trustee at least 30 days prior written notice of any relocation
of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and the
Company shall provide evidence of appropriate UCC filings.
(f) The Company will duly fulfill all obligations on its
part to be fulfilled under or in connection with each Lease
Contract, will not change or modify the terms of the Lease
Contracts except as expressly permitted by the terms of the
Transaction Documents and will do nothing to impair the rights of
the Transferor, MBIA or the Trustee in the Lease Contract or the
Equipment. In the event that the rights of the Company under any
Lease Contract, any guaranty of the related Customer's
obligations under any Lease Contract, or any Insurance Policy are
not assignable or have not, in fact, been assigned to the
Transferor or to the Trustee, the Company will enforce such
rights on behalf of the Transferor and the Trustee.
(g) The Company will comply, in all material respects, with
all acts, rules, regulations, orders, decrees and directions of
any governmental authority applicable to the Lease Assets or any
part thereof; provided, however, that the Company may contest any
act, regulation, order, decree or direction in any reasonable
manner which shall not materially and adversely affect the rights
of the Transferor, MBIA or the Trustee in the Lease Assets.
(h) The Company will advise the Transferor, MBIA and the
Trustee promptly, in reasonable detail, of the occurrence of any
breach by the Company following discovery by the Company of such
breach of any of its representations, warranties and covenants
contained herein.
(i) The Company will execute or endorse, acknowledge, and
deliver to the Transferor and the Trustee from time to time such
schedules, confirmatory assignments, conveyances, powers of
attorney, and other reassurances or instruments and take such
further similar actions relating to the Lease Contracts, the
related Lease Receivables, Equipment and the rights covered by
the Transaction Documents, as the Transferor or the Trustee may
reasonably request to preserve and maintain title to the Lease
Assets and the rights of the Trustee, MBIA and the Holders of
Certificates therein against the claims of all persons and
parties.
(j) The Company agrees to indemnify, defend and hold the
Transferor, the Trustee, MBIA and the Certificateholders
harmless from and against any and all loss, liability, damage,
judgment, claim, deficiency or expense (including interest,
penalties, reasonable attorney's fees and amounts paid in
settlement) that is caused by (i) a breach at any time by the
Company of its representations, warranties and covenants
contained in Section 3.01 hereof or this Section 4.01 or (ii) any
material information furnished by the Company which is set forth
in any schedule delivered hereunder, being untrue in any respect
when any such representation was made or schedule delivered,
provided that the Company shall not have any liability with
respect to a representation or warranty as to any specific Lease
Contract, Lease Receivable or Equipment other than to purchase
such Lease Contract or substitute for such Lease Contract in
accordance with Section 3.03 hereof unless such breach of
representation or warranty is the result of the Company's fraud,
gross negligence, bad faith or willful misconduct. The Company
shall also indemnify the Trustee, the Servicer, MBIA and the
Certificateholders for any cost or expenses incurred by them in
the enforcement of this Lease Acquisition Agreement or as a
result of the Company's failure to perform its obligations
hereunder. The obligations of the Company under this Section
4.01(j) shall be considered to have been relied upon by the
Transferor, the Trustee and MBIA and shall survive the execution,
delivery and performance of this Lease Acquisition Agreement,
regardless of any investigation made by or on behalf of the
Transferor, until termination of the Trust and Security
Agreement. If the Company has made any indemnity payments
pursuant to this Section 4.01(j) and thereafter any Person
recovers the amount of the related loss or any portion thereof
from others, such Person will promptly repay the amount recovered
to the Company, without interest.
(k) The Company will do nothing to disturb or impair the
acquisition hereunder by the Transferor of the Lease Contracts
and the related Lease Receivables and Equipment.
(l) The Company (i) will (A) maintain its books and records
separate from the books and records of the Transferor and (B)
maintain bank accounts separate from those of the Transferor and
its shareholders, (C) prepare (and issue to its creditors) only
financial statements which are separate from those of its
shareholders, (D) maintain two Independent directors on the
Transferor's board of directors, so long as the Company is a
shareholder of the Transferor, (E) maintain an arm's length
relationship with the Transferor, (F) conduct its business solely
in its own name so as not to mislead others as to the identity of
the company with which those others are concerned, (G) disclose
the effects of these transactions on its annual financial
statements in accordance with generally accepted accounting
principles and will also disclose on such financial statements
that the Trust Estate and the assets of the Transferor are not
available to pay creditors of the Company, and (ii) will not (V)
hold itself out or permit itself to be held out as having agreed
to pay or as being liable for the debts of the Transferor, (W)
commingle its assets or funds with those of the Transferor, (X)
take any action that would cause the dissolution or liquidation
of the Transferor, (Y) guarantee (directly or indirectly),
endorse or otherwise become contingently liable (directly or
indirectly) for the obligations of the Transferor, or (Z)
institute against the Transferor, or join any other person in
instituting against the Transferor, any case, proceeding or other
action under any existing or future bankruptcy, insolvency or
similar laws. This subsection (l) shall survive termination of
this Lease Acquisition Agreement.
(m) The Company shall notify the Transferor, the Trustee
and MBIA promptly after becoming aware of any Lien on any Lease
Asset.
(n) On each date as of which the Company substitutes a
Substitute Lease Contract or assigns Funded Lease Contracts to
the Transferor in accordance with Sections 2.06 or 3.04(b)
hereof, or otherwise assigns Lease Contracts to the Transferor,
the Company shall provide to the Transferor a Company Certificate
substantially in the form of Exhibit A hereto subjecting such
Lease Contract to the provisions hereof and providing with
respect to such Lease Contracts the information required in the
Amended Lease Schedule.
(o) For financial accounting purposes (and notwithstanding
the tax treatment of the transactions contemplated by the
Transaction Documents), the annual financial statements of the
Company will disclose the effects of the transactions
contemplated by the Transaction Documents as a sale by the
Company to the Transferor and a sale by the Transferor to the
Trustee in accordance with generally accepted accounting
principles. The financial statements of the Company and the
Transferor will also disclose that the Trust Estate and the
assets of the Transferor are not available to pay creditors of
the Company. The resolutions, agreements and other instruments
underlying the Transaction Documents will be continuously
maintained by the Company as official records.
(p) The Company shall comply with Section 2.11 of the Trust
and Security Agreement concerning the treatment of this
transaction for Federal, state and local income tax purposes.
(q) The Company as Servicer will, at its own cost and
expense, (i) retain the Electronic Ledger as a master record of
the Lease Contracts and Equipment and copies of all documents
relating to each Lease Contract (other than the original executed
Lease Contracts) as custodian for the Transferor, the Trust and
other Persons, if any, with interests in the Lease Contracts and
Equipment and (ii) mark the Electronic Ledger to the effect that
the Lease Contracts and Equipment have been acquired by the
Transferor and that they have been transferred and assigned to
the Trustee pursuant to the Trust and Security Agreement.
(r) In the event that the Company elects to transfer the
Common Stock to an affiliate or pledge a security interest in the
Common Stock, the Company agrees that each of the following
conditions shall be satisfied: (i) such transfer or pledge shall
be made in connection with a financing by such affiliate or the
Company, as applicable, secured by the Common Stock, (ii) if
transferred, the Common Stock shall be held by one entity and if
that entity is an affiliate, such entity shall be organized as a
bankruptcy remote special purpose entity, (iii) the Company
shall, on behalf of the Transferor, obtain an agreement from the
transferee or the secured party substantially to the effect that
(x) it will take no action that would cause the Transferor to
breach any of its covenants under any Transaction Document,
(y) that for a period of one year and one day after the
termination of the Trust and Security Agreement, it will not file
any involuntary petition or otherwise institute any bankruptcy,
reorganization, insolvency or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar law
against the Transferor and (z) the transferee agrees to pay any
tax or ERISA liabilities imposed upon the Transferor or the Trust
Estate to the extent attributable to the Transferor or the Trust
Estate becoming a member of the consolidated tax group of such
transferee or secured party, and (iv) the Company shall provide
such bankruptcy and tax opinions as MBIA may reasonably request.
Section 4.02 Transferor Covenants. The Transferor hereby
covenants and agrees with the Company as follows:
(a) The Transferor hereby acknowledges and agrees that its
rights in the Equipment are expressly subject to the rights of
the related Customers in such Equipment pursuant to the
applicable Lease Contract. The Transferor covenants and agrees
that, so long as a Customer shall not be in default of any of the
provisions of the applicable Lease Contract, neither the
Transferor nor any assignee of the Transferor will disturb the
Customer's quiet and peaceful possession of the related Equipment
and the Customer's unrestricted use thereof for its intended
purpose.
(b) If in any enforcement suit or legal proceeding it is
held that the Company may not enforce a Lease Contract on the
ground that it is not a real party in interest or holder entitled
to enforce the Lease Contract, the Transferor shall, at the
Transferor's expense, take such steps as the Transferor deems
necessary to enforce the Contract, including bringing suit in the
Transferor's name or causing the Trustee to bring suit in the
Trustee's name.
(c) The Transferor warrants that, until the transfer of the
Equipment to the Trustee, it will own and possess the Equipment
subsequent to its acquisition thereof and that it will warrant
and defend its title to such Equipment against all Persons,
claims and demands whatsoever. The Transferor shall not assign,
sell, pledge, or exchange, or in any way encumber or otherwise
dispose of the Equipment, except as permitted under the Trust and
Security Agreement.
(d) The Transferor shall comply with Section 2.11 of the
Trust and Security Agreement concerning the treatment of this
transaction for Federal, state and local income tax purposes.
Section 4.03 Assignment of Lease Assets. The Company
understands that the Transferor will convey to the Trustee all of
its right, title and interest in and to this Lease Acquisition
Agreement and the Lease Assets. The Company consents to such
conveyance and further agrees that all representations,
warranties, covenants and agreements the Company made herein
shall also be for the benefit of and inure to the Trustee, MBIA
and all Holders from time to time of the Certificates.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.01 Conditions to the Transferor's Obligations.
The obligations of the Transferor to provide the Company with the
consideration provided for in this Lease Acquisition Agreement
shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Company
contained in Section 3.01(a) and (b) of this Lease Acquisition
Agreement and all information provided in the Lease Schedule or
Amended Lease Schedule, as applicable, shall be true and correct
on the Closing Date with respect to Lease Contracts listed on the
Initial Lease Schedule or the Acquisition Date with respect to
Additional Lease Contracts, all representations and warranties in
Sections 3.01(c) hereof, shall be true and correct as of the
Closing Date with respect to Lease Contracts listed on the
Initial Lease Schedule or the Acquisition Date with respect to
Additional Lease Contracts, and the Company shall have delivered
to the Transferor, the Trustee, MBIA and each original purchaser
of the Certificates an Officer's Certificate to such effect;
(b) The Company shall have delivered all other information
theretofore required or reasonably requested by the Transferor to
be delivered by the Company hereunder, duly certified by an
officer of the Company, and the Company shall have substantially
performed all other obligations required to be performed by the
provisions of this Lease Acquisition Agreement;
(c) On or prior to the Closing Date with respect to Lease
Contracts listed on the Initial Lease Schedule or the Acquisition
Date with respect to Additional Lease Contracts, the Company
shall have delivered the Lease Contracts and the other items in
the Lease Contract Files to the Trustee and there shall have been
made all filings, recordings and/or registrations, and there
shall have been given, or taken, any notice or any other similar
action, as may be necessary in the opinion of the Transferor, in
order to establish and preserve the right, title and interest of
the Transferor in the Lease Assets;
(d) On or before the Closing Date, the Transferor, the
Servicer, the Back-Up Servicer and the Trustee shall have entered
into the Servicing Agreement;
(e) All of the Certificates shall be issued and sold on the
Closing Date and the Transferor shall receive the full
consideration due it upon the issuance of such Certificates and
the Existing Indebtedness shall have been satisfied.
ARTICLE 6
TERM AND TERMINATION
Section 6.01 Term. This Lease Acquisition Agreement shall
commence as of the date of execution and delivery hereof and
shall continue in full force and effect until the later of
(i) payment with respect to the last Lease Asset or
(ii) termination of the Trust and Security Agreement.
Section 6.02 Default by the Company. If the Company
breaches its representations and warranties set forth in Section
3.01 of this Lease Acquisition Agreement or its covenants set
forth in Section 4.01 of this Lease Acquisition Agreement and
such default shall not have been cured for a period of 30 days
(or such other cure period as may be specified in Section 3.03),
or if the Company shall become insolvent or make an assignment
for the benefit of its creditors or have a receiver appointed for
all or substantially all of its properties, or if any proceedings
are commenced, or consented to, by the Company are not stayed or
dismissed within 60 days after being commenced against the
Company under any bankruptcy, insolvency or other law for the
relief of debtors, the Transferor shall have the right, with the
prior written consent of the Trustee and MBIA, in addition to any
other rights it may have under any applicable law, to terminate
its obligations under this Lease Acquisition Agreement upon prior
written notice to the Company; provided that any termination of
this Lease Acquisition Agreement shall not release the Company
from any obligation under this Lease Acquisition Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.01 Amendments. This Lease Acquisition Agreement
and the rights and obligations of the parties hereunder may not
be changed orally but only by an instrument in writing signed by
the party against which enforcement is sought together with the
prior written consent of the Trustee and MBIA but without the
consent of any Certificateholder. Promptly after the execution
of any amendment, the Transferor shall send to the Trustee, MBIA,
each Holder of the Certificates, and each Rating Agency, a
conformed copy of each such amendment.
Section 7.02 Governing Law. This Lease Acquisition
Agreement shall be construed in accordance with the internal laws
of the State of New York, without regard to choice of law
principals.
Section 7.03 Notices. All demands, notices and
communications hereunder shall be in writing and shall be
delivered or mailed by registered or certified United States
mail, postage prepaid, and addressed, in the case of the Company,
to 6424 W. 91st Avenue, Westminster, CO 80030, Attention:
President, and in the case of the Transferor, to 6424 W. 91st
Avenue, Suite C, Westminster, CO 80030, Attention: President,
and in the case of MBIA to 113 King Street, Armonk, New York
10504, Attention: Structured Finance - Insured Portfolio
Management (SF-IPM). All notices and demands shall be deemed to
have been given either at the time of the delivery thereof to any
officer of the Person entitled to receive such notices and
demands at the address of such Person for notices hereunder, or
on the third day after the mailing thereof to such address, as
the case may be. Any Person may change the address for notices
hereunder by giving notice of such change to the other Person.
Section 7.04 Separability Clause. Any provisions of this
Lease Acquisition Agreement which are prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 7.05 Assignment. Except as provided in Section
4.01(a) hereof, this Lease Acquisition Agreement may not be
assigned or delegated by the Company without the prior written
consent of the Transferor, MBIA and the Trustee and, except as
provided in Section 4.03 hereof, may not be assigned or delegated
by the Transferor without the prior written consent of the
Company, MBIA and Trustee.
Section 7.06 Further Assurances. Each of the Company and
the Transferor agrees to do such further acts and things and to
execute and deliver to the Trustee and MBIA such additional
assignments, agreements, powers and instruments as are required
by the Trustee to carry into effect the purposes of this Lease
Acquisition Agreement or to better assure and confirm unto the
Trustee, MBIA or the Holders of the Certificates their rights,
powers or remedies hereunder. If any Customer shall be in
default under any Lease Contract, upon reasonable request from
the Servicer, the Company will take all reasonable steps to
assist in enforcing such Lease Contract and preserving and
maintaining title to the Lease Assets and the rights of the
Trustee, MBIA and the Holders of the Certificates therein against
the claims of all persons and parties to the extent the Company
is capable of performing such requested steps and the Servicer
reasonably determines that the assistance of the Company is
necessary to effect the intent and purposes hereof.
Section 7.07 No Waivers; Cumulative Remedies. No failure
to exercise and no delay in exercising, on the part of the
Transferor or the Company, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof nor shall any single
or partial exercise of any right, remedy, or privilege hereunder
preclude any other or further exercise hereof or the exercise of
any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative
and not exhaustive of any rights, remedies, powers and privilege
provided by law.
Section 7.08 Binding Effect; Third Party Beneficiaries.
This Lease Acquisition Agreement will inure to the benefit of and
be binding upon the parties hereto, and shall inure to the
benefit of the Trustee, MBIA, the Holders of Certificates, and
their respective successors and permitted assigns.
Section 7.09 Set-Off.
(a) The Company hereby irrevocably and unconditionally
waives all right of set-off that it may have under contract
(including this Lease Acquisition Agreement), applicable law or
otherwise with respect to any funds or monies of the Transferor
or the Trust Estate at any time held by or in the possession of
the Company.
(b) The Transferor shall have the right to set-off against
the Company any amounts to which the Company may be entitled and
to apply such amounts to any claims the Transferor may have
against the Company from time to time under this Lease
Acquisition Agreement. Upon any such set-off the Transferor
shall give notice of the amount thereof and the reasons therefor.
Section 7.10 MBIA Default or Termination. If an MBIA
Default or Termination occurs and is continuing, MBIA's right to
consent hereunder and to direct the Trustee shall be void and, in
such event, in all provisions of this Agreement wherein MBIA's
consent or direction is required or permitted, the consent or
direction of the Controlling Holders shall be required or
permitted unless a larger number of Holders is required under the
relevant provisions of this Agreement.
IN WITNESS WHEREOF, the Company and the Transferor have
caused this Lease Acquisition Agreement to be duly executed by
their respective officers thereunto duly authorized as of the
date and year first above written.
GRANITE FINANCIAL, INC.,
Company
By:_________________________
Name:William W. Wehner Title:
President
GF FUNDING CORP. III,
Transferor
By:_________________________
Name:William W. Wehner Title:
President
Schedule I
Attach Initial Lease Schedule
Schedule II
Attach List of Existing Indebtedness
CoreStates Bank, N.A.
$14,331,458.66
EXHIBIT A
FORM OF COMPANY CERTIFICATE
_______________, 19__
Pursuant to Section 3.04(b) of the Lease Acquisition Agreement
dated as of March 1, 1997 by and between Granite Financial, Inc.
and GF Funding Corp. III (the "Lease Acquisition Agreement"),
attached hereto as Schedule I is an Amended Lease Schedule for
the Certificates, which includes information regarding Lease
Assets that are hereby sold, assigned, transferred and delivered
by the Company to the Transferor in accordance with the Lease
Acquisition Agreement. [The Existing Indebtedness in respect of
such Lease Assets is listed on Schedule II attached hereto.]
Terms used herein and not otherwise defined have the meanings
given them in the Lease Acquisition Agreement.
GRANITE FINANCIAL, INC.
By:_________________________
Name:
Title:
GF FUNDING CORP. III
By:_________________________
Name:
Title:
SCHEDULE I
AMENDED LEASE SCHEDULE SCHEDULE II
LIST OF EXISTING INDEBTEDNESS
EXHIBIT B
FORM OF LEASE CONTRACTS
PLEASE SEE THE FORM OF LEASE CONTRACT ATTACHED AS EXHIBIT C TO
THE PRIVATE PLACEMENT MEMORANDUM
EXHIBIT C
SCHEDULE OF POOL CONCENTRATION LIMIT EXCEPTIONS
none
EXHIBIT D
CONCENTRATION LIMITS
Type Limit
State Customers
located in any single state are
obligated with respect to Lease
Contracts for no more than 5% of
the Aggregate IPB except for CA,
TX, FL, MA, NY and CO; Customers
located in such States are
obligated with respect to the Lease
Contracts accounting for no more
than 30%, 10%, 10%, 10%, 10% and 6%
respectively of the Aggregate IPB
Zip Code Lease Contracts with
Customers located in a particular
zip code do not account for more
than 4% of the Aggregate IPB
Customer No single Customer
accounts for more than 1% of the
Aggregate IPB
Industry Lease Contracts with
Customers in a particular SIC
industry category do not account
for more than 15% of the Aggregate
IPB, except for eating and drinking
establishments which shall not
account for more than 20% of the
Aggregate IPB
Broker Lease Contracts
originated by a particular broker
do not account for more than 10% of
the Aggregate IPB, except for C&W
Leasing which may account for up to
17%, Northcoast Capital Leasing
which may account for up to 15%,
Lexington Capital Corporation which
may account for up to 15%, Westover
Financial which may account for up
to 8% and Prolease which may
account for up to 5%. Lease
Contracts originated by brokers
noted on Exhibit I attached hereto
are not permitted in this
transaction.
Scheduled Payments Lease Contracts that
have rental payments that are not
fixed for the remaining term (other
than PUT payments) do not exceed 5%
of the Aggregate IPB
Program Lease Contracts
originated under Granite's "Market
(or Lease) Enhancement" Program and
the Specialty Programs with
Broker/Vendors in the aggregate do
not exceed 15% of the Aggregate
Implicit Principal Balance
PUT Clause Lease Contracts
containing a PUT clause account for
no more than 5% of the Aggregate
IPB and each PUT payment shall be
equal to or less than 10% of the
cost of the equipment underlying
the Lease Contract
Equipment type Lease Contracts of
the following Equipment types
account for no more than the listed
percent of the Aggregate IPB:
Peripherals/Computers 24%
Manufacturing 16%
Restaurant 20%
Dry Cleaning/Washing 13%
Radio/TV/Photographic 10%
Office Equipment 10%
Heavy Equipment 15%
Coin Op Equip 12%
Health/Sports 10%
Automotive 3%
Beauty/Barber Shop 12%
Printing 10%
Software 3%
Titled Vehicles
3%
All other Equipment types 5%
As of any Acquisition Date during the Funding Period, in addition
to the Concentration limits listed above, the pool of Lease
Contracts will also meet the following criteria: the sum of the
aggregate Implicit Principal Balance of all Lease Contracts
originated by a broker not listed on Schedule I attached hereto
do not account for more than 10% of the Aggregate IPB and Lease
Contracts originated by any broker not listed on Schedule I
attached hereto do not account for more than 5% of the Aggregate
IPB.
Schedule I to Concentration Limits
list of brokers
EXHIBIT E
FORM OF BROKER ASSIGNMENT AGREEMENTS
SERVICING AGREEMENT
among
GRANITE FINANCIAL, INC. (the "Servicer")
GF FUNDING CORP. III (the "Transferor")
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(the "Trustee")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(the "Back-up Servicer")
Dated as of March 1, 1997
TABLE OF CONTENTS
Page
ARTICLE 1 2
DEFINITIONS 2
Section 1.01 Defined Terms 2
ARTICLE 2 4
SERVICER REPRESENTATIONS AND WARRANTIES 4
Section 2.01 Representations and Warranties 4
(a) Organization and Good Standing 4
(b) Authorization and Binding Obligation 4
(c) No Violation 4
(d) No Proceedings 4
(e) Approvals 4
(f) Investment Company 5
(g) Standard of Care 5
(h) Insurance 5
(i) Net Worth 5
ARTICLE 3 6
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS 6
Section 3.01 Responsibilities of Servicer 6
Section 3.02 Servicer Standard of Care 8
Section 3.03 Lockbox Account and Servicer Remittances 9
Section 3.04 Servicer Advances 10
Section 3.05 Financing Statements 10
Section 3.06 Maintenance of Insurance Policy; Insurance
Proceeds 10
Section 3.07 Personal Property and Sales Taxes 11
Section 3.08 Servicing Compensation 11
Section 3.09 Substitution or Purchase of Lease Contracts 11
Section 3.10 No Offset 12
ARTICLE 4 13
ACCOUNTINGS, STATEMENTS AND REPORTS 13
Section 4.01 Monthly Servicer's Reports 13
Section 4.02 Financial Statements; Certification as to
Compliance; Notice of Default 13
Section 4.03 Independent Accountants' Reports; Annual
Federal Tax Lien Search 14
Section 4.04 Access to Certain Documentation and Information 15
Section 4.05 Other Necessary Data 16
Section 4.06 Trustee to Cooperate 16
ARTICLE 5 18
THE SERVICER 18
Section 5.01 Servicer Indemnification 18
Section 5.02 Corporate Existence; Reorganizations 18
Section 5.03 Limitation on Liability of the Servicer and
Others 19
Section 5.04 The Servicer Not to Resign 19
ARTICLE 6 20
SERVICING TERMINATION 20
Section 6.01 Servicer Events of Default 20
Section 6.02 Back-up Servicer to Act; Taking of Bids;
Appointment of Successor Servicer 22
Section 6.03 Notification to Certificateholders 23
Section 6.04 Waiver of Past Defaults 23
Section 6.05 Effects of Termination of Servicer 23
Section 6.06 No Effect on Other Parties 24
ARTICLE 7 25
THE BACK-UP SERVICER 25
Section 7.01 Representations of Back-up Servicer 25
Section 7.02 Merger or Consolidation of, or Assumption
of the Obligations of, Back-up Servicer 25
Section 7.03 Back-up Servicer Resignation 26
Section 7.04 Oversight of Servicing 26
Section 7.05 Back-up Servicer Compensation 27
Section 7.06 Duties and Responsibilities 27
ARTICLE 8 28
MISCELLANEOUS PROVISIONS 28
Section 8.01 Termination 28
Section 8.02 Amendments 28
Section 8.03 GOVERNING LAW 29
Section 8.04 Notices 29
Section 8.05 Severability of Provisions 29
Section 8.06 Binding Effect 29
Section 8.07 Article Headings and Captions 29
Section 8.08 Legal Holidays 29
Section 8.09 Assignment for Security for the Certificates 29
Section 8.10 No Servicing Assignment 30
Section 8.11 MBIA Default or Termination 30
Section 8.12 Third Party Beneficiary 30
Section 8.13 Counterparts 30
SERVICING AGREEMENT
This SERVICING AGREEMENT ("Agreement"), dated as of March 1,
1997, is by and among Granite Financial, Inc., a Delaware
corporation, as Servicer (the "Servicer"), GF Funding Corp. III,
a Delaware corporation, as Transferor (the "Transferor"),
Norwest Bank Minnesota, National Association, as Back-up
Servicer (the "Back-up Servicer"), and Norwest Bank
Minnesota, National
Association, as Trustee (the "Trustee").
PRELIMINARY STATEMENT
The Transferor has entered into a Trust and
Security Agreement dated as of March 1, 1997, (as amended
from time to time, the "Trust and Security Agreement"), with
the Trustee, the Back-up Servicer and the Servicer,
pursuant to which the
Transferor intends to issue the Certificates
(the "Certificates").
The Transferor and Granite Financial, Inc. (the
"Company") have entered into a Lease Acquisition Agreement
dated as of March 1, 1997 (as amended from time to time, the
"Lease Acquisition Agreement"), providing for, among other
things, the contribution, from time to time, by the Company to
the Transferor of all of the Company's right, title and
interest in and to certain Lease Assets which the
Transferor is and will be conveying to the Trustee, for the
benefit of the Certificateholders and MBIA. As a
precondition to the effectiveness of the Lease Acquisition
Agreement and the Trust and Security Agreement, the
Lease Acquisition Agreement and the Trust and Security
Agreement require that the Servicer, the Transferor, the
Trustee and the Back-up Servicer enter into this Agreement
to provide for the servicing of the Lease Assets.
In addition, the Transferor is conveying to the
Trustee, among other things, all of the Transferor's rights
derived under this Agreement and the Lease Acquisition
Agreement, and the Servicer agrees that all covenants and
agreements made by the Servicer herein with respect to the
Lease Assets shall also be for the benefit of the Trustee,
MBIA and all holders from time to time of the Certificates.
For its services under this Agreement, the Servicer, the Back-
up Servicer and the Trustee will receive the compensation
described herein or in the Trust and Security Agreement.
ARTICLE 1
DEFINITIONS
Section 1.01 Defined Terms. Except as otherwise
specified or as the context may otherwise require, the
following terms have the respective meanings set forth below
for all purposes of this Agreement, and the definitions of
such terms are equally applicable both to the singular and
plural forms of such terms and to the masculine, feminine
and neuter genders of such terms. Capitalized terms used but
not otherwise defined herein shall have the respective
meanings assigned to such terms in the Trust and Security
Agreement or, if not defined therein, in the Lease
Acquisition Agreement.
"Agreement": This Servicing Agreement, dated as of March
1, 1997, by and among the Servicer, the Transferor, the
Back-up Servicer and the Trustee, as amended from time to
time in accordance with the terms hereof.
"Back-up Servicer": Initially, Norwest Bank
Minnesota, National Association, until a successor Person shall
have become the Back-up Servicer pursuant to the applicable
provisions of this Agreement, and thereafter "Back-up
Servicer" shall mean such successor Person.
"Company": Granite Financial, Inc. and all
successors thereto in accordance with the Lease Acquisition
Agreement.
"Computer Tape": Any computer tape or disk prepared by
the Servicer and distributed to various parties as required
herein.
"Lease Acquisition Agreement": The Lease
Acquisition Agreement, dated as of March 1, 1997 between the
Transferor and the Company, as amended from time to time in
accordance with the terms thereof.
"Lockbox": The meaning given in the Lockbox Agreement.
"Lockbox Account": The account established at the
Lockbox Bank by the Trustee pursuant to the Lockbox
Agreement, which account is maintained in the name of, and at
the sole control of, the Trustee and any Permitted Parties for
and on behalf of the Trustee, MBIA, the Certificateholders,
the Transferor and any Permitted Parties into which account
shall be deposited payments related to the Lease
Receivables and as to which solely the Trustee and any
Permitted Parties shall have the ability to withdraw funds.
"Lockbox Agreement": An agreement among the Trustee,
the Transferor, any Permitted Parties and the Lockbox
Bank, substantially in the form attached hereto as Exhibit B
or such other form as approved by MBIA together with all
amendments and supplements thereto and all subsequent
agreements of a similar nature between the Transferor, the
Trustee, any Permitted Parties and any successor Lockbox Bank.
"Lockbox Bank": Any bank approved by MBIA, and
any
successor Lockbox Bank appointed pursuant to Section
3.03(a) hereof.
"Monthly Servicer's Report": The report prepared by
the Servicer pursuant to Section 4.01 hereof.
"Nonrecoverable Advance": A Servicer Advance that
the Servicer determines in good faith, and in accordance
with its customary servicing practices, is unlikely to be
eventually repaid from Scheduled Payments made by or on
behalf of the related Customer in accordance with Section
3.04 hereof.
"Officer's Certificate": A certificate signed by
the
Chairman of the Board, the Vice-Chairman of the Board,
the President, a Vice President, the Treasurer or the
Secretary of the Servicer.
"Permitted Parties": A trustee acting for the sole
benefit of the Certificateholders, MBIA and the holders of any
securities issued by a wholly owned special purpose
corporation of the Company as to which MBIA has issued an
insurance policy with
respect to the senior class of such securities.
"Reported Companies": The Servicer and its Affiliates on
a consolidated basis, and if the initial Servicer is no
longer acting as Servicer, then in addition, any successor
Servicer appointed pursuant to this Agreement.
"Reported Companies' Financial Statements": The
Reported Companies' audited consolidating balance
sheet and income
statement, consolidated statement of sources
and
uses/applications of cash, auditors opinion letter
regarding audited financial statements, and all notes to
the audited financial statements.
"Servicer": Granite Financial, Inc. until a
successor Person shall have become the Servicer pursuant to
the applicable provisions of this Agreement, and thereafter
"Servicer" shall mean such successor Person.
"Servicer Advance": The meaning set forth in Section
3.04 hereof.
"Servicer Default": Any occurrence or circumstance
which with notice or the lapse of time or both would be a
Servicer Event of Default under this Agreement.
"Servicer Event of Default": Each of the occurrences
or circumstances enumerated in Section 6.01 hereof.
"Servicer Termination Notice": The notice described
in Section 6.01 hereof.
"Servicing Officers": Those officers of the
Servicer involved in, or responsible for, the administration
and servicing of the Lease Contracts, as identified on the
list of Servicing Officers furnished by the Servicer to the
Trustee, the Back-up Servicer, and MBIA from time to time.
"Transferor": GF Funding Corp. III, and all
successors thereto in accordance with the terms of the Trust
and Security Agreement.
ARTICLE 2
SERVICER REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties. The
Servicer makes the following representations and warranties
as of the Closing Date, except as otherwise specified below,
which shall survive such date:
(a) Organization and Good Standing. The Servicer has
been duly organized and is validly existing and in good
standing as a corporation under the laws of the State of
Delaware or the laws of such other state as permitted by
Section 5.02(a), with requisite power and authority to own
its properties, perform its obligations under this Agreement
and to transact the business in which it is now engaged or in
which it proposes to engage.
(b) Authorization and Binding Obligation. Each of
this Agreement, the Trust and Security Agreement and the
Insurance Agreement has been duly authorized, executed and
delivered by the Servicer and constitutes the valid and legally
binding obligation of the Servicer enforceable against the
Servicer in accordance
with its terms, subject as to enforcement to any
bankruptcy, insolvency, reorganization and other similar
laws of general applicability relating to or affecting
creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a court
of equity or law.
(c) No Violation. The entering into of this Agreement,
the Trust and Security Agreement and the Insurance Agreement
and the performance by the Servicer of its obligations
under this Agreement, the Trust and Security Agreement and
the Insurance Agreement and the consummation of the
transactions herein and therein contemplated 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 such
Servicer pursuant to the terms of any material
indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject, nor will
such action result in any violation of the provisions of its
certificate of incorporation or bylaws, or any statute or any
order, rule or regulation of any court or any regulatory
authority or other governmental agency or body having
jurisdiction over it or any of its properties; and no consent,
approval, authorization, order, registration
or
qualification of or with any court, or any such
regulatory authority or other governmental agency or body is
required for the Servicer to enter into this Agreement, the
Trust and Security Agreement and the Insurance Agreement.
(d) No Proceedings. There are no proceedings
or
investigations pending, or to the knowledge of the
Servicer, threatened against or affecting the Servicer or any
subsidiary in or before any
court, governmental authority or agency or
arbitration board or tribunal, including but not limited to
any such proceeding or investigation with respect to
any
environmental or other liability resulting from the ownership
or use of any of the Equipment, which, individually or in
the aggregate, involve the probability of materially and
adversely affecting the properties, business, prospects,
profits or
condition (financial or otherwise) of the Servicer and
its subsidiaries, or the ability of the Servicer to
perform its obligations under this Agreement, the Trust
and Security Agreement or the Insurance Agreement. The
Servicer is not in default with respect to any order of
any court, governmental authority or agency or arbitration
board or tribunal.
(e) Approvals. The Servicer (i) is not in violation of
any laws, ordinances, governmental rules or regulations to
which it is subject, (ii) has not failed to obtain any
licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or
to the conduct of its business, and (iii) is not in violation
in any material respect of any term of any agreement, charter
instrument, bylaw or instrument to which it is a party or
by which it may be bound, which violation or failure to
obtain materially adversely affect the business or condition
(financial or otherwise) of the Servicer and its
subsidiaries.
(f) Investment Company. The Servicer is not an
investment
company which is required to register under the
Investment Company Act of 1940, as amended.
(g) Standard of Care. The Servicer has serviced the
Lease
Contracts and Equipment in a manner consistent with
industry standards for lease contracts similar to the Lease
Contracts and Equipment, and in any event in a prudent
and commercially
reasonable manner, and has conducted its servicing operations
in a manner consistent with industry standards for
servicing of financial portfolios.
(h) Insurance. The Servicer maintains insurance
with respect to its operations and property which is
adequate and customary in light of the Servicer's operations.
(i) Net Worth. As of the Closing Date, the Servicer is
in compliance with the Net Worth Requirement.
ARTICLE 3
ADMINISTRATION AND SERVICING OF LEASE CONTRACTS
Section 3.01 Responsibilities of Servicer.
(a) The Transferor hereby appoints the Servicer, for
the benefit of MBIA and the Certificateholders, to act as
Servicer of the Lease Assets and as such, the Servicer shall
be responsible for, and shall, in accordance with its
customary servicing procedures, pursue the managing,
servicing, administering, enforcing and making of
collections on the Lease Contracts, the Equipment, the Lease
Receivables and any Insurance Policies, the enforcement of
the Trustee's security interest in the Lease Contracts,
Lease Receivables and Equipment conveyed pursuant to the
Trust and Security Agreement, and the sale or the releasing of
the Equipment upon the expiration or other termination of the
related Lease Contract (or repossession thereof
without termination), each in accordance with the
standards and
procedures set forth in this Agreement and any related
provisions of the Trust and Security Agreement and Lease
Acquisition Agreement. The Servicer's responsibilities
shall include monitoring and posting of all payments,
responding to inquiries of Customers, investigating
delinquencies, accounting for
collections and furnishing monthly and annual statements to
the Back-up Servicer, the Trustee, MBIA, the Rating Agencies
and the Certificateholders with respect to payments under
the Lease Contracts, making Servicer Advances, providing
appropriate federal income tax information to the Trustee
for use in providing
information to the Certificateholders or
MBIA,
collecting and remitting sales and property taxes to
taxing authorities, and maintaining the perfected security
interest of the Trustee in the Trust Estate. The Servicer
(at its expense) shall have full power and authority,
acting at its sole discretion, to do any and all things
in connection with such managing, servicing, administration,
enforcement, collection and such sale of the Equipment
that it may deem necessary or desirable, including the
prudent delegation of such
responsibilities; provided that only with the prior
written consent of MBIA shall the Servicer subcontract with
another firm to act as subservicer with respect to the
Servicer's obligations hereunder and then only so long as the
Servicer remains fully responsible and accountable for
performance of all obligations of the Servicer hereunder;
provided further that the Servicer may subcontract out its
remarketing obligations with respect to the Equipment
without the consent of MBIA so long as the Servicer remains
fully responsible and accountable for the performance of such
obligations. Without limiting the generality of the
foregoing, the Servicer shall, and is hereby authorized
and empowered by the Trustee, subject to Section 3.02
hereof, to execute and deliver (on behalf of itself, the
Certificateholders, the Trustee 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 Lease Contracts and any files or documentation pertaining
to
the Lease Assets. The Servicer also may, in its sole
discretion, waive any late payment charge or penalty, or any
other fees that may be collected in the ordinary course of
servicing any Lease Contract. Notwithstanding the foregoing,
the Servicer shall not, except pursuant to a judicial order
from a court of competent jurisdiction, or as otherwise
expressly provided in
this
Agreement, release or waive the right to collect the
Scheduled Payments or any unpaid balance on any Lease
Contract. The
Trustee shall, at the expense of the Servicer, furnish
the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder,
and the Trustee shall not be responsible for the Servicer's
application thereof.
(b) The Servicer shall conduct any Lease
Contract management, servicing, administration, collection or
enforcement actions in the following manner:
(i) The Servicer, as agent for and on behalf of
the Trustee, MBIA and the Certificateholders, with
respect to
any Defaulted Lease Contract shall follow such practices
and procedures as are normal and consistent with the
Servicer's standards and
procedures relating to its own lease
contracts, lease receivables and equipment that are
similar to the Lease Contracts, Lease Receivables and the
Equipment, and, in any event, consistent with the
standard of care described in
Section 3.02 hereof, including without
limitation, the taking of appropriate actions to
foreclose or otherwise liquidate any such Defaulted
Lease Contract, together with the related Equipment, to
collect any Guaranty Amounts, and to enforce the
Transferor's rights under the Lease Acquisition
Agreement. All Recoveries, Insurance Proceeds or
Residual Proceeds in respect of any such Lease Receivable
and the related Equipment received by
the
Servicer shall be remitted to the Trustee for deposit in
the Collection Account pursuant to Section 3.03 hereof;
(ii) The Servicer may sue to enforce or collect
upon Lease Contracts as agent for the Trustee on behalf
of the Certificateholders and MBIA. If the Servicer
elects to
commence a legal proceeding to enforce a Lease Contract,
the act of commencement shall be deemed to be an
automatic conveyance of the Lease Contract 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 a Lease Contract on the
ground that it is not a real party in interest or a
holder entitled to
enforce the Lease Contract, then the Trustee on behalf
of
the Certificateholders and MBIA shall, at the
Servicer's request and expense, take such steps as the
Servicer deems necessary and instructs the Trustee in
writing to take to
enforce the Lease Contract, including bringing suit in
its name or the names of the Certificateholders or MBIA,
and the Trustee shall be indemnified by the Servicer for
any such action taken. Any Lease Contract temporarily
released from the custody of the Trustee to the
Servicer or its agents shall have stamped on it prior
to its delivery a legend to
the effect that the Lease Contract is the property
of
Norwest Bank Minnesota, National Association as Trustee,
and the Servicer shall promptly return all Lease
Contracts when the need therefore no longer exists,
provided that no more than 25 Lease Contracts shall be
released to the Servicer at any one time;
(iii) The Servicer shall exercise any rights
of
recourse against third parties that exist with respect to
any Lease Contract in accordance with the Servicer's usual
practice and, in any event, consistent with the standard of
care described in Section 3.02 hereof. In exercising
recourse rights, the Servicer is authorized on the Trustee's
behalf to reconvey the Lease Contract to the person against
whom recourse exists to the extent necessary, and at the
price set forth in the document creating the recourse. The
Servicer will not reduce or diminish such recourse rights,
except to the extent that it exercises such right;
(iv) The Servicer may not allow substitutions of
Substitute Lease Contracts that do not comply with Section
3.09 hereof, Sections 2.04, 3.03 and 3.04 of the Lease
Acquisition Agreement and Section 4.03 of the Trust and
Security Agreement. If a Customer requests a financing of
an upgrade to any Equipment, the Servicer shall either
(A) include such upgrade on an existing Lease Contract and
treat the Scheduled Payments related thereto as an
Additional Lease Contract for all purposes of this
Agreement, the Lease Acquisition Agreement and the Trust and
Security Agreement, or (B) originate a separate lease
contract for such Customer;
(v) The Servicer may waive, modify or vary any terms
of any Lease Contract or consent to the postponement of
strict compliance with any such term if in the Servicer's
reasonable and prudent determination such waiver,
modification or postponement is not materially adverse to
the Certificateholders or MBIA; provided, however, that
(A) the Servicer shall not forgive any payment of rent,
(B) the Servicer shall not permit any modification with
respect to any Lease Contract that would decrease any
Scheduled Payment, defer the payment of any principal or
interest or any Scheduled Payment, reduce the Implicit
Principal Balance (except in connection with actual payments
attributable to such Implicit Principal Balance), or prevent
the complete amortization of the Implicit Principal Balance
from occurring by the Calculation Date preceding the Stated
Maturity of the Certificates and, (C) except as otherwise
specifically provided herein, the Servicer will not waive or
modify the requirement that a Customer maintain insurance
with respect to the related Equipment. The Servicer shall
provide the Back-up Servicer, MBIA and the Trustee with an
Amended Lease Schedule to the Lease Schedule reflecting any
modification of any Scheduled Payment;
(vi) The Servicer shall not consent to the termination
of any Lease Contract in connection with loss of or damage
to the related Equipment unless the Customer has paid an
amount not less than the Removal Price for such Lease
Contract, or if less, the maximum amount legally collectible
under the related Lease Contract;
(vii) Upon termination of a Lease Contract after
payment of the last Scheduled Payment due thereunder or in
the event that the Servicer in the enforcement of any Lease
Contract otherwise (A) acquires title to any item of
Equipment with respect to which title was held by the
Customer or (B) reclaims possession of Equipment from the
Customer, the Servicer shall use its best efforts to sell or
re-lease such item of Equipment on market value terms
promptly and consistent with the standard of care set forth
in Section 3.02 hereof. Any Insurance Proceeds, Recoveries
or Residual Proceeds related thereto shall be deposited in
accordance with Section 3.03 hereof;
(viii) Notwithstanding any provision to the contrary
contained in this Agreement, the Servicer shall exercise any
right under a Lease Contract to accelerate the unpaid
Scheduled Payments, due or to become due thereunder in such
a manner as to maximize the net proceeds available to the
Trust Estate; provided, however, that the Servicer will not
accelerate any Scheduled Payment unless permitted to do so
by the terms of the Lease Contract or under applicable law;
(ix) The Servicer shall maintain insurance with respect
to its operations and property which is adequate and
customary in light of the Servicer's operations; and
(x) The Servicer shall comply with and not modify its
credit and collection policies with respect to the Lease
Contracts in any manner which would adversely affect the
Certificates or the Trust Estate.
Section 3.02 Servicer Standard of Care. In managing,
administering, servicing, enforcing and making collections on the
Lease Contracts and Equipment pursuant to this Agreement, the
Servicer will exercise that degree of skill and care consistent
with industry standards for servicing of small to medium ticket
equipment leasing portfolios, and that which the Servicer
customarily exercises with respect to similar lease contracts and
equipment owned or originated by it, and in any event, in a
prudent and commercially reasonable manner. The Servicer shall
punctually perform all of its obligations and agreements under
this Agreement and shall comply with all applicable federal and
state laws and regulations, shall maintain all state and federal
licenses and franchises necessary for it to perform its servicing
responsibilities hereunder, and shall not materially impair the
rights of MBIA or the Certificateholders in any Lease Contracts
or payments thereunder.
Section 3.03 Lockbox Account and Servicer Remittances.
(a) The Transferor and the Trustee shall establish the
Lockbox Account within 30 days of the Closing Date at the Lockbox
Bank pursuant to the Lockbox Agreement. At the time of execution
of the Lockbox Agreement, each of the Transferor, the Lockbox
Bank, the Servicer and any other party to the Lockbox Agreement
shall provide MBIA with opinions of counsel reasonably acceptable
to MBIA regarding the enforceability of the Lockbox Agreement
against such person. The Servicer shall pay to the Lockbox Bank
when due the fees set forth in the Lockbox Agreement. The
Lockbox Bank may be removed by the Transferor with the written
consent of MBIA if the Lockbox Bank has failed to perform its
duties to the satisfaction of the Transferor and the Servicer,
provided that a successor Lockbox Bank, meeting the
qualifications of a corporate trustee as set forth in Section
7.08 of the Trust and Security Agreement, has executed a Lockbox
Agreement in form and substance satisfactory to MBIA, the
Trustee, the Transferor and the Servicer.
(b) After the Lockbox Agreement has been executed, the
Servicer shall promptly notify the Customers of the transfer of
the Lease Contracts to the GF Funding Equipment Lease Trust 19971
and instruct the Customers to send all payments relating to
Lease Receivables directly to the Lockbox Bank for deposit into
the Lockbox Account. On each Business Day, the Trustee shall, or
shall cause the Lockbox Bank to, transfer to the Collection
Account all amounts allocable to the Lease Contracts on deposit
in the Lockbox Account.
(c) The Servicer, as agent of the Transferor, the
Certificateholders and MBIA shall remit to the Trustee for
deposit in the Collection Account by 12:00 noon Minneapolis time
on each Tuesday and Thursday that is a Business Day, or if such
day is not a Business Day, on the next Business Day thereafter,
the amounts described below that have been collected by the
Servicer through 4:00 p.m. Minneapolis time on the preceding
Business Day so long as such amounts in the aggregate exceed
$1,000:
(i) all payments made under the Lease Contracts by or
on behalf of the Customers relating to the Lease
Receivables, including prepayments and Overdue Payments but
excluding taxes and Servicing Charges, received directly by
the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Removal Price of any Lease Contract
purchased by the Company or the Transferor, to the extent
received by the Servicer;
(iv) all Guaranty Amounts; and
(v) all Insurance Proceeds.
The Servicer shall hold in trust for the benefit of the
Holders of the Certificates and MBIA any payment it receives
relating to items (i) through (v) above until such time as the
Servicer transfers any such payment to the Trustee for deposit in
the Collection Account.
(d) If ACH debits are utilized with respect to a Lease
Contract, (x) the Transferor, the Trustee and the ACH Bank shall
enter into a depositary agreement acceptable to the Trustee and
(y) the Servicer will notify the National Automated Clearing
House System to debit the Customer for all payments relating to
Lease Receivables under such Lease Contract and to credit an
account (the "ACH Account") maintained at the ACH Bank, in the
name of and in the sole control of the (i) Trustee for the
benefit of the Certificateholders and MBIA and (ii) any other
Permitted Parties, and the Servicer shall not revoke or modify
such notifications. The Servicer shall be responsible for the
payment of the fees of any ACH Account and shall not be entitled
to reimbursement therefor. In the event (i) a Customer provides
the Servicer or the ACH Bank with written notice of its
termination of such Customer's authorization agreement for ACH
debits, or (ii) the Servicer otherwise receives directly moneys
with respect to Lease Receivables that would otherwise involve
ACH debits, the Servicer shall deposit all payments from all such
Customers into the Collection Account in accordance with
subsection (c) above, and, in the case of clause (i), the
Servicer shall promptly instruct the Customer to send all lease
payments directly to the Lockbox. Payments received in the ACH
Account representing any payment listed in Section 3.03(c)(i)
through (v) above and which are no longer provisional will be
transferred to the Collection Account on a daily basis.
Section 3.04 Servicer Advances. Not later than 10:00 a.m.
(Minneapolis time) on the Determination Date prior to each
Payment Date, the Servicer shall make an advance (a "Servicer
Advance") on such date by remitting to the Trustee for deposit in
the Collection Account an amount equal to the Scheduled Payments
or portion thereof for each Lease Contract which is a Delinquent
Lease Contract and which were due in the prior Monthly Period but
not received and deposited in the Collection Account on or prior
to such Determination Date; provided that, if and until the Class
B Certificates are issued, such deposit shall equal the lesser of
(i) the Scheduled Payments or portion thereof for each Lease
Contract which is a Delinquent Lease Contract and which were due
in the prior Monthly Period but not received and deposited in the
Collection Account on or prior to such Determination Date and
(ii) the shortfall, if any, between (a) the amounts on deposit in
the Collection Account as of such Determination Date and (b) the
amounts required to be paid on the related Payment Date pursuant
to clauses (i) through (xiii) of Section 12.02 (d) of the Trust
and Security Agreement; provided, further, however, that the
Servicer shall not be obligated to make any Servicer Advance
pursuant to this Section 3.04 that the Servicer determines in
good faith, and in accordance with its customary servicing
practices, is unlikely to be eventually repaid from Scheduled
Payments made by or on behalf of the related Customer; provided,
further, that the Servicer may not make a Servicer Advance with
respect to a Lease Contract once it has become a Defaulted Lease
Contract. On each Determination Date, the Servicer shall deliver
to the Back-up Servicer, the Trustee, MBIA and the Placement
Agent the Monthly Servicer's Report, which shall include a
listing of the aggregate amount of Scheduled Payments not
received for the immediately prior Monthly Period, the amount of
Servicer Advances, and the amounts which it has determined in its
sole discretion, and in accordance with its customary servicing
practices, are unlikely to be recoverable from the related
Customers.
Section 3.05 Financing Statements. The Servicer will make
all Uniform Commercial Code filings and recordings as may be
required pursuant to the terms of the Trust and Security
Agreement. The Servicer shall, in accordance with its customary
servicing procedures and at its own expense, be responsible for
taking such steps as are necessary to maintain perfection of such
security interests. The Trustee hereby authorizes the Servicer
to re-perfect or to cause the re-perfection of such security
interest on its behalf as Trustee, as necessary.
Section 3.06 Maintenance of Insurance Policy; Insurance
Proceeds. The Servicer shall have the obligation to verify,
monitor and enforce the acquisition and maintenance of a
Customer's Insurance Policies in a manner consistent with past
practice, provided that the Servicer shall do so in a manner
consistent with that practiced by other lessors in the industry
with similar lease contracts and equipment owned or serviced by
them. In the event that a Customer fails to maintain an
Insurance Policy as required by the terms of the related Lease
Contract, and the cost of the Equipment is in excess of $50,000,
the Servicer shall procure and maintain such insurance in an
amount not less than the amount required by such Lease Contract.
The Servicer may satisfy its obligations under this Section 3.06
by maintaining a blanket insurance policy covering all of the
Equipment. Any Insurance Proceeds shall be remitted to the
Trustee for deposit in the Collection Account pursuant to Section
3.03.
Section 3.07 Personal Property and Sales Taxes. The
Servicer shall, on behalf of the Transferor, pay or cause to be
paid all personal property, sales and use taxes on or with
respect to the Equipment, or the acquisition or leasing thereof,
as and when such taxes become due, to the extent a Customer has
paid amounts to the Servicer or into the Lockbox Account for such
taxes. The Servicer shall also cause to be filed in a timely
manner any and all returns and reports required in connection
with the payment of such taxes.
Section 3.08 Servicing Compensation.
(a) As compensation for the performance of its obligations
under this Agreement the Servicer shall be entitled to receive
the Servicer Fee and the Additional Servicer Fee, if applicable.
The Servicer Fee with respect to any Lease Contract shall be paid
monthly, commencing on the Initial Payment Date and terminating
on the first to occur of (i) the receipt of the last Scheduled
Payment and related Residual Proceeds with respect to the last
remaining Lease Contract, (ii) the receipt of Recoveries and
Insurance Proceeds with respect to the last remaining Lease
Contract, or (iii) the date on which the Transferor or MBIA
purchases the last remaining Lease Contract. The Servicer Fee
shall be paid to the Servicer at the times and in the priority as
set forth in the Trust and Security Agreement. The Servicer
shall pay all expenses incurred by it in connection with its
servicing activities hereunder, including, without limitation,
payment of the fees and disbursements of the Independent
Accountants and payment of expenses incurred in connection with
distributions and reports to the Trustee, the Back-up Servicer,
MBIA, the Rating Agencies and Certificateholders, payment of the
fee of the Lockbox Bank under the Lockbox Agreement and any
payment of any fees in connection with the ACH Account and shall
not be entitled to reimbursement for such expenses; provided,
however, that the Servicer will be entitled to reimbursement
pursuant to Section 12.02(d)(i)(B) of the Trust and Security
Agreement for reasonable costs and expenses incurred by the
Servicer (including reasonable attorney's fees and out-of-pocket
expenses) in connection with the realization, attempted
realization or enforcement of rights and remedies upon Defaulted
Lease Contracts, from amounts received as Recoveries from such
Defaulted Lease Contracts.
(b) In connection with any transfer of the servicing
obligations to a successor Servicer in accordance with Section
6.02 hereof, the Back-up Servicer shall be entitled to
reimbursement of Transition Costs as provided therein and in the
Trust and Security Agreement.
Section 3.09 Substitution or Purchase of Lease Contracts.
(a) The Servicer shall not allow termination of a Lease
Contract prior to the scheduled expiration date or prepayment of
any Lease Contract (except as may be specifically required under
such Lease Contract in connection with a casualty to the related
Equipment), unless the Transferor has (i) conveyed to the Trustee
a Substitute Lease Contract, the Lease Receivables under such
Substitute Lease Contract and the Transferor's interest in the
related Equipment and delivered to the Trustee the original
executed counterpart of the Substitute Lease Contract or
(ii) removed such prepaid Lease Contract and the related
Equipment from the Trust Estate by remittance of the Removal
Price to the Servicer for deposit in the Collection Account in
accordance with Section 3.03 hereof; provided, however, that
removals and substitutions of Lease Contracts pursuant to this
subparagraph (a) shall comply with the requirements of
Section 4.03 of the Trust and Security Agreement and the criteria
set forth in Section 3.04 of the Lease Acquisition Agreement.
(b) The Servicer shall permit the Transferor to (i) remove
any Defaulted Lease Contract or Delinquent Lease Contract from
the Trust Estate by remittance by the Transferor to the Servicer,
for deposit in the Collection Account in accordance with
Section 3.03 hereof, of the Removal Price for such Lease Contract
or (ii) substitute for any Defaulted Lease Contract or Delinquent
Lease Contract, a Substitute Lease Contract and the Lease
Receivables under such Substitute Lease Contract and the
Transferor's interest in the related Equipment and, upon the
delivery to the Trustee of the original executed counterpart of
the Substitute Lease Contract and the related Lease Contract
File; provided that removals and substitutions of Lease Contracts
pursuant to this subparagraph (b) shall comply with the
requirements of Section 4.03 of the Trust and Security Agreement
and the criteria set forth in Section 3.04 of the Lease
Acquisition Agreement.
(c) Notwithstanding any other provision contained in this
Agreement, the Servicer shall not, with respect to a Defaulted
Lease Contract, (i) negotiate or enter into a new lease with the
Customer relating to the Equipment or the Customer's obligations
under such Defaulted Lease Contract or (ii) allow the Customer
thereunder to resume its rights under such Defaulted Lease
Contract, unless the Transferor has removed or made a
substitution for such Defaulted Lease Contract in the manner set
forth in subsection (b) hereof.
(d) In the event that the Company is required to repurchase
or substitute a Lease Contract pursuant to Sections 2.06 or 3.03
of the Lease Acquisition Agreement the Servicer shall permit such
repurchase or substitution only in accordance with the terms of
Sections 3.03 and 3.04 of the Lease Acquisition Agreement.
Section 3.10 No Offset. Prior to the termination of this
Agreement, the obligations of the Servicer under this Agreement
shall not be subject to any defense, counterclaim or right of
offset that the Servicer has or may have against the Transferor,
whether in respect of this Agreement, any Lease Contract, Lease
Receivable, Equipment or otherwise.
ARTICLE 4
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01 Monthly Servicer's Reports. No later than
10:00 a.m. (Minneapolis time) on each Determination Date, the
Servicer shall deliver the Monthly Servicer's Report to the
Transferor, the Back-up Servicer, the Trustee, and the Placement
Agent, and the Trustee will deliver the Monthly Servicer's Report
to each Certificateholder, MBIA, and the Rating Agencies in the
form attached as Exhibit A hereto with respect to the activity in
the immediately preceding Monthly Period. In the course of
preparing the Monthly Servicer's Report, the Servicer shall seek
direction from the Holder of the Transferor Certificate as to
remittance of any funds to be paid pursuant to Section
12.02(d)(xvi) of the Trust and Security Agreement. Lease
Contracts which have been substituted for or purchased by the
Company or the Transferor shall be identified by Customer lease
number on the Monthly Servicer's Report. On each Payment Date,
the Servicer shall deliver to the Back-up Servicer and MBIA a
Computer Tape in a format acceptable to the Back-up Servicer
containing the information from which the Servicer prepared the
Monthly Servicer's Report, as well as any additional information
reasonably requested by the Back-up Servicer prior to such
Payment Date.
Section 4.02 Financial Statements; Certification as to
Compliance; Notice of Default.
(a) The Servicer (and the Company if the initial Servicer
is no longer the Servicer) will deliver to the Trustee, the
Placement Agent, MBIA, the Back-up Servicer, the Rating Agencies
and each Certificateholder of Outstanding Certificates (and, upon
the request of any Certificateholder, to any prospective
transferee of any Certificate which has executed an agreement
with the Transferor and the Servicer containing terms
substantially similar to those set forth in Section 4.04(f)
hereof):
(i) within 120 days after the end of each fiscal year
of the Reported Companies, a copy of the Reported Companies'
Financial Statements, all in reasonable detail and
accompanied by an opinion of a firm of Independent
Accountants stating that such financial statements present
fairly the financial condition of the Reported Companies
(or, in the case of a successor Servicer, such successor
Servicer's financial condition) and have been prepared in
accordance with generally accepted accounting principles
consistently applied (except for changes in application in
which such accountants concur), and that the examination of
such accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and accordingly included such
tests of the accounting records and such other auditing
procedures as were considered necessary in the
circumstances;
(ii) with each set of Reported Companies' Financial
Statements delivered pursuant to subsection (a)(i) above,
the Servicer will deliver an Officer's Certificate stating
that such officer has reviewed the relevant terms of the
Trust and Security Agreement, the Lease Acquisition
Agreement, the Insurance Agreement and this Agreement and
has made, or caused to be made, under such officer's
supervision, a review of the transactions and conditions of
the Reported Companies during the period covered by the
Reported Companies Financial Statements then being
furnished, that the review has not disclosed the existence
of any Servicer Default or Servicer Event of Default or, if
a Servicer Default or a Servicer Event of Default exists,
describing its nature and what action the Servicer has taken
and is taking with respect thereto, and that on the basis of
such review the officer signing such certificate is of the
opinion that during such period the Servicer has serviced
the Lease Contracts in compliance with the procedures hereof
except as disclosed in such certificate.
(iii) immediately upon becoming aware of the
existence of any condition or event which constitutes a
Servicer Default or a Servicer Event of Default, a written
notice describing its nature and period of existence and
what action the Servicer is taking or proposes to take with
respect thereto;
(iv) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it
or the Transferor by any governmental authority or
agency, or
(B) any pending or proposed court or
administrative proceeding which involves or may involve
the probability of materially and adversely affecting
the properties, business, prospects, profits or
condition (financial or otherwise) of the Servicer or
the Transferor or the Trust Estate,
a written notice specifying the nature of such investigation
or proceeding and what action the Servicer is taking or proposes
to take with respect thereto and evaluating its merits;
(v) with reasonable promptness any other data and
information with respect to the Servicer or the Lease Assets
which may be reasonably requested from time to time,
including without limitation any information required to be
made available at any time to any prospective transferee of
any Certificates in order to satisfy the requirements of
Rule 144A under the Securities Act of 1933, as amended;
(vi) quarterly, unaudited versions of the Reported
Companies' consolidating balance sheet and income statement
within 45 days after the end of each quarter; and
(vii) such other information as may be
specified in the Trust and Security Agreement.
(b) On or before each March 25, commencing March 25, 1998,
so long as any of the Certificates are outstanding, the Servicer
shall furnish to MBIA, each Certificateholder and the Trustee an
Officer's Certificate either stating that such action has been
taken with respect to the recording, filing, and rerecording and
refiling of any financing statements and continuation statements
as necessary to maintain the interest of the Trustee created by
the Trust and Security Agreement with respect to the Trust Estate
and reciting the details of such action or stating that no such
action is necessary to maintain such interest. Such Officer's
Certificate shall also describe the recording, filing,
rerecording and refiling of any financing statements and
continuation statements that will be required to maintain the
interest of the Trustee in the Trust Estate until the date such
next Officer's Certificate is due.
Section 4.03 Independent Accountants' Reports; Annual
Federal Tax Lien Search.
(a) Promptly at the end of the Servicer's fiscal year, the
Servicer at its expense shall cause the Independent Accountants
(who may also render and deliver other services to the Servicer
and its Affiliates) to prepare a statement to the Back-up
Servicer, the Trustee, the Certificateholders, MBIA, the Rating
Agencies and the Placement Agent, dated as of the close of such
period, to the effect that the Independent Accountants have
examined the servicing procedures, manuals, guides and records of
the Servicer, and the accounts and records of the Servicer
relating to the Lease Contracts and any files or documentation
pertaining to the Lease Assets (which procedures, manuals, guides
and records shall be described in one or more schedules to such
statement), that such Independent Accountants have compared the
information contained in the Monthly Servicer's Reports delivered
in the relevant period with information contained in the accounts
and records for such period, and that, on the basis of such
examination and comparison, nothing has come to the Independent
Accountants' attention to indicate that the Servicer has not,
during the relevant period, serviced the Lease Contracts in
compliance with such servicing procedures, manual and guides and
in the same manner required by the Servicer's standards and with
the same degree of skill and care consistent with that which the
Servicer customarily exercises with respect to similar Lease
Contracts owned by it and otherwise in compliance with this
Agreement, that such accounts and records have not been
maintained in accordance with Section 4.04 hereof, that the
information contained in the Monthly Servicer's Reports does not
reconcile with the information contained in the accounts and
records or that such certificates, accounts and records have not
been properly prepared and maintained in all material respects or
in accordance with the requirements of this Agreement, except in
each case for (i) such exceptions as the Independent Accountants
shall believe to be immaterial and (ii) such other exceptions as
shall be set forth in such statement. The Servicer shall deliver
to the Back-up Servicer, the Trustee, the Certificateholders, the
Placement Agent, the Rating Agencies and MBIA a copy of any such
statement within 120 days of the close of the relevant period.
(b) Promptly after the end of the Servicer's fiscal year,
commencing with the fiscal year ending June 30, 1998, the
Servicer, at its expense, shall cause a search of any and all
federal tax liens against the Company and the Transferor and any
Affiliates as of the end of such fiscal year to be conducted and
shall deliver to the Back-up Servicer, the Trustee, the
Certificateholders and MBIA on or before July 31 of each year,
commencing July 31, 1998, an officer's certificate signed by a
Servicing Officer (i) stating that there are no outstanding
federal tax liens filed against any portion of the Trust Estate,
the Company, the Transferor, or any Affiliate or (ii) listing the
outstanding federal tax liens filed against any portion of the
Trust Estate, the Company, the Transferor, or any Affiliate. In
the event any such certificate shall disclose any such federal
tax liens, the Servicer shall promptly thereafter, satisfy any
such federal tax liens.
Section 4.04 Access to Certain Documentation and
Information.
(a) The Servicer shall provide to the Back-up Servicer,
MBIA, the Trustee, or any Certificateholder and their duly
authorized representatives, attorneys or accountants access to
any and all documentation regarding the Trust Estate (including
the Lease Schedule) that the Servicer may possess, such access
being afforded without charge but only upon reasonable request
and during normal business hours so as not to interfere
unreasonably with the Servicer's normal operations or customer or
employee relations, at offices of the Servicer designated by the
Servicer.
(b) At all times during the term hereof, the Servicer shall
keep available at its principal executive office for inspection
by Certificateholders, the Trustee, the Back-up Servicer and MBIA
a list of all Lease Contracts then held as a part of the Trust
Estate, together with a reconciliation of such list to that set
forth in the Initial Lease Schedule or the Amended Lease Schedule
and each of the Monthly Servicer's Reports, indicating the
cumulative addition and removal of Lease Contracts from the Trust
Estate.
(c) The Servicer will maintain accounts and records as to
each respective Lease Contract serviced by the Servicer that are
accurate and sufficiently detailed as to permit (i) the reader
thereof to know as of the most recent Calculation Date the status
of such Lease Contract, including any payments, Insurance
Proceeds, Residual Proceeds and Recoveries received or owing (and
the nature of each) thereon and (ii) the reconciliation between
payments, Insurance Proceeds, Residual Proceeds or Recoveries on
(or with respect to) each Lease Contract and the amounts from
time to time deposited in the Collection Account in respect of
such Lease Contract.
(d) The Servicer will maintain all of its computerized
accounts and records so that, from the Closing Date and after
each Acquisition Date and the conveyance of the related Lease
Contract, Lease Receivables and Equipment to the Trustee, the
Servicer's accounts and records (including any back-up computer
archives) that refer to any such Lease Contracts, Lease
Receivables or Equipment indicate clearly that the Lease
Contracts, Lease Receivables and Equipment are owned by the
Trustee for the benefit of MBIA and the Certificateholders.
Indication of the Trustee's interest in a Lease Contract will be
deleted from or modified on the Servicer's accounts and records
when, and only when, the Lease Contract has been paid in full,
replaced with a Substitute Lease Contract or purchased by the
Company or the Transferor or conveyed to the Servicer pursuant to
this Agreement.
(e) Nothing in this Section 4.04 shall affect the
obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Customers,
and the failure to provide information otherwise required by this
Section 4.04 as a result of such observance by the Servicer,
shall not constitute a breach of this Section 4.04.
(f) All information obtained by the Trustee, the Back-up
Servicer, MBIA or any Certificateholder regarding the Customers
and the Lease Contracts, whether upon exercise of its rights
under this Section 4.04 or otherwise, shall be maintained by the
Trustee, the Back-up Servicer, MBIA or the Certificateholder, as
applicable, in confidence and shall not be disclosed to any other
Person, unless such disclosure shall not violate any applicable
law or regulation or any proprietary rights of the Company, the
Transferor or the Servicer unless ordered by a court of
applicable jurisdiction; provided that MBIA may make disclosures
with respect to any of the above matters to the Rating Agencies,
reinsurers or any entity having regulatory authority over MBIA
and provided further that the Certificateholders may disclose
such information to the extent permitted by the applicable
Certificate Purchase Agreement.
Section 4.05 Other Necessary Data. The Servicer shall, on
request of the Back-up Servicer, the Trustee or MBIA, (i) on
reasonable notice, furnish the Trustee, the Back-up Servicer or
MBIA such data necessary for the administration of the Trust
Estate as can be reasonably generated by the Servicer's existing
data processing systems, and (ii) on and after a Servicer Event
of Default, within 5 Business Days, provide the Trustee and the
Back-up Servicer with access to the Servicer's existing data
processing systems and any files or records with respect to the
Lease Assets that it may have.
Section 4.06 Trustee to Cooperate. Upon payment
(including through application of any prepayment) in full of any
Lease Contract, the Servicer will notify the Trustee on the next
succeeding Determination Date by written certification (which
certification shall include a statement to the effect that all
amounts received in connection with such payments in full which
are required to be deposited in the Collection Account pursuant
to Section 3.03 hereof have been so deposited) of a Servicing
Officer and shall request delivery of the Lease Contract to the
Servicer. Upon receipt of such delivery request, the Trustee
shall within 7 days of such request by the Servicer release such
Lease Contract to the Servicer. Upon release of such Lease
Contract, the Servicer is authorized to execute an instrument in
satisfaction of such Lease Contract and to do such other acts and
execute such other documents as it deems necessary to discharge
the Customer thereunder and, if applicable, release any security
interest in the Equipment related thereto. The Servicer shall
determine when a Lease Contract has been paid in full. Upon the
written request of a Servicing Officer and subject to the
Trustee's rights to indemnity contained herein and in the Trust
and Security Agreement, the Trustee shall perform such other acts
as reasonably requested in writing by the Servicer and otherwise
cooperate with the Servicer in enforcement of the
Certificateholders' rights and remedies with respect to Lease
Contracts.
ARTICLE 5
THE SERVICER
Section 5.01 Servicer Indemnification.
(a) The Servicer shall indemnify and hold harmless the
Trustee, the Transferor, the Back-up Servicer, MBIA, and the
Certificateholders, from and against any loss, liability, claim,
expense, damage or injury suffered or sustained to the extent
that such loss, liability, claim, expense, damage or injury arose
out of or was imposed by reason of the failure by the Servicer to
perform its duties in accordance with the terms of this Agreement
or are attributable to errors or omissions of the Servicer
related to such duties or a breach of the representations and
warranties made by the Servicer in Section 2.01 hereof; provided,
however, that the Servicer shall not indemnify any party to the
extent that acts of fraud, gross negligence or breach of
fiduciary duty by such party contributed to such loss, liability,
claim, expense, damage or injury.
(b) The Servicer shall not be liable for any settlement of
any action or claim effected without its consent. If the
Servicer has made any indemnity payments to MBIA, the Trustee,
the Back-up Servicer or the Certificateholders pursuant to this
Section and such party thereafter collects any of such amounts
from others, such party will promptly repay such amounts
collected to the Servicer, without interest. The provisions of
this Section 5.01 shall survive any expiration or termination of
this Agreement.
Section 5.02 Corporate Existence; Reorganizations.
(a) The Servicer shall keep in full effect its existence
and good standing as a corporation in the State of Delaware and
will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to enable the Servicer to
perform its duties under this Agreement, except where the failure
to so qualify would not have a material adverse effect on the
Trust Estate or the ability of the Servicer to perform its duties
hereunder; provided, however, that the Servicer may reorganize as
a corporation in another state, if to do so would be in the best
interests of the Servicer and would not have a material adverse
effect upon the Certificateholders or MBIA.
(b) The Servicer shall not (i) (other than pursuant to one
or more additional lease pool financings) convey, transfer or
lease substantially all of its assets as an entirety to any
Person, or (ii) merge or consolidate with another Person, unless
(A) such Person or the merged or consolidated entity acquires
substantially all the assets of the Servicer as an entirety, has
adequate servicing skills and personnel, is substantially
involved in the equipment financing lease business and executes
and delivers to the Transferor, MBIA and the Trustee an
agreement, in form and substance reasonably satisfactory to the
Transferor, MBIA, the Controlling Holders and the Trustee, which
contains an assumption by such Person or entity of the due and
punctual performance and observance of each covenant and
condition to be performed or observed by the Servicer under this
Agreement, (B) no Default, Event of Default or Servicer Default
(or an event that due to the lapse of time or failure to act
would become a Servicer Default) has occurred and is continuing,
and (C) MBIA shall have given its prior written consent. The
Servicer shall provide prompt written notice of such event to the
Rating Agencies and shall provide to the Trustee, for the benefit
of MBIA and the Certificateholders, an Opinion of Counsel
confirming the enforceability of such assumption agreement.
(c) The Servicer shall provide written notice (to the
extent the Servicer has actual knowledge or notice and the
provision of such information does not violate any securities
laws) to the Trustee and MBIA within ten days after any
acquisition by one person or a group of persons acting in concert
of more than 50% of the stock of the Servicer.
Section 5.03 Limitation on Liability of the Servicer and
Others. Except as provided in Section 5.01 hereof, neither the
Servicer nor any of the officers, directors, employees or agents
of the Servicer shall be under any liability for any action taken
or for refraining from the taking of any action in its capacity
as Servicer pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer or any such person
against any liability which would otherwise be imposed by reason
of willful misconduct, bad faith or gross negligence (which
includes negligence with respect to the duties of the Servicer
explicitly set forth in this Agreement) in the performance of its
duties hereunder. The Servicer and any officer, director,
employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted
by any Person with respect to any matters arising hereunder. No
implied covenants or obligations shall be read into this
Agreement against the Servicer. In the event the Servicer
performs any activities beyond the requirements of this
Agreement, the Servicer shall have the option but will not be
required to perform such activities in the future.
Section 5.04 The Servicer Not to Resign.
(a) The Servicer shall not resign from the duties and
obligations hereby imposed on it except upon a determination by
its Board of Directors that by reason of change in applicable
legal requirements, with which the Servicer cannot reasonably
comply, the continued performance by the Servicer of its duties
under this Agreement would cause it to be in violation of such
legal requirements, said determination to be evidenced by a
resolution from its Board of Directors to such effect,
accompanied by an Opinion of Counsel to such effect and
reasonably satisfactory to the Trustee and MBIA.
(b) No such resignation shall become effective until a
successor Servicer shall have assumed the responsibilities and
obligations of the Servicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof,
the duties and obligations of the Servicer under this Agreement
shall continue until this Agreement shall have been terminated as
provided in Section 8.01 hereof, and shall survive the exercise
by the Transferor or the Trustee of any right or remedy under
this Agreement, or the enforcement by the Transferor, MBIA, the
Trustee or any Certificateholder of any provision of the
Certificates or this Agreement.
ARTICLE 6
SERVICING TERMINATION
Section 6.01 Servicer Events of Default.
(a) Any of the following acts or occurrences shall
constitute a Servicer Event of Default:
(i) Any failure by the Servicer to deliver to the
Trustee for payment to Certificateholders any proceeds or
payments received from a Customer or in respect of the Trust
Estate and required to be so delivered under the terms of
the Trust and Security Agreement and this Agreement that
continues unremedied until 10:00 a.m. (Minneapolis time) on
the following Business Day; provided, however, that the
Trustee, upon receiving actual knowledge of such failure,
shall give the Servicer prompt written, telecopied or
telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Trustee to deliver such notice
to the Servicer shall not prevent the occurrence of a
Servicer Event of Default; or
(ii) Any failure by the Servicer to deliver a Monthly
Servicer's Report pursuant to Section 4.01 hereof that
continues unremedied until 10:00 a.m., Minneapolis time, the
following Business Day; provided, however, that if the
Servicer has not delivered the Monthly Servicer's Report by
12:00 noon (Minneapolis time) on the Determination Date, the
Trustee shall give the Servicer notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the
occurrence of a Servicer Event of Default; or
(iii)Any failure by the Servicer to make a Servicer
Advance pursuant to Section 3.04 hereof or to deposit any
Removal Price received by it that continues unremedied until
10:00 a.m. (Minneapolis time) the following Business Day;
provided, however, that if the Servicer has not made the
Servicer Advance or deposited any Removal Price received by
it by 12:00 noon (Minneapolis time) on the Determination
Date and the Trustee has received written notification from
the Servicer by way of the Monthly Servicer's Report or
otherwise that such Servicer Advance or Removal Price is to
be paid, the Trustee shall give the Servicer prompt written,
telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to
deliver such notice to the Servicer shall not prevent the
occurrence of a Servicer Event of Default; or
(iv) Any failure on the part of the Servicer in its
capacity as such duly to observe or perform in any material
respect any other covenants or agreements of the Servicer
set forth in this Agreement or the Trust and Security
Agreement, as the case may be, or if any representation or
warranty of the Servicer set forth in Section 2.01 of this
Agreement shall prove to be incorrect, which failure or
breach (A) materially and adversely affects or could affect
the interest or rights of MBIA, the Trustee, or the
Certificateholders and (B) continues unremedied for a period
of 30 days after the date on which the Servicer becomes
aware of such failure or breach or written notice of such
failure or breach, requiring the situation giving rise to
such breach or non-conformity to be remedied, shall have
been given to a Servicing Officer of the Servicer by the
Trustee, MBIA, the Transferor, or the Back-up Servicer, or
to a Servicing Officer of the Servicer, MBIA and the Trustee
by Holders of Certificates representing not less than 25% of
the Certificate Balance; or
(v) Any assignment by the Servicer to a delegate of
its duties or rights under this Agreement, except as
specifically permitted hereunder, or any attempt to make
such an assignment; or
(vi) The entry of a decree or order for relief by a
court having jurisdiction in respect of the Servicer or a
petition against the Servicer in an involuntary case under
any federal bankruptcy laws, as now or hereafter in effect,
or any other present or future federal or state bankruptcy
insolvency or similar law, or appointing a conservator,
receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official for the Servicer or
for any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Servicer and
the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(vii)The commencement by the Servicer of a voluntary
case under any federal bankruptcy laws, as now or hereafter
in effect, or any other present or future federal or state
bankruptcy, insolvency, reorganization or similar law, or
the consent by the Servicer to the appointment of or taking
possession by a conservator, receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official
in any insolvency, readjustment of debt, marshaling of
assets and liabilities, bankruptcy or similar proceedings of
or relating to the Servicer or relating to a substantial
part of its property, or the making by the Servicer of an
assignment for the benefit of creditors, or the failure by
the Servicer generally to pay its debts as such debts become
due or if the Servicer shall admit in writing its inability
to pay its debts as they become due, or the taking of
corporate action by the Servicer in furtherance of any of
the foregoing; or
(viii)The occurrence of a Trigger Event if the initial
Servicer is the Servicer.
(b) So long as a Servicer Event of Default shall not have
been remedied within the period set forth in (i), (ii), (iii),
(iv) or (vi) above, as applicable, or if a Servicer Event of
Default described in (v), (vii) or (viii) above occurs, the
Trustee, at the direction of MBIA shall, or if there has been an
MBIA Default or Termination, the Trustee, the Transferor, or the
Back-up Servicer may and shall at the request of the Controlling
Holders, by notice (the "Servicer Termination Notice") then given
in writing to the Servicer and the Back-up Servicer, terminate
all, but not less than all, of the rights and obligations of the
Servicer under this Agreement.
(c) Upon the occurrence of a Trigger Event, the Trustee
shall, at the direction of MBIA, or if there has been an MBIA
Default or Termination, the Trustee, the Transferor, or the Backup
Servicer may and shall at the request of the Controlling
Holders, by Servicer Termination Notice then given in writing to
the Servicer and the Back-up Servicer, terminate all but not less
than all of the rights and obligations of the Servicer under this
Agreement.
(d) On or after the receipt by the Servicer of a Servicer
Termination Notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the
Lease Contracts or otherwise, shall pass to and be vested in the
successor Servicer appointed pursuant to Section 6.02 hereof,
and, without limitation, such successor Servicer is hereby
authorized and empowered to execute and deliver, on behalf of the
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 of the
Lease Contracts and related documents, or otherwise. The
Servicer agrees to cooperate with the Trustee, the Back-up
Servicer and the successor Servicer in effecting the termination
of the responsibilities and rights of the Servicer hereunder,
including, without limitation, the transfer to the successor
Servicer for administration by it of all cash amounts that shall
at the time be held by the Servicer for deposit, or have been
deposited by the Servicer, in the Collection Account or
thereafter received with respect to any of the Lease Contracts.
To assist the successor Servicer in enforcing all rights under
the Lease Contracts and the Insurance Polices to the extent they
relate to the Lease Contracts, the outgoing Servicer, at its own
expense, shall transfer its records (electronic and otherwise)
relating to such Lease Contracts to the successor Servicer in
such form as the successor Servicer may reasonably request and
shall transfer the related Lease Contracts and Lease Contract
Files (to the extent not held by the Trustee) and all other
records, correspondence and documents relating to the Lease
Contracts that it may possess to the successor Servicer in the
manner and at such times as the successor Servicer shall
reasonably request. In addition to any other amounts that are
then payable to the Servicer under this Agreement, the Servicer
shall be entitled to receive reimbursements for any unreimbursed
Servicer Advance made during the period prior to the delivery of
a Servicer Termination Notice pursuant to this Section 6.01 which
terminates the obligations and right of the Servicer under this
Agreement.
Section 6.02 Back-up Servicer to Act; Taking of Bids;
Appointment of Successor Servicer.
(a)(i) Except as provided in Section 6.02(d) hereof,
on and after the time the Servicer resigns pursuant to
Section 5.04 hereof or receives a Servicer Termination
Notice pursuant to Section 6.01(b) or (c) hereof, the
Back-up Servicer shall, unless prevented by law,
automatically and without further action be the successor
Servicer. If the Back-up Servicer cannot serve as successor
Servicer, MBIA, or if an MBIA Default or Termination has
occurred and is continuing, the Trustee, shall appoint
another firm acceptable to it and the Controlling Holders.
(ii) The successor Servicer shall, upon the execution
of a written agreement to be bound by all of the provisions
of this Agreement, be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement
and the transactions set forth or provided for herein and
shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the
terms and provisions hereof; provided, however, that the
successor Servicer (x) shall not be required to make any
Servicer Advance if such Servicer Advance would be
prohibited by applicable law and (y) shall not be liable for
any acts or omissions of the outgoing Servicer or for any
breach by the outgoing Servicer of any of its
representations and warranties contained herein or in any
related document or agreement. With the prior written
consent of MBIA (which consent shall not be unreasonably
withheld), the successor Servicer may subcontract with
another firm to act as subservicer so long as the successor
Servicer remains fully responsible and accountable for
performance of all obligations of the Servicer on and after
the time the Servicer receives the Servicer Termination
Notice. The successor Servicer shall be entitled to the
Servicer Fee and any Additional Servicer Fee, subject to the
taking of bids as described in subsection (b) below.
(b) Solely for purposes of establishing the fee to be paid
to the successor Servicer upon receipt of a Servicer Termination
Notice, the Back-up Servicer shall solicit written bids, with a
copy to MBIA (such bids to include a proposed servicer fee and
servicing transfer costs) from not less than three entities
experienced in the servicing of Lease Contracts similar to the
Lease Contracts and that are not affiliates of the Trustee, the
Back-up Servicer, the Servicer or the Transferor and are
reasonably acceptable to MBIA. The Transferor may also solicit
additional bids from other such entities. Any such written
solicitation shall prominently indicate that bids should specify
any applicable subservicing fees required to be paid from the
Servicer Fee and that any fees and transfer costs in excess of
the Servicer Fee shall be paid only pursuant to Section
12.02(d)(ix) of the Trust and Security Agreement as the
Additional Servicer Fee. The successor Servicer shall act as
Servicer hereunder and shall, subject to the availability of
sufficient funds in the Collection Account pursuant to Section
12.02(d)(i) (up to the Servicer Fee) and Section 12.02(d)(ix) (up
to any Additional Servicer Fee and any successor Servicer's
Transition Costs) and Section 12.02(d)(ix) (up to any additional
Transition Costs) of the Trust and Security Agreement, receive as
compensation therefor a fee equal to the fee proposed in the bid
so solicited which provides for the lowest combination of
servicer fee and transition costs, as reasonably determined by
MBIA.
(c) The Servicer, the Back-up Servicer, the Transferor, the
Trustee and such successor Servicer shall take such action,
consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Back-up Servicer (or the
Trustee or the Certificateholders if such Certificateholders have
previously reimbursed the Back-up Servicer and the Trustee
therefor) shall be reimbursed for Transition Costs, if any,
incurred in connection with the assumption of responsibilities of
the successor Servicer, upon receipt of documentation of such
costs and expenses and in accordance with Section 12.02(d)(ix) of
the Trust and Security Agreement. The Back-up Servicer shall
have no claim against the Transferor or the Trust Estate for any
costs and expenses incurred in effecting such succession in
excess of the amount specified in the definition of "Transition
Costs."
(d) Upon written notification to the Trustee that on any
Determination Date following the solicitation of bids provided
for in Section 6.02(b) hereof, the sum of the aggregate Implicit
Principal Balance for all Lease Contracts plus the amount on
deposit in the Cash Collateral Account less the Class A
Certificate Balance and Class B Certificate Balance is less than
the lesser of (1) $50,000 or (2) the proposed servicing transfer
costs set forth in the lowest bid solicited pursuant to Section
6.02(b) hereof, then the Back-up Servicer shall be relieved of
its obligation under Section 6.02(a)(i) hereof, and MBIA, or if
there is an MBIA Default or Termination, the Transferor shall
appoint a successor Servicer. In such event, MBIA shall be
reimbursed for any Transition Costs incurred solely pursuant to
Section 6.02(b) hereof in the manner and to the extent provided
for in Section 12.02(d)(ix) of the Trust and Security Agreement.
Section 6.03 Notification to Certificateholders. The
Servicer shall promptly notify the successor Servicer (if
specified in the Trust and Security Agreement), Back-up Servicer,
MBIA, the Transferor, the Rating Agencies and the Trustee of any
Servicer Event of Default upon actual knowledge thereof by a
Servicing Officer. Upon any termination of, or appointment of a
successor to, the Servicer pursuant to this Article 6, the
Trustee shall give prompt written notice thereof to the Rating
Agencies and the Certificateholders at their respective addresses
appearing in the Certificate Register.
Section 6.04 Waiver of Past Defaults. The Trustee shall,
at the direction of MBIA or at the direction of the Controlling
Holders, on behalf of all Certificateholders, with the written
consent of MBIA, so long as there is no MBIA Default or
Termination, waive any default by the Servicer in the performance
of its obligations hereunder and its consequences, other than a
default with respect to required deposits and payments in
accordance with Article 3 or a default of the type set forth in
clause (vii) or (viii) of Section 6.01(a) hereof, which waiver
shall require the consent of each Certificateholder and MBIA.
Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer 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 waived. The Trustee shall provide to the
Rating Agencies notification of any such waiver.
Section 6.05 Effects of Termination of Servicer.
(a) Upon the appointment of the successor Servicer, the
predecessor Servicer shall remit any Scheduled Payments, Overdue
Payments and any other payments or proceeds that it may receive
pursuant to any Lease Contract or otherwise to the successor
Servicer after such date of appointment.
(b) After the delivery of a Servicer Termination Notice,
the outgoing Servicer shall have no further obligations with
respect to the management, administration, servicing,
enforcement, custody or collection of the Lease Contracts and the
successor Servicer shall have all of such obligations, except
that the outgoing Servicer will transmit or cause to be
transmitted directly to the successor Servicer, promptly on
receipt and in the same form in which received, any amounts held
by the outgoing Servicer (properly endorsed where required for
the successor Servicer to collect them) received as payments upon
or otherwise in connection with the Lease Contracts. The
outgoing Servicer's indemnification obligations pursuant to
Section 5.01 hereof will survive the termination of the Servicer
but will not extend to any acts or omissions of a successor
Servicer.
Section 6.06 No Effect on Other Parties. Upon any
termination of the rights and powers of the Servicer pursuant to
Section 6.01 hereof, or upon any appointment of a successor
Servicer, all the rights, powers, duties and obligations of the
other parties under this Agreement, the Trust and Security
Agreement, and the Lease Acquisition Agreement shall remain
unaffected by such termination or appointment and shall remain in
full force and effect thereafter.
ARTICLE 7
THE BACK-UP SERVICER
Section 7.01 Representations of Back-up Servicer. The
Back-up Servicer makes the following representations and
warranties:
(a) The Back-up Servicer has been duly organized and is
validly existing as a national banking association in good
standing under the laws of the United States of America, with
power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such
business is presently conducted.
(b) The Back-up Servicer has the power and authority to
execute and deliver this Agreement, the Trust and Security
Agreement and the Insurance Agreement and to carry out their
respective terms; and the execution, delivery, and performance of
this Agreement, the Trust and Security Agreement and the
Insurance Agreement shall have been duly authorized by the
Back-up Servicer by all necessary corporate action.
(c) Each of this Agreement, the Trust and Security
Agreement and the Insurance Agreement constitutes a legal, valid,
and binding obligation of the Back-up Servicer enforceable in
accordance with its respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights
in general and by general principles of equity, regardless of
whether such enforceability shall be considered in a proceeding
in equity or at law.
(d) The consummation of the transactions contemplated by
this Agreement, the Trust and Security Agreement and the
Insurance Agreement and the fulfillment of the terms thereof
shall not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or
by-laws of the Back-up Servicer, or any indenture, agreement, or
other instrument to which the Back-up Servicer is a party or by
which it shall be bound; 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; nor violate
any law or any order, rule, or regulation applicable to the
Back-up Servicer of any court or of any Federal or state
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Back-up Servicer or
its properties.
(e) There are no proceedings or investigations pending or,
to the Back-up Servicer's best knowledge, threatened before any
court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Back-up
Servicer or its properties (i) asserting the invalidity of the
Servicing Agreement, the Trust and Security Agreement or the
Insurance Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement, the Trust
and Security Agreement or the Insurance Agreement, (iii) seeking
any determination or ruling that might materially and adversely
affect the performance by the Back-up Servicer of its obligations
under, or the validity or enforceability of, this Agreement, the
Trust and Security Agreement or the Insurance Agreement.
Section 7.02 Merger or Consolidation of, or Assumption of
the Obligations of, Back-up Servicer. Any Person (i) into which
the Back-up Servicer may be merged or consolidated, (ii) which
may result from any merger or consolidation to which the Back-up
Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Back-up Servicer substantially as a
whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the
Back-up Servicer hereunder, shall be the successor to the Back-up
Servicer under this Agreement with the prior written consent of
MBIA and without any further act on the part of any of the
parties to this Agreement. In the event that the resulting
entity does not meet the eligibility requirements for the Trustee
set forth in the Trust and Security Agreement, the Back-up
Servicer, upon the written request of MBIA, shall resign from its
obligations and duties under this Agreement.
Section 7.03 Back-up Servicer Resignation. The Back-up
Servicer shall not resign from its obligations and duties under
this Agreement, the Trust and Security Agreement or the Insurance
Agreement except (i) as provided in Section 7.02 above, or
(ii) upon determination that the performance of its duties shall
no longer be permissible under applicable law (any such
determination permitting the resignation of the Back-up Servicer
shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee and MBIA). Upon the Back-up Servicer's
resignation or termination pursuant to Sections 7.02 hereof or
this Section 7.03, notice thereof shall be provided to the Rating
agencies and the Back-up Servicer shall comply with the
provisions of this Agreement until the acceptance of a successor
servicer.
Section 7.04 Oversight of Servicing.
(1) Prior to each Payment Date, the Back-up Servicer shall
review the Monthly Servicer's Report related thereto and shall
determine the following:
(i) that such Monthly Servicer's Report is complete on
its face;
(ii) that the amount credited to and withdrawn from the
Lockbox Account is the same as the amount set forth in the
Monthly Servicer's Report as so credited; and
(iii) that the amounts credited to and withdrawn
from the Collection Account and the Cash Collateral Account,
and the balance of such accounts, as set forth in the
records of the Back-up Servicer, are the same as the amount
set forth in the Monthly Servicer's Report.
(b) The Back-up Servicer shall, within 30 days of the
receipt thereof, load the Computer Tape received from the
Servicer pursuant to the Section 4.01 hereof, make sure such
Computer Tape is in readable form and shall calculate and check
the following:
(i) the Aggregate IPB as of the most recent
Calculation Date;
(ii) the Class A Principal Distribution Amount and the
Class B Principal Distribution Amount as of the most recent
Payment Date; and
(iii) the Annualized Gross Default Rate, the
Cumulative Gross Default Rate and the Delinquency Rate for
the related Monthly Period as set forth in the most recent
Monthly Servicer's Report.
In addition, the Back-up Servicer shall confirm that the items
set forth in the Monthly Servicer's Report, other than the items
listed in the section entitled "Deposits by or on behalf of the
Servicer" are accurate based solely on a comparison to the
Computer Tape referred to above.
(c) In the event of any discrepancy between the information
set forth in subparagraphs (a) and (b) as calculated by the
Servicer from that determined or calculated by the Back-up
Servicer, the Back-up Servicer shall promptly notify the
Servicer, the Trustee, the Certificateholders and MBIA of such
discrepancy. If within 30 days of such notice being provided to
the Servicer, the Back-up Servicer and the Servicer are unable to
resolve such discrepancy, the Back-up Servicer shall promptly
notify the Rating Agencies, MBIA and the Holders of the
Certificates of such discrepancy.
(d) Based solely on the information included in the Initial
Lease Schedule delivered on the Closing Date and each Amended
Lease Schedule delivered on each Acquisition Date and the
Computer Tapes provided each Payment Date thereafter, the Back-up
Servicer shall determine that any Funded Lease Contracts and
Substitute Lease Contracts satisfy the criterion set forth in
Section 3.04(b) of the Lease Acquisition Agreement and that the
acquisition of such Funded Lease Contracts and Substitute Lease
Contracts do not violate the Concentration Limits set forth in
the Lease Acquisition Agreement.
(e) The Back-up Servicer will make a site visit to the
offices of the Servicer on an annual basis for the purpose of
reviewing the operations of the Servicer. The reasonable out-of
pocket costs and expenses of the Back-up Servicer incurred in
connection with this Agreement, including without limitation, the
site visit referred to in the preceding sentence will be
reimbursed to the Back-up Servicer by the Servicer.
(f) Other than as specifically set forth elsewhere in this
Agreement, the Back-up Servicer shall have no obligation to
supervise, verify, monitor or administer the performance of the
Servicer and shall have no liability for any action taken or
omitted by the Servicer.
(g) The Back-up Servicer shall consult fully with the
Servicer as may be necessary from time to time to perform or
carry out the Back-up Servicer's obligations hereunder, including
the obligation to succeed at any time to the duties and
obligations of the Servicer as servicer under Section 6.02
hereof.
Section 7.05 Back-up Servicer Compensation. As
compensation for the performance of its obligations as Back-up
Servicer under this Agreement the Back-up Servicer shall be
entitled to receive the Back-up Servicer Fee.
Section 7.06 Duties and Responsibilities.
(a) The Back-up Servicer shall perform such duties and only
such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this
Agreement against the Back-up Servicer; and
(b) In the absence of bad faith or negligence on its part,
the Back-up Servicer may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Back-up Servicer
and conforming to the requirements of this Agreement; but in the
case of any such certificates or opinions, which by any provision
hereof are specifically required to be furnished to the Back-up
Servicer, the Back-up Servicer shall be under a duty to examine
the same and to determine whether or not they conform to the
requirements of this Agreement.
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.01 Termination.
(a) Except with respect to a particular party under
Sections 5.01, 5.04, 5.05, 6.01, 7.02 or 7.03 hereof, the
respective duties and obligations of the Servicer, the
Transferor, the Back-up Servicer and the Trustee created by this
Agreement shall terminate upon the discharge of the Trust and
Security Agreement in accordance with its terms; and the
respective duties and obligations of the Trustee shall terminate
with respect to the Trustee in the event the Trustee resigns or
is replaced under Section 7.09 of the Trust and Security
Agreement; provided, however, that no resignation or removal of
the Trustee and no appointment of a successor Trustee shall
become effective until the acceptance of appointment by the
successor Trustee under Section 7.10 of the Trust and Security
Agreement. Upon the termination of this Agreement pursuant to
this Section 8.01(a), the Servicer shall pay all monies with
respect to the Lease Assets held by the Servicer and to which the
Servicer is not entitled to the Transferor or upon the
Transferor's order.
(b) This Agreement shall not be automatically terminated as
a result of an Event of Default under the Trust and Security
Agreement or any action taken by the Trustee thereafter with
respect thereto, and any liquidation or preservation of the Trust
Estate by the Trustee thereafter shall be subject to the rights
of the Servicer to service the Lease Receivables and to collect
servicing compensation as provided hereunder.
Section 8.02 Amendments.
(a) Subject to paragraph (b) of this Section 8.02, this
Agreement may be amended from time to time by the Transferor, the
Servicer, the Back-up Servicer, and the Trustee, with the consent
of MBIA but without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provisions
herein that may be inconsistent with any other provisions herein
and therein, as the case may be.
(b) The provisions of this Agreement may be waived from
time to time and this Agreement may be amended from time to time
by the Transferor, the Servicer and the Back-up Servicer, with
the consent of the Trustee, MBIA and the Controlling Holders, for
the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement; provided,
however, that no such amendment or waiver shall, without the
consent of each Certificateholder, (i) alter the priorities with
which any allocation of funds shall be made under this Agreement,
(ii) permit the creation of any lien on the Trust Estate (other
than the lien of the Trust and Security Agreement) or any portion
thereof or deprive any such Certificateholder of the benefit of
this Agreement with respect to the Trust Estate or any portion
thereof, (iii) modify this Section 8.02 or (iv) modify any of the
items referred to in clauses (i) through (viii) of Section 9.02
(a) of the Trust and Security Agreement.
(c) Promptly after the execution of any amendment, the
Servicer shall send to the Trustee, MBIA, each Holder of the
Certificates and each Rating Agency a conformed copy of each such
amendment.
(d) Any amendment or modification effected contrary to the
provisions of this Section 8.02 shall be void.
(e) The manner of obtaining any consents from the
Certificateholders and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such
reasonable regulations as the Trustee may prescribe.
Section 8.03 GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 8.04 Notices. All demands, notices and
communications hereunder shall be in writing and shall be
delivered or mailed by registered or certified United States
mail, postage prepaid, and addressed, in each case as follows:
(a) if to the Transferor, at 6424 W. 91st Avenue, Suite C,
Westminster, CO 80030; (b) if the Servicer, at 6424 W. 91st
Avenue, Westminster, CO 80030; (c) if to the Trustee, at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070;
(d) if to MBIA, at 113 King Street, Armonk, New York 10504,
Attention: Structured Finance - Insured Portfolio Management (SF
IPM); or (e) if to the Certificateholders at the address set
forth on Exhibit A to the applicable Certificate Purchase
Agreement. All notices and demands shall be deemed to have been
given either at the time of the delivery thereof to any officer
of the Person entitled to receive such notices and demands at the
address of such Person for notices hereunder, or on the third day
after the mailing thereof to such address, as the case may be.
Section 8.05 Severability of Provisions. If one or more
of the provisions of this Agreement shall be for any reason
whatever held invalid, such provisions shall be deemed severable
from the remaining covenants and provisions of this Agreement,
and shall in no way affect the validity or enforceability of such
remaining provisions, the rights of any parties hereto, or the
rights of the Trustee, MBIA or any Certificateholder. To the
extent permitted by law, the parties hereto waive any provision
of law which renders any provision of this Agreement prohibited
or unenforceable in any respect.
Section 8.06 Binding Effect. All provisions of this
Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the
Certificateholders. This Agreement may not be modified except by a
writing signed by all parties hereto.
Section 8.07 Article Headings and Captions. The article
headings and captions in this Agreement are for convenience of
reference only, and shall not limit or otherwise affect the
meaning hereof.
Section 8.08 Legal Holidays. In the case where the date
on which any action required to be taken, document required to be
delivered or payment required to be made is not a Business Day,
such action, delivery or payment need not be made on such date,
but may be made on the next succeeding Business Day.
Section 8.09 Assignment for Security for the Certificates.
The Servicer and the Back-up Servicer understand that the
Transferor will convey to the Trustee all its right, title and
interest to this Agreement. The Servicer and the Back-up
Servicer consent to such conveyance and further agree that all
representations, warranties, covenants and agreements of the
Servicer and the Back-up Servicer made herein shall also be for
the benefit of and inure to the Trustee and all Holders from time
to time of the Certificates.
Section 8.10 No Servicing Assignment. Notwithstanding
anything to the contrary contained herein, except as provided in
Sections 5.02, 5.04 and 8.09 hereof, this Agreement may not be
assigned by the Transferor or the Servicer without the prior
written consent of MBIA and the Controlling Holders.
Section 8.11 MBIA Default or Termination. If an MBIA
Default or Termination occurs and is continuing, MBIA's right to
consent hereunder and to direct the Trustee shall be voided and,
in such event, in all provisions of this Agreement wherein MBIA's
consent or direction is required or permitted, the consent or
direction of the Controlling Holders shall be required or
permitted unless a larger number of Holders is required under the
relevant provision of this Agreement.
Section 8.12 Third Party Beneficiary. Each of MBIA and
the Holders of the Certificates are express third party
beneficiaries to this Agreement.
Section 8.13 Counterparts. This Agreement may be executed
in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the Transferor, the Servicer, the
Trustee and the Back-up Servicer have caused this Servicing
Agreement to be duly executed by their respective officers
thereunto duly authorized as of the date and year first above
written.
GF FUNDING CORP. III,
Transferor
By: ______________________
Name: William W. Wehner
Title: President
GRANITE FINANCIAL, INC.,
Servicer
By: ______________________
Name: William W. Wehner
Title: President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee and Back-up Servicer
By: ______________________
Name: Eileen Stelzner
Title: Assistant Vice
President
Exhibit A
Form of Monthly Servicer's Report
[see attached]
Exhibit B
FORM OF LOCKBOX AGREEMENT
This Lockbox Agreement, dated as of [
], 1997 is by and between [ ] (the
"Bank"), Granite Financial, Inc. ("Granite"), as servicer on
behalf of GF Funding Corp. III, GF Funding Corp. III, Norwest Bank
Minnesota, National Association, as Trustee under the terms of the
Trust and Security Agreement dated as of March 1, 1997 for the
benefit of MBIA Insurance Corporation and the Certificateholders
thereunder (the "Secured Party").
WHEREAS, GF Funding Corp. III has assigned to the Secured
Party the right to certain payments which GF Funding Corp. III is
to receive from its customers;
WHEREAS, GF Funding Corp. III and the Secured Party wish to
expedite the posting of deposits to the Secured Party account
described below (the "Secured Party's Account"):
[enter info re Collection Account]
WHEREAS, GF Funding Corp. III's customers have been directed
to mail payments to GF Funding Corp. III at the post office box
described as follows:
GF Funding Corp. III
[address]
(the "Lockbox"); and
WHEREAS, Granite, GF Funding Corp. III, the Secured Party, and
Bank wish to set forth their mutual understandings as to the terms
and conditions upon which Bank will pick up the contents of the
Lockbox and upon which Bank will receive such contents at its
Operations Center, process the checks, drafts and other
instruments for the payment of money contained in such mail, and
wire transfer the appropriate amounts to the Secured Party's
Account.
NOW THEREFORE, in consideration of the promises and of the
mutual covenants and agreements hereinafter contained, the parties
agree as follows:
1. Deliver Contents of Lockbox to Operations Center
Each business day, Bank or its authorized designees shall
remove the contents of the Lockbox and deliver them to Bank's
Operations Center in ________________ ("Operations Center"). Every
day is a business day except Saturdays, Sundays and holidays
observed by Bank. Bank may, at its option and without any
obligation to do so, perform the services set forth in this
Agreement on a day that is not a business day.
2. Process Contents of Lockbox
Bank will process the mail removed from the Lockbox ("Items")
and deliver it to its Operations Center. Standard processing of
the Items will generally include the following:
2.1 All Items will be opened and inspected.
2.2 Each check will be examined for date, payee, signature,
consistency of written and numerical amounts on the face
of the check, and legends. Bank will only process
checks which are made payable to a payee whose name or
reasonable variations thereof appear on the "Wholesale
Lockbox Implementation Worksheet" attached as Exhibit I
hereto.
2.2.1 Any check that is undated will be dated by Bank
with the date that the Item is processed, and will
be processed as if correctly dated.
2.2.2 A postdated check will be processed if the
check is postdated not later than 2 days from the
date the check was received at the Operations
Center. Otherwise the check will be delivered to
the Granite.
2.2.3 Any check whose written and numerical amounts
disagree will be credited to the Lockbox Account
(as defined below) in an amount equal to the
written amount; provided however, that if the
written amount is ambiguous, such check will be
delivered to Granite.
2.2.4 A request to obtain proper signature or
authority to pay will be stamped on any unsigned
check, and such check will be deposited to the
Lockbox Account.
2.2.5 If a check contains the legend "paid in full"
or any other language that is intended to modify GF
Funding Corp. III's contractual rights, or is
payable to a payee other than a payee whose name or
reasonable variations thereof appear on the
"Wholesale Lockbox Implementation Worksheet"
attached as Exhibit I hereto, the check will be
delivered to Granite.
2.3 Mail that does not contain any checks will be delivered
to Granite.
2.4 If the amount of any check differs from the amount of
the invoice received in the same envelope, the amount on
the invoice will be crossed out and the amount of the
check will be inserted.
2.5 If a check is received without an accompanying invoice,
any related correspondence and other material received
with such check will be stapled to the envelope in which
it is received.
2.6 Each business day, copies of all deposit tickets, all
tape listing, all rejected checks, and all other
instruments and papers referred to in this paragraph
will be delivered to Granite in accordance with the
instructions set forth in the "Wholesale Lockbox
Implementation Worksheet" attached hereto as Exhibit I.
3. Deposit Checks to Lockbox Account; Wire Transfer to Secured
Party's Account
(a) For all processed checks, other than those with respect
to which Paragraph 2 provides a different procedure, the GF
Funding Corp. III hereby authorize Bank to supply any endorsement
necessary to pass good title of such checks to the Secured Party
and to deposit them into an account (the "Lockbox Account") at the
Bank held in the name of the Secured Party on the business day of
receipt; provided, however, that for this purpose checks received
by Bank at its Operations Center after 3:00 P.M. on a business day
will be deemed to have been received on the following business
day.
(b) On each business day, Bank shall wire transfer in
immediately available funds to the Secured Party's Account, all
amounts on deposit in the Lockbox Account representing payments
collected and cleared by Bank from customers of GF Funding Corp.
III which are available by 3:00 P.M. on such business day.
4. Credit for Checks
Bank will credit the Lockbox Account for each deposited
check in accordance with Bank's then current availability schedule
applicable to the Lockbox Account. Collected balances will be
used in computing earnings allowances which shall only be used to
offset the fees due pursuant to Section 7 below.
5. Account Subject to Deposit Agreement
Except as modified by this Agreement each and every provision
of any account agreement between the Secured Party and Bank with
respect to the Lockbox Account shall remain in full force and
effect.
6. Limitation of Liability
Bank's liability in connection with the performance of the
transactions covered by this Agreement shall be strictly limited
as follows:
6.1 Bank shall have no duty to perform services not
enumerated herein. Bank shall exercise Ordinary Care in
selecting agents and independent contractors to pick up
and deliver the contents of the Lockbox ("Bank's
Designees"). In the event of loss caused by Bank's
Designee's negligence or misconduct, Bank's sole
obligation will be to exercise reasonable efforts, at GF
Funding Corp. III's cost and expense, to assist GF
Funding Corp. III in obtaining redress from the
responsible party. "Ordinary Care" means the observance
of reasonable commercial standards, prevailing in the
area in which Bank is located, with respect to the
business in which Bank is engaged.
6.2 Bank shall exercise Ordinary Care in determining the
optimum time to pick up mail at the Lockbox and the best
carrier to deliver that mail to Bank. However, Bank
shall not be liable in the event the chosen pickup time
and carrier prove not to result in the earliest possible
availability of funds.
6.3 In performing its duties hereunder, Bank will exercise
Ordinary Care and will act in good faith. Bank will not
be accountable for its failure to perform any of its
obligations hereunder, except in the event of its
negligence or willful misconduct, or that of its
employees, officers, or agents. If, as a result of such
negligence or willful misconduct, Bank is liable for
mishandling any item, such liability shall be limited to
the lesser of the face amount of any check involved or
the actual amount of GF Funding Corp. III's direct loss
as a result of such mishandling, and in no event shall
Bank be responsible for any incidental or consequential
damages.
6.4 Bank shall not be liable for any loss, delay or damage
arising from acts beyond its control including but not
limited to acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental regulations imposed after
the fact, fire, communication line failures, power
failures, electronic data processing equipment failures,
earthquakes or other disasters.
7. Fees.
For the services to be provided by Bank, Granite will pay Bank
in accordance with the schedule attached hereto as Schedule I.
Where applicable, there shall be added to the fees amounts equal
to any applicable taxes, however designated, exclusive of taxes
based on the net income of Bank. Except as otherwise
agreed, all fees and taxes shall be invoiced monthly and shall be
due and payable thirty (30) days after date of invoice.
8. Access to Lockbox and Lockbox Account.
Notwithstanding anything to the contrary contained herein, the
Lockbox and the Lockbox Account shall be maintained by Bank for
the sole benefit of the Secured Party, on behalf of MBIA Insurance
Corporation and all other persons for whom the Secured Party is
acting as trustee. Secured Party shall have sole dominion and
control over the Lockbox and the Lockbox Account at all times and
shall exclusively be entitled to give instructions to Bank
concerning the Lockbox and the Lockbox Account. Bank is hereby
authorized to follow any and all instructions given by the Secured
Party to Bank regarding the Lockbox and the Lockbox Account from
time to time.
9. Debits to the Lockbox Account.
Bank agrees not to make any charges or debits to the Lockbox
Account, except as approved by Secured Party and MBIA or exercise
any right of set-off or banker's lien with respect thereto;
provided, however that Bank may (without the approval of the
Secured Party or MBIA) credit or debit the Lockbox Account to
correct processing mistakes which are capable of correcting,
including without limitation chargebacks, return items and other
similar account adjustments.
10. Term and Termination.
This Agreement shall be effective as of the date and year
first written above when a copy of this Agreement, executed by the
Bank, Granite, Secured Party and GF Funding Corp. III, has been
delivered to Bank. The parties hereto may terminate this
Agreement at any time, with or without cause, upon 30 days'
written notice to the other parties.
11. Notice.
Any notice required or permitted by this Agreement shall be
deemed to have been given when mailed, postage prepaid, or when
delivered to the following addresses:
If to Bank:
If to the Secured Party:
6th Street & Marquette Minneapolis,
MN 55479-0070
If to GF Funding Corp. III:
6424 W. 91st Avenue, Suite C
Westminster, CO 80030
If to Granite:
6424 W. 91st Avenue
Westminster, CO 80030
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
[BANK]
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Secured Party
By:
Name:
Title:
GF FUNDING CORP. III
By:
Name:
Title:
GRANITE FINANCIAL, INC.
By:
Name:
Title:
Schedule I
attach fee schedule
EXHIBIT I
Attach Wholesale Lockbox Implementation Worksheet
2
h:\FWD\GFI-CA.doc
UNSECURED REVOLVING CREDIT AGREEMENT
This Unsecured Revolving Credit Agreement (the "Agreement") is
made as of January ______, 1997, between GRANITE FINANCIAL, INC.,
a Delaware corporation ("Borrower") and COLORADO NATIONAL BANK, a
national banking association ("Bank").
RECITALS:
i. Borrower and Bank have entered into that certain Loan and
Security Agreement dated January ____, 1997 among Borrower,
CoreStates Bank, N.A., as agent, Bank as a Lender and the
other financial institutions named therein (as it may be
supplemented, amended, extended or replaced from time to
time, herein called the "Warehouse Line Agreement");
ii. Borrower has requested that Bank make available to Borrower
an unsecured revolving line of credit in the amount of
$2,000,000 for working capital purposes due to timing
differences between lease originations and warehousing or
securitization or sale; and
iii. Bank is willing to make available such line of credit as
requested by Borrower, upon and subject to the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants contained in this Agreement, Borrower and Bank
agree as follows:
1.TERMS OF BORROWING
1.01 Revolving Credit Line. Subject to the following terms and
conditions, Bank agrees to make a line of credit available
to Borrower (the "Revolving Credit Line") in the maximum
amount of $2,000,000 (the "Maximum Line") or, if less, the
amount of the Borrowing Base (defined below), pursuant to
which Bank will make loans to Borrower (each an "Advance")
in such amounts as Borrower may request from time to time,
the proceeds of which shall be used for general short-term
working capital. The aggregate outstanding principal balance
of all Advances made hereunder may not exceed the Maximum
Line. Amounts borrowed under the Revolving Credit Line may
be repaid prior to the Termination Date (defined below)
without penalty and may be reborrowed subject to the terms
hereof.
Bank's commitment to make Advances hereunder is subject to
the conditions in Section 3 below and the following
limitations:
a. Bank's commitment to lend hereunder terminates on
the earlier of (i) January 31, 1998, (ii) such date
Bank is no longer a Lender under the Warehouse Line
Agreement, or (iii) the date of any termination under
Section 7 below (the "Termination Date");
b. Bank shall not be obligated to make any Advance
which would cause the outstanding principal balance of
the Revolving Credit Line (the "Line Balance") to
exceed the Maximum Line or, if less, the Borrowing
Base; and
c. Bank shall not be obligated to make any Advance if
an Event of Default, as defined in Section 7 below, or
an event which, with the giving of notice or lapse of
time, or both, would become an Event of Default
(a "Potential Default"), has occurred and has not been
cured by Borrower or waived by Bank.
1.02 Line Note. Borrower's indebtedness to Bank for amounts
borrowed under the Revolving Credit Line and for interest
accrued thereon shall be evidenced by Borrower's promissory
note to Bank, on Bank's standard form for commercial
promissory notes and otherwise satisfactory to Bank, in the
principal amount of the Maximum Line (the "Line Note").
1.03 Interest. Borrower agrees to pay interest on the Line
Balance from time to time as provided herein. Interest will
accrue on the daily outstanding Line Balance at a
fluctuating rate per annum equal at all times to the sum of
the Reference Rate plus three fourths of one percent
(0.75%), which rate will change when and as the Reference
Rate changes. "Reference Rate" means the rate of interest
per annum announced publicly from time to time as Bank's
"reference rate", which may be a rate at, above or below the
rate or rates at which Bank lends to other parties and it is
not necessarily the lowest rate charged by Bank on
commercial loans. Accrued interest shall be due and payable
(i) on the first day of each month, (ii) at maturity of the
Line Note and (iii) on demand after such maturity. After
the occurrence of an Event of Default or after maturity or
any acceleration of maturity of the Line Note, at Bank's
option, the interest rate applicable to the Line Balance may
be increased as provided in the Line Note and Borrower
agrees to pay any such increased interest. Interest shall be
computed using the actual number of days in the period for
which such computation is made and a per diem rate equal to
1/360 of the fluctuating rate per annum.
1.04 Repayment of Principal. Borrower agrees to repay all
Advances made hereunder. The Line Balance will be due and
payable in full at the maturity of the Line Note, which will
be January 31, 1998 subject to acceleration upon the
occurrence of an Event of Default.
1.05 Borrowing Base and Related Definitions. The "Borrowing
Base" means from time to time an amount equal to 100% of the
present value (using the current interest rate under Section
1.03 above) of the total remaining payments due Borrower
under any and all Unencumbered Leases (as defined below)
owned and held by Borrower in the ordinary course of
business as shown on the most recent Borrowing Base
Certificate (defined below) delivered to Bank. "Borrowing
Base Certificate" means a certificate showing the
calculation of the Borrowing Base and the amount of the Line
Balance executed by an appropriate officer of Borrower in
the form attached as Exhibit A or otherwise in a form
satisfactory to Bank. "Lease" means any lease or purported
lease under which Borrower is lessor or of which Borrower
has received assignment directly from the original lessor,
now existing or hereafter arising, including but not limited
to all schedules, amendments, addenda and riders to any such
lease, together with all sums due or to become due
thereunder, all claims for damages arising out of a breach
thereof, and all rights of Borrower to terminate said lease,
to perform thereunder and to compel performance of the terms
thereof. "Lease Documents" means, with respect to any
Lease, all material documents connected therewith which are,
or would be, necessary for the enforcement of such Lease,
including without limitation all options to purchase the
relevant equipment, consents by landlords or other persons,
guaranties, notes, certificates of acceptance, copies of
invoices for all equipment subject thereto and assignments
from the original lessor, if any. "Unencumbered Lease"
means any Lease and the related Lease Documents that are not
subject to any assignment, lien, pledge, security interest
or other encumbrance to any other party or person.
1.06 Method of Borrowing. Requests for Advances may be submitted
by Borrower in writing or by telephone. Bank shall be
entitled to honor any such request it reasonably believes to
be genuine, whether or not the person making the request is
named as an authorized person in any corporate resolution or
instruction furnished Bank by Borrower. Advances shall be
disbursed only by deposit to a demand deposit account
maintained by Borrower at Bank. Proceeds of an Advance
shall be disbursed on the Banking Day (as defined in the
Colorado Uniform Commercial Code) Bank receives Borrower's
request if such request is received before 2:00 p.m. Denver
time on such day, and on the next Banking Day if received at
or after 2:00 p.m. on such day, and in either case the
conditions of Section 3 are met.
1.07 Letters of Credit. In the event and to the extent Bank
issues a letter of credit (an "L/C") on behalf of Borrower
under the Revolving Credit Line in lieu of an advance, the
Maximum Line shall be considered utilized by the amount of
such L/C. Borrower shall pay fees for any such L/C at the
time of issuance according to Bank's schedule of fees
relating to letters of credit in effect from time to time;
and Borrower shall execute Bank's then current standard form
application and agreement for such L/C. Amounts drawn under
any such L/C and honored by Bank but not immediately
reimbursed by Borrower to Bank shall become an Advance
hereunder in such amount at such time evidenced by the Line
Note and subject to all the terms of this Agreement, whether
or not any Event of Default or Potential Default has
occurred. No such L/C shall expire later than the
Termination Date.
1.08 Quarterly Rest Period. Notwithstanding that the Line
Balance is not due in full until maturity, during each
calendar quarter Borrower agrees to reduce the Line Balance
to zero and refrain from reborrowing for a period of fifteen
(15) consecutive days commencing at a time selected by
Borrower during each calendar quarter.
2.REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement, Borrower
represents and warrants as follows:
2.01 Incorporation. Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of the
State indicated at the beginning of this Agreement, and
Borrower is duly qualified or licensed and in good standing
to do business as a foreign corporation in all jurisdictions
in which the nature of Borrower's business requires
qualification.
2.02 Borrower's Authorization. The execution, delivery and
performance by Borrower of this Agreement, the Line Note and
any other documents required by the Bank in connection with
this Agreement are within Borrower's corporate powers, have
been authorized by all necessary corporate action and do not
and will not contravene Borrower's Articles of Incorporation
or Bylaws, violate any provision of law or result in a
breach of or default under any other agreement to which
Borrower is a party.
2.03 Litigation. There is no pending or threatened action,
claim, investigation, lawsuit or proceeding against or
affecting Borrower before any court, governmental agency,
arbitrator or arbitration panel, which if decided adversely
to Borrower would have a material adverse affect on the
financial condition or operations of Borrower or in any
event which claims or involves an amount exceeding $100,000
("Material Litigation").
2.04 Financial Condition. The balance sheet of Borrower as at
October 31, 1996, and the related statements of income and
retained earnings for the period then ended, copies of which
have been furnished to Bank, fairly present the financial
condition of Borrower as at such date and the results of the
operations of Borrower for the period ended on such date,
all in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis, subject
to year-end audit adjustments and omission of footnote
disclosures, and since October 31, 1996 there has been no
material adverse change in such condition or operations.
2.05 Valid Obligations. This Agreement constitutes, and the Line
Note when delivered hereunder will be, a legal, valid and
binding obligation of Borrower, enforceable against Borrower
in accordance with its respective terms.
2.06 Taxes. Borrower (i) has filed all tax reports and returns
required to be filed, including but not limited to reports
and returns concerning income, franchise, employment, sales
and use, and property taxes; (ii) has paid all of its tax
liabilities which were due on or prior to the date hereof;
and (iii) is not aware of any pending investigation by any
taxing authority or of any pending assessments or
adjustments which would materially increase its tax
liability.
2.07 Regulation U. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by
the Board of Governors of the Federal Reserve System), and
no proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
2.08 Disclosure. No information, exhibit or report furnished by
Borrower to Bank in connection with the negotiation of this
Agreement contains any material misstatement of fact or
omitted to state a material fact necessary to make the
statement contained therein not misleading.
2.09 Environmental Compliance. The ownership and operation of
Borrower's properties have been and are in compliance with
all applicable federal, state, and local environmental
protection and hazardous waste disposal statutes and
regulations. Borrower has not received any notice of claim
under or violation of any such laws affecting Borrower's
properties.
3.CONDITIONS PRECEDENT
3.01 Conditions Precedent to Initial Advance. The obligation of
Bank to make its initial Advance hereunder is subject to the
condition precedent that Bank shall have received on or
before the day of such Advance the following, each in form
and substance satisfactory to Bank:
i. the Line Note duly executed by Borrower;
ii. copies of the Articles of Incorporation and By-laws
of Borrower, each certified by the Secretary of Borrower
to be a true and correct copy thereof, including all
amendments thereto, if any;
iii. certified copies of the resolutions of the Board
of Directors of Borrower approving this Agreement and the
Line Note, and of all documents evidencing other
necessary corporate action and governmental approvals, if
any, with respect to this Agreement and the Line Note;
iv. a certificate of the Secretary of Borrower
certifying the names and true signatures of the officers
of Borrower authorized to sign this Agreement and the
Line Note; and
v.a certificate of the Secretary of State of the State in
which Borrower is incorporated certifying that Borrower
is a corporation duly organized and in good standing
under the laws of such State.
3.02 Conditions Precedent to All Advances. The obligation of
Bank to make each Advance (including the initial Advance)
shall be subject to the further conditions precedent that on
the date of such Advance:
i. the following statements shall be true:
(a) the representations and warranties
contained in Section 2 are correct on and as of
the date of such Advance as though made on and as
of such date; and
(b) no event has occurred and is continuing,
or would result from such Advance, which
constitutes an Event of Default or Potential
Default;
and Bank may request a certificate of an officer of
Borrower stating the foregoing;
ii. Bank shall have received such other approvals,
opinions or documents as Bank may reasonably request;
and
iii. Bank's legal counsel is reasonably satisfied as to
all legal matters incident to the making of such
Advance.
4.AFFIRMATIVE COVENANTS
So long as the Line Note or any indebtedness of Borrower to Bank
remains unpaid or Bank has any commitment to lend hereunder,
Borrower will:
4.01 Accounting Records. Maintain adequate books and accounting
records in accordance with GAAP, consistently applied,
reflecting all financial transactions of Borrower.
4.02 Inspections. At any reasonable time and from time to time,
permit any agents or representatives of Bank to examine and
make copies of and abstracts from records and books of
account of Borrower, to visit and inspect the properties of
Borrower and to discuss the affairs, finances and accounts
of Borrower with any of its officers or directors.
4.03 Maintenance of Property. Maintain and preserve all of its
properties and assets necessary or useful in the performance
of its business in good working order, repair and condition,
ordinary wear and tear excepted.
4.04 Insurance. Maintain insurance with responsible and
reputable insurance companies in such amounts and covering
such risks as is usually and customarily carried by
companies engaged in similar businesses and owning similar
properties, including, but not limited to, public liability,
property damage and worker's compensation, and deliver to
Bank, at Bank's request, schedules setting forth all
insurance then in effect and copies of such policies or
certificates of insurance.
4.05 Payment of Taxes, Liens. Pay and discharge, before the same
become delinquent, (i) all taxes, assessments and
governmental charges or levies imposed upon Borrower or upon
its property, and (ii) all lawful claims which, if unpaid,
might by law become a lien upon its property, except any
thereof which is being contested in good faith and by
appropriate proceedings.
4.06 Compliance with Laws. Comply in all material respects with
all applicable laws, rules, regulations and orders of any
government authority, non-compliance with which would
materially adversely affect its business or credit.
4.07 Corporate Existence. Preserve and maintain its corporate
existence and rights and franchises in its State of
incorporation, and all licenses necessary to do business;
and qualify and remain qualified and in good standing as a
foreign corporation in each jurisdiction in which such
qualification is necessary in view of its operation or
ownership of its properties.
4.08 Reporting. Furnish Bank the following as soon as available
and in any event:
i.Within thirty (30) days after the end of each month, a
Borrowing Base Certificate for any month in which any
Advance is outstanding; and
ii. From time to time such other information as Bank
may reasonably request.
4.09 Financial Condition. Maintain the financial condition of
Borrower, determined in accordance with GAAP, so that its
Borrowing Base is not less than the Line Balance at any
time.
4.10 Deposit Accounts. Maintain a material deposit account at
Bank.
4.11 Notice of Significant Events. Promptly notify Bank in
writing of 1) the occurrence of any Event of Default or
Potential Default; 2) any change in its name, address, form of
entity, or organizational or capital structure; or 3) the
threat of or commencement of any Material Litigation.
5.NEGATIVE COVENANTS
So long as the Line Note or any indebtedness of Borrower to Bank
remains unpaid or Bank has any commitment to lend hereunder,
without the prior written consent of Bank, Borrower will not:
5.01 Use of Funds. Use any of the amounts loaned to it by Bank
pursuant to this Agreement for any purpose except for
general short-term working capital; or
5.02 Nature of Business. Materially change the scope or nature
of its business.
6.DEFAULT
If any of the following events shall occur, it shall be an
event of default ("Event of Default"):
6.01 Non-Payment. Borrower fails to pay any principal of the
Line Note or any other sums payable by Borrower to Bank
pursuant to this Agreement when due, or Borrower fails to
pay any interest on the Line Note within five (5) days after
any such interest is due;
6.02 Representations. Any representation or warranty made by
Borrower herein or in connection herewith proves to have
been incorrect in any material respect when made;
6.03 Breach of Negative Covenants. Borrower fails to observe or
comply with any of the covenants in Section 5 of this
Agreement;
6.04 Breach of Covenants. Borrower fails to perform or observe
any other term, covenant or agreement contained in this
Agreement (other than those referred to in Section 6.01 and
6.03) and such failure has not been cured within ten (10)
days after Bank has notified Borrower of such failure;
6.05 Default on Other Debt. Borrower shall fail to pay any Debt
of Borrower (other than Debt evidenced by the Line Note) or
any interest or premium thereon when due (whether by
scheduled maturity, required prepayment, acceleration,
demand or otherwise), including any Debt under the Warehouse
Line Agreement, and such failure shall continue after the
applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other default or
event under any agreement or instrument relating to any such
Debt shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity
of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the
stated maturity thereof;
6.06 Insolvency. Borrower shall generally not pay its debts as
such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against Borrower
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any
substantial part of its property and, if instituted against
Borrower, shall remain undismissed for a period of thirty
days; or Borrower shall take any corporate action to
authorize any of the actions set forth above in this
subsection;
6.07 Judgments. Any judgment or order for the payment of money
in excess of $100,000 shall be rendered against Borrower and
either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a
stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect;
6.08 Change in Management. Borrower's current Chief Executive
Officer ceases to be employed by Borrower in such capacity,
or the responsibility or authority of such officer is
materially reduced; or
6.09 Change in Control. Any person, entity or group of persons
acting together (not including the current principal
shareholder(s) of Borrower) acquires a sufficient number of
the shares of Borrower's voting common stock to enable such
acquiring person, entity or group to elect a majority of
Borrower's Board of Directors.
7.REMEDIES
Upon the occurrence of any Event of Default, Bank shall have the
right by notice to Borrower:
7.01 Further Loans. To terminate its commitment to make
Advances;
7.02 Acceleration. To declare the Line Balance and all interest
accrued thereon and all other amounts payable under this
Agreement to be immediately due and payable whereupon all
such indebtedness of Borrower to Bank shall become and be
immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are
hereby expressly waived by Borrower; and
7.03 Pledge of Leases. To request that Borrower deliver, pledge
and assign to Bank such numbers of Unencumbered Leases then
owned and held by Borrower as shall secure repayment of the
Line Balance to the satisfaction of Bank; and
7.04 Other Rights. To exercise any other rights or remedies
available to it whether at law or in equity.
8.MISCELLANEOUS
8.01 Waiver; Amendments. No waiver by Bank or any amendment of
any provision of this Agreement, nor any consent of Bank to
any failure to comply with the terms hereof by Borrower,
shall be effective unless made in writing and signed by
Bank. No waiver by Bank of any default or of any right to
enforce this Agreement shall operate as a waiver of any
other default, or of the same default on a future occasion,
or of the right to enforce this Agreement on any future
occasion. No delay in or discontinuance of the enforcement
of this Agreement, nor the acceptance by Bank of
installments of principal or interest after the occurrence
of any Event of Default, shall operate as a waiver of any
default.
8.02 Rights Cumulative. The rights and remedies herein provided
are cumulative and not exclusive of any rights or remedies
afforded by any promissory note or other agreement executed
in connection herewith, or provided by law. Bank's remedies
may be exercised concurrently or separately, in any order,
and the election of one remedy shall not be deemed a waiver
of any other remedy.
8.03 Expenses. Borrower will pay to Bank on demand all expenses,
including reasonable fees and expenses of attorneys, paid or
incurred by Bank in connection with the making or collection
of Advances made pursuant to this Agreement, or the
protection, preservation or enforcement of Bank's rights
hereunder.
8.04 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Borrower, Bank and their
respective successors and assigns. However, Borrower shall
not have the right to assign or otherwise transfer any
rights in or under this Agreement without Bank's prior
written consent. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in the Advances
provided for herein. In connection therewith Bank may
disclose all documents and information which Bank now has or
may hereafter acquire relating to the Advances, Borrower or
Borrower's business.
8.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Colorado.
8.06 Notices. All notices, requests and demands given to or made
upon either party must be in writing and shall be deemed to
have been given or made when personally delivered or two (2)
days after having been deposited in the United States Mail,
first class postage prepaid, addressed as follows:
If to Borrower: Granite Financial, Inc.
Attn: William W. Wehner
President and CEO
6424 W. 91st Avenue
Westminster, CO 80030-2913
If to Bank Colorado National Bank
Attn: Commercial Loan Department
Post Office Box 5168
Denver, CO 80217
8.07 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with
generally accepted accounting principles consistently
applied, except as otherwise stated herein.
8.08 Recitals. The recitals to this Agreement and any
definitions set forth therein are made a part hereof and
incorporated in this Agreement.
8.09 Entire Agreement. The following documents contain the
entire agreement between the parties concerning the subject
matter hereof: this Agreement and the Line Note
(collectively, the "Relevant Documents"). Any
representation, understanding or promise concerning the
subject matter hereof, which is not expressly set forth in
any of the Relevant Documents, shall not be enforceable by
any party hereto or its successors or assigns. In the event
of any conflict or inconsistency between the terms of this
Agreement and the terms of any other relevant document, the
terms of this Agreement shall govern.
8.10 Severability. The unenforceability of any provision of this
Agreement shall not affect the enforceability or validity of
any other provision hereof.
8.11 JURY TRIAL WAIVER. BANK AND BORROWER EACH IRREVOCABLY
WAIVES ITS RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING
OF ANY ISSUE, CLAIM, COUNTERCLAIM OR OTHER CAUSE OF ACTION,
WHETHER IN CONTRACT OR TORT, BASED UPON OR ARISING OUT OF
THIS AGREEMENT, THE CREDIT EXTENDED HEREUNDER, OR ANY OTHER
AGREEMENT OR DEALINGS RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement the
date first stated above for the purposes set forth herein.
GRANITE FINANCIAL, INC. COLORADO NATIONAL BANK
By: By:
Title: Title:
EXHIBIT A
BORROWING BASE CERTIFICATE
of
GRANITE FINANCIAL, INC.
"Borrower"
As Of the Period Ending ___________________________, 199___
This Certificate is submitted to Colorado National Bank ("Bank")
in connection with the Unsecured Revolving Credit Agreement
dated as of January ____, 1997 (the "Agreement") between Bank
and Borrower. Capitalized terms used herein are defined in the
Agreement.
The undersigned hereby certifies to Bank that the undersigned is
familiar with the following financial information which has been
taken from Borrower's books and records which are complete and
accurate and that the following calculations of the Borrowing
Base and the remaining amount available under the Borrowing Base
are true and correct:
BORROWING BASE
1. Total Remaining Payments due under all
Unencumbered Leases $
2. Borrowing Base: Present Value of Line 1 using
current interest rate on Line Balance $
3. Current Line Balance (i.e. outstandings under
Revolving Credit Line) $
4. [Excess/Deficit] Borrowing Base: $
The undersigned further certifies that (a) Borrower is in
compliance with all of the covenants contained in the Agreement,
and (b) there has been no Event of Default under the Agreement
which has not been cured or waived, and no Potential Default has
occurred.
By:
Title:
Date:
K:\ROSNER\CORESTAT\GRANITE\GFI\L&S.R6 1/29/97
2:44pm
LOAN AND SECURITY AGREEMENT
Granite Financial, Inc.
with
CoreStates Bank, N.A., as
Agent and
Each of the Financial Institutions Now or
Hereafter Shown on the Signature Pages hereof
as Lenders
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS AND INTERPRETATION 1
1.1 Terms Defined 1
1.2 Accounting Principles 8
SECTION 2. THE LOANS 9
2.1 Credit Facility - Description 9
2.2 Advances, Conversions and Payments 10
2.3 Preconditions to Advances and Assignment
of Leases and Leased Property 12
2.4 Credit Facility Interest 13
2.5 Additional Interest Provisions. 14
2.6 Fees 14
2.7 Prepayments 15
2.8 Use of Proceeds 16
2.9 Capital Adequacy 16
SECTION 3. COLLATERAL 16
3.1 Description 16
3.2 Lien Documents 16
3.3 Other Actions 17
3.4 Searches 17
3.5 Filing Security Agreement 18
3.6 Power of Attorney 18
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES 18
4.1 Resolutions, Opinions, and Other Documents 18
4.2 Absence of Certain Events 19
4.3 Warranties and Representations at Closing 20
4.4 Compliance with this Agreement 20
4.5 Officers' Certificate 20
4.6 Closing 20
4.7 Non-Waiver of Rights 20
SECTION 5. REPRESENTATIONS AND WARRANTIES 20
5.1 Organization and Validity 20
5.2 Places of Business 21
5.3 Pending Litigation 21
5.4 Title to Collateral 22
5.5 Governmental Consent 22
5.6 Taxes 22
5.7 Financial Statements 22
5.8 Full Disclosure 22
5.9 Subsidiaries 23
5.10 Guarantees; Other Indebtedness 23
5.11 Government Regulations, etc. 23
5.12 Names 24
5.13 Other Associations 24
5.14 Environmental Matters 24
5.15 Capital Stock 25
5.16 Solvency 25
5.17 Leases and Leased Property 25
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS 29
6.1 Payment of Taxes and Claims 29
6.2 Maintenance of Properties and Corporate
Existence 29
6.3 Business Conducted 30
6.4 Litigation 30
6.5 Taxes 30
6.6 Bank Accounts 31
6.7 Warranties for Future Advances 31
6.8 Financial Covenants 31
6.9 Financial and Business Information 32
6.10 Officers' Certificates 34
6.11 Inspection 34
6.12 Tax Returns and Reports 35
6.13 Material Adverse Developments 35
6.14 Places of Business 35
6.15 Sale of Collateral 35
6.16 Receipt of Payments 35
SECTION 7. BORROWER'S NEGATIVE COVENANTS: 36
7.1 Merger, Consolidation, Dissolution or
Liquidation 36
7.2 Liens and Encumbrances 36
7.3 Negative Pledge 36
7.4 Transactions With Affiliates or Subsidiaries 37
7.5 Guarantees 37
7.6 Distributions, Redemptions and Other
Indebtedness 37
7.7 Use of Lenders' Name 37
7.8 Change of Management 37
SECTION 8. DEFAULT 38
8.1 Events of Default 38
8.2 Cure 40
8.3 Rights and Remedies on Default 40
8.4 Nature of Remedies 42
8.5 Set-Off 42
SECTION 9. AGENT 42
9.1 Appointment and Authorization 42
9.2 General Immunity 43
9.3 Consultation with Counsel 43
9.4 Documents 43
9.5 Rights as a Bank 43
9.6 Responsibility of Agent 43
9.7 Collections and Disbursements 44
9.8 Indemnification 45
9.9 Expenses 46
9.10 No Reliance 46
9.11 Reporting 46
9.12 Removal of Agent 46
9.13 Action on Instructions of Lenders 47
9.14 Several Obligations 47
9.15 Consent of Banks 47
9.16 Participations and Assignments 49
SECTION 10. MISCELLANEOUS 49
10.1 GOVERNING LAW 49
10.2 Integrated Agreement 49
10.3 Waiver 49
10.4 Time 50
10.5 Expenses of Agent 50
10.6 Brokerage 50
10.7 Notices 51
10.8 Headings 51
10.9 Survival 51
10.10 Successors and Assigns 52
10.11 Counterparts 52
10.12 Modification
52
10.13 Signatories
52
10.14 Third Parties
52
10.15 Discharge of Taxes, Borrower's Obligations,
Etc.
52
10.16 Most Favored Lenders
53
10.17 Consent to Jurisdiction
53
10.18 Waiver of Jury Trial
53
10.19 WARRANT OF ATTORNEY
53
10.20 Information to Participant
54
EXHIBIT LIST
Exhibit 2.1(b) -- Form of Revolving Credit Note
Exhibit 2.1(d) -- Form of Borrowing Base
Certificate
Exhibit 2.3(b)(ii) -- Form of Assignment Agreement
Exhibit 5.1 -- Borrower's States of
Qualifications
Exhibit 5.2 -- Places of Business
Exhibit 5.3 -- Judgments, Proceedings, Litigation
and Orders
Exhibit 5.9 -- Subsidiaries and Affiliates
Exhibit 5.10 -- Existing Guaranties, Investments
and Borrowings, Leases and Employment Agreements
Exhibit 5.12(a) -- Schedule of Names
Exhibit 5.12(b) -- Trademarks, Patents and
Copyrights
Exhibit 5.13 -- Other Associations
Exhibit 5.14 -- Environmental
Matters
Exhibit 5.15 -- Capital Stock
Exhibit 5.17 -- Form of Lease
Exhibit 6.9(ii) -- Form of
Receivables Aging Report
Exhibit 6.9(vi) -- Covenant Compliance
Certificate
Exhibit 6.10 -- Officers' Certificates
SCHEDULES
Schedule A -- Schedule and Addresses of Lenders
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated
this 4th day of February, 1997, by and among Granite Financial,
Inc., a Delaware corporation ("Borrower"), CoreStates Bank,
N.A., a national banking association in its capacity as agent
("Agent"), and CoreStates Bank, N.A. ("CoreStates") and the
financial institutions listed on Schedule A attached hereto and
made a part of this Agreement (as such Schedule may be amended,
modified or replaced from time to time), in their capacity as
lenders (singly, each is a "Lender" and collectively, all are
"Lenders").
BACKGROUND
A. Borrower wishes, from time to time, to obtain advances
from Lenders up to the Maximum Credit Limit. Lenders are
willing to make loans and grant extensions of credit to Borrower
under the terms and provisions hereinafter set forth.
B. The parties desire to define the terms and conditions
of their relationship to writing.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the
following terms have the following respective meanings and if a
Section reference follows any such term below, the meaning
ascribed thereto in such Section.
Account - Any right to payment for goods sold or
leased or for services rendered which is not evidenced by an
Instrument or Chattel Paper, whether or not it has been earned
by performance.
Additional Facility Fee - Section 2.6(d).
Adjusted Debt to Tangible Net Worth Ratio - At any
time means the ratio of Borrower's (i) total Liabilities less
Nonrecourse Debt to (ii) Tangible Net Worth.
Advance(s) - Any monies loaned or credit extended to
Borrower by any Lender under the Credit Facility.
Affiliate - As to any Person, each other Person that
directly, or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with,
the Person in question.
Agent Fee - Section 2.6(c).
Agreement - This Loan and Security Agreement, as it
may hereafter be amended, supplemented, extended or replaced
from time to time.
Assignment Agreement - Section 2.3(b)(ii).
Authorized Officer - Any officer of Borrower
authorized by specific resolution of Borrower to request
Advances as set forth in the incumbency certificate referred to
in Section 4.1(d) of this Agreement.
Available Credit Amount - As of any date of
determination, an amount equal to the lesser of:
(i) the Maximum Credit Limit, and
(ii) the Borrowing Base.
Base Rate - A per annum fluctuating rate of interest
which is five eighths (5/8) of one percentage point in excess of
the Prime Rate.
Books and Records - All of Borrower's original ledger
cards, payment schedules, credit applications, Contract Rights,
liens, security instruments, guarantees and other General
Intangibles relating in any way to the Leases or Leased
Property.
Borrowing Base - As of any date of determination, an
amount equal to the lesser of the following with respect to each
Eligible Lease, (x) 75% of the Lease Receivables corresponding
to each such Eligible Lease, and (y) 95% of the Present Value of
the Lease Receivables corresponding to each such Eligible Lease.
Business Day - Any day that is not a Saturday or
Sunday or day on which Agent or any Lender is required or
permitted to close.
Chattel Paper - The meaning ascribed thereto in the
Pennsylvania Uniform Commercial Code.
Closing - Section 4.6.
Closing Date - Section 4.6.
Closing Fee - Section 2.6(b).
Collateral - All now or hereafter existing Leases and
Leased Property, Books and Records and all cash and noncash
proceeds, thereof, including, without limitation, insurance
proceeds.
Contract Rights - All rights under contracts not yet
earned by performance.
Credit Facility - Section 2.1(a).
Current Term - The Initial Term during the period of
the Initial Term, and any renewal or extended term during the
term thereof, if Lenders elect, in their sole discretion, to
renew or extend the Credit Facility.
Defaulted Lease - Any Lease where the Lease or Leased
Property associated therewith fails, at any time, to comply with
all of the representations and warranties set forth in Section
5.17 below.
Defaulting Lender - Section 2.2(b)(iii)(C).
Distribution -
(1) The payment of dividends or other distributions
on capital stock of Borrower; and
(2) The redemption, repurchase or acquisition of
such capital stock or of warrants, rights or other options to
pur chase such capital stock.
Documents - The meaning ascribed thereto in the
Pennsylvania Uniform Commercial Code.
Eligible Lease(s) - Each Lease which meets all of the
following specifications: (1) is not subject to any Lien,
security interest or assignment other than Agent's security
interest for the benefit of Lenders and the rights of the
Lessees thereunder; (2) is a valid and enforceable Lease,
representing the undisputed obligation of the Lessee, with
rentals due thereunder not more than 61 days contractually past
due; (3) is not subject to any defense, set off, counterclaim,
deduction, or allowance or adjustment; (4) provides for the
lease of Leased Property which has not been returned, rejected,
lost or damaged; (5) arose in the ordinary course of Borrower's
business; (6) Borrower has not received notice of bankruptcy,
receivership, reorganization, insolvency or material adverse
change in the financial condition of the Lessee; (7) the Lessee
is not a Subsid iary or Affiliate of Borrower; (8) is not a
Defaulted Lease; (9)
the Lease does not have an initial stated term in excess of
sixtyfive (65) months; (10) the Lease has not been pledged to
Agent and/or Lenders for a period exceeding, in the aggregate,
six (6) months; and (11) is a Lease with a Lease Receivable,
which together with all other Lease Receivables owed by the same
Lessee, does not exceed $200,000 in the aggregate, unless
otherwise agreed to in writing by the SuperMajority Lenders.
Equipment - The meaning ascribed thereto in the
Pennsylvania Uniform Commercial Code.
ERISA - The Employee Retirement Income Security Act of
1974, as the same may be amended, from time to time.
Event of Default - Section 8.1.
Exchange Act - The Securities Exchange Act of 1934, as
amended, together with all rules and regulations in connection
therewith.
Expenses - Section 10.5.
Federal Funds Rate - means a fluctuating interest rate
per annum equal, for each day, to the weighted average of the
rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day,
for the next succeeding Business Day) by the Federal Reserve
Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for
such day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by the
Agent.
Financial Statements - The financial statements of
Borrower prepared in accordance with GAAP.
GAAP - Generally accepted accounting principles as in
effect on the Closing Date, as they may be amended from time to
time.
General Intangibles - The meaning ascribed thereto in
the Pennsylvania Uniform Commercial Code and shall include, but
not be limited to, all contract rights (including without
limitation, all rights under remarketing agreements), Chattel
Paper, documents, Instruments, books, records, ledgers,
journals, check books, print outs, blue prints, designs,
computer programs, computer tapes, punch cards, formulae,
drawings, customer lists,
choses in action, claims, goodwill, designs and plans,
licenses, license agreements, tax and all other types of
refunds, returned and unearned insurance premiums, rights and
claims under insurance policies, patents, patent application,
trademarks, trade names, trade styles, trademark applications
and copyrights.
Hazardous Substance - Section 5.14.
Initial Term - Section 2.1(c).
Instruments - The meaning ascribed thereto in the
Pennsylvania Uniform Commercial Code.
Intercreditor Agreement - The Granite Lock Box
Intercreditor Agreement dated January 24, 1997 by and among
Borrower, Agent, Colorado National Bank, FBS Business Finance
Corporation, Leasing Division, Norwest Equipment Finance, Inc.,
and the other parties joining therein, from time to time, in
accordance with the terms thereof, as the same may be amended,
modified, restated or supplemented from time to time.
Inventory - The meaning ascribed thereto in the
Pennsylvania Uniform Commercial Code and shall include, but not
be limited to, all additions, improvements, accessions,
attachments, upgrades, replacements and substitutions thereto
or therefor.
Lease(s) - All of Borrower's Accounts, Documents,
General Intangibles, Instruments and Chattel Paper arising in
connection with each and every equipment lease and/or schedule
to a master lease agreement assigned to Lenders and/or Agent
for the benefit of Lenders, or now or hereafter designated on
any schedule as being assigned to Lenders and/or Agent for the
benefit of Lenders. The term "Lease" includes (i) all payments
to be made thereunder, (ii) all rights of Borrower therein, and
(iii) any and all amendments, renewals, extensions or
guarantees thereof.
Lease Receivable(s) - With respect to each Lease, the
gross value of the contractual firm term remaining lease
payments plus the absolute and unconditional obligation, if
any, of the corresponding Lessee to make a payment(s) at the
end of the stated Lease term.
Leased Property - Any personal property leased or to
be leased or financed by Borrower pursuant to a Lease; the term
"Leased Property" includes all of Borrower's Inventory or
Equipment so leased and any and all additions, improvements,
accessions, attachments, upgrades, replacements and
substitutions thereto and therefor.
Lessee - The lessee(s) or obligor(s) responsible for
payment and/or performance under a Lease.
Liabilities - All liabilities of every kind of
Borrower and its Subsidiaries as would be shown on a
consolidated financial statement of Borrower prepared in
accordance with GAAP, and all contingent and unmatured
obligations of Borrower and its Subsidiaries pursuant to any
and all guarantee, surety or similar type agreements relating
to the debts of Persons outside of the consolidated group.
Lien - Any interest of any kind or nature in property
securing an obligation owed to, or a claim of any kind or
nature in property by, a Person other than the owner of the
Property, whether such interest is based on the common law,
statute,
regulation or contract, and including, but not limited to, a
security interest or lien arising from a mortgage, security
agreement, encumbrance, pledge, conditional sale or trust
receipt, a lease, consignment or bailment for security
purposes, a trust, or an assignment.
Loans - All Revolving Credit Loans.
Loan Documents - This Agreement, the Revolving Credit
Notes and all agreements, instruments and documents executed
and/or delivered from time to time in connection therewith, as
amended or replaced from time to time.
Maturity Date - The later of (i) the date which is
one (1) year from the date hereof or (ii) the last day of the
then Current Term.
Maximum Credit Limit - The sum of the Pro Rata Shares
which at the time of Closing equals Thirty-Six Million Dollars
($36,000,000).
Net Income - The net income after taxes of Borrower
as such would appear on Borrower's statement of income,
prepared in accordance with GAAP.
Net Worth - At any time means the amount of
shareholder equity in Borrower, as defined under GAAP.
Nonrecourse Debt - All Liabilities of Borrower which
are non-recourse in nature and treated as non-recourse
obligations on Borrower's Financial Statements. The term "Non
recourse Debt" shall not include the recourse portion of any
partially recourse Liabilities whether or not such Liabilities
are shown on a balance sheet of Borrower prepared in accordance
with GAAP.
Obligations - All existing and future liabilities and
obligations of every kind or nature at any time owing by
Borrower to Lenders (or any of them) and/or to Agent, whether
joint or several, related or unrelated, primary or secondary,
matured or contingent, due or to become due, and whether
principal, interest, fees or Expenses, including, without
limitation, obligations in respect of the Revolving Credit
Loans and any extensions, modifications, substitutions,
increases and renewals thereof, and Borrower's unconditional
obligation to reimburse Agent and/or Lenders for all fees paid
by Agent and/or Lenders pursuant to Section 8 of the
Intercreditor Agreement, and the payment of all reasonable
amounts advanced by Agent (or any Lender after the occurrence
of an Event of Default) to preserve, protect and enforce rights
hereunder and in the Collateral and all Expenses incurred by
Agent (or any Lender after the occurrence of an Event of
Default) in connection therewith.
Pennsylvania Uniform Commercial Code or UCC - The
Uniform Commercial Code as enacted in Pennsylvania, as the same
shall be amended from time to time.
Person - An individual, partnership, corporation,
limited liability company, trust, unincorporated association or
organization, joint venture or any other entity.
Present Value - The value, from time to time, as of
the date of determination, of the remaining Lease Receivables
due under a Lease, discounted using the Base Rate. Present
Value calculations shall fluctuate from time to time as the
Base Rate changes, with such fluctuations to be reflected in
calculating
the Borrowing Base hereunder.
Prime Rate - The per annum rate designated or
announced by Agent at its principal office from time to time as
its prime rate of interest, which may be greater or less than
other interest rates charged by Agent to other borrowers and is
not solely based or dependent upon the interest rate which
Agent may charge any particular borrower or class of borrowers.
Pro Rata Percentage - Section 2.1(a)(ii).
Pro Rata Share - Section 2.1(a)(ii).
Property - Any interest of Borrower in any kind of
property or asset, whether real, personal or mixed, or tangible
or intangible.
Revolving Credit Loans - Section 2.1(a).
Revolving Credit Notes - Section 2.1(b).
Securitization Transaction - Any transaction, for
which Agent has received 30 days prior written notice, using,
in part, leases or leased Property to secure promissory notes
issued by Borrower or a special purpose subsidiary of Borrower
and in connection with which, Borrower will be subject to
limited recourse arising out of a servicing agreement or no
recourse.
Subsidiary - As to any Person, any corporation more
than fifty percent (50%) of whose voting stock is legally and
beneficially owned by such Person or owned by a corporation
more than fifty percent (50%) of whose voting stock is legally
and beneficially owned by such Person.
SuperMajority Lenders - At any time, Lenders holding
Pro Rata Percentages aggregating at least sixty-six and two
thirds (66-2/3%) percent of the aggregate amount outstanding
under the Credit Facility at such time; provided, however, that
if there is no outstanding amount under the Credit Facility,
the SuperMajority Lenders shall be determined by those Lenders
holding sixty-six and two-thirds (66-2/3%) percent of the
Maximum Credit Limit.
Tangible Net Worth - At any time means the amount of
shareholder equity in Borrower (excluding trademarks, goodwill,
deferred closing costs, loans to shareholders or Affiliates and
all other intangible assets, as those terms are defined under
GAAP and further excluding an amount equal to twenty-five
percent (25%) of all restricted cash pledged as collateral in
connection with Securitization Transaction(s)).
Unmatured Event of Default - An event or condition
which, with the passage of time, the giving of notice, or both
would become an Event of Default.
Unused Line Fee - Section 2.6(a).
1.2 Accounting Principles: Where the character or amount
of any asset or liability or item of income or expense is
required to be determined or any consolidation or other
accounting computation is required to be made for the purposes
of this Agreement, this shall be done in accordance with GAAP,
to the extent applicable, except as otherwise expressly
provided in this Agreement.
SECTION 2. THE LOANS
2.1 Credit Facility - Description:
(a) (i) Subject to the terms and conditions of
this Agreement, each Lender, severally, hereby establishes for
the benefit of Borrower a credit facility (collectively
referred to as "Credit Facility") which shall include Advances
extended by Lenders to or for the benefit of Borrower from time
to time hereunder in the form of revolving credit loans
("Revolving Credit Loans"). The proceeds of all Revolving
Credit Loans shall be used solely to finance the acquisition of
Leased Property or Leases. The aggregate outstanding principal
amount of all Loans, at any time, shall not exceed the
Available Credit Amount. Subject to such limitation, the
outstanding balance of all Revolving Credit Loans may fluctuate
from time to time, to be reduced by repayments made by Borrower
and to be increased by future Revolving Credit Loans which may
be made by Lenders. The obligations of Borrower under the
Credit Facility and this Agreement shall at all times be
absolute and unconditional.
(ii) Subject to the terms and conditions of
this Agreement, each Lender, severally, agrees to lend to
Borrower an amount equal to such Lender's respective percentage
(as to each Lender, the percentage of the Credit Facility set
forth opposite its name on Schedule A attached hereto and made
a part hereof and referred to as its "Pro Rata Percentage") of
the Advance requested by Borrower. The aggregate outstanding
Loans by each Lender shall not exceed the respective amount
("Pro Rata Share") set forth opposite such Lender's name on
Schedule A.
(b) At Closing and contemporaneously with the
joinder of any Lender after the Closing Date, Borrower shall
execute and deliver its promissory note to each Lender for the
total principal amount of such Lender's Pro Rata Share
(collectively as may be amended, modified or replaced from time
to time, the "Revolving Credit Notes"). The Revolving Credit
Notes shall evidence Borrower's absolute and unconditional
obligation to repay such Lender(s) for all Revolving Credit
Loans made by such Lender(s) under the Credit Facility, with
interest as herein and therein provided. Each and every
Revolving Credit Loan under the Credit Facility shall be deemed
evidenced by the Revolving Credit Notes, which are deemed
incorporated herein by reference and made a part hereof. All
Revolving Credit Notes shall be substantially in the form set
forth in Exhibit 2.1(b) attached hereto and made a part hereof.
(c) The term ("Initial Term") of the Credit
Facility shall expire on the day which is one (1) year from the
date hereof. In Lenders' sole discretion, without any
obligation to do so, the Credit Facility may, nonetheless, be
renewed annually for additional one year periods. Borrower's
request for such renewal must be made at least 60 days prior to
the expiration of the then Current Term. After the Maturity
Date no further Advances shall be available from Lenders.
Borrower acknowledges that no Lender has any obligation to
renew its part of the Credit Facility.
(d) Borrower shall deliver, at least monthly on
the tenth (10th) day of each month, and with each borrowing
request, unless Agent requests more frequent delivery, a
Borrowing Base Certificate in the form of Exhibit 2.1(d)
attached hereto and made a part hereof, executed by an
Authorized Officer, evidencing availability under the Borrowing
Base for any such borrowing request.
2.2 Advances, Conversions and Payments:
(a) Except to the extent otherwise set forth in this
Agreement, all payments of principal and of interest on the
Credit Facility, the Unused Line Fee, the Closing Fee, the
Additional Facility Fee, the Agent Fee, the Expenses, and all
other charges and any other Obligations of Borrower hereunder,
shall be made to Agent at its main Philadelphia banking office,
CoreStates Bank, N.A., 1339 Chestnut Street, Philadelphia,
Pennsylvania, in United States dollars, in immediately
available funds. Agent, on behalf of all Lenders, shall have
the unconditional right and discretion to make an Advance under
the Credit Facility in the form of a Revolving Credit Loan
(whether or not availability exists under the Borrowing Base)
to pay, and/or to charge Borrower's operating account with
Agent, for all of Borrower's Obligations as they become due
from time to time under this Agreement, including without
limitation, interest, principal, fees and reimbursement of
Expenses.
(b)(i) Advances which may be made by Lenders from
time to time under the Credit Facility shall be made available
by crediting such proceeds to Borrower's operating account with
Agent.
(ii) Each Advance requested by Borrower must be
requested by 11:00 A.M. Eastern time, one (1) Business Day
prior to the date of such requested Advance. All requests and
confirmations of requests for Advances are to be in writing and
may be sent by telecopy or facsimile transmission provided that
Agent shall have the right to require that receipt of such
request not be effective unless confirmed via telephone with
Agent.
(iii) A. Upon receiving a request for an Advance
in accordance with subparagraph (ii) above, as soon as
reasonably practical thereafter, Agent shall notify all Lenders
of the request. Each Lender shall advance its applicable Pro
Rata Percentage of the requested Advance to Agent by remitting
federal funds, immediately available, to Agent pursuant to
Agent's instructions prior to 11:00 A.M. Eastern Time on the
scheduled date of the Advance. Subject to satisfaction of the
terms and conditions hereof, Agent shall make the requested
Advance available to Borrower by crediting such amount to
Borrower's operating account with Agent as soon as is
reasonably practical thereafter on the day the requested
Advance is to be made. In lieu of the foregoing, Agent may, in
its discretion, fund the Pro Rata Percentage of such Advance on
behalf of any one or more Lenders (unconditionally and
absolutely obligating each affected Lender to reimburse Agent
in full without deduction or setoffs for its portion of such
Advance) with a settlement of the Pro Rata Percentage of such
Advance of each Lender on the following Business Day under such
procedures as Agent may establish.
B. Neither Agent nor any other Lender
shall be obligated for any reason whatsoever to advance the
share of any other Lender. If such corresponding amount is not
made available to Agent by such Lender on the date the Advance
is made and Agent elects (at its discretion, without any
obligation to do so) to make such Lender's Pro Rata Percentage
of the Advance, Agent shall be entitled to recover such amount
on demand from such Lender together with interest at the per
annum rate equal to the Federal Funds Rate in respect of the
first two days and at the Base Rate in respect of each day
thereafter during the period commencing 2:00 P.M. Eastern Time
on the date of such Advance and ending on (but excluding) the
date Agent recovers such amount. Agent shall also be entitled
to recover any and all losses and damages (including without
limitation, reasonable attorneys' fees
and costs) from any Lender failing to so advance upon demand of
Agent. Agent may set off the obligations of a Lender under
this subsection against any distributions or payments of the
Obligations which Agent would otherwise make available to such
Lender.
C. To the extent and during the time
period in which any Lender fails to provide or delays providing
its respective payment to Agent pursuant to subsections A or B
above (any such Lender being referred to, during such period,
as a "Defaulting Lender"), such Lender's percentage of all
payments of the Obligations (but not its Pro Rata Percentage of
future Advances required to be funded by such Lender) shall
decrease to reflect the actual percentage which its actual
outstanding Loans bears to the total outstanding Loans of all
Lenders. In addition, notwithstanding any definition or other
provision of this Agreement to the contrary except Section
9.15(b) herein, during any period in which a Lender is a
Defaulting Lender, all calculations for voting purposes among
the Lenders shall be made as if the Defaulting Lender were not
a Lender and not a party to this Agreement except when
calculating votes on the issues enumerated in Section 9.15(b)
herein, for which each Lender shall have a vote regardless of
whether it is a Defaulting Lender at the time of any vote on
such issues.
2.3 Preconditions to Advances and Assignment of
Leases and Leased Property
(a) Before Lenders will make any Advance:
(i) Borrower will deliver to Agent the following
(dated and signed) in form and substance satisfactory to Agent
and its counsel:
A. A borrowing request setting forth the
requested date of the Advance (but no sooner than three (3)
Business Days after Agent receives the request), the requested
Advance amount, a Borrowing Base Certificate in the form
attached hereto as Exhibit 2.1(d) setting forth the
availability under the Borrowing Base, any information required
by this Agreement and such other information as Agent shall
reasonably request. A borrowing request may be made orally,
provided that Borrower confirms the request in writing within
two (2) days thereafter, provided further, however, that
Lenders need not make any Advances until Agent receives actual
written confirmation and a Borrowing Base Certificate,
B. Such financial information concerning any
of the Leases, Borrower or any Lessee, as Agent may reasonably
request, and
C. Such other instruments, agreements and
documents as Agent reasonably requests to carry out the intent
of the parties to this Agreement.
(ii) No Event of Default or Unmatured Event of
Default shall have occurred hereunder.
(b) In order to increase the Borrowing Base,
Borrower shall deliver to Agent, for the benefit of Lenders,
the following items:
(i) A list of Leases being assigned and a
description of all such Leases, which shall include
identification of the Lessee, a description of the Leased
Property, the net cost of the Leased Property, the net
remaining principal balance under the Lease(s), and the terms
of and rentals owed under each Lease, and such other
information which Agent or Lenders shall reasonably request,
(ii) An Assignment Agreement signed by Borrower
assigning Borrower's right, title and interest in and to the
Leased Property and Leases to Agent for the benefit of Lenders,
in the form attached hereto as Exhibit 2.3(b)(ii) ("Assignment
Agreement"),
(iii) Invoices showing the true cost of the Leased
Property net of any servicing or maintenance charges, brokers'
fees or similar type of "soft costs",
(iv) If requested by Agent, additional Uniform
Commercial Code ("UCC") financing statements covering, inter
alia, the Leased Property and the Leases listing Agent, for the
benefit of Lenders, as secured party and Borrower as debtor, to
be filed in locations reasonably required by Agent,
(v) Copies of all UCC-1 financing statements filed
by Borrower against Lessee(s) and any acknowledgment copies or
recording information Borrower has received back from the
filing or recording offices,
(vi) The sole original of each Lease including all
relevant schedules, duly assigned to Agent for the benefit of
Lenders,
(vii) For each item of Leased Property with a fair
market value greater than $25,000.00, evidence that such item
of Leased Property is insured against such risks, in such
amounts, with such insurance, and on such terms and conditions
as shall be satisfactory to Agent, including but not limited
to, provisions naming Agent, for the benefit of Lenders, lender
loss payee and preventing cancellation or modification of the
insurance coverage without at least 30 days prior notice to
Agent ("Insurance Cover age"),
(viii) A certificate of acceptance or other
document evidencing that the Lessee has received and accepted
the Leased Property, and
(ix) An undated notice signed by the Borrower
directing each Lessee to pay all sums due or to become due
under each Lease directly to Agent for the benefit of Lenders
("Lessee Notice") to be used only following the occurrence of
an Event of Default or Unmatured Event of Default. Agent will
hold the Lessee Notices in safekeeping and will not release
them, unless and until an Event of Default or Unmatured Event
of Default shall have occurred.
2.4 Credit Facility Interest: The unpaid principal
balance of all Revolving Credit Loans shall bear interest,
subject to the terms hereof, at the per annum fluctuating rate
equal to the Base Rate. Changes in the applicable interest
rate shall become effective on the same day as Agent announces
a change in its Prime Rate. Interest on Revolving Credit Loans
shall be due and payable in arrears on the first day of each
calendar month commencing the first full month following the
Closing Date.
2.5 Additional Interest Provisions.
(a) Calculation of Interest: Interest on the
Loans, regardless of the applicable interest rate, shall be
based on a
three hundred sixty five (365) day year and charged for the
actual number of days elapsed.
(b) Default Rate: After the occurrence and during
the continuance of an Event of Default hereunder, the per annum
effective rate of interest on all Revolving Credit Loans
outstanding under the Credit Facility shall be increased to a
per annum rate equal to two (2%) percentage points in excess of
the otherwise applicable interest rate.
(c) Continuation of Interest Charges: All
contractual rates of interest chargeable on outstanding Loans,
regardless of the then applicable interest rate, shall continue
to accrue and be paid even after default, maturity,
acceleration, judgment, bankruptcy, insolvency proceedings of
any kind or the happening of any event or occurrence similar or
dissimilar.
(f) Applicable Interest Limitations: In no
contingency or event whatsoever shall the aggregate of all
amounts deemed interest hereunder and charged or collected
pursuant to the terms of this Agreement exceed the highest rate
permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such court determines Lenders have
charged or received interest hereunder in excess of the highest
applicable rate, Agent, on behalf of Lenders, shall in its sole
discretion, apply and set off such excess interest received by
Lenders against other Obligations due or to become due and such
rate shall automatically be reduced to the maximum rate
permitted by such law.
2.6 Fees:
(a) Unused Line Fee: So long as the Credit
Facility is outstanding and has not been terminated, Borrower
shall unconditionally pay to Agent, for the benefit of Lenders
in accordance with their respective Pro Rata Percentages, a non
refundable fee ("Unused Line Fee") equal to one-quarter of one
percent (1/4%) per annum of the average daily unused portion of
the Credit Facility (which shall be calculated as the Maximum
Credit Limit minus the average daily outstanding balance of all
Loans during the quarter for which such calculation is made).
The Unused Line Fee shall be computed and paid on a quarterly
basis, in arrears, on the first day of each January, April,
July and October for the previous quarter for which such
computation is made by Agent, beginning on the first day of
April, 1997.
(b) Closing Fee: As of the Closing, Lenders shall
have fully earned, and Borrower shall have paid to Agent, for
the benefit of Lenders, a non-refundable closing fee ("Closing
Fee") in an amount equal to Twenty Thousand Dollars
($20,000.00). CoreStates' share of the Closing Fee shall be
$5,000.00 and each other Lender's share of the Closing Fee
shall be $5,000.00.
(c) Agent Fee: So long as the Credit Facility is
outstanding and has not been terminated, Borrower shall
unconditionally pay to Agent, for Agent's account, a non
refundable fee ("Agent Fee") as set forth in that certain
letter agreement between Agent and Granite Financial, LLC dated
October 5, 1996, the obligations under which have been
expressly assumed by Borrower. The Agent Fee shall be computed
and paid on a quarterly basis, in arrears, on the first day of
each January, April, July and October for the previous quarter
for which such computation is made by Agent, beginning on the
first day of April, 1997 (provided, however, that Borrower
shall pay to Bank on the Closing Date the unpaid Agent Fee for
the quarter ending
December 31, 1996 and the portion of the Agent Fee attributable
to the quarter in which closing occurs pro rated through the
Closing Date).
(d) Additional Facility Fee: In the event that
Lenders and Agent, in their sole discretion, agree from time to
time to increase the Maximum Credit Limit, Borrower shall at
the time of any such increase (as a condition thereof), pay to
Agent, for the benefit of Lenders in accordance with their
respective Pro Rata Percentages, a non-refundable additional
facility fee ("Additional Facility Fee") in an amount equal to
one-quarter of one percent (1/4%) of the applicable increase.
Notwithstanding the foregoing, Lenders and Agent shall at no
time be obligated to increase the Maximum Credit Limit.
2.7 Prepayments:
(a) Revolving Credit Loans: Subject to Section
2.1(a), Revolving Credit Loans may be prepaid at any time and
from time to time in whole or in part without premium or
penalty upon at least two (2) days prior written notice to
Agent.
(b) Proceeds of Collateral: Prior to the
occurrence of an Event of Default, proceeds from Collateral
comprising a portion of the Borrowing Base, to the extent that
the aggregate outstanding amount of all Revolving Credit Loans
exceeds the Available Credit Amount, shall promptly be paid to
Agent for the benefit of Lenders and be first applied to
accrued but unpaid interest, fees, costs and Expenses related
to the Credit Facility, and then to the outstanding balance of
the Revolving Credit Loans and then to Borrower's other
Obligations. Following the occurrence of an Event of Default,
all proceeds from the Collateral shall be immediately delivered
to Agent and Agent may apply such proceeds to any of Borrower's
Obligations in such order as Agent may decide in its sole
discretion.
(c) Mandatory Prepayment: In the event the
aggregate outstanding amount of all Loans at any time exceeds
the Maximum Credit Limit, Borrower shall immediately repay such
excess in full and if the aggregate outstanding amount of all
Revolving Credit Loans exceeds the Borrowing Base, Borrower
shall immediately either (i) repay such excess in full or (ii)
pledge additional Eligible Leases in accordance with the terms
hereof. Any such payments shall first be applied to accrued but
unpaid interest, fees, costs and Expenses related to the Credit
Facility, and then to the outstanding balance of the Revolving
Credit Loans and then to Borrower's other Obligations.
2.8 Use of Proceeds: The extensions of credit under the
Credit Facility shall be used to enable Borrower to purchase
Leased Property and finance Leases associated with such Leased
Property.
2.9 Capital Adequacy: If any present or future law,
governmental rule, regulation, policy, guideline, directive or
similar requirement (whether or not having the force of law)
imposes, modifies, or deems applicable any capital adequacy,
capital maintenance or similar requirement which affects the
manner in which any Lender allocates capital resources to its
commitments (including any commitments hereunder), and as a
result thereof, in the reasonable opinion of such Lender, the
rate of return on such Lender's capital with regard to the
Loans is reduced to a level below that which such Lender could
have achieved but for such circumstances, then in such case and
upon notice from Agent and/or such Lender to Borrower, from
time to time, Borrower shall pay such Lender such additional
amount or
amounts as shall compensate such Lender for such reduction in
its rate of return. Such notice shall contain the statement of
such Lender with regard to any such amount or amounts which
shall, in the absence of manifest error, be binding upon
Borrower. In determining such amount, such Lender may use any
reasonable method of averaging and attribution that it deems
applicable.
SECTION 3. COLLATERAL
3.1 Description: As security for the payment of the
Obligations, and satisfaction by Borrower of all covenants and
undertakings contained in this Agreement and the other Loan
Documents, Borrower hereby grants to Agent, for the benefit of
Lenders, a continuing first lien on and security interest in,
upon and to the Collateral.
3.2 Lien Documents: At Closing and thereafter as Agent
deems necessary, Borrower shall execute and deliver to Agent,
or have executed and delivered (all in form and substance
reasonably satisfactory to Agent):
(a) Financing Statements - Financing statements
pursuant to the UCC, which Agent, on behalf of Lenders, may
file in any jurisdiction where any Collateral is or may be
located and in any other jurisdiction that Agent deems
appropriate; and
(b) Other Agreements - Any other agreements,
documents, instruments and writings, including, without
limitation, security agreements and Assignment Agreements,
reasonably required by Agent to evidence, perfect or protect
Agent's and/or Lenders' liens and security interests in the
Collateral or as Agent may request from time to time.
3.3 Other Actions: In addition to the foregoing,
Borrower shall do anything further that may be lawfully
required by Agent to secure Lenders and effectuate the
intentions and objects of this Agreement, including, but not
limited to, the execution and delivery of lockbox agreements,
continuation statements, amend ments to financing statements,
security agreements, contracts and any other documents required
hereunder. Borrower shall also immediately deliver (with
execution by Borrower of all necessary documents or forms to
reflect Agent's Lien for the benefit of Lenders thereon) to
Agent as bailee for Lenders, all items for which Agent and/or
Lenders must or may receive possession to obtain a perfected
security interest, including without limitation, all Leases,
notes, certificates and documents of title, Chattel Paper,
warehouse receipts, Instruments, and any other similar
instruments constituting Collateral.
3.4 Searches: Agent shall, prior to or at Closing, and
thereafter as Agent may determine from time to time, at
Borrower's sole expense, obtain the following searches (the
results of which are to be consistent with the warranties made
by Borrower in this Agreement):
(a) UCC Searches: UCC financing statement
searches with the Secretary of State and local filing office of
each state where Borrower maintains its executive office, a
place of business, or assets;
(b) Judgments, Etc.: Judgment, federal tax lien
and corporate tax lien searches, in all applicable filing
offices of each state searched under subparagraph (a) above.
Borrower shall, prior to or at Closing and at its
expense, obtain and deliver to Agent good standing certificates
showing Borrower to be in good standing in its state of
incorporation and in each other state or foreign country in
which it is doing and presently intends to do business for
which Borrower's failure to be so qualified might have a
material adverse effect on Borrower's business, financial
condition, Property or Agent's and/or Lenders' rights
hereunder.
3.5 Filing Security Agreement: A carbon, photographic or
other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu
of a financing statement.
3.6 Power of Attorney: Each of the officers of Agent is
hereby irrevocably made, constituted and appointed (such
appointment being coupled with an interest) the true and lawful
attorney for Borrower (without requiring any of them to act as
such) with full power of substitution to do the following: (1)
endorse the name of Borrower upon any and all checks, drafts,
money orders and other instruments for the payment of monies
that are payable to Borrower and constitute collections on the
Collateral; (2) execute in the name of Borrower any financing
statements, schedules, assignments, instruments, documents and
statements that Borrower is obligated to give Agent hereunder
or is necessary to perfect Agent's and/or Lenders' security
interest or Lien in the Collateral; (3) to verify validity,
amount or any other matter relating to the Collateral by mail,
telephone, telecopy or otherwise; and (4) do such other and
further acts and deeds in the name of Borrower that Agent may
reasonably deem necessary or desirable to enforce any Account
or other Collateral.
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following
conditions precedent (all documents to be in form and substance
satisfactory to Agent and Agent's counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrower
shall have delivered to Agent the following:
(a) this Agreement and the Revolving Credit Notes
all properly executed;
(b) each document and agreement required to be
executed under any provision of this Agreement or any related
agreement;
(c) certified copies of (i) resolutions of
Borrower's board of directors authorizing the execution of this
Agreement, the Revolving Credit Notes to be issued hereunder
and each document, instrument and agreement required to be
delivered by any Section hereof and (ii) Borrower's articles of
incorporation and bylaws;
(d) an incumbency certificate identifying all
Authorized Officers of Borrower, with specimen signatures;
(e) a written opinion of Borrower's counsel
addressed to Agent for the benefit of all Lenders;
(f) certification by Borrower's chief financial
officer or president that there has not occurred any material
adverse change in the operations and condition (financial or
otherwise) of Borrower since October 31, 1996;
(g) payment by Borrower of all Expenses associated
with the Credit Facility incurred to the Closing Date and the
Closing Fee;
(h) UCC financing statement, judgment, federal and
state tax lien searches against Borrower, at Borrower's
expense, showing that the Collateral is not subject to any
Liens, together with good standing certificates showing
Borrower to be in good standing in each jurisdiction where the
failure to so qualify might have a material adverse affect on
Borrower's business, financial condition, Property or Agent's
and/or Lenders' rights hereunder;
(i) an initial Borrowing Base Certificate dated
the Closing Date evidencing Borrower's minimum borrowing
availability under the Borrowing Base as of the Closing Date;
(j) UCC-1 financing statements naming Borrower as
debtor and Agent as secured party, to be filed in all locations
satisfactory to Agent;
(k) a copy of the Intercreditor Agreement; and
(l) a certified copy of Borrower's Form S-1
Registration Statement filed with the Securities and Exchange
Commission in connection with the initial public offering of
its capital stock consummated on October 25, 1996 together with
all amendments and exhibits and schedules thereto and all
documentation evidencing the acquisition by Borrower of all of
the membership units of Granite Financial, LLC and the
liquidation thereof and the assumption of all obligations and
liabilities thereof by Borrower.
4.2 Absence of Certain Events: At the Closing Date, no
Event of Default or Unmatured Event of Default hereunder shall
have occurred and be continuing.
4.3 Warranties and Representations at Closing: The
warranties and representations contained in Section 5 as well
as any other Section of this Agreement shall be true and
correct in all material respects on the Closing Date with the
same effect as though made on and as of that date. Borrower
shall not have taken any action or permitted any condition to
exist which would have been prohibited by any Section hereof.
4.4 Compliance with this Agreement: Borrower shall have
performed and complied with all agreements, covenants and
conditions contained herein including, without limitation, the
provisions of Sections 6 and 7 hereof, which are required to be
performed or complied with by Borrower before or at the Closing
Date.
4.5 Officers' Certificate: Agent shall have received a
certificate dated the Closing Date and signed by an Authorized
Officer of Borrower certifying that all of the conditions spec
ified in this Section have been fulfilled.
4.6 Closing: Subject to the conditions of this Section
4, the Credit Facility shall be made available on the date
("Closing Date") this Agreement is executed and all of the
conditions contained in Section 4 hereof are completed (the
"Closing").
4.7 Non-Waiver of Rights: By completing the Closing here
under, or by making Advances hereunder, neither Agent nor any
Lenders thereby waive a breach of any warranty, representation
or covenant made by Borrower hereunder or in any agreement,
document, or instrument delivered to Agent and/or any Lender or
otherwise referred to herein, and any claims and rights of
Agent and/or Lenders resulting from any breach or
misrepresentation by Borrower are specifically reserved by
Agent and Lenders.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lenders to complete the Closing and make the
initial Advance under the Credit Facility to Borrower, Borrower
warrants and represents to Agent and Lenders that:
5.1 Organization and Validity:
(a) Borrower is a corporation duly organized and
validly existing under the laws of the State of Delaware, is
duly qualified, is validly existing and in good standing and
has lawful power and authority to engage in the business it
conducts in each state and other jurisdiction where the nature
and extent of its business requires qualification, except where
the failure to so qualify would not have a material adverse
effect on Borrower's business, financial condition, Property or
prospects. A list of all states and other jurisdictions where
Borrower is qualified to do business is attached hereto as
Exhibit 5.1 and made a part hereof.
(b) The making and performance of this Agreement
and related agreements, and each document required by any
Section hereof will not violate any law, government rule or
regulation, or the articles of incorporation or bylaws of
Borrower or violate or result in a default (immediately or with
the passage of time) under any contract, agreement or
instrument to which Borrower is a party, or by which it is
bound. Borrower is not in violation of, nor has knowingly
caused any Person to violate, any term of any agreement or
instrument to which it or such Person is a party or by which it
may be bound or of its Articles of Incorporation or Bylaws,
which violation could have a material adverse effect on
Borrower's business, financial condition, Property or
prospects.
(c) Borrower has all requisite corporate power and
authority to enter into and perform this Agreement and to incur
the Obligations herein provided for, and has taken all proper
and necessary action to authorize the execution, delivery and
performance of this Agreement and the documents and related
agreements required hereby.
(d) This Agreement, the Revolving Credit Notes to
be issued hereunder, and all related agreements and documents
required to be executed and delivered by Borrower hereunder,
when delivered, will be valid and binding upon Borrower and
enforceable in accordance with their respective terms.
5.2 Places of Business: The only places of business of
Borrower, and the places where it keeps and intends to keep
copies of the Leases and its Books and Records concerning the
Collateral, are at the addresses listed in Exhibit 5.2 attached
hereto and made a part hereof. The name of the record owner of
each property is also set forth on Exhibit 5.2.
5.3 Pending Litigation: There are no judgments or
judicial or administrative orders, proceedings or
investigations (civil or criminal) pending, or to the knowledge
of Borrower, threatened, against Borrower in any court or
before any governmental author ity or arbitration board or
tribunal except as shown in Exhibit 5.3 attached hereto and
made a part hereof, none of which may materially and adversely
affect the business, financial
condition, Property or prospects of Borrower, or the ability of
Borrower to perform under this Agreement. Borrower is not in
default with respect to any order of any court, governmental
authority, regulatory agency or arbitration board or tribunal,
the effect of which would materially and adversely affect the
business, financial condition, Property or prospects of
Borrower. No executive officer or director of Borrower has been
indicted or convicted in connection with or is engaging in any
criminal conduct, or is currently subject to any lawsuit or
proceeding or under investigation in connection with any anti-
racketeering or other conduct or activity.
5.4 Title to Collateral: Borrower has good and
marketable
title in fee simple (or its equivalent under applicable law) to
all the Collateral it respectively purports to own, free from
Liens, except those of Agent, and free from the claims of any
other Person other than the leasehold interests of the Lessees.
5.5 Governmental Consent: Neither the nature of Borrower
or of its business or Property, nor any relationship between
Borrower and any other Person, nor any circumstance affecting
Borrower in connection with the issuance or delivery of the
Revolving Credit Notes, is such as to require a consent,
approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of
Borrower in connection with the execution and delivery of this
Agreement or the issuance or delivery of the Revolving Credit
Notes or other documents contemplated hereby.
5.6 Taxes: All tax returns required to be filed by
Borrower
in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon Borrower,
or upon any of its Property, income or franchises, which are
shown to be due and payable on such returns have been paid,
except for those taxes being contested in good faith with due
diligence by appropriate proceedings for which appropriate
reserves have been maintained under GAAP.
5.7 Financial Statements: Borrower's opening
consolidated
balance sheet as of October 31, 1996 has been prepared in accor
dance with GAAP (except for the omission of footnote disclosure
and year-end adjustments) and presents fairly, accurately and
completely the financial position of the Borrower as of such
date. The fiscal year for Borrower currently ends on June 30.
Borrower's federal tax identification number is 84-1349929.
5.8 Full Disclosure: Neither the financial statements
referred to in Section 5.7, nor this Agreement or related
agreements and documents or any written statement furnished by
Borrower to Agent in connection with the negotiation of the
Credit Facility and contained in any financial statements or
documents relating to Borrower contain any untrue statement of
a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading.
5.9 Subsidiaries: Borrower has no Subsidiaries or
Affiliates, except as listed on Exhibit 5.9 attached hereto and
made a part hereof.
5.10 Guarantees; Other Indebtedness:
Borrower does not (i) own or hold equity or long term
debt investments in, (ii) have any outstanding advances to,
(iii) serve as guarantor, surety or accommodation maker for the
obligations of, or (iv) have any outstanding borrowings from,
any Person except as described in Exhibit 5.10, attached hereto
and a
made part hereof.
5.11 Government Regulations, etc.:
(a) The use of the proceeds of and Borrower's
issuance of the Revolving Credit Notes will not directly or
indirectly violate or result in a violation of Section 7 of the
Exchange Act or Regulations U, T, G or X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
Borrower does not own or intend to carry or purchase any
"margin stock" within the meaning of said Regulation U.
(b) Borrower has obtained all licenses, permits,
franchises or other governmental authorizations necessary for
the ownership of its Property and for the conduct of its
business, where the failure to obtain would have a material
adverse effect on the business, financial condition, Property
or prospects of Borrower or Agent's and/or Lenders' rights with
respect to the Collateral.
(c) Borrower is not in violation of, has not
received written notice that it is in violation of, or has
knowingly caused any Person to violate, any applicable statute,
regulation or ordinance of the United States of America, or of
any state, city, town, municipality, county or of any other
jurisdiction, or of any agency or department thereof,
(including without limitation, environmental laws and
regulations) which may materially and adversely affect its
business, financial condition, Property or prospects or Agent's
and/or Lenders' rights with respect to the Collateral.
(d) Borrower is current with all reports and
documents required to be filed with any state or federal
securities commission or similar agency and is in full
compliance in all material respects with all applicable rules
and regulations of such commissions.
5.12 Names:
(a) Within five (5) years prior to the Closing
Date, Borrower has not conducted business under or used any
other name (whether corporate or assumed) except for the names
shown on Exhibit 5.12(a), attached hereto and made a part
hereof. Borrower is the sole owner of all names listed on such
Exhibit 5.12(a) and any and all business done and all invoices
issued in such trade names are Borrower's business and
invoices. Each trade name of Borrower represents a division or
trading style of Borrower and not a separate corporate
Subsidiary or Affiliate or independent entity.
(b) All trademarks, patents or copyrights which
Borrower uses, plans to use or has a right to use are listed on
Exhibit 5.12(b) attached hereto and made a part hereof.
Borrower is the sole owner of such Property except to the
extent any other Person has claims or rights in such Property,
as such claims and rights are described on such Exhibit
5.12(b). To the best of Borrower's knowledge, Borrower is not
in violation of any rights of any other Person with respect to
such Property.
5.13 Other Associations: Borrower is not engaged and has
no interest in any joint venture or partnership with any other
Person except as described on Exhibit 5.13 hereto and made a
part hereof.
5.14 Environmental Matters: Except as disclosed on
Exhibit 5.14 attached hereto and made a part hereof, Borrower
has no
knowledge:
(a) of the presence of any Hazardous Substances on
any of the real property where Borrower conducts operations or
has its personal property, or
(b) of any on-site spills, releases, discharges,
disposal or storage of Hazardous Substances that have occurred
or are presently occurring on any of such real property or
where any Collateral is located, or
(c) of any spills, releases, discharges or disposal
of Hazardous Substances that have occurred, are presently
occurring on any other real property as a result of the
conduct, action or activities of Borrower.
As used herein, the term "Hazardous Substances" means any
substances defined or designated as hazardous or toxic waste,
hazardous or toxic material, hazardous or toxic substance or
similar term, by any environmental statute, rule or regulation
of any governmental entity presently in effect and applicable
to such real property.
5.15 Capital Stock: The authorized and outstanding shares
of capital stock of Borrower are as set forth on Exhibit 5.15
attached hereto and made a part hereof. All of the capital
stock of Borrower has been duly and validly authorized and
issued and is fully paid and non-assessable and has been sold
and delivered to the holders thereof in compliance with, or
under valid exemption from, all Federal and state laws and the
rules and regulations of all regulatory bodies thereof
governing the sale and delivery of securities. Except for the
rights and obligations set forth in Exhibit 5.15, there are no
subscriptions, warrants, options, calls, commitments, rights or
agreements by which Borrower or any of the shareholders of
Borrower are bound relating to the issuance, transfer, voting
or redemption of shares of its capital stock or any pre-emptive
rights held by any Person with respect to the shares of capital
stock of Borrower. Except as set forth in Exhibit 5.15,
Borrower has not issued any securities convertible into or
exchangeable for shares of its capital stock, or any options,
warrants or other rights to acquire such shares or securities
convertible into or exchangeable for such shares.
5.16 Solvency: Borrower is solvent, able to pay its debts
as they become due, and has capital sufficient to carry on its
business and all business in which it is about to engage, and
now owns Property having a value both at fair valuation and at
present fair salable value greater than the amount required to
pay its debts. Borrower will not be rendered insolvent by the
execution and delivery of this Agreement or any of the other
documents executed in connection with this Agreement or by the
transactions contemplated hereunder or thereunder.
5.17 Leases and Leased Property: Each Lease reported to
Agent and Lenders as an Eligible Lease and the Leased Property
associated therewith shall, at all times when such Leases are
included in the Borrowing Base calculation, be in compliance
with all of the following representations:
(a) Each Lease is in substantially the same form
as that attached as Exhibit 5.17 hereto and is genuine, based
on contracts that are enforceable in accordance with its terms
against the Lessee and the Leased Property named and referenced
therein, constitutes the entire agreement for the leasing of
the Leased Property thereby covered, has not been altered or
amended,
except as set forth in the related schedules, and Borrower's
Books and Records relating thereto are accurate, complete and
genuine;
(b) The sole original of each Lease has been
delivered to Agent, and all other counterparts of each Lease
shall contain a legend stating that the Lease has been assigned
to CoreStates Bank, N.A., As Agent, pursuant to that certain
Loan and Security Agreement dated January __, 1997, or contain
similar language specifying that such counterpart is not an
original for "Chattel Paper" purposes under the UCC;
(c) Where the Lease consists of a Master Lease
Agreement and specific schedules which describe the terms of
any specific items to be leased pursuant to such schedule, the
sole original schedule shall constitute the sole original
Lease, provided that the terms of the Master Lease Agreement
and the schedule make it clear that the sole original schedule
is a separate lease for "Chattel Paper" purposes under the UCC
and that possession of such schedule constitutes possession of
"Chattel Paper" under the UCC;
(d) None of the Leased Property is Property for
which a certificate of title is required;
(e) The original amount and unpaid balance of each
Lease shown on Borrower's Books and Records and on any
statement or schedule delivered to Agent in connection
therewith is the true and correct amount actually owed to
Borrower, no portion of which, except as specifically provided
for in the Lease, has been prepaid;
(f) The amount due under each Lease is not subject
to, and the terms of the Lease provide that the Lessee may not
assert, any claim or reduction, counterclaim, setoff,
recoupment, or any other claim, allowance or adjustment and no
Lease has been re-negotiated, restructured or compromised
except as renewed in the ordinary course of business;
(g) All security agreements, title retention
instruments and other documents and instruments which are
security for any Lease, and/or each Lease, contain a correct
and sufficient description of the Leased Property covered
thereby and all security interests granted therein to Borrower
(either directly or as assignee), if applicable, have been
properly perfected and assigned to Agent for the benefit of
Lenders, except for security interests in items of Leased
Property which have a fair market value of less than $25,000;
(h) Borrower has not and will not enter into any
agreement with a Lessee of any Leased Property which provides,
directly or indirectly, for the crediting of any obligation or
liability of Borrower to such Lessee against future rentals
accruing under the Lease;
(i) Each item of Leased Property has been
delivered
to and, in all instances, accepted by the Lessee and is in good
condition, ordinary wear and tear accepted, has not been
returned, rejected, lost, stolen, destroyed or damaged and has
not been removed from service;
(j) Each Lease has been duly executed by Borrower
and each Lessee, is a valid, legal and binding obligation of
Borrower, and such Lessee, and is enforceable against Borrower
and such Lessee in accordance with its terms. Borrower is the
sole owner of each of the Leases and has the authority to
assign
all of its right, title and interest therein upon the terms
herein set forth;
(k) Each of the Leases and all Leased Property
which
is the subject matter thereof at the time of its assignment to
Agent for the benefit of Lenders and at all times thereafter,
will be free and clear of any and all assignments, options,
rights, or other Liens whatsoever except Lenders' and/or
Agent's;
(l) Borrower has made its usual credit
investigation
of each Lessee and has determined that the credit is
satisfactory;
(m) All costs, fees, and expenses incurred in
making
and closing each of the Leases has been paid and each Lease is
and, except as hereafter provided, will be current at the time
of the assignment thereof to Lenders. No default exists or
event exists which, with the giving of notice or the passage of
time or both, will result in the occurrence of a default of any
obligation, as expressed in any Lease, except for a default
arising from a Lessee's failure to pay rent within sixty-one
days of the date when due under the Lease;
(n) All rentals, fees, costs, expenses and charges
paid or payable by the Lessee under any Lease, including
without limitation, any brokerage and other fees paid to
Borrower do not violate any laws relating to the maximum fees,
costs, expenses or charges that can be charged in any state in
which any Leased Property is located or in which the
corresponding Lessee is located, or in which a transaction was
consummated, or in any other state which may have jurisdiction
with respect to any such Leased Property, Lease or Lessee;
(o) Agent, for the benefit of Lenders, has a first
perfected lien and security interest in the Collateral
(including without limitation each Lease and the Leased
Property except for Leased Property having a fair market value
of less than $25,000) subject to no other Lien. Borrower has
taken, and in the future shall take, all steps necessary to
maintain Agent's first perfected lien and security interest in
the Collateral, including, if required, perfecting Borrower's
security interest (in the event the Lease is not a "true
lease") through filing financing statements, amendments
thereto, or assignments and/or continuations thereof and
recording of the documentation necessary to perfect Borrower's
lien;
(p) For each Lease of Leased Property with a fair
market value of $25,000 or more, Borrower has filed, within ten
(10) days of receipt by the Lessee of possession of the Leased
Property, such UCC financing statements (listing Borrower as
secured party, Lessee as debtor, and such Leased Property as
collateral), in such locations as would be required by
applicable law (if Borrower were a secured party and Lessee
were a debtor) in order to perfect a security interest in such
Leased Property under the UCC or otherwise;
(q) For each Lease of Leased Property with a fair
market value of $25,000 or more, Borrower has either (i) listed
Agent for the benefit of Lenders, as assignee on the UCC-1
Financing Statement so filed, or (ii) after Borrower has
received acknowledgment copies of UCC-1s, delivered to Agent
executed UCC3 Financing Statements naming Agent for the benefit
of Lenders as assignee of Borrower's security interest. Agent
agrees not to file the UCC-3 Financing Statements until such
time as an Event of Default or Unmatured Event of Default
occurs under this Agreement, and Agent will return such UCC-3
Financing Statements
to Borrower if such Leases are ultimately sold or refinanced on
a permanent basis with another lender or in a Securitization
Transaction;
(r) Each Lease is valid and enforceable and
presents
the undisputed obligation of the Lessee named therein and is
not more than sixty-one (61) days contractually past due;
(s) Each item of Leased Property with a fair
market
value of $25,000 or more has been insured in the ordinary
course of Borrower's or the corresponding Lessee's business;
(t) Borrower has not received notice of a
bankruptcy, receivership, reorganization or insolvency of any
Lessee;
(u) No Lessee is a Subsidiary or Affiliate of
Borrower, or under common control with Borrower or is an
officer or employee of Borrower; and
(v) The Lessee is not otherwise in default under
the
corresponding Lease; and
(w) No item of Leased Property had an original
cost
in excess of $150,000.00.
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants that until all of Borrower's
Obligations to Lenders and Agent are paid and satisfied in full
and the Credit Facility has been terminated:
6.1 Payment of Taxes and Claims: Borrower shall pay,
before they become delinquent, all taxes, assessments and
governmental charges or levies imposed upon it or upon
Borrower's Property.
6.2 Maintenance of Properties and Corporate Existence:
(a) Property Insurance - Borrower shall maintain
or
cause to be maintained insurance on the Collateral (except for
items of Leased Property having a fair market value of less
than $25,000) against fire, flood, casualty and such other
hazards in such amounts, with such deductibles and with such
insurers as are satisfactory to Agent. At or prior to Closing,
Borrower shall furnish Agent with copies of original insurance
binders certified as true and correct and being in full force
and effect as of the Closing Date or such other evidence of
insurance as Agent may require. In the event Borrower fails to
procure or cause to be procured any such insurance or to timely
pay or cause to be paid the premium(s) on any such insurance,
Agent (on behalf of Lenders) may do so for Borrower, but
Borrower shall continue to be liable for the same. The
policies of all such casualty insurance shall contain standard
lender's loss payable clauses issued in favor of Agent (on
behalf of Lenders) under which all losses thereunder shall be
paid to Agent (on behalf of Lenders) as Agent's interest may
appear. Such policies shall expressly provide that the
requisite insurance cannot be altered or canceled without
thirty (30) days prior written notice to Agent and shall insure
Lenders notwithstanding the act or neglect of Borrower.
Borrower hereby appoints Agent as Borrower's attorney-in-fact,
exercisable at Agent's option, to endorse any check which may
be payable to Borrower in order to collect the proceeds of such
insurance and any amount or amounts collected by Agent pursuant
to the provisions of this paragraph may be applied
by Agent to Borrower's Obligations in such order as Agent shall
elect in its sole discretion. Borrower further covenants that
all insurance premiums owing under its current casualty policy
have been paid. Borrower also agrees to notify Agent,
promptly, upon Borrower's receipt of a notice of termination,
cancellation, or non-renewal from its insurance company of any
such policy.
(b) Public Liability Insurance - Borrower shall
maintain, and shall deliver to Agent upon Agent's request
evidence of, public liability insurance in such amounts, with
such deductibles and with such insurers as are satisfactory to
Agent.
(c) Financial Records - Borrower shall keep
current and accurate books of records and accounts in which
full and correct entries will be made of all of its business
transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in
accordance with GAAP. Borrower shall not change its respective
fiscal year end date without the prior written consent of
Agent.
(d) Legal Existence and Rights - Borrower shall do
(or cause to be done) all things necessary to preserve and keep
in full force and effect its legal existence, good standing,
rights and franchises.
(e) Compliance with Laws - Borrower shall be in
compliance with any and all laws, ordinances, governmental
rules and regulations, and court or administrative orders or
decrees to which it is subject, whether federal, state or
local, (including without limitation environmental or
environmental-related laws, statutes, ordinances, rules,
regulations and notices and all applicable consumer sale and/or
leasing laws and regulations), and shall obtain and maintain
any and all licenses, permits, fran chises or other
governmental authorizations necessary to the ownership of its
Property or to the conduct of its businesses, which violation
or failure to obtain may materially adversely affect the
business, Property, financial conditions or prospects of
Borrower.
6.3 Business Conducted: Borrower shall continue in the
business presently operated by it using its best efforts to
maintain its customers and goodwill. Borrower shall not
engage, directly or indirectly, in any material respect in any
line of business substantially different from the businesses
conducted by it immediately prior to the Closing Date, unless
such line of business is reasonably related to such business so
conducted prior to the Closing Date.
6.4 Litigation: Borrower shall give prompt notice to
Agent of any litigation claiming in excess of $250,000 from
Borrower, or which may otherwise have a material adverse effect
on the business, financial condition, Property or prospects of
Borrower.
6.5 Taxes: Borrower shall pay all taxes (other than
taxes based upon or measured by any Lender's income or
revenues), if any, in connection with the Loans and/or the
recording of any Lien documents. The obligations of Borrower
under this section shall survive the payment of Borrower's
Obligations under this Agreement and the termination of this
Agreement. Borrower shall cause to be paid all taxes incurred
in connection with any of the Leases or the acquisition, sale
or lease of any of the Leased Property.
6.6 Bank Accounts: Borrower shall maintain depository
and disbursement account(s) with Agent with a minimum balance
of
$10,000.
6.7 Warranties for Future Advances: Each request by
Borrower for an Advance under the Credit Facility in any form
following the Closing Date shall constitute an automatic
representation and warranty by Borrower to the effect that:
(a) There has been no material adverse change in
Borrower's operations or condition (financial or otherwise)
since the date of delivery of Borrower's most recent Financial
Statements;
(b) No Event of Default which has not been cured
or
waived, or Unmatured Event of Default, then exists;
(c) Each Advance is within and complies with the
terms and conditions of this Agreement, including without
limitation, the notice provisions contained in Section 2.3
hereof;
(d) No Lien, including, without limitation, any
federal tax Lien, has been imposed on Borrower which may, in
any way, take priority over Agent's and/or Lenders' security
interests in or Liens on any Collateral; and
(e) Each representation and warranty set forth in
Section 5 of this Agreement is then true and correct in all
material respects.
6.8 Financial Covenants: Borrower shall maintain and
comply with the following financial covenants as reflected on
and computed from their Financial Statements:
(a) Adjusted Debt to Tangible Net Worth Ratio:
Borrower shall have and maintain at all times an Adjusted Debt
to Tangible Net Worth Ratio on a consolidated basis, measured
quarterly as of the last day of each fiscal quarter during each
fiscal year, of not more than 5.0 to 1.
(b) Tangible Net Worth\Net Worth:
(i) Borrower shall have and maintain a
Tangible Net Worth on a consolidated basis, measured quarterly
as of the last day of each fiscal quarter, of not less than
$8,000,000 plus an amount equal to 50% of Borrower's Net
Income, without respect to losses, for the immediately
preceding fiscal quarter, with such step-up to commence with
the fiscal quarter ending December 31, 1996.
(ii) Borrower shall have and maintain a Net
Worth on a consolidated basis, measured quarterly as of the
last day of each fiscal quarter, of not less than $11,000,000
plus an amount equal to 50% of Borrower's Net Income, on a
consolidated basis without respect to losses, for the
immediately preceding fiscal quarter, with such step-up to
commence with the fiscal quarter ending December 31, 1996.
(c) Interest Coverage Ratio: Borrower shall
have
and maintain as of the end of each fiscal quarter, based on
financial information for the twelve (12) month period ending
as of the end of such fiscal quarter, on a consolidated basis,
a ratio of Net Income before interest to interest expense of
not less than 1.25 to 1.0.
(d) Delinquent Leases: Borrower shall maintain
its Accounts which are 31 days or more past due at a level less
than 3.75% of its gross lease receivables, measured as of the
last day of each month.
(e) Charge-Offs: Borrower shall maintain its
chargeoffs on a year-to-year date basis at a level less than 2%
of equipment cost (net of "soft costs"). Compliance with this
covenant is to be calculated on a monthly basis.
6.9 Financial and Business Information: Borrower shall
deliver to Agent (and Agent shall thereafter promptly furnish
copies to each of the Lenders) the following:
(a) Financial Statements and Collateral Reports:
such data, reports, statements and information, financial or
otherwise, as Agent may reasonably request, including, without
limitation:
(i) within one hundred twenty (120) days after
the end of each fiscal year of Borrower, deliver to Agent,
Financial Statements of Borrower for such year including the
balance sheet of Borrower as at the end of such fiscal year and
a statement of cash flows and income statement for such fiscal
year, all on a consolidated and consolidating basis, setting
forth in the consolidated statements in comparative form, the
corresponding figures as at the end of and for the previous
fiscal year, all in reasonable detail, including all supporting
schedules, and audited and certified by independent public
accountants of recognized standing, selected by Borrower and
satisfactory to the Agent, to have been prepared in accordance
with GAAP, and such independent public accountants shall also
provide an unqualified opinion that the Financial Statements
present fairly the Borrower's financial condition. Such
independent accountants shall also provide a statement
certifying that nothing has come to their attention to cause
them to believe that calculations contained in the compliance
certificate delivered pursuant to Section 6.9(vi) below are
inaccurate;
(ii) within twenty-five (25) days of the end of
each calendar month, deliver to Agent the following reports for
that month and on a year-to-date basis (i) Borrower's Lease
receivables aging report in the form of Exhibit 6.9 (ii)
attached hereto, (ii) a monthly delinquency report, (iii)
Borrower's monthly portfolio statistics and (iv) such other
reports as Agent reasonably deems necessary, certified by
Borrower's chief financial officer or president as true and
correct, all in form and substance satisfactory to Agent;
(iii) within forty-six (46) days after the end of
each fiscal quarter, deliver to Agent, Borrower's internally
prepared monthly consolidated and consolidating Financial
Statements, including balance sheet, income statement and
statements of cash flows; and
(iv) Within forty-five (45) days after the end
of each fiscal quarter, deliver to Agent a quarterly write-off
analysis for such quarter and on a year-to-date basis;
(v) Within twenty-five (25) days after the end
of each month, deliver to Agent, certified copies of all
servicing reports or similar covenant compliance reports
delivered to the applicable trustee for all existing and future
Securitization Transaction(s); and
(vi) Within forty-six (46) days after the end of
each fiscal quarter, deliver to Agent a covenant compliance
certificate in the form of Exhibit 6.9(vi) attached hereto.
(b) Notice of Event of Default - promptly upon
becoming aware of the existence of any condition or event which
constitutes a default or an Event of Default or Unmatured Event
of Default under this Agreement, a written notice specifying
the nature and period of existence thereof and what action
Borrower is taking (and proposes to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon
receipt by Borrower, notice of default, oral or written, given
to Borrower by any creditor for borrowed money in excess of
$20,000;
(d) Securities and Other Reports - if Borrower
shall be required to file reports with the Securities and
Exchange Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act, promptly upon its becoming available, one copy of
each financial statement, report, notice or proxy statement
sent by Borrower to stockholders generally, and, a copy of each
regular or periodic report, and any registration statement, or
prospectus in respect thereof, filed by Borrower with any
securities exchange or with federal or state securities and
exchange com missions or any successor agency.
6.10 Officers' Certificates: Along with the set of
Financial Statements delivered to Agent at the end of each
fiscal quarter and fiscal year pursuant to Section 6.9(a)
hereof, deliver to Agent a certificate (in the form of Exhibit
6.10 attached hereto and made a part hereof) from the chief
financial officer or president of Borrower (and as to
certificates accompanying the annual statements of Borrower,
also certified by Borrower's independent certified public
accountant) setting forth:
(a) Covenant Compliance - the information
(including detailed calculations) required in order to
establish whether Borrower is in compliance with the
requirements of Section 6.8 as of the end of the period covered
by the financial statements then being furnished (and any
exhibits appended thereto) under Section 6.9; and
(b) Event of Default - that the signer, in his
capacity as an officer of Borrower, has reviewed the relevant
terms of this Agreement and has made (or caused to be made
under his supervision) a review of the transactions and
conditions of Borrower from the beginning of the accounting
period covered by the Financial Statements being delivered
therewith to the date of the certificate, and that such review
has not disclosed the existence during such period of any
condition or event which constitutes an Event of Default or
Unmatured Event of Default or if any such condition or event
existed or exists, specifying the nature and period of
existence thereof and what action Borrower has taken or
proposes to take with respect thereto.
6.11 Inspection: Borrower will permit (from time to time
at Agent's discretion) any of Agent's officers or other
represen tatives to visit and inspect any of Borrower's
locations and where any Collateral is kept during regular
business hours, to examine and audit all of Borrower's books of
account, records, reports and other papers, to make copies and
extracts therefrom and to discuss its affairs, finances and
accounts with its officers, employees and independent certified
public accountants. Agent will notify Lenders of each scheduled
field examination and to the extent reasonably practicable,
representatives of each Lender may accompany Agent during each
such field examination. Prior to the occurrence of an Event of
Default, Borrower shall be responsible for the cost of no more
than two (2) such
examinations per year, at a cost not to exceed $3,000 per audit
(plus out-of-pocket expenses). After the occurrence of an
Event of Default, Borrower shall be responsible for all costs
(and outof-pocket expenses) for all audits conducted by Agent
or any outside firm retained by Agent for such purpose.
6.12 Tax Returns and Reports: At Agent's request from
time to time, Borrower shall promptly furnish Agent with copies
of the annual federal and state income tax returns of Borrower.
6.13 Material Adverse Developments: Borrower agrees that
immediately upon becoming aware of any development or other
information which would reasonably be expected to materially
and adversely affect its businesses, financial condition,
Property, prospects or its ability to perform under this
Agreement, it shall give to Agent telephonic or facsimile
notice specifying the nature of such development or information
and such anticipated effect. In addition, any such verbal
communication shall be con firmed by written notice thereof to
Agent on the next Business Day after such verbal notice is
given.
6.14 Places of Business: Borrower shall give thirty (30)
days prior written notice to Agent of any changes in the
location of any of its respective places of business, or of the
places where Books and Records are kept, or the establishment
of any new place of business, or the discontinuance of any
existing place of business.
6.15 Sale of Collateral: Borrower shall mark its Books
and Records to indicate Agent's security interest in the
Collateral for the benefit of Lenders, including the Leases and
Leased Property and, unless Agent consents otherwise in
writing, Borrower shall retain title at all times to the Leased
Property; provided however, that so long as no Event of Default
or Unmatured Event of Default has occurred, Borrower may,
subject to the prepayment provisions set forth herein, sell (i)
Leases and Leased Property pursuant to Securitization
Transactions or (ii) Leased Property at the termination of
Leases in the ordinary course. So long as no Event of Default
or Unmatured Event of Default has occurred, upon receipt by
Agent of the proceeds (if required) from the sale of such
Leases and/or Leased Property, Agent shall execute such
documentation as is reasonably necessary to release its
security interest in such Leases and/or Leased Property.
6.16 Receipt of Payments: Prior to the occurrence of
an Event of Default and the Agent's notification to lessees to
redirect payment under Leases to a place designated by Agent,
Borrower shall direct all Lessees to make payments under Leases
to Borrower at a Post Office Box No. 0280 in Denver, Colorado
80256-0280 (provided, however, that Borrower agrees to redirect
payments under the Leases to a lock-box in the name of, and
under the dominion and control of, Agent, upon the request of
Agent anytime after the expiration of 120 days from the date
hereof, provided Agent has reasonably demonstrated its ability
to provide the requisite lock-box functions in connection with
its provision of lock-box services under that certain Lockbox
Agreement dated _________, 1997 among GF Funding Corp. II,
Agent, and Norwest Bank of Minnesota, as Trustee, as amended
from time to time) and Borrower shall not redirect payments or
change such post office box without the express written consent
of Agent.
SECTION 7. BORROWER'S NEGATIVE COVENANTS:
Borrower covenants that until all of Borrower's
Obligations to Lenders and Agent are paid and satisfied in full
and the
Credit Facility has been terminated, that:
7.1 Merger, Consolidation, Dissolution or Liquidation:
(a) Borrower shall not sell, lease, license,
transfer or otherwise dispose of more than 10% of Borrower's
aggregate assets during any 12 consecutive month period except
in the ordinary course or ordinary operation of Borrower's
business and in Securitization Transactions and other
nonrecourse financing of Leases.
(b) Borrower shall not enter into any merger,
consolidation, reorganization or recapitalization or acquire
all or substantially all of the assets of any other Person or
entity except for a merger, consolidation or acquisition in
which properties and assets of Borrower are transferred to or
combined with, as a single entity, any one Person, so long as
(A) no Event of Default or Unmatured Event of Default has
occurred hereunder and that after giving effect to such merger,
consolidation or acquisition, no Event of Default or Unmatured
Event of Default shall have occurred, and (B) Borrower shall be
the surviving entity.
7.2 Liens and Encumbrances: Borrower shall not: (i)
execute a negative pledge agreement with any Person covering
any of the Collateral, or (ii) cause or permit or agree or
consent to cause or permit in the future (upon the happening of
a contingency or otherwise) the Collateral, whether now owned
or hereafter acquired, to be subject to a Lien;
7.3 Negative Pledge: Borrower shall not pledge, grant or
permit any Lien to exist on the common stock of its
Subsidiaries and Affiliates (except GF Funding Corp. I or any
other special purpose corporation formed in connection with a
Securitization Transaction) nor on any Leases or Leased
Property (except those Liens and assignments granted to Agent
for the benefit of Lenders).
7.4 Transactions With Affiliates or Subsidiaries:
(a) Borrower shall not enter into any transaction
with any Subsidiary or other Affiliate including, without
limita tion, the purchase, sale, lease or exchange of Property,
or the loaning or giving of funds to any Affiliate or any
Subsidiary (other than a sale to a special purpose Subsidiary
in connection with a Securitization Transaction), unless (i)
such Subsidiary or Affiliate is engaged in a business
substantially related to the business conducted by Borrower and
the transaction is in the ordinary course of and pursuant to
the reasonable requirements of Borrower's business and upon
terms substantially the same and no less favorable to Borrower
as it would obtain in a comparable arm's-length transactions
with any Person not an Affiliate or a Subsidiary, and (ii) so
long as such transaction is not prohib ited hereunder.
(b) Subject in any event to the limitations of
Section 7.4(a) above, Borrower shall not create or acquire any
Subsidiary unless such Subsidiary engages in a business
substantially related to the business of Borrower as conducted
immediately prior to the Closing Date.
7.5 Guarantees: Excepting the endorsement in the
ordinary course of business of negotiable instruments for
deposit or collection, Borrower shall not become or be liable,
directly or indirectly, primarily or secondarily, in any
manner, whether as guarantor, surety, accommodation maker, or
otherwise, for the
existing or future indebtedness, matured or contingent, of any
kind of any Person.
7.6 Distributions, Redemptions and Other Indebtedness:
Borrower shall not make any Distribution to its shareholders,
their successors or assigns while an Event of Default is
outstanding or if an Event of Default would be caused by such
Distribution.
7.7 Use of Lenders' Name: Borrower shall not use any
Lender's name (or the name of any of any Lender's Affiliates)
or Agent's name in connection with any of its business
operations except to identify the existence of the Credit
Facility and the names of the Lenders and Agent in the ordinary
course of Borrower's business. Nothing herein contained is
intended to permit or authorize Borrower to make any contract
on behalf of any Lender or Agent.
7.8 Change of Management: William W. Wehner shall at all
times remain as President of Borrower.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events
shall constitute an event of default ("Event of Default") and
Agent shall thereupon have the option, and the SuperMajority
Lenders shall have the right to cause Agent, to declare the
Obligations immediately due and payable, all without demand,
notice, presentment or protest or further action of any kind
(it also being understood that the occurrence of any of the
events or conditions set forth in subparagraphs (j), (k) or (l)
shall automatically cause an acceleration of the Obligations):
(a) Payments - if Borrower fails to make any
payment of principal or interest under the Credit Facility
within five (5) days of the due date of such payment; or
(b) Other Charges - if Borrower fails to pay any
other charges, fees, Expenses or other monetary obligations
owing to any Lender or Agent arising out of or incurred in
connection with this Agreement within five (5) days of the date
such payment is due and payable; or
(c) Particular Covenant Defaults - if Borrower
fails to perform, comply with or observe any covenant or
undertaking contained in this Agreement and (other than with
respect to the covenants contained in Section 6.8 and in
Section 7 hereof, as to which no cure period shall be
applicable) such breach is not cured (to the satisfaction of
Lender) within five (5) days from the date Borrower becomes
aware or should have known of such breach; or
(d) Financial Information - if any statement,
report, financial statement, or certificate made or delivered
by Borrower or any of its officers, employees or agents, to
Agent or any Lender, is not true and correct, in all material
respects, when made; or
(e) Uninsured Loss - if there shall occur any
uninsured damage to or loss, theft, or destruction in excess of
$20,000 with respect to any portion of any Collateral; or
(f) Warranties or Representations - if any
warranty, representation or other statement by or on behalf of
Borrower contained in or pursuant to this Agreement, or in any
document, agreement or instrument furnished in compliance with,
relating to, or in reference to this Agreement, is false,
erroneous, or
misleading in any material respect when made; or
(g) Agreements with Others - if Borrower shall
default beyond any grace period under any agreement with any
creditor for borrowed money and (i) such default consists of
the failure to pay any principal, premium or interest with
respect to such indebtedness or (ii) such default consists of
the failure to perform any covenant or agreement with respect
to such indebtedness, if the effect of such default is to cause
Borrower's obligations which are the subject thereof to become
due prior to its maturity date or prior to its regularly
scheduled date of payment or would entitle such creditor to
accelerate such obligations; or
(h) Other Agreements with Lenders - if Borrower
breaches or violates the terms of, or if a default or an event
of default occurs under, any other existing or future agreement
(related or unrelated) between or among Borrower and Agent or
any Lender or all Lenders; or
(i) Judgments - if any final judgment for the
payment of money in excess of $20,000 which is not fully and
unconditionally covered by insurance shall be rendered against
Borrower; or
(j) Assignment for Benefit of Creditors, etc. - if
Borrower makes or proposes an assignment for the benefit of
creditors generally, offers a composition or extension to
creditors, or makes or sends notice of an intended bulk sale of
any business or assets now or hereafter owned or conducted by
Borrower which might materially and adversely affect Borrower;
or
(k) Bankruptcy, Dissolution, etc. - the
commencement
of any action for the dissolution or liquidation of Borrower,
or the commencement of any proceeding to avoid any transaction
entered into by Borrower, or the commencement of any case or
proceeding for reorganization or liquidation of Borrower's
debts under the Bankruptcy Code or any other state or federal
law, now or hereafter enacted for the relief of debtors,
whether in stituted by or against Borrower; provided, however,
that Borrower shall have sixty (60) days to obtain the
dismissal or discharge of involuntary proceedings filed against
it, it being understood that during such sixty (60) day period,
no Lender shall be obligated to make Advances hereunder and
Agent may seek adequate protection in any bankruptcy
proceeding; or
(l) Receiver - the appointment of a receiver,
liquidator, custodian, trustee or similar official or fiduciary
for Borrower or for any of Borrower's Property; or
(m) Execution Process, Seizure, etc. - the
issuance
of any execution or distraint process against Borrower, or any
Property of Borrower is seized by any governmental entity,
federal, state or local; or
(n) Termination of Business - if Borrower ceases
any
material portion of its business operations as presently
conduct ed; or
(o) Pension Benefits, etc. - if Borrower fails to
comply with ERISA, so that grounds exist to permit the
appointment of a trustee under ERISA to administer Borrower's
employee plans or to allow the Pension Benefit Guarantee
Corporation to institute a proceeding to appoint a trustee to
administer such plan(s), or to permit the entry of a Lien to
secure any deficiency or claim; or
(p) Investigations - if any indication or evidence
is received by Agent or any Lender that reasonably leads it to
believe Borrower may have directly or indirectly been engaged
in any type of activity which, would be reasonably likely to
result in the forfeiture of any Property of Borrower to any
governmental entity, federal, state or local; or
(q) Securitization Transaction Violations. If a
"Trigger Event" occurs or any other violation or default under
or in connection with any existing or future Securitization
Transaction occurs or any event occurs, the occurrence of which
entitles the trustee in connection with such Securitization
Transaction to cause an acceleration of the promissory notes or
other instruments issued in connection with such Securitization
Transaction.
8.2 Cure - Nothing contained in this Agreement or the
Loan Documents shall be deemed to compel Agent and/or Lenders
to accept a cure of any Event of Default hereunder.
8.3 Rights and Remedies on Default:
(a) In addition to all other rights, options and
remedies granted or available to Agent under this Agreement or
the Loan Documents, or otherwise available at law or in equity,
upon or at any time after the occurrence and during the
continuance of an Event of Default or Unmatured Event of
Default, Agent may, in its discretion, and the SuperMajority
Lenders shall have the right to cause Agent to, withhold or
cease making Advances under the Credit Facility.
(b) In addition to all other rights, options and
remedies granted or available to Agent under this Agreement or
the Loan Documents, Agent may, in its discretion, and the
SuperMajority Lenders shall have the right to cause Agent to,
upon or at any time after the occurrence and during the
continuance of an Event of Default, terminate the Credit
Facility.
(c) In addition to all other rights, options and
remedies granted or available to Agent under this Agreement or
the Loan Documents, Agent may, upon or at any time after the
occurrence of an Event of Default, exercise all rights under
the UCC and any other applicable law or in equity, and under
all Loan Documents permitted to be exercised after the
occurrence of an Event of Default, including the following
rights and remedies (which list is given by way of example and
is not intended to be an exhaustive list of all such rights and
remedies):
(i) The right to take possession of, and notify
all Lessees of the Agent's and Lenders' security interest in
the Collateral and require payment under the Leases to be made
directly to Agent for the benefit of Lenders and Agent may, in
its own name or in the name of Borrower, exercise all rights of
lessor under the Leases and collect, sue for and receive
payment on all Leases, and settle, compromise and adjust the
same on any terms as may be satisfactory to Agent, in its sole
and absolute discretion for any reason or without reason and
Agent may do all of the foregoing with or without judicial
process (including without limitation notifying the United
States postal authorities to redirect mail addressed to
Borrower to an address designated by Agent); or
(ii) By its own means or with judicial
assistance, subject to the rights of the Lessees, enter
Borrower's premises or location of Collateral and take
possession of the Collateral,
or render it unusable, or dispose of the Collateral on such
premises in compliance with subsection (d) below, without any
liability for rent, storage, utilities or other sums, and
Borrower shall not resist or interfere with such action; or
(iii) Require Borrower, at Borrower's sole
expense, subject to the rights of the Lessees, to assemble all
or any part of the Collateral and make it available to Agent at
any place designated by Agent; or
(iv) The right to reduce or modify the Maximum
Credit Limit, Borrowing Base or any portion thereof or the
advance rates or to modify the terms and conditions upon which
Agent, on behalf of and with the consent of Lenders, may be
willing to consider making Advances under the Credit Facility
(without any obligation to do so) or to take additional
reserves in the Borrowing Base for any reason; or
(v) The right to terminate the lock-box
arrangement established pursuant to the Lock-Box Agreement
described and defined in the Intercreditor Agreement as it
relates to this Agreement and to direct delivery of all
remittances thereto constituting Collateral in accordance with
Agent's instructions by notifying Colorado National Bank, in
its capacity as lock-box bank, to take such actions. Any such
notice to be deemed a Control Event Notice as defined in the
Intercreditor Agreement.
(d) Borrower hereby agrees that a notice received
by it at least five (5) days before the time of any intended
public sale or of the time after which any private sale or
other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other
disposition. If per mitted by applicable law, any Collateral
which threatens to speedily decline in value or which is sold
on a recognized market may be sold immediately by Agent without
prior notice to Borrower. Borrower covenants and agrees not to
interfere with or impose any obstacle to Agent's exercise of
its rights and remedies with respect to the Collateral, after
the occurrence of an Event of Default hereunder.
8.4 Nature of Remedies: All rights and remedies granted
Agent or Lenders hereunder and under the Loan Documents, or
otherwise available at law or in equity, shall be deemed
concurrent and cumulative, and not alternative remedies, and
Agent may proceed with any number of remedies at the same time
until all Obligations are satisfied in full. The exercise of
any one right or remedy shall not be deemed a waiver or release
of any other right or remedy, and Agent, upon or at any time
after the occurrence of an Event of Default, may proceed
against Borrower, at any time, under any agreement, with any
available remedy and in any order.
8.5 Set-Off: If any bank account of Borrower with Agent,
any Lender or any participant is attached or otherwise liened
or levied upon by any third party, Agent or such Lender or such
participant, as applicable, as agent for Lenders, shall have
and be deemed to have, without notice to Borrower, the
immediate right of set-off and may apply the funds or amount
thus set-off against any of Borrower's Obligations hereunder.
SECTION 9. AGENT
As between the Agent, on one hand, and the Lenders, on the
other hand, the Agent and each of the Lenders, who are now or
shall become parties to this Agreement, agree as follows (with
the consent and approval of Borrower):
9.1 Appointment and Authorization. Each Lender, and each
subsequent holder of any of the Revolving Credit Notes, by its
acceptance thereof, hereby irrevocably appoints and authorizes
the Agent to take such action on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent
by the terms hereof, together with such powers as are
reasonably incidental thereto. Except as may be otherwise
expressly provided herein, Borrower is hereby authorized by the
Lenders to deal solely with the Agent in all transactions which
affect the Lenders under this Agreement and the Loan Documents.
The rights, privileges and remedies accorded to the Agent
hereunder shall be exercised by the Agent on behalf of all of
the Lenders.
9.2 General Immunity. Subject to the provisions of this
Agreement, the Agent will handle all transactions relating to
the Loans and all other Obligations, including, without
limitation, all transactions with respect to this Agreement,
the Loan Documents and all related documents in accordance with
its usual banking practices. In performing its duties as Agent
hereunder, the Agent will take the same care as it takes in
connection with loans in which it alone is interested.
However, neither the Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or
omitted to be taken by it or them hereunder or in connection
herewith except for its or their own gross negligence or
willful misconduct.
9.3 Consultation with Counsel. The Agent may consult
with legal counsel and any other professional advisors or
consultants deemed necessary or appropriate and selected by
Agent and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such
counsel.
9.4 Documents. The Agent shall not be under a duty to
examine into or pass upon the effectiveness, genuineness or
validity of this Agreement or any of the Revolving Credit
Notes, or any other instrument or document furnished pursuant
hereto or in connection herewith, and the Agent shall be
entitled to assume that the same are valid, effective and
genuine and what they purport to be. In addition, the Agent
shall not be liable for failing to make any inquiry concerning
the accuracy, performance or observance of any of the terms,
provisions or conditions of such instrument or document.
9.5 Rights as a Bank. With respect to its applicable Pro
Rata Percentage of the Credit Facility, the Agent shall have
the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not the Agent, and the
term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Agent in its individual capacity.
Subject to the provisions of this Agreement, the Agent may
accept deposits from, lend money to and generally engage in any
kind of banking or trust business with Borrower and its
Affiliates as if it were not the Agent.
9.6 Responsibility of Agent. It is expressly understood
and agreed that the obligations of the Agent hereunder are only
those expressly set forth in this Agreement and that the Agent
shall be entitled to assume that no Event of Default and no
Unmatured Event of Default has occurred and is continuing,
unless the Agent has actual knowledge of such fact. Except to
the extent Agent is required by the Lenders pursuant to the
express terms hereof to take a specific action, the Agent shall
be entitled to use its discretion with respect to exercising or
refraining from exercising any rights which may be vested in it
by, or with respect to taking or refraining from taking any
action or actions that it may be able to take under or in
respect of, this Agreement and the Loan Documents. The Agent
shall incur no liability under or in respect of this Agreement
and the Loan Documents by acting upon any notice, consent,
certificate, warranty or other paper or instrument believed by
it to be genuine or authentic or to be signed by the proper
party or parties, or with respect to anything that it may do or
refrain from doing in the reasonable exercise of its judgment,
or that may seem to it to be necessary or desirable under the
circumstances. It is agreed among the Agent and the Lenders
that the Agent shall have no responsibility to carry out field
examinations or otherwise examine the books and records or
properties of Borrower, except as the Agent in its sole
discretion deems appropriate. The relationship between the
Agent and each Lender is and shall be that of agent and
principal only and nothing herein shall be construed to
constitute the Agent a joint venturer with any Lender, a
trustee or fiduciary for any of the Lenders or for the holder
of a participation therein nor impose on the Agent duties and
obligations other than those set forth herein.
9.7 Collections and Disbursements.
(a) The Agent will have the right to collect and
receive all payments of the Obligations, together with all
fees, charges and other amounts due under this Agreement and
the Loan Documents, and the Agent will remit to each Lender
according to applicable Pro Rata Percentages all such payments
actually received by Agent (subject to any required clearance
procedures) on the same Business Day of receipt thereof (but if
such payments shall not have been received by the Agent prior
to 12:00 noon Eastern Time on such Business Day then, on the
next Business Day).
(b) On the Business Day for which notice is given
Lenders by Agent with respect to requested Advances (which
notice shall state the date and amount of such payment), each
Lender shall, provided all preconditions to Advances contained
in Section 2.3 herein have been satisfied, remit to the Agent
its Pro Rata Percentage of the payment in respect to such
Advance. The obligations of Lenders under this Section 9.7(b)
are unconditional, not subject to set-off, are irrevocable and
may not be terminated at any time.
(c) If any such payment received by the Agent is
rescinded, determined to be unenforceable or invalid or is
otherwise required to be returned for any reason at any time,
whether before or after termination of this Agreement and the
Loan Documents, each Lender will, upon written notice from the
Agent, promptly pay over to the Agent its Pro Rata Percentage
of the amount so rescinded, held unenforceable or invalid or
required to be returned, together with interest and other fees
thereon if also required to be rescinded or returned.
(d) All payments by the Agent and the Lenders to
each other hereunder shall be in immediately available funds.
The Agent will at all times maintain proper books of account
and records reflecting the interest of each Lender in the
Credit Facility, in a manner customary to the Agent's keeping
of such records, which books and records shall be available for
inspection by each Lender at reasonable times during normal
business hours, at such Lender's sole expense. In the event
that any Lender shall receive any payments in reduction of the
Obligations in an amount greater than its applicable Pro Rata
Percentage in respect of indebtedness to the Lenders evidenced
hereby (including, without limitation amounts obtained by
reason
of setoffs), such Lender shall hold such excess in trust for
Agent (on behalf of all other Lenders) and shall promptly remit
to the Agent such excess amount so that the amounts received by
each Lender hereunder shall at all times be in accordance with
its applicable Pro Rata Percentage. To the extent necessary
for each Lender's actual percentage of all outstanding Loans to
equal its applicable Pro Rata Percentage, the Lender having a
greater share of any payments than its applicable Pro Rata
Percentage shall acquire a participation in the applicable
outstanding balances of the Pro Rata Shares of the other
Lenders as determined by Agent.
9.8 Indemnification. The Lenders hereby each indemnify
the Agent ratably according to their respective Pro Rata
Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or
omitted by the Agent under or related to this Agreement or the
other Loan Documents or the Loans, provided that no Lender
shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from
the Agent's gross negligence or willful misconduct. Agent
shall have the right to deduct, from any amounts to be paid by
Agent to any Lender hereunder, any amounts owing to Agent by
such Lender by virtue of this paragraph. The indemnity
provision contained in this Section 9.8 shall survive the
termination of this Agreement, the Revolving Credit or payment
in full of the Obligations.
9.9 Expenses.
(a) All out-of-pocket costs and out-of-pocket
expenses incurred by Agent and not reimbursed on demand by
Borrower, in connection with the creation, amendment,
administration, termination and enforcement of the Loans
(including, without limitation, field examination expenses,
counsel fees and expenditures to protect, preserve and defend
Agent's and any Lender's rights and interest under the Loan
Documents) shall be shared and paid on demand by Lenders pro
rata, based on their applicable Pro Rata Percentage provided
that such out-of-pocket costs and expenses shall not be
recoverable from the Lenders by the Agent to the extent such
costs and expenses resulted solely from the Agent's gross
negligence or willful misconduct.
(b) Agent may deduct from payments or
distributions to be made to Lenders such funds as may be
necessary to pay or reimburse Agent for the costs and expenses
described in subsection 9.9(a) if not paid to Agent within
thirty (30) days of the date of demand for same by Agent
pursuant to such subsection.
9.10 No Reliance. By execution of or joining in this
Agreement, each Lender acknowledges that it has entered into
this Agreement and the Loan Documents solely upon its own
independent investigation and is not relying upon any
information supplied by or any representations made by Agent.
Each Lender shall continue to make its own analysis and
evaluation of Borrower. Agent makes no representation or
warranty and assumes no responsibility with respect to the
financial condition or Property of Borrower, any Lessee or any
Collateral; the accuracy, sufficiency or currency of any
information concerning the financial condition, prospects or
results of operations of Borrower; or for sufficiency,
authenticity, legal effect, validity or enforceability of the
Loan Documents. Agent assumes no responsibility or liability
with respect to the collectibility of the Obligations or the
performance by Borrower of any obligation under the Loan
Documents.
9.11 Reporting. During the term of this Agreement, Agent
will promptly furnish each Lender such financial statements and
reports as any Lender may reasonably request. Agent will
notify Lenders within a reasonable period of time after it
receives actual knowledge of any Event of Default under the
Loan Documents.
9.12 Removal of Agent. The Agent may resign at any time
upon giving thirty (30) days prior written notice thereof to
Lenders and Borrower. The Agent may be removed as Agent
hereunder upon the written direction of all Lenders exclusive
of the Agent upon the following: (i) wilful misconduct in the
performance of Agent's duties or responsibilities under this
Agreement; or (ii) if a receiver, trustee or conservator is
appointed for Agent or any state or federal regulatory
authority assumes management or control of Agent or if, under
applicable law, the administrative or discretionary duties and
responsibilities of Agent hereunder become controlled by or
subject to the approval of any state or federal regulatory
authority. Upon any resignation or permitted removal of Agent,
the Lenders shall have the right to appoint a successor Agent
by majority vote of the other Lenders (based upon the
percentages of the total Pro Rata Shares of the Lenders other
than the Lender which is the Agent). Upon the acceptance of
the appointment as a successor Agent hereunder by such
successor Agent, such successor Agent shall thereupon succeed
to and become vested with all rights, powers, obligations and
duties of the retiring Agent and the retiring Agent shall be
discharged from its duties and obligations hereunder.
9.13 Action on Instructions of Lenders. With respect to
any provision of this Agreement, or any issue arising
thereunder, concerning which the Agent is authorized to act or
withhold action by direction of one or more Lenders, the Agent
shall in all cases be fully protected in so acting, or in so
refraining from acting, hereunder in accordance with written
instructions signed by the requisite Lenders. Such
instructions and any action taken or failure to act pursuant
thereto shall be binding on all Lenders and on all holders of
the Revolving Credit Notes.
9.14 Several Obligations. The obligation of each Lender
is several, and neither the Agent nor any other Lender shall be
responsible for any obligation or commitment hereunder of any
other Lender.
9.15 Consent of Lenders.
(a) Subject to this Section 9.15, Agent shall have
the sole and exclusive right to service, administer and monitor
the Loans and the Loan Documents, including without limitation,
the right to exercise all rights, remedies, privileges and
options under the Loan Documents, including without limitation
the determination as to whether Advances should be made under
this Agreement and the determination as to the basis on which
and extent to which Advances may be made.
(b) Notwithstanding anything to the contrary
contained in subparagraph (a) above, Agent shall not, without
the prior written consent of all Lenders: (i) extend or renew
the Current Term or any payment date under the Credit Facility,
(ii) decrease any interest rate on the Credit Facility, (iii)
compromise or settle all or a portion of the Obligations, (iv)
release any obligor from the Obligations except in connection
with termination of the Credit Facility and full payment and
satisfaction of all Obligations, (v) increase the Borrowing
Base advance rate, (vi) modify Section 9.15(b) or (c), or (vii)
increase the Maximum Credit Limit; provided however that Agent
may increase the Maximum Credit Limit after first offering the
amount of any such increase to each of the Lenders in
accordance with their respective Pro Rata Percentage. To the
extent any Lender may choose not to increase its respective Pro
Rata Share by the amount attributable to its Pro Rata
Percentage of such increase, such amount will be offered to the
other Lenders on such sharing basis as Agent may reasonably
establish. After each Lender choosing to increase its Pro Rata
Share has agreed to do so, and in conjunction with the
modification of this Agreement to reflect such increase
executed by those Lenders sharing in the increase of the Credit
Facility, the Lenders' Pro Rata Percentages will be adjusted
accordingly and all Lenders (whether or not sharing in such
increase) shall be bound by such modification.
(c) Notwithstanding anything to the contrary
contained in subparagraph (a) above and subject to the terms of
subparagraph (b) above, Agent shall not, without the prior
written consent of the SuperMajority Lenders: (i) enter into
any written amendment to any of the Loan Documents; (ii) waive
Borrower's compliance with the terms and conditions of the Loan
Documents or any Event of Default hereunder or thereunder; or
(iii) consent to Borrower taking any action which, if taken,
would constitute an Event of Default under this Agreement or
under any of the Loan Documents.
(d) After an acceleration of the Obligations,
Agent shall have the sole and exclusive right, with
communication (to the extent reasonably practicable under the
circumstances) with all Lenders, to exercise or refrain from
exercising any and all rights, remedies, privileges and options
under the Loan Documents and available at law or in equity to
protect and enforce the rights of the Lenders and collect the
Obligations, including, without limitation, instituting and
pursuing all legal actions against Borrower or to collect the
Obligations, or defending any and all actions brought by
Borrower or other Person; or incurring Expenses or otherwise
making expenditures to protect the Loans, the Collateral or
Lenders' rights or remedies.
(e) To the extent Agent is required to obtain or
otherwise elects to seek the consent of Lenders to an action
Agent desires to take, if any Lender fails to notify Agent, in
writing, of its consent or dissent to any request of Agent
hereunder within seven (7) Business Days of such Lender's
receipt of such request, such Lender shall be deemed to have
given its consent thereto.
(f) No provision in Section 9 of this Agreement
may be amended without Agent's prior written consent.
9.16 Participations and Assignments: Borrower and Lenders
hereby acknowledge and agree that Lenders may not grant
participations in or assign all or any portion of their
respective Pro Rata Shares, or Pro Rata Percentages or of their
right, title and interest therein or in or to this Agreement
except:
(a) the granting of such participations or
assignments to any Affiliate of such Lender; and
(b) assignments which arise by operation of law;
and
(c) assignments or participations approved by
Agent in its discretion and on such terms and conditions as are
reasonably acceptable to Agent.
Agent agrees with each other Lender that it shall at all
times maintain a Pro Rata Share equal to at least $11,000,000
and a Pro Rata Percentage which is no less than the Pro Rata
Percentage of any other Lender unless the Agent obtains the
express written consent of the other Lenders. The agreement
contained in the immediately preceding sentence is only for the
benefit of the Lenders and shall confer no rights on the
Borrower or any other third parties.
SECTION 10. MISCELLANEOUS
10.1 GOVERNING LAW: THIS AGREEMENT, AND ALL RELATED
AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA. THE PROVISIONS OF THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO
HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR
UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR
THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND
EFFECT.
10.2 Integrated Agreement: The Revolving Credit Notes,
the other Loan Documents, all related agreements, and this
Agreement shall be construed as integrated and complementary of
each other, and as augmenting and not restricting Lenders' and
Agent's rights and remedies. If, after applying the foregoing,
an inconsistency still exists, the provisions of this Agreement
shall constitute an amendment thereto and shall control.
10.3 Waiver:
(a) No omission or delay by Agent or Lenders in ex
ercising any right or power under this Agreement or any related
agreements and documents will impair such right or power or be
construed to be a waiver of any default, or Event of Default or
an acquiescence therein, and any single or partial exercise of
any such right or power will not preclude other or further
exercise thereof or the exercise of any other right, and as to
Borrower no waiver will be valid unless in writing and signed
by Agent and then only to the extent specified.
(b) Borrower releases and shall indemnify, defend
and hold harmless Agent and Lenders, and their respective
officers, employees and agents, of and from any claims,
demands, liabilities, obligations, judgments, injuries, losses,
damages and costs and expenses (including, without limitation,
reasonable legal fees) resulting from (i) acts or conduct of
Borrower under, pursuant or related to this Agreement and the
other Loan Documents, (ii) Borrower's breach or violation of
any representation, warranty, covenant or undertaking contained
in this Agreement or the other Loan Documents, and (iii)
Borrower's failure to comply with any or all laws, statutes,
ordinances, governmental rules, regulations or standards,
whether federal, state or local, or court or administrative
orders or decrees, (including without limitation environmental
laws, etc.) and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting solely from acts
or conduct of Lenders constituting wilful misconduct or gross
negligence. The indemnity provisions contained in this Section
10.3(b) shall survive indefinitely, notwithstanding the
termination of this Agreement, the Credit Facility or payment
in full of the Obligations.
10.4 Time: Whenever Borrower shall be required to make
any payment, or perform any act, on a day which is not a
Business Day, such payment may be made, or such act may be
performed, on the next succeeding Business Day. Time is of the
essence in Borrower's performance under all provisions of this
Agreement and all related agreements and documents.
10.5 Expenses of Agent and Lenders: At Closing and from
time to time thereafter, Borrower will pay all expenses of
Agent (and after the occurrence of an Event of Default, all
expenses of Lenders, or any of them) on demand (including,
without limitation, search costs, audit fees, appraisal fees,
environmental fees and the fees and expenses of legal counsel
for Agent, and/or Lender(s), if applicable) relating to this
Agreement, and all related agreements and documents, including,
without limitation, expenses incurred in the analysis, nego
tiation, preparation, closing, administration and enforcement
of this Agreement and the other Loan Documents, the
enforcement, protection and defense of the rights of Agent and
Lenders in and to the Loans and Collateral or otherwise
hereunder, and any expenses relating to extensions, amendments,
waivers or consents related to this Agreement or any related
agreements and documents or relating to agreements with other
creditors, or termination of this Agreement (collectively, the
"Expenses").
10.6 Brokerage: This transaction was brought about and
entered into by Agent, Lenders and Borrower acting as
principals and without any brokers, agents or finders being the
effective procuring cause hereof. Borrower represents that it
has not committed Agent or any Lender to the payment of any
brokerage fee, commission or charge in connection with this
transaction.
10.7 Notices:
(a) Any notices or consents required or permitted
by this Agreement shall be in writing and shall be deemed given
if delivered in person or if sent by telecopy or by nationally
recognized overnight courier, or via first class, Certified or
Registered mail, postage prepaid, as follows, unless such
address is changed by written notice hereunder:
If to Agent to: CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19101
Attn: David D'Antonio, Vice
President Telecopy No.: 215/786-7704
With copies to: Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Attn: Lawrence F. Flick, II,
Esquire Telecopy No.: 215/569-5555
If to Borrower to: Granite Financial, Inc.
6424 W. 91st Avenue
Westminster, CO 80030-2913
Attn: William W. Wehner,
President Telecopy No.: 303/650-
4061
With copies to: William A. Wiese, Esquire
475 17th Street, Suite 790
Denver, CO 80202
Telecopy No.: 303/296-3152
If to Lenders: To the addresses
set forth on Schedule A attached
hereto
(b) Any notice sent by Agent, any Lender or
Borrower by any of the above methods shall be deemed to be
given when so received.
(c) Agent shall be fully entitled to rely upon any
facsimile transmission or other writing purported to be sent by
any Authorized Officer (whether requesting an Advance or
otherwise) as being genuine and authorized.
10.8 Headings: The headings of any paragraph or Section
of
this Agreement are for convenience only and shall not be used
to interpret any provision of this Agreement.
10.9 Survival: All warranties, representations, and
covenants made by Borrower herein, or in any agreement referred
to herein or on any certificate, document or other instrument
delivered by it or on its behalf under this Agreement, shall be
considered to have been relied upon by Agent and Lenders, and
shall survive the delivery to Lenders of the Revolving Credit
Notes, regardless of any investigation made by Lenders or on
their behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of Agent
and any and all Lenders shall constitute warranties and
represen tations by Borrower hereunder. Except as otherwise
expressly provided herein, all covenants made by Borrower
hereunder or under any other agreement or instrument shall be
deemed continuing until all Obligations are satisfied in full.
10.10 Successors and Assigns: This Agreement shall inure
to the benefit of and be binding upon the successors and
assigns of each of the parties. Borrower may not transfer,
assign or delegate any of its duties or obligations hereunder.
10.11 Counterparts: Two or more duplicate originals of
this Agreement may be signed by the parties, each of which
shall constitute an original but all of which together shall
constitute one and the same instrument. This Agreement may be
executed in counterparts, all of which counterparts taken
together shall constitute one completed fully executed
document.
10.12 Modification: No modification hereof or any agree
ment referred to herein shall be binding or enforceable unless
in writing and signed by Borrower, Agent and the Lenders and
except as provided in Section 9 hereof. Any modification in
accordance with the terms hereof shall be binding on all
parties hereto, whether or not each is a signatory thereto.
10.13 Signatories: Each individual signatory hereto
repre
sents and warrants that such individual is duly authorized to
execute this Agreement on behalf of their principal and that
such individual executes the Agreement in such capacity and not
as a party.
10.14 Third Parties: No rights are intended to be
created
hereunder, or under any related agreements or documents for the
benefit of any third party donee, creditor or incidental benefi
ciary of Borrower. Nothing contained in this Agreement shall
be construed as a delegation to Agent or any Lender of
Borrower's duty of performance, including, without limitation,
Borrower's duties under any Lease, account or contract with any
other Person.
10.15 Discharge of Taxes, Borrower's Obligations, Etc.:
Agent, in its sole discretion, shall have the right at any
time, and from time to time, with prior notice to Borrower, if
Borrower fails to do so five (5) Business Days after requested
in writing to do so by Agent, to: (a) pay for the performance
of any of Borrower's obligations hereunder, (b) discharge taxes
or Liens, at any time levied or placed on any of Borrower's
Property in violation of this Agreement unless Borrower is in
good faith with due diligence by appropriate proceedings
contesting such taxes or Liens and maintaining proper reserves
therefor in accordance with GAAP and (c) pay the fee described
in Section 8 of the Intercreditor Agreement. Expenses and
advances, including without limitation, those advances
described in clauses (a), (b) and (c) above, shall be added to
the Revolving Credit Loans, bear interest at the same rate
applied to the Revolving Credit Loans, until reimbursed to
Agent. Such payments and advances made by Agent shall not be
construed as a waiver by Agent or Lenders of an Event of
Default under this Agreement.
10.16 Most Favored Lenders: Borrower agrees to promptly
notify Agent in writing if any agreement for borrowed money to
which Borrower is a party contains, or is amended to contain,
financial or performance covenants more restrictive than those
contained herein and upon Agent's request, Borrower agrees to
amend this Agreement accordingly so that covenants contained
herein are substantially the same as those contained in such
other agreements for borrowed money.
10.17 Consent to Jurisdiction: Borrower and each Lender
hereby irrevocably consents to the jurisdiction of the Courts
of Common Pleas of Philadelphia, Commonwealth of Pennsylvania
or the United States District Court for the Eastern District of
Pennsylvania in any and all actions and proceedings whether
arising hereunder or under any other agreement or undertaking
related hereto and irrevocably agree to service of process by
certified mail, return receipt requested to the address of the
appropriate party set forth herein.
10.18 Waiver of Jury Trial: EACH OF BORROWER, LENDERS
AND AGENT HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A
JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR
AGAINST AGENT OR ANY LENDER OR LENDERS WITH RESPECT TO RIGHTS
AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN
DOCUMENTS.
10.19 WARRANT OF ATTORNEY: THIS SECTION 10.19 SHALL ONLY
APPLY AND BE ENFORCEABLE AGAINST BORROWER IN THE EVENT THAT
BORROWER GRANTS SIMILAR RIGHTS TO ANY OTHER CREDITOR. BORROWER
AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ATTORNEYS OR THE
PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA, UPON THE OCCURRENCE OF AN EVENT
OF DEFAULT HEREUNDER, TO APPEAR FOR BORROWER IN ANY SUCH COURT,
WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM OR TIME THERE
OR ELSEWHERE TO BE HELD AND THEREIN TO CONFESS OR ENTER
JUDGMENT AGAINST BORROWER IN FAVOR OF THE AGENT, ON BEHALF OF
LENDERS FOR ALL SUMS DUE OR TO BECOME DUE BY BORROWER TO
LENDERS UNDER THIS AGREEMENT, WITH COSTS OF SUIT AND RELEASE OF
ERRORS AND WITH THE GREATER OF FIVE PERCENT (5%) OF SUCH SUMS
OR $7,500.00 ADDED AS A REASONABLE ATTORNEY'S FEE; AND FOR
DOING SO THIS AGREEMENT OR A COPY VERIFIED BY AFFIDAVIT SHALL
BE SUFFICIENT WARRANT; SUCH AUTHORITY AND POWER SHALL NOT BE
EXHAUSTED BY ANY EXERCISE THEREOF, AND JUDGMENT MAY BE
CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS THERE IS
OCCASION THEREFOR.
BORROWER ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF
COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND
FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE
CONFESSION OF JUDGMENT HAVE BEEN FULLY EXPLAINED TO IT BY SUCH
COUNSEL.
BORROWER, BEING FULLY AWARE OF THE RIGHT TO NOTICE AND A
HEARING CONCERNING THE VALIDITY OF ANY AND ALL CLAIMS THAT MAY
BE ASSERTED AGAINST BORROWER BY THE AGENT AND/OR LENDERS BEFORE
A JUDGMENT CAN BE ENTERED HEREUNDER OR BEFORE EXECUTION MAY BE
LEVIED ON SUCH JUDGMENT AGAINST ANY AND ALL PROPERTY OF
BORROWER, HEREBY WAIVES THESE RIGHTS AND AGREES AND CONSENTS TO
JUDGMENT BEING ENTERED BY CONFESSION IN ACCORDANCE WITH THE
TERMS HEREOF AND EXECUTION BEING LEVIED ON SUCH JUDGMENT
AGAINST ANY AND ALL PROPERTY OF BORROWER, IN EACH CASE WITHOUT
FIRST GIVING NOTICE AND THE OPPORTUNITY TO BE HEARD ON THE
VALIDITY OF THE CLAIM OR CLAIMS UPON WHICH SUCH JUDGMENT IS
ENTERED.
10.20 Information to Participant: Agent may divulge all
information pertaining to Borrower and the Credit Facility to
any participant, co-lender or assignee or prospective
participant, co-lender or assignee it may obtain in the Credit
Facility, or any portion thereof, and furnish to any such
Person copies of any reports, financial statements,
certificates, and documents obtained under any provision of
this Agreement, or related agreements and documents; provided,
however that any potential participant, co-lender or assignee
agrees to hold in confidence all confidential or proprietary
information provided to them by Borrower or Agent except (a) to
the extent that the production of such information is required
pursuant to any statute, ordinance, regulation, rule or order
or any subpoena or any governmental inquiry or by reason of any
bank regulation in connection with any bank examination, and
(b) such potential participant, colender or assignee shall not
be prohibited from disclosing any such information to any of
their agents, officers, employees, attorneys, accountants or
consultants who shall be informed of this provision.
IN WITNESS WHEREOF, the undersigned parties have executed
this Agreement the day and year first above written.
GRANITE FINANCIAL, INC.
By:________________________________
Title:
Attest:_____________________(Corporate
Seal) Title:
CORESTATES BANK, N.A., as Agent
By:________________________________
Title:
CORESTATES BANK, N.A., as a Lender
By:________________________________
Title:
COLORADO NATIONAL BANK, as a Lender
By:________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION, as a Lender
By:________________________________
Title:
BANK LEUMI TRUST COMPANY OF NEW YORK, as
a Lender
By:________________________________
Title:
SCHEDULE A
Pro Rata
Lenders Pro Rata Share Percentage
CoreStates Bank, N.A. $11,000,000 30.56%
1339 Chestnut Street
Phila., PA 19101
Attn: Mr. David D'Antonio,
Vice President
Telecopy No.: 215/786-7704
Colorado National Bank $10,000,000
27.78%
Commercial Banking Division
918 Seventeenth Street
Denver, CO 80202
Attn: Kerstin Treadway,
Asst. Vice President
Telecopy No.: (303) 585-4242
PNC Bank, National $7,500,000
20.83%
Association
PNC Bank Center
1600 Market Street
31st Floor, F2-F070-31-2
Philadelphia, PA 19103
Attn: Donald K. Schirmer,
Vice President
Telecopy No.: 215/585-8351
Bank Leumi Trust $7,500,000
20.83%
Company of New York
562 Fifth Avenue
New York, NY 10036
Attn: Andrew H. Melville,
Asst. Vice President
Telecopy No.: (212) 626-1329
Exhibit 2.1(d)
CoreStates Bank, N.A. ("CS"), as
Agent Borrowing Base
Availability
for Granite Financial, Inc. ("Granite")
As of ______________, 19__
- - ---------------------------------------------------------------
- - --
This Certificate is submitted to CS, as Agent, in
connection with the Loan and Security Agreement dated as of
_______, 1997
(the "Agreement") between CS, as Agent, the Lenders now or
hereafter identified on the signature pages thereof and
Granite. Capitalized terms used herein without further
definition shall have the meanings ascribed thereto in the
Agreement.
The undersigned hereby certifies to CS, as Agent, that the
undersigned is familiar with the following financial
information which has been taken from Granite's books and
records which are complete and accurate and that the following
calculations of the Borrowing Base and remaining amount
available under the Borrowing Base and all of the
representations and warranties contained in the Agreement are
true and correct on the date hereof:
BORROWING BASE
1. Total Eligible Lease Receivables
Currently Pledged to CS
$___________________
2. Total Ineligible Lease Receivables:
Delinquent Leases (over 61 days past
due)
$___________________
Leases pledged to Lenders for
over six (6) months
$___________________
Other exclusions per definition
of Eligible Leases
$___________________
3. Borrowing Base:
$___________________
lesser of 75% Of Eligible Lease
Receivables or (ii) 95% of Present
Value of such Lease Receivables.
4. Aggregate Revolving Credit
$___________________
Note Balances
5. Excess of Borrowing Base
over Revolving Credit
Note Balances (Line 3,
minus line 4)
$___________________
6. Maximum Credit Limit $ 36,000,000
7. Availability Under Facility
(lesser of (i) line 6, minus
line 4 or (ii) line 5) $___________________
8. Amount Of Borrowing Request $___________________
9. Net Availability (Line 7, minus
line 8) $___________________
Date:____________________ GRANITE FINANCIAL, INC.
By: ___________________________
Name: Title:
EXHIBIT 2.3(b)(ii)
ASSIGNMENT AGREEMENT
Granite Financial, Inc. (hereinafter "Assignor"), does
hereby assign to CORESTATES BANK, N.A. as Agent, for the benefit
of the
Lenders (as defined below) (hereinafter "Assignee"), its
successors and assigns, all of the right, title and interest of
Assignor in and to (i) the Leases, as identified on the Schedule
A attached hereto and made a part hereof, the Leased Property
which is the subject matter of such Leases, and all proceeds
thereof; and (ii) all of the interest of Assignor as loss payee
or beneficiary under any insurance policies issued in connection
with any Lease or any Leased Property which is the subject matter
of any Lease.
This Assignment is entered into and delivered in accordance
with and is subject to that certain Loan and Security Agreement
dated _____________, 1997 among Assignor, Assignee and the
lenders now or hereafter shown on the signature pages thereof
(collectively "Lenders") (hereinafter "Agreement"). Assignee
shall have the right to sue for, collect, and receive all
payments due or to become due under the Leases, in accordance
with the Agreement, with power to enforce in its own name or in
Assignor's name any and all rights given to Assignor thereunder.
All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Agreement.
This Assignment and the subject matter hereof, is hereby
given as security for all of Assignor's Obligations.
Delivered herewith are the sole originals of all Leases
referred to on Schedule A attached hereto and made a part hereof.
Assignor agrees that Assignee has not assumed and does not
assume by virtue of this assignment, any of Assignor's
obligations or liabilities to the lessee/renter under any Leases.
All of the representations and warranties contained in the
Agreement with respect to Assignor, the Leases and the Leased
Property are true, correct and complete as of the date of this
Assignment and no Event of Default has occurred under the
Agreement.
IN WITNESS WHEREOF, the undersigned has caused these
presents to be executed by its duly authorized officer this _____
day of _____________________, 199__.
Granite Financial, Inc.
Attest:_____________________ By:___________________________
Title: Title:
Exhibit 6.9(ii)
CoreStates Bank, N.A. ("CS"), as Agent
Lease Receivable Agings
for Granite Financial, Inc.
("Granite") As of
___________, 199__
_________________________________________________________________
__ This Certificate is submitted to CS, as Agent, in connection
with the Loan and Security Agreement dated as of _______, 1997
(the "Agreement") between CS, as Agent, the Lenders now or
hereafter identified on the signature pages thereof and Granite.
Capitalized terms used herein without further definition shall
have the meanings ascribed thereto in the Agreement.
Aging of Lease Receivables
Eligible Lease Receivables:
Current: $___________________ ( % of portfolio)
1-30 days past due: $___________________ ( % of portfolio)
31-61 days past due: $___________________ ( % of portfolio)
Ineligible Lease Receivables:
Current:
1-30 days past due: $___________________ ( % of portfolio)
31-61 days past due: $___________________ ( % of portfolio)
over 61 days past due: $___________________ ( % of portfolio)
Attach supporting documentation hereto.
Borrower certifies to CS, as Agent, that the undersigned is
familiar with the above financial information which has been
taken from Granite's books and records which are complete and
accurate and that all information contained herein and the
representations and warranties made in the Agreement are true and
correct as of the date hereof.
Granite Financial, Inc.
DATE:_______________ BY:__________________________________
Name Title
Exhibit 6.9(vi)
CoreStates Bank, N.A. ("CS"), as Agent
Financial Covenant Compliance
for Granite Financial, Inc.
("Granite")
As of ___________, 199__
_________________________________________________________________
__ This Certificate is submitted to CS, as Agent, in connection
with the Loan and Security Agreement dated as of _______, 1997
(the "Agreement") between CS, as Agent, the Lenders now or
hereafter identified on the signature pages thereof and Granite.
Capitalized terms used herein without further definition shall
have the meanings ascribed thereto in the Agreement.
Financial Covenant Compliance
Covenant Required Actual Compliance
Yes/No
Adjusted Debt to
Tangible Net Worth 5.0 to 1
Tangible Net Worth
Net Worth
Interest Coverage Ratio 1.25x
Delinquencies less than 3.75%
of gross receivables
Charge-Offs less than 2%
of equipment cost
Attach supporting documentation hereto.
Borrower certifies to CS, as Agent, that the undersigned is
familiar with the above financial information which has been
taken from Granite's books and records which are complete and
accurate
and that all information contained herein and the representations
and warranties made in the Agreement are true and correct as of
the date hereof.
Granite Financial, Inc.
DATE:_______________ BY:__________________________________
Name Title
Amendment No. 1 Dated
To Loan and Security Agreement- 1 - April 18, 1997
AMENDMENT NO. 1
to
Loan and Security Agreement
Amendment No. 1, dated April 18, 1997, (herein called the
"Amendment") to Loan and Security Agreement dated February 4,
1997 (the "Credit Agreement"), by and among Granite Financial,
Inc. ("GFI"), the financial institutions which are signatories
thereto (collectively, the "Lenders" and individually, a
"Lender") and CoreStates Bank, N.A. as agent for the Lenders
under the Agreement ("Agent"). All capitalized terms used herein
and not otherwise defined shall have the respective meanings
ascribed to them in the Credit Agreement.
Preliminary Statement
WHEREAS, GFI formed Granite Financial Acquisition Corp. I, a
Delaware corporation ("GFAC"), as a wholly-owned subsidiary, in
compliance with 7.4(b) of the Credit Agreement.
WHEREAS, GFAC acquired the assets and business of Global
Finance & Leasing, Inc. ("Global") effective March 31, 1997.
WHEREAS, GFI proposes to purchase from GFAC Leases created
by Global in the ordinary course of its business and purchased by
GFAC as part of the assets acquired on March 31, 1997
("GFAC/Global Leases") as well as Leases generated by GFAC in the
ordinary course of its business ("GFAC Leases").
WHEREAS, GFI wishes to assign to the Lenders, GFAC/Global
Leases and GFAC Leases purchased by it and to have such leases
treated as Eligible Leases for purposes of the Credit Agreement
and Advances thereunder.
WHEREAS, the Lenders are willing to amend the Agreement as
provided herein.
NOW, THEREFORE, in consideration of the premises and
promises hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Section 1.1 of the Credit Agreement. The definitions of
Borrowing Base and Eligible Leases set forth in 1.1 of the
Credit Agreement each shall be and is hereby amended and restated
in its entirety to be as follows:
"Borrowing Base - As of any date of determination:
(1) with respect to each Eligible Lease generated
by the Borrower, an amount equal to the lesser of 75%
of the Lease Receivables corresponding to each such
Eligible Lease or 95% of the Present Value of the Lease
Receivables corresponding to each such Eligible Lease,
and
(2) with respect to each Eligible Lease generated
by Global Finance & Leasing, Inc. or Granite Financial
Acquisition Corp. I, an amount equal to the lesser of
70% of the Lease Receivables corresponding to each such
Eligible Lease or 90% of the Present Value of the Lease
Receivables corresponding to each such Eligible Lease."
"Eligible Lease(s) - Each Lease which meets all of
the following specifications: (1) is not subject to any
Lien, security interest or assignment other than
Agent's security interest for the benefit of Lenders
and the rights of the Lessees thereunder; (2) is a
valid and enforceable Lease, representing the
undisputed obligation of the Lessee, with rentals due
thereunder not more than 61 days contractually past
due; (3) is not subject to any defense, set off,
counterclaim, deduction, or allowance or adjustment;
(4) provides for the lease of Leased Property which has
not been returned, rejected, lost or damaged; (5) arose
in the ordinary course of Borrower's business, or in
the ordinary course of business of Global Finance &
Leasing, Inc., the assets of which were acquired on
March 31, 1997 by Granite Financial Acquisition Corp.
I, a Delaware corporation and a wholly-owned subsidiary
of the Borrower, or in the ordinary course of business
of Granite Financial Acquisition Corp. I; (6) Borrower
has not received notice of bankruptcy, receivership,
reorganization, insolvency or material adverse change
in the financial condition of the Lessee; (7) the
Lessee is not a Subsidiary or Affiliate of Borrower;
(8) is not a Defaulted Lease; (9) the Lease does not
have an initial stated term in excess of sixty-five
(65) months; (10) the Lease has not been pledged to
Agent and/or Lenders for a period exceeding, in the
aggregate, six (6) months; and (11) is a Lease with a
Lease Receivable, which together with all other Lease
Receivables owed by the same Lessee, does not exceed
$200,000 in the aggregate, unless otherwise agreed to
in writing by the SuperMajority Lenders."
2. Section 5.17(a) of the Credit Agreement. 5.17(a) of the
Credit Agreement is hereby amended and restated in its entirety
to read as follows:
"(a) Each Lease (1) is in substantially the same
form as that attached as Exhibit 5.17 hereto, in the
case of Leases originated by the Borrower, or Exhibit
5.17A hereto, in the case of Leases originated by
Global Finance & Leasing, Inc. and acquired by the
Borrower from its wholly-owned subsidiary, Granite
Financial Acquisition Corp. I and Leases originated by
Granite Financial Acquisition Corp. I, (2) is genuine,
(3) is based on contracts that are enforceable in
accordance with its terms against the Lessee and the
Leased Property named and referenced therein, (4)
constitutes the entire agreement for the leasing of the
Leased Property thereby covered, and (5) has not been
altered or amended, except: as set forth in the related
schedules; and the Borrower's Books and Records
relating thereto are accurate, complete and genuine;"
3. Section 5.17(l) of the Credit Agreement. 5.17(l) of the
Credit Agreement is hereby amended and restated in its entirety
to read as follows:
"(l) Borrower (1) has made its usual credit
investigation of each Lessee in the case of Leases
created by it, (2) has made a credit investigation
deemed adequate by the Borrower in the case of Leases
created by Global Finance & Leasing, Inc. and acquired
from Granite Financial Acquisition Corp. I or created
by Granite Financial Acquisition Corp. I itself, and
(3) has determined that the credit in each case is
satisfactory;"
4. Exhibit 2.1(d) to the Agreement. Exhibit 2.1(d) shall
be and is hereby amended and restated in its entirety to be as
set forth in Exhibit 2.1(b) attached hereto.
5. Representations and Warranties. GFI hereby restates the
representations and warranties made in the Credit Agreement,
including but not limited to Section 5 thereof, on and as of the
date hereof as if originally given on this date.
6. Covenants. GFI hereby represents and warrants that it is
in compliance and has complied with each and every covenant set
forth in the Agreement, including but not limited to Sections 7
and 8 thereof, on and as of the date hereof.
7. Affirmation. GFI hereby affirms its absolute and
unconditional promise to pay to the Lenders the Loans and all
other amounts due under the Credit Agreement and any other Loan
Document on the maturity date(s) provided in the Agreement or any
other Loan Document, as such documents may be amended hereby.
8. Effect of Amendment. This Amendment amends the Credit
Agreement only to the extent and in the manner herein set forth,
and in all other respects the Credit Agreement is ratified and
confirmed.
9. Counterparts. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the
same effect as if the signatures hereto were upon the same instru
ment.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed by their duly authorized
representatives as of the date first above written.
GRANITE FINANCIAL, INC.
By ______________________________
Name:
Title:
CORESTATES BANK, N.A., for itself
and as Agent
By ______________________________
David D'Antonio
Vice President
COLORADO NATIONAL BANK
By __________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By __________________________
Name:
Title:
BANK LEUMI TRUST COMPANY OF NEW
YORK
By __________________________
Name:
Title:
Exhibit 2.1(d)
CoreStates Bank, N.A. ("CoreStates"), as Agent
Borrowing Base Availability
for Granite Financial, Inc. ("Granite")
as of ____________, 19____
(Interim____/Month-End____)
- - -----------------------------------------------------------------
- - -------------------------------------------------
This Certificate is submitted to CoreStates, as Agent, in
connection with the Loan and Security agreement dated as of
February 4, 1997 (the "Agreement") between CoreStates, as Agent,
the Lenders now or hereafter identified on the signature pages
thereof and Granite. Capitalized terms used herein without
further definition shall have the meanings ascribed thereto in
the Agreement.
The undersigned hereby certified to CoreStates, as Agent,
that the undersigned is familiar with the following financial
information which has been taken from Granite's books and records
which are complete and accurate and that the following
calculations of the Borrowing Base and remaining amount available
under the Borrowing Base and all of the representations and
warranties contained in the Agreement are true and correct on the
date hereof:
BORROWING BASE
1. Total Eligible Lease Receivables as of the last
Borrowing Base Certificate (Line 5 from immediately
preceding, or prior month-end Borrowing Base).
$_________________
2. Additional Eligible Lease Receivables
pledged to CoreStates (since immediately preceding, or
prior month-end Borrowing Base)
$________________ Schedule_______________
$________________ Schedule_______________
$________________ Schedule_______________
$_________________
3. Total Ineligible Lease Receivables (since
immediately preceding, or prior month-
end Borrowing Base:
Delinquent Leases (over 61 days past due): $_____________
Leases pledged to Lenders for over six (6)
months $_____________
Other exclusions per definition of Eligible
Leases $_____________ $_________________
4. Aggregate sales of Eligible Lease Receivables
(since immediately preceding, or prior month-
end Borrowing Base)
$________________ Date_______________
$________________ Date_______________
$________________ Date_______________
$________________
5. Total Eligible Lease Receivables pledged to CoreStates
(Line 1 plus 2 minus 3 minus 4)
$________________
6. Borrowing Base:
(1) Borrower Eligible Leases:
lesser of 75% of Eligible Lease
Receivables or 95% of Present
Value of such Lease Receivables $_____________
(2) Global Finance & Leasing, Inc.
and Granite Financial Acquisition
Corp. I Eligible Leases:
lesser of 70% of Eligible Lease
Receivables or 90% of Present
Value of such Lease Receivables $_____________
$________________
7. Aggregate Revolving Credit Note Balances
$________________
8. Excess of Borrowing Base over Revolving Credit
Note Balances (Line 6 minus Line 7)
$________________
9. Maximum Credit Limit
$________________
10. Availability Under facility (Lesser of (i) Line 9 minus
Line 7, or (ii) Line 8
$________________
11. Amount of Borrowing Request
$________________
12. Net Availability
$________________
GRANITE FINANCIAL, INC.
Date:________________________
By:_______________________________
Name:
Title:
Exhibit 5.17A
Form of Lease
Global Finance & Leasing, Inc.
Granite Financial Acquisition Corp. I
Page 1 of _
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of March 31, 1997,
is among Granite Financial Acquisition Corp. I, a Delaware
corporation ("Buyer"); Global Finance & Leasing, Inc., a Michigan
corporation ("Seller") and Thomas Mannes ("Mannes").
Recitals
A. Seller is engaged in the business of equipment leasing (the
"Business").
B. Mannes is the owner of all the issued and outstanding common
stock of Seller.
C. Upon and subject to the terms and conditions set forth
herein, Buyer desires to buy and Seller desires to sell and
transfer all of the assets and business of Seller, and Buyer is
willing to assume certain specified liabilities and obligations
of Seller, all as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants of the parties hereto, it is hereby agreed as
follows:
1. Definitions
1.1 Definitions. The following terms when used in this
Agreement shall have the following meanings:
"Acquisition Proposal" shall mean any proposal for the
acquisition of, or merger or other business combination involving
Seller or the sale of any controlling equity interest in, or the
Business or substantially all the assets of, Seller, other than
the Contemplated Transactions.
"Action" shall mean any action, suit, proceeding,
investigation or arbitration.
"Affiliate" shall mean, with respect to any person, at the
time in question any other person controlling, controlled by or
under common control with such person.
"Agreement" shall mean this Asset Purchase Agreement,
including the exhibits and schedules hereto, as amended,
supplemented or otherwise modified from time to time.
The term "audit" or "audited" when used in regard to
financial statements shall mean an examination of the financial
statements by a firm of independent certified public accountants
in accordance with generally accepted auditing standards for the
purpose of expressing an opinion thereon.
"Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking
institutions in the City of Denver, are authorized or obligated
by law or executive order to close.
"Certificate of Incorporation" shall mean, in the case of
any corporation, the certificate of incorporation, articles of
incorporation or charter of a corporation, howsoever denominated
under the laws of the jurisdiction of its incorporation.
"Claims" shall mean any actions, suits, claims,
counterclaims or legal, administrative or arbitral proceedings or
investigations of any kind.
"Closing" shall mean the closing of the sale and purchase of
the Purchased Assets and Business of Seller, as contemplated by
this Agreement.
"Contract" shall mean any contract, agreement, indenture,
note, bond, lease, conditional sale contract, mortgage, license,
franchise, instrument, commitment or other binding arrangement,
whether written or oral.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Contemplated Transactions" means the transactions
contemplated by this Agreement or any other Contract to be
entered into in connection herewith.
"Control" (including the terms "controlling , controlled by"
and "under common control with") shall mean the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a person whether through the
ownership of voting securities or otherwise.
"Employee Benefit Plan" shall mean any qualified or non-
qualified deferred compensation plan or arrangement that Seller
maintains or to which Seller contributes or which Seller has ever
maintained or contributed for the benefit of any director,
officer or employee of Seller, including but not limited to
employee benefit plans (as defined in Section 3(3) of ERISA).
"Environmental Laws" shall mean, without limitation, all
environmental statutes enacted by Governmental Bodies, and any
executive orders, ordinances, rules or regulations promulgated
under the foregoing, and state tort laws and common law.
"Environmental Matters" shall mean any matter arising out
of, relating to or resulting from pollution, contamination,
protection of the environment or human health and safety, or
other related matters, including any matters relating to the
spill, pumping, injection, disposal, dumping, leaching,
migration, emission, discharge or threatened release of Hazardous
Materials into the indoor or outdoor environment, including
without limitation, the movement of Hazardous Materials through
or in air, soil, surface water, ground water or property or the
manufacture, process, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
"Equipment Leases" shall mean those equipment lease
agreements between Seller, as lessor, and the lessee thereof,
that are owned or serviced by Seller as of the Closing.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1976, as amended.
"Federal" shall mean of or pertaining to the government of
the United States.
"Financial Statements" shall mean the audited financial
statements of Seller consisting of a balance sheet, statements of
income and supporting schedules as at and for the (i) years ended
December 31, 1995 and 1996 and (ii) the interim period from
January 1, 1997 through February 28, 1997, complete copies of
which have been delivered to Buyer.
"GAAP" shall mean generally accepted accounting principles
in effect on the date hereof as set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by
a significant segment of the accounting profession of the United
States.
"Governmental Body" shall mean any government or political
subdivision thereof whether federal, state or local, or any
agency or instrumentality of any such government or political
subdivision or any court or arbitrator.
"Hazardous Materials" shall mean any pollutants,
contaminants, hazardous or toxic substances, materials,
constituents or chemicals (including, without limitation,
petroleum or any by-products or fractions thereof, any form of
natural gas, asbestos and asbestos-containing materials,
polychlorinated biphenyls ("PCBs") and PCB-containing equipment,
radon and other radioactive elements, infectious, carcinogenic,
mutagenic, or etiologic agents, pesticides, defoliants,
explosives, flammables, corrosives and urea formaldehyde) that
are regulated by any Environmental Laws.
"IRS" shall mean the Internal Revenue Service.
The term "knowledge" with respect to (a) any individual
shall mean actual knowledge and (b) any entity shall mean the
actual knowledge of the directors, executive officers or managers
of such entity; and "knows" has a correlative meaning.
"Laws" shall mean any federal, state or local law, statute,
code, ordinance, rule, regulation or other requirement.
"Liability" shall mean any direct or indirect indebtedness,
liability, assessment, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit,
performance credits or with respect to insurance loss accruals).
"Lien" shall mean, with respect to any asset, any mortgage,
lien (including mechanics, warehousemen, laborers and landlords
liens), claim, pledge, charge, security interest, preemptive
right, right of first refusal, option, judgment, title defect, or
encumbrance of any kind in respect of or affecting such asset.
"Material Adverse Effect" shall mean an effect which is
either (i) materially adverse to the Permits, properties,
prospects, business, condition (financial or otherwise), assets,
liabilities, or results of operations of the Purchased Assets or
the Business or (ii) adverse to the ability of Seller or Mannes
to consummate any of the Contemplated Transactions.
"Order" shall mean any order, judgment, injunction, decree,
consent or writ.
"Permit" shall mean any license, franchise, permit,
certificate of occupancy, authorization or approval.
"person" shall mean and includes any natural person,
corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, business trust,
unincorporated organization or other entity.
"Purchased Assets" shall mean all the properties, rights,
interests and assets, real, personal or mixed, tangible or
intangible to be sold, assigned, conveyed, demised or otherwise
transferred to Buyer pursuant to the terms hereof.
"Representatives" of a person shall mean the directors,
officers, employees, accountants, lawyers, advisers and agents of
such person.
"Subject Equipment" means the equipment owned by Seller that
is subject to an Equipment Lease and all warranties and
guarantees, if any, express or implied, existing for the benefit
of Seller with respect to the Subject Equipment.
"Subsidiary" of any person shall mean any entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
persons performing similar functions are owned directly or
indirectly through one or more intermediaries, or both, by such
person.
"Tax" (including, with correlative meaning, the terms
"Taxes" and "Taxable") shall mean (i) any net income, gross
income, gross receipts, sales, use, ad valorem, transfer,
transfer gains, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, rent, recording,
occupation, premium, real or personal property, intangibles,
environmental or windfall profits tax, alternative or add-on
minimum tax, customs duty or other tax, fee, duty, levy, impost,
assessment or charge of any kind whatsoever (including but not
limited to taxes assessed to real property and sewer rents
relating thereto), together with any interest and any penalty,
addition to tax or additional amount imposed by any Governmental
Body (domestic or foreign) (a "Tax Authority") responsible for
the imposition of any such tax, with respect to Seller, the
Business or the Purchased Assets (or the transfer thereof); (ii)
any Liability for the payment of any amount of the type described
in the immediately preceding clause (i) as a result of Seller's
being a member of an affiliated or combined group with any other
corporation at any time on or prior to the Closing Date and (iii)
any Liability of Seller for the payment of any amounts of the
type described in the immediately preceding clause (i) as a
result of a contractual obligation to indemnify any other person.
"Tax Returns" shall mean any report, return, statement, or
other information required to be supplied to a Taxing Authority
in connection with Taxes.
The following terms are defined in the following sections of
this Agreement:
Term Section
Assumed Contracts 2.1
Assumed Liabilities 2.3(a)
Benefit Arrangements 5.13(a)
Business Recital
Closing 3.1
Closing Date 3.1
Employment Contract 4.2(g)(viii)
Equipment 2.1(g)
Holdback 3.2
Retained Liabilities 2.5(6)
Financial Information 5.4(a)
Governmental Authorizations 5.11
Intellectual Property 2.1(p)
Purchase Price 3.2(c)
Leases 5.6(a)(ii)
LINC 3.2(a)
Seller Required Consents 5.3
Supplies 2.1(h)
1.2 Interpretation. Unless the context otherwise
requires, the terms defined in Section 1.1 shall be applicable to
both the singular and plural forms of any of the terms defined
herein. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The use of the
neuter gender herein shall be deemed to include the masculine and
feminine genders wherever necessary or appropriate, the use of
the masculine gender shall be deemed to include the neuter and
feminine genders and the use of the feminine gender shall be
deemed to include the neuter and masculine genders wherever
necessary
or appropriate.
2. Purchase and Sale of Assets; Assumption of Certain
Liabilities
2.1 Transfer of Assets. On the basis of the
representations, warranties, covenants and agreements and subject
to the satisfaction (or waiver by the party whose obligations
hereunder are subject to such satisfaction) of the conditions set
forth in this Agreement, on the Closing Date, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall
purchase and acquire from Seller, all of the assets, rights,
properties, Claims, Contracts and business of Seller at the
Closing Date of every kind, nature, character and description,
tangible and intangible, personal or mixed, wherever located,
free and clear of all Liens, including, without limitation, the
following:
(a) All cash and cash equivalents;
(b) All accounts and notes receivable;
(c) All Equipment Leases and Subject Equipment;
(d) All applications, credit files, purchase orders and
other agreements and documents for pending lease
applications:
(e) All Contracts referred to in Sections 5.6(a) (i), (ii)
and (iii) (the "Assumed Contracts");
(f) The leasehold interests in real property leased by
Seller, as lessee;
(g) All equipment, furniture, furnishings, fixtures,
machinery, vehicles, telephones, computer systems and hardware
and other tangible personal property of Seller, excluding the
Subject Equipment (collectively, the "Equipment") and all
warranties and guarantees, if any, express or implied, existing
for the benefit of Seller with respect to the Equipment;
(h) All supplies on hand, in transit or on order as of the
opening of business on the Closing Date, including, without
limitation, stationery, forms, labels, directories and
promotional materials collectively, (the "Supplies");
(i) All management information systems; employee and asset
records; and Customer names, Customer, subscriber and vendor
lists; catalogs, research material, technical information,
technology, and quality control data (whether manual or
computerized);
(j) All business plans, sales promotion and selling
literature, promotional and advertising materials, market
research reports and competitor information;
(k) All Permits issued by any Governmental Body or other
third party;
(l) All security (including cash) deposited with third
parties, including, without limitation, the Holdback held by
LINC;
(m) All goodwill and going concern value;
(n) All prepaid expenses as of the opening of business on
the Closing Date;
(o) All Claims against other parties;
(p) All trademarks, trade names, corporate names, service
marks, logos, designs, know-how, trade and business secrets,
photographs, artwork, licenses, copyrights, patents, computer
software programs and licenses and electronic data processing
software and other similar tangible or intangible property
including, without limitation, the name Global Finance & Leasing,
together with any derivative of the foregoing and the goodwill
associated therewith (collectively, "Intellectual Property"); and
(q) All of the Seller's right, title and interest in and to
the telephone and telecopier numbers currently assigned to Seller
for business purposes. Attached as Schedule 2.1 is a listing of
all telephone and telecopier numbers assigned to Seller which are
being transferred to Buyer.
2.2 Instruments of Conveyance and Transfer. (a) On the
Closing Date, Seller shall (i) deliver or cause to be delivered
to Buyer such bills of sale, endorsements, consents, assignments,
and other good and sufficient instruments of conveyance and
assignment, all in recordable form, where applicable, as shall be
effective to vest in Buyer all right, title and interest of
Seller in and to the Purchased Assets, and (ii) transfer to Buyer
originals of all Equipment Leases, Contracts, books, lists,
records, files, certificates, Permits, plans and specifications
and other data of Seller, including, without limitation, computer
tapes and computer-generated records relating to Seller's
Business or the Purchased Assets. All materials referred to in
subsection (ii) shall be delivered to Buyer in the form and order
in which they are maintained by Seller.
(b) From time to time after the Closing Date, Seller,
Mannes and any Affiliate thereof shall execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered,
such other instruments of conveyance, assignment, transfer and
delivery (all documents to be prepared by Buyer) and will take or
cause to be taken such other actions as Buyer may reasonably
request in order more effectively to sell, convey, assign,
transfer, and deliver to Buyer any of the Purchased Assets, or to
enable Buyer to protect, exercise and enjoy all rights and
benefits of Seller with respect thereto, and as otherwise may be
appropriate to carry out the Contemplated Transactions.
2.3 Assumed Liabilities. (a) On the basis of the
representations, warranties, covenants and agreements and subject
to the satisfaction of the conditions set forth in this
Agreement, on the Closing Date, Buyer shall assume and agree to
pay, perform, fulfill and discharge the Liabilities of Seller
recorded on the balance sheet of Seller as of Closing (the
"Closing Balance Sheet"), but only to the extent of the amount of
such Liabilities reflected on the Closing Balance Sheet. Seller
shall prepare and provide Buyer with a copy of Seller's Closing
Balance Sheet at or prior to the Closing. The liabilities and
obligations assumed by Buyer in accordance with this Section 2.3
are sometimes hereinafter referred to as the "Assumed
Liabilities."
(b) Seller and Mannes will take such reasonable action as
may be appropriate to obtain the consent of the appropriate party
or parties so that Buyer will be permitted to assume the Assumed
Liabilities on terms no less favorable than currently exist.
(c) Except for the Assumed Liabilities, Buyer is not
assuming and shall not have any Liability to pay any of the other
Liabilities of Seller of any nature whatsoever, known or unknown,
fixed or contingent relating to Seller or the Purchased Assets,
or to any of them. Without derogating from the generality of the
forgoing, Buyer specifically is not assuming: (i) any Tax
Liabilities of Seller accruing either before or after the Closing
Date, (ii) any Liability of Seller to any of its employees or on
account of compensation or benefits due or to become due to such
employees or on account of any payments, benefits or rights to
which any of such employees are or may be entitled under any
Contract or Law (including, without limitation, any arising out
of or by reason of the Contemplated Transactions and all pension
plans, profit sharing plans and other plans or Contracts
relating to major medical, health, disability, life insurance and
other related benefits which are or have been maintained by
Seller), or (iii) any Liabilities incurred by Seller or Mannes in
connection with the negotiation and closing of the Contemplated
Transactions, it being understood that Seller is and shall remain
responsible for any and all Liabilities not being assumed by
Buyer hereunder.
Such obligations and liabilities of Seller not being assumed
by Buyer are referred to herein collectively as the "Retained
Liabilities." Seller agrees to perform, fulfill and discharge,
when due, all of the Retained Liabilities. Seller and Mannes
shall take any and all action which may be necessary to prevent
any person from having recourse against any of the Purchased
Assets or against Buyer as transferee thereof with respect to any
Retained Liabilities and shall indemnify Buyer and hold it
harmless therefrom.
(d) At its sole discretion, Buyer may pay any Retained
Liabilities not assumed by it pursuant to this Agreement, if such
Liability is not otherwise being contested in good faith by
Seller and may deduct the amount paid or incurred in connection
with any such Liability from any payment due Seller or Mannes
hereunder or any other Contract contemplated hereby.
3. Closing: Purchase Price
3.1 Closing Date. On and subject to the conditions herein
set forth, the closing with respect to the transactions provided
for in this Agreement (the "Closing") shall take place on April
1, 1997, or at such other time and place as shall be agreed upon
by the parties thereto. Notwithstanding the time and date of the
delivery of this Agreement and the other documents contemplated
hereby, the transactions provided for in this Agreement shall be
deemed to have been consummated and shall be fully effective as
of the close of business on March 31, 1997 (the "Closing Date").
3.2 Purchase Price. (a) Initial Payment. At the
Closing, Buyer shall pay Seller an amount of cash equal to
$1,884,000, which represents the total purchase price of
$2,800,000 less $916,000 of the "Holdback", as hereafter defined,
held by Newcourt LINC Financial, Inc., and any of its affiliates,
subsidiaries, parent, predecessors, and successors (collectively,
"LINC") as of the Closing Date (the "Initial Payment"). Holdback
means the cash due Global and held by LINC as collateral or
security for Global's obligations arising out of any and all
transactions between Global and LINC.
(b) Contingent Payment. A contingent payment equal to the
amount of Holdback paid by LINC to Granite subsequent to closing,
but, in no event, exceeding the amount of the Holdback deducted
from the total purchase price under 3.2 (a) above. The parties
recognize that the Holdback received from LINC may be in the form
of cash or lease contracts. As Holdback is received from LICN,
the parties shall divide such Holdback between them as follows:
55.9% to Seller (determined by dividing the amount of Holdback
deducted under 3.2(a) above of $916,000 by the total amount of
the Holdback as of the Closing Date of $1,639,449.98) and 44.1%
to Buyer. Once Seller has received a total of $916,000 under
this Section 3.2(b), all remaining Holdback, if any, received
from LINC shall be paid to Buyer.
(c) Allocation of Price. The amounts payable to Seller
in accordance with the provisions of Section 3.2(a) and (b)
(collectively, the "Purchase Price") shall be allocated in the
manner set forth in Schedule 3.2(c) hereto. Buyer and Seller
agree to act in accordance with such allocations in all Tax
Returns, reports and filings and complete and timely file Form
8594 pursuant to applicable Treasury Regulations.
(d) Method of Payment. All payments due hereunder from
Buyer to Seller or from Seller to Buyer shall be made by means of
a cashiers check or certified check of the party making the
payment or by means of a wire transfer of immediately available
funds in accordance with written directions given by the
receiving party at least one Business Day prior to the date of
transfer.
4. Conditions Precedent
4.1 Conditions Precedent to Obligations of Parties. The
respective obligations of the parties hereto to consummate the
Contemplated Transactions shall be subject to the satisfaction at
or prior to the Closing Date of the following conditions:
(a) No Injunction. No provision of any applicable Law and
no judgment, injunction, order or decree shall prohibit the
consummation of the Contemplated Transactions.
(b) No Proceedings or Litigation. No Action before any
court or any Governmental Body instituted by any person shall
have been commenced or pending against Buyer, Seller or Mannes
or any of their respective Affiliates, associates, officers or
directors which Action shall have a reasonable likelihood of
success and which Action seeks to restrain, prevent, change or
delay in any material respect the Contemplated Transactions or
seeks to challenge any of the terms or provisions of this
Agreement or seeks material damages in connection with any of
such transactions or seeks to restrain or prevent the ownership
and operations by Buyer after the Closing Date of the Purchased
Assets and Business of Seller.
4.2 Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to consummate the Contemplated Transactions
are subject to the satisfaction (or waiver by Buyer) at or prior
to the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Seller and Mannes contained
herein or in any certificate, instrument or other document
delivered to Buyer pursuant hereto shall be true and correct in
all material respects on and as of the Closing Date, with the
same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except to
the extent that any such representation and warranty is made as
of a specified date, in which case such representation and
warranty shall have been true and correct as of such date.
(b) Performance of Obligations. Seller and Mannes shall
have performed all obligations and agreements, and complied with
all covenants and conditions, contained in this Agreement to be
performed or complied with at or prior to the Closing Date.
(c) Absence of Certain Changes. Since December 31, 1996,
there shall not have been any change in the condition (financial
or other), results of operations, assets, business or prospects
of the Business of Seller or any Action or Claim filed, or to the
knowledge of Seller or Mannes threatened, against or affecting
Seller, which has or could have a Material Adverse Effect, except
as otherwise disclosed in any Schedule hereto.
(d) Employees. Seller shall have released from
employment all employees of the Business that Buyer wishes to
employ and Buyer shall have entered into employment agreements
with certain of such employees upon terms acceptable to Buyer.
(e) Lien Search. Buyer shall have received satisfactory
results of Lien searches with respect to the Purchased Assets.
(f) Consents. etc. All Permits, consents, approvals, and
orders of Governmental Bodies and other third parties necessary
for the consummation of the Contemplated Transactions shall have
been obtained.
(g) Deliveries. There shall have been delivered to Buyer
the following:
(i) one or more duly executed original bills of sale
and assignments, in form and substance satisfactory to Buyer, and
all applications therefor, and such other instruments as are
necessary or desirable to effect the transfers, conveyances and
assignments to Buyer of the Purchased Assets, and a set of the
keys to all premises of Seller and to all locks located therein.
(ii) A certificate, dated the Closing Date, of the
Chief Financial Officer of Seller and Mannes confirming the
matters set forth in Sections 4.2(a), (b) and (c).
(iii) A certificate, dated the Closing Date, of the
Secretary or Assistant Secretary of Seller certifying, among
other things, that attached or appended to such certificate (A)
is a true and correct copy of the Certificate of Incorporation of
Seller, and all amendments, if any, thereto as of the date
hereof; (B) is a true and correct copy of the By-laws of Seller
as of the date hereof; (C) is a true copy of all corporate
actions taken by Seller and its shareholders, including
resolutions of its Board of Directors and shareholders,
authorizing the execution, delivery and performance of this
Agreement and each other document to be delivered by Seller
pursuant hereto and the Contemplated Transactions; (D) are the
names and signatures of Seller's duly elected and appointed
officers who
are authorized to execute and deliver this Agreement and any
certificate, document or other instrument in connection herewith.
(iv) A good standing certificate of Seller.
(v) Copies of all Seller Required Consents.
(vi) Evidence of possession and control of the
Purchased Assets of Seller (including all corporate books, bank
accounts, records and documents).
(vii) A signed opinion(s) of Seller's and Mannes's
counsel, dated the Closing Date, addressed to Buyer,
substantially in the form of opinion annexed as Exhibit A hereto.
(viii) A original of the Employment/Non-Compete
Agreement, duly executed by Mannes, in the form attached hereto
as Exhibit B (the "Employment Contract").
(h) Actions and Proceedings. All corporate actions,
proceedings, instruments and documents of Seller and its
Affiliates required to carry out the Contemplated Transactions or
incidental thereto and all other related legal matters shall be
reasonably satisfactory to counsel for Buyer, and such counsel
shall have been furnished with such certified copies of such
corporate actions and proceedings and such other instruments and
documents as it shall have reasonably requested.
(i) Minimum Net Worth. Seller's balance sheet as of
closing shall reflect a net worth (total assets less total
liabilities) of at least $300,000.
(j) Seller shall have fully reserved on both of its balance
sheets dated December 31, 1996, and closing, for the entire
amount of the Holdback through increases to its loss reserve.
4.3 Conditions Precedent to the Obligations of Seller.
The obligations of Seller and Mannes to consummate the
Contemplated Transactions are subject to the satisfaction (or
waiver by Seller or Mannes) at or prior to the Closing Date of
each of the following conditions:
(a) Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained herein or in
any certificate, instrument or other document delivered to Seller
or Mannes pursuant hereto shall be true and correct in all
material respects on and as of the Closing Date, with the same
force and effect as though such representations and warranties
had been made on and as of the Closing Date, except to the extent
that any such representation and warranty is made as of a
specified date, in which case such representation and warranty
shall have been true and correct as of such date.
(b) Performance of Obligations. Buyer shall have
performed all obligations and agreements, and complied with all
covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to the Closing Date in all
material respects.
(c) Deliveries. There shall have been delivered to
Seller the following:
(i) One or more duly executed original assumption
agreements, in form and substance satisfactory to Seller,
pursuant to which Buyer shall assume the Assumed Liabilities.
(ii) A certificate, dated the Closing Date, of the
President of Buyer confirming the matters set forth in Sections
4.3(a) and (b).
(iii) A certificate, dated the Closing Date, of the
Secretary or Assistant Secretary of Buyer certifying, among other
things, that attached or appended to such certificate (A) is a
true and correct copy of the Certificate of Incorporation of
Buyer, and all amendments, if any, thereto as of the date
thereof; (B) is a true and correct copy of its By-laws as of the
date thereof; (C) is a true copy of all corporate actions taken
by it, including resolutions of its Board of Directors,
authorizing the execution, delivery and performance of this
Agreement, and each other document to be delivered by Buyer
pursuant hereto; and (D) are the names and signatures of its duly
elected or appointed officers who are authorized to execute and
deliver this Agreement and any certificate, document or other
instrument in connection herewith.
(iv) A good standing certificate of Buyer.
(v) A signed opinion(s) of Buyer's counsel, dated the
Closing Date, addressed to Seller, substantially in the form of
opinion annexed as Exhibit C hereto.
(vi) A original of the
Employment/Non-Compete
Agreement, duly executed by
Buyer, in the form attached
hereto as Exhibit B.
(d) Actions and Proceedings. All corporate actions,
proceedings, instruments and documents of Buyer required to carry
out the Contemplated Transactions or incidental thereto and all
other related legal matters shall be reasonably satisfactory to
counsel for Seller, and such counsel shall have been furnished
with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall
have reasonably requested.
5. Representations and Warranties of Seller and Mannes.
Seller and Mannes jointly and severally represent and warrant to
Buyer as follows:
5.1 Due Organization; Power; Good Standing. Seller is an
entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has the
requisite power and authority to own, lease and operate its
properties and assets and to conduct its business as now
conducted by it. Seller has all requisite power and authority
to enter into this Agreement and any other agreement contemplated
hereby and to perform its obligations hereunder and thereunder.
Except as reflected in Schedule 5.1, Seller is duly authorized,
qualified or licensed to do business as a foreign corporation,
and is in good standing, in each of the jurisdictions in which
its right, title or interest in or to any of the assets held by
it, or the conduct of its business, requires such authorization,
qualification or licensing, except where the failure to so
qualify or to be in good standing could not have a Material
Adverse Effect.
5.2 Authorization and Validity. The execution, delivery
and performance by Seller of this Agreement and any other
agreements contemplated hereby and the consummation by it of the
Contemplated Transactions have been duly authorized by Mannes and
the Board of Directors and shareholders of Seller. No other
corporate action is necessary for the authorization, execution,
delivery and performance by Seller of this Agreement and any
other agreements contemplated hereby and the consummating by
Seller of the Contemplated Transactions. This Agreement has been
duly executed and delivered by each of Seller and Mannes and
constitutes a valid and legally binding obligation of each of
Seller and Mannes enforceable against them in accordance with its
terms.
5.3 No Governmental Approvals or Notices Required; No
Conflict. The execution, delivery and performance of this
Agreement and any other agreements contemplated hereby by Seller
and Mannes and the consummation by Seller and Mannes of the
Contemplated Transactions (a) if the consents set forth in
Schedule 5.3 hereto (the "Seller Required Consents") are
obtained, will not violate (with or without the giving of notice
or the lapse of time or both), or require any consent, approval,
filing or notice under, any provision of any Law, court or
administrative order, writ, judgment or decree applicable to
Seller or any of its assets or properties, and (b) will not (with
or without the giving of notice or the lapse of time or both) (i)
violate or conflict with, or result in the breach, suspension or
termination of any provision of, or constitute a default under,
or result in the
acceleration of the performance of the obligations of Seller
under, or (ii) result in the creation of any Lien upon all or any
portion of the properties, assets (including the Purchased
Assets) or business of Seller pursuant to the charter or by-laws
of Seller, or any Contract, Permit or instrument to which the
Seller is a party or by which the Seller or any of its
properties, assets (including the Purchased Assets) or the
Business is bound.
5.4 Financial Information; Liabilities. (a) The
Financial Statements of Seller, the Closing Balance Sheet and all
other financial and other information provided by Seller to
Buyer, including, but not limited to, information on revenue,
operating expenses and lease delinquencies and losses
(collectively with the Financial Statements and the Closing
Balance Sheet, the "Financial Information"), are true, complete,
and correct and, subject to the immediately succeeding sentence,
present fairly and accurately the financial condition of Seller
and the results of Seller's operations for the periods reflected
in such Financial Information. Except as otherwise specifically
indicated in the Financial Information or on Schedule 5.4(a)
hereto, all such Financial Information has been prepared in
accordance with GAAP applied consistently throughout the periods
involved.
(b) Seller has no Liability for Taxes, or any long-term
lease or unusual forward or long-term commitment for which Buyer
will have any liability after Closing other than the Assumed
Liabilities.
(c) Attached as Schedule 5.4(c) hereto is a list of all
creditors of Seller as of the end of the month preceding the date
of this Agreement. Such list has been prepared, signed, sworn to
(or affirmed) in accordance with the provisions of, and contains
the information set forth in, Section 6-104 of the Uniform
Commercial Code.
(d) Except as set forth on Schedule 5.4(d): (i) As at the
date of the Financial Statements, Seller did not have any
Liabilities that were not fully and adequately reflected or
reserved against on the balance sheet contained in, or in the
notes to, the Financial Statements; (ii) Seller has not, except
in the ordinary course of business consistent with past practice,
incurred any Liabilities since the date of the most recent
balance sheet included in Financial Statements; and (iii) neither
Seller nor Mannes has any knowledge of any circumstance,
condition, event or arrangement that they reasonably anticipate
would hereafter give rise to any Liabilities of Seller or any
successor to its business except Liabilities arising in the
ordinary course of business consistent with past practice.
5.5 Title and Condition of Properties: Absence of Liens.
(i) Seller is the sole, true and lawful owner of the Purchased
Assets and has, and Buyer on the Closing Date will receive, good
and marketable title to all the Purchased Assets, which will at
the time of Closing be free and clear of all Liens, except for
those Liens recorded or reflected on the Financial Statements or
the Schedules hereto. Neither the Seller nor the Business is
party to any contract that will interfere in any material respect
with, or impose a material burden on, the continuing ownership,
operation or use of the Purchased Assets or any portion thereof
by Buyer. Seller does not, directly or indirectly, own any real
property.
(ii) Seller has no knowledge of any material defect in
the normal operating condition and repair of the Equipment and
the Subject Equipment.
(iii) Except as disclosed on Schedule 5.5(iii),
payments due from lessees under all of the Equipment Leases are
current and there are no other defaults existing thereunder.
(iv) Except as disclosed on Schedule 5.5(iv), to the
knowledge of Seller and Mannes: (A) neither the Business nor the
Real Property is in violation in any material respect of any
building, zoning, health, occupational safety or other Law or any
Order or Permit in respect of such Real Property, improvements,
structures and buildings located therein or thereat; (B) no
person, other than Seller, has any right to occupy or possess any
of the Real Property or any such structures or buildings thereat;
(C) all tenant improvements or other work required to be
performed by or on the part of Seller under any Lease has been
completed substantially in accordance with the provisions of such
Lease; and (D) no notice has been received by Seller from any
insurer or any Governmental Body recommending or requiring any
work to be performed on or with respect to the Real Property.
5.6 Contracts. (a) (i) Schedule 5.61(a)(i) contains a
complete and correct list of all Contracts (other than real
property Leases and Equipment Leases).
(ii) Schedule 5.6(a)(ii) contains a complete and correct
list of all written leases ("Leases") of real property ("Real
Property") under which Seller is a lessee. Schedule 5.6(a)(ii)
also sets forth the date of each Lease and any amendments thereto
and assignments thereof, the term thereof, (including any renewal
options), options to purchase, rights of first refusal and the
aggregate monthly rental payable thereunder.
(iii) Schedule 5.6(a)(iii) contains a complete and
correct list of all Equipment Leases owned or serviced by Seller
along with a detailed aging of all such Equipment Leases.
(b) True and complete copies of all Assumed Contracts
(including all amendments thereto and waivers in respect thereof)
referred to in Section 5.6(a)(i), (ii) and (iii) or in the
Schedules thereto have been delivered to Buyer. There are no
Contracts binding, affecting or otherwise pertaining to the
Purchased Assets, except for this Agreement, the Assumed
Contracts, Equipment Leases, Leases and Liens listed in the
Schedules to this Agreement. To the knowledge of Seller and
Mannes all such Assumed Contracts, Equipment Leases, Leases and
other arrangements referred to in such Schedules are in full
force and effect and are valid and enforceable in accordance with
their respective terms and, except as disclosed in such
Schedules, no consent or approval of any person is required
thereunder by virtue of the Contemplated Transactions. Seller
has paid or accrued all amounts due under all such Contracts and
has satisfied or provided for all of its liabilities and
obligations through the date hereof.
(c) Each Lease is with an unrelated third-party lessor.
Except for the consents required to consummate the Contemplated
Transactions, none of the rights of the lessee under any of the
Leases will be impaired by the consummation of the Contemplated
Transactions and all of the rights under such Leases assumed by
Buyer pursuant to this Agreement will inure to and be enforceable
by Buyer. As of the Closing Date, all rentals and other monies
due for such leased location shall be paid in full. Seller and
Mannes represent and warrant that the Business operated by Seller
is at the following leased location:
Global Finance & Leasing, Inc.
3097 Prairie, S.W.
Grandville, MI 49418
(d) Except as disclosed in Schedule 5.6(d), to the
knowledge of Seller and Mannes: (i) the Assumed Contracts
(including the Leases and Equipment Leases) are valid,
subsisting, in full force and effect and binding upon Seller and
the other parties thereto in accordance with their respective
terms; (ii) neither Seller nor any other party thereto is in
default (or alleged default) of any such Contract, nor does any
condition exist that with notice or the lapse of time or both
would constitute a default (or give rise to a termination right)
thereunder; (iii) none of the parties to any such Contract
intends to terminate or materially alter the provisions thereof;
(iv) since December 31, 1996, Seller has not waived any material
right under any such Contract, materially amended any such
Contract or terminated or failed to renew (or received notice of
termination or failure to renew with respect to) any such
Contract; and (v) Seller has paid or accrued all amounts due
under all such Contracts and has satisfied or provided for all of
its Liabilities through the date hereof.
5.7 Legal Proceedings. Except as described in Schedule
5.7, there is no Action to which Seller is a party pending or, to
the knowledge of Seller and Mannes, threatened against it or
relating to the Purchased Assets or the Business of Seller or the
Contemplated Transactions. Neither Seller nor Mannes is in
violation of any term of any judgment, writ, decree, injunction
or order entered by any court or Governmental Body and
outstanding against Seller or Mannes with respect to any of its
assets or properties. To the knowledge of Seller and Mannes,
except as described in Schedule 5.7, there are no facts which
could provide a basis for any such Action. There are no
judgments of record against Seller or any judgment Lien on the
Purchased Assets, nor any petition in bankruptcy or an insolvency
proceeding involved by or against it, nor has it made any general
assignment for the benefit of creditors.
5.8 Insurance. Schedule 5.8 is a list of Seller's
insurance maintained on its properties and assets (including the
Purchased Assets) and with respect to its employees,
representatives and Business. All policies of insurance are in
full force and effect and all premiums currently due and owing
have been paid. There is no Claim by Seller pending under any of
such policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies. Such policies of
insurance are of the type and in amounts customarily carried by
persons conducting a business similar to that of Seller. Seller
does not know of any threatened termination of, or premium
increase
with respect to, any of such policies. True and complete copies
of all such policies have been delivered to Buyer.
5.9 Labor. (a)(i) To Seller's and Mannes's knowledge,
Seller is in compliance in all material respects with all
applicable Laws relating to employment practices, terms and
conditions of employment and wages and hours; (ii) there are no
controversies pending or, to the knowledge of Seller and Mannes,
threatened between Seller and any of their respective employees,
prospective employees, former employees, retirees or labor unions
or other collective bargaining representatives representing their
employees; (iii) no unfair labor practice complaints have been
filed against Seller and Seller has not received any notice
reflecting an intention or a threat to file any such complaint;
(iv) there is no labor strike, dispute, slow-down or stoppage
pending or, to the knowledge of Seller
and Mannes, threatened against Seller; (v) no representation
petition is pending with the National Labor Relations Board (or
any other labor relations board) in respect of Seller; (vi)
Seller has paid in full to all of its employees all wages,
salaries, commissions, bonuses, benefits and other compensation
due to such employees; (vii) Seller has not closed any facility,
effectuated any layoffs of employees or implemented any early
retirement or separation program within the past three years, nor
has Seller planned or announced any such action or program for
the future; (viii) no promises of benefit improvements under the
Employee Benefit Programs have been made by Seller or any
affiliate thereof to any employee of Seller; and (ix) there are
no collective bargaining agreements or agreements with any labor
organization which Seller or its Affiliates have entered into on
behalf of any employees of Seller, nor, to the knowledge of
Seller and Mannes, are there any ongoing efforts to organize any
union representation.
(b) Schedule 5.9(b) sets forth (i) the name, total
compensation, date of hire and current salary for each current
employee of Seller, (ii) the name and total direct compensation
of each consultant, agent or other representative of Seller whose
current or committed annual rate of compensation (including
bonuses and commissions) exceeds $25,000, (iii) all wage and
salary increases, bonuses and increases in any other direct
compensation received by or accrued to such persons since
December 31, 1996, (iv) any payments or commitments to pay any
severance or termination pay to any such persons or to any other
person, and (v) any accrual for, or any commitment or agreement
by Seller to pay, such increases, bonuses or pay.
(c) All employees are "employees-at- will" of Seller and
Buyer shall be free to hire any such employees after the Closing.
5.10 Intellectual Property. (a) Schedule 5.10 contains a
complete and correct list of (i) all trademarks and service
marks, trademark and service mark registrations and applications,
trade names and corporate names, (ii) patents, patent
applications and all other patent rights, copyrights, copyright
registrations and applications owned by Seller and (iii) all
material non-governmental licenses or sublicenses granted by or
to Seller and other covenants or Contracts to which Seller is a
party, which relate in whole or in part to any items of the
categories mentioned above or to any other material proprietary
rights, trade secrets ideas or know-how owned or licensed by
Seller.
(b) Seller has, and will transfer to Buyer on the Closing
Date, good and marketable title to all the Intellectual Property,
free and clear of all Liens. To the best knowledge of Seller and
Mannes, after due inquiry, no claims have been asserted to the
effect that the use of the Intellectual Property by Seller
infringes on any Intellectual Property of any other person. To
the knowledge of Seller and Mannes, the use of the Intellectual
Property by Seller does not infringe on the rights of any person.
Seller owns all material Intellectual Property used in Seller's
business as presently conducted. To Seller's knowledge no third
party is using any Intellectual Property which is confusing with
or similar to any of Seller's Intellectual Property.
5.11 Governmental Authorizations. Schedule 5.11 lists all
Permits, variances, waivers, consents and other authorizations
of, by or from Governmental Bodies ("Governmental
Authorizations") related to the Purchased Assets or the use
thereof, or to the knowledge of Seller required in connection
with the valid assignment and transfer of the Purchased Assets
pursuant hereto or the use of the Purchased Assets by Buyer after
the Closing Date. The Governmental Authorizations constitute all
Permits required in connection with the ownership, operation or
use of the Purchased Assets. In all material respects, Seller
has owned, operated and used the Purchased Assets in accordance
with the conditions and provisions of such Governmental
Authorizations. The Governmental Authorizations are in full
force and effect, Seller is in compliance with all obligations
thereunder or imposed thereby, and no Actions are pending or, to
Seller's or Mannes's knowledge, threatened, which might result in
any modification, revocation, termination or suspension of any
Governmental Authorization. Each of the Governmental
Authorizations will either (i) continue in full force and effect
and inure to the benefit of Buyer without any action by any
person, or (ii) comparable replacement or substitute Governmental
Authorizations will be obtained by Buyer at little or no cost in
the ordinary course after application by Buyer therefore.
5.12 Compliance with Law and Requirements. Seller has
conducted its business in compliance in all material respects
with all applicable Laws, rights of concession, licenses,
know-how or other proprietary rights of others, the failure to
comply with which could individually or in the aggregate have a
Material Adverse Effect. Seller is not in violation of any Order
of any Governmental Body affecting its property, business or the
Purchased Assets, the effect of which, individually or in the
aggregate, could have a Material Adverse Effect.
5.13 Employee Benefit Programs. (a) Except asset forth
in Schedule 5.13, neither Seller nor any Affiliate of Seller
maintains or has ever maintained and/or contributed to any
Employee Benefit Plan or other employee benefit plan or
arrangement of any kind whatsoever (such employee benefit plans
or arrangements hereinafter collectively called the "Benefit
Arrangements").
(b) Each Benefit Arrangement has been maintained and
administered at all times substantially in compliance with all
applicable Laws including, without limitation, ERISA and the
Code. All employer contributions required to be made under the
Benefit Arrangements have been fully and timely paid.
(c) No Action involving the Benefit Arrangements has
occurred, is pending or, to the knowledge of Seller and Mannes,
is threatened.
5.14 Certain Fees. Except for Barry Geister, neither
Mannes, Seller, nor any of its officers, directors or employees
or its Affiliates has employed any broker or finder or incurred
any other liability for any brokerage fees, commissions or
finders' fees in connection with the Contemplated Transactions.
Buyer and Seller shall each pay one half of Barry Geister's fees;
provided, however, that the total amount of such fees shall not
exceed $50,000.
5.15 Absence of Certain Changes or Events. Except as
reflected in the Financial Information or Schedule 5.15, since
December 31, 1996, there has not been (i) any material adverse
change in the assets or in the condition (financial or other),
results of operations, prospects or business of Seller, (ii) any
material damage, destruction or loss relating to the business or
assets of Seller, whether or not insured, (iii) except as
disclosed on any Schedule hereto, any Liability created or
incurred which Buyer will assume under Section 2.5 hereof, (iv)
any Lien created on any Purchased Asset (v) except in the
ordinary course of business, any increase in, or commitment or
plan adopted to increase, the wages, salaries, compensation,
pension or other benefits or payments to employees, (vi) any
material capital expenditures or commitment to make any such
expenditures with respect to the Purchased Assets or as to which
Buyer will become obligated after the Closing pursuant to this
Agreement, (vii) any condemnation Actions commenced with respect
to any Purchased Asset or notice received by Seller as to the
proposed commencement of any such Actions, (viii) any rights of
substantial value waived with respect to the Purchased Assets or
the Business of Seller, (ix) any sale or transfer of any
Purchased Assets other than dispositions in the ordinary course
of business, (x) any termination or failure to renew, or the
receipt of any written threat to terminate or not renew any
material Contract or (xi) a Material Adverse Effect or any event
or events that individually or in the aggregate could result in a
Material Adverse Effect. Since December 31, 1996, other than
acts relating to the Contemplated Transactions, and except as
otherwise disclosed herein, the Business of Seller has been
conducted in all significant respects only in the ordinary
course, consistent with past practice.
5.16 Equipment Vendors. Schedule 5.16 lists for the 12
months ended December 31, 1996, the __ largest vendors that refer
lease applicants and sell Subject Equipment to Seller. The
relationships of Seller with such vendors are reasonable
commercial working relationships and: (i) no vendor has refused
to provide credit, or has suspended the provision of credit, to
Seller as a result of the failure or delay in payment of amounts
due to such vendors; (ii) all amounts owing to such vendors, if
not in dispute, have been paid in accordance with their
respective terms; (iii) no person within the last twelve months
has threatened in writing to cancel, or otherwise terminate, the
relationship of such person with Seller, and (iv) no person
during the last twelve months has decreased materially or, to
Seller's knowledge, threatened to decrease or limit materially,
its relationship with Seller or intends to decrease or limit
materially its referrals of lease applicants to Seller.
5.17 Environmental Matters. Neither Seller nor any of its
Affiliates has in the past violated and is not now in violation
of any Environmental Laws in connection with the ownership or
operation of any of its assets (including the Purchased Assets)
and the conduct of the Business of Seller. Seller has not
received any notice from any Governmental Body, and does not have
knowledge of any governmental inquiry, with respect to any actual
or alleged violation of any Environmental Laws with respect to
the Purchased Assets or the Business of Seller and there is not
pending or, to the knowledge of Seller and Mannes, threatened any
Action against Seller relating to any violation or threatened
violation of any Environmental Law. There has been no storage,
disposal or treatment of solid wastes or hazardous wastes on,
under or at any real property used by Seller while Seller has
been in possession of such real property and, to Seller's
knowledge, prior to Seller's possession. There has been no
release, including any spill, discharge, leak, emission,
injection, escape or dumping, of any kind onto any real property
used by Seller or into the environment surrounding any such real
property, of any Hazardous Materials, other than those releases
permissible under applicable Laws or allowable under applicable
Permits while Seller has been in possession of such real property
and, to Seller's and Mannes' knowledge, prior to Seller's
possession. Neither Seller nor, to the knowledge of Seller and
Mannes, any other person has discovered any occurrence or
condition on any real property adjoining or in the vicinity of
any real property used by Seller that could cause such real
property or any part thereof to be subject to any restrictions on
the ownership, occupancy, transferability or use of such real
property under any Environmental Law.
5.18 Entire business. On the Closing Date, Seller will
transfer to Buyer all of the Purchased Assets used by Seller in
Seller's Business and such Purchased Assets are sufficient to
enable Buyer to carry on the Business.
5.19 Tax Matters. Except as disclosed on Schedule 5.19,
all Tax Returns required to be filed by Seller (or its
predecessors) on or before the Closing Date have been or shall be
timely filed and all Taxes which are due or which may be claimed
to be due have been or shall be paid. All Taxes of Seller
attributable to periods ending on or before the Closing Date
which are not yet due have been adequately provided for and
remain the sole responsibility of Seller and/or Mannes. As of
the time of filing, the Tax Returns correctly reflected (and, as
to any Tax Returns not filed as of the date hereof will correctly
reflect) the facts regarding the income, business, assets,
operations, activities and status of Seller. There are no Tax
Liens upon any property of Seller except for Liens for current
Taxes not yet due and payable. All amounts required to be
withheld by Seller from employees for income Taxes, social
security and other payroll Taxes have been collected and
withheld, and either paid to the respective Governmental Bodies,
set aside in accounts for such purpose, or have been or will be
accrued, reserved against and entered upon the books and records
of Seller. Except for sales Taxes which result from the
consummation of the Contemplated Transactions, Seller has
collected and remitted to the appropriate Tax Authority all sales
and use or similar Taxes required to have been collected on or
prior to the Closing Date and has been furnished properly
completed exemption certificates for all exempt transactions.
Seller has maintained and has in its possession all records,
supporting documents and exemption certificates required by
applicable sales Tax statutes and regulations to be retained in
connection with the collection and remittance of sales and use
Taxes for all periods up to and including the Closing Date.
Seller (or any of its predecessors) is not a party to or has
received any notice with respect to any proposed or pending
Action by any Governmental Body for assessment or collection of
Taxes, or is party to any dispute or threatened dispute and no
such claim for assessment or collection of Taxes has been made
upon Seller. Seller is not a "foreign person" within the meaning
of section 1445 of the Code, and Seller will furnish Buyer with
an affidavit that satisfies the requirements of section 1445 (b)
(2) of the Code. Seller is not and has never been a member of or
included in any consolidated, combined or unitary group for
purposes of filing Tax Returns or paying Taxes at any time.
Seller has no Liability for Taxes of any other person under
Treasury Regulation section 1.1502-6 (or any similar provision of
state or foreign law), or as a transferee of such person, or
under any other provision of law or tax sharing, tax indemnity or
similar Contract.
5.20 Capital Stock; No Subsidiaries. Mannes owns 100% of
the issued and outstanding common stock of the Seller. Except
for GFL & S, Inc., Seller does not have any equity interest in
any other person.
5.21 Prohibited Payments. Neither Seller nor any of its
officers, directors, employees or agents has offered, paid or
agreed to pay any illegal payment or other illegal consideration
to customers, suppliers, purchasing agents or other customers'
representatives, or engaged in any other illegal reciprocal
practice in respect of sales made or to be made by Seller.
5.22 Affiliate Transactions. Except as set forth on
Schedule 5.22, Seller is not party to any arrangements with any
Affiliate of Seller or Mannes or any employee of Seller the
absence of which could have a Material Adverse Effect. Schedule
5.22 lists all transactions through the date of this Agreement
(or which were entered prior to such date but continue in effect
to the date thereof) entered into by Seller with any Affiliate of
any of the following: Mannes, Seller, or any directors, officers
or employees of Seller.
5.23 Disclosure. This Agreement, together with all other
documents and instruments to be executed and/or delivered by
Seller or Mannes in connection herewith, does not and will not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements contained herein
and therein not misleading. There is no fact (other than facts
relating to general economic, social or political conditions or
other facts not specifically relating to the Purchased Assets or
the Business) known to Seller or Mannes which materially
adversely affects or in the future may, materially adversely
affect the Purchased Assets or the ownership, operation, or use
thereof by Buyer which has not been set forth herein.
6. Representations and Warranties of Buyer. Buyer
represents and warrants to Seller and Mannes as follows:
6.1 Due Organization; Good Standing and Power. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Buyer has all requisite
corporate and other power and authority to enter into this
Agreement and any other agreement contemplated hereby and to
perform its obligations hereunder and thereunder.
6.2 Authorization and Validity. The execution, delivery
and performance by Buyer of this Agreement and any other document
contemplated hereby and the consummation by Buyer of the
Contemplated Transactions have been duly authorized by its Board
of Directors. No other corporate or stockholder action is
necessary for the authorization, execution, delivery and
performance by Buyer of this Agreement and any other agreements
contemplated hereby and the consummation by Buyer of the
Contemplated Transactions. This agreement has been duly executed
and delivered by Buyer and constitutes a valid and legally
binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
6.3 Governmental Approvals: No Conflict. The execution,
delivery and performance of this Agreement and any other
agreements contemplated hereby by Buyer and the consummation by
it of the Contemplated Transactions (i) will not violate (with or
without the giving of notice or the lapse of time or both), or
require any consent, approval, filing or notice under any
provision of any Law, court or administrative order, writ,
judgment or decree applicable to Buyer or its assets or
properties, except for such violations the occurrence of which,
and such consents, approvals, filings or notices the failure of
which to obtain or make, could not, either individually or in the
aggregate, have a material adverse effect on Buyer's ability to
perform its obligations hereunder, and (ii) will
not (with or without the giving of notice or the lapse of time or
both) violate or conflict with, or result in the breach,
suspension or termination of any provision of, or constitute a
default under, or result in the acceleration of the performance
of the obligations of Buyer, under, or in the creation of any
Lien pursuant to the charter or by-laws of Buyer or any Contract
to which Buyer is a party or by which Buyer or any of its assets
or properties is bound, except for such violations, conflicts,
breaches, suspensions, terminations, defaults, accelerations or
Liens which could not have a material adverse effect on Buyer's
ability to perform its obligations hereunder.
6.4 Certain Fees. Except for Barry Geister, neither Buyer
nor any of its officers, directors or employees on behalf of
Buyer, has employed any broker or finder or incurred any other
liability for any brokerage fees, commissions or finders' fees in
connection with the Contemplated Transactions. As provided under
Section 5.14, Buyer and Seller shall each pay one half of Barry
Geister's fees; provided, however, that the total amount of such
fees shall not exceed $50,000.
6.5 Litigation. There is no Action to which Buyer is a
party pending or, to the knowledge of Buyer, threatened against
it or relating to the business of Buyer or the Contemplated
Transactions. Buyer is not in violation of any term of any
judgment, writ, decree, injunction or order entered by any court
or Governmental Body and outstanding against Buyer with respect
to any of its assets or properties. To the knowledge of Buyer,
there are no facts which could provide a basis for any such
Action. There are no judgments of record against Buyer, nor any
petition in bankruptcy or an insolvency proceeding involved by or
against it, nor has it made any general assignment for the
benefit of creditors.
6.6 Compliance with Law and Requirements. Buyer has
conducted its business in compliance in all material respects
with all applicable Laws, rights of concession, licenses,
know-how or other proprietary rights of others, the failure to
comply with which could individually or in the aggregate have a
Material Adverse Effect on Buyer or its business. Buyer is not
in violation of any Order of any Governmental Body affecting its
property, business or the assets, the effect of which,
individually or in the aggregate, could have a Material Adverse
Effect.
6.7 Environmental Matters. Neither Buyer nor any of its
Affiliates has in the past violated and is not now in violation
of any Environmental Laws in connection with the ownership or
operation of any of its assets and the conduct of the business of
Buyer. Buyer has not received any notice from any Governmental
Body, and does not have knowledge of any governmental inquiry,
with respect to any actual or alleged violation of any
Environmental Laws with respect to the business of Buyer and
there is not pending or, to the knowledge of Buyer, threatened
any Action against Buyer relating to any violation or threatened
violation of any Environmental Law. There has been no storage,
disposal or treatment of solid wastes or hazardous wastes on,
under or at any real property used by Buyer while Buyer has been
in possession of such real property and, to Buyer's knowledge,
prior to Buyer's possession. There has been no release,
including any spill, discharge, leak, emission, injection, escape
or dumping, of any kind onto any real property used by Buyer or
into the environment surrounding any such real property, of any
Hazardous Materials, other than those releases permissible under
applicable Laws or allowable under applicable Permits while Buyer
has been in possession of such real property and, to Buyer's
knowledge, prior to Buyer's possession. Neither Buyer nor, to
the knowledge of Buyer, any other person has discovered any
occurrence or condition on any real property adjoining or in the
vicinity of any real property used by Buyer that could cause such
real property or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or use
of such real property under any Environmental Law.
6.8 Assumption of Purchased Assets. On the Closing Date,
Buyer will accept and assume from Seller all of the Purchased
Assets used in Seller's Business; provided, however, that Buyer
is only assuming those liabilities of Seller recorded on the
Closing Balance Sheet.
7. Covenants and Agreements.
7.1 Access to Information. Seller agrees to (a) give or
cause to be given to Buyer and its Representatives and potential
financing sources such access, during normal business hours, on
reasonable advance written notice, to the offices, properties,
books and records of Seller as Buyer may from time to time
reasonably request and (b) furnish or cause to be furnished to
Buyer such financial and operating data and other information
with respect to the business and properties (including the
Purchased Assets) of Seller, as Buyer may from time to time
reasonably request. Buyer and its Representatives and potential
sources of financing shall have access, in consultation with
Seller, to such Representatives of Seller as Buyer may reasonably
request. Mannes shall, and shall cause Seller and its
Representatives to, cooperate fully with Buyer's investigation.
7.2 Conduct of the Business. Seller and Mannes jointly and
severally agree that, except as required by this Agreement or
otherwise consented to in writing by Buyer, during the period
commencing on the date of this Agreement and ending on the
Closing Date, Seller shall:
(a) operate its business only in the usual, regular and
ordinary manner, on a basis consistent with past practice and, to
the extent consistent with such operation, use its reasonable
efforts to preserve its present business organization intact,
keep available the services of its present employees and preserve
its present business relationships;
(b) maintain its books, accounts and records relating to
its business in the usual, regular and ordinary manner, on a
basis consistent with past practice, comply with and perform in
all material respects all Laws and contractual and other
obligations applicable to it or its business;
(c) except for Equipment Leases entered into in the
ordinary course of business, not enter into any Contract which is
not terminable by the parties upon 30 days notice or less or
which involves aggregate consideration in excess of $1,000.00;
(d) not (i) dispose of or abandon any of the Purchased
Assets, other than in the ordinary course of business, consistent
with past practice, (ii) enter into, change, waive or otherwise
modify any Contract, other than in the ordinary course of
business consistent with past practice, (iii) enter into or
engage in any transaction with any Affiliate other than to
continue existing business relationships with Affiliates;
(e) not change any material accounting principle and Seller
shall maintain its books, accounts, and records in conformity
with past practices;
(f) not authorize or make any capital expenditures
involving the payment or Liability of $5,000 or more in the
aggregate; or
(g) authorize any of, or commit or agree to take any of,
the foregoing actions.
7.3 Further Actions. Subject to the terms and conditions
hereof, Seller and Buyer agree to use reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done,
all things necessary, proper or advisable to consummate and make
effective the Contemplated Transactions, including using its
reasonable efforts (without payment of money, commencement of an
Action or the assumption of any material obligation): (i) to
obtain at the earliest practicable date prior to the Closing Date
(pursuant to instruments reasonably satisfactory to Buyer in form
and substance) all Permits and consents, approvals,
authorizations, qualifications and orders of Governmental Bodies
and other third parties to Contracts with Seller as are necessary
for the consummation of the Contemplated Transactions; (ii) to
effect all necessary registrations and filings; (iii) to furnish
to each other such information and assistance as reasonably may
be requested in connection with the foregoing; and (iv) to assist
Buyer in obtaining prior to the Closing Date all Governmental
Authorizations as are necessary in order to enable Buyer to
conduct the business of Seller in the ordinary course as of and
from the opening of business on the Closing Date. To the extent
that any consent or approval is not obtained with respect to any
Contract as contemplated above, this Agreement shall not
constitute an assignment or an attempted assignment thereof. In
each such case, without prejudicing or limiting Buyer's rights
under other Sections of this Agreement, Seller agrees to
cooperate with Buyer in any reasonable arrangement designed to
provide for Buyer the benefits under any such Contract, including
enforcement at the cost and for the account of Buyer of any and
all rights of Seller against the other party or otherwise. If
and to the extent that such arrangement cannot be made, Buyer
shall not have any Liability with respect to any such Contract.
7.4 Notification. Seller shall promptly notify Buyer and
keep it advised of (i) any Action instituted or threatened in
writing against Seller which could, if adversely determined, have
a Material Adverse Effect; (ii) any material damage or
destruction of any of the Purchased Assets; (iii) any material
adverse change in the condition (financial or other), results of
operations, assets, business or prospects of Seller, including
the Purchased Assets and the Business; (iv) any termination of an
employee relationship with Seller; (v) any notice from any
Governmental Body in connection with the Contemplated
Transactions; and (vi) any event, condition or circumstance that
would constitute a violation or breach of any representation,
warranty or covenant contained herein.
7.5 No Inconsistent Action. The parties hereto shall not
take any action inconsistent with their obligations under this
Agreement or which could materially hinder or delay the
consummation of the Contemplated Transactions. None of the
parties hereto shall take or omit to take any action that could
result in any of their respective representations and warranties
not being true in all material respects as of the Closing Date.
7.6 Seller Employees. Seller shall not interfere with the
efforts of Buyer to hire those employees of Seller whom Buyer
wishes to employ after the Closing. Seller covenants and agrees
that it will not be a party to any action or activity which would
deprive Buyer of the services of the foregoing employees of
Seller. Buyer shall have no obligation and by this Agreement
does not assume any obligation to any employee of Seller, except
as may specifically be negotiated by such employee and Buyer.
Nothing herein shall be deemed to constitute Buyer a successor
employer to Seller. Seller shall remain solely responsible for
all wages, sick leave, vacation pay or other benefits which may
be due to such employees prior to the Closing.
7.7 Change of Names. At the Closing, Seller shall, and
Mannes shall cause Seller to, relinquish any and all rights any
of them may have in and to the trade name "Global Finance &
Leasing" and any other trade name, trademark or service mark used
by them or any of their affiliates and convey to Buyer any and
all such rights. Promptly following the Closing (and, in any
event, within fifteen (15) business days following the Closing
Date) Seller shall, and Mannes shall cause Seller to, take such
action as necessary to change the name of Seller so that such
name will not resemble the trade name "Global Finance & Leasing".
Immediately after the Closing Date, Seller shall discontinue
using and deliver to Buyer any assets in its possession
including, without limitation, stationery, business cards and
literature, bearing the trade name "Global Finance & Leasing."
7.8 Negotiations with Others. From and after the date
hereof unless and until this Agreement shall have terminated in
accordance with its terms, Mannes will not, and will not permit
Seller, or any officer, director, employee or other
representative of Seller to, directly or indirectly (a) solicit,
engage in discussions or engage in negotiations with any person
(other than Buyer or any of its Affiliates) with respect to an
Acquisition Proposal; (b) provide information to any person
(other than Buyer or any of its Affiliates) in connection with an
Acquisition Proposal; or (c) enter into any transaction with any
person (other than Buyer or any of its Affiliates) with respect
to an Acquisition Proposal. If any of Mannes, Seller, or any of
their Representatives receives any offer or proposal to enter
into discussions or negotiations relating to any of the above,
Seller will immediately notify Buyer in writing as to the
identity of the offeror or the party making any such proposal and
the specific terms of such offer or proposal.
7.9 Bulk Sales Law. The parties agree to waive
compliance with the provisions of the Bulk Sales Law of any
jurisdiction.
7.10 Public Announcements. Upon execution of this
Agreement, Buyer may issue a news release or other public
announcement regarding the Contemplated Transactions. No other
public announcements will be made by Seller or Mannes without the
prior written consent of Buyer.
7.11 Expenses. Subject to Section 7.12, whether or not the
Contemplated Transactions are completed, each of the parties
hereto shall pay the fees and expenses incurred by it in
connection with the negotiation, preparation, execution and
performance of this Agreement, including, without limitation,
attorneys' and accountants' fees. The foregoing shall not affect
the legal right, if any, that any party hereto may have to
recover expenses from any other party that breaches its
obligations hereunder.
7.12 Transfer Taxes and Recording Expenses. Seller shall
bear and pay any and all sales, motor vehicle or transfer Taxes
and recording expenses, if any, required to be paid in connection
with the transfer of the Purchased Assets (including any
interest, charge or penalty with respect thereto).
7.13 Books and Records. From and after the Closing, Buyer
and Seller, at the expense of the requesting party, shall make
available to each other (including the right to make copies) any
and all books and records of or relating to Seller reasonably
requested in connection with (a) any matter for which
indemnification is claimed; (b) any inquiry or investigation by
any Governmental Body; or (c) any Action. Buyer and Seller shall
retain, or cause to be retained, for as long as any taxable year
in the Tax period (including partial periods) that ends on or
prior to the Closing Date, including but not limited to any short
taxable year required under Section 1.1502-76 of the Treasury
regulations, shall remain open for assessment of Taxes, any
material records or information which may be relevant to any such
Tax returns or audits or other examinations by any Tax Authority
relating to the Company, and shall not dispose of any such Tax
returns, books or records relating to
the Company during such period.
7.15 Confidentiality. (a) Buyer, on the one hand, and
Mannes and Seller, on the other hand, each shall hold in strict
confidence, and shall use its best efforts to cause all its
Representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or by other
requirements of Law, including disclosure required by applicable
securities laws, all confidential or proprietary information
concerning Seller (in the case of Buyer) and Buyer (in the case
of the Seller) which is created or obtained prior to, on or after
the dates hereof in connection with the Contemplated
Transactions, and Buyer and Seller each shall not use or disclose
to others, or permit the use of or disclosure of, any such
information created or obtained except (i) to its officers,
directors, employees, Representatives and lending institutions
who need to know such information in connection with this
Agreement, and (ii) to the extent that such information can be
shown to have been (A) previously known by Buyer or Seller, as
the case may be, or (B) in the public domain through no fault of
Buyer or Seller, as the case may be, or any of their respective
Representatives.
(b) If the Contemplated Transactions are consummated,
Seller and Mannes shall each hold in strict confidence, and shall
use its best efforts to cause all its Representatives to hold in
strict confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of Law, all
information concerning the Business and Seller and Mannes each
shall not use or disclose to others, or permit the use of or
disclosure of any such information except to the extent that such
information can be shown to have been in the public domain
through no fault of Seller or Mannes or any of their respective
Representatives.
8. Termination
8.1 General. This Agreement may be terminated and the
Contemplated Transactions abandoned (a) by mutual consent of
Buyer and Seller, (b) by Buyer, if there has been breach of
Seller's or Mannes' covenants and agreements hereunder or if the
conditions contained in Sections 4.1 and 4.2 cannot be fulfilled
on or before the Closing Date, as extended by agreement of the
parties, (c) by Seller, if there has been a breach of Buyer's
covenants and agreements hereunder or if the conditions contained
in Sections 4.1 and 4.3 cannot be fulfilled on or before the
Closing Date, as extended by agreement of the parties, or (d) by
any party by notice to the other parties in the event that the
Closing, as extended by agreement of the parties, shall not have
occurred on or before April 11, 1997; provided however, that if
the Closing shall not have occurred on or before April 11, 1997,
due to the act or omission of one of the parties, that party may
not terminate the Agreement, except that no party shall be deemed
to have willfully taken action or to have willfully omitted to
take action for purposes hereof by reason of such party's failure
or refusal to (i) pay money to any third parties, (ii) commence
litigation, (iii) assume any other material obligation not
otherwise required to be assumed by this Agreement or (iv) agree
with any Governmental Body or any other person that such party
will divest or hold separate any assets as a condition of
completing any of the Contemplated Transactions.
8.2 No Liabilities in Event of Termination. In the event of
any termination of the Agreement pursuant to Section 8.1, this
Agreement shall forthwith become null and void and of no further
force or effect and there shall be no Liability on the part of
Buyer, Seller or Mannes, except under Sections 7.11, 7.15, 8.3
and 9 of this Agreement which shall remain in full force and
effect, and except that termination shall not preclude any party
from suing any other party for breach of this Agreement.
8.3 Non-Solicitation. All parties further agree that for
one (1) year following the termination of this Agreement pursuant
to Section 8.1, that they will not solicit for employment or hire
any employees of any other party to this Agreement.
9. Indemnification
9.1 Survival of Representations. The representations,
warranties, covenants and agreements contained in this Agreement,
and in any agreements, certificates or other instruments
delivered pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigations made by or on behalf
of any party, but subject to all express limitations and other
provisions contained in this Agreement. Such representations and
warranties shall survive the Closing hereunder: (a) for the
applicable statute of limitations period with respect to matters
covered by Section 5.19; and (b) for three (3) years with respect
to all other matters.
9.2 Seller and Mannes Indemnity. Seller and Mannes,
jointly and severally agree to indemnify and hold harmless Buyer
and its Affiliates against and in respect of (i) all Liabilities
of Seller or any of its Affiliates not assumed by Buyer pursuant
to this Agreement or under any other agreement executed and
delivered by the parties in furtherance of the transactions
described herein; (ii) any Claim, cost, loss, Liability or damage
incurred or sustained by Buyer or its Affiliates as a result of
any misrepresentation or breach of warranty by Seller or Mannes
or a breach by Seller or Mannes of any covenant or other
agreement contained herein or under any other agreement executed
and delivered by the parties in furtherance of the transactions
described herein; (iii) Liabilities for sales, use, income and
other Taxes arising at any time out of the operation of the
Business of Seller and its Affiliates prior to the opening of
business on the Closing Date; (iv) any Claim, cost, loss,
Liability or damage incurred or sustained by Buyer or its
Affiliates as a result of the operation of the Business of Seller
and its Affiliates prior to the opening of business on the
Closing Date, except to the extent specifically assumed by Buyer
pursuant to this Agreement and (v) all Claims, liabilities,
losses, costs and expenses incurred by Buyer (in excess of the
Holdback) arising out of or in connection with all transactions
between Seller and LINC, including, without limitation,
repurchases of leases by Buyer from LINC due to a payment default
by lessee within the first three payments after being purchased
by LINC or a default by Seller of its other representations,
warranties or covenants in favor of LINC. Seller and Mannes
jointly and severally agree to indemnify and hold harmless Buyer
and its Affiliates against and in respect of all reasonable costs
and expenses (including reasonable attorneys' fees and
disbursements) incurred by Buyer or its Affiliates in connection
with any Action, demand, assessment or judgment incident to any
of the matters indemnified against in this Section 9.2. Buyer
shall not assert a claim for indemnification from Seller or
Mannes under this Section 9.2 unless and until the aggregate
amount of Buyer's claims exceeds $250,000, at which time this
sentence shall be of no further force and effect and Buyer shall
be entitled to fully assert all such existing claims.
9.3 Buyer Indemnity. Buyer agrees to indemnify and hold
harmless Seller, Mannes and their respective Affiliates against
and in respect of (i) any Claim, cost, loss, Liability or damage
incurred or sustained by Seller, Mannes or any of their
respective Affiliates as a result of the failure by Buyer to
assume and discharge the Assumed Liabilities; (ii) any Claim,
cost, loss, Liability or damage incurred or sustained by Seller,
Mannes or any of their respective Affiliates as a result of any
misrepresentation or breach of warranty by Buyer or a breach by
Buyer of any covenant or other agreement contained herein or
under any other agreement executed and delivered by the parties
in furtherance of the transactions described herein; (iii)
Liabilities for sales, use, income and other Taxes accruing and
incurred as result of the operation of the Business subsequent to
the Closing; and (iv) any Claim, cost, loss, Liability or damage
incurred or sustained by Seller, Mannes or any of their
respective Affiliates as a result of the operation of the
Business by Buyer following the opening of business on the
Closing Date. Buyer agrees to indemnify and hold harmless
Seller, Mannes and their respective Affiliates against and in
respect of all reasonable costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by such
parties in connection with any Action, demand, assessment or
judgment incident to any of the matters indemnified against in
this Section 9.3.
9.4 Procedures for Indemnification. Promptly after
receipt by an indemnified party under this Section 9 of notice of
any Claim, the commencement of any Action, or the discovery of
any facts or circumstances which could reasonably result in, if
not attended to, a Claim or commencement of any Action, the
indemnified party shall, if a Claim in respect thereof is to be
or may be made against the indemnifying party under this Section
9, notify the indemnifying party in writing of the Claim, the
commencement of that Action or state of facts of circumstances;
provided that, the failure to notify the indemnifying party shall
not relieve it from any Liability which it may have to the
indemnified party, except to the extent it is actually prejudiced
as a result of such delay. If any such Claim shall be brought
against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be
entitled to participate at its cost and expense jointly with the
indemnified party in the indemnified party's defense, settlement
or other disposition of any such Claim. With respect to any such
Claim relating solely to the payment of money damages and which
will not result in the indemnified party's becoming subject to
injunctive or other relief or otherwise materially adversely
affect the business of the indemnified party in any manner, and
as to which the indemnifying party shall have acknowledged in
writing the obligation to indemnify the
indemnified party hereunder, the indemnifying party shall have
the sole right to defend, settle or otherwise dispose of such
claim on such terms as the indemnifying party, in its sole
discretion, shall deem appropriate; provided, however that the
indemnifying party shall obtain the written consent of the
indemnified party, which shall not be unreasonably withheld,
prior to ceasing to defend, settling or otherwise disposing of
any such claim if as a result thereof the indemnified party would
become subject to injunctive or other equitable relief or the
business of the indemnified party would be materially adversely
affected in any manner; and provided, further, that if the
indemnified party has elected to be represented by separate
counsel pursuant to the proviso to the following sentence, such
settlement or compromise shall be effected only with the consent
of the indemnified party, which consent shall not be unreasonably
withheld. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other
expenses subsequently incurred by the indemnified party in
connection with the defense thereof. The indemnified party shall
have the right to employ counsel to represent it if, in the
indemnified party's reasonable judgment, it is advisable for the
indemnified party to be represented by separate counsel, and in
that event the fees and expenses of such separate counsel shall
be paid by the indemnified party. The parties each agree to
render to the other parties such assistance as may reasonably be
requested in order to insure the proper and adequate defense of
any such claim or proceeding.
9.5 Additional Agreements. (a) The parties agree that
Buyer shall be permitted to offset against any payments due
Seller or Mannes under this Agreement or under any other
agreement contemplated herein (except for the Employment
Contract, against which no offset shall be made) the amount of
any indemnification payments required to be made by Seller or
Mannes pursuant to this Section 9, provided, however, that if it
is subsequently determined that any such offset was not proper,
Buyer shall pay to the person against whom such offset was made,
in addition to the amount of such offset, interest thereon at the
rate of 2% in excess of the Buyer's cost of borrowing at such
time from the date such payment should have been paid to Seller
or Mannes.
(b) The parties agree that any indemnification payments
made pursuant to this Agreement shall be treated for tax purposes
as an adjustment to the Purchase Price, unless otherwise required
by applicable Law.
10. Miscellaneous
10.1 Notices. All notices, requests, demands and other
communications which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally, telecopied or sent by
nationally recognized overnight carrier, or mailed by certified
mail, postage prepaid, return receipt requested, as follows:
(a) If to Seller or Mannes, to:
Thomas Mannes
3097 Praire, S.W.
Granville, MI 49418
Telephone: 616-530-8117
Telecopier: 616-530-1788
(b) If to Buyer:
Granite Financial Acquisition Corp. I
6424 W. 91st Avenue
Westminster, CO 80030-2913
Telephone: 303-650-4059
Telecopier: 303-650-4061
or to such other address as any party shall have specified by
notice in writing to the other parties. All such notices,
requests, demands and communications shall be deemed to have been
received on the date of personal delivery or on the first
Business Day after dispatch by an overnight carrier or on the
third Business Day after mailing by certified mail, return
receipt requested.
10.2 Entire Agreement. This Agreement (including the
Exhibits and Schedules thereto) constitutes the entire agreement
between the parties hereto and supersedes all prior agreements
and understandings, oral and written, between the parties hereto
with respect to the subject matter thereof.
10.3 Binding Effect; Benefit. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other
than the parties hereto or their respective successors and
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
10.4 Assignability. Except as set forth in Section 10.12,
this Agreement shall not be assignable, in whole or in part, by
any party hereto without the prior written consent of the other
parties thereto.
10.5 No Third Party Beneficiaries. Nothing herein expressed
or implied shall confer upon any of the employees of Seller any
rights or remedies, including, without limitation, any right to
employment, or continued employment for any specified period, of
any nature or kind under or by reason of this Agreement.
10.6 Amendment; Waiver. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument
executed by the parties thereto. No waiver by any party of any
of the provisions hereof shall be effective unless explicitly set
forth in writing and executed by the party so waiving. Except as
provided in the preceding sentence, no action taken pursuant to
this Agreement, including without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants, or agreements contained
herein, or in any documents delivered or to be delivered pursuant
to this Agreement or in connection with the Closing hereunder.
The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
10.7 Severability. If any provision of this Agreement shall
be declared by any court of competent jurisdiction to be illegal,
void, or unenforceable, all other provisions of this Agreement
shall not be affected and shall remain in full force and effect.
10.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and
the same instrument.
10.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Colorado
without regard to conflicts of laws principles thereof.
10.10 Attorneys' Fees. In the event of any litigation
concerning any controversy, Claim or dispute between the parties
hereto, arising out of or relating to this Agreement or the
breach hereof, or the interpretation hereof, the prevailing party
shall be entitled to recover from the losing party reasonable
expenses, attorneys' fees and costs incurred therein or in the
enforcement or collection of any judgment or award rendered
therein. The "prevailing party" means the party determined by
the court to have most nearly prevailed, even if such party did
not prevail in all matters, not necessarily the one in whose
favor a judgment is rendered.
10.11 Exhibits. All Exhibits and Schedules attached
hereto are hereby incorporated by reference into, and made a part
of, this Agreement. The disclosure contained in any one Schedule
to this Agreement, if by its description in such Schedule is
clearly applicable to other sections of this Agreement, will also
be deemed to have been made with respect to such other sections
even if such disclosure is not repeated in any other Schedules.
10.12 Designated Buyer. It is understood and agreed
between the parties that Buyer may cause one or more Affiliates
or other entities designated by it (the "Designated Buyer") to
carry out all or part of the Contemplated Transactions to be
carried out by Buyer; provided, that Buyer nevertheless shall
remain liable for all of its obligations and those of any
Designated Buyer hereunder.
10.13 Arbitration. Each party hereby agrees to submit
to binding arbitration in Denver, Colorado, all disputes or
controversies arising out of or in conjunction with this
Agreement in accordance with the commercial arbitration rules of
the American Arbitration Association then in effect. The
prevailing party in any such arbitration shall be entitled to an
award of reasonable attorneys fees, costs and disbursements,
including reimbursement for costs of witness' travel and
subsistence incurred as a result of such arbitration. Judgment
upon any arbitration award rendered
may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Asset Purchase Agreement as of the date first
above written.
Granite Financial Acquisition Corp.
I
By:
___________________________________
Title:
__________________________________
Global Finance & Leasing, Inc.
By:
___________________________________
Title:
__________________________________
___________________________________
_____
Thomas Mannes, individually
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<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 4,774,653 4,774,653
<SECURITIES> 0 0
<RECEIVABLES> 36,279,163 36,279,163
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